Labor Relations & Wages Hours Update
April 2014
Hot Topics in LABOR LAW:
NLRB grants request for review in Northwestern University football player election
case
The NLRB has granted Northwestern University’s request to review a regional director’s
March 26 decision that the university’s grant-in-aid scholarship football players are
statutory employees under the NLRA and thus eligible to vote for union representation.
The request for review and decision and direction of election raised substantial issues
warranting review, the Board said in a statement issued Thursday.
The election scheduled for Friday, April 25, will take place, but the ballots will be
impounded until the Board issues a decision affirming, modifying, or reversing the
Regional Director’s decision, the agency said. The Board also noted that it intends to
issue a subsequent notice establishing a schedule for the filing of briefs on review and
inviting amicus briefs to afford the parties and interested amici the opportunity to address
issues raised in this case.
The Northwestern football players petitioned the NLRB for representation by the College
Athletic Players Association (CAPA) in January, citing concerns about health and safety
issues and the lack of adequate protections. An “overwhelming majority” of the NU
football players were said to have signed cards supporting the unionization effort at the
time; later news reports, however, have indicated that a majority of the players intend to
vote against representation. The fledgling union’s expenses were covered by the
Steelworkers union.
In a closely watched case, the NLRB regional director for Region 13 ruled that
scholarship football players at Northwestern University are statutory employees under the
NLRA and directed a representation election to take place. The regional director
concluded that scholarship players who perform football-related services for the
university under a contract for hire in return for compensation are subject to the
employer’s control and are therefore employees within the meaning of the Act.
The election petition and subsequent decision by the NLRB regional director in Chicago
have drawn much discussion about the nature of unions and exactly when union
representation is appropriate. Those who support the college football players have
asserted that the players’ receipt of scholarship funds, and required uniforms and
appearances at certain venues, among other things, evidences an employment
relationship. NCAA Chief Legal Officer Donald Remy, though, insisted that while many
student athletes are provided scholarships and many other benefits for their participation,
there was no employment relationship between the NCAA, affiliated institutions, and
student athletes.
According to comments by attorneys at management firm Jackson Lewis, reprinted with
permission here and originally published at www. jacksonlewis.com, it could take several
months or more for the NLRB to decide the university’s appeal. They anticipate the
Board will likely uphold the regional director’s determination that the players are
employees. If so — and even if Northwestern ultimately prevails in the election — “it
and other private institutions will be required forevermore to interact with their
scholarship athletes as they would any other employee under the NLRA.”
“This will mean that the players’ exercise of any of the protections afforded traditional
employees contained in the NLRA — for example, to discuss and engage in union
activity or to combine to improve ‘working conditions’ — must not result in any
disadvantage to the players,” according to Jackson Lewis. “Similarly, any documentation
applicable to the players must not leave any impression (expressly or impliedly) that
engaging in any of these activities could disadvantage the athlete.”
NLRB saw 211,394 ULP charges filed in FY 2013, more than 142 cases await Noel
Canning outcome
By Pamela Wolf, J.D.
In fiscal year (FY) 2013, 211,394 unfair labor practice charges were filed with the
NLRB, and the settlement rate was 92.8 percent, according to the Board General Counsel
Richard F. Griffin, Jr. From those charges, 1,272 complaints were issued and the
agency’s litigation win rate was 85.7 percent. There are also more than 142 cases that
raise issues affected by the controversial Noel Canning case challenging President
Obama’s recess appointments to the Board. Griffin provided the data, as well as other
information, to the Annual Midwinter meeting of the Practice and Procedure (P&P)
Committee of the ABA Labor and Employment Law Section.
According to the GC Memorandum summarizing the questions posed by the P&P
Committee and the answers provided, 559 cases were submitted to the Division of
Advice in FY 2013, with a median case-processing time of 21 days. The submitted cases,
Griffin said, involved novel or difficult legal issues, high-profile disputes, charges
pending in multiple Regional Offices, or Sec. 10(j) authorization requests.
