Labor Relations & Wages Hours Update
October 2013
Hot Topics in LABOR LAW:
Griffin nomination as GC to NLRB is confirmed
By Pamela L. Wolf, J.D.
Despite a reported threat by Senator Lindsey Graham (R-SC) to block all the President’s
pending nominations until survivors of the deadly 2012 attack on the U.S. consulate in
Benghazi, Libya, are made available to Congress, the Senate on Tuesday, October 29,
confirmed by a vote of 55-44 the nomination of Richard F. Griffin, Jr., to be General
Counsel of the NLRB.
Griffin previously served as Board Member under a controversial recess appointment in
January 2012. His nomination to the NLRB, however, was later withdrawn by the
President as part of an eleventh-hour deal with Senate Republicans in the face of their
staunch opposition.
“Today’s Senate vote to confirm Richard F. Griffin, Jr. as General Counsel will ensure
the NLRB’s ability to enforce the National Labor Relations Act,” said NLRB Board
Chairman Mark Gaston Pearce. “Having served as a staff attorney and as a member of the
Board, Mr. Griffin has a wealth of experience in labor law and a deep understanding of
the National Labor Relations Act. On behalf of the NLRB, I welcome him back and
know that he will play a vital role in ensuring that we continue to provide excellent
service to the American people.”
Prior to serving on the Board, Griffin, from 1983 to 2012, worked for the International
Union of Operating Engineers in a number of roles, including general counsel and
associate general counsel. From 1981 to 1983, he was a counsel to NLRB members. He
received a B.A. from Yale University and a J.D. from Northeastern University School of
Law.
A motion for cloture was filed in the Senate on October 16 to cut off debate on Griffin’s
nomination. Initially, the cloture motion was scheduled for a vote on Monday, October
28. However, the vote was delayed by unanimous consent agreement until the following
day. Tuesday afternoon, by a vote of 62-37, the cloture motion carried, with a vote on the
nomination to take place later in the proceedings. The vote on the nomination was cast
along party lines, with Lisa Murkowski (Ark) being the sole Republican voting in favor
of confirmation.
Chairman Pearce also offered a word of appreciation for Lafe Solomon, whose term ends
with Griffin’s appointment. Solomon served throughout a contentious period for the
agency and often found himself on the hot seat during his tenure. “The Agency and the
American people owe a debt of gratitude to Lafe E. Solomon, who began his career at the
NLRB in 1972 and has served so ably as the Acting General Counsel since June of 2010.
His courage and dedication to the mission and to improving the efficiency of the Agency
during his term as Acting General Counsel was extraordinary. I know that all the
dedicated public servants who work for the Agency in headquarters and regional offices
throughout the country appreciate his long record of service and significant
accomplishments at the NLRB.”
Cert granted in cases challenging mandatory union fees, unemployment taxes on
severance checks after employer shut-down
The Supreme Court on October 1 granted certiorari in a pair of cases that impact the labor
and employment law arena. One case challenges mandatory union fees and the other
addresses whether employees must pay unemployment taxes on severance checks when
they are involuntarily terminated because the employer shuts down.
Mandatory union fees. In Harris v Quinn (Dkt No 11-681), assisted by the National
Right to Work Foundation, a group of Medicaid home-based personal care providers filed
a class-action federal suit against Illinois Governor Pat Quinn and Illinois SEIU and
AFSCME locals over an executive order that designated 20,000 providers as public
employees for collective bargaining purposes. As such, a CBA that required the
attendants to pay an agency fee to a union did not violate the First Amendment, the
Seventh Circuit held. Because the attendants were state employees, the union’s collection
and use of fair share fees would be permitted by the Supreme Court’s mandatory union
fee jurisprudence, according to the appeals court. However, the circuit court rejected as
unripe the claims of home care assistants who had opted not to join a union and were not
presently subject to mandatory fair share fees.
Two issues are raised for review: (1) Whether a state may, consistent with the First and
Fourteenth Amendments to the United States Constitution, compel personal care
providers to accept and financially support a private organization as their exclusive
representative to petition the state for greater reimbursements from its Medicaid
programs; and (2) whether the lower court erred in holding that the claims of certain
home care attendants were not ripe for judicial review.
Unemployment taxes. In United States v Quality Stores Inc. (Dkt No 12-1408), the Sixth
Circuit held that payments made by Quality Stores to its employees upon ending their
employment involuntarily due to business cessation constituted supplemental
unemployment compensation benefits (SUB payments) that were not taxable as wages
under the Federal Insurance Contributions Act (FICA), affirming judgment for the
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retailer. Accordingly, Quality Stores and the employees who agreed to be represented by
the company were entitled to a refund of more than $1 million paid in FICA taxes.
The question to be addressed by the High Court is “Whether severance payments made to
employees whose employment was involuntarily terminated are taxable under the Federal
Insurance Contributions Act, 26 U.S.C. 3101 et seq.”
Readying for extended shutdown, Board posts contingency procedures for public
By Lisa Milam-Perez, J.D.
With the federal government shutdown expected to continue into a second week with no
imminent resolution of the budget impasse, the NLRB has issued a Federal Register
notice setting forth procedures for the public to follow in light of the agency’s closure.
The NLRB has granted an extension of time to file or serve any documents for which
extensions are permitted by law. Because extensions to the six-month filing period for
bringing Sec. 10(b) charges cannot be provided by law; and, as the Board noted, the
operation of Sec. 10(b) during an interruption of NLRB operations is uncertain, persons
with charges to file during the lapse of operations are urged to fax a copy of the charge to
the appropriate regional office.
The Federal Register notice also indicates when ALJ hearings will be postponed as a
result of the shutdown of operations, and provides that all representation elections and
pre- and post-election hearings scheduled to be held through October 11 have been
postponed indefinitely. The notice also sets forth contingencies for postponement of
hearings after that date.
Add 16 days to filing and service due dates because of shutdown; tolling also applies
The NLRB, now that it has reopened for business in the wake of the federal government
shutdown, has provided instructions on how the shutdown will impact filings with the
agency. As the NLRB noted in a Federal Register notice on October 4, an extension of
time was granted to file or serve any document for which a grant of extension is legally
permissible.
In a notice posted on its website, the NLRB explained that for each day on which the
agency’s offices were closed for all or any part the day, one day will be added to the time
permitted for the filing or service of the document. The NLRB’s offices were closed for a
total of 16 days.
Therefore, the agency said that if a document was due on October 8, it would now be due
on October 24 (October 8 plus 16 days). Per the usual practice, when the due date falls on
a Saturday, Sunday or holiday, the document would be due the following business day.
The NLRB also noted that a due date created prior to the shutdown on October 1, is
“tolled” during the shutdown — “even if the original due date did not fall within the
period of the shutdown.” By way of example, if, on September 23 the parties were
assigned a due date of October 21 (which is after the agency reopened on October 17), 16
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days are added to the due date and the document(s) are now due by November 6, the
NLRB advised.
ADEA exclusivity for state, local government workers first of several labor and
employment issues on High Court’s docket
By Deborah Hammonds, J.D. and Pamela Wolf, J.D.
Despite the government shutdown, the Supreme Court is expected to officially start its
new term on Monday, October 7. There are several provocative employment law issues
awaiting the High Court during the 2013-2014 term, including the first case scheduled for
oral arguments, Madigan v Levin (Dkt No 12-872), in which the Court will determine
whether state and local government employees may avoid the ADEA and bring age
discrimination claims directly under the Equal Protection Clause and Section 1983.
Also on the docket are numerous additional issues of relevance to labor and employment
practitioners, including the legitimacy of the Obama administration’s recess appointments
to the NLRB, the meaning of “changing clothes” in the FLSA donning and doffing
context; and the scope of the Sarbanes-Oxley Act’s reach, among others.
For the rest of the story, click here.
Independent homecare providers in Vermont now represented by AFSCME
In what the union local has called “the largest union vote and organizing win in the
state’s history,” independent homecare providers in Vermont have voted in favor of the
American Federation of State, County and Municipal Employees (AFSCME) Vermont
Homecare United to represent them in collective bargaining with the State of Vermont.
The big win came after two years of organizing. According to the union, there were 7,500
eligible voters — about one in every 100 Vermonter. It’s also the largest organizing win
in the nation in 2013, the union said.
The Vermont Labor Relations Board (VLRB) announced the victory on October 3. When
the votes were tallied, 71 percent of home care providers had voted for AFSCME.
Homecare providers supporting AFSCME also pitched in with the successful battle for
state legislation allowing homecare providers to organize. According to the union,
AFSCME supporters gave testimony, attended committee hearings, legislative debates,
and advocacy events with disability groups in an effort to get the bill passed. Act 48,
relating to independent direct support providers, was signed into law May 24, 2013.
Vermont Homecare United is now asking members to nominate individuals for election
to the bargaining committee that will negotiate their first contract with the State of
Vermont.
California sues DOL for denying transit grant certification due to pension reform
law’s bargaining restrictions
By Pamela Wolf, J.D.
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The State of California filed a lawsuit against the U.S. Department of Labor on October 4
in a move calculated to defend Governor Edmond G. Brown’s landmark package of
pension reforms, namely the California Public Employee Pension Reform Act of 2013
(PEPRA). According to the complaint, the DOL improperly denied federal grants to
California public transit providers after DOL erroneously concluded that the pension
reforms constrain workers’ collective bargaining rights.
Lawsuit challenges certification denial. Under federal laws, the DOL must certify that
fair and equitable labor protection is in place for transit employees before the Federal
Transit Administration (FTA) can issue grants to local transit agencies to improve or
operate a transit system, the complaint filed by the State of California explains. In this
case, the DOL improperly declined to certify critical transit grants on the ground that the
PEPRA diminishes the collective bargaining rights of transit employees, according to the
complaint. In its determination letters, the DOL purportedly “takes the position that any
change in state law affecting a mandatory subject of collective bargaining precludes grant
certification, notwithstanding the continued ability of the transit agencies to bargain over
pension and retirement issues.”
The state contends that if the DOL’s conclusion stands that PEPRA abridges collective
bargaining rights and that the only valid pension changes are those made at the
bargaining table, its “practical effect would be to prevent state legislatures from
amending any law that affects the employment terms of transit workers.” The DOL’s
decision violates federal law; will result in the loss of billions of dollars in federal
funding to California transit providers; and constitutes an arbitrary, capricious, and
unconstitutional effort to coerce California to alter a pension reform law adopted for the
benefit of California's citizens and public employees, according to the complaint. The
state asks the court to invalidate and overturn the DOL’s determinations.
The denial of certification that sparked the controversy began when in December 2012,
the DOL’s Office of Labor-Management Standards notified the Sacramento Regional
Transit District (SacRTD) and the labor organizations representing transit employees in
the project's service area of DOL’s intent to certify a pending grant unless the DOL
received a written objection within 15 days of the referral. The same notice was included
in an August 2013 letter regarding the DOL’s referral of a pending FTA grant application
for Los Angeles County Metropolitan Transportation Authority, according to the
complaint, as well as in referral letters for grants to other California entities.
The Amalgamated Transit Union (ATU) then filed an objection to the DOL’s December
2012 referral on the grounds that enactment of PEPRA “removed or limited certain
mandatory and/or traditional subjects of collective bargaining in violation of [Urban
Mass Transportation Act] Section 13(c) requirements,” according to the complaint. After
SacRTD opposed the objection, arguing that “PEPRA did not substantively impact
existing collective bargaining agreements or future bargaining, or otherwise eliminate or
remove pension issues from bargaining,” the DOL nonetheless determined that the ATU
had raised sufficient objections.
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Although the DOL ordered good faith negotiations between the parties, a resolution was
not reached. The DOL then issued a final determination on September 4, 2013, stating
that that “the PEPRA ‘makes significant changes to pension benefits that are inconsistent
with section 13(c)(1)'s mandate to preserve pension benefits under existing collective
bargaining agreements and section 13(c)(2)'s mandate to ensure continuation of collective
bargaining rights,’” the complaint states. Certification of SacRTD's pending grants was
thus denied.
The State of California challenges the DOL’s purported finding that any restriction of the
right to bargain over a mandatory subject of collective bargaining violates Section 13(c).
According to the complaint, the DOL has “acknowledged that nothing in Section 13(c) or
other federal law restricts a state's enactment of law regulating the pensions of public
employees, but determined that a state must forego federal funding if a state law alters the
pension rights of public transit employees in any respect.”
“Bringing this lawsuit is just another step to ensure that our pension system is viable long
into the future,” Governor Brown said.
Temporary exemption. In September, Brown proposed legislation to ensure that $1.6
billion in federal grants continue to flow to transit districts after the DOL denied grant
money to SacRTD. The Sacramento transit provider is a co-litigant in the lawsuit, which
the state filed through Caltrans, whose own federal transit grant also was denied last
month.
In conjunction with the filing of the lawsuit, the governor signed AB 1222, authored by
Assemblymembers Richard H. Bloom (D-Santa Monica) and Roger Dickinson (DSacramento). The new legislation temporarily exempts local transit agencies’ workers
from the PEPRA to allow the state to pursue its case in court and creates a state loan
program to assist transit operators that have lost federal transit grants.
The PEPRA establishes new retirement formulas for employees first employed on or after
January 1, 2013, which it bars public employers offering a defined benefit pension plan
from exceeding. It also requires those employees to contribute a specified percentage of
the normal cost of the defined benefit plan and restricts public employers from paying an
employee’s share of retirement contributions. Certain retirement systems are exempted.
Specifically, AB 1222 exempts from PEPRA public employees whose collective
bargaining rights are subject to specified provisions of federal law until the federal
district court reaches a decision on a challenged grant certification denial by DOL’s
Secretary of Labor, or his or her designee, or until January 1, 2015, whichever is sooner.
If a federal district court upholds DOL’s determination that application of PEPRA to
those public employees precludes certification, those employees would be exempted from
the PEPRA under the new legislation.
AB 1222 also permits the Director of Finance to authorize a loan of up to $26,000,000
from the Public Transportation Account in the State Transportation Fund to be made to
local mass transit providers in amounts equal to federal transportation grants not received
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due to the DOL’s noncertification. By providing for loans, the bill makes an
appropriation and also prescribes requirements regarding the disbursement of these funds.
Local transit providers are required to repay the loan based on the occurrence of certain
contingencies or by January 1, 2019.
This new law takes effect immediately as an urgency statute.
TWU will be content to stay in airline merger case as amicus curiae
By Pamela Wolf, J.D.
The Transport Workers Union has modified its bid to intervene in the lawsuit filed by the
DOJ against the proposed merger of American Airlines and U.S. Airways. Understanding
the road blocks that may prevent it from getting it into the middle of the action, the union
is now backing off and going for its alternative choice, amicus curiae status.
In August, the DOJ, six state attorneys general and the District of Columbia filed a civil
antitrust lawsuit challenging the proposed $11 billion merger between US Airways Group
Inc. and American Airlines’ parent corporation, AMR Corp. According to the DOJ, the
merger, which would result in the creation of the world’s largest airline, “would
substantially lessen competition for commercial air travel in local markets throughout the
United States and result in passengers paying higher airfares and receiving less service.”
The agency also pointed to the more than $70 billion on airfare spent last year by
business and leisure travelers. In recent years, according to the DOJ, “major airlines have,
in tandem, raised fares, imposed new and higher fees, and reduced service.”
The TWU sought to intervene in the lawsuit, which, pursuant to an order issued by U.S.
District Judge Colleen Kollar-Kotelly, is moving forward despite the federal government
shutdown. And the union has some skin in the game. According to its own count, more
than 23,000 TWU members work at American Airlines and American Eagle in seven
crafts and/or classes, including: Mechanics and Related, Fleet Service, Materials
Logistics Specialists, Dispatchers, Ground School and Simulator Pilot Instructors,
Maintenance Control Technicians, and Flight Simulator Technicians. Some 300
employees of US Airways are also TWU members in the Flight Dispatch, Flight Crew
Training Instructor, and Flight Simulator Technician crafts and/or classes.
“We represent workers at both airlines, and the livelihood of our members is at stake,”
said TWU President Harry Lombardo. “That’s why we filed for intervenor status.”
However, on Wednesday, October 9, the union filed a pleading with the court asking that
it instead be granted amicus curiae status. The TWU cited the responses of both the DOJ
and the airlines expressing a shared concern that “nothing stand in the way of a prompt
resolution of this litigation on the schedule set by the Court.” The union said that it shares
the same concern.
Although union said it “continues to believe that it is in the best position to protect the
specific interests of its members in this litigation by articulating those interests to the
Court directly,” in view of the parties’ concern that its “intervention might put at risk a
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prompt resolution of this litigation” as scheduled by the court, the TWU asked the court
to grant it ongoing status as amicus curiae.
Release of previously scheduled economic data delayed
The U.S. Department of Labor has issued a statement about previously scheduled
economic data. Among other data, the Consumer Price Index September 2013, a measure
of the average change over time in the prices paid by urban consumers for a market
basket of consumer goods and services, and Real Earnings, September 2013, which
details current and constant-dollar earnings for all employees on private nonfarm
payrolls, will not be released on October 16. Alternative release dates have not been
scheduled.
Bureau of Labor Statistics. In addition, the Bureau of Labor Statistics (BLS) has posted
a special notice on its website indicating that the website is currently not being updated
due to the suspension of federal government services. The last update to the site was
Monday, September 30. During the shutdown period BLS will not collect data, issue
reports, or respond to public inquiries. Updates to the site will start again when the
federal government resumes operations. Revised schedules will be issued as they become
available. The most recent information on Federal government suspensions, shutdowns,
and closings can be found at www.opm.gov.
AFL-CIO, U.S. Chamber, United Way team up to push for end to the shutdown
By Pamela Wolf, J.D.
As the federal government shutdown has continued to take a toll across the country —
affecting not just furloughed federal workers, but also private sector profit and non-profit
employers and their workforces — the AFL-CIO joined forces with the U.S. Chamber of
Commerce, as well as with the United Way, in an unusual pairing designed to push
Congress to put an immediate end to the standoff.
The disparate group sent a letter to Congress on October 11. Signed by U.S. Chamber of
Commerce President and CEO Thomas J. Donohue, AFL-CIO President Richard
Trumka, and United Way Worldwide U.S. President Stacey D. Stewart, the message
made clear both the damage that has resulted from the shutdown and the need to put it to
an end.
“Our country is navigating the most challenging economic times in a generation,” wrote
the triad. “While we may disagree on priorities for federal policies and we even have
conflicting views about many issues, we are in complete agreement that the current
shutdown is harmful and the risk of default is potentially catastrophic for our fragile
economy.”
It’s almost impossible, 15 days into the shutdown, not to notice the barrage of headlines
detailing the toll that this congressionally created crisis has taken on ordinary citizens
across the nation, particularly those who are most vulnerable due to their dependence on
social services provided via state and/or federal funding. As the triad note in their letter to
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Congress, “The federal government is our nation’s largest consumer of goods and
services, our largest employer, and the single largest source of financial support for state
and local governments and for private social services.” They also point to the several
hundred thousand public servants who are locked out of their workplaces and forced to
try to make ends meet without pay.
“As we often have in our history, our country benefits from strong differences of opinion
on many important issues affecting both federal legislation and the federal government,”
the triad told Congress. “We believe it is important that we turn to the normal processes
our government has for resolving these issues. We cannot afford to have either our
government closed or our nation’s creditworthiness called into question as part of the
way we resolve these important issues.”
Representing three disparate factions, the triad stressed their common view — “no one
benefits from the current shut-down and everyone will be harmed if the government
defaults.” They urged Congress, in the interest of the nation, to restore normal function of
the political process, to immediately fund the government, and to quickly take action to
resolve the impasse over the debt ceiling limit. “We urge all of our leaders in Washington
to set aside the many issues we disagree about, reach across the aisle and end the
shutdown and the threat of a national default,” they wrote.”
FLRA nominees confirmed, Griffin nomination as GC to NLRB poised for vote
By Pamela Wolf, J.D.
While reaching a deal that would end the government shutdown consumed much of
Congress’ focus and attention yesterday, the Senate also acted to confirm two
nominations to the Federal Labor Relations Authority and lined up the nomination of
Richard F. Griffin, Jr., as General Counsel to the NLRB for consideration in the
chamber’s Executive Session on Monday, October 28.
FLRA. The Senate confirmed the nominations of Carol Waller Pope, of the District of
Columbia, to be a member of the FLRA for a term of five years expiring July 1, 2014.
The congressional body also confirmed the nomination Ernest W. DuBester, of Virginia,
as FLRA Member for a term of five years expiring July 29, 2017.
DuBester was unanimously confirmed to be an FLRA member in August 2009. He was
designated as chairman on January 15, 2013, by President Barack Obama. DuBester was
previously nominated by President Clinton and served as chairman and member of the
National Mediation Board (NMB) from 1993-2001.
DuBester has 35 years of experience in labor-management relations, with a career that
began at the NLRB serving as counsel to former chairman and member, John Fanning.
He also served as a union attorney with the firm of Highsaw & Mahoney, and as
legislative counsel to the AFL-CIO. He received his undergraduate degree from Boston
College, his law degree from the Catholic University of America School of Law and his
Masters of Law in Labor Law from the Georgetown University Law Center.
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Pope, immediate past chairman of the FLRA, held that position from 2009 until recently.
She was first appointed as a member of the FLRA in 2000. Before that Pope worked in
the Office of the FLRA General Counsel from 1980 to 2000, first as an attorney in the
Boston Regional Office, then as Executive Assistant to the General Counsel, and finally
as Assistant General Counsel.
NLRB. On October 16, a motion for cloture was filed in the Senate to cut off debate over
Griffin, who served as Board member under a controversial recess appointment in
January 2012. His nomination to the NLRB was withdrawn by the President as part of an
eleventh-hour deal with Senate Republicans in the face of their staunch opposition.
Previously, from 1983 to 2012, Griffin worked for the International Union of Operating
Engineers in a number of roles, including General Counsel and Associate General
Counsel. From 1981 to 1983, he was a Counsel to NLRB members. He received a B.A.
from Yale University and a J.D. from Northeastern University School of Law.
On Monday, October 28, there will be a period of debate, followed by a vote on the
motion for cloture.
BART workers strike and each side blames the other for the lack of a deal
By Pamela Wolf, J.D.
The Bay Area Rapid Transit (BART) workers are on strike after unions and the
California five-county transit district fell short of reaching a deal that everyone could live
with to put an end to this protracted labor dispute. And, at least according to one of the
unions, the sweet spot was close at hand. “In all my years in the Labor movement, I’ve
never seen an employer drive negotiations that were this close to a deal into a strike,”
said SEIU Local 1021 Executive Director Pete Castelli. But each side blames the other
for the breakdown leading up to the strike.
A BART spokesperson, in what may be an eerie replay of sentiments expressed during
the recent federal government shutdown, says that instead of striking, the unions could
have taken the transit provider’s offer to a vote of their members or continued to talk
about options that might lead to a resolution. “We hope they will call off the work
stoppage as soon as possible and join us in seeking ways to come to an agreement that
doesn’t impact our riders and the Bay Area,” he said.
BART’s two largest unions thought they had a final framework for a deal after a
marathon 28-hour bargaining session. The purported framework agreement included
wages, pensions, healthcare and an offer to submit to binding interest arbitration on work
rules in order to avoid a strike,” Castelli said. According to the SEIU version of what
went wrong, BART management, after telling the public that their main goal during
bargaining was saving money to buy new trains, “blew up negotiations” when they
insisted that employees sacrifice workplace protections in exchange for economic wellbeing. “This was a poison pill for workers: choose between your paycheck and your
rights,” the union said.
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We had a rough deal on economics,” explained Castelli. “We can’t believe BART is
willing to incite a strike over their professed desire to implement an electronic pay stub
system and handheld computers in the workplace.”He said the union was focused on
protecting basic rights, such as the 8-hour workday and past practice language that
protects workers from punishment and retribution when they report favoritism, sexual
harassment, and other problems in the workplace.
According to Castelli, the union local is willing to let a neutral third-party arbitrator step
in to help work through differences on work rules and reach final agreement on the
economic package discussed in the last 28-hour bargaining session.
Although the BART spokesperson said the transit district had reached out to union
leaders after negotiations broke down, Castelli countered, at least at the time of his
statement on October 17, that neither BART General Manager Grace Crunican nor Board
Chair Tom Radulovich had contacted him or any other top union staff to restart talks after
bargaining broke up that afternoon.
Crunican also issued a statement on October 17, indicating that no deal had been reached
and that there remained a large gap between the parties. She advised that BART had
made its final offer: “Today I gave an updated final offer to the unions on behalf of the
Board. It reflects the limited progress we’ve made over the past four days of work and it
addresses the essential work rule efficiencies BART desperately needs to modernize our
operations.”
The final package, Crunican said, included a 3-percent raise per year for a total of a 12percent increase, with a chance to earn up to $1000 a year if ridership grows; and
contributions of 4 percent for pension and 9.5 percent for medical. The unions had until
October 27th to consider the offer and take it to a vote by the members.
“We are not going to agree to something we can’t afford,” Crunican said. “We have to
protect the aging system for our workers and the public.”
No requirement that commercial vehicle drivers be tested for sleep disorders absent
formal rulemaking procedure
By Pamela Wolf, J.D.
Last week, President Obama signed H.R. 3095, which ensures that a rulemaking
procedure must take place before any new or revised requirement providing for the
screening, testing, or treatment of individuals operating commercial motor vehicles for
sleep disorders (including sleep apnea) is adopted. Thus, the secretary of transportation
cannot implement or enforce any requirement for screening, testing, or treatment
(including consideration of all possible treatment alternatives) of commercial motor
vehicle drivers for sleep disorders unless the requirement has been adopted pursuant to a
formal rulemaking procedure.
The Teamsters followed up with a statement taking credit for the union’s role in
preventing the Federal Motor Carrier Safety Administration’s purported attempt to
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“circumvent the rulemaking process by offering ‘guidance’ on the testing and treatment
of sleep apnea in the trucking industry.” Noting that agency guidance, unlike the formal
rulemaking process, does not allow for stakeholder input, the union said: “This could
have led to drivers being required to take expensive and unnecessary tests that they would
have to pay for. In response to this threat, the Teamsters joined with truck and bus
industry stakeholders to mobilize and pressure Congress to introduce and pass the
legislation.”
The bill cleared the House by a 405-0 vote on September 26, and was passed in the
Senate on October 4 by unanimous consent without amendment. It was signed by the
President on October 15.
Charges fly at VW’s Chattanooga plant
By David Stephanides, J.D.
Eight VW workers at the automaker’s Chattanooga, Tennessee, plant have filed charges
with the NLRB against the UAW, saying that it misled and coerced them, along with
other workers, into forfeiting their rights during the recent card check unionization drive,
according to the National Right to Work Legal Defense Foundation (NRTW). Via free
legal assistance from NRTW lawyers, the workers filed their charges at the NLRB’s
regional office in Atlanta.
And on October 16, it was reported that four more workers filed a federal charge with the
Board alleging that statements by German VW officials illegally coerced them into UAW
representation, also according to the NRTW. The charge comes after the officials stated,
according to recent media reports, that for any expanded production to be considered in
Chattanooga, the plant must adopt a works council that would force workers to accept the
representation by the UAW.
“With reports that Volkswagen is considering Chattanooga to build its new SUV, this is
no idle threat,” said Mark Mix, NRTW president. “If VW management was discouraging
workers from joining the UAW with threats, there’s little question that an NLRB
prosecution would have already begun at the UAW’s behest.”
The cards not only authorized the union to represent the workers, they also ostensibly
authorize the importation of a German-style “work council” to the U.S. plant. The card
includes language stating that the workers “commend and embrace the Volkswagen
philosophy of co-determination and aim to contribute to the production of the highest
quality products, safe and efficient production methods, and the overall profitability of
Volkswagen.” The language goes on to state: “We believe that the best way to actively
participate in our company and to contribute to VW’s continued success is to achieve
representation as our colleagues have at the other 61 Volkswagen facilities across the
globe.”
The charges filed by the VW workers — some nine days after a UAW spokesperson
confirmed to Employment Law Daily that the union had obtained a majority of UAW
authorization cards — are said to state that union organizers told the workers that a
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signature on the card was to call for a secret ballot unionization election. The charges also
purportedly allege other problems in the card check process, including that some of the
cards used were signed too long ago to be valid. The NLRB charges seek an order that
UAW union officials cease and desist from demanding recognition based upon the tainted
cards.
According to the NRTW, union officials have told workers that they must physically
appear at the union office if they want their cards returned to them. Purportedly, these
workers sought to revoke their signatures following media reports suggesting that
workers were misled or bribed into signing cards.
The NRTW acknowledges that this latest development stems from a NRTW “special
legal notice” targeted to the VW workers. The notice points to the decline of the UAW
and suggests that the union now “sees German-style ‘works councils’ as its salvation.”
The notice also disputes the alleged claim of the UAW’s president that workers must join
the union and authorize it to be exclusive bargaining agency in order to have such a work
council. The NRTW’s targeted notice also advises VW workers of several rights under
the NLRA, including their right to revoke a union authorization card that they have
signed and exactly how to do so.
BART trains running again after tentative deal ends strike
The Bay Area Rapid Transit (BART) strike that began on October 18 — after negotiations broke
down the day before, and each side publically blamed the other — has been resolved. The
California five-county transit district and its two largest unions have reached a tentative
agreement on labor contracts, which will now be presented to employees for a ratification vote,
according BART General Manager Grace Crunican.
The tentative deal, announced on October 21, brought BART trains back into service the next
morning. “This is a good package for our union members while still allowing the District to make
the necessary investments in our infrastructure,” Crunican said. “That investment is critical to the
future of the Bay Area.”
“We believe the tentative agreement will allow us to go forward with a commitment to working
together,” Crunican continued. “I won’t go into details about the tentative agreement. I will simply
say it sets BART on a path of partnerships with union members and helps us to prepare for the
future.
Crunican also noted what the mediators, the union, the workers, and the public already new all
too well — that the negotiations had been long and difficult. “I want to thank the union leaders, the
mediators and the BART Board of Directors for the hard work that has gone into getting us to the
tentative agreement,” she said.
$666 raises to “Satan” union organizers were retaliatory, state ULP charge alleges
By Pamela Wolf, J.D.
The Cleveland State University Chapter of the American Association of University
Professors (CSU-AAUP) has brought an unfair labor practice charge against the
Cleveland State University College of Law with the Ohio State Employment Relations
Board (SERB). According to the charge, virtually all the professors who assisted the
organizing campaign that culminated in the certification of the CSU-AAUP as the
13
bargaining unit representative last June were either given no merit raise, or a $666 merit
raise in retaliation for organizing activities. In many circles, 666 is known as the “Mark
of the Beast.”
Although the charge may seem eerily Halloween-ish, it is dated August 29. It alleges that
faculty generally received one of four amounts as merits raises from a 2-percent raise
pool: $5,000; $3,000; $666: and $0. Of the eight union organizers identified in the
charge, two allegedly received no raise and six received the ominous $666, even though
many had exemplary scholarship and teaching scores. “In effect Dean Boise has called
AAUP’s organizers and AAUP Satan,” the charge states, calling the law school dean’s
actions “a poorly veiled threat in opposition to AAUP’s organizing and concerted
activities.”
The CSU-AAUP asserts that the dean’s actions in manipulating the merit raise increase
pool and his failure to be forthcoming as to his methods in calculating the increases
amounts to retaliation for engaging in activity that is protected under Ohio Revised Code
Chapter 4117.
The charge was by filed on the union’s behalf by attorneys Susannah Muskovitz and
William E. Froehlich of Muskovitz & Lemmerbrock, LLC.
The SERB is expected to reach a probable cause determination on the charge as early as
November or December. If probable cause is found, the state attorney general would
likely bring an action against the law school and the CSU-AAUP would then intervene in
the suit.
When asked by Employment Law Daily to comment, the CSU-AAUP stated that it
“represents a group of respected and accomplished professionals who are pursuing their
legal remedy through the appropriate legal channels.”
Secretary of Labor’s comments, EPI report offer insight into the “alt-labor”
movement
By Pamela Wolf, J.D.
In the wake of Secretary of Labor Thomas E. Perez’s remarks on October 29 at the
Center for American Progress in conjunction the annual Half in Ten Anti-Poverty Report
release, the Economic Policy Institute (EPI) released another report, The Legislative
Attack on American Wages and Labor Standards, 2011–2012. Many of the Secretary’s
remarks and the various developments noted in the EPI report echo the issues fueling the
so-called “alternative labor” movement that has gained much momentum in United States
this past year. The Secretary’s remarks also provide insight into his view of how workers
and management should interact on the labor scene.
“There is an undeniable relationship — not just correlation, but direct causation —
between declining poverty and the strength of the labor movement,” Perez said. “It just
stands to reason: when workers have a strong voice and a seat at the table ... they are able
to bargain for their fair share of the value they help to create. But when someone muzzles
14
that voice and cuts off the legs of that seat ... that's when you see stagnant wages even as
productivity and corporate profits continue to record heights. Empowered, organized
workers reduce inequality and build the middle class.”
According to the EPI report’s author, Gordon Lafer, state legislators have over the last
two years “launched an unprecedented series of initiatives aimed at lowering labor
standards, weakening unions, and eroding workplace protections for both union and nonunion workers. This policy agenda undercuts the ability of low- and middle-wage
workers, both union and non-union, to earn a decent wage.”
For his part, Perez offered this prediction: “In the coming years, we're going to see a
rapidly evolving workers movement that takes many forms. More and more, we're seeing
new groups of workers beginning to organize at the grass roots level. Fast food workers,
taxi drivers, domestic workers and others in low-wage industries are taking action and
speaking up for their right to a fair day’s pay for a hard day’s work. The labor movement
and other allies (many of them in this room) are welcoming and supporting these
independent movements.”
The Labor Secretary applauded this grassroots movement, calling it “exactly what we
need: everyone working together, forging new strategies and building new alliances, in
support of working people taking courageous action to improve their lives and
communities.”
State legislative action. Lafer, in the EPI report, ticked through the many efforts taken
by state legislatures in 2011 and 2012 that he characterized as “efforts to undermine
wages and labor standards”:

Four states passed laws restricting the minimum wage, four lifted restrictions on
child labor, and 16 imposed new limits on benefits for the unemployed.

States also passed laws stripping workers of overtime rights, repealing or
restricting rights to sick leave, undermining workplace safety protections, and
making it harder to sue one’s employer for race or sex discrimination.

Legislation has been pursued making it harder for employees to recover unpaid
wages (i.e., wage theft) and banning local cities and counties from establishing
minimum wages or rights to sick leave.

For the 93 percent of private-sector employees who have no union contract, laws
on matters such as wages and sick time define employment standards and rights
on the job. Thus, this agenda to undermine wages and working conditions is
aimed primarily at non-union, private-sector employees.
According to Lafer, the above-noted efforts provide important context for the actions
taken to undermine public employee unions that have been much more publicized. He
pointed to what he considered the most galvanizing and prominently reported legislative
battle — Wisconsin Governor Scott Walker’s “budget repair bill” that “largely eliminated
collective bargaining rights for the state’s 175,000 public employees.”
15
In the wake of Governor Walker’s move, Lafer cites to these legislative efforts in 2011
and 2012 to curb the workplace rights of public employees:

Fifteen states passed laws restricting public employees’ collective bargaining
rights or ability to collect “fair share” dues through payroll deductions.

Nineteen states introduced “right-to-work” bills, and “right-to-work” laws
affecting private-sector collective bargaining agreements were enacted in
Michigan and Indiana.
Despite portrayals of those who supported such anti-union legislation as defenders of
non-union workers, whom they cast as the hardworking, private sector taxpayers who
were stuck with picking up the tab for public employees’ lavish pay and pensions, Lafer
asserts that it is now “clear that the attack on public employee unions has been part of a
broader agenda aiming to cut wages and benefits and erode working conditions and legal
protections for all workers —whether union or non-union, in the public and private
sectors alike.”
The evolving labor movement. Perez, for his part, apparently finds renewed hope in the
“new” labor movement: “This isn't your father's labor movement as you know. For more
reasons than I have time to enumerate, our unions are seeking out new and innovative
ways of doing business. Around the country, I see example after example of labor
working with management to forge win-win solutions that get workers the good jobs,
skills and opportunity they need.”
Perez cited to these examples, among others:

The Culinary Academy in Las Vegas, a partnership between the local hospitality
industry and the unions that is training thousands of people a year for good jobs
— as cooks, maids, bartenders, stewards and more — paying a middle-class wage
and providing a secure career path.

The Building Trades working together with construction companies to leverage
$750 million a year in private sector money to provide state-of-the-art
apprenticeship training that helps people find good work and skills that create the
foundation for a stable career.

