Legally Speaking

Legally Speaking, October 2013

Written By
Carr Maloney, P.C.

In this issue:

  • Lien on Me: New Maryland Labor and Employment Law Takes Effect by  Matthew D. BerkowitzEsq.
  • U.S. Department of Labor Announces Two Final Rules That Strengthen Affirmative Action and Improve Employment Opportunities for Vietnam War Veterans and Individuals with Disabilities By Jason Zappasodi, Esq.
  • In a Challenge Brought by the EEOC, the United States District Court for Maryland Holds that Background Checks Are an “Important” and “Essential” Part of the Employment Process. By Ali Khorsand Esq.

Lien on Me: New Maryland Labor and Employment Law Takes Effect

By: Matthew D. BerkowitzEsq.

On October 1, 2013, a new law in Maryland, the Lien for Unpaid Wages Act, Md. Code, Labor and Employment, §§ 3-1101 through 3-1110, went into effect.  The Act was enacted to provide an expedited process that allows an unpaid worker to obtain a lien on the personal or real property of his or her employer in the amount of the wages unpaid.  Under the Act, “wages” does not include commissions.  A lien is a legal right or interest that a creditor, or in this case, the unpaid worker, has in the debtor/employer’s property, lasting until the debt, or wages, are satisfied.

To establish a lien under the Act, the employee must personally serve the employer with written notice that adequately describes the wages due and the property against which the lien for unpaid wages is sought.  The employer may dispute the lien by filing a complaint in the Circuit Court within thirty (30) days after the notice is served.  In filing a complaint, the employer is also required to file a statement of any defenses to the claim and an affidavit stating any facts that support the defenses raised.  If the employer fails to file a complaint disputing the claim within the thirty (30) day period, then the lien for unpaid wages is “established.”  Thus, an employer must act swiftly to rebut any disputed claim, as the new law does not provide a means for the employer to challenge the lien once it is established.

Within forty-five (45) days of filing the complaint, the Circuit Court must determine whether to establish a lien. This determination is based upon the preponderance of evidence, yet the employee has the burden of proof.  Either the employer or the employee may request an evidentiary hearing.  If the Circuit Court orders the establishment of a lien for unpaid wages, the employee may record the lien by filing a wage lien statement against the employers’ real or personal property.  If, however, the employee fails to record the lien statement within 180 days after the lien is established, then the lien for unpaid wages is extinguished.

Of significance, a prevailing employee may also be entitled to court costs and reasonable attorneys’ fees.  Thus, the new law encourages unpaid employees to seek to recover smaller unpaid wages.  Previously, the cost and time expended to recover smaller unpaid wages may have been outweighed the amount of the unpaid wages.  In other words, previously, it may not have been worth an employee and his attorneys’ time and investment.  But now, the prospect of an award of attorneys’ fees will likely encourage plaintiffs’ attorneys to pursue smaller unpaid wage cases that they previously declined.  If, however, the Court determines that the employee sought to establish the lien in bad faith, then the Court may award court costs and attorneys’ fees to the employer.

Of further significance, the Act’s definition of “employer” is broad and includes any “person who acts directly or indirectly in the interest of another employer with an employee.” This means that an unpaid employee’s supervisor, or the general contractor of a subcontractor’s unpaid worker, for example, could be held responsible. In addition, other employees who may have had no interaction with the unpaid employee, e.g., those in payroll or those who make payroll decisions, could also subject to the imposition of a lien.  Accordingly, the employer and the employer’s employees with payroll and supervisory authority should be aware of the new law and should be diligent in ensuring that employees are paid in full.

U.S. Department of Labor Announces Two Final Rules That Strengthen Affirmative Action and Improve Employment Opportunities for Vietnam War Veterans and Individuals with Disabilities

By:  Jason Zappasodi, Esq.

On August 27, 2013, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP or Office) announced two Final Rules that make changes to regulations implementing the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), at 41 CFR Part 60-300, and Section 503 of the Rehabilitation Act of 1973 (Rehabilitation Act), at 41 CFR Part 60-741.  The Final Rules seek to strengthen affirmative action provisions in these regulations for Vietnam War veterans and individuals with disabilities and improve their opportunities for employment.  On September 24, 2013, the Final Rules were published in the Federal Register.  They become effective on March 24, 2014.

