Preliminary Injunction Blocks Dallas Paid Sick Time Ordinance

By Robert G. Chadwick, Jr., Managing Member, Seltzer, Chadwick, Soefje & Ladik, PLLC.

As noted in an earlier blog post, the City of Dallas enacted a paid sick time ordinance which became effective on August 1, 2019 for private employers with six (6) or more employees. Under the Ordinance, no penalties were to be assessed, except for anti-retaliation violations, until April 1, 2020.

On June 30, 2019, a lawsuit was filed in the U.S. District Court for the Eastern District of Texas to stop the ordinance from taking effect. On March 30, 2020, two days before the ability of the City of Dallas to assess penalties, the Court issued a preliminary injunction blocking enforcement of the ordinance. The court’s reasoning was similar to that used by the Texas Third Court of Appeals in finding Austin’s paid sick time ordinance unconstitutional.

Since the ordinance has been in effect for eight months, many Dallas employers have already implemented sick leave policies in compliance with its prescriptions. Although likely welcomed by most Dallas employers, the preliminary injunction nevertheless presents the difficult question of whether to continue such policies, thereby incurring increased payroll costs, or to discontinue such policies, thereby risking poor employee morale or attrition.

Robert G. Chadwick, Jr. frequently speaks to non-profit organizations regarding labor & employment issues. To contact him for a speaking engagement please e-mail him at rchadwick@realclearcounsel.com

How Will Small Businesses Fare In Court Under Emergency Paid Leave Law?

By Robert G. Chadwick, Jr., Managing Member, Seltzer, Chadwick, Soefje & Ladik, PLLC

For small businesses with fewer than 50 employees, the Families First Coronavirus Response Act (“FFCRA”) includes two parts which suddenly present new, unanticipated and complex leave mandates.

Emergency Family & Medical Leave Expansion Act

The first part amends the Family & Medical Leave Act (“FMLA”) to include leave mandates applicable to school or place of care closures or child care provider unavailability for COVID-19-related reasons.

Small businesses with fewer than 50 employees are included in this mandate subject to the authority of the Department of Labor (“DOL”) “to issue regulations for good cause to exclude small businesses …”when the imposition of such a requirement would jeopardize the viability of the business as a going concern.”

Only the DOL may bring an enforcement action under this part of the FFCRA. In such an action, the DOL may seek not only actual damages, but also an additional amount equal to the amount of actual damages as liquidated damages to punish the employer.

Emergency Paid Sick Leave Act

This part prescribes 80 hours of paid sick leave for all employers with fewer than 500 employees. There is no exemption for small businesses with fewer than 50 employees.

As to the paid sick leave prescriptions, the FFCRA incorporates the penalty provisions of the Fair Labor Standards Act (“FLSA”) which allow for (1) civil actions by the DOL, (2)  civil actions by “any one or more employees on behalf of himself or themselves and other employees similarly situated”, (3) liquidated damages in an amount equal to the paid sick leave denied by the employer, and (4) attorney’s fees.

DOL Guidance

The Department of Labor (“DOL”) has provided (1) question & answer guidance to help small businesses understand these mandates, (2) a temporary rule interpreting the FFCRA, and (3) notice of its intent to delay full enforcement of the Act until April 18, 2020.

Included in this guidance is the small business exemption under the first part of the FFCRA. The DOL has stated a small business may claim the exemption if an authorized officer of the business has determined that:

  1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
  2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
  3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

Litigation Under Emergency Family & Medical Leave Expansion Act

Beyond the limited guidance provided by the DOL, little guidance is being offered to small businesses as to what to expect if litigation is brought by the DOL for a violation of the FMLA.

1. Who Has Burden of Proving Availability of Small Business Exemption?

To be sure, the DOL has provided guidance for small businesses in determination the availability of the small business exemption. But, who would have the burden of proving the availability of this exemption in court?

FLSA and the FMLA jurisprudence generally provides it is the employer’s burden to prove the availability of applicable exemptions. If cases under the FFCRA follow such precedent, the courts will look to small businesses to prove they fall within the exemption. A small business unable to meet its burden faces actual and liquidated damages as to each affected employee.

2. What Evidence Will Prove Availability of Small Business Exemption?

Interestingly, the DOL has stated the availability of the small business exemption hinges upon a “determination by an authorized officer of the business.” There is no similar FLSA or FMLA exemption tied to such a determination.

It will thus likely be up to the courts to determine, as a matter of first impression, what evidence is necessary as to the determination. Among the questions which will likely be addressed by the courts are: (1) Must a determination be in good faith? (2) Must a determination be based upon evidence? (3) What evidence must be considered in the determination? These questions will likely make the jeopardy inquiry much more complicated than the three-prong inquiry published by the DOL.

3. How Narrowly Will Small Business Exemption Be Construed?

The DOL guidance also leaves unanswered the question of how broadly or narrowly the small business exemption will be construed by the courts. For years, cases under the FLSA and FMLA have dictated that statutory exemptions under those statutes be narrowly construed. Several courts have thus held the burden of proving the availability of an exemption under the statutes is a substantial one.

If FFCRA cases follow FLSA and FMLA jurisprudence, they will likely require more than minimal evidence of jeopardy. Indeed, close questions as to jeopardy will likely be resolved in favor of the DOL.

Litigation Under Emergency Paid Sick Leave Act

Similarly, little guidance is being offered to small businesses as to what to expect if litigation is brought by the DOL or an employee for a violation of the paid leave prescriptions.

