Background. The Obama Administration’s six years in
office have been characterized by a ramping up of regulatory activity across
the bureaucratic spectrum. The
Department of Labor has linked arms with the Internal Revenue Service in
challenging bogus “independent contractor” classifications, while DOL has also
issued onerous rules restricted when unpaid interns can be excluded by
for-profit firms from their payrolls.
Although the Supreme Court threw employers a bone back in January by
declaring that waiting time for security clearances was non-compensable (see your February Bulletin at [2.2]), news
on the labor/employment law front has been mostly bad for employers. In particular, as the DOL’s aggressive
actions against misclassification of independent contractors and unpaid interns
illustrates, the Obama bureaucracy is expanding the definition of “employee” to
include categories not previously contemplated.
This regulatory activity has stimulated
analogous litigation. Boutique law
firms, specializing in Fair Labor Standards Act class-action suits are a case
on point. Witness the following
statements from law-firm websites:
- “Has
your employer failed to pay you for work you did? Are you unsure if you
are being paid enough? There are various wage laws, which dictate
the amount employees should be paid. A wage attorney is familiar with
these federal and state wage laws and will be able to tell you if you have
a claim. The sooner you contact a wage attorney, the sooner you can
collect unpaid wages from your employer. If you have any questions about
your paycheck, contact a KM&A wage attorney today.” (http://lawkm.com/)
- “The Tran Law Firm is a groundbreaking plaintiff's law firm that
enforces the FLSA through individual and class action lawsuits.
Innovative, energetic, with an unrelenting mindset for success, the firm
represents individuals against large companies in complex, class and
collective action lawsuits for wage and hour violations. The Firm has
developed, changed, and enforced wage and hourly rules to protect workers'
rights. What makes the Tran Law Firm different in the field of overtime
law is that we are Trial Lawyers who have the skills and experience to
succeed in the courtroom. Centrally located in Houston, Texas, the Tran
Law Firm has a national practice and litigates and arbitrates cases throughout
the United States.” (http://overtimelawyers.com/)
- “Some businesses, such as call centers and retail
companies, may have hundreds of employees misclassified as exempt. Some
legal experts have speculated that the FLSA is the most frequently
violated federal labor and employment statute on the books.” (http://www.wcsr.com)
- “CHICAGO
(May 19, 2014) - Leading law firm Seyfarth Shaw LLP has released
information charting another record year for federal wage and hour
lawsuits filed under the Fair Labor Standards Act (FLSA) in 2014, marking
the seventh straight year of increases in these cases.
“In data obtained
from the Federal Judicial Center, 8,126 FLSA cases were filed in 2014, up
nearly 5 percent from 2013 which saw 7,764 cases filed. FLSA cases have
exploded across the country, rising 438% since 2000. (For more details, see
Seyfarth’s complete chart of federal FLSA claims filed between 1990 – 2014).
“’The wage and hour litigation epidemic continues, and
we expect this trend to expand further
in the coming year,’ said Richard Alfred, chair of Seyfarth’s Wage & Hour
Litigation practice. ‘While the rise we’ve seen in FLSA cases is astonishing,
these numbers are also just one part of the equation. They would be even higher
if wage and hour lawsuits filed in state courts under state pay practices, data
which isn’t readily available, were added.’” (http://www.seyfarth.com)
An unexpected source. Just
two years ago, it was unlikely that anyone would have predicted that that the
National Labor Board would be the sharp point of the revolution to redefine
“employee.” At a time when well under
10% of the private-sector workforce is organized, the NLRB has been in
disarray. The Supreme Court during
Obama’s first term reversed hundreds of Labor Board rulings rendered by a rump
panels, while the Senate sat on the President’s nominees. More recently, the SCOTUS has held that
Obama’s so-called “recess appointments” to the Board were invalid.
