July 09 Labor & Employment Law Update

Written by: Crystal M. O'Brien, Esq.

Employers May Specify How Much Vacation Pay Can Accrue

In Owen v. Macy, (June 29, 2009) (__ Cal.App. __), a class action brought by sales associates against Macys posed the question as to whether employers are obligated to provide employees with accrued vacation benefits rights that are available to some employees and not others.  Division Two of the California Court of Appeal concluded “no.”  An employer who duly informs new employees that they will have no vested rights in accrued vacation hours is then not obligated to pay-out vacation benefits at termination.

In this case, predecessor Robinsons department stores imposed a six-month waiting period before all new employees could begin to earn vacation pay.  The store thereafter required continuous service and a 1000 hours of work in any given year before permitting employees to accrue vacation pay benefits.  Owens worked for Robinsons for some 16 years, when it was acquired by Macy’s department stores at which time Owen elected to be laid off.  When Owen was allegedly denied a hoped for four-weeks vacation pay in addition to $12,469 in severance pay, she brought a civil lawsuit seeking back pay, damages, and injunctive relief on behalf of other similarly situated former Robinsons employees. 

In upholding a summary judgment against Owens and other class members, the Court considered the policies set forth in the employer’s handbook which provided that employee rights to vacation pay vest before they accrued, rather than after.  In the latter scenario, an employee would be entitled to a vacation pay-out at termination because he or she would have earned those benefits as a form of “deferred” compensation rather than merely becoming eligible to potentially enjoy those benefits.  The difference, although hyper-technical, paves the way for whether an employee is due certain payments at the time of job separation.  To read the Macy’s case in full, please click here.

Federal Law Update: Are Employment Tests Inherently Unfair?

In the closely watched “Firefighters Case,” Ricci et al. v. DeStefano et al. matter, the U.S. Supreme Court ruled June 29, 2009 that the City of New Haven, Connecticut’s decision to throw out promotion test results (which appeared to favor white firefighters) violated laws prohibiting race-based decisionmaking.  The pivotal question presented in this case, is whether compliance with federal anti-discrimination laws requires employers to cease using promotional tests which appear to favor certain races?

Faced with racial discrimination claims, the City of New Haven attempted to correct any misconception that it engaged in racially biased employment practices by electing to stop using a promotions test that it relied on for advancing firefighters.  In doing so, the City’s actions induced criticism from those firefighters who were awaiting promotions based on those results. 

The Supreme Court held that employment tests are not inherently racially biased merely because one racial group is likely to perform one way or another.  What is key to promoting workplace fairness laws are that claims alleging unlawful bias are supported by whether the test at issue is (1) job-related and (2) consistent with business necessity or if there exists (3) an equally valid, less discriminatory alternative that serves the employer’s needs for assuring qualified applicants but which the employer refused to adopt.  Only under this analysis, the Court emphasized, may an intent to discriminate be revealed, and that intent is what is prohibited by civil rights laws. 

The Court warned that fear of litigation alone should not justify an employer’s actions to disregard qualified applicants.  Moreover, employers should respond to fairness in employment challenges with the confidence that their practices can withstand scrutiny, which of course assumes that employers are engaging only in those practices which are necessary and job-related and not intended to promote a hidden racially biased agenda.  To read the decision in full, click here. 

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