Monday, November 23, 2015
When does paying workers via tips count as illegal employment discrimination? Arguments against tip compensation--around for a while (e.g., Scott, 1916)---re-emerged last month (e.g., here and here) after restauranteur Danny Meyer (like some others) decided to ban tipping and raise prices instead. One of these anti-tipping arguments: Customers of all races tend to tip black restaurant servers far less than white restaurant servers, even after controlling for service quality (Lynn et al. 2008; Brewster & Lynn, 2014). In turn, some (e.g., Lynn et al., 2008, p. 1057-58) suggest that such a race disparity in tips exposes employers to Title VII disparate-impact liability. That liability applies if a defendant-employer “uses a particular employment practice that causes a disparate impact on the basis of” race or sex, among other characteristics, 42 U.S.C. § 2000e-2(k)(1)(A)(i), regardless of “the employer's motives and whether or not he has employed the same practice in the past,” Lewis v. City of Chicago, 560 U.S. 205, 217 (2010).
So, can a race disparity caused by tip compensation amount to Title VII disparate impact liability? There isn’t much litigation on this issue, but the answer is yes, if we treat tips just like bonuses, commissions, and other kinds of compensation practices used to pay an amount on top of base pay—practices that, according to the EEOC (Title VII’s federal agency enforcer), may generate disparate-impact liability. EEOC Compliance Manual § 10(III)(C)(2).
Although Wang (2014, p. 157-58) doubts it, it’s pretty easy to conclude that a race disparity in tips is caused by the employer’s use of a “particular employment practice.” But for tip compensation, there can’t be a tip disparity. Sure, employers don’t control how much their customers tip. But employers do decide whether part of a worker’s pay comes from tips, instead of, say, imposing a flat service charge. Besides, customer race bias can’t excuse an employer’s legal responsibility for causing a race disparity in tips. In general, Title VII does not excuse employers who defer to their customers’ racial preferences.
Wang also suggests that a court might treat a disparate-impact challenge to tip compensation—which partly leaves worker pay to customer discretion—like the challenged policy upheld in Wal-Mart Stores v. Dukes, 131 S. Ct. 2541, 2554-57 (2011), which left worker pay and promotion to local store managers’ discretion. But Wal-Mart—a class action lawsuit—mostly turned on an issue of federal class action procedure. See, e.g., Gschwind v. Heiden, 692 F.3d 844, 848 (7th Cir. 2012); Tabor v. Hilti, Inc., 703 F.3d 1206, 1221-22 & n. 8 (10th Cir. 2013). So, Wal-Mart might matter in a Title VII disparate-impact class action filed in federal court against a restaurant chain that lets each restaurant’s local manager decide whether to adopt tip compensation there. But Wal-Mart doesn’t stop a court from saying that an employer who adopts tip compensation thereby “uses a particular employment practice” under Title VII.
There is, however, no hard and fast rule about how big a race disparity in tips has to be for a court to declare Title VII liability. And whatever any individual employee collects in tips, any resulting race disparity in tip income—what workers take home—might differ depending on how the employer engages in tip pooling. Although collected tips belong to the employee, see 29 C.F.R. § 531.52; see also, e.g., Cal. Labor Code § 351; NY Labor Law § 196-d, under certain conditions, an employer can redistribute the tips among a set of employees, see 29 C.F.R. § 531.54; see also, e.g., Avidor v. Sutter's Place, 212 Cal. App. 4th 1439, 1449-50 (6th Dist. 2013); 12 NYCRR § 146-2.16. Which employees get to join a tip pool can be complicated, but since 2011, the US Department of Labor (DOL) reads the Fair Labor Standards Act to “not impose a maximum contribution percentage on valid mandatory tip pools.” 29 C.F.R. § 531.54. (DOL had set a maximum of 15% of an employee’s tips, but it changed tack after some courts rejected it. See 76 Fed. Reg. 18832-01, 18839 (2011). How far DOL may regulate tip pooling is disputed. See, e.g., Oregon Restaurant and Lodging v. Solis, No. 13-35765 (9th Cir., appeal submitted July 10, 2015)).