However, instead of accepting its
apparent fate as a backwater agency, the NLRB has moved to the cutting edge of
radical labor-law “reforms.” Wielding Section
7 of the National Labor Relations Act, which assured all private-sector
employees of their right to engage in “protected, concerted activity,” the
Board has tackled unfair labor practice charges filed by non-union workers
disciplined for joining in criticism of their bosses on such social networking
sites as Facebook.
But, undoubtedly, the most dramatic
Board decision came not out of Washington, but from America’s Second City. About this time last year, the Regional
Director of the NLRB’s Chicago office fired a shot heard round the world, when
he ruled that Northwestern University’s football players are employees entitled
to vote for a labor union. The school’s
appeal of that radical ruling remains pending before the Board in Washington. As wildly improbable as it may seem at first
blush, the Director’s analysis must be credited as careful, detailed and
potentially compelling. Herewith a few
excerpts:
“The Employer’s football team is
comprised of about 112 players of which there are 85 players who receive
football grant-in-aid scholarships that pay for their tuition, fees, room,
board, and books.3 The players on a scholarship typically
receive grant-in-aid totaling $61,000 each academic year.4 The
grant-in-aid for the players’ tuition, fees and books is not provided directly
to them in the form of a stipend as is sometimes done with room and board.
Because the Employer’s football team has a rule requiring its players to live
on campus during their first two years, these players live in a dorm room and
are provided a meal card, which allows them to buy food at the school
cafeteria. In contrast, the players who are upperclassmen can elect to live off
campus, and scholarship players are provided a monthly stipend totaling between
$1,200 and $1,600 to cover their living expenses. Under current NCAA
regulations, the Employer is prohibited from offering its players additional
compensation for playing football at its institution with one exception. The
Employer is permitted to provide its players with additional funds out of a
‘Student Assistance Fund’ to cover certain expenses such as health insurance,
dress clothes required to be worn by the team while traveling to games, the
cost of traveling home for a family member’s funeral, and fees for graduate
school admittance tests and tutoring. The
players do not have FICA taxes withheld from the scholarship monies they
receive. Nor do they receive a W-2 tax form from the Employer.”
***
“As has already been alluded to, the
Employer’s players (both scholarship players and walk-ons) are subject to
certain team and athletic department rules set forth, inter alia, in the Team
Handbook that is applicable solely to the Employer’s players and Northwestern’s
Athletic Department Handbook. Northwestern’s regular student population is not
subject to these rules and policies. Specifically, freshmen and sophomore year
players receiving scholarships are required to live in on-campus dormitories.
Only upperclassmen players are permitted to live off campus and even then they
are required to submit their lease to Fitzgerald for his approval before they
can enter into it. If players want to obtain outside employment, they must
likewise first obtain permission from the athletic department. This is so that
the Employer can monitor whether the player is receiving any sort of additional
compensation or benefit because of their athletic ability or reputation. Similarly,
players are required to disclose to their coaches detailed information
pertaining to the vehicle that they drive. The players must also abide by a
social media policy, which restricts what they can post on the internet,
including Twitter, Facebook, and Instagram. In fact, the players are prohibited
from denying a coach’s “friend” request and the former’s postings are
monitored. The Employer prohibits players from giving media interviews unless
they are directed to participate in interviews that are arranged by the
Athletic Department. Players are prohibited from swearing in public, and if a
player ‘embarrasses’ the team, he can be suspended for one game. A second
offense of this nature can result in a suspension up to one year. Players who
transfer to another school to play football must sit out a year before they can
compete for the new school. Players are prohibited from profiting off their
image or reputation, including the selling of merchandise and autographs.
Players are also required to sign a release permitting the Employer and the Big
Ten Conference to utilize their name, likeness and image for any purpose. The
players are subject to strict drug and alcohol policies and must sign a release
making themselves subject to drug testing by the Employer, Big Ten Conference,
and NCAA. The players are subject to anti-hazing and anti-gambling policies as
well.”