Final Rule – VEVRAA
The first rule change affects VEVRAA’s implementing regulations.  The antecedents for VEVRAA date back to the early-1970s.  On June 16, 1971, President Nixon issued Executive Order No. 11598 (Order).  The Order stated that it was the federal government’s policy to “help  [ ] veterans obtain employment,” and further directed that they “be given a preference in job referrals through the employment service system.”  Exec. Order No. 11598, 36 FR 11711 (June 16, 1971).  The President noted that “[l]arge numbers of veterans are now leaving the armed forces, and many of them have been encountering severe difficulties in making the transition to civilian life . . . .”  Id.  To aid the veterans in this transition, the Order established, among other things, a program that required each department and agency of the executive branch to list employment openings suitable for these veterans.  Id.  It further directed the Secretary of Labor to gather information on the effectiveness of this program and report to the President concerning the evaluation of its effectiveness.  Id.

On October 24, 1972, Congress passed and President Nixon signed into law VEVRAA.  Pub.L. 92-540, Title V, § 503(a), Oct. 24, 1972, 86 Stat. 1097, § 2012.  VEVRAA superseded the Order and added Section 2012 (now 4212) to Title 38 of the U.S. Code.  Section 4212 requires any party entering into a contract with a department or agency of the United States in the amount of $100,000 or more “for the procurement of personal property and nonpersonal services (including construction) . . . [to] take affirmative action to employ and advance in employment qualified covered veterans.”  38 U.S.C. § 4212.  In addition, the contractor for each such contract covered under the statute must immediately list its employment openings with the “appropriate employment service delivery system” (ESDS) and for each such system “give such qualified covered veterans priority in referral to such employment openings . . . .”  Id.

The Final Rule makes several changes to the regulations implementing VEVRAA.  The Final Rule rescinds 41 CFR Part 60-250 in its entirety.  OFCCP received few comments to its proposed rule change that supported retaining and amending 41 CFR Part 60-250, which applies to other federal contracts, and the Office believed that there were no remaining federal contracts governed solely by its provisions.  78 FR 58614-01.  However, out of an abundance of caution, aggrieved individuals who are protected from discrimination solely under 41 CFR Part 60-250 are able to bring their claims under the Final Rule.  See 41 CFR Parts 60-300.1 and 60-300.2.

The Final Rule made several changes to 41 CFR Part 60-300.5(a).  First, it made clear that OFCCP would not alter the job listing requirement in 41 CFR Part 60-300.5(a).  Although the Office received several comments asserting that the requirements were burdensome because the ESDS “in varying states and localities require different submission formats and information,” it noted that this requirement is mandated by the statute.  78 FR 58614-01.  The Final Rule explicitly requires contractors to provide the job listing in a manner usable by the ESDS.  Second, while the existing rule required contractors to post the notice of rights for veteran applicants and employees in a conspicuous manner that is accessible to disabled persons, the Final Rule provides updated examples of what constitutes “accessible,” which include furnishing copies of the notice in Braille or large print.  Third, contractors must now notify labor organizations about its affirmative action obligations and its nondiscrimination obligations.  Fourth, contractors must state in solicitations and advertisements that they are an equal employment opportunity employer of protected veterans.

The Final Rule strengthens the already-existing affirmative action program (AAP) requirement.  Under 41 CFR Part 60-300.40, the AAP must now be annually reviewed and updated by a contractor’s designated official.  In addition, while contractors were required to design and implement an audit system to measure the effectiveness of their AAP, they now must document all actions they have taken to comply with this requirement and retain the documentation as an employment record.  41 CFR Part 60-300.44(h).  Further, the Final Rule’s new AAP requires contractors to document outreach and recruitment activities, conduct an annual self-assessment of these activities, retain the results of this self-assessment for three years and identify and implement alternative efforts if its activities are not effective.  41 CFR Part 60-300.44(f).

OFCCR included benchmarks for hiring in the Final Rule. Under 60 CFR Part 60-300.45, contractors must set an annual hiring benchmark to measure the success of their efforts to attract veterans for employment.  The contractors must retain all records that relate to their benchmark for three years.  However, failure to obtain the benchmark is not a violation of VEVRAA.