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Section 10(j) requests. In FY 2013, 161 Sec. 10(j) requests were received from NLRB
Regional offices. Of the 43 cases that the General Counsel submitted to the Board
requesting authorization for 10(j) proceedings, the Board authorized proceeding in 41
cases — the other two were withdrawn prior to Board consideration based on new case
developments. Of those authorized, the Regions obtained settlements or adjustments in
15 cases. Eleven of the 22 petitions filed in district courts were litigated to conclusion by
the end of the fiscal year. The Board won eight of those cases, one of which was a partial
win, and lost three.
Representation cases. According to the Memo, 1,986 representation certification cases
were filed in FY 2013, while 472 decertification cases were filed. For cases closed that
fiscal year, 1,330 certification elections were held and 202 decertification elections were
held. The union won 64.06 percent of certification elections and 39.11 percent of
decertification elections. The median number of days from the filing of the petition to the
election was 38 days.
The Board conducted a total of 1,620 elections in FY 2013, with 172 mail ballot elections
and 14 mixed manual/mail ballot elections. There are no statistics available as to how
many elections were held at locations other than at the employer’s facility.
Impact of Noel Canning. As to the impact of the Noel Canning case that is awaiting the
Supreme Court’s decision after oral arguments in January, Griffin noted that there are
three issues under consideration: (1) whether the President's recess-appointment power
may be exercised during a recess that occurs within a session of the Senate, or is instead
limited to recesses that occur between sessions of the Senate; (2) whether the President's
recess-appointment power may be exercised to fill vacancies that exist during a recess, or
is instead limited to vacancies that first arose during that recess; and (3) whether the
President's recess-appointment power may be exercised when the Senate is convening
every three days in pro-forma sessions.
There are about 107 pending cases in the courts of appeals in which a party or the court
has raised a question regarding the validity of the recess appointments of Members
Griffin, Block, or Flynn, according to the Memo. Another 35 cases have raised the
question of the validity of Member Becker's appointment. There is also a Southern
District of Ohio case that has been stayed since last July awaiting the Noel Canning
ruling — it was filed by National Right to Work on behalf of an individual seeking
declaratory and injunctive relief that a Board order dismissing his certification petition
was ultra vires.
The NLRB’s Section 10(j) litigation program continues to be affected by these issues, the
GC said. While the validity of Obama's appointment of three members to the Board on
January 4, 2013, was challenged in some district courts in response to Sec. 10(j) petitions,
the primary challenges were to the Board's 2011 delegation of authority to the GC to
initiate 10(j) proceedings, either at its inception or that it lapsed when the Board fell
below a quorum.
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Respondents have also challenged the 2001 and 2002 Board delegations, as well as
continuing to challenge the validity of the 2011 delegation. This defense was raised in
response to Sec. 10(j) petitions in FY 2013. According to the Memo, every court that
addressed the issue upheld the validity of the Board's delegations of the GC's authority to
initiate 10(j) proceedings, avoiding the constitutional issue of the validity of the recess
appointments.
The GC also said that for the first time, respondents also mounted challenges this year to
Regional Directors that had been appointed by the recess Board and to the President’s
designation of Acting General Counsel Lafe Solomon. He noted that a district court in the
Western District of Washington dismissed a 10(j) petition on the basis that Solomon's
designation was invalid under the Federal Vacancies Reform Act (FVRA). The appeal of
that case is pending the Ninth Circuit. In contrast, a court in the District of Alaska denied
a motion to dismiss and granted injunctive relief after considering the FVRA and finding
the employer brought an impermissible collateral attack or a direct attack that failed
pursuant to the de facto officer doctrine. Similar challenges were litigated in three other
cases, with one still pending in district court. Two of the challenges were rejected, with
one under appeal in the Second Circuit.
Election ballots impounded, strikes authorized, contract rejected and union
representation authorized
By Pamela Wolf
In recent days, the NLRB has impounded election ballots, airlines pilots have rejected a
proposed contract, casino workers have authorized strikes, and enough Verizon Wireless
retail workers in Brooklyn have signed union authorization cards to get an election.
Taylor Farms. The Teamsters reported that on Friday, March 28, the NLRB impounded
workers’ ballots in an organizing election for representation by the union at Taylor
Farms, the largest supplier of fresh-cut produce in the country. The nearly 900
predominately Latino food processing workers at the company’s plants in Tracy,
California, have been organizing since last September to join Teamsters Local 601 in
Stockton.
