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FMG Law Blog Line

Archive for March, 2014

The Working Vacation

Posted on: March 28th, 2014

By: Lisa Gorman

When is the last time you took a vacation without your phone?  Unless you’ve traveled someplace without cell reception, the answer is likely never.  If you’ve brought your phone on vacation, and your work email is accessible on your phone, you probably couldn’t resist checking your email.  If you received a work email that warranted a response, and you probably received numerous such emails, you likely responded.  A recent survey revealed more than half of U.S. employees work during their vacations.  How does this affect an employee’s use of Paid Time Off (“PTO”) during vacation?

Most employers offer their employees the benefit of PTO.  Pursuant to such policies, employees accrue PTO on a periodic basis, and accrual amounts often increase with seniority.  While employers cannot take away employees’ accrued and unused vacation in a “use it or lose it” policy, they can implement a cap, or maximum accrual amount.   In California, accrued and unused PTO is treated as a wage and must be paid at an employee’s regular rate of pay upon separation of employment.  While PTO policies may provide for use in hourly increments, or any other increment, many companies have PTO policies that require employees to use PTO in full-day increments or 4-hour increments.

If an employee who works for a company with a PTO policy that requires use in full-day increments spends just 2 minutes per vacation day reading and responding to work emails, he does not have to take any of his vacation as PTO.  When this hypothetical employee leaves the company, he is entitled to be paid out for all of his accrued PTO, even if he spent 7 hours and 58 minutes of his vacation days snorkeling or hiking Mt. Kilimanjaro.  Even for companies that allow PTO to be taken in one-hour increments, the “working vacation” can present a problem.  That is, under a policy that allows for PTO in one-hour increments, an employee who sends one email from a beach in Hawaii has now earned back one hour of PTO for what could conceivably amount to 30 seconds of work.

In this day and age, when enacting PTO policies, employers should take into consideration that many of their employees will leave the company with PTO banks that come close, if not all the way, to their PTO cap.  It is therefore more important than ever that PTO policies have a cap.  And when deciding on a PTO cap, employers should consider that amount akin to a severance, as many of their employees will leave the company with a check for their regular rate of pay times the number of hours of the PTO cap.

Big Man on Campus, Big Money in Pocket?

Posted on: March 27th, 2014

By: Marty Heller 

Spring is here.  Time to enjoy college baseball, spring football and lawsuits by college players for unpaid wages?  This very soon may become a reality.

Tuesday’s National Labor Relations Board decision ruling that college football players at Northwestern University are “employees” under the National Labor Relations Act raises some very interesting questions for wage and hour litigation.  First, and perhaps most importantly, does this ruling mean that the football players also are employees under the Fair Labor Standards Act?  I cannot imagine that this is the case, but 48 hours ago, I would have opined that there is no way college football players are employees in the NLRB context.

Just assume for a second that these players are employees, and assume that a few of the facts alleged in the Northwestern case are true: (1) the players (employees) receive little or no payment for their work; (2) the players (employees) spend 40-60 hours per week working (playing football).  Now assume that a four year starter spends half of the year playing football.  Using these figures, each player could bring an FLSA claim seeking between $30,000 and $50,000.00 in unpaid minimum wage and overtime.  After yesterday, it sounds like this is not an absurd assertion, and I anticipate we may see a similar argument soon.

If we do see a rash of FLSA cases involving college football players, I am curious how far this ruling will extend within private Universities?  Basketball players spend a lot of time on their sport, as do baseball players, hockey players, gymnasts, swimmers, tennis players, even members of the equestrian team.  There are no answers to these questions, but one thing is for certain: unless yesterday’s NLRB ruling is overturned, it is going to raise a lot of issues and create a lot of problems for private Universities (employers).

College Football Players Are “Employees” And Can Unionize

Posted on: March 27th, 2014

By: Jonathan Kandel  

                In a surprising decision issued yesterday, the National Labor Relations Board’s (NLRB) Regional Director in Chicago ruled that scholarship football players at Northwestern University qualify as “employees” under the National Labor Relations Act (NLRA) and, therefore, can unionize.  The decision has the potential to completely revolutionize college athletics.

The primary issue in the case was whether football players who receive athletic scholarships are “employees” for purposes of the NLRA; thus, allowing them to vote on unionizing.  Under the NLRA, “employees” are individuals who perform services for another under a contract for hire, subject to the other’s control or right to control, and in return for payment.

