Friday, September 13, 2013

The Continued “Employee” versus “Volunteer” Debate: Categorization of Volunteer Firefighters under the FMLA and FLSA

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In Mendel v. City of Gibraltar, No. 12-1231, 2013 U.S. App. LEXIS 16922 (6th Cir. Aug 15, 2013), the Sixth Circuit recently held, in a 2-1 decision, that a group of volunteer firefighters who receive a substantial hourly wage for responding to calls whenever they choose to do so, are “employees” within the meaning of the FLSA and FMLA.  In doing so, the Court reversed the judgment of Judge Roberts of the United States District Court for the Eastern District of Michigan, which had concluded that the firefighters were “volunteers” for the purposes of the two statutes.  Chief Judge Batchelder wrote the Sixth Circuit opinion, in which Judge Merritt joined, and Judge Kethledge wrote a separate dissenting opinion. 

The terms “employ” and “employee” have the same definition under both the FLSA and the FMLA. See 29 U.S.C. § 2611(3) (providing that for the purposes of the FMLA, the terms “employ” and “employee” have the same meaning as given in 29 U.S.C. § 203(e) and (g), the definitions section of the FLSA).  Thus, the Mendel decision focused exclusively on the definition of those terms under the FLSA.  In applying the Supreme Court’s “economic reality” test set forth in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947), and upon consideration of “the ‘striking breadth’ of the FLSA’s expansive definition of ‘employ’”, the Sixth Circuit concluded that the firefighters “fall within the FLSA’s broad definition of employee,” as they “are suffered or permitted to work… and they even receive substantial wages for their work.”

The court considered a 1986 amendment to the FLSA’s definition of “employee”, 29 U.S.C. § 203(e), which provides that individuals who volunteer to perform services for a public agency are not “employees” for the purposes of the statute.  However, that exception only applies where the worker in question “receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered.” Id.  Thus, the operative question was whether the monies paid to the firefighters constituted “compensation”, or whether it was instead just a “nominal fee”.  As the Court noted in its opinion with regard to this particular question:

The official regulations provide guidance at this juncture. The regulations define ‘volunteer’ as ‘[a]n individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered.’ 29 C.F.R. § 553.101(a); see also 29 C.F.R. § 553.104(a) (employing similar language). The regulations proceed to recognize, ‘Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers.’ 29 C.F.R. § 553.106(a).  The specific provision addressing nominal fees provides, in part, ‘A nominal fee is not a substitute for compensation and must not be tied to productivity. However, this does not preclude the payment of a nominal amount on a 'per call' or similar basis to volunteer firefighters.’ 29 C.F.R. § 553.106(e). Finally, the regulations caution, ‘Whether the furnishing of expenses, benefits, or fees would result in individuals’ losing their status as volunteers under the FLSA can only be determined by examining the total amount of payments made (expenses, benefits, fees) in the context of the economic realities of the particular situation.’ 29 C.F.R. § 553.106(f).
Mendel, 2013 U.S. App. LEXIS 16922 at *12-13.

In concluding that the monies paid to the firefighters was compensation rather than a nominal fee, the Court noted that:

The firefighters do not receive ‘a nominal amount on a 'per call' or similar basis.’ 29 C.F.R. § 553.106(e). Rather, they render services with the promise, expectation, and receipt of substantial compensation. See 29 C.F.R. §§ 553.101(a), 553.104(a). Each time a firefighter responds to a call, he knows he will receive compensation at a particular hourly rate—which happens to be substantially similar to the hourly rates paid to full-time employed firefighters in some of the neighboring areas. Essentially, the Gibraltar firefighters are paid a regular wage for whatever time they choose to spend responding to calls. These substantial hourly wages simply do not qualify as nominal fees.
Id. at *13.  

The Court recognized the seemingly counter-intuitive conclusion that so-called volunteer firefighters could be classified as “employees” rather than as “volunteers”.  But, the Court chalked that result up to “[t]he fact that the FLSA’s categories of ‘employee’ and ‘volunteer’ do not necessarily match the common use of those terms or popular perception in general.” Id. at *17.