***
“The first week in August, the
scholarship and walk-on players begin their football season with a month-long
training camp, which is considered the most demanding part of the season. In
training camp (and the remainder of the calendar year), the coaching staff
prepares and provides the players with daily itineraries that detail which
football-related activities they are required to attend and participate in. The
itineraries likewise delineate when the players are to eat their meals and
receive any necessary medical treatment. For example, the daily itinerary for
the first day of training camp in 2012 shows that the athletic training room
was open from 6:30 a.m. to 8:00 a.m. so the players could receive medical
treatment and rehabilitate any lingering injuries. Because of the physical
nature of football, many players were in the training room during these hours.
At the same time, the players had breakfast made available to them at the N
Club. From 8:00 a.m. to 8:30 a.m., any players who missed a summer workout
(discussed below) or who were otherwise deemed unfit by the coaches were
required to complete a fitness test. The players were then separated by
position and required to attend position meetings from 8:30 am. to 11:00 a.m.
so that they could begin to install their plays and work on basic football
fundamentals. The players were also required to watch film of their prior
practices at this time. Following these meetings, the players had a walk-thru
from 11:00 a.m. to 12:00 p.m. at which time they scripted and ran football
plays. The players then had a one-hour lunch during which time they could go to
the athletic training room, if they needed medical treatment. From 1:00 p.m. to
4:00 p.m., the players had additional meetings that they were required to
attend. Afterwards, at 4:00 p.m., they practiced until team dinner, which was
held from 6:30 p.m. to 8:00 p.m. at the N Club. The team then had additional
position and team meetings for a couple of more hours. At 10:30 p.m., the
players were expected to be in bed (“lights out”) since they had a full day of
football activities and meetings throughout each day of training camp. After
about a week of training camp on campus, the Employer’s football team made
their annual trek to Kenosha, Wisconsin for the remainder of their training
camp where the players continued to devote 50 to 60 hours per week on football
related activities.
“After training camp, the Employer’s
football team starts its regular season which consists of 12 games played
against other colleges, usually played on Saturdays, between the beginning of
September and the end of November. During this time, the players devote 40 to
50 hours per week to football-related activities, including travel to and from
their scheduled games. During each Monday of the practice week,
injured players must report to the athletic training room to receive medical
treatment starting at about 6:15 a.m. Afterwards, the football coaches require
the players to attend mandatory meetings so that they can begin to install the
game plan for their upcoming opponent. However, the only physical activity the
coaches expect the players to engage in during this day is weightlifting since
they are still recovering from their previous game. The next several days of
the week (Tuesday through Thursday), injured players must report to the
athletic training room before practice to continue to receive medical
treatment. The coaches require all the players to attend mandatory practices
and participate in various football- related activities in pads and helmets
from about 7:50 a.m. until 11:50 a.m. In
addition, the players must attend various team and position meetings during
this time period. Upon completion of these practices and meetings, the
scholarship players attend a mandatory ‘training table’ at the N Club where
they receive food to assist them in their recovery. Attendance is taken at
these meals and food is only provided to scholarship players and those walk-ons
who choose to pay for it out of their own pocket.”
Bottom line, following a dozen
single-spaced pages of such factual recitations, the Director concludes, “Based
on the foregoing and the entire record herein, I have found that all
grant-in-aid scholarship players for the Employer’s football team who have not
exhausted their playing eligibility are ‘employees’ under Section 2(3) of the
Act. Thus, I direct an immediate election in this case.” [Northwestern University and College Athletes Players Association
(CAPA), Case 13-RC-121359 (March 26, 2014), accessible at http://www.nlrb.gov/news-outreach/news-story/nlrb-director-region-13-issues-decision-northwestern-university-athletes]
The
inevitable next step. Just as the
DOL’s enactment of a tough, six-point test of “unpaid internship” under the
FLSA instigated a spate of class-action suits by private attorneys, the NLRB’s Northwestern University decision predictably
has propagated a private action, which purports to qualify for class-action
classification. On October 20, 2014, PL
McDonald Law, LLC of Philadelphia (PA) filed Sackos v. National Collegiate Athletic Association, Civil Action
No.1:14-CV-1710 WTL-MJD in the U.S. District Court of the Southern District of
Indiana. In addition to the NCAA, the
named defendants include all 340 NCAA Division I schools.