SEIU 1999, which working directly with health care employers, has training
centers in several states designed to prepare people for careers as nurses,
homecare workers, pharmacists and more. This is labor and management working
hand-in-glove, rejecting the stale debates of yesterday, finding common ground
and identifying mutual interests, Perez said.
The Labor secretary cast a wide net in offering examples for the evolving U.S. model:
“As we aspire to build more of these partnerships, we can look overseas for a model.
Take Germany, a manufacturing powerhouse, and what they have accomplished with
their werks councils. Workers and employers there have demonstrated conclusively that
labor-management cooperation increases productivity, spurs innovation and creates
16
shared prosperity. We can do the same as we rebuild manufacturing here in the states —
if we reject false choices and work together on creative solutions.”
Pointing to Henry Ford’s move in 1914, when he doubled the wages of Dearborn,
Michigan, assembly line workers, Perez quoted the successful capitalist with approval:
"If we can distribute high wages, then that money is going to be spent and it will serve to
make storekeepers and distributors and manufacturers and workers in other lines more
prosperous and their prosperity will be reflected in our sales. Countrywide high wages
spell countrywide prosperity."
Decrying the low-wage model that is so common in the fast food and retail industry, the
Labor Secretary said: “Costco, one of the nation's most successful retailers, sells great
products at reasonable prices while paying employees around $15 or $20 an hour plus
benefits. I went to a Costco opening in northern Virginia this summer and talked to the
manager who’s been with the company for several years. She started by pushing carts,
now she’s running a store. Costco provides these kinds of opportunities for upward
mobility and middle-class employment while still being quite profitable.”
For those who are trying to figure out how to deal with both the changing face of labor in
the United States and the impetus for the alt-labor movement, the Secretary of Labor’s
remarks and the EPI report are both well worth the read.
LEADING CASE NEWS:
2d Cir.: Challenge to NLRB delegation of authority to seek injunctions to General
Counsel rejected
By Ronald Miller, J.D.
An employer’s contention that a district court was without jurisdiction to grant a petition
by an NLRB regional director to enjoin alleged unfair labor practices by the management
of a group of nursing care facilities because the Board did not have a quorum and did not
properly authorize its General Counsel to seek temporary injunctive relief was rejected by
the Second Circuit (Kreisberg v HealthBridge Management, LLC dba Danbury HCC,
October 15, 2013, Lohier, R). In a question of first impression, the appeals court
concluded that because the Board’s 2001 and 2002 delegations of authority to the
General Counsel to petition for injunctions were effective at the time of the petition in
question, without regard to a 2011 delegation, the petition for injunctive relief was
validly authorized and properly granted.
HealthBridge began managing the facilities in 2003, assuming prior agreements with the
union. In 2004, the parties entered into a collective bargaining agreement that was set to
last through March 2011. However, disputes arose in 2010 when the employer instituted
a number of unilateral changes to the terms and conditions of some union members.
Charges were filed with the NLRB. Nevertheless, the parties began negotiations of a new
agreement in January 2011. Essentially, HealthBridge sought to codify the unilateral
17
changes it made in the new CBA. The union wanted the changes rescinded. HealthBridge
also proposed replacing the employees’ pension plan with a 401(k) plan. Ultimately, the
union filed charges. Notwithstanding the complaint, HealthBridge implemented its
proposals, including the 401(k) plan. Employees from one facility were also locked out.
Request for Sec. 10(j) injunction. Throughout, HealthBridge insisted that it would not
sign a CBA that did not phase out the pension plan. Offers and counteroffers by both
parties were rejected as unacceptable. Eventually, HealthBridge declared an impasse and
unilaterally imposed its last and best final proposals (LBFs), which included substantial
modifications to employee benefits. The union responded by notifying HealthBridge of
its intent to strike. Ultimately, the NLRB authorized a regional director to bring an action
under Sec. 10(j) to enjoin HealthBridge from imposing its LBFs. Thereafter,
HealthBridge filed a motion to dismiss for lack of subject matter jurisdiction.
The Sec. 10(j) petition sought to enjoin temporarily, pending a final adjudication by the
Board, alleged unfair labor practices related to a long-running labor dispute between
HealthBridge and a union that represented approximately 700 employees. Here, the
appeals court was called upon to consider the power of the NLRB General Counsel to
authorize petitions for temporary injunctive relief under Sec. 10 of the NLRA, and the
propriety of a district court’s grant of an injunction in this case. HealthBridge argued that
the Board lacked a quorum at the time that it purported to authorize the Sec. 10(j)
petition, that the Board’s prior contingent delegation to its General Counsel of the power
to authorize such petitions did not survive the loss of a quorum, and that the district court
lacked subjected matter jurisdiction because the petition was not validly authorized.
Moreover, the employer argued that the Supreme Court’s decision in Winter v Natural
Resources Defense Council overruled the Second Circuit’s established legal standard for
evaluating Sec. 10(j) petitions that the district court applied, and that the district court
abused its discretion in granting the petition. However, the appeals court observed that
Winter involved preliminary injunctions generally and not the specific right to injunctive
relief created by the NLRA, and so did not impact the standard for Sec. 10(j) petitions.
Further, the court held that the district court did not otherwise abuse its discretion in
granting the petition in this case.
Delegation of power. The appeals court first addressed the employer’s argument
regarding the Board’s delegation of power to the General Counsel. As an initial matter,
the court concluded that the Board may contingently delegate the power to authorize Sec.
10(j) petitions to the General Counsel. Further, it concluded that such delegations, made
in 2001 and 2002, were in effect here, so the petition for injunctive relief was properly
authorized by the General Counsel.
The question of whether the Board had a quorum when the petition was filed depended
on the constitutional validity of several recess appointments made by President Obama.
On January 4, 2012, the President made three recess appointments to the NLRB. At that
time, the Senate was holding periodic “pro forma sessions.” By the time the Sec. 10(j)
petition was authorized in August 2012, two of the Board’s four members were serving
on the January 4, 2012, recess appointments.
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The General Counsel prosecutes complaints before the NLRB, and has such other duties
as the Board may prescribe. Whether the General Counsel could authorize Sec. 10(j)
petitions depends on the effectiveness of the Board’s delegation. The Board has, at
various times, contingently delegated its power to authorize Sec. 10(j) petitions to the
General Counsel in the event that it loses quorum. In this instance, the district court held
that the Board had validly delegated to the General Counsel its power to authorize Sec.
10(j) petitions. This appeal followed.
Validity of recess appointments. The Second Circuit concluded that it was not required
to resolve the validity of the President’s recess appointments under the Recess
Appointment Clause. Rather, it considered only whether the district court erred when it
concluded that the General Counsel properly authorized the petition pursuant to the
Board’s delegation of its Sec. 10(j) authority. The appeals court pointed out three
delegations by the Board of its Sec. 10(j) powers are relevant to resolve this issue: the
2001 delegation; the 2002 delegation; and the 2011 delegation. The 2001 delegation
granted the General Counsel full and final authority to prosecute injunctions. This
delegation was to be revoked whenever the Board had at least three members.
The 2002 delegation confirmed all existing delegations of authority to the General
Counsel in effect prior to its issuance, including the 2001 delegation. Moreover,
additional authority was granted to the General Counsel to certify the results of secret
ballot elections. Finally, the 2011 delegation explicitly stated that the previous 2001 and
2002 delegations were consolidated, restated, and affirmed. While HealthBridge
challenged the validity of the 2011 delegation, it did not challenge the validity of the
2001 or 2002 delegations, which contain no expiration date and remain effective.
Whether or not the 2011 delegation was validly issued, it reconfirmed that the 2001 and
2002 delegations were still in effect.
Loss of quorum. The subsequent loss of quorum by the NLRB did not negate a proper
delegation of Sec. 10(j) authority to the General Counsel, determined the Second Circuit.
The appeals court observed that the delegation at issue here was designed to allow the
continued exercise of Sec. 10(j) authority if and when the Board lost a quorum.
Consistent with the Supreme Court’s ruling in New Process Steel, L.P. v NLRB, and its
own precedent, the Second Circuit joined with sister circuits that have concluded that the
delegation of Sec. 10(j) authority to the General Counsel survives even when the Board
subsequently lacks a quorum. Consequently, the appeals court held that the General
Counsel properly authorized and filed the Sec. 10(j) petition in this case pursuant to the
Board’s 2001 and 2002 delegations.
The case number is 12-4890-cv.
Attorneys: Beth S. Brinkmann, U.S. Department of Justice, and Laura T. Vazquez,
National Labor Relations Board, for Jonathan B. Kreisberg. Rosemary Alito (K&L
Gates) and Erin E. Murphy (Bancroft PLLC) for HealthBridge Management, LLC.
2nd Cir.: Union failed to show that non-signatory union was alter ego of signatory
company
19
By Ronald Miller, J.D.
A union failed to establish that two companies were a single company or alter egos so as
to bind a non-signatory company to collective bargaining agreements (CBA) to which the
union and another company were parties, ruled the Second Circuit in an unpublished
decision (United Union of Roofers, Waterproofers, and Allied Workers, Local No 210 v
AW Farrell & Son, Inc, October 15, 2013, Per curiam). Although the owners of the two
companies were related, the facts developed at trial plainly pointed in different directions
with respect to the factors relevant to a single employer determination. Thus, the appeals
court declined to overturn the judgment of the district court.
The union sued the two companies under ERISA and the LMRA seeking to bind the nonsignatory company to CBAs signed by the signatory company. After a bench trial, the
district court found that the two companies were not a single employer or alter egos. The
union appealed seeking to overturn that ruling.
Factors to consider. A CBA binding one employer may be enforced against a nonsignatory employer if the two employers constitute a “single employer” and their
employees constitute a single appropriate bargaining unit. Whether two entities constitute
a “single employer” is determined by four factors enumerated by the Supreme Court: (1)
interrelation of operations, (2) common management, (3) centralized control of labor
relations, and (4) common ownership. The Second Circuit has added two additional
factors: (5) “the use of common office facilities and equipment,” and (6) “family
connections between or among the various enterprises.”
In Murray v Minor, the Second Circuit held that “the law only treats the employees of a
corporate entity as the employees of a related entity under extraordinary circumstances.”
Here, the union argued that the district court erred in construing this language to establish
a strong presumption of “limited liability” and then concluding that the union had failed
to “overcome” the presumption by demonstrating sufficiently “extraordinary”
circumstances. Whether the extraordinary circumstances necessary to overcome the
presumption were, in fact, present could only be made on an assessment of the totality of
particular circumstances in a given case.
In this instance, the district court made detailed findings of fact and methodically
reviewed each factor. Under such circumstances, the Second Circuit found no error in the
legal standards used by the district court in making its single employer determination.
The appeals court observed that the facts developed at trial plainly pointed in different
directions with respect to the factors relevant to a single employer determination. In such
circumstances, the district court was accorded considerable discretion in assigning weight
to competing evidence, and the appeals court declined to reverse unless the evidence, as a
matter of law, compelled a different conclusion from that reached.
Single employer. With respect to the single employer determination, the appeals court
noted that some evidence pointed to the two companies sharing common administrative
offices and administrative personnel. The owner of the signatory company financed the
acquisition of the non-signatory company in the names of his adult children; the manager
20
of the non-signatory company was hired and trained by the vice president of the
signatory; the signatory company delivered materials to job sites for the non-signatory
during its start-up phase; and the non-signatory company applied certain work rules of
the signatory company to its own employees.
On the other hand, there was evidence at odds with a single employer finding. The
manager of the non-signatory company exercised sole control over the company’s day-today operations with no input from management of the signatory company. He decided on
what jobs to bid and the amount of the bid, ordered materials, and supervised all roofing
work. He also exercised exclusive authority to hire, discipline, and fire employees; he set
salaries, work schedules, and job duties, and he awarded raises and promotions. The two
companies did not share the work of their roofers on jobs, and they targeted different
parts of the roofing market. Moreover, the signatory company apportioned the cost of the
administrative services it provided to the non-signatory company on a pro rata basis.
Further, while there was a close family relationship between the two companies, they
were separately owned, with the respective owners bearing distinct tax responsibility. On
this record of conflicting facts, the Second Circuit concluded that it was not compelled to
find a single employer relationship.
Alter ego doctrine. Noting that the union invoked many of the same arguments to
challenge the district court’s alter ego determination, the Second Circuit again concluded
that it found no legal error in the district court’s application of the relevant legal standard,
nor could it conclude that the trial record compelled a finding that the two companies had
substantially identical management, business purpose, operations, equipment, customers,
supervision, and ownership. Moreover, the trial evidence did not compel a finding that
the signatory company established the non-signatory company to avoid its obligations
under the CBA. Rather, it was undisputed the owners of the signatory company were
longtime union supporters and that no union grievance had ever been filed against the
company prior to this dispute. Accordingly, the judgment of the district court was
affirmed.
The case number is 12-4107-cv.
Attorneys: John A. Collins (Lipsitz Green Scime Cambria) for United Union of Roofers,
Waterproofers, and Allied Workers, Local No. 210. Craig A. Leslie (Phillips Lytle) for
AW Farrell & Son, Inc.
3rd Cir.: Arbitrator’s finding that employer must get union’s consent to increase
wages of individual employees affirmed
By Ronald Miller, J.D.
A district court order enforcing an arbitration award in favor of a union, which found that
a collective bargaining agreement (CBA) required an employer to obtain the union’s
consent in order to increase the wages of individual employees, was affirmed by the
Third Circuit in an unpublished decision (Giant Eagle, Inc v United Food and
Commercial Workers Union Local 23, October 16, 2013, Shwartz, P). The appeals court
agreed with the district court that the arbitrator rationally found that the wage provisions
21
of the CBA were ambiguous, so that he appropriately looked to the parties’ past practices
to find that they intended for the employer to secure union consent before granting a
wage increase to an individual employee.
The employer, Giant Eagle, is a supermarket chain. The UFCW represented employees as
the exclusive bargaining representative for certain units of store employees. In 2011, the
employer gave wage increases and higher starting salaries to certain employees at a
Pennsylvania store. In response, the union filed a grievance, stating that the employer had
failed to notify it prior to increasing the wages. Thereafter, an arbitrator issued an award,
finding that the language of the CBA was ambiguous, but the parties’ negotiation history
and past practices showed that Giant Eagle had violated the agreement by granting
individual employees wage increases without obtaining the union’s approval. The
employer was ordered to rescind the wage increases.
Giant Eagle filed a complaint in district court and sought to vacate the arbitration award
and the union filed a counterclaim to enforce it. On cross-motions for summary
judgment, the district court granted the union’s motion, finding support for the
arbitrator’s conclusion that the language was ambiguous and that consent was required to
provide higher pay. This appeal followed.
Rational findings. Giant Eagle sought to vacate the award on two grounds: (1) that the
arbitrator’s decision ignored the plain language of the agreement; and (2) that the
arbitrator exceeded his authority by deciding an issue the parties did not submit to him.
The Third Circuit concluded that the arbitrator’s conclusion was supported by a rational
interpretation of the agreement. Giant Eagle contended that the language of the CBA
concerning additional compensation was not ambiguous. It claimed that the relevant
contractual provision applied to wage increases by department, store, or individuals, and
that the company could grant increases at its “sole discretion.”
However, the arbitrator found that while the first sentence of the provision allowed for
individual increases, the third sentence stated that increases “can” be done by
“department and/or store.” Thus, the arbitrator rationally viewed this conflict as internally
ambiguous. Further, while one section of the CBA set a cap for wages the employer
could pay without obtaining union approval, another provision included an exception that
seemed to allow increases in compensation at the store or department level in the
company’s sole discretion. This conflict between the two provisions reflected a second
ambiguity.
Because the arbitrator’s finding of ambiguity was rational, he was authorized to look to
outside sources to decipher the parties’ intent. Here, the arbitrator looked at the
negotiation history and the past practices of the parties, including 21 instances where the
employer asked the union for permission to give an individual employee an increase, all
of which pointed to an understanding that the parties intended to give the union the right
to object to individual wage increases. Thus, the appeals court concluded that the district
court appropriately declined to disturb the arbitrator’s finding that the wage provision of
the CBA was ambiguous and it was proper for him to consider the parties’ past conduct
22
to find that the parties intended to have the union consent to wage increases for individual
employees.
Authority of arbitrator. Additionally, the appeals court rejected the employer’s
contention that the arbitrator exceeded his authority when he addressed the question of
whether the CBA required the union’s consent to increases, instead of deciding only
whether the union was entitled to notice. At this juncture, the court reiterated that parties
should be cautious about attaching too great of significance to documents drafted earlier
in a dispute, such as a grievance, and issues to be decided are those reflected in the
evidence and articles of the parties at the arbitration hearing.
Here, while the grievance and demand for arbitration speak only of a lack of notice, the
evidence at the hearing and the post-hearing briefs explicitly addressed the consent issue.
Moreover, in the hearing, each side produced witnesses to testify about the purpose of the
wage provision’s language and whether it was intended to require the union’s consent.
Faced with the evidence and post-hearing briefs, the arbitrator found that the issue of
obtaining union’s consent was a question the parties submitted. Thus, even if the initial
issue could be viewed as having morphed from notice to consent at the hearing, the
language of the wage provision was at the heart of the dispute and the arbitrator was
within the scope of his authority to interpret the issue as he did to determine the full
meaning of the provision. Consequently, the decision to consider the issue of consent was
rational and it was appropriate for the district court to leave this aspect of the award
undisturbed.
The case number is 12-4588.
Attorneys: Susan G. Flynn (Marcus & Shapira) for Giant Eagle, Inc. Marianne Oliver
(Gilardi, Cooper & Lomupo) for United Food & Commercial Workers Union Local 23.
4th Cir.: Recess appointments of NLRB members again found to be constitutionally
invalid
By Ronald Miller, J.D.
An employer was granted its petition for review of an NLRB order finding that it violated
the NLRA, after the Fourth Circuit determined that the Board did not have a valid
quorum (Gestamp South Carolina, LLC v NLRB, October 16, 2013, per curiam). In an
unpublished opinion, the appeals court determined that the Board lacked power to
lawfully act when it issued its decision in this case, because one member of the threemember panel was granted a recess appointment at a time when the Senate was adjourned
for a two-week period and, therefore, the appointment did not occur during an
intersession.
The NLRB issued a complaint against the employer for suspending and discharging one
employee and discharging a second employee because of their union organizing efforts.
Specifically, it was alleged that a supervisor warned the first employee that he would be
fired if the plant general manager found out he was trying to unionize the facility.
Following a hearing, an administrative law judge found that the employer had indeed
23
committed the alleged violations. On review, a three-member panel of the NLRB adopted
the ALJ’s decision and recommended order.
Thereafter, the employer petitioned for review of the Board’s order raising several nonconstitutional challenges to the decision. Following oral argument, however, the
employer raised an additional constitutional challenge to the Board’s power to act at the
time it issued its decision, based on the recent Fourth Circuit decision in NLRB v
Enterprise Leasing Co Southeast. In Enterprise Leasing, the Fourth Circuit held that
President Obama’s recess appointment of a board member to the NLRB is
constitutionally valid under the Recess Appointments Clause of the United States
Constitution only if the appointment is made during an intersession, as opposed to an
intrasession, recess of the Senate. Further, if the recess appointment of any one member
of a three-member NLRB panel is invalid, the appointment is “invalid from [its]
inception,” and there can exist no lawful quorum to exercise the authority of the Board
under the NLRA.
The appeals court noted the Member Becker was appointed by the President on March
27, 2010, during a two-week adjournment of the Senate. Because his appointment was
constitutionally invalid from its inception, there were not enough valid members to meet
the requisite quorum and the Board lacked the power to lawfully act when it issued its
decision in this case. Consequently, the appeals court vacated the Board’s decision and
remanded the case.
The case numbers are 11-2362 and 12-1041.
Attorneys: John J. Coleman, III (Burr & Forman) for Gestamp South Carolina, LLC.
Nina Schichor for National Labor Relations Board.
6th Cir.: NLRB failed to show employer filed court action against unions to punish
them for secondary boycotts
By Ronald Miller, J.D.
An NLRB order finding that an employer engaged in an unfair labor practice by bringing
a court action as a means of punishing two unions for engaging in secondary boycotts
was denied enforcement by a divided panel of the Sixth Circuit (NLRB v Allied
Mechanical Services, Inc, October 30, 2013, Rogers, J). The appeals court majority
concluded that evidence in the record was not substantial enough to show that the
employer’s motive in filing the court action against the unions was specifically to punish
them through litigation costs. Further, the court found that important First Amendment
considerations kept it from upholding the Board’s order. Judge Daughtrey dissented.
Union job-targeting funds. The employer argued that two local unions colluded to
withhold job targeting funds from it. A job targeting fund program provides union
contractors with money that would enable such employers to lower bids on certain jobs
so that union contractors could achieve a competitive advantage over non-union
contractors. In February 1998, a Sheet Metal local (Local 7) had job-targeting funds
available on a Red Cross construction project. Although the employer had previously
24
received job-targeting funds, the Local 7 did not allow it to receive funds for this job. The
employer alleged that after the Red Cross job, the union denied it job-targeting funds on
several other projects, while other union contractors continued to benefit from the
program.
According to the employer, a business agent for Local 7 informed it that it was not
eligible for funds on the Red Cross project because it had not signed a collective
bargaining agreement with a Plumbers local union (Local 357). The employer’s history
with Local 357 was characterized by labor disputes, and the parties had consistently
failed to reach a CBA. Based on the information from Local 7, the employer concluded
that the unions were responsible for illegally keeping it from getting job-targeting funds.
Secondary boycott suit. The employer filed suit in federal district court naming the two
unions and their parents. It alleged the Plumbers violated NLRA Sec. 8(b)(4) by causing
Local 7 to deny it job-targeting funds, and that the Sheet Metal Workers violated LMRA
Sec. 301 by breaching Local 7’s CBA with the employer. In essence, the employer
claimed that the union violated the secondary boycott provisions of the NLRA. The
district court dismissed the employer’s complaint, and that decision was affirmed on
appeal. Any influence the Plumbers had over Local 7’s use of its job-targeting funds was
not sufficient to trigger the protections of the secondary boycott provisions.
Thereafter, the unions brought an unfair labor practice charge before the NLRB claiming
that the employer violated the NLRA by filing the federal suit. An administrative law
judge agreed with the unions and required the employer to reimburse them for their
litigation expenses in the case. While the case was pending before the Board, the
Supreme Court issued BE & K Constr Co v NLRB, concerning the necessary standards
for finding employers liable under the NLRA for civil suits filed against labor unions.
The opinion suggested that a more stringent test may be required to avoid implicating
First Amendment concerns related to citizens’ rights to petition the government for the
redress of their grievances. Accordingly, the case was remanded in light of BE & K. The