The union says that the workers have endured years of poverty wages, inhumane working
conditions, mistreatment of immigrant workers, and disrespect by the company. In
addition to low wages and lack of affordable benefits, the challenged workplace practices
include workers being harassed or terminated for taking time off due to illness, the denial
of worker’s compensation for injuries on the job, and inadequate protective gear exposing
workers to dangerous chemical fumes.
In advance of the election, the Teamsters said it filed claims covering hundreds of unfair
labor practice violations by the company that included retaliatory firing of union
supporters, threatening workers around immigration status, and telling immigrant
workers they could not vote.
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During the two-day election, according to the union, the company sent supervisors and
lead workers to intimidate workers and constrain their movement during the voting
period. Armed guards were purportedly stationed in full view of workers who were
voting and police were called; they parked their squad cars in front of the facilities. The
union said that “company goons” also spat on union t-shirts and yelled obscenities and
threats at union organizers and workers. There was also a report that a plant manager
called terminated pro-union workers and told them that they would be rehired if they
came in and voted against the union. Other reports, according to the Teamsters, suggest
that workers were sent to vote twice under different names or to vote for workers on
vacation.
The NLRB intervened as final ballots were being cast on the evening of March 28, the
Teamsters said. The Board purportedly removed ballots to a more secure location at its
offices in Oakland while it investigates the company’s alleged unlawful conduct.
The vote last week included three different elections for each employer at the facilities,
including Taylor Farms and two “temp” agencies, Sling Shot and Abel Mendoza,
according to the union. Many agency workers at Taylor Farms have worked at the plant
for years and are temps in name only, the union said. The company uses the agencies to
access a pool of flexible labor to which it has little accountability, according to the
Teamsters.
Taylor Farms has not publicly commented about the election.
American Eagle. Pilots for American Eagle represented by the Air Line Pilots
Association, International (ALPA) on March 28 rejected a concessionary contract
proposed by American Airlines Group (AAG). With 92 percent of the eligible pilots
casting their ballots, 70 percent voted against ratification of the contract.
The proposed contract changes were a combination of pay freezes, reductions in per
diem, and increased health-care costs in exchange for a promise to re-fleet the airline and
enhance the existing agreement to transfer pilots to American Airlines, according to the
ALPA. These concessions were in addition to the $43 million the pilots gave the
company during bankruptcy last year, the union said.
Having previously worked under a 16-year contract that concluded with AMR’s
bankruptcy filing, the American Eagle pilots have not seen meaningful contractual gains
since 2004, the union said. New-hire pilot pay begins at less than $23,000 per year. If the
contract had been approved, first officers would have been capped at about $38,000 per
year after four years of service.
“Management has said many times to us that this agreement is their ‘bottom line’ offer
and believe that they will be able to get the same cost savings from another provider,”
remarked Capt. Bill Sprague, chairman of the Eagle ALPA Master Executive Council.
“We question whether any regional airline is able to attract and retain pilots by offering
poverty-level wages. American Eagle already has a career progression arrangement with
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American, and yet, due to a lack of pilots, it’s unable to perform the regional flying that
American Airlines desires. Other airlines are experiencing the same problem.”
Downtown Las Vegas casinos. On Thursday, March 27, several thousand members of
the Culinary and Bartenders unions, UNITE HERE Local 226 and 165, authorized a
strike against ten downtown Las Vegas casinos. The 99-percent affirmative strike voted
came some five weeks after the unions gave notice to terminate contract extensions. As a
result, the unions can now call for a strike at any time against these properties until they
have new contracts.
Properties now subject to a strike are Binion's, Fremont, Four Queens, El Cortez, Golden
Gate, Golden Nugget, Las Vegas Club, Las Vegas Plaza, The D., and Main Street
Station. Workers at Brady Linen Services, who provide laundry services for many
casinos and hotels on the Strip, and Margaritaville also passed the strike authorization
vote by overwhelming margins. The Culinary and Bartenders Unions recently concluded
negotiations for new five-year new contracts covering over 37,000 workers on the Las
Vegas Strip.