1. How Many Employees Can Join a Suit For Unpaid Sick Leave?

The only limitations on the number of employees which can join a suit under the FLSA are (1) the number of employees employed by the employer, (2) the number of employees who are shown to be similarly situated to the lead plaintiff, and (3) the statute of limitations.  Even for a small business, therefore, the stakes of litigation can be liability to multiple employees for unpaid sick leave and liquidated damages.

2. What Amount of Attorney’s Fees Can Be Awarded? 

The only limitation on the ability of a court to award attorney’s fees to a successful plaintiff is that the fees be reasonable. Indeed, in many FLSA collective actions, the attorneys fees awarded can exceed the combined liability of a defendant employer to all claimants.

3. Will Employers be Able to Avail Themselves of a Good Faith Defense?

The FLSA (29 U.S.C. 260) expressly allows an employer to avoid liquidated damages if the employer proves the act or omission which violated the Act was in good faith and the employer had reasonable grounds for believing the act or omission was not a violation. No such provision is expressly set forth in this part of the FFCRA.

Accordingly, a question which courts will be presented from the onset is whether a good faith defense exists for failure to provide paid sick leave. This question will be especially important for small businesses which are tackling federally mandated leave for the first time. If the good faith defense does not exist, the stakes of making wrong determinations become more serious for small businesses.

Takeaways

For small businesses, effective risk management under the FFCRA requires more than merely following DOL guidance. It requires understanding the stakes, expense and evidentiary realities of litigation. A small business which does not account for these realities risks unwanted litigation or, worse, a costly judgment or settlement.

So, how will small businesses fare in court under the FFCRA?  The answer depends upon how well they have been prepared by legal counsel for the prospect of  such litigation.

Robert G. Chadwick, Jr. frequently speaks to non-profit organizations regarding labor and employment law issues. To contact him for a speaking engagement please e-mail him at rchadwick@realclearcounsel.com.

What Employers Can Learn From The Coronavirus Suit Against Princess Cruises

By Robert G. Chadwick, Jr., Managing Member, Seltzer, Chadwick, Soefje & Ladik, PLLC.

On March 9, 2020, Ronald & Eva Weissberger sued Princess Cruise Lines, Ltd. in the U.S. District Court for the Central District of California. Mr. & Mrs. Weissberger are passengers aboard the Grand Princess which departed out of San Francisco on Feb. 21, 2020, and has been anchored off the coast of California since March 4, 2020 since March 4, 2020 as a result of an outbreak of COVID-19.

Two unique aspects of the suit are worthy noting.

First, the only causes of action actually plead are negligence and gross negligence (likely to invoke insurance coverage). The allegations nevertheless also support a claim of intentional misconduct. In this regard, the suit alleges: “Defendant PRINCESS chose to place profits over the safety of its passengers, crew and general public in continuing to operate business as usual, despite their knowledge of the risk of actual injury to Plaintiffs, who are elderly with underlying medical conditions.”

Second, neither of the plaintiffs has actually contracted COVID-19. Their alleged damages stem only from the actual risk of immediate exposure to the virus. The suit specifically alleges: “… Plaintiffs are suffering from emotional distress, are traumatized from the fear of developing COVID-19 as they sit minute after minute in their confined cabin on an infected vessel, and this emotional harm will continue to plague them.”

Frankly, the suit against Princess Cruises may have dubious merit. Still, the suit must now be defended, even if frivolous, at considerable expense. This expense, along with unwanted media attention, means the suit has settlement value. The plaintiffs likely had no problem finding an attorney willing to file a lawsuit under such circumstances.

Now that Coronavirus litigation has begun, other potential plaintiffs will soon join the party. They will see the suit against Princess Cruises as a model even as to persons who never contracted the virus.

So, why should employers be worried? After all, worker’s compensation insurance generally provides a shield from liability to employers not available to cruise lines. This shield can be especially formidable for injuries which are mental and emotional in nature. Still, there are circumstances in which this shield may not be available.

In Texas, for instance, an employer can opt out of worker’s compensation insurance coverage for its employees. A non-subscriber Texas employer, therefore, is not shielded from negligence claims, such as those asserted against Princess Cruises, for failure to provide a safe workplace.

In Illinois, moreover, the Worker’s Compensation Act provides the exclusive remedy only for “accidental injuries” that occur in the workplace. As recognized in 2018 by the U.S. District for the Northern District of Illinois in Phillips v. Exxon Mobil Corporation, there are circumstances in which a claim for intentional infliction of emotional distress is not barred by worker’s compensation insurance. An Illinois employer, therefore, is not shielded from claims, such as those effectively asserted against Princess Cruises, for intentional misconduct in the face of COVID-19.

As long as end-arounds exist to state worker’s compensation laws, employers should anticipate the tremendous incentive for employees exposed to the threat of contracting COVID-19 to exploit them. They will likely find no shortage of attorneys willing to try an end-around as to such a high-profile subject matter. Even if frivolous, a suit making claims, such as those asserted against Princess Cruises, will still need to be defended.

How can the risk of such a lawsuit be mitigated by employers? Follow the advice of the CDC on the webpage specifically developed or business and employers. This webpage can be accessed here. The more proactive an employer is in safeguarding the health of its employees, the lower the risk of an unfortunate lawsuit.

Robert G. Chadwick, Jr. frequently speaks to non-profit organizations regarding labor and employment law issues. To contact him for a speaking engagement please e-mail him at rchadwick@realclearcounsel.com.