Does Headquarters Location Dictate Liability Under State Laws?

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By Keith M. Hill

“My lawsuit will claim that this company failed to pay me for the time I spent in mandatory training sessions in three different states,” Ron, an examiner trainee, said to Karl, the payroll manager.

“You have no claim in this state because you've never worked here,” Karl said.

FACTS: A New York nonprofit accreditation company hired a Canadian citizen as an assessor trainee. The worker signed an employment agreement with the company that was governed by New York state labor laws.

As part of his job, the worker was required to travel and attend mandatory, multiday training sessions in Maryland, New Jersey and Washington, D.C. However, the worker did not travel to New York or work in the city, where the company had its headquarters.

The trainee filed a class action lawsuit under the Fair Labor Standards Act and New York labor laws over the nonprofit's failure to pay him for the time spent at training sessions, along with preparation time and for time spent traveling to the mandatory trainings. The nonprofit sought to dismiss the trainee's state law claims.

ISSUE: Was the trainee entitled to bring the state law claim against the nonprofit?

DECISION: The trainee was not entitled to bring the state law claim against the nonprofit, a federal district court ruled.

The trainee raised three claims in opposition to the nonprofit's motion to dismiss his state law claim.

The application of New York labor laws was required under the doctrine of interest analysis because the nonprofit required him to attend training in multiple states, the worker said. This argument failed because the laws do not have extraterritorial reach, the court said. Even if the interest analysis applied, the states where the trainee attended training sessions “have a greater interest in regulating the treatment of employees working in their states than New York,” where the trainee neither worked nor trained, the court said.

The court rejected the trainee's claim that a central law should govern working conditions and privileges because the issue is where the employee works, not where the employee lives. Because the trainee “was never employed in or domiciled in New York, he has even less claim to its statutory protections,” it said.

The court rejected the trainee's second argument that the assessor agreement was sufficiently broad to apply to state law claims regarding unpaid wages. New York courts construe contractual choice-of-law provisions narrowly to not bind parties for non-contractual causes of action, the federal court said. Thus, the choice-of-law clause in the agreement “applies only to claims sounding in contract and not statutory causes of action,” it said.

The court rejected the trainee's third argument that the nonprofit implicitly consented to the application of New York laws by maintaining its headquarters in New York City, requiring the use of New York laws through the employment agreement's choice-of-law provision and relying on New York labor laws to defend against wage-and-hour claims. The trainee produced no authority that the acts amounted to implied consent and neither of the two cases he cited supported his position, it said.

“If maintaining a New York headquarters constituted consent to the application of New York statutory laws to all its employees, no matter their state of employment, it would swallow the presumption against extraterritoriality, incentivize forum shopping and inevitably create conflicts with other states' labor law,” the court said.

The nonprofit's response to the trainee's state law claims was not considered consent, the court said. The nonprofit responded to the claims so they could be preserved if its motion failed, which does not amount to consent, the court said ( Warman v. Am. Nat'l Standards Inst., 2016 BL 216340, S.D.N.Y., No. 15-CV-5486, 7/6/16 ).

POINTERS: Although attendance at mandatory training sessions may not be compensable under individual state laws, mandatory on-the-job training of employees, including newly hired workers, generally counts as compensable time under the Fair Labor Standards Act.

Time spent attending employer-sponsored training programs and instructional meetings may not be counted as hours worked if four conditions are met:

• The meetings are held outside regular working hours.

• Attendance is truly voluntary.

• The training program or meeting is not directly related to the employee's job.

• The employee does not perform any productive work while attending the course or meeting.

Employer-provided training for pre-hire trainees generally does not count as hours worked as long as training is for the benefit of the trainees, they do not replace regular workers, they are not entitled to a job at the end of the training and the employer and the trainees agree that no wages will be paid during the program.

For more information, see PAG's “ Determining Hours Worked ” chapter.

By Keith M. Hill

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This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.

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