Verizon Wireless. According to the CWA, an overwhelming majority of Verizon
Wireless retail workers in Brooklyn have signed union authorization cards. A strong
inside committee from the company's seven Brooklyn stores has been mobilizing workers
around the issues of unreasonable sales quotas, favoritism, and the lack of job security,
the union said.
Even though workers filed for an election two weeks ago, management has delayed it
twice, according to the union. A pre-conference hearing was to be held on March 31.
CWA Local 1109 also is working on the campaign.
Christopher P. Lu confirmed for number-two spot at DOL
By Pamela Wolf, J.D.
The Senate on Tuesday, April 1, unanimously approved President Obama’s nominee to
serve as Deputy Secretary of Labor, Christopher P. Lu. Lu’s nomination for the numbertwo spot at the Department of Labor received a green light from the Senate Health,
Education, Labor, and Pensions (HELP) Committee on February 27.
The former White House official was a senior fellow at the Center for the Study of the
Presidency and Congress at the time of his nomination, which was sent to the Senate on
January 9, 2014. In 2013, Lu was also a fellow at the University of Chicago Institute of
Politics and the Georgetown University McCourt School of Public Policy. From 2009 to
2013, he served in the White House as Assistant to the President and Cabinet Secretary.
In 2008, Lu was the Executive Director of the Obama-Biden Transition Project, and from
2005 to 2008, he was the Legislative Director and then Acting Chief of Staff for Senator
Obama. He was Deputy Chief Counsel of the House Committee on Oversight and
Government Reform (Minority Staff) from 1997 to 2005.
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Lu began his legal career as a law clerk to Judge Robert E. Cowen on the Third Circuit
Court of Appeals and as an attorney at Sidley Austin. He was Co-Chair of the White
House Initiative on Asian Americans and Pacific Islanders from 2011 to 2013.
Lu’s nomination received strong support from Congressional members on both sides of
the aisle. HELP Committee Chairman Tom Harkin (D-Iowa) applauded the Senate’s
confirmation of the nominee. “Helping ordinary working Americans is at the heart of the
work the Department of Labor does every day, and thanks to the strong leadership of the
Obama Administration we have seen this critical agency strengthened and revitalized,”
Harkin said in a statement. “Christopher Lu brings a wide range of experience and
knowledge from his service as Assistant to the President and Secretary to the Cabinet as
well as his work as a longtime Congressional staffer. I know that he is ready to continue
the Department’s great work as the new Deputy Secretary of Labor, helping the
Department to work effectively and efficiently with Congress and federal agencies.
Secretary of Labor Thomas E. Perez was similarly pleased with the confirmation of the
nominee: “Chris is an enormously capable manager and a devoted public servant, whose
commitment to President Obama's opportunity agenda is second to none,” Perez
commented. He will continue to be a tenacious advocate for American workers, and I
look forward to working with him on all of our priorities — from job training to wage
protection to worker safety to benefits security. Welcome aboard, Deputy Secretary Lu.”
Joint ministerial declaration between United States and Mexico provides
cooperation on issues raised under NAALC, workers’ rights
With the aim of helping to inform Mexican workers about their labor rights under U.S.
laws, Secretary of Labor Thomas E. Perez and Mexican Secretary of Labor and Social
Welfare Jesús Alfonso Navarrete Prida have signed a joint ministerial declaration to carry
out consultations under the North American Agreement on Labor Cooperation (NAALC)
— the labor side agreement to the North American Free Trade Agreement.
The Mexican Secretariat of Labor and Social Welfare in 2013 requested ministerial
consultations with the U.S. DOL on issues raised in three public submissions filed with
the Mexican Secretariat under the NAALC regarding the rights of Mexican migrants
working in the United States on H-2A and H-2B visas in sectors such as agriculture,
forestry, food packing, fairs and carnivals.