The Regional Director concluded that football players who receive athletic scholarships are “employees” under the NLRA.  His conclusion was based primarily on the amount of time the football players spend on football-related activities versus academics as well as the amount of control that Northwestern exercises over scholarship football players, including rules that regulate non-football-related activities.  For example, the Director emphasized that the players spend 50 to 60 hours per week before classes ever start in football training camp.  He also emphasized that, even after classes begin, football players spend 40 to 50 hours per week on football-related activities, but only 20 hours per week attending class plus some time completing homework and preparing for exams.


Critics of the decision contend that allowing college athletes to unionize could result in strikes by disgruntled players and lockouts by athletic departments.  Proponents of the decision emphasize that college football is, in all reality, a commercial enterprise that generates billions of dollars in revenue based on services performed by college athletes.  This may have been a factor in the decision; the Regional Director noted that Northwestern’s football program generated $30.1 million in revenue during the 2012-2013 academic year.

The proponents’ argument may sound familiar; there have been a lot of discussions lately regarding college athletes being paid.  The ruling also comes at the same time that the NCAA, which is the governing body for college sports, is fighting multiple lawsuits by former players, including one where former players seek a portion of the billions of dollars earned from broadcasts, memorabilia sales, and video games, and another alleging that the NCAA did not protect players from significant head injuries.

Notably, the decision does not impact the vast majority of college football players.  The NLRB has no jurisdiction over public universities, only private universities.  According to the decision, of the 120 to 125 universities with Division I football programs, only 17 are private.  Players at public universities would have petition their state’s labor board if they want to unionize.

Northwestern has announced that it will appeal the Regional Director’s decision to the full NLRB in Washington, D.C.  Regardless of the outcome at the NLRB, this case will likely be appealed further to the Federal Court of Appeals, and perhaps the Supreme Court.  Stay tuned for future updates.

So what do you think, are college football players “employees?”

Florida Joins Georgia In Declaring Non-Economic Caps on Damages to be Unconstitutional

Posted on: March 27th, 2014

By: Scott Rees

Florida recently joined Georgia and at least five other states when its Supreme Court in a 5-2 decision ruled that a non-economic cap on damages in medical malpractice wrongful death cases is unconstitutional.  The caps were part of a 2003 tort reform package put in place in part to lower the cost of malpractice insurance rates, avoid physician flight, and make sure high risk procedures continued.  The Court determined that the caps violated the constitutional guarantee of equal protection, stating that “the cap on non-economic damages serves no purpose other than to arbitrarily punish the most grievously injured or their surviving family members.”  The Court questioned whether there ever was a crisis involving insurance rates and physician flight, and that even if such a crisis had existed, it no longer did.  The ruling does not address caps in malpractice cases where the patient does not die, but it is expected that aspect of the law will be addressed shortly. The decision can be found here.  According to the National Conference of State Legislatures, thirty-five states continue to have some type of cap on medical malpractice awards at this time.

Contractors Win Big in Recent Federal Court Ruling

Posted on: March 27th, 2014

By: Gautam Reddy 

A recent federal court ruling marked a decisive victory for contractors engaged in federal government projects. The case, Metcalf Construction Co. v. United States, Case No. 2013-5041 (Fed. Cir. Feb. 11, 2014), involved two majors issues: (1) what standard the government is held to in its duty to act in good faith towards contractors; and (2) whether the disclaimers the government places in its pre-bid site reports shield it from the risk of differing site conditions.

As to the first issue, the court lowered the standard required to establish that the government lacked good faith in dealing with a contractor. Contractors no longer have to show that the Government’s actions were targeted specifically towards them in an attempt to avoid payment.  Practically speaking, this makes it easier for contractors to allege that the government has acted in bad faith.

Second, the court held that the government cannot shift the risk and costs of differing site conditions to the contractor by placing disclaimers in the contract or pre-bid site reports. For example, in this case, the government provided a soil report that prospective contractors relied on to make their bids. The report contained a disclaimer stating that it was only for preliminary use and that the contractor would need to perform an independent investigation. While preparing the site for construction, the contractor discovered that the soil was not as described by the government report. In addition, this difference was not immediately apparent but required an extensive analysis.  As a result, the contractor incurred additional, unforeseen costs during construction. The court ruled that the government could not avoid paying the contractor for these additional costs by relying on its disclaimers.

Overall, this ruling strengthens the position of contractors involved in disputes with the Federal government. Contractors now have more leeway to allege bad faith on the part of the government and can bypass disclaimer language to recover costs associated with differing site conditions.