Plaintiff Samantha Sackos is
identified in the complaint as a Houston resident who “was employed by the
University of Houston as an unpaid student athlete on the Women’s Soccer roster
from academic year 2010-11 through academic year 2013-14.” As such, the complaint alleges, “Sackos is a
covered employee within the meaning of the FLSA.”
The complaint also asserts that the
NCAA’s rules forbid member schools from paying their players, except for those
who receive scholarship aid. “ Defendants’ refusal to recognize, and pay, student
athletes as temporary employees of NCAA Division I Member Schools under the
FLSA, codified in NCAA bylaws, produces the following perverse result: work
study participants who sell programs or usher at athletic events are paid, on average, $9.03 an hour, but
student athletes whose performance creates
such work study jobs in the athletic department are
paid nothing.”
The 24-page complaint
pleads for the following relief for all current and former student-athletes
affiliated with the 340 named schools:
- Permission to notify all such athletes of
the action and their right to opt into it, and
- Ultimately, unpaid wages, liquidated (double)
damages, plus
- Pre- and Post-judgment interest; an
- An injunction of continued violations of the FLSA
by the defendants.
The suit appears to be part of a larger
crusade in the arena of big-time college athletics. The lynchpin of this movement is an
organization calling itself “SAME: Student Athlete Minimum-Wage Equity,” whose
Statement of Principles reads, “Student athletes deserve to be treated the SAME as students in work
study programs.
“Under
the Fair Labor Standards Act (FLSA), colleges are required to pay work study
participants at least the federal minimum-wage of $7.25 per hour. Student
athletes meet FLSA criteria more than work study participants do.
But the NCAA, NAIA and NJCAA prohibit even modest student athlete
pay.
“SAME
legal counsel aims to level the field of pay for all student
athletes in NCAA, NAIA and NJCAA sports – regardless of their scholarship
status, popularity or performance, team revenue generation, or gender.
“No
student treated better, or worse. All the SAME.”
[http://www.studentathleteequity.com/#sthash.gdtuOgcZ.dpuf]
The organization adds, “Collective
Actions [the FLSA label for class actions] to change similar rules for NCAA
Divisions II and III, the NAIA and NJCAA are on deck --- if good faith efforts
to effect change via cooperation are rejected or futile.”
What
this may mean to other employers. With
nearly two more years of Obama Administration activism in front of us, and the
very real prospect of a Hilary Clinton Administration in Obama’s wake, an
aggressive national executive branch is a fact of employment-law life in the
foreseeable future. The FLSA defines
“employ” as “to suffer or permit to work.”
Arguably, never before has the DOL and other federal agencies defined
that phrase so liberally and so broadly.
Our first inclination might be conclude
that --- beyond the 1,281 NCAA member schools and some 450,000 student-athletes
who compete annually (and the several million athlete-alumni) --- our concerns
can be limited to how this lawsuit might impact our favorite Saturday afternoon
pastime.
Conversely, one might reasonably fear
that all this FLSA activity represents not only a significant litigation threat
in its own right. Combined with the
increasing activism of such elements of organized labor as the Service
Employees International Union and President Obama’s determination to wield the
Executive Order as a sword to carve new employee rights --- such as last year’s
order extending employment protections to LGBT applicants and employees vis a
vis government contractors --- and employers face a “Perfect Storm” of
regulatory and litigation challenges.
Will the courts protect employers
from this tsunami? While the
conservative-dominated SCOTUS may be expected to issue more decisions like
January’s waiting-time ruling, other courts may not be so solicitous. Recall, for example, the lead story in your
February Bulletin, which reported the
Pennsylvania Supreme Court’s affirmance of a $151 million jury verdict against
Wal-Mart under the FLSA. No one reading
that report can sit back and assume that the revolution underway, regarding who
is an employee entitled to relief in one form or another under the federal
labor laws, will be confined to collegiate athletics.