The two secretaries agreed on a joint ministerial declaration that articulates cooperative
activities concerning the matters raised in those public submissions. Under its terms, the
DOL and the Mexican Secretariat intend to use the DOL’s Consular Partnership Program
(CPP) to conduct educational and outreach activities to inform Mexican workers in the
United States and their U.S. employers about workers’ rights and employers’
responsibilities. The CPP has been in place since 2004 with the Mexican Ministry of
Foreign Affairs and its U.S. consulates. Information will be provided in both Spanish and
English to workers and employers by the DOL’s Wage and Hour Division and OSHA,
the NLRB, the EEOC, and Mexico's consulates. The DOL and the Mexican Secretariat
will seek input from stakeholders in the United States and Mexico in carrying out those
activities.
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Secretary Perez and Mexican Ambassador Eduardo Medina Mora also renewed the 2004
and 2010 joint declaration between the DOL and the Mexico’s Ministry of Foreign
Affairs under which the CPP has been implemented.
“Under the Consular Partnership Program that we renew today, Mexican Consulates
across the United States have entered into over 100 local arrangements with their
Department of Labor counterparts,” Mexico’s U.S. Ambassador Medina Mora said. “We
are confident that this fruitful collaboration will continue to thrive with the ultimate goal
of protecting the rights of all Mexican workers in this country.”
APWU to protest outsourcing of postal services to Staples, delivers harsh words in
response to Ryan budget proposal
By Pamela Wolf, J.D.
American Postal Workers Union (APWU) members in the Chicago area, joined by
hundreds of labor and community activists, are planning a protest on Saturday, April 5, in
Chicago suburb Elmwood Park over a deal between the U.S. Postal Service (USPS) and
Staples that they say would outsource mail services to Staples stores. The union is also
unhappy with Representative Paul Ryan’s (R-Wis.) budget proposal for the USPS.
Outsourcing. In October, the USPS announced what the union called “a no-bid,
sweetheart deal” to open postal counters in more than 80 Staples stores. According to the
union, the Staples postal counters are less secure than public post offices, and they are
staffed with low-wage Staples employees. Moreover, the union pointed out, Staples
closed 159 stores in the past year and intends to close another 225 by the end of next
year. The USPS and Staples purportedly intend to expand this “pilot” project to 1,500
Staples locations nationwide, while the USPS eliminates public post offices.
About 40 percent of all APWU members already work in retail operations, making the
threat to both postal workers and the public very real, according to the union.
The planned protest at the Elmwood Park Staples store is the latest in a series of protests
by postal workers and supporters who oppose the Staples’ program. A National Day of
Action is also planned, with scores of protests to be held April 24 at Staples stores across
the country.
“This is a bad deal for consumers, for workers and for the country,” said APWU
President Mark Dimondstein. “It makes no sense to transfer critical public services to a
private, for-profit company that has closed 159 stores in the past year and recently
announced it will close 225 more stores by the end of next year.
“Instead of using public resources to bail out a struggling company, the USPS should use
its unmatched nationwide network of people and facilities to take advantage of new
opportunities such as package delivery for e-commerce sales and offering new services
— like low-cost basic banking – that meet the needs of American consumers.”
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Proposed budget. The union president also had some harsh words for the postal
provisions in Ryan’s budget proposal, calling them a “thinly-veiled attempt to plunder the
Postal Service — to slash service, cut workers’ benefits, and render our great national
treasure ripe for privatization.” They’re also based on a fallacy, according to
Dimondstein. He contends that the USPS did not have “an operating loss of $1 billion” in
fiscal year 2013, as Ryan asserts.
“In fact, the Postal Service had an operating surplus of $600 million in fiscal year 2013.
The Postal Service’s losses are the result of a manufactured crisis — the legislative
requirement that forces the USPS to pre-fund healthcare benefits for future retirees 75
years in advance and within a 10-year period,” Dimondstein said.
“As Rep. Ryan undoubtedly knows, the USPS is not supported by tax dollars and does
not contribute to the nation’s debt,” he added.
APWU Legislative and Political Director John Marcotte said: “The [budget] summary
provided by Mr. Ryan is riddled with misleading statements. The USPS has overfunded
both the CSRS [Civil Service Retirement System] and FERS [Federal Employees
Retirement System] by tens of billions of dollars; has $50 billion set aside for future
retiree healthcare; is on its way to making a $1billion dollar surplus this year, and takes
no tax money.” To count cuts to the Postal Service as “budget savings” is absurd, he said.
