E-Newsletter, October 2011

In this issue:

  • Complying with Maryland’s “Healthy Retail Employee Act” by Edward J. Krill, Esq. and Thomas L. McCally, Esq.
  • Supreme Court To Decide on The ‘Ministerial Exception’ by Tina M. Maiolo and Juan M. Sempertegui
  • The NLRB’s New Posting Requirement Is Postponed: What does it mean for your business? By Thomas L. McCally and Jan M. Blee
  • Virginia Supreme Court Rules Insurer Does Not Have To Defend Claims For Damages Resulting From Climate Change. By: Kevin W. Weigand

Complying with Maryland’s “Healthy Retail Employee Act”

By Thomas L. McCally, Esq. and Edward J. Krill, Esq.

Private employees in retail establishments in Maryland now have a statutory right to an unpaid break during work shifts lasting over four hours. This legislation is in keeping with similar laws in a few of the nearby states of Delaware, New York and Connecticut. However, most states have not mandated break time as part of their wage and hour laws.

After considerable industry opposition, Maryland passed the Healthy Retail Employee Act effective March 1, 2011. Private Maryland employers who operate “retail establishments” must provide non-exempt (hourly) retail employees with break periods based on the length of the shifts the employees work. Employers in violation of the Act may be fined.

The Act defines a retail establishment as “a place of business with the primary purpose of selling goods to a consumer who is present at the place of the business at the time of sale.” A “retail establishment” does not include a restaurant or wholesaler but does include small stores that are part of a large chain. Certain employees are exempt from the Act, including employees who work at an establishment with five or fewer employees. The Act does not apply to employees covered by a collective bargaining agreement or other employment policy that provides for shift breaks of equal or greater duration to those required by this law.

The Act further provides:

  • Employees who work a shift of 4 to 6 consecutive hours are entitled to a nonworking shift break of at least 15 minutes.
  • Employees who work a shift of 6 to 8 consecutive hours are entitled to a nonworking shift break of at least 30 minutes; and
  • Employees who work a single shift of 8 or more consecutive hours is entitled a second nonworking shift break of at least 15 minutes for every 4 consecutive additional hours of work beyond the original 8.

If an employee works fewer than 6 consecutive hours, the nonworking shift break requirement may be waived by a written agreement between the employer and the employee. For shifts in excess of 6 consecutive hours, the nonworking shift break may not be waived.

The Act also permits a “working shift break” instead of a nonworking break provided the employer and employee agree to that arrangement in writing and (1) the type of work prevents employees from being relieved of their duties, or (2) employees are allowed to consume a meal while working and the working shift break is counted towards the employee’s work hours.

The Act does not address whether an employee is to be paid during the break time. Under the federal Fair Labor Standards Act and Maryland law, however, short breaks of less than 20 minutes are considered work time that must be included in the sum of all hours worked in a week and are compensable. Thus the law mandates time off with pay.

According to the Maryland Department of Labor, Licensing and Regulation (“DLLR”), the Act only applies to an employer who has at least 50 retail employees in Maryland. However, those 50 employees need not be in one location. The Act applies to the place of business of a “franchise” employer with 50 employees in several facilities with the same store name if there are more than five employees at that location.

“Retail employees” are defined as those who are “engaged in actual sales in a store.” Employees who are not working in a “retail establishment” such as those at a corporate or other office, in a warehouse or engaged in delivery are not covered by the Act and do not count towards the 50 employees required to trigger the protections of the Act.

Several issues remain unresolved six months after this legislation took effect:

  1. Employees appear to be able to select the time of their break. 
    There is nothing in the law that allows a retail store manager to schedule breaks in accord with the needs of the store or the break times of other employees. Imagine a situation in which all five employees of a retail store took their break at the same time.

    Possible solution: with the regular work schedule, post the times of all breaks and allow employees to switch with each other so long as the retail floor remains covered.

  2. There is no recognition of licensed employees. 
    Hourly paid licensed personnel may need to remain on duty in order for the store to lawfully operate. Various non-professional yet licensed employees are essential for the continuous delivery of professional services where, for example, they are required to assist a professional.