ALJ again concluded that liability under the NLRA was warranted, and the Board
adopted his recommendation. The employer sought review.
Application of BE & K.BE & K stopped short of providing a specific test and focused
instead on the type of test that underprotected petitioning rights. The NLRB adopted the
ALJ’s modified test, which permits liability only when the challenged legal action was
(1) objectively baseless, meaning that no reasonable litigant would have expected to
succeed on the merits of the action, and (2) subjectively baseless, in this context meaning
that it was intended to retaliate against the union for its protected activity. According to
the employer, the Board’s test for finding liability under Sec. 8(a)(1) underprotects First
Amendment rights to file suit in federal court. It also challenged the Board’s finding that
its lawsuit was objectively baseless and retaliatory.
The Sixth Circuit majority concluded that substantial evidence did not support the
NLRB’s conclusion that the employer lacked an objective basis for filing this suit. While
the employer may have lost in court, its claims did not sink to the level that no reasonable
litigant could have expected to succeed on the merits of the case. While the appeals court
25
ultimately concluded that the secondary boycott claims were untenable against
organizations that did not engage it in commerce, its effort to extend the reach of Sec.
8(a)(2) to inter-union coercion was not entirely unreasonable.
Here, the employer argued that pressure exerted on one union by another union that had a
relationship with it for the purpose of affecting its ability to obtain and conduct its
business might have been deemed actionable under the secondary boycott provisions. The
majority concluded that its narrow construction of the term “doing business” did not
require a conclusion that an alternative, broad construction was not a possible outcome of
the litigation. This chance of success makes clear that the employer’s secondary boycott
claims were not objectively baseless. The presence of an objective basis for the
employer’s suit was enough in itself to warrant reversal of the NLRB.
Evidence of retaliation. Moreover, the majority concluded that the evidence of
retaliation cited by the ALJ did not permit the conclusion that the employer brought the
suit in order to impose the costs of litigation on the unions. Rather, the record indicated
that the retaliatory motive, if any, related to the “ill will [that] is not uncommon in
litigation.” Thus, the Board’s petition for enforcement was denied.
Dissent. Judge Daughtrey filed a separate dissenting opinion. While the dissent agreed
with the majority that the court had a duty to protect the First Amendment rights of the
employer, she argued that given the decisional framework set up in the wake of BE &K, it
was required to determine whether the claims advanced by the employer were objectively
baseless. Further, the dissent argued that while the appeals court is not compelled to
accept the decision of the NLRB in all instances, substantial evidence in the record
supported the conclusion of the agency on an issue that required examination of the
motivation of a party. The dissent would have deferred to the findings of the Board.
The case numbers are 12-1235 and 12-1351.
Attorneys: Kira Dellinger Vol for National Labor Relations Board. David Melvin Buday
(Miller Johnson) for Allied Mechanical Services, Inc. Nicholas R. Femia (O’Donoghue &
O’Donoghue) for United Association of Journeymen. Tinamarie Pappas (Law Offices of
Tinamarie Pappas) for UA Plumbers.
7th Cir.: Union did not exceed powers by consolidating five locals into “super local”
By Kathleen Kapusta, J.D.
The Transportation Workers Union of America (TWU) did not exceed the powers
afforded to it by its constitution when it consolidated five local unions into a single
“super local” the Seventh Circuit ruled, affirming a district court’s denial of the locals’
motion for a preliminary injunction preventing the consolidation (Transport Workers
Union of America, AFL-CIO, Local Unions 561,562, 563, 564, 565 v Transport Workers
Union of America, AFL-CIO, International Union, October 18, 2013, Bauer, W).
The TWU administers collective bargaining agreements (CBA) with American Airlines.
When American filed for Chapter 11 bankruptcy protection in November 2011, it sought
26
concessions from TWU that would yield a 20 percent reduction in labor costs. After
extensive negotiations, the parties ratified a new CBA, which eliminated the requirement
that American pay approximately $2 million to compensate local union representatives.
This resulted in a direct loss of funding to local unions. Additionally, the number of
TWU-represented American mechanics was forecasted to drop by approximately 4,000
members by 2017 because of American’s plans to add new planes to its fleet.
Consolidation. In August 2012, a former local president proposed that five local unions
be consolidated to improve the representation of its members. Subsequently, the TWU
International Executive Council (IEC) established an IEC subcommittee, which
unanimously recommended consolidating the locals. After the TWU international union
president interpreted the TWU constitution and concluded that the union had the
authority to consolidate the locals, the IEC passed a resolution adopting the
recommendation. The consolidation was scheduled to occur in March 2013 but the locals
appealed. When the appeal was denied, the locals moved for a TRO and a preliminary
injunction to prevent the consolidation. The district court denied the TRO and the motion
for preliminary injunction and TWU consolidated the locals as planned.
Injunctive relief. On appeal, the locals first requested a preliminary injunction that
would maintain the status quo prior to the consolidation. Declining to grant this request,
the appeals court pointed out that in order for a preliminary injunction to be effective, it
must be issued prior to the event the movant wishes to prevent. Here, TWU’s intervening
consolidation of the locals prevented the court from maintaining their earlier status quo.
Observing that it could not make time run backwards, the court found that the request to
grant injunctive relief was moot.
Restoration of independent status. The locals next asked the court to order affirmative
relief restoring their independent status as local unions based on claimed violations of the
TWU constitution. Finding that this request failed on its merits, the court noted that a
union’s interpretation of its own constitution is entitled to judicial deference. To prevail,
the locals had to show that the union’s interpretation of its constitution was
“unreasonable, perhaps even patently unreasonable.”
In an effort to understand how much authority the TWU constitution granted its national
leadership, the court turned to Local 507, Transp. Workers Union of Am., AFL-CIO v
Transp. Workers Union of Am., AFL-CIO, in which a federal district court in
Massachusetts found that the same constitution granted broad powers over locals to both
the IEC and the IAC. In that case, the court found that Art. V, Sec. 1, which empowered
the international president to “interpret” and “enforce” the constitution, together with Art.
VIII, Sec. 2, which named the IEC as the “supreme authority in the International Union,”
indicated that “ultimate power lies in the TWU national leadership instead of the Local
leadership.” Thus, that court held that the transfer of Local 507 mechanic members to
another local was within the powers granted to TWU by its constitution. Applying that
reasoning here, the appeals court observed that the TWU constitution granted nearly
plenary powers to the TWU national leadership over subordinate local unions.
27
Noting that here TWU was effectively consolidating five locals into one, and that the
consolidation was similar to the merger of the two locals that the court approved in Local
507, the Seventh Circuit concluded that it could not deem the International president’s
interpretation of the constitution as “patently unreasonable.” Although the locals argued
that the president’s interpretation conflicted with eight sections of the constitution, the
lower court analyzed each provision individually and found that each section was either
not relevant to the locals’ situation or that the president’s interpretation was not
unreasonable. Finding that the locals failed to argue how or why TWU’s interpretation
conflicted with the “stark and unambiguous” language of the constitution, the appeals
court agreed.
Also rejected was the locals’ argument that, because the TWU constitution lacked an
express provision allowing for the consolidation, TWU’s action fell outside the authority
granted to it. While there was no single section that specifically addressed consolidating
the locals, the court found that the explicit language of the “Duties and Powers of the
International Executive Council” provision and the “Local Unions” provision allowed the
IEC to revoke, merge, dissolve, or take any “other action as it deems advisable.”
Specifically, the court found that the “IEC is the only entity named with the authority to
make these decisions. And TWU consolidated the Local Unions only after the IEC
unanimously passed the resolution to do so.” Thus, its actions fell wholly within the
scope of the authority granted to it.
The case number is 13-1722.
Attorneys: Richard Silber (Law Offices of Richard J. Silber) for Transport Workers
Union of America, AFL-CIO, Local Unions 561, 562, 563, 564, 565. Stanley Eisenstein
(Katz, Friedman, Eagle, Eisenstein & Johnson) for Transport Workers Union of America,
AFL-CIO, International Union.
9th Cir.: Court did not abuse discretion in issuing injunction in jurisdictional
dispute between unions
By Ronald Miller, J.D.
Affirming in part a preliminary injunction under Sec. 10(l) of the NLRA regarding a
jurisdictional dispute between two labor unions over work at the Port of Portland, the
Ninth Circuit found in an unpublished opinion no abuse of discretion by a district court’s
holding that an NLRB regional director was likely to succeed in establishing that the
union violated the Sec. 8(b)(4)(ii)(B) of the NLRA (Hooks v International Longshore and
Warehouse Union, September 30, 2013, per curiam).
In 2010, the Port of Portland leased its terminal operations to ICTSI Oregon. The port
expressly retained the right to control the disputed work when it leased the terminal. In
response to the carrier’s assignment of work to a rival union, the ILWU filed a series of
grievances challenging the work assignment. The district court concluded that the NLRB
was likely to find that the port controlled the disputed work, so the union engaged in
unlawful secondary activity by filing the grievances. As an initial matter, the appeals
court concluded that the union’s argument that shipping carriers could bypass the port
28
conflated the carriers’ control over their containers with the legal question of whether
they had the “right to control” the assignment of work at the port.
The appeals court also observed it was mindful that an employer cannot be permitted
purposely to contract away its right to control, thereby insulating itself from otherwise
lawful primary activity. However, in this case, the employees of the port, not the shipping
carriers, had performed the disputed work for over 40 years. Additionally, ICTSI was not
a party to the collective bargaining agreement with the ILWU at the time it entered into
the lease with the port. Thus, the appeals court found no evidence to suggest that these
secondary employers actively and knowingly contracted away their control.
If the NLRB finds that the port controlled the disputed work, the ILWU’s invocation of
the work-preservation doctrine fails. Consequently, it was not an abuse of discretion for
the district court to conclude that the regional director was likely to succeed in
establishing that ILWU’s grievances and lawsuits constituted unlawful secondary activity
in violation of section 8(b)(4)(ii)(B). Further, because the district court’s holding as to
8(b)(4)(ii)(B) did not depend on the NLRB’s findings in a Sec. 10(k) proceeding, neither
the ILWU’s constitutional challenge to the Board’s quorum nor a decision vacating the
Sec. 10(k) award on jurisdictional grounds undermined this aspect of the injunction.
Having found a likelihood of success on the merits, the district court did not abuse its
discretion in concluding that the risk of irreparable harm, the balance of the hardships,
and the public interest supported issuing a section 10(l) injunction here. It was not an
abuse of discretion to find that ILWU’s continued prosecution of the grievances
outweighed the hardship to ILWU from delaying adjudication of its damages claims.
The case number is 12-36068.
Attorneys: Beth S. Brinkmann, U.S. Department of Justice, for Ronald K. Hooks. Robert
Lavitt (Schwerin Campbell Barnard Iglitzin & Lavitt) for International Longshore and
Warehouse Union.
9th Cir.: Ralphs Grocery’s arbitration policy found unconscionable under state law,
which was not preempted by FAA
By Kathleen Kapusta, J.D.
Finding a grocery company’s arbitration agreement, which was presented to an employee
on a take-it-or-leave-it basis as a condition of applying for employment but wasn’t
provided to her until three weeks after she agreed to be bound by it, procedurally
unconscionable, the Ninth Circuit affirmed a district court’s refusal to compel arbitration
of her California labor law claims (Chavarria v Ralphs Grocery Co, October 28, 2013,
Clifton, R). The appeals court also agreed that the arbitrator selection process and fee
apportionment provision were unjustifiably one-sided so as to render the policy
substantively unconscionable. Finally, the state law supporting the unconsionability
holding was not preempted by the Federal Arbitration Act because it applied to contracts
generally and did not in practice impact arbitration agreements disproportionately.
29
Apply and be bound. When the employee applied for a job at Ralphs Grocery Company,
she completed and signed an employment application in which she agreed to be bound by
its arbitration policy. Although the application stated that the policy had been provided
for review, in fact she did not receive a copy of it until three weeks after she was hired.
The policy explicitly prohibited the use of an administrator from either the American
Arbitration Association or the Judicial Arbitration and Mediation Service; in practice
always produced an arbitrator proposed by the employer in employee-initiated arbitration
proceedings; and required that arbitration fees be apportioned at the outset of the
arbitration and be split evenly regardless of the merits.
The employee, who quit after six months, filed suit against the grocer on behalf of herself
and others similarly situated alleging that the company failed to pay overtime
compensation, pay for meal and rest periods, and provide complete and accurate wage
statements in violation of California labor law. Ralphs moved to compel arbitration of her
individual claims, and the employee opposed the motion arguing that the arbitration
agreement was unconscionable under California law. Agreeing, the district court denied
the grocer’s motion.
California unconscionability law applies. On appeal, Ralphs contended that because the
FAA required the arbitration policy to be enforced in accordance with its terms, even if
the policy was unconscionable under California law, the district court was required to
compel arbitration. Although the U.S. Supreme Court has held that state rules
disproportionately impacting arbitration, though generally applicable to contracts of all
types, are nonetheless preempted by the FAA when the rule stands as an obstacle to the
accomplishment of Congress’s objectives in enacting the FAA, the appeals court pointed
out that no single rule uniquely applicable to arbitration was at issue here. Thus,
California’s general principles of contract unconscionability applied. Under California
law, a contract must be both procedurally and substantively unconscionable to be
rendered invalid.
Procedural unconscionability. Ralphs’ employment application contained a provision
stating “Please sign and date the employment application … to acknowledge you have
read, understood & agree to the following statements.” Ralphs argued that the word
“please” belied any suggestion that the employee was required to agree to the arbitration
policy and that she could have been hired without signing it. Disagreeing, the court
observed that the policy provided that a signature wasn’t necessary for it to apply to
covered disputes. Rather, the policy bound the employee and all other potential
employees upon submission of their application. “That Ralphs asked nicely for a
signature is irrelevant.” The employee could only agree to be bound by the policy or seek
work elsewhere. Thus, the district court did not err when it found that the grocer’s policy,
which was presented on a take-it-or-leave-it basis, was procedurally unconscionable.
Substantive unconscionability. Ralphs next argued that the provisions relied upon by
the lower court to find substantive unconscionability actually disadvantaged it and
instead were intended to benefit the employee. Acknowledging that the arbitrator
selection provision precludes the selection of an arbitrator proposed by the party seeking
arbitration, Ralphs contended that it would not always be the party guaranteed an
30
arbitrator of is choosing because an employee wouldn’t always be the party demanding
arbitration. In this case, it contended that the employee would wind up with an arbitrator
of her choosing because the grocer demanded arbitration. Finding this argument flawed,
the court observed that it invites an employee to disregard the arbitration policy and file a
lawsuit in court knowing that the claim is subject to arbitration. “We cannot endorse an
interpretation that encourages the filing of an unnecessary lawsuit simply to gain some
advantage in subsequent arbitration,” the court stated.
Employer picks the pool. Nor did the grocer’s motion to compel constitute a “demand
for arbitration” as provided in its policy, which states that a “[a] demand for arbitration ...
must be made in writing, comply with the requirements for pleadings under the [Federal
Rules of Civil Procedure] and be served on the other party.” Thus, a fair construction of
the agreement suggested that an employee, even after filing a frivolous claim in federal
court, must still serve a demand for arbitration on Ralphs that complies with the Federal
Rules. As a result, the court found that Ralphs would be entitled to pick the pool of
potential arbitrators every time an employee brings a claim.
Cost allocation. Turning to its cost allocation provision, Ralph’s argued that it simply
followed the American Rule that each party shall bear its own fees and costs. Observing
that Ralphs missed the point, the court found that the troubling aspect of this provision
related to the arbitrator’s fees, not attorney fees. Pursuant to the provision, an arbitrator
must apportion costs equally between Ralphs and the employee, disregarding any
potential state law to the contrary. Moreover, under its policy, only a decision of the U.S.
Supreme Court could alter the cost allocation term. Here, the court found that the policy
imposes great costs on employees, precluding them from recovering those costs and
making many claims impractical. Noting that these terms “lie far beyond the line required
to render an agreement invalid,” the court found that Ralphs tilted the scale so far it its
favor, both in the circumstances of entering the agreement and its substantive terms, that
the policy could not be enforced against the employee under California law.
FAA preemption. Observing that the FAA preempts state laws that in theory apply to
contracts generally, but in practice impact arbitration agreements disproportionately, the
court determined that, in this case, California’s procedural unconscionability rules did not
disproportionately affect arbitration agreements. Rather, they focused on the parties and
the circumstances of the agreement and applied equally to the formation of all contracts.
However, the court found that the application of the state’s general substantive
unconscionability rules to the grocer’s policy warranted more discussion.
Citing the Supreme Court’s decision in American Express Corp v Italian Colors
Restaurant, the appeals court reasoned it was not precluded from considering the cost that
Ralph’s arbitration agreement imposes on employees in order for them to bring a claim.
Here, the court noted that administrative and filing costs effectively foreclosed pursuit of
an employee’s claim. “Ralphs has constructed an arbitration system that imposes nonrecoverable costs on employees jut to get in the door,” the court stated.
In addition to the problematic cost provision, the court noted that Ralphs’ policy contains
a provision that unilaterally assigns one party (most always Ralphs) the power to select
31
the arbitrator whenever an employee brings a claim. Although any state law that
invalidated this provision would have a disproportionate impact on arbitration because
the term is arbitration-specific, the court observed that, viewed another way, “invalidation
of the term is agnostic towards arbitration. It does not disfavor arbitration; it provides that
the arbitration process must be fair.”
Pointing out that federal law favoring arbitration is not a license to “tilt the arbitration
process in favor of the party with more bargaining power,” the court found that California
law regarding unconscionable contracts, as applied in this case, is not unfavorable
towards arbitration. Rather it reflects a generally applicable policy against abuses of
bargaining power. Accordingly, the court found that the FAA did not preempt
invalidation of Ralphs’ arbitration policy.
The case number is 11-56673.
ALJ finds work rule prohibiting “disruption of any kind” during “working hours”
overly restricts Section 7 rights
A work rule prohibiting sign language interpreters for the deaf from “[c]ausing, creating,
or participating in a disruption of any kind during working hours on Company property”
was an overly broad restriction that interfered with the Sec. 7 rights of employees to
engage in protected concerted activity, an NLRB administrative law judge has found in a
ruling on October 24, 2013.
Work rule. The employer suggested that because the rule only prohibited disruptions
during working hours and, it was permissible, further arguing that the “disruption”
language would not interfere with lawful strike activity because strikes are not protected
unless they occur on non-work time. This contention is not persuasive for several
reasons. But the ALJ found the prohibition on “disruptions” so broad that it could
reasonably apply not only to strike activity, but also to other forms of protected Section 7
activity, including, for example, solicitation.
In addition, the employer seemed to confuse working time with working hours, said the
ALJ. The rule was not limited to working time but explicitly extended to the entire
“working hours” period, which under board precedent encompassed periods that are the
employees’ own time such as meal times and break periods, as well as times when
employees have completed their shifts but are still on the company premises. This
distinction was particularly significant here since the employer operated 24/7 – meaning
that the prohibition on disruptions during “working hours” arguably applied to all hours
of the day and night.
Moreover, the rule did not merely prohibit employees from directly participating in a
disruption, but also from “causing” or “creating” a disruption that took place during
working 25 hours on company property. Employees could reasonably fear that this could
allow them to be disciplined for participating in meetings or other Sec. 7 activities that
took place during non-work time and away from the workplace if those activities were
causally linked to a disruption at the facility.
32
However, the ALJ tossed a challenged to the employer’s rule prohibiting employee use of
its email system for “non-job-related solicitations,” because that rule was valid under
Register-Guard.
Pre-election statements referencing Hostess bankruptcy. Among other objections, the
union also claimed that in pre-election statements, the employer made threats of
bankruptcy and threatened employees with closure of the facility or loss of work if the
workers voted for or supported the union. Specifically, the union cited statements made
by the president and CEO regarding the Hostess bankruptcy. The ALJ disagreed.
Although the CEO discussed the recent bankruptcy of Hostess, including the presence of
a union at Hostess, as evidence that “unionization is not a panacea,” and that it would not
necessarily be a solution to the interpreter’s problems, but could, instead, have an
outcome unfavorable to the interpreters and the employer.
Contrary to the union’s argument, the ALJ noted this was not an unlawful threat of
bankruptcy. Here, although the CEO noted a correlation between the union and Hostess’
bankruptcy, but he did not explicitly claim causation. Nor did the CEO suggest that
Hostess purposely chose to declare bankruptcy rather than deal with a union, but rather
suggested that Hostess was forced into bankruptcy for economic reasons “that
unionization was either unable to ameliorate or negatively influenced.” Accordingly, it
could not reasonably be viewed as a threat that the employer would declare bankruptcy or
close union facilities to avoid dealing with a union.
Finally, the ALJ found that with respect to one facility, when the CEO told the
interpreters, less than two weeks before the election at a meeting held for all interpreters
present, that he could not make changes to address their discontent because a union
election was scheduled, but that he could make such changes at those facilities where a
union vote was not scheduled, the facility’s election results should be set aside. The ALJ
relied not only on the misconduct and the temporal proximity of that statement to the
election, but also on the election’s extremely close margin: 15 valid ballots in favor of
union representation and 16 against it. If the employer’s misconduct caused even a single
eligible voter to cast a ballot against, rather than for, union representation, then the
outcome of the election was altered by that misconduct.
NLRB: Employer’s failure to comply with settlement invokes default provision of
agreement and without recourse on substance
By Sheryl C. Allenson, J.D.
After an employer failed to comply with the terms of a settlement agreement and a
regional director reissued a complaint, the NLRB granted the Acting General Counsel’s
motion for a default judgment, first finding that the employer failed to show that it had
fully complied with the terms of the agreement (Bristol Manor Health Care Center and
1199 SEIU, United Healthcare Workers East, October 24, 2013).
After 1199 SEIU, United Healthcare Workers East (union) filed a charge against the
employer, the Acting General Counsel issued a complaint in October 2012 alleging
violations of Sec. 8(a)(5) and (1) of the NLRA. Among other things, the complaint
33
alleged that certain employees constituted a unit appropriate for purposes of collective
bargaining, that the employer recognized the union as the unit’s exclusive bargaining unit
and that for more than a year, the union had requested certain specific information, to no
avail. After the employer filed an answer, the employer and the union entered into a
bilateral informal settlement agreement. That agreement was approved by an ALJ in
December 2012, after the hearing had commenced. .
Default provision. Pursuant to the agreement, the employer was required to furnish the
union with the information it had requested on dates certain and to post an appropriate
notice. The agreement also contained a default provision, which provided that upon
default and notice to cure, the regional director would reissue the complaint. Thereafter,
the General Counsel could file a motion for default. Under the terms of the settlement