Finally, the Final Rule alerts subcontractors of their obligations under the statute.  41 CFR Part 60-300.5(d) and (e) requires parties to use specific, mandatory language for the equal opportunity clause in contracts.  Contractors are no longer permitted to reference the clause by citation.  This will, in effect, make the subcontractors’ responsibilities to veteran employees more conspicuous prior to beginning work on a project.  Under 41 CFR Part 60-300.44(f), contractors are required to send written notification to subcontractors of the company affirmative action policy and request their cooperation.

Final Rule – Rehabilitation Act
The second rule change affects the regulations implementing Section 503 of the Rehabilitation Act of 1973 (“Act”).  On September 26, 1973, the Act was signed into law.  Pub.L. 93-112, Sept. 26, 1973, 87 Stat. 355.  Codified at 29 U.S.C. § 701 et seq., the Act sought to empower individuals with disabilities to maximize their “employment, economic self-sufficiency, independence, and inclusion and integration into society . . . [and] ensure that the Federal Government plays a leadership role in promoting [their] employment . . . .”  Section 503 of the Act requires any party entering into a contract with a department or agency of the United States in excess of $10,000 or more “for the procurement of personal property and nonpersonal services (including construction) . . . [to] take affirmative action to employ and advance in employment qualified individuals with disabilities.”  29 U.S.C. § 793.  Further, any disabled individual who believes a contractor is not in compliance with this provision may file a complaint with the Department of Labor.  Id.

Implementing regulations for Section 503 of the Act are at 41 CFR Part 60-741.  The Final Rule makes several changes to these regulations, beginning with their scope.  It conforms the regulations to Section 503 by increasing from $2,500 to $10,000 the threshold amount of the federal contract that triggers coverage under the Act.  41 CFR Part 60-741.4(a)(1).  The Final Rule superseded case law that limited coverage based on the relationship between the work and the federal contract by extending coverage to all positions.  41 CFR Part 60-741.4(a)(2).  And, while still limited, the Final Rule elucidates the “employment activities within the United States” that are covered under the Act.  41 CFR Part 60-741.4(a)(4).

As with VEVRAA, the Final Rule strengthens affirmative action provisions in the Act.  Under 41 CFR Part 60-741.43, the Final Rule no longer implies that nondiscrimination against individuals with disabilities is mandated, but rather states this requirement explicitly.  Moreover, the necessary written contents in each employer’s affirmative action program (AAP) are set forth in greater detail and with more clarity.  41 CFR Part 60-741.44(a).  The Final Rule also requires contractors to invite potential employees to self-identify as an individual with a disability prior to employment.  41 CFR Part 60-741.42.  Finally, failure to provide reasonable accommodations to employees is expressly defined as discrimination unless the employer can show an “undue hardship.”  41 CFR Part 60-741.21(f).  And the assessment of “undue hardship” must take into account offsets that are available to reduce the costs of the accommodations.  41 CFR 60-741.2(w)(2).

The Final Rule reduces some barriers that employees faced when they alleged discrimination by a contractor covered under the Act.  The filing period for bringing such complaints increased from 180 days to 300 days.  41 CFR Part 60-741.61(b).  Third-party complaints, i.e. complaints made on behalf of another party, were permitted under the existing rule, but required identification of the complainant.  The Final Rule, on the other hand, permits the person on whose behalf the complaint was filed to remain anonymous whenever possible, as long as that person is identified to the OFCCP.  41 CFR Part 60-741.61(c)(2).  The Final Rule also eliminated a 60-day internal review that the existing rule permitted contractors to undertake when a complaint was brought against them.

The Final Rule also restricts what employers may ask or test for during the job application process.  Employers are now prohibited from requiring medical examinations prior to offering employment.  Post-offer medical examinations are permitted if all employees in the job class are subjected to them.  41 CFR Part 60-741.23.  Medical inquiries are prohibited except that employers may ask about the applicant’s ability to perform job related functions.  41 CFR Part 60-741.23(b)(1).  The Final Rule still permits medical examinations of employees, but only if they are related to the job and a business necessity.  41 CFR Part 60-741.23(b)(4).

Recordkeeping requirements are more stringent under the Final Rule.  The retention period is increased from one year to two years for larger contractors.  40 CFR Part 60-741.80(a).  If an employer destroys or fails to retain records, a negative inference will be drawn.