    Possible solution: Physicians, pharmacists, nurses, barbers, optometrists, podiatrists are not primarily engaged in the retail sale of goods, they are in a separate area delivering professional services. This is true even when they practice within a larger retail store such as a grocery store, department store or mall setting, they typically occupy work space that is separated from the retail food, clothing and merchandize displays. Thus a pharmacy technician with duties exclusively devoted to filling prescriptions (and not any retail sales of storewide goods) may not be considered to be working in a “retail establishment,” although the law is not clear. In light of the fact that the law is unclear, Employers facing this situation may elect to seek written agreement with the employee(s) at issue under which the employee(s) agree to take “working shift breaks,” assuming all other criteria required to allow “working shift breaks” are met.

  3. Transfers and changes in schedule are not approved.
    If an employee does not consent to take a “working shift break” the right of the employer to reassign that employee to a different location or to different hours is unclear.  Theoretically, an employee who is transferred or scheduled to work at a different time could claim retaliation for not agreeing to a “working shift break.” The Act does not expressly prohibit retaliation against employees who do not sign the “working shift break” waiver, but Maryland courts would likely view disciplinary action such as termination as against public policy if it is based solely on the refusal to waive rights under the Act.  Employers who make adjustments to accommodate workers who refuse to sign a waiver will need to document and establish that the changes were made for legitimate business purposes, such as the need to maintain adequate staffing.Possible solution: In a store that staffs discreet sections with one employee, such as would be the case in a hardware store with plumbing, electrical, lumber, tools and paint departments, if the only employee assigned to that department is on break, customers must wait for an unreasonable period of time for service and may simply leave the store.  If an employee in that setting refuses to agree to a “working shift break” arrangement, the manager should be able to reassign that worker to a larger store with several employees covering each department or to a different time schedule to avoid employee absence from an entire department.
  4. Records must be kept that demonstrate compliance with the law. 
    If employees are given discretion to take their break during the shift when they wish, the employer must rely on the employees to accurately record that event.  A daily “break sheet” comes to mind, i.e. a document that the manager can inspect from time to time during the day and if there is no notation regarding the break of a particular employee, something can be said.  The burden of tracking, monitoring and recording employee breaks remains the employer’s and, as with all wage and hour compliance issues, sloppy record keeping can lead to serious liability/financial problems.Possible solution: require employees to sign a “break sheet,” and if an employee does not sign the “break sheet,” the employee should be reprimanded.  There is no financial penalty for failing to record breaks, but the failure to record breaks will create difficulty in defending against a claimed violation of the Act.  Under the terms of this law, if employees are entitled to breaks, regardless of whether the breaks are taken, the employer is liable to pay the employee as having worked the full shift, because a period of work time that includes a break of 20 minutes or less is considered a period of unbroken work and is fully compensable under the FLSA.  Accordingly, employees are paid in full if they took the break or not.  Under the law, employers must force employees to take the breaks to which they are entitled because there appears to be no way that the employee can waive break time for shifts in excess of six hours.

The Act also fails to describe what constitutes a “break.”  Theoretically, it is a time when the retail store employee is, for example, not required to assist customers or work in the store on shelving merchandise.  There is no requirement that the employee be permitted to leave the store or even leave the work station, as a result, employers have some latitude in that regard.  A number of brief breaks taken during an 8 hour period should certainly satisfy the requirements of the law but, as written, this is not clear.  Some flexibility should be provided to employers who want all break time taken in one block and to other employers who have no problem with several small breaks. Bear in mind that short breaks are seen as compensable work time under the FLSA and an uninterrupted break of over 20 minutes is seen as time off.

It will be interesting to see whether the Maryland Department of Labor issues guidelines or regulations dealing with these issues and even more interesting to watch for enforcement activity that will tell us how the Department views some of the omissions in this new legislation.  Retail employers should consult with legal counsel to ensure that their policies and practices regarding break time are in compliance with the Act.


Supreme Court To Decide on The ‘Ministerial Exception’

By: Tina M. Maiolo and Juan M. Sempertegui

Most U.S. Circuit Courts of Appeals have held that certain employees who perform religious duties are prohibited from filing discrimination claims against religious entities, schools and parishes. The exclusion is known as the “ministerial exception.” On October 5, 2011, the U.S. Supreme Court considered whether the ministerial exception should apply to employees who do not perform religious duties for the church or an affiliated religious entity.

Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission stems from the 6th Circuit Court of Appeals’ decision holding that the ministerial exception did not apply to a teacher at the religious school because she performed primarily secular duties. The teacher, Cheryl Perich, had worked at the school for five years. Due to a medical condition, Ms. Perich took six months of sick leave to recover. When she attempted to return, the school informed her that she had been replaced by a new hire. Ms. Perich threatened to sue the school alleging discrimination based on her medical condition, which was a disability, and for requesting the accommodations under the American with Disabilities Act. Ms. Perich was fired for insubordination and violation of the church’s tenets to settle disputes internally. The EEOC filed Ms. Perich’s retaliation suit.