In his dissent, Judge Kethledge noted that the firefighters had to perform a great number of tasks (152 hours of training, passing an examination, and then completing an additional 73 hours of training each year) for which they were not compensated, and that, taking only the annual training into account, that amounted to the firefighters receiving “little more than minimum wage.” Id. at *20.  Judge Kethledge indicated that he would thus hold that the firefighters are volunteers.  Further, Judge Kethledge noted that the FLSA defines “employ” in 29 U.S.C. § 203(g) to mean “to suffer or permit to work”, and that the Supreme Court had defined “work” for those purposes, in Tenn. Coal, Iron, & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598 (1944) as meaning “physical or mental exertion” that is “controlled or required by the employer.”  He reasoned that here, the city “neither controls nor requires the firefighters’ efforts’, as the firefighters generally worked without supervision, and were not required to respond to fires at all if they chose not to.  He concluded that “[p]ersons that need a Family and Medical Leave Act are presumably persons who need leave not to show up for work.  That description does not apply to the City of Gibraltar’s firefighters.  I respectfully dissent.”

In contrast to the Mendel case, the Eleventh Circuit held last year, in a per curiam opinion in Freeman v. Key Largo Volunteer Fire & Rescue Dep’t, Inc., 494 Fed. Appx. 940 (11th Cir. 2012), argued before Judges Hull, Martin, and Cox, that a volunteer firefighter was a volunteer, rather than an employee, under the FLSA.  As in Judge Kethledge’s dissenting opinion in Mendel, the Eleventh Circuit based its decision, in part, on a finding that the fire district in question did not supervise the plaintiff, and did not set the plaintiff’s schedule. Freeman, 494 Fed. Appx. at 943.  The Court also noted that (a) the fire department / fire district contract made a clear distinction between volunteers and employees; (b) volunteers were paid $5.00 per hour while employees were paid between $16.83 and $20.04 per hour; (c) the most that the plaintiff volunteer firefighter could earn in a month was $1,200 regardless of the number of hours he spent at the fire station or the number of emergency calls he responded to; (d) the fire department needed permission from the fire district to hire paid employees; (e) the plaintiff’s schedule varied depending on his availability; (f) the district did not mandate standard operating guidelines for volunteer firefighters; (g) the plaintiff’s individual rate of pay was not set by the fire department or fire district; and (h) besides W-2 forms, the fire department did not provide any employment records to the plaintiff, and the plaintiff did not allege that the fire district had any employment records for him. Id. at 943-44.  The Court concluded that based on the above factors, “the economic reality is that Freeman is not an employee of the Department or the District.”

Whether the Mendel and Freeman cases represent a circuit split on this issue, or whether they are instead distinguishable on their facts, is not entirely clear.  According to Judge Kethledge’s view of the Mendel case, both cases involved a lack of supervision, schedules which varied according to the individual workers’ availabilities and which were not controlled by the fire departments or districts, and pay which (at least when considering time spent training and taking examinations without compensation in the Mendel case) was near or below minimum wage.  However, the cases also appear to differ factually in some respects.  At least with regard to the time spent actually responding to calls, and excluding Judge Kethledge’s consideration of unpaid time spent training and taking exams, the rate of pay in the Mendel case was $15 per hour – three times the $5 per hour in the Freeman matter.  And, the Freeman opinion speaks of a monthly cap on volunteers’ earnings, while no such cap is discussed in either the Mendel majority opinion or dissent.  Whether these and the other factual differences between the two cases are sufficient to explain the difference in the two holdings, one can only surmise.

