Archive for October, 2014

Sit back, fire one up and collect unemployment . . . But only if you have a card.

We interrupt our normal program for a special report on Medical Marijuana in Michigan. How’s that for an alliteration? It has been a while since we have discussed the Michigan Medical Marihuana Act, MCL 333.26421 et. seq (MMMA) and how it relates to employment. To see the last time we did, which was back in 2011, click here. And you might want to do that because we are going to talk about that court’s opinion. But first, what’s new?

Well, here is the question presented by this most recent challenge (Braska v Challenge Manufacturing) to an employee (actually three employees) termination for testing positive for marijuana (and by the way, I am going to spell marijuana with a “j” even though the Michigan Legislature insisted on spelling it with an “h”, what a bunch of squares): whether an employee who possesses a registration identification card is disqualified from receiving unemployment benefits after the employee has been terminated for failing to pass a drug test?

I know you can’t wait until the end of this post for the answer, so drum roll please, . . . Seems the answer is . . . . the employee does get unemployment benefits.

What? How can that be? After all, the U.S. District Court for the Western District of Michigan, Southern Division held that a private employer could fire an employee who had a card and who tested positive during a drug test conducted by his employer. You will recall, because you read it right here, that Judge Jonker stated: “The fundamental problem with Plaintiff’s case is that the MMMA does not regulate private employment. Rather, the Act provides a potential defense to criminal prosecution or other adverse action by the state.”  Judge Jonker went on to note that the employee’s public policy argument would “confer on medical marijuana patients, rights, to this point conferred only on a select group of people based on immutable characteristics like race, sex and religion.”  Judge Jonker stated:  “Further, the MMMA does not indicate a general policy on behalf of the State of Michigan to create a special class of civil protections for medical marijuana users.” You can see the opinion here. Plus, the Michigan unemployment statute disqualifies people for benefits under § 29(1)(m) for “testing positive on a drug test, if the test was administered in a nondiscriminatory manner.” Isn’t that what happened here? The employees tested positive on a drug test administered in a nondiscriminatory manner.

So what’s up with that? How come an employer has the right to fire the employee, the statute disqualifies them from getting benefits, but the employee can still get unemployment compensation?

Here is what the Michigan Court of Appeals said: First, the court noted that the MMMA has a broad preemption provision which says:

 … ‘[a]ll other acts and parts of acts inconsistent with this act do not apply to the medical use of marijuana as provided for by this act.’

So that disqualifier in the unemployment statute, yeah, it does not matter if the employee has a card and is not otherwise violating the MMMA by, for example, “being under the influence at work” or “using at work.”

Second, the court noted that the MMMA says that people with cards who are using marijuana in accordance with the MMMA:

… ‘shall not’ . . . (2) be denied any ‘right’ or ‘privilege,’ ‘including but not limited to civil penalty or disciplinary action by a business or occupational or professional licensing board or bureau. . . .

And the court held:

 Applying this definition to the present case, we conclude that denial of unemployment benefits under § 29(1)(m) constitutes a ‘penalty’ under the MMMA that was imposed upon claimants for their medical use of marijuana.

So, the summary is that the MMMA trumps the unemployment act and denying unemployment benefits just because of a positive test for someone who properly has a card is a penalty imposed by the state in violation of the MMMA.

But what about the Casias case? Well the court dealt with that too. First they basically said Casias is not binding on the Michigan Court of Appeals because this is a question of Michigan law and Casias was a federal case. Then the court noted:

Moreover, unlike in Casias, in this case, we are not presented with the issue of whether the MMMA’s immunity clause applies in cases involving action solely by private employers.The issue raised in this case is not whether the employers violated the MMMA because they terminated claimants. The issue is whether, in denying unemployment benefits, the MCAC—a state actor—imposed a penalty upon claimants that ran afoul of the MMMA’s broad immunity clause. When an individual is denied unemployment benefits, the employer’s conduct is not at issue, but rather, the denial involves state action. See Vander Laan v Mulder, 178 Mich App 172, 176; 443 NW2d 491 (1989).

You see, ultimately the court decided that determining who gets or does not get unemployment is up to the state and not the employer and that makes Casias different.

So what does this mean for you the next time you fire someone for testing positive for marijuana? Well one thing is certain, if the employee has a medical marijuana card that was properly issued and you can’t prove the employee was using at work or under the influence at work, they are going to get unemployment benefits.

