October 2020 – Vol. 22, No. 10 The Employer E-Letter: Labor and Employment Law News from the Duluth, Minnesota law firm of Hanft Fride, A Professional Association.

Co-Editors, Scott A. Witty, saw@hanftlaw.com and Richard R. Burns, rrb@hanftlaw.com, or 218.722.4766. Please feel free to forward this e-mail or share it with others.  If there are other topics of interest to you or any other suggestions concerning this newsletter, please let us know.

This Month’s Topics:

  • Tip Of The Month


The Wage and Hour Division of the Department of Labor (“DOL”) recently issued a new rule pertaining to commission‑based jobs in the retail and services industry. As you are aware, an employee is required to be paid 1.5 times his or her hourly wage for any amount of time worked in excess of 40 hours in a week unless the employee is exempt. Section 7(i) of the Fair Labor Standards Act (“FLSA”) exempts certain commissioned employees for retail and service establishments if they meet these conditions: 1. They must be employed by a retail or service establishment; 2. The employee’s regular rate of pay must exceed 1.5 times the applicable minimum wage; and 3. More than half of the employee’s total earnings must consist of commission on goods or services. The recent change by DOL eliminated two lists that were used as guides for employers in determining whether they qualified as a retailer under the DOL definition. One list identified businesses, such as real estate companies, that were not realtors and the other identified industries that may be considered retail, such as department stores. By eliminating the lists, more employers will be able to argue they have a retail concept, and their commissioned employees do not qualify for overtime.


In this recent Seventh Circuit Court of Appeals Case (the Circuit for Wisconsin), the plaintiff sued the Chicago Park District claiming national origin discrimination.  Under Title VII (and 42 USC 1983), the jury returned a verdict of $750,000 in compensatory damages under Section 1983, which the Trial Court reduced to the maximum Title VII damage amount of $300,000.  The Court of Appeals determined this award was not excessive.  There was some evidence of discrimination against Hispanics shown and, in particular, the plaintiff was fired for falsifying timesheets, but other white workers were neither fired nor significantly investigated for the same transgression.  The Court noted that following a jury determination in a Title VII case, the ‘sole question for the trial court’ is “[whether] a reasonable juror could conclude that [the plaintiff] would have kept [her] job if [she] had a different ethnicity, and everything else had remained the same.”  The fact that Vega relied mainly on circumstantial rather than direct evidence also was of no concern to the Court.  What matters is whether she presented enough evidence to allow the jury to find in her favor – and she did.  Lydia Vega v. Chicago Park District, Case No. 19-1926 and 1939 (7th Cir. 2020). 


Issued in January, the Department of Labor emphasized control in its revised joint employer rule.  It stated that joint employment depends on a four-factor balancing test, including the power to hire and fire; supervise and schedule; set pay; and maintain employment records.  The revised rule narrowed who is an employer and is helpful for companies who rely heavily on franchises and outsourcing.  However, New York and 17 other states sued to block the rule in February and suggested that the revised rule violated the Fair Labor Standards Act and its definitions.  The revised rule was similar to the standards adopted by the First, Third, Fifth and Seventh Circuits, but this four-factor standard has been rejected by the Second Circuit (New York).  New York District Judge Gregory Woods said the Department’s revised joint employer rule violated federal rule making norms and was thus invalid.  Among other things, it was suggested the final rule violated the Administrative Procedure Act as being arbitrary and capricious.  The Court concluded that it also conflicted with the FLSA, because it ignored the statute’s broad definition that states that an employer is a joint employer if it suffers or permits an employee to work while another employer simultaneously suffers or permits the same employee to work.  Among other determinations, the Court stated that the rule placed too much emphasis on control, and the Department did not adequately justify its departure from its prior interpretations.  According to the Court, the revised rule did not account adequately for the important costs to workers, which could limit claims to only one of two joint employers for, among others, violations of overtime and minimum wage rules, as well as other employment claims.  New York, et al v. U.S. Department of Labor(SDNY, September 2020).


In a recently released memo, the National Labor Relations Board (NLRB) advises unions cannot place “too great a restriction” on workers’ ability to revoke a voluntary waiver, and found unions violate federal labor law by blocking workers from resigning union membership during the term of their agreement despite voluntary waiver. In the case subject to NLRB review, employees with Laborers’ Local 980 signed cards authorizing dues deductions, and by signing also agreed, “For the effective period of this checkoff authorization and assignment, I hereby waive any right I may have to resign my union membership.” The NLRB found including this waiver language in the deduction authorization impedes employees’ right to resign from union membership because the waiver is subject to automatic renewal and paying dues and remaining a union member are two distinct actions.  Even if employees voluntarily waive their right to resign membership, it violates federal labor law to impose a waiver on employees who may only want to sign to agree to the dues deduction and in this instance is too great a restriction. See Laborers’ Local 980, NLRB ADV. No. 05-CB-229670 (July 29, 2019).


With many employees now working from home during the pandemic, employers should be reminded to review and not ignore changes to the job duties and responsibilities for those employees now working from home and how such changes may impact exempt v. non-exempt classification under the Fair Labor Standards Act.  As you are aware, there are several exemptions that render an employee ineligible for overtime pay.  One such exemption, the executive exemption, requires that the employee “customarily and regularly direct the work of at least two or more other full-time employees.”  If an employee was directing other employees’ work in the workplace but is now performing other tasks (and not directing others), the employee may now be properly classified as non-exempt and be entitled to overtime pay.  This is just one example of numerous potential exemptions that could change with employees from working at home, so employers should take a look at classifications for each employee working from home to ensure proper classification and avoid costly litigation or FLSA penalties. 

Hanft Fride’s business and trial lawyers are located at 1000 U.S. Bank Place, in Duluth, Minnesota.  Visit our website at www.hanftlaw.com for general information on the firm and our attorneys. Our employment lawyers include Tom Torgerson, Rob Merritt and Scott Witty.  Richard Burns is now of Counsel.

The information provided in this E-letter is general in nature and should not be used as a substitute for professional services and advice.  The communication and receipt of this information is not intended to create an attorney-client relationship.  Readers should consult with their legal counsel before taking any action on matters covered in this E‑letter.

To subscribe or unsubscribe to Employer E-Letter, e-mail your request to jaw@hanftlaw.com or call Scott Witty at 218.722.4766.

Copyright 2020 by Hanft Fride, P.A.  All rights reserved.  Hanft Fride, A Professional Association, 1000 U.S. Bank Place, 130 W. Superior Street, Duluth, MN 55802.  Phone 218.722.4766; Fax 218.529.2401.