This issue has also been litigated under state and local statutes.  See, e.g., City of Ft. Calhoun v. Collins, 500 N.W.2d 822, 826 (Neb. 1993) (a volunteer fire department is not an employer within the meaning of the state fair employment practices act).  And, the above cases certainly do not represent the first time that similar issues have been litigated with regard to volunteer firefighters. See, e.g., Bryson v. Middlefield Volunteer Fire Dept., Inc., 656 F.3d 348 (6th Cir. 2011) (reversing District Court’s holding that that plaintiff volunteer firefighter had to receive “significant renumeraction” in order to be considered an employee for the purposes of her Title VII claims, and holding that compensation is only one of a number of factors that should be considered in making that determination); Haavistola v. Community Fire Co., 6 F.3d 211 (4th Cir. 1993) (holding that the issue of whether a volunteer firefighter was an employee, for the purposes of her Title VII sex discrimination claim, involved fact-intensive determinations on which the trial court was not equipped to rule on the basis of a summary judgment record alone).  Indeed, these cases are only part of the larger longstanding debate over the proper characterization of workers as employees versus volunteers, whether certain workers can rightfully be characterized as unpaid interns or externs, and the similar issue as to whether workers should be categorized as employees as opposed to independent contractors.  For several of our firm’s prior publications on those topics, see, e.g.:
  • The Department of Labor’s Internship Test under the FLSA, available here;
  • Misclassification of Employees as Independent Contractors, available here; and
  • FLSA Developments: Missclassification as Independent Contractors, Unpaid Interns, the Status of DOL Opinion Letters, and the Meaning of Clothes Under Section 3(o), available here.
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EEOC Wins Summary Judgment in Religious Head Scarf Case

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We have written often on the banning of religious garb, whether in the workplace or otherwise.  See, e.g., our article on banning the wearing of burquas (here), our article on the push in France to ban the wearing in public of Muslim veils (here), and our article on the Third Circuit affirming a workplace head scarf ban (here).

In a recent development on this issue, the EEOC recently won a motion for summary judgment, in a religious discrimination case involving the wearing of a religious head scarf. See EEOC v. Abercrombie & Fitch Stores, Inc., No. 11-cv-03162-YGR, 2013 U.S. Dist. LEXIS 125628 (N.D. Cal. Sept. 3, 2013).  The defendant in that case, Abercrombie & Fitch, Inc., operates retail stores across the country under the brand names Abercrombie & Fitch, Hollister Co., Abercrombie Kids, and Gilly Hicks. Id. at 4.  The case revolved around Abercrombie’s “Look Policy”, which sets forth certain rules regarding employee appearance, including a prohibition on wearing any form of headwear. Id. at *6-7.  All in-store Abercrombie employees were required to comply with the Look Policy, are to be informed of the Look Policy during the job interview process, and are required to sign an acknowledgement of the Look Policy when they are hired. Id. at *7.  The Look Policy also appears in Abercrombie’s handbook. Id.

Plaintiff, Ms. Umme-Hani Khan, a Muslim, believes that Islam requires her to wear a head scarf, also known as a hijab, when in public or in the presence of men who are not immediate family members. Id. at *7-8.  For more on the practice of wearing a hijab among Muslim women, see Kim Parker, Women, Islam, and Hijab, Postcolonial Studies @ Emory (May 2012) (available here); Islam’s Women: Jewels of Islam, The Virtues of Hijab (available here);, The Qur’an and Hijab (available here).  At the time Ms. Khan was hired, she had fully adopted the practice of wearing a head scarf on the above occasions, and she therefore wore a head scarf when she interviewed for the position. Id. at *8.  She acknowledged the Look Policy, and agreed to abide by it. Id. 

Ms. Khan worked for Abercrombie from October 2009 to February 2010, all the time wearing her head scarf. Id. at *9.  Local supervisors allowed her to wear her head scarf so long as it matched company colors (the Look Policy was a part of Abercrombie’s marketing strategy, aimed at “communicating the spirit of” the store’s brand). Id. at *6-7, *9.  Her store managers never informed her that she was not complying with the Look Policy. Id. at *9.

