Employment & Labor Law Department Update
Including Employment & Labor, Benefits and Immigration Law
Fall 2002
Now That Employers Can Require Agreements to Arbitrate–
Should They Do So?
Inside This Issue:
By Mark Tuvim
Federal courts in the Ninth Circuit (which
covers Washington, California, Oregon,
Alaska, Idaho, Nevada, Arizona, Montana,
and Hawaii) may now enforce agreements
between employers and employees to
arbitrate federal discrimination claims,
including agreements required by
employers as a condition of employment.
History
In 1998, the Ninth Circuit ruled in Duffield v. Robertson
Stephenson & Co. that employers could not require
applicants and employees to agree to give up their rights to
bring a federal discrimination lawsuit in court. All other
federal courts of appeal, as well as state supreme courts in
California and Nevada, ruled to the contrary.
Last year in Circuit City Stores, Inc. v. Adams, the
United States Supreme Court held that agreements
between employees and most employers to arbitrate Title
VII discrimination claims were enforceable. (See “Supreme
Court Upholds Arbitration Clauses in Employment
Contracts,” Summer 2001 Update.) According to the
Supreme Court, there is no guarantee of a jury trial for
federal discrimination claims, and arbitration agreements
provide “real benefits,” including generally lower costs and
faster resolution, while preserving “protection against
discrimination prohibited by federal law.” In E.E.O.C. v.
Luce, Forward, Hamilton & Scripps, the Ninth Circuit
finally followed the Supreme Court’s reasoning in Circuit
City to overrule Duffield, and held that employers could
indeed require employees to arbitrate such claims as a
condition of employment.
Should Employers Require Arbitration?
Now that most non-governmental employers may require
arbitration agreements from their employees (except
transportation workers involved in interstate commerce),
the question facing employers is whether to require such
agreements. First, as the Supreme Court noted in Circuit
City and the Ninth Circuit recognized in Luce Forward,
compulsory arbitration agreements must still comply with
the general rules of contract law and not be unfair to either
side. Second, assuming
these requirements are
met, there are significant
considerations both in
favor and against
arbitrating employment
claims. Among the pros:
IMMIGRATION REPORT
National Security and
the Foreign Worker (II) . . . . . . . . . . . . . . . . . . . . .2
Allowing Charities to Solicit Does Not
Discriminate Against Unions . . . . . . . . . . . . . . .3
CALIFORNIA UPDATE
Termination for Discussing Bonuses Could
Violate California Public Policy
California Imposes Personal Liability for
Unpaid Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
• Reduced litigation
Ninth Circuit Court Allows Claims Against
Multi-National Corporation for Human-Rights
expenses. Arbitration
Violations Committed Abroad . . . . . . . . . . . . . .4
generally provides
IN THE NEWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
streamlined discovery
and procedures.
However, arbitration agreements must
provide for discovery sufficient to protect the employee’s
rights, and employers may be required to pay additional
expenses in arbitration, such as the fee for the
arbitrator(s).
• Faster resolution. Arbitration cases usually are resolved
sooner than court cases. This usually translates into
lower costs and less strain on company personnel and
resources.
• Confidentiality. Arbitration can be more private, helping to
protect sensitive information and preventing public
embarrassment from the trial and adverse publicity from
a large verdict.
• Fewer excessive awards. Arbitrators are usually
experienced attorneys or businesspeople, and are less
likely than a jury to award excessive damages. Juries, on
the other hand, are usually comprised mostly of
employees, and may be more likely to award exorbitant
damages.
There are also significant considerations against
requiring the arbitration of claims. Among them:
• Controversy with employees. Requiring employees to
arbitrate claims can alienate applicants and members of
the workforce, and could lead good applicants or
employees to work elsewhere. Also, employers have spent
considerable sums simply litigating the enforceability of
an arbitration agreement.
Continued on Page 4
Employment & Labor Law Department Update
Page 2
IMMIGRATION REPORT: National Security and the Foreign Worker II
By James Doane
The Department of
Justice, which
administers the
Immigration and
Naturalization Service,
and the Department of
State, which administers
American consular posts
around the world, have
enacted new immigration control
measures. The Department of Justice’s
secret detentions, secret trials, and
limitations on the right to counsel are a
few examples. Other writers have
addressed the impact of such measures
on a free society and the need for
legitimate security measures. This article
focuses instead on some potential traps
for unwary employers and employees.