agreement, the employer agreed that the allegations of the complaint would then be
deemed admitted and its answer would be deemed withdrawn. The only issue subject to
review would be whether the employer did in fact default.
Deeming the production incomplete, a regional director sent a letter to the employer’s
counsel stating that while the employer had produced some information, it was
noncompliant because it had not produced everything. As a result, the regional director
demanded that specific information be produced within two weeks and warned the
employer that the settlement agreement would be revoked and the complaint reissued if
the information was not timely produced.
Complaint reissued. When the employer failed to comply with the demand, the regional
director stuck to his word and reissued the complaint. Thereafter, the Acting General
Counsel filed a motion for default judgment, which the parties fully briefed before the
Board.
Although the employer tried to wedge its way into defeating the default by arguing it was
actually compliant, the Board disagreed. While the Board acknowledged that the
employer submitted letters stating that it provided information, the employer never
established that it had fully complied with the settlement agreement’s disclosure
requirements. Carefully measuring the employer’s language, the Board noted that it only
said the information produced was “responsive,” but never said it was fully compliant.
Because the employer missed the threshold on this issue, and because compliance was the
only judicable issue under the agreement, the Board concluded that it was entitled to
proceed without a trial or further proceedings.
As it was entitled to do, the NLRB took each allegation contained in the complaint as true
and made findings of fact and conclusions of law consistent with those allegations
adverse to the employer. Drawing on those findings, the Board decided that the employer
failed and refused to bargain collectively and in good faith with the exclusive bargaining
unit in violation of Sec. 8(a)(5) and (1) of the Act. Moreover, that conduct affected
commerce, the Board explained. As a result, the Board issued an order directing the
employer to cease and desist its failure and refusal to bargain collectively and in good
faith, and to take affirmative action necessary to finish the union with the requested
34
information. The employer was also ordered to post a copy of an order stating that it had
violated the labor laws.
The slip opinion number is 360 NLRB No 7.
Attorneys: William S. Massey (Gladstein R. Meginniss) for 1199 SEIU-UWHE Region.
David Jasinski (Jasinski, PC) for Bristol Manor Health Care Center.
Ohio S.Ct.: Public employees engaged only in informational picketing not required
to give ten days’ notice
By Ronald Miller, J.D.
Employee-union picketers were not required to give their public employer and the SERB
ten days’ notice before they engaged in informational picketing, ruled the Ohio Supreme
Court, in affirming an appellate court ruling regarding R.C. 4117.11(B)(8) (Mahoning
Education Association of Developmental Disabilities v State Employment Relations
Board, October 23, 2013, Kennedy, S). However, the state high court did not affirm the
appellate court’s judgment on constitutional grounds but based its ruling on the plain
language of the statute and held that the notice requirement of R.C. 4117.11(B)(8) did not
apply to picketing that was merely informational in nature and was unrelated to a work
stoppage, strike, or refusal to work. Justice Lanzinger filed a separate opinion concurring
in the judgment only.
A public employer and employee union operated pursuant to a collective bargaining
agreement. In June 2007, the union filed notice with SERB and the employer to begin
negotiations on a successor contract. Prior to the employer holding a board meeting in a
county-owned building, union representatives peacefully picketed outside the building.
The parties stipulated that the union was engaged in picketing related to the successor
contract, and the picketers were expressing their desire for a fair contract as well as their
dissatisfaction with the progress of negotiations. The union did not engage in a strike or
give written notice of an intention to strike. It also did not give either SERB or the
employer notice of its intent to picket.
Constitutional challenge. The employer filed an unfair labor practice charge with SERB
alleging that the union had violated the notice requirements of R.C. 4117.11(B)(8). SERB
found that the union had committed an unfair labor practice by failing to give the
required ten-day notice before picketing. The union appealed, asserting that R.C.
4117.11(B)(8) was unconstitutional on its face and as applied. When the trial court
upheld SERB’s decision, the union appealed that judgment. Subsequently, the appellate
court reversed the judgment of the trial court and declared the notice requirement of R.C.
4117.11(B)(8) unconstitutional.
Statute improperly applied. On appeal, the Ohio Supreme Court affirmed the appellate
court’s judgment reversing the trial court, but on alternative grounds. The state high court
held that the legislature did not intend R.C. 4117.11(B)(8) to apply to informational labor
picketing. Rather, it concluded that the statute applied only to picketing related to a work
stoppage, a strike, or other “concerted refusal to work.” Consequently, the statute was
35
improperly applied to the union’s picketing activity in this case, and the union did not
commit an unfair labor practice.
The high court first observed that “picketing” has more than one definition. It could mean
conduct associated with protests during a strike or work stoppage, or refer to activity
expressing a grievance not associated with a strike or work stoppage. In this instance, it
was determined that the legislature sought to regulate the first type of picketing. The
statute addresses “any picketing, striking, or other concerted refusal to work,” and this
language expresses the drafters’ understanding of picketing as part of a work stoppage.
Because it concluded that the statute did not apply to in this case, the court concluded that
the issue of the statute’s constitutionality was beyond the scope of its review.
The case number is 2012-1378.
Attorneys: Ira J. Merkin (Green Haines Sgambati Co.) for Mahoning Education
Association of Developmental Disabilities. Michael DeWine, Office of Attorney General,
for State Employment Relations Board. Eugene P. Nevada for Mahoning County Board
of Developmental Disabilities.
Hot Topics in WAGES HOURS & FMLA:
Animal hide wholesaler to pay $925,000 for FLSA violations
Under a consent judgment, Boston Hides & Furs Ltd., and its owner will pay a total of
$825,000 in back wages and liquidated damages to 14 underpaid employees of the
Chelsea, Massachusetts wholesale animal hide business, the DOL announced on
September 30. The defendants were also ordered to pay a total of $100,000 in
compensatory and punitive damages to 10 workers who, according to the DOL, were
unlawfully fired for cooperating with the Wage and Hour Division’s (WHD)
investigation.
Investigators found that 14 Boston Hides & Furs employees worked about 10 hours a
day, six days a week, processing hides and furs for shipping to tanneries. These workers
were paid a daily cash wage of $50 to $70, which amounted to an hourly rate far below
the federal minimum wage of $7.25 per hour, the WHD concluded. The employees also
were not paid time and one-half the required state minimum wage of $8 per hour for
those hours worked above 40 in a week, according to the investigation.
The DOL filed a lawsuit in November 2012 alleging that the defendants violated FLSA
minimum wage, overtime, recordkeeping and “hot goods” provisions, and unlawfully
retaliated against several workers by firing them after they cooperated with the WHD’s
investigation.
“For several years, these workers performed hard, dirty work for long hours without
being paid overtime or even the legally required minimum wage,” remarked George
36
Rioux, the WHD’s district director in Boston. “They did so for an employer who then
fired most of them after we started our investigation.”
While neither admitting nor denying the allegations, the defendants agreed to pay 14
workers a total of $412,500 in back wages and an equal amount in liquidated damages,
the WHD said. The defendants also agreed to pay the 10 employees who were discharged
an additional $10,000 each ($5,000 in compensatory and $5,000 in punitive damages).
Moreover, the defendants will pay the DOL $50,000 in civil money penalties.
The consent judgment also prohibits the defendants from withholding payment of the
back wages and damages and requires them to pay proper minimum wage and overtime
to employees and maintain adequate and accurate records of wages and work hours. The
defendants are also barred from shipping, delivering, or selling into the stream of
interstate commerce any goods produced in violation of the FLSA. Violations of any of
these provisions could result in the defendants being found in contempt of court.
The DOL filed its lawsuit in the District of Massachusetts.
Bipartisan bill would give retroactive pay to federal employees furloughed during
shutdown
By Pamela Wolf, J.D.
The U.S. House of Representatives on October 5 passed the Federal Employee
Retroactive Pay Fairness Act by a 407-0 vote, with 24 members not participating in the
ballot. The bill, HR 3223, provides for retroactive compensation of federal employees
who have been furloughed due to the federal government shutdown.
Specifically, under HR 3223, federal employees who have been furloughed due to any
lapse in appropriations beginning on October 1 would be compensated at their standard
rate of pay for the period of the lapse in appropriations “as soon as practicable after such
lapse in appropriations ends.”
The bipartisan bill is sponsored by Representatives James Moran (D-Va.) and Frank Wolf
(R-Va.) and has 177 cosponsors. It has been placed on the Senate Calendar.
The White House issued a statement on October 4 “strongly” supporting the bill, noting
that federal workers “keep the Nation safe and secure and provide vital services that
support the economic security of American families.” While expressing appreciation for
the prompt congressional action to move the bipartisan legislation, the administration also
said the bill, by itself, “will not address the serious consequences of the funding lapse,
nor will a piecemeal approach to appropriations bills.” The White House called for “a
straight up or down vote on Senate-passed H.J. Res. 59, to fund the Government and
bring the Nation's dedicated civil servants back to work.”
Federal workers will get paid for time off due to shutdown
By Pamela Wolf, J.D.
37
Federal workers have returned to work in the wake of the long-awaited deal that ended
the government shutdown. Under Division A, Sec. 115 (a) of the now-famous short-term
deal, the estimated 800,000 federal workers unable to work due to the standoff will be
compensated at their standard rate of pay for their time off due to the lapse in
appropriations that began on October 1.
The American Federation of Government Employees (AFGE), which represents some
670,000 federal workers, quickly issued a statement yesterday after news of the
impending resolution spread: "On behalf of the 670,000 federal employees represented
by AFGE, I am thrilled that a deal was reached to put our members back to work and
restore the services American taxpayers count on,” said National President J. David Cox
Sr. “But make no mistake about it, this is not a happy day for federal employees. The
Senate deal is simply a brief reprieve from the suffering federal employees and their
families have endured for the past sixteen days. We cannot accept another government
shutdown in just a few short weeks; federal workers and the public they serve have
suffered enough.”
Cox pointed to the “countless numbers” of federal workers who were forced to choose
between paying the mortgage or feeding families, buying gas or paying the electric bill.
He also said the workers are “deeply frustrated” by their inability to serve the public due
to the shutdown. “These employees wanted nothing more than to go to work and provide
for their families and their country, but were turned away by shameless politics,” Cox
said.
Moreover, the union president warned that the economic and social costs resulting from
the shutdown of vital government services for weeks “will be felt for months and
possibly years.” He said that while backlogs will eventually be processed and federal
workers’ savings will slowly be restored, “the taint of this outrageous effort to undermine
the Affordable Care Act will likely affect government service for a long time.”
"The good credit that many federal employees worked so hard to achieve will have been
damaged at least as severely as the reputation of politicians who downplayed the
seriousness of breaching the debt ceiling,” Cox said. “Thousands could not manage
through the shutdown on goodwill alone, and they lost their apartments, daycare slots,
and good credit scores.”
Cox vowed that in the upcoming weeks the union will fight any efforts to cut federal pay,
retirement, or health care as Congress hashes out FY 14 spending levels.
Benihana hit with suit alleging chefs not paid overtime, tips pilfered, harassed when
they complained
By Pamela Wolf, J.D.
A former employee has brought a FLSA collective action against Benihana National
Corporation alleging illegal pay practices and unlawful retaliation at a restaurant in
Broward County, Florida (Kim v Benihana National Corporation). The former chef
contends that the Miami-based Japanese restaurant company failed to pay overtime,
38
mishandled tips, and retaliated against chefs who complained. The new litigation follows
a vacation pay suit that settled earlier this year.
According to the complaint, for a period of at least three years and continuing, Benihana
“has had policies and practices to require its chefs to work off the clock without
compensation.” Moreover, the company has made illegal deductions from chef’s tips and
distributes the money to employees who are not entitled to share in the tips. When chefs
complain about the improper conduct, the complaint alleges, Benihana terminates or
harasses them with the intent of getting them to quit.
The employee alleges that while employed as a chef at Benihana, he was a covered nonexempt employee, but he “was required to work many hours without any compensation
whatsoever.” He also contends that “his tips were illegally reduced and shared with other
employees who were not entitled to tips.” Tip credits purportedly were improperly taken
against minimum wage. When he complained about these pay practices, the employee
said he was harassed and he ultimately terminated his employment due to Benihana’s
actions.
The employee, on behalf of himself and all others similarly situated, is seeking unpaid
overtime (or unpaid minimum wage), unpaid tips unlawfully deducted, and liquidated
damages or pre-judgment interest, post-judgment interest, and attorneys’ fees and costs.
In a separate action resolved earlier this year, Benihana was sued in the Northern District
of California for unlawful forfeiture of accrued vacation pay, failure to pay wages on
termination, failure to provide accurate itemized wage statements, and unfair business
practices (Akaosugi v Benihana National Corporation). A settlement in that case was
approved by the court in January, under which a common settlement fund of $460,000
was created to compensate class members for vacation pay allegedly forfeited by class
members. The court also approved $200,000 in attorneys’ fees and expenses to class
counsel.
Apple facing class suit for unpaid time clocking in and out, checking devices in and
out, security checks
By Pamela Wolf, J.D.
A former Apple employee has slapped the tech-gizmo giant with what could materialize
into a huge nationwide class suit. The class, collective, and representative lawsuit seeks
recovery of unpaid wages and penalties under the FLSA and the California Labor Code,
Industrial Welfare Commission Wage Order No. 4, the California Business and
Professions Code, as well as injunctive and declaratory relief and restitution.
The employee alleges that he worked as a full-time non-exempt Specialist at Apple stores
in Spokane and San Francisco from about September 2010 to November 2012. He seeks
to represent other Specialists, as well as certain non-exempt managers.
According to the complaint, the employee and these other hourly employees were not
compensated for the time they spent waiting in line to clock in and out of the company’s
39
time-tracking system, checking out and back in again the company-owned devices they
were required to use at work, and getting their personal bags and packages searched when
they left their Apple retail locations across the country. These unpaid wait-time issues
occurred at the beginning and end of each work day as well as during meal breaks.
The employee alleges that the wait in line to clock in could take up to 30 minutes or more
on product launch days, but he generally arrived about 15 minutes early on other days
because the wait-time was unpredictable. The amount of time spent checking company
devices in and out could take from five to 45 minutes or more, he said.
Completing the security check of personal bags and packages when leaving the store for
meal breaks and at the end of the day would involve at least 10-15 minutes each,
according to the complaint. These security checks were required pursuant to Apple’s
“uniform nationwide policy,” which exposed those who failed to comply with discipline
up to and including termination.
The complaint seeks certification of a nationwide FLSA class and California unpaid
wage, wage statement, and waiting time penalty classes. Each class is expected to include
more than 1,000 members.
The employee filed his complaint in the Northern District of California on October 10.
The case number is 3:13-cv-04727-JSC.
Employer nets felony conviction for false statements in low-wage worker overtime
kick-back case
Texas-based High Performance Ropes of America has been convicted of one felony
count of making false statements, ordered to pay $165,356 in overtime back wages and
liquidated damages to 31 employees, fined $12,100 in civil money penalties for repeat
and willful FLSA violations, and received a court-ordered fine of $10,000. The company
makes heavy duty wire rope used in construction, mining, oil and gas, bridge suspension
and ski lifts. Its owner, plant manager, and office manager were also convicted on
separate felony counts, according to a DOL Wage and Hour Division release on October
17.
A two-year WHD investigation covering December 2008 to December 2010 found the
employer failed to pay its workers time and a-half for hours worked over 40 in each
workweek. A second investigation, from December 2010 to March 2013, found the
company had submitted false payment evidence to the department and demanded
kickbacks from workers while continuing to avoid overtime obligations. The WHD said
the employer also kept a second set of time records that it hid from investigators.
The WHD, in cooperation with the Justice Department, provided evidence that the
company and its officers repeatedly and willfully violated FLSA overtime and recordkeeping provisions. The case was prosecuted by the U.S. Attorney for the Western
District of Texas. The company and its officials were found guilty of felony counts that
included making a false statement, aiding and abetting illegal re-entry into the United
40
States, and withholding information about a crime. Three company officials were
sentenced to time served with probation.
“High Performance Ropes of America, a company with a history of FLSA violations,
furnished falsified records to Labor Department investigators and willfully withheld
information that showed employees worked up to 96 hours per workweek, with no
overtime compensation,” said WHD Regional Administrator Cynthia Watson. “These
were egregious labor violations that resulted in the exploitation of low-wage workers.”
Company agrees to pay back wages to workers for unpaid log-on time
Sitel Operating Corp. will pay $68,901 in back wages to 486 employees after an
investigation by the Wage and Hour Division (WHD) found FLSA overtime and
recordkeeping violations at the company’s facility in Oak Ridge, Tennessee. The firm,
dba Sitel, provides phone-based business operations support to companies that want to
outsource those functions. Sitel’s employees make and receive calls on behalf of the
company’s clients to sell products, fulfill orders, take claims, provide technical support,
answer customer questions, and collect payments. Sitel was also assessed, and has paid,
civil money penalties of $74,900 for repeat FLSA violations, according to the WHD.
Agency investigators found that employees who worked on one client account, United
Services Automobile Association, were not paid for time spent conducting required
preparatory work before their shifts started. The company purportedly had failed to pay
its employees for the 28-39 minutes they were required to spend each week logging into
Web applications before they could access the time clock to start their shift. The WHD
said that because the employees were not paid for all hours worked, they were denied
overtime compensation at time and a-half their regular rates of pay for hours worked
beyond 40 in a workweek, as required by the FLSA. Sitel also failed to keep accurate
records of the time employees spent conducting preparatory work, according to the
agency.
The company has agreed to pay all back wages and civil money penalties and maintain
compliance with the FLSA.
Employers should be aware that the DOL now offers a smart phone application to help
employees independently track the hours they work and determine the wages they are
owed. Available in English and Spanish, the application permits users to track regular
work hours, break times, and any overtime hours for one or more employers. Instead of
relying on their employers’ records, workers now can keep their own records.
“Employers must pay workers for all time spent conducting work activities, which
includes any work done before or after a shift officially begins or ends,” said Nettie
Lewis, district director of the WHD’s Nashville district office. “This case should be a
wake-up call to other employers to review their employment practices and ensure that
their employees are being compensated for all work activities they perform.”
Agency files suit to ensure coffee-bean pickers paid at statutory rates
41
The DOL had filed suit in federal court in Puerto Rico against Beneficiado de Café Las
Indieras, dba Hacienda Remanso de Paz, and its president, for alleged violations of the
FLSA’s minimum wage and record-keeping provisions. The suit is seeking back wages
covering the last two years and requests that the court restrain the defendants from
withholding payment of the wages owed, and from future FLSA violations.
An investigation by the department’s Wage and Hour Division found that the Yauco
coffee grower employed farm workers and coffee harvesters but failed to pay them the
legally required minimum wage for all hours worked. Several coffee pickers were paid by
the pound, amounting to hourly wages between $1.25 and $6.54, and some seasonal
hourly workers were paid $5.25 per hour instead of the legally required minimum wage
of $7.25 per hour. Investigators also found that the defendants failed to create and
maintain accurate records of their employees’ wages, hours and other conditions of
employment, in violation of the FLSA.
“The coffee-growing industry in Puerto Rico employs thousands of low-wage agricultural
workers, many of whom are coffee pickers who work on rugged land in mountainous
regions for subminimum wages. These are among the most vulnerable of workers, and
they deserve to be paid correctly,” said Jose R. Vazquez, director of the division’s
Caribbean District Office. “These workers are typically paid by the pound for the coffee
they pick. Paying by the pound is legal, but it is the employer’s responsibility to ensure
workers are earning at least the minimum wage.”
Motel 6 agrees to back wages following investigation into FLSA, FMLA violations
Envy27 LLC, doing business as Motel 6 in Knoxville, Tennessee, has agreed to pay
employees $51,967 in overtime back wages after an investigation by the Wage and Hour
Division identified violations of the FLSA and FMLA.
An investigation conducted by the Division’s Nashville district office disclosed that
employees regularly worked more than 40 hours a week but were only paid straight-time
wages for all hours worked. The employer also failed to post required FMLA posters in
an area visible to workers and did not provide information about the FMLA in the
company’s handbook in violation of FMLA requirements.
Following the investigation, establishment owner Nitinkumar “Nick” Patel agreed to pay
all back wages due to the affected employees, pay proper overtime rates when overtime is
worked, amend the company handbook to include general notice of the FMLA, display
required FMLA posters at all locations, and comply with the FLSA and FMLA going
forward.
The investigation into the Motel 6 franchise was conducted pursuant to the agency’s
current enforcement initiative aimed at the hospitality industry. “The Wage and Hour
Division has noticed the noncompliance in this industry and is concentrating its resources
on investigating and remedying violations, informing workers of their rights, and
providing compliance assistance to employers,” according to a DOL press release
announcing the settlement. Since 2009, the division has concluded nearly 5,000 cases
42
involving hotel and motel employers, resulting in more than $15.1 million in back wages
for more than 28,000 workers nationwide.
Failure to pay required overtime premiums is “a typical violation in the hotel and motel
industry,” said Nettie Lewis, district director of the Wage and Hour Division’s Nashville
district office. “We encourage other hotel and motel employers to learn from this case,
review their practices and make a diligent effort to limit future liability by complying
with the FLSA and FMLA.”
Break requirement of FMCSA hours of service rules does not apply to short-haul
drivers, rule revision confirms
The Federal Motor Carrier Safety Administration on Monday, October 28 published a
revision to its hours of service (HOS) regulations to clarify that its 30-minute rest break
requirement does not apply to short-haul drivers who are not required to prepare records
of duty status (RODS). The rulemaking comes in response to a D.C. Circuit decision
invalidating this provision of the final rule.
On December 27, 2011, FMCSA published a final rule amending its HOS regulations for
drivers of property-carrying commercial motor vehicles (CMVs). The final rule included
a new provision requiring drivers to take a rest break during the work day under certain
circumstances. Drivers may drive a CMV only if a period of 8 hours or less has passed
since the end of their last off-duty or sleeper-berth period of at least 30 minutes.
FMCSA did not specify when drivers must take the 30-minute break but the rule requires
that they wait no longer than 8 hours after the last off-duty or sleeper-berth period of that
length or longer to take the break. Drivers who already take shorter breaks during the
work day could comply with the rule by taking one of the shorter breaks and extending it
to 30 minutes. The new requirement took effect on July 1, 2013.
On August 2, the D.C. Circuit upheld the regulations in all respects in the face of a
trucking industry challenge — except for the 30-minute break provision as it applied to
short-haul drivers. The agency ceased enforcement of the 30-minute rest break provision
against short-haul operations effective August 5 and requested that its state enforcement
partners do the same with respect to state versions of the provision.
The “short haul” exceptions are outlined in 49 CFR 395.1(e)(1) or (2). An introductory
clause excluding those drivers has been added to 49 CFR 395.3(a)(3)(ii). Specifically, the
following drivers are no longer subject to the 30-minute break requirement:

All drivers (whether they hold a commercial driver's license (CDL) or not) who
operate within 100 air-miles of their normal work reporting location and satisfy
the time limitations and recordkeeping requirements of Sec. 395.1(e)(1);

All non-CDL drivers who operate within a 150 air-mile radius of the location
where the driver reports for duty and satisfy the time limitations and
recordkeeping requirements of Sec. 395.1(e)(2).
43
The FMCSA also removed regulatory text made obsolete by the passing of the July 1
compliance date for the final rule.
Hotel employers will pay back overtime wages to resolve FLSA violations
The DOL’s Wage and Hour Division (WHD) announced on October 28 that MCM
Elegante and MCM Grande Hotels in Albuquerque and Texas have paid $78,876 in
overtime back wages to 200 dishwashers, bartenders, wait staff, bellmen, housekeeping,
and maintenance workers following an investigation that found FLSA overtime,
minimum wage and recordkeeping violations. Employees in Albuquerque and Abilene,
Beaumont, Dallas, DeSoto, and Odessa, Texas, were not properly paid wages they were
due. The hotels are owned by HTL Operating LLC, based in Odessa. HTL Operating
LLC has agreed to comply with the FLSA at all of its locations and will pay the back
wages found due in full.
Investigators found that the hotels paid housekeeping staff a flat rate per room cleaned,
without regard to the number of hours worked. When employees worked more than 40
hours in a week, the employers continued to pay only this flat rate, failing to pay
overtime at the required one and one-half times the employees’ regular rates of pay. A
housekeeper paid $3 per room, cleaning three rooms per hour, would earn $450 for a 50hour week at the piece rate, without overtime. But the employee would legally be due
$495, a shortage of $45, the WHD explained.
The employers also failed to pay proper overtime to servers when they based their
overtime rates on time and one-half their direct cash wages, rather than the full minimum
wage. Tipped employees may be paid as little as $2.13 per hour directly by the employer,
provided they collect enough in tips to earn the federal minimum wage of $7.25 per hour.
Overtime must be computed on the full minimum wage, though, the WHD pointed out.
Additionally, the hotels purportedly failed to include incentive pay they had paid to
employees in their regular rates of pay when computing overtime, and failed to maintain
accurate records of employees’ wages and work hours, as required by the FLSA.
The WHD said that it’s concerned about the severity of noncompliance in the hotel and
motel industry and is concentrating its resources on identifying and remedying violations,
informing workers of their rights, and providing compliance assistance to employers.
Since 2009, the division has conducted more than 4,000 investigations of industry
employers, resulting in more than $12.4 million in back wages recovered for more than
23,000 workers nationwide.
Working Family Flexibility Act introduced in Senate to provide choice of overtime
pay or comp time
On October 31, Senator Mike Lee (R-Utah) introduced the Working Family Flexibility
Act, a bill aimed to help workers handle the constant challenge of work-life balance by
permitting all individuals who work overtime to choose between monetary compensation
and comp-time. A companion bill, HR 1406, passed in the House on May 8 by a 223-204
vote. The Working Family Flexibility Act would free workers to choose the best way to
alleviate the difficulties of juggling work, home, kids, and community, according to Lee’s
release.
44
As it made its way through the House, however, the companion bill was not without
controversy. The legislation was strongly opposed by employee advocacy groups and
labor unions, and prompted a letter from more than 160 organizations urging its defeat.
The bill was also opposed by Democrats, including President Obama, who indicated he
would veto the measure. In a Statement of Administrative Policy issued May 6, the
President said HR 1406 would not prevent employers from cutting overtime hours or
guarantee that workers could use their accrued comp time when they choose. He feared
the bill “could be read to provide employers broad discretion to deny requests to use
compensatory time off,” and failed to specify a remedy for when such requests are
denied.
According to Lee, the Working Family Flexibility Act would:

Give employers the ability to offer their employees the option of comp time or
overtime pay, both accrued at 1½ times the overtime hours worked.

Require employers that decide to offer this option to their employees to establish
a written agreement with the employee outlining the options and to allow each
employee to voluntarily choose the option that best fits his needs.

Require that comp time agreements be included in the collective bargaining
agreement negotiated between the union and the employer for any employee
represented by a union.

Allow employees who choose to accrue comp time to accrue up to 160 hours each
year.

Allow employees to “cash out” their accrued comp time at the traditional
overtime pay rate at any time throughout the year.

Maintain all existing employee protections, including the current 40-hour
workweek and overtime accrual, and provide additional safeguards to ensure that
the choice to use comp time is voluntary.

Require employers to pay employees at the traditional overtime rate for any
unused comp time at the end of each calendar year.
On the House side, the companion bill enjoyed considerable support from employer
groups, including a show of support by the Society for Human Resource Management
(SHRM).
But Representative George Miller (D-Calif), the ranking Democrat on the House
Workforce Committee, decried the legislation as “more work and less pay” in a statement
following the House bill’s passage. In his view, HR 1406 “would allow employers to
replace workers’ overtime time-and-a-half pay with nonguaranteed time off in the future.
Any unused comp time would be repaid to the worker at the end of the year without
interest, amounting to an interest-free loan from workers to their boss.”
45
“The representations that the workers are free to choose between comp time and overtime
pay, in fact, are not correct. At the end of the day, the employer has the right to veto any
comp time that this bill will allow to accrue,” said Representative Joe Courtney (DConn), the ranking member of the House Workforce Protections Subcommittee.
Republicans rejected a Democratic amendment to the House bill that would have ensured
that workers would be entitled to use their accrued comp time in cases of a family illness
or a medical appointment for a veteran. The amendment would also have prevented an
employer from offering comp time in lieu of overtime pay if it had violated the Equal Pay
Act.
The House bill was received in the Senate on May 9 and has been referred to the
Committee on Health, Education, Labor, and Pensions.
LEADING CASE NEWS:
1st Cir.: Teacher’s FMLA claims fail where he was ineligible for FMLA leave
By Ronald Miller, J.D.
A federal district court properly granted summary judgment against a teacher’s claim that
a school district improperly handled his request for FMLA leave and forced him to resign
in retaliation for seeking such leave, ruled the First Circuit (McArdle v Town of Dracut,
October 9, 2013, Kayatta, W). Where the employee worked only 82 days in the 12
months preceding his request for FMLA leave, the 615 hours he worked did not come
close to the 1,250 hours required for FMLA eligibility.
The employee began working as a middle school English teacher in 1997. In 2007, he
began drinking excessively after he and his wife began divorce proceedings. The
employee suffered depression, anxiety, foreclosure on his home, and personal
bankruptcy. Reeling from his personal crisis, the employee began missing work. He went
to work only 10 days in September 2008, and did not appear at all in October, November
or December. After the winter break, his work record improved temporarily. In total, he
came to school for only 82 days in the 2008-2009 school year. His absences exhausted
the 15 days of sick leave and the two personal days to which he was entitled. Moreover,
he exercised a contractual right to use his 15 days of sick leave for the 2009-2010 school
year during the 2008-2009 school year.
Job abandonment. Throughout the 2008-2009 school year the employee provided only
cursory explanations for his absences; he supplied the school principal with two notes
indicating that he had a “medical condition” and was unable to work. He was disciplined
for failing to leave lesson plans for a substitute. When the new school year began, the
employee did not appear at school. Instead, he called his principal and informed her that
he had made the decision that it would not be in anyone’s interest for him to come back
to school. During that conversation, the employee stated that he wished to apply for
FMLA leave. The principal informed him that he would have to contact the
46
superintendent’s office. About two weeks later, the employee received an FMLA packet,
informing him that he had to contact the superintendent in writing to request FMLA
leave. The employee did not send notice of his desire for FMLA leave and did not return
a completed medical certification.
On September 28, 2009, the employee was terminated for abandoning his position. His
reply noted for the first time in writing his desire to take FMLA leave. Still he failed to
provide a physician’s statement. Ultimately, the employee resigned his position and filed
suit alleging that the school district violated his rights under the FMLA, among other
claims. After discovery, the defendants successfully moved for summary judgment on all
claims. This appeal ensued.
FMLA leave eligibility. The employee claimed that the school district violated the
FMLA both by interfering with his attempt to seek permission to take FMLA leave, and
by terminating him because he attempted to avail himself of the protections of the FMLA
for the leave he took. Here, the appeals court determined that the employee had no cause
for complaint of any type under the FMLA because he was ineligible to take FMLA
leave. The employee argued on appeal that he was eligible for FMLA leave or that the
school district should be estopped from denying that he was eligible.
To be eligible for FMLA leave, an employee must have “at least 1,250 hours of service
with the employer during the previous 12-month period. Here, the school district
demonstrated that the employee worked only 82 days in the 12 months preceding
September 1, 2009. The employee testified that when he actually came to school he
typically worked 7.5 hours. The collective bargaining agreement under which he was
covered also specified a 7.5-hour workday. Thus, the employer worked only 615 hours.
The court concluded that the gap between 615 hours and 1,250 hours was so large that it
was implausible that the employee worked anywhere close to 1,250 hours. The
employee’s own description of what he might do at home fell short of suggesting that his
work at home was so substantial as to exceed his work at school. Thus, the employee
failed to present sufficient evidence to create a genuine issue of fact as to the number of
hours he actually worked during the 12 months preceding his request for leave.
Handling of FMLA application. Moreover, the court declined to find that the school
district interfered with his FMLA rights by the manner in which it handled his FMLA
leave application. Here, it was not clear that the employee’s communications with the
school district were sufficient to trigger an obligation to provide notice of eligibility when
it had already sent him the medical certification form and notice that a written request
was required to obtain FMLA leave. The employee pointed to nothing that he could or
would have done differently had the school district told him in early September 2009,
that he was not eligible for FMLA leave. Thus, no harm was suffered by reason of the
alleged violations.
Retaliation claim. Finally, the employee was unable to establish that the school district
retaliated against him for exercising his FMLA rights. The First Circuit noted that there is
a split in authority as to whether an employee who is not eligible for FMLA leave can
bring a retaliation claim under the FMLA. At any rate, the appeals court said it was not
47
convinced that an employee who is ineligible for FMLA leave can never bring a
retaliation claim. Firing an employee for asking would frustrate the aims of the Act even
if the inquiring employee turns out to be ineligible. However, here, the employee was not
fired for asking to take FMLA leave. Rather, he was fired because the school district
concluded that his indefinite absences without advance notice permitted it to fire him.
The case number is 13-1044.
Attorneys: Jeffrey R. Mazer (Mazer Law Group) for Raymond C. McArdle. Thomas A.
Mullen (Thomas A. Mullen, P.C.) for Town of Dracut. Theresa Rogers for Dracut Public
Schools, Stacy Scott, and Spencer Mullen.
5th Cir.: Paralegal had not agreed to fluctuating workweek method; lower court
erred in computing damages in FLSA suit against law firm
By Lisa Milam-Perez, J.D.
A trial court erroneously applied the fluctuating workweek method when computing
damages after a jury found a paralegal was improperly classified as FLSA-exempt and
thus wrongly denied overtime pay (Black v Settlepou, PC, October 11, 2013, Graves, J, Jr).
The employee’s repeated objections to being reclassified as exempt from overtime
supported a finding that there was no agreement between the parties that she would be
paid a fixed salary for all of the hours she worked each week, the Fifth Circuit concluded,
vacating the damages award and remanding for recalculation.
Reclassified as exempt. The employee began working for the law firm as a nonexempt
legal secretary, and was promoted a year later to paralegal, still deemed a nonexempt
position. The following year, she was told that she would now be supervising a legal
secretary and therefore would be reclassified as exempt from overtime, much to her vocal
displeasure. When she was terminated a few years later, she filed an FLSA suit alleging
claims for unpaid overtime and retaliation. A jury found the law firm had willfully
violated the Act by misclassifying her as exempt, and concluded she was entitled to 274
hours of overtime compensation. She did not prevail on her retaliation claim, though.
In computing the overtime pay award following the verdict, the district court applied the
fluctuating workweek (FWW) method, multiplying her 274 overtime hours worked by
one-half of her regular hourly pay rate of $28.891 per hour, for an actual damages award
of $3,957.93. The court also awarded liquidated damages in the same amount, for a total
damages award of $7,915.86. The employee moved to alter or amend the judgment,
arguing that the court erred in awarding only half the regular hourly rate instead of one
and one-half times the rate. After her motion was denied, the employee filed an appeal,
contending that the FWW method was not warranted here. Agreeing, the Fifth Circuit
reversed.
FWW method. Under the FWW method, as set forth in 29 CFR Sec. 778.114, an
employee receives a fixed weekly pay for a fluctuating work schedule with a varying
number of hours worked each week. After a finding of fact is made that an employee was
misclassified and is entitled to overtime pay, the court determines as a matter of law
48
whether to apply the standard method of calculating overtime pay due or whether instead
to apply the FWW multiplier. The issue has divided the federal courts, the Fifth Circuit
noted — particularly the question of whether the FWW formula is to be applied
retroactively.
The Fifth Circuit, in Ransom v M Patel Enterprises, Inc, held that Sec. 778.114 does not
allow for a retroactive damages award in misclassification cases. Looking to the Supreme
Court’s endorsement of the FWW method in Overnight Motor Trans Co v Missel, which
held that the FWW half-time multiplier may be used to calculate overtime when the
employee had been working under a “contract [that] is for a weekly wage with variable or
fluctuating hours,” the appeals court reasoned that the FWW method is appropriate only
when employer and employee have agreed that the employee will be paid a fixed weekly
wage to work fluctuating hours. Accordingly, the case here turned on the factual question
of whether the employee had agreed to receive a fixed weekly wage for working
fluctuating hours.
No agreement found. The district court made no specific finding of fact as to the terms
of the paralegal’s employment agreement with the law firm; it implicitly determined that
the parties agreed that her fixed weekly salary was intended to compensate her for all the
hours she worked each week no matter how her hours fluctuated. But the lower court
should have taken into account the parties’ initial understanding of the employment
arrangement as well as their ongoing course of conduct.
Turning to this inquiry, the appeals court observed that the parties initially agreed that the
employee would be given a fixed weekly salary and time and one-half of her regular
hourly pay for any hours worked beyond 40. When the law firm reclassified her as
exempt, that agreement changed — raising the question of whether the parties mutually
agreed that she would receive a fixed salary to compensate her for fluctuating weekly
hours under her new employment arrangement.
At trial, the employee testified that it was her understanding that she would be
compensated with a fixed weekly wage to work a regular schedule of 37.5 hours per
week, even though she was now classified as exempt. The HR director who had informed
her that she was being reclassified as exempt testified that she too was unaware of any
fluctuating workweek agreement in place. One firm partner testified that a full-time
employee’s regular workweek was 37.5 hours per week. This testimony warranted a
finding that the parties had agreed that the employee’s weekly salary was meant only to
compensate her for a regularly set schedule of 37.5 hours per week. The law firm’s
payroll records provided further support for this finding, as did the firm’s employee
handbook, which sets forth a regular 37.5 hour workweek.
Course of conduct. The employee’s course of conduct also suggested there was no
meeting of the minds on the FWW method. Her schedule did fluctuate above her standard
workweek at least some of the weeks she was employed, yet she was only paid the same
fixed weekly salary no matter how many hours she worked. The law firm argued that by
accepting her fixed weekly pay, she indicated that she understood and agreed that her
49
fixed weekly salary would cover all of her hours worked on her varying schedule. In its
view, such conduct evidenced a FWW agreement.
However, the appeals court noted, the critical issue was not only whether the employee
was paid a fixed salary for varying hours, “but whether the parties had agreed that a fixed
salary would compensate her for all of the hours she worked each week.” The record
evidence suggested otherwise: when she found herself working overtime without pay, she
lodged both verbal and written complaints with her supervisor and HR about not being
compensated for the extra work. Her continued protests showed that she did not agree
that her fixed salary should compensate her for all of the hours she worked each week.
“By immediately and repeatedly voicing her disagreement with her lack of overtime pay
after being reclassified as exempt,” the appeals court wrote, the employee “did much,
short of quitting her job, to show that she did not agree that her fixed weekly salary was
intended to compensate her for all of the hours she worked each week.” Accordingly, it
was clear error for the district court to apply the FWW method in calculating her
overtime premiums.
Remaining damages. In addition to vacating the amount of actual damages awarded, the
appeals court remanded as to the liquidated damages and attorneys’ fee awarded. Because
the jury found the law firm acted willfully in violating the Act, the employer could not
show it acted in good faith. And, because the lower court erred in calculating actual
damages, the liquidated damages award was to be recalculated accordingly.
As to the attorneys’ fee award, the district court determined the proper lodestar was
$232,400, but in its discretion reduced the award to only $45,000 in attorney’s fees. The
appeals court observed that plaintiff’s counsel had voluntarily reduced their billing hours
by excluding any hours that were related strictly to the failed retaliation claim, and
further reduced their hours by an additional 25 percent to compensate for their failure to
recover on that claim. The district court ultimately concluded that a 25 percent voluntary
reduction in hours was insufficient because, having lost the retaliation claim, the
employee recovered only about $8,000 in damages instead of the $97,000 or so
requested. However, the appeals court concluded that, while the district court must take
into account the degree of success obtained, it was an abuse of discretion to reduce the
fee award solely on the basis of the amount of damages obtained.
The case number is 12-10972.
Attorneys: Joseph Halcut Gillespie (Gillespie, Rozen & Watsky) for Betty Black.
Susanna Elaine Johnson (Bourland, Kirkman, Seidler, Evans, Jay & Michel) for
Settlepou, P.C.
5th Cir.: No pretext in termination of employee for failing to return to work after
leave
By Kathleen Kapusta, J.D.
50
Finding that none of an employee’s “plethora of arguments” created a genuine fact issue
on pretext, the Fifth Circuit, in an unpublished decision, affirmed a lower court’s grant of
summary judgment on her claims that her employer discriminated and retaliated against
her in violation of the FMLA when it terminated her for failing to return to work
following an extended leave (Paris v Sanderson Farms, Inc, October 18, 2013, Smith, J).
For the same reasons, the appeals court also refused to revive the employee’s claims
under the ADA and the Texas Commission on Human Rights Act (TCHRA).
Leave policy. The employee worked at Sanderson Farms’ poultry processing plant,
which has its own FMLA policy for salaried employees. The policy impose certain
protocols employees must follow before and during leave and specifies that an employee
who fails to return after exhausting the provided 13 weeks of leave will be subject to
discharge unless an extension is granted. In October 2009, the employee took leave to
undergo surgery. While she was out, her supervisor allegedly harassed her regarding her
leave. He was subsequently terminated for poor job performance, including issuing
improper write-ups to the employee.
She began a second leave in December. In early January, she submitted an updated
FMLA certification indicating a return to work date of January 25. On that date, however,
she submitted a doctor’s note indicating she would be out of work until released by her
gastroenterologist. Her doctor subsequently submitted an updated FMLA certification
stating that the employee could not return to work until after she saw the specialist on
March 18. Although her leave expired in February, the company extended her leave until
March 18.
Terminated. After she saw the gastroenterologist, her doctor sent a note stating that the
employee was excused from work until cleared by the specialist. In response, her
supervisor sent a certified letter indicating that her extension had expired and her
employment would be terminated unless she returned to work or requested another
extension by Friday, April 9. When she failed to return to work on Monday, April 12, she
was terminated. She then sued, asserting claims under the FMLA, the ADA, and the
TCHRA. The district court granted summary judgment for Sanderson Farms on all
claims.
FMLA discrimination. Assuming, as did the district court, that the employee could
establish a prima facie case of discrimination under the FMLA, the court found that
Sanderson Farms provided a legitimate, nondiscriminatory reason for terminating her:
she failed to return to work following her extended leave and to submit any certification
seeking another extension. In an attempt to show pretext, the employee argued that she
requested a leave extension before April 9. She contended that she left messages for her
supervisor informing her that she had a procedure scheduled for April 5 and that her
paperwork would be delayed because her doctor was out of the country. However, she
pointed only to her own testimony regarding these messages. Here, the court found that
even if she could show she left the messages, she still failed to comply with the
company’s policy requiring that she submit completed certification forms to Sanderson
Farms. Because this was the stated reason for her termination, she failed to show pretext.
51
Also rejected was her assertion that the company’s failure to contact her between April 9
and April 13 created a genuine issue on pretext because she had complied with company
policy up until then. Contrary to this assertion, she had not complied with her
supervisor’s certified letter informing her of the exact steps she needed to take to remain
employed. Moreover, while she argued that the company violated its own policy to
ensure there was no miscommunication, this did not preclude summary judgment. Here,
the undisputed evidence showed that Sanderson Farms repeatedly communicated with the
employee and told her the specific obligations to remain employed. Thus, even if its
policy required it to have communicated with the employee between April 9 and April
13, that did not give rise to a genuine issue on pretext.
The employee next attempted to show pretext by arguing that she put forth sufficient
evidence showing her effective termination date was actually April 1. In support of this
contention, she relied on an allegedly altered payroll authorization form, a COBRA letter
stating that her medical benefits ended on April 1, and her supervisor allegedly telling her
that her employment had been terminated on April 1. Finding that none of these
assertions gave rise to a material fact dispute on pretext, the court observed that as to the
“altered” payroll form, the employee did not explain why or how the document was
altered and ignored testimony that no one had been instructed to alter the document. The
date on the COBRA form merely reflected that her paycheck would be stopped as to
March 31 because no further pay was due. As to her assertion that her supervisor called
her and told her she was terminated on April 1, this was nothing more than an
unsubstantiated conclusory statement.
Finally, the court rejected the employee’s contention that Sanderson Farms had a pattern
and practice of terminating employees for taking FMLA leave. Here, the court noted that
she did not dispute that the company’s leave policy provided more generous benefits than
required by state and federal law— a fact inconsistent with a pattern and practice of
FMLA discrimination. Nor did the facts suggest a pattern and practice of terminating
employees for taking FMLA leave. Not only was the employee granted discretionary
leave, she continued receiving pay long after her statutory and company leave had
expired. Thus, she failed to offer any competent evidence giving rise to a genuine issue
on pretext.
FMLA retaliation claim. The employee also contended that she was terminated in
retaliation for having been identified as a witness in a former coworker’s lawsuit against
the company. The district court found that she failed to establish any nexus between her
potential role as a witness in the coworker’s case and her termination; thus, she failed to
establish a prima facie case regarding her “witness retaliation claim.” Even assuming she
could establish a prima facie case, the lower court nonetheless found summary judgment
was appropriate because she failed to produce any evidence of pretext.
On appeal, the employee argued that Sanderson Farms did not move for summary
judgment on this claim; thus, the district court could not grant summary judgment on it.
Rejecting this argument, the appeals court found that the company moved for summary
judgment on all of the employee’s claims, including her witness retaliation claim.
52
Moreover, as with her discrimination claim, she failed to present any evidence giving rise
to a genuine issue of pretext.
The case number is 13-20239.
Attorneys: Gregory Scott Fiddler (Law Office of G. Scott Fiddler) for Anniesa L. Paris.
Mark R. Flora (Constangy, Brooks & Smith) for Sanderson Farms, Inc.
6thCir: Employer held “honest belief” discharged employee was abusing FMLA
leave
By Marjorie Johnson, J.D.
An employee with chronic back pain who took intermittent FMLA leave for more than
two years, and was fired after his employer became suspicious of the patterns in the
timing of his leave requests, could not advance FMLA interference and retaliation claims,
ruled the Sixth Circuit ruled in an unpublished opinion (Tillman v Ohio Bell Telephone
Co, October 8, 2013, per curiam). Summary judgment was warranted as to the
employee’s FMLA retaliation claim since he failed to refute that his employer held an
“honest belief” that he abused his FMLA leave and violated its code of conduct.
Moreover, although the district court also applied the “honest belief” rule to his FMLA
interference claim, it needn’t have made the decision to do so since the employee failed
to show he was entitled to FMLA leave in the first place, thus warranting dismissal of
that claim as well.
Intermittent leave provides long weekends off. The employee worked for Ohio Bell
Telephone Company as a telecommunications specialist (TCS). In 2006, he was
diagnosed with lumbar degenerative disease, which allegedly caused him to experience
exacerbated back pain two to three days a month. In December 2006, Ohio Bell granted
his request for intermittent FMLA leave, which he was allowed to use whenever his back
pain flared up or when he had doctor’s appointments. He took several periods of
intermittent FMLA leave over the next two-and-half years. These FMLA days routinely
fell on Fridays and weekends, resulting in him having three-day or four-day weekends on
several occasions, including the weekend preceding the New Year’s holiday. Also,
although his doctor had stated that he could not predict when he was going to have a flare
up of his back pain, he often notified his supervisor several days in advance that he
intended to use FMLA leave time on a future date.
Towards the end of 2008, his coworkers and supervisors began noticing these patterns in
his leave and complained to the area manager. After reviewing the information and
observing the patterns in his FMLA leave, the manager suspected misuse of FMLA time.
He contacted human resources, who recommended that the FMLA department investigate
the matter. The FMLA manager agreed that the employee’s FMLA use was suspicious
and turned the matter over to the company’s asset protection department for
investigation. The assigned investigator hired a private investigation company to conduct
surveillance of the employee during his FMLA leave.
53
Surveillance leads to discharge. The surveillance company videotaped the employee on
two separate days that he took FMLA leave. On March 15, he was observed working in
his yard and in his garage for two hours. On March 28, he was observed driving his
family around for two hours and conducting a number of personal errands. He was also
observed working in his garage for an hour, during which time he repeatedly bent down,
lifted and carried pieces of wood trim.
Ohio Bell provided the surveillance report and video to an outside medical consultant for
review. The consultant issued a report concluding that the employee’s activities on the
two videotaped days were inconsistent with the physical behaviors typical of someone
with incapacitating back pain. She suggested that he was thus not incapacitated from
performing his work duties on those dates. Amongst other things, she noted that he was
seen bending without any sign of pain or weakness and was able to reach above his head
and take objects down from above. He also moved objects with one hand, could kneel
and stand without hesitation, and walked and stood without any sign of stiffness,
weakness or pain.
Six days later, the investigator questioned the employee regarding his FMLA usage. The
employee allegedly indicated that he used FMLA on weekends because he did not have
time to do his home exercises during the week. He was unable to recall his activities on
March 15 or 28, but suggested that he may have been able to engage in some physical
activities because he may have received a Cortisone shot that day. He also stated that he
may have been under the influence of painkillers and thus could not have operated a
company vehicle.
As a result of the investigation, the employee’s request for FMLA leave on March 15 and
28 were denied. The findings of the investigation were subsequently reported to members
of management who concluded that he should be terminated. After a hearing by the
dismissal review board, the employee was discharged based on his violation of the AT&T
Code of Business Conduct, which prohibited fraudulent or illegal conduct.
FMLA retaliation. The district court did not err in ruling that summary judgment was
warranted as to the employee’s FMLA retaliation claim due to its finding that the “honest
belief” rule protected Ohio Bell’s discharge decision. Specifically, Ohio Bell established
that it held an honest belief that the employee abused his FMLA leave and violated the
company’s code of business conduct. The employee could not establish pretext simply by
arguing that the proffered reason was incorrect. Rather, he was required to put forth
evidence demonstrating that Ohio Bell did not “honestly believe” its proffered nondiscriminatory reason, which he failed to do.
Notably, in deciding to discharge him, the company relied on the investigation report and
the surveillance tapes of his activities; his interview statements; the medical consultant’s
report; the employee’s e-mail to his supervisor indicating he would take FMLA leave on
a certain day if he got assigned to the night shift; and the pattern observed over a period
of nearly two-and-a-half years of the employee’s use of FMLA leave on weekends or
combined with his days off and holidays. It was entirely proper for Ohio Bell to consider
its medical consultant’s report in forming its honest belief, ruled the appeals court. She
54
reviewed the video footage, the employee’s job description, and his 2009 FMLA
certifications, and concluded that his activities on March 15 and 28 were inconsistent
with how someone with incapacitating back pain would act. Although the employee
argued that she should have discussed the matter with his own physician, and should have
inquired about the specific weight of the objects she observed him carrying in the video,
Ohio Bell was not require to show that its investigation was “optimal or that it left no
stone unturned.” In sum, the record reflected that Ohio Bell made a reasonably informed
and considered decision based upon the particularized facts before it at the time.
FMLA interference. The Sixth Circuit also affirmed summary judgment against the
employee on his FMLA interference claim, but for different reasons than those found by
thedistrict court. Although the lower court held that the use of the “honest belief” rule
applied to the employee’s interference claim, the appeals court decided that it did not
need to resolve this “thorny issue.” Notably, the circuit’s authority on this issue was
conflicting. And, although the “honest belief” defense fit neatly into the retaliation
context — where the legal standard inherently demanded an employer’s culpable mental
state — an FMLA interference claim lacked this inherent scienter requirement and
simply prohibited interference with FMLA rights. Moreover, although the Third, Seventh
and Tenth Circuits have allowed the “honest belief” defense to interference claims, the
Sixth Circuit averred that the relevant FMLA provisions did not support the broad
inference that an employer may defeat an interference claim solely on the basis of its
honest belief (even if mistaken) that the employee wrongfully claimed FMLA leave.
The Sixth Circuit ultimately dodged the bullet on this issue by concluding that the
employee failed to show he was entitled to FMLA leave in the first place. Specifically,
because Ohio Bell asserted that he failed to show entitlement to FMLA leave for the
March 15 and 28 dates, he was required to present evidence demonstrating his
entitlement. He failed to do so, but instead asserted only that Ohio Bell failed to disprove
his alleged condition, which was insufficient. Because Ohio Bell presented evidence
casting doubt on the employee’s need for leave, the appeals court refused to presume
from his chronic condition and intermittent leave requests that he actually suffered from a
serious condition on those specific days. To do so would allow a medical certification
attesting to an intermittent condition to be used as a license to take unnecessary medical
leave, eliminating the employee’s burden of showing entitlement.
Concurrence. In a concurrence, Chief District Judge Gerald Rosen argued that
thelowercourt properly applied the “honest belief rule” to the employee’s interference
claim, since the issue was not simply his entitlement to FMLA leave but rather his abuse
of his FMLA leave rights. Judge Rosen also disagreed with the conclusion that the
employee failed to show entitlement to FMLA leave in the first place. Rather, he believed
that this element of the prima facie case was satisfied once the employee provided the
company with the his doctor’s medical certification, establishing that he suffered from a
serious health condition that made him unable to perform the functions of his job and
certifying a “medical necessity” for intermittent FMLA, which Ohio Bell accepted
without question.
The case number is 11-3857.
55
Attorneys: John D. Franklin (Widman & Franklin) for Eirik Tillman. Michelle R. Arendt
(Ogletree Deakins) for Ohio Bell Telephone Company.
6th Cir.: Law clerk was county judge’s “personal staff” and exempt from