In February of 2010, a District Manager made a regularly scheduled visit to the store at which Ms. Khan worked, noted that Ms. Khan was not in compliance with the Look Policy, informed Ms. Khan of same a few days later, and asked Ms. Khan if she could take her head scarf off. Id. at *10.  Ms. Khan responded that she could not take the head scarf off because it was part of her religion.  Within weeks, Abercrombie suspended and then fired Ms. Khan, solely due to her non-compliance with the Look Policy. Id. at *10-11.  Eleven days after the termination, Abercrombie offered Ms. Khan an unconditional offer of reinstatement with the accommodation of being allowed to wear her head scarf to work, but Ms. Khan declined the offer of reinstatement. Id. at *11.

At the time that Ms. Khan filed her charge of discrimination with the EEOC, the EEOC was involved in two other cases against Abercrombie in connection with the wearing of headscarves – one case alleging a refusal to hire an applicant for an associate position because she wore a hijab, and the other alleging a refusal to hire a woman as a model because she wore a hijab. Id. at *11-12.  The EEOC found reasonable cause to believe that Abercrombie had discriminated against Ms. Khan in violation of Title VII. Id. at *13.  The EEOC unsuccessfully attempted to jointly settle all three cases with Abercrombie.  Id. at *12-13, *15. The EEOC, as a part of a conciliation effort, attempted to get Abercrombie to agree to modify its policies to allow the wearing of head scarves by all employees, but Abercrombie rejected that proposal, as the EEOC’s proposed policy modification did not allow for a case-by-case consideration of whether employees should be permitted to wear head scarves. Id. at *13-14.  After continued unsuccessful efforts at conciliation and settlement, EEOC filed suit on behalf of Ms. Khan as Plaintiff-Intervenor. Id. at *15-16.

In litigation, Abercrombie raised a number of affirmative defenses, including that the EEOC failed to engage in conciliation in good faith, Id. at *19, that Abercrombie’s Look Policy is protected commercial free speech, Id. at *24, that accommodating Ms. Khan’s religious beliefs would constitute an undue hardship, Id., and that punitive damages and injunctive relief were not warranted, Id. at *46-47, *50.  Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California granted the plaintiffs’ motion for summary judgment (and denied Abercrombie’s cross-motion) as to all of those issues, as well as to the issue of liability. Id. at *23-24, *41, *45, *50, *56.

Abercrombie did not dispute that the plaintiffs had established a prima facie case of unlawful discrimination. Id. at *29.  As to liability, setting aside the procedural issues about good faith conciliation and whether punitive and injunctive relief was available, Abercrombie based its defense solely on its undue hardship and commercial free speech defenses.

Abercrombie’s undue hardship defense was that the Look Policy was “key to Abercrombie’s success and/or that deviations from the policy ‘detract from the in-store experience and negatively affect [the] brand.’” Id. at 32.  Judge Gonzalez Rogers rejected that argument, as it was based only on the testimony of Abercrombie employees as to their “beliefs” based on “personal experience” about the effects of the Look Policy, and not on any hard data.  Id. at *35-37.  The Judge therefore found the employees’ “beliefs” to be “speculative and purely subjective in nature,” and that “[a] reasonable jury could not conclude that Abercrombie would be unduly burdened by allowing Khan to continuing [sic] wearing her hijab as she had been prior to February 2010.”  Id. at *38, *41.

Abercrombie’s commercial free speech defense, which Judge Gonzalez Rogers characterized as a “novel argument,” was that “the store associates should be classified as ‘living advertisements’ for [Abercrombie’s] brand and therefore their appearance is protected as commercial free speech.” Id. at *42.  The standard for a finding of commercial free speech was succinctly summarized by the Court as follows:

Commercial speech is that ‘which does 'no more than propose a commercial transaction.’’ Valle Del Sol Inc. v. Whiting, 709 F.3d 808, 818 (9th Cir. 2013) (quoting Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 762, 96 S. Ct. 1817, 48 L. Ed. 2d 346 (1976)). The test for determining whether commercial speech exists is set forth in Bolger v. Youngs Drug Products Corp. There, the Supreme Court held that commercial speech can be found where the speech: (i) is an advertisement; (ii) refers to a particular product; and (iii) the speaker has an economic motivation for the speech. 463 U.S. 60, 66-67, 103 S. Ct. 2875, 77 L. Ed. 2d 469 (1983) (holding that the ‘combination of all these characteristics’ provided ‘strong support’ that the pamphlets at issue were properly characterized as commercial speech). Commercial speech is entitled to constitutional protection, albeit a lesser degree of protection than is afforded to other forms of speech. See Central Hudson Gas & Elec. Corp. v. Public Service Comm'n of New York, 447 U.S. 557, 562-63, 100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980).
Id. at *41-42.  The Court concluded that Abercrombie had not provided any authority to support its “novel argument”, and concluded that Abercrombie had failed in any event to satisfy the above standard to establish commercial free speech. Id. at *43. The Court based this decision primarily on the fact that the employees in question did much more than just purportedly “representing the brand,” given that “the employees’ responsibilities consist of ensuring shipments are complete, folding clothing, and placing/replacing clothing on the floor,” duties which were “primarily performed in the stockroom.” Id. at *44.  And, while the Look Policy restricted what employees could and could not wear, it did not require employees to wear only Abercrombie’s products. Id.

After also dispensing with Abercrombie’s argument about good faith conciliation, Judge Gonzalez Rogers granted the plaintiffs’ motion for summary judgment as to liability, “[t]here being no viable defense” thereto. Id. at *45.

As to Abercrombie’s arguments about the plaintiffs’ entitlement to injunctive relief, the Court explained the applicable standard as follows:

‘Generally, a person subjected to employment discrimination is entitled to an injunction against future discrimination, unless the employer proves it is unlikely to repeat the practice.’ E.E.O.C. v. Goodyear Aerospace Corp., 813 F.2d 1539, 1544 (9th Cir. 1987) (citations omitted). ‘[V]oluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot.’ County of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S. Ct. 1379, 59 L. Ed. 2d 642 (1979) (quoting United States v. W. T. Grant Co., 345 U.S. 629, 632, 73 S. Ct. 894, 97 L. Ed. 1303 (1953)). However, an injunction may be unnecessary where there is no reasonable expectation that the alleged violation will recur and ‘interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.’ County of Los Angeles, 440 U.S. at 631. To obtain an injunction, the ‘necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.’ W. T. Grant Co., 345 U.S. at 633.
Id. at *46. The plaintiffs sought an “injunction enjoining Abercrombie from engaging in practices which discriminate on the basis of religion, and an order that Abercrombie institute policies, practices, and programs providing employment opportunities for employees of all religions and which ‘eradicate’ effects of past unlawful practices”. Id. at *45.  Abercrombie opposed such an injunction, arguing that (a) Abercrombie had offered Ms. Khan unconditional reinstatement with the accommodation of wearing her hijab; (b) there was no threat of future, recurring violations, as Abercrombie had made “significant policy changes” since the events in question; and (c) the injunction was overbroad. Id. at *46-47.  The Court denied Abercrombie’s summary judgment motion on this issue, finding triable issues as to whether the changes in Abercrombie’s policies “completely and irrevocably eradicated the effects of the alleged violation.” Id. at *49.  The Court pointed to evidence that Abercrombie had changed its policies due to the instant litigation rather than because of the law, and on the fact that several of Abercrombie’s witnesses continued to believe that wearing religious headwear harmed Abercrombie’s image and brand. Id. at *49-50.  As to Abercrombie’s argument as to the breadth of the contemplated injunction, Judge Gonzalez Rogers concluded that the record was not sufficiently developed to determine that issue. Id. at *50.

Finally, the Court rejected Abercrombie’s summary judgment motion regarding the availability of punitive damages, finding that “[r]easonable jurors could determine that by offering Khan one option – to remove her hijab despite her religious beliefs – Abercrombie acted with malice, reckless indifference or in the face of a perceived risk that its actions violated federal law.” Id. at *55.  As to Abercrombie’s anti-discrimination policies, the Court concluded that triable issues existed as to whether those policies were implemented in good faith, and that there was insufficient information in the record to determine whether deterrence or punishment would be necessary. Id. at *56.

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