Stuck at the Border
Employers need to be aware of important
changes in State Department regulations
that may delay or prevent return of
foreign employees to the United States
from short trips to Canada or Mexico.
Before April 1, 2002, aliens in nonimmigrant status, but holding expired
visas, could return to the United States
following trips not exceeding 30 days
spent solely in contiguous territory such
as Canada or Mexico. They were able to
re-enter the United States based upon
the un-expired I-94 arrival-departure card
in their passport.
Now, nationals of seven countries that
the United States has designated as
terrorist sponsoring states (Iraq, Iran,
Syria, Libya, Sudan, North Korea, and
Cuba) cannot be readmitted to the United
States without a valid, unexpired visa. In
view of prolonged security checks, it is
unlikely that nationals of such countries
would be able to quickly obtain new visas
at U.S. consulates in Canada or Mexico,
or that Canada or Mexico would allow
them to remain long enough to do so.
More relevant to most employers, any
alien who unsuccessfully applies for a
visa at an American consular post in
Canada or Mexico no longer may re-enter
the United States based on an unexpired
I-94 arrival departure card in his or her
passport.
Accordingly, whether or not an
employee is a national of a terrorist
sponsoring state, a short trip across the
border may result in delays upon
attempted return to the United States, or
even require travel to an American
consular post in the employee’s home
country to attempt to secure a new visa
to return to the U.S.
Additional Delays at Consulates
Since 9/11, scrutiny at American
consular posts around the world has
significantly delayed non-immigrant visa
processing, even when the INS has
already approved a particular nonimmigrant category or status. Employees
who are unable to obtain visas in Canada
or Mexico to re-enter the United States
and who return to their home countries to
apply for new visas will have to join the
backlog with those making initial visa
applications at American consular posts.
In recent months, waits of 2-1/2
months for issuance of non-immigrant
visas to nationals of some countries have
become common. For example, one
Preston client, a Chinese-owned U.S.
employer, filed an L-1A intra-company
transferee petition to allow its new
president to come to this country to work.
The good news was that INS approved
the petition within a few days under its
$1,000 premium processing service. The
bad news was that the American consular
post indefinitely set aside the president’s
visa application for additional administrative processing, with no reason given
or information provided regarding timing.
Special Registration
Once admitted to the United States,
certain non-immigrant employees need to
comply with additional requirements,
which they ignore at their peril.
Registration at Entry
Effective September 11, 2002, as the
first phase of a revised alien registration
program that will likely be expanded, (1)
non-immigrant aliens who are nationals of
one of 5 countries (Iran, Iraq, Libya,
Sudan, and Syria); (2) other nonimmigrants designated by the State
Department at American embassies or
consulates; and (3) any other nonimmigrants identified by INS officers at
ports of entry, became subject to special
registration upon each entry to the United
States and periodically during their stay
in the United States. Effective October 1,
2002, as part of the second phase of the
revised alien registration program, males
between 16 to 45 years of age who are
citizens or nationals of Pakistan, Yemen,
and Saudi Arabia also became subject to
special registration.
The initial registration at the port of
entry requires fingerprinting, a
photograph, and an interview. In addition,
non-immigrants subject to special
registration who remain in the United
States for 30 days or longer must report
to a designated INS office between the
30th and 40th day after arrival in the
United States for further fingerprinting, a
photograph, and an interview confirming
their activities. This procedure must be
repeated during a ten day period
following each anniversary of the date of
each subsequent arrival in the
United States.
Departure Controls
Effective October 1, 2002, each time
non-immigrants subject to special
registration wish to depart the United
States, including visits to contiguous
territory such as Canada and Mexico, they
must appear in person before an INS
inspector at a designated point of
departure and leave the same day
through that designated point. Failure to
appear and depart through a designated
point of departure may make the person
ineligible for admission to the United
States, so care must be taken before
leaving the United States to confirm the
location of designated points of
departure, and to remember to appear.
