December 2015 FBA Labor and Employment Law Third Circuit Update

Posted on Thursday, January 14th, 2016.

December 2015 FBA Labor and Employment Law Third Circuit Update

 

Stephen E. Trimboli, Esq.

Trimboli & Prusinowski, L.L.C.

Corrections officers receive the “predominant benefit” of their fifteen-minute unpaid meal period and are not entitled to receive overtime compensation under the Fair Labor Standards Act even though they are not relieved from all possible duty responsibilities during their meal periods.

 

Babcock, et al. v. Butler County, 806 F.3d 153 (3d Cir. 2015), 2015 WL 7444875, C.A. 3, (Penna.), November 24, 2015, available at www2.ca3.uscourts.gov/opinarch/141467p.pdf

 

The plaintiffs in this matter are corrections officers employed in the Butler County Prison. Under the collective bargaining agreement between Butler County and the Prison’s corrections officers, they work an eight and one-quarter hour shift that includes a one-hour meal period, of which only forty-five minutes are paid. During this meal period, corrections officers may not leave the Prison without permission, must remain in uniform, must remain in close proximity to emergency response equipment, and must be “on call” to respond to emergencies. Officers allegedly cannot run personal errands, sleep, breath fresh air, or smoke cigarettes during the meal period. Plaintiffs therefore argued that their entire meal period constitutes “work time,” that the unpaid fifteen minutes (when added to the forty-five minutes of paid meal period time) pushed the officers over forty hours of work per week, and that officers were therefore entitled to overtime compensation under the federal Fair Labor Standards Act (FLSA), at the rate of time and one-half their regular rates of pay, for fifteen minutes every day.

 

In a case of first impression before the Third Circuit Court of Appeals, a panel of the court, in a 2-1 decision, upheld the dismissal of the plaintiffs’ complaint on the pleadings, utilizing the “predominant benefit” test to hold that the meal period did not constitute work time even under the facts alleged in the plaintiffs’ complaint.

 

The interpretative regulation on meal periods issued by the United States Department of Labor suggests that the employee “must be completely relieved from duty for the purposes of eating regular meals,” and that an employee required to eat at his or her work location “is working while eating.” 29 C.F.R. Sec. 785.19(a). However, as the Babcock majority recognized, court “have generally eschewed a literal reading of {this} regulation” in favor of the “predominant interest” test deriving from United States Supreme Court precedent, which instead asks whether the time in question is spent predominantly for the employer’s benefit or for the employee’s. As applied to meal periods, the “predominant interest” inquiry asks whether the employee is engaged primarily in work-related duties during the purported meal break. Application of the “predominant interest” inquiry is fact sensitive, and requires assessment of the “totality of the circumstances to determine, on a case-by-case basis, to whom the benefit of the meal period inures.” Some courts place “particular importance” on whether the employees are free to leave the premises, while other courts “emphasize the number of interruptions to which the employees are subject.”

 

The Babcock majority found that the restrictions alleged by the plaintiffs did not cause the meal period to predominantly benefit the employer. Butler Prison corrections officers can request permission to leave the premises, and can eat lunch away from their desks. In addition, the corrections officers’ collective bargaining agreement provides officers with forty-five minutes of paid meal period time, and provides for mandatory overtime pay if the meal period is interrupted by work. The Babcock majority recognized that a collective bargaining agreement does not constitute a defense to a FLSA violation, and that a labor union cannot negotiate away employees’ rights under the FLSA. Nonetheless, citing precedent from other Circuits, the Babcock majority reasoned that the “agreed-upon characterization of the fifteen-minute unpaid meal break” was “a factor in analyzing to whom the predominant benefit of the period inures.”

 

The dissenting Judge argued that the plaintiffs had raised a plausible claim that their meal periods constitute compensable work even in the absence of interruption. The dissenter also faulted the majority for relying on a collective bargaining agreement in determining the officers’ FLSA rights, disregarding Supreme Court precedent on the definition of “work,” and relying on distinguishable and legally flawed precedent.

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61-year-old nurse was unable to present evidence sufficient to survive summary judgment that her employers proffered reasons for terminating her were unworthy of belief, or that her age was more likely than not the determinative reason for her termination.

 

Willis v. UPMC Children’s Hospital of Pittsburgh, _ F.3d _ (3d Cir. 2015), 2015 WL 9286713, C.A. 3, (Penna.), December 22, 2015, available at www2.ca3.uscourts.gov/opinarch/151526p.pdf

 

Catherine Willis, sixty-one years of age, had been employed by the defendant as Neonatal Nurse Practitioner. She was terminated on January 13, 2012, after three incidents occurring between August 2011 and January 2012, having received disciplinary warnings for each. The first incident involved a post-operative patient with an endotracheal tube. Upon hearing that the tube may have fallen out, Willis declared, “That fuckin’ tube better not be out, I’ll fuckin’ kill someone,” in a work area in which the patient’s father was present, (although he apparently did not hear the profane comment). The second incident involved Willis raising her voice in a work area while complaining about a fellow employee, and then walking out of subsequent discussion of the matter called by her supervisor. The third and final incident involved Willis failing to perform a history and physical on an incoming patient or complete an admission order, causing the patient’s care to “fall through the cracks.”

