What's New This Month

The Department of Labor has proposed new regulations intended to curtail the right to overtime pay for many American workers, perhaps millions of people who now either receive or have the right to receive overtime compensation.  As often happens in political debates, the data presented to support the different camps are widely divergent.  The Senate voted to block the rule change in early September.  For now, the proposal seems stalled, but the Bush Administration still supports it and has threatened a veto of the Senate action. 

The basics of the law (The Fair Labor Standards Act of 1938) have been in effect since the Depression era.  Unless exempt, workers who work more than 40 hours per week must be paid for the additional hours worked.  For many jobs, the rate of overtime pay is one and one-half the hourly rate.  The definitions of the exemptions from overtime entitlement have remained relatively constant, except for a new exemption for the computer industry.  One consequence of the stability in this law is that the rules for exemptions have not kept up with inflation.  Another is that the rules have been interpreted many times, for many jobs.  The new proposed rules are complex as well, but most observers agree that middle-income workers in white collar jobs would be most affected by any rule change.  Many workers who earn more than $22,100 per year would find their access to overtime compensation eliminated, effectively causing a pay decrease for anyone working more than 40 hours per week.  For more analysis, see an article from the Economic Policy Institute, http://www.epinet.org/content.cfm/briefingpapers_flsa_jun03.

Congress May Still Enact Long-Proposed Bankruptcy Amendments

In the aftermath of the terrorist attacks on New York and the Pentagon, as well as the receding economy, Congress approached but never managed a final vote on the bankruptcy legislation that has been pending for more than two years now.  Some commentators believe that the legislation will die since the economy has continued to decline, and the stock market has lost value for three years running.  On the other hand, with the gains made by Republicans, others are confident that Congress will again consider and may well pass the new amendments.

The economic climate has worsened considerably since the bill’s tougher standards were first proposed and therefore more individuals and families face the risk of financial hardship or ruin if Congress acts to limit bankruptcy protection. As many large companies sicken, file for bankruptcy protection, and even fold, many workers in financial and manufacturing sectors have been laid off. Most have been unable to find comparable positions.

Bankruptcy filings are again rising steadily. A study from 1999 has found that individual women filing for bankruptcy is the fastest growing group; this group contains many single-parent families. In the fiscal year ending on June 30, 2002, bankruptcy filings in this state were up by 3% over the previous year.

If bankruptcy standards do tighten, there almost certainly will be a six month period before the new law goes into effect. One of the new provisions will be a requirement that each debtor receive bankruptcy counseling, either before filing or just after. Certification of bankruptcy counselors and other regulations will have to be put in place before such a change can take place.

Congress Considering Tax Reform on Employment Discrimination Damages

Congress has been lobbied by a broad spectrum of the business and consumer community to alter the taxability of employment discrimination awards.  Under current law, the awards are fully taxable, unless there is some damage component attributable to personal injury (but not psychological injury).  The National Employment Lawyers Association (NELA) linked forces with the National Chamber of Commerce, among other groups, to urge a fairer treatment.  Because they received their award in one lump sum representing compensation for several years of back wages, victims of employment discrimination found themselves taxed at a much higher rate than if they had never suffered from the discriminatory practices.  In addition, attorneys' fees were taxed to the plaintiffs (and then again to the attorneys, of course).   The bill would permit income averaging of back pay awards, eliminate taxation of emotional distress awards, and eliminate the taxation of the attorney fee award (at least until the income appears on the attorney's personal tax return).  The bill has been introduced in the Senate with solid support, but unfortunately was deleted from the latest tax bill prior to passage. Advocates will continue to push for these needed reforms.

Supreme Court Aids Discrimination Plaintiffs by Clarifying Proof Requirements in Mixed Motive Cases

The Supreme Court ended its term, as it has many recent terms, with an important new employment discrimination decision.  While lacking the newsworthy character of the case striking down anti-sodomy laws, the decision in Desert Palace v. Costa made an important clarification to the standard of proof required to get to a jury in a case involving a mixed motive.  In a mixed motive case, the plaintiff contends that at least one reason for her termination or other adverse treatment was illegal discrimination.  In this Circuit, it has been difficult for plaintiffs to tell their stories to juries; a great proportion of cases that do not settle before the end of the discovery period falls to summary judgment. 

The Supreme Court's Affirmative Action Decisions

As quickly as a day after the Supreme Court issued its twin decisions passing on the constitutionality of the University of Michigan’s affirmative action programs, newspapers and other media outlets were flooding us with commentary. The decisions are interesting on a number of levels, not the least of which is the compromise stance taken by a relatively conservative court. The bottom line is that the Law School's use of race in admissions decisions is not prohibited by the Equal Protection Clause of the Constitution or the Due Process Clause. The University of Michigan’s use of race as one factor in admitting law students, in the interests of achieving a diverse student body, is compelling enough to withstand constitutional scrutiny, as held in Grutter v. Bollinger, opinion dated June 23, 2003. Several opinions offered views on the rationale, the vote was 5-4 on the result. BUT, in Gratz v. Bollinger, decided the same day, the University’s use of race in selecting students for admission to the College of Literature, Science and Arts (my alma mater) was overturned. The use of a 20-point preference given to members of a disadvantaged minority is not narrowly tailored to meet the compelling state interest in diversity. Interest in diversity is acceptable, but the means to achieve it must be done in a constitutional way, without racial quotas or other methods that fail to evaluate students as individuals. Here, the 20 points guaranteed that all qualified applicants from minority groups were admitted; such an outcome was not guaranteed for white students.

The Court’s opinion of the cultural value of diversity bodes well for employment cases in which affirmative action is challenged, or race-based decisions are at issue.