The Final Rule establishes a 7% utilization goal for qualified individuals with disabilities.  Contractors will apply this goal to their job groups or their entire workforce, depending on the size of the company.  Id.  Further, contractors must annually perform a utilization analysis that assesses problem areas and establishes a program to address them.  Failure to meet the goal, however, is not a violation under the statute.  41 CFR Part 60-741.45.

Finally, the Final Rule alerts subcontractors of their obligations under the statute.  41 CFR Part 60-741.5(d) and (e) requires parties to use specific, mandatory language for the equal opportunity clause in contracts.  The Final Rule does not permit contractors to reference the clause by citation.

In a Challenge Brought by the EEOC, the United States District Court for Maryland Holds that Background Checks Are an “Important” and “Essential” Part of the Employment Process.

By Ali Khorsand, Esq.

The Equal Employment Opportunity Commission, in its lawsuit filed in the United States District for Maryland, alleged that Freeman has implemented a hiring policy, though facially neutral, which had a discriminatory effect on African-American and male applicants. Under Title VII of the Civil Rights Act of 1964, a specific hiring policy may be an unlawful employment practice if an employer’s particular employment practice causes a disparate impact on the basis of race, color, religion, sex, or national origin. In particular, the EEOC challenged Freeman’s use of criminal background and credit checks in reaching its hiring decisions. The action filed against Freeman is only one of several high profile lawsuits brought by the EEOC across the nation challenging the use of criminal background and credit checks in reaching the hiring decisions; most notably, the EEOC recently filed similar actions against BMW and the Dollar General.

Freeman is a national leader in face to face marketing services for expositions, conventions, corporate events, meetings, and exhibit programs. It employs over 3,500 full-time and 25,000 part-time and seasonal workers and has revenues exceeding $1.3 billion.

Freeman, from 2006 to 2011 conducted two types of background checks: 1) a criminal history investigation and social security verification for “general employees,” individuals who did not hold credit sensitive jobs; and 2) a credit history review for “credit sensitive” employees, individuals who had access to financial information and possessed budgetary authority. Freeman’s employment application asked jobseekers if they had ever “ever pleaded guilty to, or been convicted of, a criminal offense” and provided space to describe the date and facts surrounding the plea or conviction. Types of convictions that were of particular concern to Defendant, and would generally disqualify an applicant, included those involving violence, destruction of private property, sexual misconduct, felony drug convictions, or job-related misdemeanors. Further, a conviction did not result in an automatic disqualification from consideration for the position. The background checks were conducted by an outside vendor, Prescreen America.

In its decision, the court noted that “careful and appropriate use of criminal history information is an important, and in many cases an essential, part of the employment process of employers throughout the United States.” Further, the Court noted that for the EEOC to prevail, it must show African-American applicants failed Freeman’s credit check at a significantly higher rate than other races and African-American applicants failed Freeman’s background checks at a significantly higher rate than females and non-African-Americans; the showing must be supported by an evidentiary foundation.

The court found that the EEOC did not establish this required evidentiary foundation because it did not provide reliable and accurate expert testimony and statistical analysis that demonstrated the alleged disparate impact on the employment of African-American applicants. Further, the court identified a “plethora of errors and analytical fallacies underlying Murphy’s conclusions [which] render[ed] them completely unreliable, and insufficient to support a finding of disparate impact. In particular, the Court identified the following deficiencies:

  • The EEOC’s expert’s analysis was not based on a random sample of accurate data from the relevant applicant pool and time period, but was rather a “cherry picked” set of data;
  • The EEOC’s expert analyzed data from only a distorted fraction of the time period relevant to the claim, making it an inadequate basis for examining disparate impact during the relevant time period;
  • The EEOC’s expert analyzed data from a time-period irrelevant to the claim;
  • The EEOC’s expert analyzed credit check data compiled under an older, stricter credit check that was not used by Freeman during the times relevant to the claim; and
  • The EEOC’s expert only analyzed employment data from half of Freeman’s branch offices.

The Court concluded that even if the expert’s reports were admissible, the claim would still fail because the EEOC failed to identify the specific policy or policies adopted by Freeman that caused the alleged disparate impact. The EEOC simply made no effort to break down the background and credit checks, clearly multi-faceted, multi-step policies.

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