Special registrants, in the United
States for 30 days or longer, are required
to provide a written report in English of
change of address, school, or
employment within 10 days. For this
purpose, they may use Form AR-11, the
form now to be used by all aliens visiting
or residing in the United States for 30
days or longer.
Compliance with special registration
upon entry and departure may cause
travel delays. Periodic registration may
require time off from work. However,
non-compliance renders the alien out of
status and subject to arrest, detention,
fines, removal, and/or denial of future
immigration benefits. ■
Please refer to the INS web site
www.ins.usdoj.gov for detailed information
about these changes.
Business Department
Seattle
jamesd@prestongates.com
Page 3
Allowing Charities to Solicit Does Not Discriminate Against Unions
By Patrick M. Madden
The National Labor
Relations Act guarantees
employees the right to
engage in “concerted
activities” regarding their
wages and working
conditions. The National
Labor Relations Board
(NLRB) has interpreted
this guarantee to preserve employees’ rights
to discuss these issues on the employer’s
premises, subject to restrictions on
solicitation during work time and in work
areas. In contrast, the U.S. Supreme Court
has ruled that an employer may establish
and enforce non-discriminatory policies that
prohibit non-employees, including nonemployee union organizers, from soliciting
on the employer’s property.
Preston client, Albertson’s, Inc., adopted
such an exclusionary policy. The company
allowed certain well-known charities (such
as the Salvation Army, Girl and Boy Scouts,
and local school groups) to solicit on store
property, but prohibited any business,
political, or other solicitation.
Two union locals complained after being
barred from soliciting at Albertson’s stores.
The NLRB agreed, finding that Albertson’s
was discriminating against the unions by
allowing the charities to solicit.
On appeal, the U.S. Court of Appeals for
the Sixth Circuit (covering Michigan, Ohio,
Kentucky and Tennessee) set aside the
NLRB’s determination. In a nationally
publicized decision, the Sixth Circuit
accepted Albertson’s argument that its
policy in favor of charities was not
discriminatory because it treated unions
like all other non-charities. Moreover, the
Sixth Circuit emphasized that no relevant
labor policies are advanced by forcing
employers to ban charitable contributions to
keep non-employee union protesters off
their property.
CALIFORNIA UPDATE:
Termination for Discussing Bonuses
Could Violate California Public Policy
By Michael McCabe
A California appellate court recently ruled that an
employee who claims that she was terminated for
discussing bonuses with other managers could
pursue a claim for wrongful termination in violation
of public policy.
In Grant-Burton v. Covenant Care, the plaintiff
alleged that she was fired six days after discussing
the company’s bonus structure with other managers
and revealing that she did not receive a bonus
because her director did not believe in them. She
also claimed that company executives expressed displeasure that
managers had talked about compensation issues.
The plaintiff’s lawsuit claimed that her termination violated
California Labor Code section 232, which prevents an employer from
taking adverse employment action against an employee who discloses
the amount of his or her wages. The appellate court found that the
plaintiff’s allegations, if true, would violate Labor Code section 232
and therefore be in violation of California’s public policy.
Labor Code section 923 also recognizes the rights of employees to
engage in concerted activity for “collective bargaining or other mutual
aid or protection.” These Labor Code sections are sources of California
public policy that limit the employer’s ability to terminate an otherwise
at-will employee. The National Labor Relations Act similarly prohibits
retaliation against employees who discuss wages, benefits and working
conditions. ■
Employment & Labor Law Department
San Francisco
mmccabe@prestongates.com
This important decision reaffirms that
companies may be good corporate citizens
without sacrificing their legal rights. The
decision also is important for charities
because an adverse decision would have
convinced many retailers to prohibit
charitable solicitation on their property.
Employers should approach this issue
with caution, however. Because the U.S.
Supreme Court and other Courts of Appeals
have not addressed this issue, the NLRB
may continue to rule against employers
outside the Sixth Circuit if they have
policies that give special access to
charities. ■
Editor’s note: Patrick Madden and Peter
Anderson represented Albertson’s before the
Sixth Circuit.
Employment & Labor Law Department
Seattle
pmadden@prestongates.com
California Imposes Personal Liability for Unpaid Wages
By Stephen D. Leanos
According to a recent opinion letter from the
California Division of Labor Standards Enforcement
(DLSE), individual corporate officers or supervisors
can be personally liable for unpaid wages if the
officers or supervisors exercise control over wages,
hours or working conditions of the unpaid employee.