 

After receiving a “right to sue” letter from the Equal Employment Opportunity Commission, Willis filed suit in the Federal District Court for the Western District of Pennsylvania under the federal Age Discrimination in Employment Act (ADEA) and the Pennsylvania Human Resources Act (PHRA). Defendant was granted summary judgment on both claims, and the Third Circuit affirmed.

 

To prevail, an ADEA plaintiff must establish by preponderance of evidence that being over the age of forty was the “but-for” cause of the adverse employment action. Under the framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), the plaintiff needs to establish a prima facie case of discrimination by showing that he or she is at least forty years of age, that he or she suffered an adverse employment decision, that he or she is qualified for the job at issue, and that either he or she was replaced by another employee sufficiently younger to support an inference of discriminatory motive based on age, or that other facts exist that would support an inference of discriminatory motive based on age if not otherwise explained.

 

If a prima facie case is made out, the burden shifts to the employer to submit evidence sufficient to articulate a legitimate nondiscriminatory justification for the adverse employment action. If the employer does so, the burden of proof shifts back to the plaintiff to prove by a preponderance of evidence that the employer’s proffered justification is pretextual. To prove pretext, the plaintiff must convince the factfinder not only that the employer’s proffered reason is false, but also that the real reason for the adverse action was impermissible discrimination. Under Third Circuit precedent, at the pretext stage, the factual inquiry into the employer’s alleged discriminatory motive rises to a new and higher level of specificity.

 

Third Circuit precedent recognizes two alternative means of proving “pretext.” First, a plaintiff may point to evidence that would allow a factfinder to disbelieve the employer’s proffered justification, such as weaknesses, incoherencies or contradictions in the employer’s explanations. Second, a plaintiff may point to evidence that would allow the factfinder to conclude that invidious discrimination was more likely than not the reason for the adverse action. This second means of proving pretext can be satisfied by evidence showing (1) that the defendant had previously discriminated against the plaintiff, (2) that the defendant had discriminated against others in the plaintiff’s protected class, or (3) that the defendant had treated similarly-situated younger individuals more favorably.

 

Willis attempted to establish the fourth element of her prima facie case by arguing that the defendant treated younger, similarly situated employees more favorably that it had treated her. But Willis produced no evidence that anyone, younger or otherwise, had committed the same infractions as she had and escaped discipline. Willis’ argument in this regard “defies this Court’s precedent and logic.”

 

With regard to pretext, Willis presented no evidence that renders the proffered disciplinary reasons for her removal unworthy of credence. Nor did Willis present evidence to support any of the three categories that would allow the factfinder to conclude that unlawful discrimination was more likely than not the reason for her termination.

 

Willis attempted to argue that use of profanity was “generally commonplace” in the defendants’ work environment, and cited an unconfirmed rumor that a younger nurse allegedly guilty of “abruptness” and “sarcasm” was not disciplined. The Willis Court rejected these arguments. The only support Willis could offer to support her claim that profanity was “generally commonplace” was the absence of any evidence on the record that any younger employee had ever been reported or disciplined for using profanity. This “alleged lack of discipline does not provide sufficient support for Willis’s assertion of more favorable treatment.” Similarly, rumored conduct involving “abruptness” and “sarcasm” was not comparable to the conduct in which Willis engaged. Further, “this type of second-hand, general rumor regarding a single substantially younger employee is insufficient as a matter of law to show pretext.” In addition, a “decision adversely affecting an older employee does not become a discriminatory decision merely because one younger employee is treated differently.”

 

Because the PHRA is interpreted in accordance with ADEA case law, the dismissal of the plaintiff’s PHRA claim also was affirmed.

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ERISA exemption for “church” pension plans is available only for pension plans established and maintained by a church; a pension plan created by a “qualifying agency” of a church such as a hospital is not entitled to the benefit of the exemption, notwithstanding a private IRS letter ruling to the contrary.

 

Kaplan v. St. Peter’s Healthcare System, et al., 806 F.3d 153 (3d Cir. 2015), 2015 WL 9487719, C.A. 3, (N.J.), December 29, 2015, available at www2.ca3.uscourts.gov/opinarch/151172p.pdf

 

Subsection 4(b)(2) of the Employee Retirement Income Security Act (ERISA) exempts church pension plans from several requirements applicable to retirement plans generally, such a ERISA fiduciary obligations and minimum funding rules. Subsection 3(33)(A) defines a church plan as a plan “established and maintained” by a tax-exempt church for its employees. Subsection 3(33)(C)(i) extends the exemption to a plan maintained by a “qualifying agency” of a church; that is, “an organization, whether a civil law corporation or otherwise … if such organization is controlled by or associated with a church or a convention or association of churches.”