protections of FMLA
By Lorene D. Park, J.D.
Affirming summary judgment for a judge on the FMLA retaliation claim of a former staff
attorney, a Sixth Circuit panel, in an unpublished opinion, found that the attorney was the
judge’s “personal staff” and was not covered by the Act (Horen v Cook, October 10,
2013, Black, T).
The employee was a research law clerk or staff attorney in a county court of common
pleas in Ohio and was responsible for, among other things, drafting proposed opinions
and orders for the judge to which she was assigned. In 2007, a new judge was elected and
requested her staff to continue to work as they had in order to maintain continuity.
According to the judge, she soon discovered that the employee did not timely complete
her work and when the judge confronted her, the employee responded with a contentious
email. There were other problems with the employee’s work and, on one occasion, she
failed to recognize mandatory statutory language, resulting in the judge issuing an
opinion that contravened the statute.
Meanwhile, in May 2009, the employee took FMLA leave to care for her daughter. When
she returned in August, she immediately asked for three weeks of vacation. She claimed
the judge was hostile toward her and complained loudly and angrily about the backlog of
work her absence had created. The judge put her on a 90-day probationary period. On
December 1, the employee told the judge she needed additional FMLA leave. A day later,
in a staff meeting, the employee announced that she would be unable to follow a new
time sheet procedure because the judge was “never there” to sign off on her time sheets.
The judge learned of the comment and confirmed with several other workers what was
said. She then confronted the employee, who refused to accept responsibility for her
actions. The judge terminated her on December 16.
“Personal staff.” Affirming the district court’s grant of summary judgment in favor of
the judge on the employee’s FMLA retaliation claim, the Sixth Circuit found that the
“personal staff” exemption applied and the claim was therefore not covered by the
FMLA. Looking to Title VII’s definition of an employee as well as case law on the
exemption, the appeals court set forth a nonexhaustive list of factors to consider when
deciding if the employee was the judge’s “personal staff” and thus exempt from
coverage. It considered the judge’s plenary powers of appointment and removal, the
employee’s personal accountability to the judge, whether the employee represented the
judge in the eyes of the public, whether the judge exercised considerable control over the
position, the level of the employee’s position in the chain of command, and the intimacy
of the working relationship between the judge and employee.
Plenary powers. Here, the handbook governing the employee’s employment with the
court explicitly stated that staff attorneys are personal, at-will employees of the individual
56
judge for whom they work. The fact that she was “assigned” to the judge did not change
the analysis because the judge had the option to terminate her and hire someone else at
any time. Further, the judge here wished to maintain continuity by keeping the former
judge’s procedures and practices and the fact that she did not reject the employee did not
show she lacked the authority to do so.
Personal accountability. In addition, as to the employee’s personal accountability to the
judge, the handbook and job description stated she was a “personal and confidential
employee for the individual judge” and the relationship required “absolute confidence in
the confidentiality of information.” Further, the employee reported directly to the judge
and when the judge was unhappy with her work or her attitude, she scheduled personal
meetings with the employee and personally disciplined her. The fact that the employee
sometimes “covered for” other staff attorneys in their absences did not change the fact
that she was accountable to the judge.
Other factors. The appeals court also noted that a law clerk represents her judge in the
“eyes of the public.” And as to control over the position, the employee acknowledged that
the judge had control of her workload and time, to the extent the judge desired to exercise
that control. Indeed, the judge asked her to produce at least two decisions per week and
provide case law to support the draft decisions. In addition, the level of the employee’s
position was that of a first line advisor or immediate subordinate, which further weighed
in favor of finding that she was the judge’s “personal staff.”
Moreover, the relationship between the judge and employee was highly intimate. While
they rarely spoke face-to-face, and the employee worked on a different floor in an area
reserved for staff attorneys, she checked in with the judge’s courtroom upon arriving each
day, the judge relied heavily on her work and the employee retained confidential
information as to all of the judge’s cases.
In the aggregate, these factors supported a finding that the employee was the judge’s
personal staff. Thus, the exemption applied and her FMLA retaliation claim failed
because “the statute does not protect an attempt to exercise a right that is not provided by
the FMLA.”
The case number is 12-4544.
Gary A. Reeve (Law Offices of Gary A. Reeve) for Joanne E. Horen. Linda L. Woeber
(Montgomery, Rennie & Jonson) for Judge Stacy Cook.
7th Cir.: Lack of OSHA rules no bar to claim for pay for time spent showering and
changing clothes
By Ronald Miller, J.D.
OSHA’s failure to promulgate a rule requiring that foundry employees shower and
changes clothes on-site did not bar the employees from presenting evidence as to the
compensability of such activities under the FLSA, ruled a divided Seventh Circuit
(DeKeyser v Thyssenkrupp Waupaca, Inc dba Waupaca Foundry, Inc, October 31, 2013,
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Lee, J). Here, the appeals court majority determined that the district court erred when it
ignored the “sharp dispute” in the evidence as to the health effects of chemical exposure
at the foundry and the impact, if any, that showering and changing clothes would have on
the workers. Judge Manion dissented.
Showering and changing clothes. For safety, a foundry provided its employees with
personal protective equipment (PPE), including hardhats, safety glasses, ear protection,
steel-toed footwear and fire-retardant uniforms. Employees were required to wear the
PPE while working, and were subject to discipline for failing to comply with the
employer’s safety standards. Locker rooms equipped with showers were also provided to
the employees. When employees finished their shifts, they first clocked out and preceded
to the locker rooms, where they removed their uniforms, PPE, showered and changed into
street clothes. Some employees do leave the foundry wearing their uniforms.
The foundry employees sued their employer alleging that it violated the FLSA by failing
to pay them overtime compensation for the time they spent showing and changing
clothes. They represented more than 400 opt-in plaintiffs in the action. Citing Department
of Labor regulations and authority from sister circuits, the district court held that an
employee’s activity constituted compensable “work” under the FLSA if such activities
are required by law, by the employer, or by the “nature of the work.” It thereafter granted
summary judgment in favor of the employer, ruling that that showering and changing
clothes at the plant was not compensable under the FLSA because OSHA had
responsibility for promulgating and enforcing occupational safety and health standards,
and had not mandated that workers in foundries shower and change clothes on-site.
Negative inferences. The district court concluded that the employees did not satisfy the
first two elements, holding that neither the law nor the employer required employees to
shower and change clothes on-site. The third element, the “nature of the work,” it found
was “not a question that either a court or a jury was well-equipped to answer.” Thus, it
concluded that a determination of what practices and procedures should be mandated to
protect worker health and safety in the workplace should be made on an industry-wide
basis. Accordingly, the district court concluded that “the fact that OSHA has promulgated
a standard for [hazardous material] exposure that does not mandate changing clothes and
showering after work requires the conclusion that such activities are not required by the
nature of the work.”
This conclusion was erroneous. Unlike the district court, the Seventh Circuit concluded
that it could not draw any negative inferences from the absence of an OSHA standard
requiring foundry workers to shower and change clothes on-site. Next, the majority
determined that it could not ignore factual evidence and expert testimony offered by the
parties to establish the compensability of an activity under the FLSA. Moreover, the court
concluded that although cases such as this may implicate difficult and complex scientific
issues, courts cannot avoid discovery or expert testimony simply because it may be
costly, time consuming, or difficult to understand. Thus, the district court erred in
ignoring evidence of as to the health effects of chemical exposure, and the impact that
showering and changing clothes would have on the workers. Consequently, the case was
remanded.
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Dissent. Judge Mannion filed a dissent in which he concluded that the district court did
not err in granting summary judgment in favor of the employer. Because the Seventh
Circuit had not resolved the question of what test a district court should apply to
determine whether donning, doffing, or showering are “integral and indispensable” parts
of employees’ activities, or merely an employee convenience, the dissent argued that the
lower court properly looked to the guidance of the Ninth Circuit in granting summary
judgment to the employer.
The case number is 12-3306.
Attorneys: Anne T. Regan (Zimmerman & Reed) for Ryan Dekeyser. Paul E. Benson
(Michael Best & Friedrich) for Thyssenkrupp Waupaca, Inc
11th Cir.: Settlement agreement left open possibility of award of attorneys’ fees
By Ronald Miller, J.D.
An employee’s voluntary acceptance of payment from her employer as settlement of her
claims for unpaid overtime did not preclude a separate award of attorneys’ fees under the
FLSA, ruled the Eleventh Circuit in an unpublished decision (Wolff v Royal American
Management, Inc, October 1, 2013, per curiam). In this instance, a district court
concluded that the offer was fair and reasonable and entered judgment in favor of the
employee. Moreover, the appeals court agreed that the settlement did not provide the
employee with all of the relief to which she was entitled to under the FLSA, so that it did
not moot her claim, and she was entitled to seek attorneys’ fees and costs from the
employer.
Settlement offer. After filing her complaint alleging FLSA violations, the employee
calculated that her employer failed to pay her $1,800 in overtime wages. With liquidated
damages, that brought her total itemized damages to $3,600. In December 2011, the
employer tendered $3,600 to the plaintiff through her attorney and moved to dismiss the
action. The employee’s counsel returned the check. In December 2012, the employer
offered to settle the case for $5,000, but the employee’s counsel claimed that he never
submitted the offer to the employee because it was never put in writing. Nevertheless, the
employee received a 1099 form reflecting a payment of $3,600. The employee called to
determine the reason for the 1099. The employer informed the employee for the first time
of the prior tender offer to her attorney, and the employee stated she wanted to settle the
case. Thereafter, the employee met with the employer, signed a general release and took
the $3,600 check.
Subsequently, the parties moved the court to determine whether the payment and release
rendered the action moot, stripping the employee of attorneys’ fees on the ground that
there was no judgment in the case to indicate that she was the prevailing party.
Ultimately, the district court approved the settlement as reasonable, even though it was
reached without the participation of the employee’s counsel. However, the district court
found that the settlement had not mooted the lawsuit and awarded the employee’s counsel
more than $61,000 in fees and costs. This appeal ensued.
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Prevailing party determination. Because the FLSA seeks to protect employees from
“inequalities in bargaining power between employers and employees,” Congress has
made its provisions mandatory. Thus, “FLSA rights cannot be abridged by contract or
otherwise waived because this would nullify the purposes of the statute and thwart the
legislative policies it was designed to effectuate.” Moreover, the FLSA plainly requires
that a plaintiff who receives a judgment in his favor is entitled to attorneys’ fees and
costs. The Supreme Court has recognized that a plaintiff is a prevailing party only when
she obtains either (1) a judgment on the merits, or (2) a settlement agreement “enforced
through consent decree.”
Thus, in the absence of a judgment on the merits, to be a prevailing party, the FLSA
plaintiff needs a stipulated or consent judgment or its “functional equivalent” from the
district court evincing the court’s determination that the settlement “is a fair and
reasonable res[o]lution of a bona fide dispute over FLSA provisions.”
Here, the employer’s settlement offer to the employee did not include an offer of
judgment in the employee’s favor and against the employer. Rather, the employee signed
a release providing that she acknowledged receipt of the $3,600 check as full and
complete satisfaction of any monies owed to her by the employer. Under such
circumstances, the employer’s offer did not constitute full relief of the employee’s claim.
In Zinni v ER Solutions, Inc, the Eleventh Circuit made clear that so long as a settlement
agreement does not include an offer of judgment against a defendant (and it did not in
this case), whether a plaintiff accepted the settlement makes no difference. Thus, the
employer’s settlement with the employee did not moot her FLSA claim, and she was
entitled to seek attorneys’ fees and costs from the employer.
Moreover, the appeals court rejected the employer’s claim that the district court abused
its discretion in awarding the fees in this case. Here, the district court plainly found that
the settlement was reasonable, and entered judgment in favor of the employee. Further, it
was unclear whether the employee received everything to which she was entitled at the
time the agreement was reached, since the district court found that the parties did not
intend the settlement to preclude attorneys’ fees. Accordingly, the judgment of the district
court was affirmed.
The case number is 12-15981.
Attorneys: Banks Christian Ladd (Law Office of Banks C. Ladd) for Phyllis Wolff.
David Andrew Byrne (Bryant Miller Olive) for Royal American Management
Incorporated.
11th Cir.: Because of good faith dispute over whether wages owed, cruise ship
stewards denied penalty wages
By Ronald Miller, J.D.
A federal district court did not err in not awarding senior stateroom stewards aboard a
cruise ship penalty wages under the Seaman’s Wage Act, ruled the Eleventh Circuit
(Wallace v NCL (Bahamas) Ltd, October 1, 2013, Proctor, R). In light of the district
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court’s finding that a good faith dispute existed over whether the wages were owed
because the employer actually paid the wages, but created a situation where the stewards
had to use some of their wages to hire helpers to complete their embarkation day duties,
the appeals court concluded that the evidence did not necessitate a finding of arbitrary,
willful, or unreasonable withholding of wages to warrant penalty wages.
Because of a new policy allowing passengers on a cruise ship to stay aboard for a longer
time after the ship had docked, senior stewards, who were responsible for having cabins
cleaned, found it more difficult to timely complete their work. Although their shifts
began at 7:00 a.m., for the most part, they were unable to begin cleaning cabins until as
late as 10:30 a.m. because of later departing passengers. In light of the substantial
workload, and shortened time frame in which to complete it, most stewards adopted the
practice of hiring helpers (out of their own pocket) to assist them in completing their
work on embarkation day.
District court findings. Six stewards filed suit alleging that the employer has not paid
them their full wages because their compensation does not take into account the amounts
they were required to pay helpers to complete their work on embarkation day. They
contended that the employer was liable for compensatory and penalty wages under the
Seaman’s Wage Act. Following a bench trial, the district court awarded the stewards
compensatory wages but not penalty wages. On appeal, the only question was whether
the district court erred in not awarding the stewards penalty wages.
The stewards each signed a contract with the employer under which they lived aboard the
cruise ships for ten months, then took two months of vacation before signing new
employment contracts. Each contract incorporated the terms of a collective bargaining
agreement between the employer and union representing the stewards. The CBA
established the stewards’ pay rates and guaranteed that the stewards would be entitled to
100 percent of wages minus approved deductions. On embarkation day, stewards had to
clean between 30 and 35 cabins before new passengers arrived. The employer had
rigorous standards for cleanliness of the cabins and randomly checked cabins as a quality
control system.
New debarkation policy. Prior to the change in policy, passengers disembarked by 8:00
a.m. or 8:30 a.m. The new policy caused problems for the stewards on embarkation day
because departing passengers disembarked later. If the stewards failed to complete their
assignments or rushed their work, they faced a quality control process that could lead to
reprimands. Based on documents presented at trial, the district court determined the
senior stewards had to hire helpers to complete their duties on embarkation day.
Thereafter, the district court concluded that the employer wrongfully withheld the
stewards’ wages in violation of the Seamen’s Wage Act, but did not award penalty
wages.
As to compensatory wages, the district court concluded that the employer created a
situation where it was nearly impossible for the stewards to clean all of their assigned
cabins without “hiring” helpers. By assigning the stewards an amount of work that could
not be completed without using some of their wages to pay for helpers, and not
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compensating them in a manner that accounted for the payments, the employer owed the
stewards an amount in compensatory damages. On the other hand, because the district
court concluded that the employer had a reasonable belief that the stewards’ claimed
wages were not due to them, and at least two stewards told the employer that they could
complete the work without helpers, it concluded that the employer had not acted
arbitrarily, willfully, or unreasonably, and did not award penalty wages.
Penalty wages. The Eleventh Circuit affirmed the district court judgment denying
penalty wages to the stewards. In this instance, the district court observed that the
stewards’ theory of back wage liability, although a winning one, was novel and its own
research had not uncovered any opinion (published or unpublished) in which a shipowner
was held liable under the Act for failing to compensate seaworkers for amounts paid to
others. Moreover, the employer presented two credible witnesses on the issue of whether
senior stewards could finish their work without hiring helpers. Adverse credibility
findings that the district court made as to other employer witnesses were irrelevant to the
Rule 52(a) question before the appeals court, as that testimony did not inform the district
court’s decision not to award penalty wages.
The appeals court also rejected the stewards’ contention that because they prevailed on
their common law claim for breach of the duty of good faith and fair dealing, it followed
that the employer acted in bad faith under the Seaman’s Wage Act, thus warranting the
imposition of penalty wages. Under Florida law a breach of this duty occurs “where one
party to a contract uses its discretion to make it difficult for the other party to fulfill his
contractual obligations.” Thus, the district court’s finding the employer breached its duty
of good faith and fair dealing did not necessarily compel the conclusion that the employer
acted in bad faith for purposes of penalty wages. Bad faith in the penalty wages context is
measured against a different legal standard than bad faith for purposes of the common
law claim.
The case number is 12-15204.
Attorneys: Carlos Felipe Llinas Negret (Lipcon Margulies Alsina & Winkleman) for
Everol Barran. Sanford L. Bohrer (Holland & Knight) for NCL-Bahamas Ltd.
11th Cir.: District court order vacating class arbitration of overtime pay claims
reversed
By Ronald Miller, J.D.
A district court order granting DirecTV’s petition to vacate an arbitration award that
allowed satellite installation technicians to pursue their overtime pay claims as collective
actions was reversed on appeal to the Eleventh Circuit in an unpublished decision
(DirecTV, LLC v Arndt, October 22, 2013, per curiam). The appeals court concluded that
“the briefest glance” at the arbitrator’s award revealed she arguably interpreted the
agreements. Because the arbitrator arguably interpreted the parties’ agreements, the
district court should have ended its inquiry and denied DirecTV’s petition to vacate the
arbitration award.
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While employed by DirecTV, the satellite installation technicians each signed an
arbitration agreement that required all employment claims to be submitted to binding
arbitration, including claims for wages. In November 2011, the technicians filed a
demand for collective or class arbitration, alleging that DirecTV failed to pay them
overtime wages in violation of the FLSA. They sought to bring their case on behalf of
themselves and all other similarly situated employees. The arbitrator issued an order
finding that the agreements provided for collective arbitration of the employees’ FLSA
claims. Thereafter, DirecTV filed a petition seeking to vacate the arbitrator’s award,
claiming she exceeded her authority in finding the parties consented to collective
arbitration. The district court granted DirecTV’s petition to vacate the arbitration award
and ordered arbitration to proceed bilaterally.
District court jurisdiction. On appeal, the employees argued that the district court
lacked subject matter jurisdiction over DirecTV’s petition to vacate the arbitration award
because (1) the arbitrator’s award was an interim order; and (2) the AAA’s Employment
Rules do not provide for an interlocutory appeal of an arbitrator’s award finding the
parties consented to collective arbitration. With respect to the employee’s jurisdictional
argument, the appeals court concluded that the district court had jurisdiction because their
claims arose under a federal statute — the FLSA.
Similarly, the employees’ argument that the district court lacked jurisdiction because this
case was proceeding under the AAA’s Employment Rules also missed the mark. The
court pointed out that it is axiomatic that the district court’s jurisdiction is granted by
Congress and may not be conferred by any act or agreement of the parties. The fact that
the parties submitted their dispute to a private organization for resolution did not elevate
that organization’s rules and procedures into a congressional grant of federal jurisdiction.
Thus, it was irrelevant whether the arbitration proceeded under the AAA’s rules.
Order vacating arbitration award. Nonetheless, the court concluded that the district
court erred in vacating the arbitrator’s award. The Federal Arbitration Act (FAA)
provides that a district court may vacate an arbitration award “where the arbitrators
exceeded their powers, or so imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.” Moreover, the Supreme Court
allows federal courts little leeway in determining whether the arbitrator exceeded her
powers within the meaning of Sec. 10(a)(4). “Because the parties bargained for the
arbitrator’s construction of their agreement, an arbitral decision even arguably construing
or applying the contract must stand, regardless of a court’s view of its merits or demerits.
Thus, the sole question for a federal court is “whether the arbitrator (even arguably)
interpreted the parties’ contract, not whether [s]he got its meaning right or wrong.”
In this case, the arbitrator explicitly acknowledged that her duty was to examine the terms
of the agreements and to determine if there existed a contractual basis for concluding that
the parties either agreed to or did not agree to arbitrate FLSA collective actions. She cited
specific language in the agreements and explained that the agreements were worded
broadly. According to the arbitrator, the plain language of the agreements explicitly
allowed the employees to assert their rights on a collective basis. Furthermore, the
language relied on by DirecTV to demonstrate the agreements provided only for bilateral
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arbitration was not sufficiently compelling to override the employees’ statutory rights
guaranteed by the agreements. Accordingly, the district court’s order was reversed.
The case number is 13-10033.
Attorneys: Halima Horton (McGuireWoods) for DirecTV, LLC. Andrew Weir Funk
(Stueve Siegel Hanson) for John Arndt.
Cal. Sup. Ct.: California rule categorically prohibiting waiver of Berman hearing in
arbitration agreement overturned
By Ronald Miller, J.D.
On remand from U.S. Supreme Court for consideration in light of AT&T Mobility LLC v
Concepcion, the California Supreme Court held that its prior ruling was inconsistent with
the Federal Arbitration Act (FAA) (Sonic-Calabasas A, Inc v Moreno, October 17, 2013,
Liu, G). It concluded that because compelling parties to undergo a Berman hearing would
impose significant delays in the commencement of arbitration, the approach it took in
Sonic-Calabasas A, Inc v Moreno (Sonic I) was inconsistent with the FAA. It also found
that the FAA preempted a state law rule categorically prohibiting waiver of a Berman
hearing in a pre-dispute arbitration agreement imposed on employee as condition of
employment. Justice Chin filed a separate opinion dissenting in part.
Administrative wage claim process. In this case, the employee worked for an
automobile dealership. As a condition of his employment, he signed an agreement setting
forth a number of conditions of employment, including drug testing, permission to
contact former employers, and a statement of his at-will employment status. The
agreement also had an arbitration provision that applied to all disputes arising in the
employment context. In December 2006, after leaving his employment, the employee
filed an administrative claim with the Labor Commissioner for unpaid vacation pay. In
response, the employer petitioned to compel arbitration of the wage claim, arguing the
employee waived his right to a Berman hearing in the arbitration agreement.
The Berman statutes confer important benefits on wage claimants by lowering the costs
of pursuing their claims and by ensuring they are able to enforce judgments in their favor.
A Berman hearing is a dispute resolution forum established to assist employees in
recovering wages owed. The Labor Commissioner intervened on behalf of the employee,
arguing that the arbitration agreement did not preclude him from filing an administrative
wage claim. According to the Labor Commissioner, resort to a Berman hearing was
compatible with the arbitration agreement because the hearing could be followed by
arbitration in lieu of a de novo appeal in the superior court. The court denied the petition
to compel arbitration, and the employer appealed.
The state appellate court concluded that arbitration agreement constituted a waiver of a
Berman hearing and precluded the employee from pursuing any judicial or “other
government dispute resolution forum.” Thus, it determined that the employee was
precluded from pursuing an administrative wage claim. It also ruled that the Berman
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waiver was enforceable and not contrary to public policy. The California Supreme Court
granted a petition for review of that decision.
Categorical rule. In Sonic I, the California Supreme Court held that although the
employee could be compelled to arbitrate, he could not be required to waive his right to a
Berman hearing before arbitration. As a consequence, it stated a categorical rule that it
was contrary to public policy and unconscionable for an employer to require an
employee, as a condition of employment, to waive the right to a Berman hearing to
recover wages owed. The appellate court was reversed. Ultimately, the U.S. Supreme
Court granted a writ of certiorari and vacated that judgment, and remanded the case for
consideration in light of Concepcion.
Impact of Concepcion. The U.S. Supreme Court issued its decision in Concepcion two
months after the Sonic I was filed. In Concepcion, the High Court held that the FAA
preempts unconscionability rules “aimed at destroying arbitration or demanding
procedures incompatible with arbitration.” After first offering an extensive review of its
holding in Sonic I, and the state law rule at issue in Concepcion, the California Supreme
Court agreed with the employer’s contention that the FAA as construed by Concepcion
preempts the holding in Sonic I that a waiver of Berman procedures in an arbitration
agreement was unconscionable and contrary to public policy. Accordingly, the holding in
Sonic I was overruled.
In Concepcion, the U.S. Supreme Court made clear that courts cannot impose
unconscionability rules that interfere with arbitral efficiency. Here, the employer pointed
out that the usual time between the filing of a complaint with the Labor Commissioner
and the conclusion of a Berman hearing is four to six months. Because a Berman hearing
causes arbitration to be substantially delayed, the unwaivability of such a hearing
interferes with a fundamental attribute of arbitration. The FAA, as interpreted by
Concepcion, does not permit additional delay that results not from adjudicating whether
there is an enforceable arbitration agreement, but from an administrative scheme to
effectuate state policies unrelated to the agreement’s enforceability.
Unconscionability doctrine. Still, which the California high court concluded that the
FAA preempted a state-law rule categorically requiring arbitration to be preceded by a
Berman hearing, that holding did not fully resolve the unconscionability claim in this
case. Rather, the state high court noted that state courts may continue to enforce
unconscionability rules that do not “interfere with fundamental attributes of arbitration.”
Consequently, although a court may not refuse to enforce an arbitration agreement
imposed on an employee as a condition of employment simply because it requires the
employee to bypass a Berman hearing, such an agreement may be unconscionable if it is
otherwise unreasonably one-sided in favor of the employer.
In this instance, the employee argued that the arbitral scheme crafted by the employer
failed to provide an arbitral forum in which employees could fully and effectively
vindicate their statutory rights to recover unpaid wages, and so was contrary to public
policy, unconscionable and unenforceable. The fundamental fairness of the bargain will
depend on what benefits the employee received under the agreement’s substantive terms
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and the totality of circumstances surrounding the formation of the agreement. Here, there
was no occasion to address whether the employee can vindicate his right to recover
unpaid wages under this particular arbitral scheme.
After Concepcion, unconscionability remains a valid defense to a petition to compel
arbitration. What is new is that Concepcion clarifies the limits the FAA places on state
unconscionability rules as they pertain to arbitration agreements. Such rules must not
facially discriminate against arbitration and must be enforced evenhandedly. The
unconscionability doctrine ensures that contracts do not impose terms that are overly
harsh, unduly oppressive or so one-sided as to “shock the conscience.” Because evidence
relevant to the unconscionability claim was not developed in this case, the matter was
remanded to the trial court to determine whether the present arbitration agreement is
unconscionable.
Partial dissent. Although Justice Chin agreed with the majority‘s conclusion that the
FAA preempted Sonic I’s public policy rationale, he dissented from the majority’s
treatment of the employee’s unconscionability claim. The dissent argued that the
employee’s unconscionability claim should be rejected for two reasons: (1) he forfeited it
by failing to raise and pursue it below; and (2) he has not met, and cannot meet, his
burden of showing unconscionability. Justice Chin also disagreed with the majority’s
advisory opinion regarding the unconscionability principles the trial court should apply
on remand.
The case number is S174475.
Attorneys: John P. Boggs (Fine, Boggs & Perkins) for Sonic-Calabasas A, Inc. Miles E.
Locker (Locker Folberg) for Frank Moreno.
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