Oh, and one more thing. There are some other issues here too. Like how would this court have come down in the Casias case? Would they have agreed with Judge Jonker or gone the other way? We don’t know. We can guess, but I am not going to do that in this post. I’m not going to do it for a couple or reasons, first, we don’t know because even though the Court addressed the Casias case, that issue, can an employer fire an employee with a medical marijuana card, was not in front of them to decide. And, second, this may not be the final word on this issue. No word yet, if the state will appeal this decision to the Michigan Supreme Court. So keep your eyes open and we will too. And don’t panic, . . . yet.

The regular rate and commissions. Part 3.

Remember last week we had another cliff hanger and I left you with trying to figure out how you compute the regular rate for an employee who is paid commissions that can’t be allocated to a specific workweek. All right, who read ahead? Come on admit it, this was just so exciting you couldn’t wait to find out, now could you? Admit it! Well if you didn’t read ahead, here is what the Regulation says:

If it is not possible or practicable to allocate the commission among the workweeks of the period in proportion to the amount of commission actually earned or reasonably presumed to be earned each week, some other reasonable and equitable method must be adopted. The following methods may be used:

(a) Allocation of equal amounts to each week. Assume that the employee earned an equal amount of commission in each week of the commission computation period and compute any additional overtime compensation due on this amount. This may be done as follows:

(1) For a commission computation period of 1 month, multiply the commission payment by 12 and divide by 52 to get the amount of commission allocable to a single week. If there is a semimonthly computation period, multiply the commission payment by 24 and divide by 52 to get each week’s commission. For a commission computation period of a specific number of workweeks, such as every 4 weeks (as distinguished from every month) divide the total amount of commission by the number of weeks for which it represents additional compensation to get the amount of commission allocable to each week.

(2) Once the amount of commission allocable to a workweek has been ascertained for each week in which overtime was worked, the commission for that week is divided by the total number of hours worked in that week, to get the increase in the hourly rate. Additional overtime due is computed by multiplying one-half of this figure by the number of overtime hours worked in the week. A shorter method of obtaining the amount of additional overtime compensation due is to multiply the amount of commission allocable to the week by the decimal equivalent of the fraction

Overtime hours

——————–

Total hours × 2

A coefficient table (WH-134) has been prepared which contains the appropriate decimals for computing the extra half-time due.

Examples: (i) If there is a monthly commission payment of $416, the amount of commission allocable to a single week is $96 ($416×12=$4,992÷52=$96). In a week in which an employee who is due overtime compensation after 40 hours works 48 hours, dividing $96 by 48 gives the increase to the regular rate of $2. Multiplying one-half of this figure by 8 overtime hours gives the additional overtime pay due of $8. The $96 may also be multiplied by 0.083 (the appropriate decimal shown on the coefficient table) to get the additional overtime pay due of $8.

(ii) An employee received $384 in commissions for a 4-week period. Dividing this by 4 gives him a weekly increase of $96. Assume that he is due overtime compensation after 40 hours and that in the 4-week period he worked 44, 40, 44 and 48 hours. He would be due additional compensation of $4.36 for the first and third week ($96÷44=$2.18÷2=$1.09×4 overtime hours=$4.36), no extra compensation for the second week during which no overtime hours were worked, and $8 for the fourth week, computed in the same manner as weeks one and three. The additional overtime pay due may also be computed by multiplying the amount of the weekly increase by the appropriate decimal on the coefficient table, for each week in which overtime was worked.

(b) Allocation of equal amounts to each hour worked. Sometimes, there are facts which make it inappropriate to assume equal commission earnings for each workweek. For example, the number of hours worked each week may vary significantly. In such cases, rather than following the method outlined in paragraph (a) of this section, it is reasonable to assume that the employee earned an equal amount of commission in each hour that he worked during the commission computation period. The amount of the commission payment should be divided by the number of hours worked in the period in order to determine the amount of the increase in the regular rate allocable to the commission payment. One-half of this figure should be multiplied by the number of statutory overtime hours worked by the employee in the overtime workweeks of the commission computation period, to get the amount of additional overtime compensation due for this period.

Example: An employee received commissions of $192 for a commission computation period of 96 hours, including 16 overtime hours (i.e., two workweeks of 48 hours each). Dividing the $192 by 96 gives a $2 increase in the hourly rate. If the employee is entitled to overtime after 40 hours in a workweek, he is due an additional $16 for the commission computation period, representing an additional $1 for each of the 16 overtime hours.

29 CFR § 778.120.

That Regulation is pretty self-explanatory, it is also very long and very boring, so I’m just not going to get into it any further. If you have questions, call your labor lawyer which you should do every week anyway.

The regular rate and commissions. Part 2.

You know, I really have to start coming up with better titles for these posts. I’m getting boring beyond belief. Could be because I have spent the better part of a year talking about the FLSA and Regulations and every time I try to do something even a bit funny I get knocked down by someone in . . . . well, let’s not go there.

