Being an employer in the fashion world isn’t easy, that’s for sure. In a commercial landscape in which “see you in court” is an all too frequent refrain, legal exposure is a constant concern for fashion houses, manufacturers and retailers alike. But this worry can be reduced if employers in the space avail themselves of a handful of safeguards that can significantly lower the risk of costly and time-consuming workplace litigation. Here are five simple steps that can be taken to prevent potential employee-related problems — avoidable ones that attorneys nevertheless see time and time again.
Say No to Salary Inquiries
Unfortunately, there continues to be a divide between what men and women are paid. In an effort to narrow the gap, a number of state and local legislators, including those in fashion hot spots like California and New York City, have moved to ban questions about a job candidate’s salary history. The thinking behind the laws goes like this: when employers rely on an applicant’s past earnings to determine compensation going forward, wage inequality is perpetuated. Therefore, many employers are now prohibited from asking would-be employees what they were paid at prior jobs so that salary conversations are merit- and qualifications-based.
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Disobeying salary inquiry bans can come at a hefty price; for instance, infractions of the law in New York can result in penalties of up to $250,000. As such, the best hiring practice would be to preclude questions about an applicant’s current and past earnings, and instead set compensation based upon the candidate’s skill set and its relevance to the job being filled. Another permitted approach is to advertise an expected pay range for any given position, which takes into account experience, licenses and education. In either case, employers in the fashion industry should update their employment applications and interview processes accordingly.
Ban-the-Box, Too
While on the topic of hiring, it’s also important to mention the denial of employment based on an applicant’s criminal history. In many places — again, California and New York City included — this has become a bit complicated and certainly frowned upon. To ensure that job seekers with criminal records are judged first on their qualifications, and to give them a fair chance at employment, laws are in place in more than 30 states and 150-plus municipalities that require the removal of the conviction history question from job applications (you know the one — “check here if you have ever been convicted of a crime”). Some jurisdictions go a step further and delay background checks until later in the hiring process (read: once a conditional offer of employment has been made), and others — hello California — even insist that an employer undertake an individualized assessment to determine if a person’s criminal record justifies the denial of employment. In fact, when a job offer is withheld in the Golden State based upon an applicant’s criminal past, he or she must be given the opportunity to challenge the accuracy of the conviction record or provide evidence of rehabilitation or mitigating circumstances, or both.
It’s no secret that fashion employers have relied on the criminal history question to limit their applicant pools, but continuing to do so may be unlawful, not to mention costly — those who violate these ban-the-box regulations are subject to significant financial penalties. To limit potential liability, management should make sure, one, their job applications don’t ask about criminal convictions and, two, that their hiring methods otherwise conform to applicable state or local fair chance laws.
Wage Theft Prevention
Here’s a rather obvious principle: employers must provide paychecks to employees on time and in full. Nonetheless, shortchanging workers — not paying them their legally or contractually promised wages — is an ongoing problem; one that has precipitated the passage of a series of wage theft laws throughout the country.
Most commonly, wage theft comes in the form of an employer’s failure to pay the full minimum wage or for all hours an employee has worked; not properly compensating a worker for overtime or meal and rest breaks; making illegal paycheck deductions; or withholding a former employee’s last paycheck after he or she leaves a job. Such wage and hour law violations can spell big trouble for management (can you say class action?) and shouldn’t be allowed to happen. Employee-leaning laws, like California and New York’s Wage Theft Protection Acts, are designed to make sure they don’t. How? By requiring that non-exempt employees be given detailed written notice containing, among other things, wage and overtime information at the inception of employment and, subsequently, upon a change in pay rate, as well as legally compliant pay stubs.
Whether or not they’re governed by a wage theft protection regulation, fashion employers must be certain to, one, extend minimum wage and overtime standards to their employees; two, be wary of misclassifying these employees as independent contractors (especially for the purposes of wage and hour laws), and three, ensure that their personnel is being paid for all hours worked. Doing so will go a long way toward avoiding wage and hour litigation.
Do Not Allow Off-the-Clock Work
While off-the-clock work falls under the wage and hour umbrella just discussed, the topic is deserving of a category all its own. And that’s because we live in an age of instant access, meaning that it’s far too easy for employers to reach out to non-exempt employees before or after hours asking that work be done. Yet as a general rule, requiring workers to perform off-the-clock tasks without pay violates labor laws — an obvious no-no both in and out of the fashion space.
Even the smallest infraction can be problematic. For example, if an employer e-mails or texts an hourly employee before or after working hours, who then checks his or her smartphone and reads and responds to the communication while off-the-clock, that worker likely is performing compensable work. Such a routine task left unpaid — and similar others ones, like locking up a workplace, activating an alarm or logging off a computer before “clocking in” or after “clocking out” — can be perilous. Bottom line: non-exempt employees are to be compensated for all the time they spend working, and those who toil off-the-clock can sue to be paid for any increments of time that employers refuse or fail to count (including overtime). The takeaway for fashion employers: don’t e-mail, text or even call non-exempt employees on their personal devices — or have them do anything, really — when they’re off-the-clock, unless you’re prepared to track and pay for the time.
Interns Are Not Free Labor
As summer approaches, many companies — those in the fashion industry included — see an influx of interns. And with interns come the inevitable questions about whether they must be paid. The short answer is that sometimes they do.
In 2018, the U.S. Department of Labor relaxed the time-worn test to determine whether interns are employees (and required to be paid at least applicable minimum wage and considered overtime eligible) under the federal Fair Labor Standards Act in favor of a “primary beneficiary” analysis. The new standard provides more flexibility in determining which party — the intern or the company — primarily benefits from the relationship. The test, which was designed to align with the economic reality that interns gain non-economic benefits from properly designed internship programs, weighs the extent: one, the parties understand the relationship is unpaid; two, the internship provides training that would be given in an academic environment and is limited to the time such training is given; three, the internship corresponds with an academic calendar and entitles the intern to academic credit; four, the work performed complements, rather than displaces, the work of paid employees, and five, the parties understand the intern is not entitled to a paid job after the end of the internship.
Here’s the rub: Although the standard to maintain unpaid internship programs has been loosened, employers are not granted a license to employ free labor. Long story short, if a balancing of the factors determines the company mainly benefits from the relationship, the intern must be paid. Additionally, although the new test applies to the federal law, applicable state and local laws may provide for a stricter approach to the unpaid intern question. All of this must be considered when deciding whether to “staff up” with unpaid fashion students in the summertime.
Defending against litigation brought by an employee — or worse yet, a class of employees — can serve to exhaust a fashion employer’s precious resources (financial and otherwise) and distract from day-to-day operations. But with an ounce of prevention as prescribed above can come a pound of cure in the form of a workplace that steers clear of the courthouse.
Marc Zimmerman is a partner at Michelman & Robinson LLP, a national law firm with offices in Los Angeles, Orange County, Calif., San Francisco, Chicago and New York City. He represents management across the fashion and luxury goods spaces in litigation and transactional matters. Marc can be contacted at 212-659-2554 or mzimmerman@mrllp.com.