 

For decades, it had been assumed that such a “qualifying agency” could establish, as well as maintain exempt church plans. The few courts that addressed the issue likewise assumed that this reading of the statutes was correct. However, in recent years, a wave of litigation has arisen based on the theory that the plain language of the church plan exemption provisions precludes “qualifying agencies” from establishing exempt church plans. Under this reading, “qualifying agencies” can only maintain exempt church plans that are established by a church, but cannot establish exempt church plans on their own. The District Courts that have considered this theory have split on the issue.

 

In Kaplan, the Third Circuit became the first Court of Appeals to decide this issue. Affirming the United States District Court for the District of New Jersey, the Kaplan Court held that a pension plan created by a “qualifying agency” of a church such as a hospital is not entitled to the benefit of the “church plan” exemption.

 

Defendant, St. Peter’s Healthcare Center, is a non-profit healthcare entity that operates a hospital and other facilities and employees over 2,800 persons. All but two of its board members are appointed by the Bishop of Metuchen, who retains veto authority over the board’s actions. St. Peter’s hospital features daily Mass, and there are devotional pictures and statues located throughout the facility. St. Peter’s established a non-contributory defined benefit plan in 1974 that covers substantially all employees hired up to July 1, 2010. Until the late 2000’s, St. Peter’s had maintained its plan in full compliance with all ERISA requirements, but in 2006, St. Peter’s filed an application with the Internal Revenue Service (IRS) seeking to have its plan deemed exempt as a “church plan.” St. Peter’s received a private IRS letter ruling in August 2013 deeming its plan to be so exempt.

 

Nonetheless, in May 2013, retired employee Laurence Kaplan filed a class action lawsuit alleging that St. Peter’s had failed to comply with its fiduciary disclosure and funding obligations under ERISA. St. Peter’s sought to dismiss the complaint on the ground that it was excused from compliance with the ERISA requirements cited by Kaplan under the church plan exemption. The District Court denied the motion, and the Third Circuit affirmed.

 

ERISA originally limited the church plan exemption to “qualifying agency” plans that were in existence as of January 1, 1974, and contained a “sunset” provision that would terminate the exemption for “qualifying agency” plans as of December 31, 1982. The Multiemployer Pension Plan Amendments Act of 1980 eliminated this “sunset” provision. St. Peter’s argued that the 1980 amendments also annulled the requirement that a church actually establish the plan in order for it to qualify as an exempt church plan. In St. Peter’s reading, it is sufficient for the plan to be “maintained” by a “qualifying agency” for the plan to be an exempt church plan, regardless who establishes the plan.

 

The Kaplan Court found St. Peter’s argument to be contrary to the plain language of the controlling statute:

 

Subsection 3(33)(A) requires that all exempt plans be established by a church. Prior to 1980, a plan needed to be established and maintained by a church. The 1980 amendments provided an alternate way of meeting the maintenance requirement by allowing plans maintained by church agencies to fall within the exemption. But they did not do away with the requirement that a church establish a plan in the first instance.

 

The canons of construction and legislative history to the 1980 amendments further refute St. Peter’s argument. St. Peter’s reading would improperly render the “establishment” requirement of subsection 33(3)(A) superfluous and nullify the statute’s “careful limitation.” A proposed version of the 1980 amendments that would have expressly extended the exemption to plans “established and maintained” by “qualified agencies” was not enacted. ERISA’s remedial purposes require that exemptions be construed narrowly. St. Peter’s pointed to nothing in the legislative history showing that Congress at all considered extending the church plan exemption to plans established by “qualifying agencies.”

 

The Kaplan Court rejected the private IRS letter ruling St. Peter’s had received. The letter ruling derived from a 1983 general counsel memorandum that is entitled to deference only to the extent that it has the power to persuade. But because the 1983 general counsel memorandum did not address the church establishment requirement of subsection 33(3)(A), it lacks persuasive power.

 

The Kaplan Court also rejected St. Peter’s argument that Congress had ratified the 1983 IRS general counsel memorandum by incorporating the church plan definition of the 1980 amendments into laws adopted subsequent to 1983. “{R}atification does not apply where, as is the case here, the statute has a plain meaning that is inconsistent with the proposed interpretation.”

 

Finally, the Kaplan Court rejected the claim that the District Court’s reading of the church plan exemption violated the Free Exercise Clause of the United States Constitution:

 

St. Peter’s has not offered any reason why the First Amendment entitles it to a retirement plan structured using a particular corporate form. The ability of church agencies to have their employees covered by exempt plans is by no means eliminated by our reading. We have merely determined that Congress has required that such coverage come in the form of plans established by churches. Even assuming that St. Peter’s has a constitutional right to have its employees covered by an exempt plan, this arrangement does not unduly interfere with that.

 

 

 

 

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