During oral argument before the United States Supreme Court, Douglas Laycock from the University of Virginia Law School and on behalf of Hosanna-Tabor, stated that “churches do not set the criteria for selecting or removing the officers of government, and government does not set the criteria for selecting or removing officers of the church.”

Justice Sotomayor expressed concern that the way the exception stands, it would allow the firing of a “teacher who reports sexual abuse to the government.” Mr. Laycock responded that the court could carve out an exception for those types of situations if necessary but “a discharge claim by minister presents a question of why she was discharged and the court should stay out of that.”

Chief Justice Roberts inquired as to who is covered by the exception. Mr. Laycock responded that, in the case in question, Ms. Perich, is covered by the exception because “[s]he teaches religion.” The response prompted numerous questions regarding the definition of a “minister.” Justice Kennedy pointed out that “some churches don’t have what we think of as professional or full-time ministers at all.” Justice Scalia asked and received confirmation that what constitutes a minister is decided by the law, not by the church. Justice Kagan asked whether all teachers of religion are ministers under the exception. Mr. Laycock responded that anyone ordained or commissioned as a minister is covered, as well as anyone who teaches a religious class. Justice Ginsburg then asked for an explanation of the type of claims that a minister would be allowed to bring. Mr. Laycock pointed out that a minister could proceed with a tort claim to obtain tort damages, for example, but the minister could not file a claim for the loss of the position.

The EEOC was represented by Leondra R. Kruger, Assistant to the Solicitor General at the Department of Justice. Chief Justice Roberts, Justice Breyer and Justice Scalia asked Kruger about the affect of the constitutional protections afforded to religious institutions (such as the First Amendment’s right to freedom of religion and free establishment which prohibit the government from entangling itself in the thicket of religious issues, including choosing church ministers). Ms. Kruger argued that the government does not dispute the protections afforded to religious institutions. She said that the government is trying to prevent “religious employers, like any other employers, from punishing their employees for threatening to bring illegal conduct to the attention” of proper government authorities. Ms. Kruger further argued that if the Court were to take the position advocated by Mr. Laycock, then firing decisions “with respect to priests” would be off limits, despite the “relative public and private interests at stake.” Justice Breyer then inquired what prevents the government from requiring the Catholic Church to ordain women. In response, Ms. Kruger stated that government interest is “simply not sufficient to justify changing the way that the Catholic Church chooses its priests based on gender roles that are rooted in religious doctrine.” Justice Alito then inquired if the distinction is based on the Catholic Church’s stronger standing as compared to the Lutheran doctrine. Ms. Kruger responded that the government is not drawing any distinctions between religions. Instead, she said, “[t]he government’s interest [is] in preventing retaliation against those who []go to civil authorities with civil wrongs… ”

Walter Dellinger, from O’Melveny & Myers, represented Ms. Perich. Mr. Dellinger argued, similar to the EEOC, that the state has an interest to allow its citizens access to the court system and that such interest does not have to impede on the protection of church autonomy in situations such as the firing of a priest seeking reinstatement. Further, Mr. Dellinger argued that the Court could compel conformity with discrimination laws on religious institutions in the same manner it did with Social Security laws in a prior case.

A decision is expected by the end of the Court’s term in June of 2012.


The NLRB’s New Posting Requirement Is Postponed: What does it mean for your business?

By Thomas L. McCally and Jan M. Blee

The National Labor Relations Board (NLRB) has postponed the implementation date for its new notice-posting rule. The new effective date of the rule is Jan. 31, 2012. Lawsuits challenging the new posting requirement continue to move forward despite the NLRB’s decision to postpone the requirement’s effective date. If the law takes effect on January 31, 2012, almost all private sector employers will be required to comply with a new posting requirement mandated by the National Labor Relations Board (NLRB). The new rule was published by the NLRB in the August 30 Federal Register, and establishes the size, form, and content of the required notice, as well as remedies for noncompliance.

Who Is Required to Post the Notice?
The new posting requirement applies to almost every private-sector employer. The new rule applies to both union and non-union workplaces that are subject to the jurisdiction of the NLRB. The rule does not apply to public-sector employers or employers who are otherwise excluded from coverage of the National Labor Relations Act, such as railroads and airlines. Other exceptions include agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, and certain small businesses.