As the tip-pool contribution percentage increases, any race disparity in tip income likely decreases. Accordingly, in some cases, there may be a big enough disparity in tips collected but the disparity in tip income (after tip-pooling) is too small. Title VII, however, says that a plaintiff has to show that “each particular challenged employment practice” causes a disparate impact, unless she can show that an employer’s “decisionmaking process” can’t be separated for analysis. 42 U.S.C. § 2000e-2(k)(1)(B)(i). This implies that if a plaintiff can prove that tip compensation (the challenged practice) causes a big enough race disparity in tips collected, that’s enough, whether or not the disparity in tip income (after those tips are pooled) is big enough, too. Tip compensation and tip pooling are practices that can be analyzed separately. An employer can adopt tip compensation without tip pooling. Some do.
Once the plaintiff proves the requisite disparate impact, the employer has several defenses, including that its tip compensation practice is “job related for the position and consistent with business necessity,” 42 U.S.C. § 2000e-2(k)(1)(A)(i), a “bona fide . . . merit system,” or “a system which measures earnings by quantity or quality of production,” 42 U.S.C. § 2000e-2(h). For all these, the employer bears the burden of proving that, at bottom, tipping really relates pay to job performance. The problem for employers: In general, past studies suggest that, even after controlling for service quality, tips substantially vary with, among other things, a server’s race (e.g., Brewster & Lynn, 2014) or physical attractiveness (e.g., Parrett, 2015). That doesn’t settle the matter, because the defendant’s restaurant may be the odd case in which tips do measure job performance pretty well. But, in Title VII litigation, it’s the defendant-employer’s burden to prove that, not the plaintiff’s. And what counts as good job performance is an objective inquiry, not whatever the employer sincerely believes.
Similarly, using tips as a proxy for job performance is, by itself, hardly a bona fide “merit system.” According to the EEOC, a merit system involves evaluating employee job performance “at regular intervals according to predetermined criteria, such as efficiency, accuracy, and ability.” EEOC Compliance Manual § 10(IV)(F)(1) (discussing parallel defense in Equal Pay Act). Similarly, tips don’t really measure the “quantity or quality of production.” This defense covers not just piece-rate-compensation for making goods, but also compensation for services, such as securities-broker bonuses. See McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 882 (7th Cir. 2012). Even for broker bonuses, this defense may not apply if “for example, black brokers were receiving systematically poorer reviews than their white counterparts who performed substantially similar work, and the reviews determined compensation.” Id. Here, in any particular case, an employer can’t assume that tips accurately measure the “quality of production” (service quality). Instead, the employer must prove that they really do. Facing this possibility, some employers may want just to ban tipping instead.
H/t: Jon Bauer, Peter Siegelman. A version of this essay first appeared at OnLabor.
Thursday, November 19, 2015
The American Constitution Society is currently hosting a Symposium on Labor and Economic Inequality—a series of posts by labor and employment law professors, including:
Michael Selmi, “The New Front in the Fight for Workers’ Rights”
Ruben Garcia, “Friedrichs, Teacher Salaries, and Inequality in Public Education”
Brishen Rogers, “Inequality and Economic Democracy”
H/t: Noah Zatz, who, as a precursor to thinking about Title VII disparate-impact liability, also recently posted this essay on Texas Department of Housing and Community Affairs v. Inclusive Communities Project, 135 S. Ct. 2507 (2015), which recognized disparate-impact liability under the Fair Housing Act.
Tuesday, November 17, 2015
Congratulations to Paul Harpur (U. Queensland - Beirne School of Law) who has just been promoted to Senior Lecturer. Paul focuses on disability rights, anti-discrimination laws, work health and safety laws, and corporate social responsibility. He has published widely in Australia, the United Kingdom and the United States on employment, anti-discrimination, and human rights laws. He currently leads an International Labour Organization project assessing labour rights in the South Pacific.