DLSE is the agency responsible for enforcing
California wage and hour laws. The opinion letter is
not binding on courts but is entitled to consideration.
The DLSE opinion letter concerned an employee who had made a
claim for unpaid wages against his former employer and supervisor.
The employee had agreed in writing to defer his salary to help keep
the company in business. The business failed, however, and the
company never paid the deferred wages. Finding the executive and
company jointly responsible for the employee’s wages, DLSE reasoned
that the supervisor was an “employer” for purposes of wage and hour
law because he had control over the employee’s working conditions.
California does not recognize a business necessity or other
exception to the obligation to pay wages. Although not specifically
addressed by DLSE, personal liability might also extend to other types
of wage claims such as a failure to pay overtime to a non-exempt
employee. Corporate officers and supervisors now have an even greater
incentive to ensure that their employer complies with wage and hour
policies to avoid personal liability for potentially significant wage
claims. ■
Editor’s note: Washington State has a statute that holds “officers,
directors and vice-principals” personally liable for up to twice the wages
unpaid by the company.
Employment & Labor Law Department
San Francisco
sleanos@prestongates.com
Agreements to Arbitrate
(Continued from Page 1)
• Compromise. Arbitrators are more likely
than a court to reach a compromise
resolution and give the employee some
sort of award. In addition, arbitrators
are generally less likely than a court to
grant an employer’s motion for
summary judgment and resolve the
case short of an award. A substantial
number of cases are resolved in the
employer’s favor via summary judgment
and statistics show that employers
actually prevail in a majority of jury
verdicts following trial.
• Finality. Arbitration agreements
generally provide that the award is final
and not subject to appellate review.
This can be both a positive and a
negative. While a trial may result in a
large verdict, many such verdicts have
been reversed on appeal. In arbitration,
the employer would be unable to
appeal such a verdict. On the other
hand, an employee dissatisfied with the
outcome is also bound.
Still a Trial?
The Supreme Court recently ruled in
EEOC v. Waffle House, Inc. that the
Equal Employment Opportunity
Commission is not a party to an
arbitration agreement between an
employer and employee, and therefore
could still file a complaint in court on the
employee’s behalf seeking all available
relief. (See “Arbitration Agreement Does
Not Preclude EEOC Lawsuit,” Spring
2002 Update.) While the EEOC files
complaints in a very small percentage of
claims brought to it (generally about 1%),
the possibility exists that an employer
could still face a trial of a complaint
brought by the EEOC even after
arbitrating the employee’s claims.
Employers should consult with counsel
to determine whether use of an
arbitration agreement is appropriate or, if
an agreement is already in place and an
employee nonetheless files a lawsuit,
whether the arbitration agreement should
be enforced. ■
Employment & Labor Law Department
Seattle
markt@prestongates.com
Ninth Circuit Court Allows Claims Against
Multi-National Corporation for
Human-Rights Violations Committed Abroad
By Mark Tuvim
In a landmark decision, the Ninth
Circuit Court of Appeals recently ruled
in Doe I v. Unocal Corporation that
companies can be held liable in U.S.
courts under the federal Alien Tort
Claims Act (ATCA) for “aiding and
abetting” human-rights violations
committed abroad. Lawsuits seeking
to impose similar liability against
such well-known defendants as
ChevronTexaco and Coca-Cola are
pending in courts around the country.
In the Unocal case, Burmese
villagers sued under ATCA, claiming
that government soldiers forced them
to help build a large natural gas
pipeline in Myanmar (formerly
Burma). They claimed that Unocal a partner in the construction project knew of alleged human-rights abuses,
including murder, rape, and forced
labor, committed to further the project
and provided financial, logistical, and
moral support to the Myanmar military
that committed them.
ATCA provides relief to aliens for
torts committed in violation of
international law, including acts such
as rape, torture, and murder
committed in furtherance of slavery
(forced labor), genocide and other war
crimes. The ATCA has a ten-year
statute of limitations.