What Must the Notice Contain?
The notice must inform employees of their right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and/or of their right to refrain from any of these activities. Examples of unlawful employer and union conduct must be included in the notice, and the notice must contain information on how to contact the NLRB with questions or complaints. A copy of the required notice is available on the NLRB’s website, and can be accessed by clicking here. Employers also can satisfy the posting requirements by purchasing and posting a set of workplace posters from a commercial supplier that contain the required information.

Where and How the Notice Must Be Posted?
The notice must be posted “in conspicuous places where they are readily seen by employees, including all places where notices to employees concerning personnel rules or policies are customarily posted.” The poster must be at least 11 inches by 17 inches in size and must be in the format, type size, and style prescribed by the NLRB. If the employer customarily communicates with employees about personnel rules and policies through electronic means, the notice must also be electronically posted in a manner “no less prominently than other notices to employees.” The electronic posting requirement may be met by posting either an exact copy of the poster, downloaded from the NLRB’s website, or a link, reading ‘‘Employee Rights under the National Labor Relations Act,’’ to the NLRB’s website that contains the poster. If at least twenty percent (20%) of an employer’s workforce does not speak English, the notice must be posted in multiple languages.

Penalties for Failure to Comply
If an employer fails to comply with the new posting requirements, the NLRB may conduct an investigation and may issue a finding that the employer committed an unfair labor practice. The NLRB has noted that, at present, it lacks the statutory authority to impose fines. However, as the notice clearly specifies and as recent NLRB cases illustrate, the NLRB may order an employer to rehire a worker fired in violation of the law and to pay lost wages, benefits and other compensatory damages to the injured employee. The NLRB may also order an employer or union to cease violating the law. The failure to comply with posting requirements will adversely impact an employer’s ability to defend against employee complaints of unfair labor practice.

What Should Employers Do?
Employers should act now by obtaining the required notices and ensuring that they are properly posted by January 31, 2012.


Virginia Supreme Court Rules Insurer Does Not Have To Defend Claims For Damages Resulting From Climate Change

By: Kevin W. Weigand

In a closely-watched decision heralded by the New York Times as the “first case of its type,” the Virginia Supreme Court ruled in September that an insurance carrier is not obligated to defend its insured in litigation for damages allegedly caused by climate change.

In 2008, the native Alaskan village of Kivalina brought a federal common law nuisance claim against twenty-four energy companies, alleging that their excessive use emissions of greenhouse gases caused the sea ice to thin and break up, rendering the town uninhabitable due to the resulting erosion from storm waves and surges. AES Corp, an Arlington, Virginia-based energy company and one of the defendants in the suit, sought representation and coverage from Steadfast Insurance Company pursuant to its commercial general liability policy. In response, Steadfast sought a declaratory judgment that the Complaint did not allege property damage caused by an “occurrence”, a requisite for coverage. Steadfast also argued that the alleged injuries occurred prior to its contractual relationship with AES and that the claims alleged by the plaintiffs fell within the pollution exclusion of the policy.

The Arlington County Circuit Court agreed with Steadfast and held that the Complaint against AES failed to allege an occurrence, thereby precluding the insurer from the obligation to defend or provide coverage. The Supreme Court of Virginia affirmed. The Complaint alleged that the energy companies intentionally released greenhouse gases into the atmosphere. Since the policy defined an occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful condition,” the alleged intentional act by the insured was not covered. Even though the insured may not have known that its actions were contributing to the damages alleged by the Plaintiffs, the resulting damage was a natural and probable consequence of an intentional act, and therefore failed to constitute an “occurrence.”

The Supreme Court’s ruling is a significant victory for insurers and will likely be examined by courts throughout the country that will soon address the issue. Insurers should not rush to dismiss concerns over the need to defend and provide coverage in litigation alleging damage as a result of climate change, however. In his concurring opinion, Justice Koontz emphasized the limited reach of the holding to the particular allegations of the underlying lawsuit and the language of the policy. He noted that the “vast majority” of cases in which a policyholder seeks representation and coverage will involve a claim for an accidental tortious injury.

Although Virginia is the first state to address the issue of potential insurer liability for climate change, other courts are certain to examine the hot-button issue in the near future. A 2008 industry survey study revealed that climate change was the “greatest strategic risk” facing the property/casualty industry. Consequently, litigation over an insurer’s obligation to provide coverage for damages resulting from climate change will continue for the foreseeable future.