Saturday, November 14, 2015
There has been an enormous amount of discussion recently on how anti-discrimination law should be applied to workers in the LGBT Community. As reported by the Washington Post, the White House announced on Tuesday its support for an amendment to the Civil Rights Act of 1964 which would prohibit discrimination against gay and transgender employees (the Equality Act):
"The bill would insert language about gay and transgender people into legislation created by the 1964 Civil Rights Act — the historic measure that banned many forms of discrimination by race, color, religion, sex or national origin."
The Washington Post article includes an interesting discussion about the differences of the proposed Equality Act with ENDA. The article also has an interesting discussion of the recent application of the Price Waterhouse case to transgender workers. This issue continues to make headlines and it will be interesting to follow the proposed legislation as well as the continued development of the case law in this area.
- Joe Seiner
Thursday, November 12, 2015
The Center for WorkLife Law at UC Hastings has launched a new resource called Pregnant@Work. The site has resources on pregnancy accommodation for a wide range of audiences – attorneys from both sides of the employment bar, pregnant women, their healthcare providers, and employers. The laws surrounding pregnancy accommodation have changed drastically over the last couple of years, and the site provides educational materials and practical tools to help various audiences understand these changes.
The materials the site provides or organizes for different audiences range from model policies, to forms, to ideas for accommodations that will work for both employers and pregnant workers who might need them. It's a great model for a kind of problem solving advocacy that we don't see very often. Check it out.
Wednesday, November 11, 2015
Deb Widiss (Indiana) has two recent articles that will be of interest to our blog readers. The first is Griggs at Midlife, 113 Mich. L. Rev. 992 (2005), reviewing Bob Belton's recent book, The Crusade for Equality in the Workplace. From the abstract:
Griggs v. Duke Power, the Supreme Court case that held that policies that disproportionately harm minority employees can violate federal employment discrimination law even without evidence of “intentional” discrimination, recently turned forty. Griggs is generally celebrated as a landmark decision, but disparate impact’s current relevance (and its constitutionality) is hotly debated. Robert Belton’s The Crusade for Equality in the Workplace offers a rich and detailed history of the strategic choices that led to the plaintiffs’ victory in Griggs. This Review uses Belton’s history as a jumping off point to consider the contemporary importance of disparate impact in efforts to challenge employers’ use of criminal background screens. The Review also suggests that the failure to develop intersectional analysis — that is, an analysis of how sex and race may interact — in disparate impact doctrine risks obscuring key vectors of exclusion.
Belton’s book gives modern readers an inside look at the NAACP Legal Defense and Education Fund’s litigation campaign in Griggs, and it does an excellent job showing how lawyers used disparate impact doctrine to dismantle test and educational requirements that could have excluded many black employees. The book, however, focuses almost exclusively on race discrimination cases. This Review explores the contemporaneous — and less successful — development of the doctrine in early sex discrimination cases. Generally, courts have not required employers to modify workplace structures that fail to accommodate caregiving responsibilities or pregnancy, despite their disparate impact on the basis of sex. Moreover, such policies often disproportionately harm women of color. By filling in this history, the Review offers a more nuanced assessment of disparate impact’s early years.
The Review then considers contemporary efforts to challenge employers’ use of criminal background screens, policies that likewise cause a disparate impact on the basis of both race and sex. It suggests that current litigation might be more successful if the intersectional approach were better developed, but it also highlights the importance of compliance work in achieving equal employment opportunity in the modern world. Although the EEOC has lost some high profile cases in this area, its guidance indicating that criminal background screens may cause an unlawful disparate impact has pushed employers to reconsider and refine their use of such screens.