The Ninth Circuit panel reversed
the trial court’s grant of summary
judgment in favor of Unocal and
remanded the case for trial. Using
standards developed by international
criminal tribunals such as the
Nuremberg Military Tribunals, the
International Criminal Tribunal in
Rwanda and the International Tribunal
for the former Yugoslavia, the majority
opinion held that individuals and
companies can be liable for “aiding
and abetting” human-rights violations
through “knowing practical assistance,
encouragement, or moral support
which has a substantial effect on the
perpetuation of the crime.” The
concurring opinion found potential
ATCA liability against Unocal under
more familiar standards of U.S.
federal law used for imposing joint
venture and agency liability.
Overseas operations or
subsidiaries of American
multi-national companies that
encourage or support
employment law violations
could result in ... liability.
While the allegations in Unocal
involve rape, torture, and summary
executions in order to coerce forced
labor, companies with overseas
operations face potential ATCA
liability from far less egregious
conduct. For example, overseas
operations or subsidiaries of American
multi-national companies that
encourage or support employment law
violations could result in allegations of
forced labor, creating the possibility of
ATCA liability. Companies should
carefully audit their overseas
operations to ensure compliance with
local standards as well as
international law, and may wish to
consider applying U.S. workplace
standards to operations abroad. ■
Employment & Labor Law Department Update
IN
THE
Page 5
NEWS
Items Of Interest To Employers
By Steve Peltin
Minimum wage increases in Alaska, Washington
Effective January 1, 2003, the Alaska state
minimum wage will increase from $5.65 per
hour to $7.15 per hour, and thereafter will
adjust annually with changes in the
consumer price index. Washington is on a
similar schedule, with its minimum wage
increasing from $6.90 to $7.01 on January
1. For a summary of each state’s minimum
wage, see www.dol.gov/esa/minwage/america.htm.
OSHA takes aim at nursing and personal care facilities
The U.S. Occupational and Safety Health Administration
(OSHA) recently announced a “National Emphasis Program”
to concentrate outreach efforts and inspections on nursing and
personal care facilities that have higher rates of injury or
illness, focusing particularly on ergonomics, exposure to blood,
tuberculosis and other potentially infectious matter, and slips,
trips and falls. For more information, see
www.osha.gov/media/oshnews/july02/trade-20020715.html.
California enacts paid family leave
In late September, Governor Gray Davis signed Senate Bill
1661 to make California the first state to authorize paid
family leave. Under the new law, which takes effect in 2004,
employees can take up to six weeks of partially paid family
leave each year to care for a new child or ill relative. After a
one-week waiting period, the State Disability Insurance (SDI)
Fund will provide benefits of up to 55 percent of an
employee’s wages, with a cap of $728 per week. The Bill
requires employees to use up to two weeks of unused vacation
time before receiving paid leave. These new benefits will be
funded by an increase in employee contributions to the SDI
fund. Bills providing paid family and medical leave are
pending in a number of other states. ■
Employment & Labor Law Department
Seattle
stevep@prestongates.com
Washington employer-paid taxes to rise next year
The Department of Labor and Industries has proposed
hefty increases in workers compensation taxes. The
increase, if approved, would vary by the industry
(see www.lni.wa.gov/news/2002/pr020906a.htm), but
would average 40.5%. The proposed increases must be
approved through a formal rulemaking process, and employers
may oppose these increases. Washington employers also face
substantial increases in unemployment insurance taxes. For
more information about unemployment insurance taxes, see
www.wa.gov/esd/tax/index.htm.
New federal antifraud statute imposes duties on employers
Under the Sarbanes-Oxley Act (a/k/a the Corporate Fraud and
Accountability Act of 2002), publicly traded companies must
create internal policies to facilitate the identification and
reporting of potential financial fraud, including a procedure for
confidential, anonymous employee complaints about
“questionable accounting or auditing matters.” The Act
created civil liability and criminal penalties of up to 10 years
in prison for retaliating against employees who make such
complaints. The Act also made it a crime, punishable by up to
20 years in prison, for anyone (even those in privately-held
companies) to destroy documents with intent to impede or
obstruct a bankruptcy case or federal investigation. In light of
the Act, every company should review its employment and
document retention policies. For more information about
compliance with the Act, please contact Tom Kelly
(tomk@prestongates.com) in the Seattle office.
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