Last week we talked about the really simple and admittedly very rare situation where an employee gets paid on an hourly basis with weekly commissions. But what about the less simple and more common situation where a non-exempt employee gets paid commission once a month, or once a quarter? Then what?

 If the calculation and payment of the commission cannot be completed until sometime after the regular pay day for the workweek, the employer may disregard the commission in computing the regular hourly rate until the amount of commission can be ascertained. Until that is done he may pay compensation for overtime at a rate not less than one and one-half times the hourly rate paid the employee, exclusive of the commission. When the commission can be computed and paid, additional overtime compensation due by reason of the inclusion of the commission in the employee’s regular rate must also be paid. To compute this additional overtime compensation, it is necessary, as a general rule, that the commission be apportioned back over the workweeks of the period during which it was earned. The employee must then receive additional overtime compensation for each week during the period in which he worked in excess of the applicable maximum hours standard. The additional compensation for that workweek must be not less than one-half of the increase in the hourly rate of pay attributable to the commission for that week multiplied by the number of hours worked in excess of the applicable maximum hours standard in that workweek.

29 CFR § 778.119. So what you are doing here is getting the commission total on a, say, monthly or quarterly basis. Figure out how much of the commission was earned in each week of whatever period is covered, then you recalculate the regular rate for each week and pay the employee an additional amount equal to one-half of the increase in the regular rate for all of the overtime hours worked in that week. Not that bad, right? But you can only use this method when you can actually allocate the commission to a workweek in which it was earned.

So what do you do when you can’t apportion the commission to a specific workweek? Seems like in a lot of industries that would be the more common situation. Well, that is a really long Regulation and it even has examples, so we will do it next week.

The regular rate and commissions. Part 1.

What is a commission? We all know what a commission is, right? According to Webster, a commission is “a fee paid to an agent or employee for transacting a piece of business or performing a service; especially: a percentage of the money received from a total paid to the agent responsible for the business.” http://www.merriam-webster.com/dictionary/commission

Wiki defines it as “a form of payment to an agent for services rendered.” http://en.wikipedia.org/wiki/Commission.

So now that we know what a commission is, the next logical question is, can you even pay a non-exempt employee a commission? Of course you can, it may not happen much, but you can. You just have to make sure you follow the other rules: That the employee makes at least the minimum wage and that the employee gets time and one-half of the regular rate for all hours worked over 40 in the workweek. And that is what we have been dealing with since the beginning of the year. Right? Right. So how do you determine what the regular rate is when you pay a non-exempt employee a commission? Well, like a bunch of the other rules we have been talking about, there is a general rule and then a couple of more specific rules that tell you exactly how to do that.

Here is the general rule:

Commissions (whether based on a percentage of total sales or of sales in excess of a specified amount, or on some other formula) are payments for hours worked and must be included in the regular rate. This is true regardless of whether the commission is the sole source of the employee’s compensation or is paid in addition to a guaranteed salary or hourly rate, or on some other basis, and regardless of the method, frequency, or regularity of computing, allocating and paying the commission. It does not matter whether the commission earnings are computed daily, weekly, biweekly, semimonthly, monthly, or at some other interval. The fact that the commission is paid on a basis other than weekly, and that payment is delayed for a time past the employee’s normal pay day or pay period, does not excuse the employer from including this payment in the employee’s regular rate.

29 CFR § 778.117. So it is simple, right? You have to include commissions in the total compensation earned by the employee and then you just do some division and figure out what the regular rate is. And if the commissions are earned on a weekly basis, it is really that simple.

When the commission is paid on a weekly basis, it is added to the employee’s other earnings for that workweek (except overtime premiums and other payments excluded as provided in section 7(e) of the Act), and the total is divided by the total number of hours worked in the workweek to obtain the employee’s regular hourly rate for the particular workweek. The employee must then be paid extra compensation at one-half of that rate for each hour worked in excess of the applicable maximum hours standard.

29 CFR §778.118. So if the employee makes $10 per hour and works 50 hours he gets $500 in hourly wages and he makes an additional 5% on all sales for that week, and if he sells $1,000 worth of widgets, he makes an additional $50 in commissions. So the total is $500 plus $50 which is $550 divided by 50 hours or a regular rate of $11 per hour. Then he gets half-time or an additional $5.50 for all the overtime hours. (Remember, he has already been paid the straight time rate for those hours). (See how I made that math really easy. . . . know why? Cause I hate math). Now that is really simple, and it can’t possibly be that simple, can it? Sure it can, if you pay commissions on a weekly basis. And how many employers do that? Not many. So next week we talk about deferred commissions.