The second expanded on Deb's other work on "shadow precedents," precedents that still seem to guide the courts even after Congress amends statutes to reverse the effects of those precedents: Still Kickin after All these Years: Sutton and Toyota as Shadow Precedents, 63 Drake L. Rev. 919 (2015). From that abstract:
Congress’s ability to override judicial opinions that interpret statutes is generally understood as an important aspect of maintaining legislative supremacy. In a series of articles, I have challenged the validity of this assumption by showing that courts often continue to rely on overridden precedents — what I have called shadow precedents. My earlier work explores instances in which it was unclear or debatable whether the override or the prior precedent should control. This article further documents such ambiguities, but its primary objective is to highlight examples of ongoing reliance on shadow precedents where it is unquestionably improper. It suggests, however, that citation of shadow precedents may often stem from information failure, including poor briefing by counsel, rather than courts’ willful disregard of legislative mandates.
The article, written for a symposium on the Americans with Disabilities Act (ADA), examines implementation of the ADA Amendments Act of 2008 (ADAAA). The ADAAA, a broadly bipartisan bill, was intended to supersede Supreme Court decisions that had set a very stringent standard for what impairments qualified as a disability. The ADAAA explicitly “rejected” the reasoning in these decisions; amended the ADA’s substantive provisions; and instructed courts to interpret the standard “in favor of broad coverage.” Many lower courts are properly implementing the revised standard, and the overall number of citations to the superseded decisions has dropped sharply. But this article identifies numerous post-ADAAA cases in which courts follow the old precedents for propositions that were undeniably superseded. Mistakes are particularly prevalent in cases alleging discrimination because one is “regarded as” having a disability. Even though the ADAAA was an unusually strong and clear override, it has failed to change fully the law on the ground.
The symposium mentioned in the abstract was published in the Drake Law Review and was an outgrowth of the AALS Employment Discrimination section panel at last year's annual meeting. It's a great symposium with pieces by Senator Tom Harkin (D-Iowa), Steven Befort (Minnesota), Ruth Colker (Ohio State), Arlene Kanter (Syracuse), and Nicole Porter (Toledo).
Tuesday, November 10, 2015
There was a fascinating article in the New York Times last week which discussed proposed federal legislation to protect certain young professionals. As we are all aware, the FLSA includes a number of protections for child workers. However, these protections often do not extend to models and actors as such individuals are often exempted by the statute. The new legislation (the Child Performers Protection Act) can be found here, and as discussed in the article, the legislation "would establish specific working hours, salary and savings requirements (models could no longer be paid in clothes, for example), and it would offer private recourse for sexual harassment." It will be interesting to follow this proposed legislation and see whether it gains any traction in Congress.
-- Joe Seiner
Friday, November 6, 2015
As the labor market tightens, it has been interesting to see employers add different benefits to attract and retain workers. The Washington Post reports that several companies -- including Wal-Mart, Taco Bell and other fast food restaurants -- are helping workers to prepare for the GED Exam and are covering the costs of the test itself.
According to the article, the program "includes online study materials, practice tests, and access to an adviser whose job it is to check in with candidates and keep them motivated and engaged in what can be a lengthy process to study for and pass the tests." It is great to see these types of benefits now being provided by employers, and it will be interesting to see what other benefits might be offered if the labor market continues to tighten in this economy.
-- Joe Seiner
Tuesday, November 3, 2015
image from www.eeoc.gov
The EEOC harassment task force held a public meeting late last month with testimony from a panel of experts in the area. The EEOC's statement on the meeting is available here, and much of the testimony can be viewed here. Experts from a wide field of study weighed in on the issue, and there appeared to be agreement that a variety of measures are necessary to help prevent harassment.
From the EEOC, "Placing pressure on companies by buyers, empowering bystanders to be part of the solution, multiple access points for reporting harassment, prompt investigations, and swift disciplinary action when warranted, along with strong support from top leadership, are some of the measures employers can take to prevent workplace harassment".
I would highly recommend this source if you are interested in the topic of workplace harassment.
- Joe Seiner