GC seeks feedback on proposal to close Jacksonville, Florida office
NLRB General Counsel Richard F. Griffin, Jr. is considering a proposal that would close
the agency’s office in Jacksonville, Florida, and is soliciting feedback on the potential
move. The Jacksonville office handles cases in Northern Florida and Southern Georgia,
and is part of Region 12, which also has offices in Tampa, Miami and San Juan, Puerto
Rico.
The proposal would make the sole employee from the Jacksonville office a Resident
Agent, who would continue to serve this area of the country in a full-time capacity. The
NLRB currently has Resident Agents in Providence, Rhode Island; Knoxville, Tennessee;
Salt Lake City, Utah; Newport News, Virginia; Western Massachusetts; and Spokane,
Washington.
The move is under contemplation in connection with the NLRB’s ongoing efforts to
reduce costs by decreasing office space and taking advantage of new technologies and
workplace innovations, which enable employees to work remotely. However, no
employees would be displaced under the proposal and casehandling should not be
adversely affected, according to the agency.
Before deciding whether to present a formal proposal to the Board for approval, Griffin
plans to thoroughly consider internal and external input, including from agency staff,
practitioners, members of the management-labor relations community, members of
Congress and other interested members of the public.
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To that end, comments should be submitted no later than May 2, 2014, to Associate
General Counsel Anne Purcell in the Division of Operations-Management by e-mail at
feedback@nlrb.gov or by mail to the National Labor Relations Board, Division of
Operations-Management, 1099 14th Street, NW, Suite 10206, Washington, DC 20570.
Unfair labor practice complaints against T-Mobile consolidated for single hearing
before ALJ
By Pamela Wolf, J.D.
The NLRB has consolidated four pending cases against T-Mobile in order to “avoid
unnecessary costs or delay.” As a result, the complaints in all four cases will be heard in a
single hearing before an administrative law judge that is set for June 23, 2014. The unfair
labor practice charges alleged in the various complaints challenge the company’s actions
in response to employee efforts to organize, as well as some of its policies, including
those relating to confidentiality, that the Board’s General Counsel contends are overbroad
and discriminatory to the point of violating the NLRA.
Specifically, the order consolidates four cases pending against either T-Mobile USA,
Inc., or MetroPCS Communications, Inc. Among the purportedly unlawful practices
challenged in the now-consolidated cases are a T-Mobile handbook rule and a training
module that restricts employees from discussing the content and names of witnesses in
internal investigations; a confidentiality agreement; a confidentiality and information
security code of conduct rule; and an employee acknowledgement form.
The conduct of management officials at an Albuquerque call center is also challenged,
including purported discouragement of union activities and interrogation of employees
regarding their union membership, sympathies and activities. According to the General
Counsel, certain employees were discharged or suspended for assisting the CWA and
engaging in concerted activity and for the purpose of discouraging other workers from
doing the same.
The general counsel is seeking remedies that would require T-Mobile, on a nationwide
basis, to rescind and stop enforcing and maintaining the challenged policies and rules,
among other things.
Calling the consolidation “an extraordinary decision,” the CWA applauded the move.
“Over the past decade, NLRB complaints were repeatedly issued against TMUS [TMobile US] in different regional offices,” the union said in a press release. “The decision
to consolidate a group of current unfair labor practice complaints challenging the
company’s disciplinary actions targeting union activists and its overly broad company
rules and policies into one national case is an important step by the NLRB. The company
will need to defend its systemic anti-union behavior in one proceeding where the Board
can order broad relief for employees at every TMUS location.”
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Valero Services agrees to rescind social media policy to settle ULP charge
The NLRB announced on Monday, April 7, that Valero Services, Inc., has agreed to
rescind its nationwide social media policy in response to a complaint filed by the Board.
The company will also post and mail a remedial notice to its employees throughout the
country. Valero Services provides employee leasing services to refineries and plants
across the United States, including a refinery located in Port Arthur, Texas.
After the USW filed an unfair labor practice charge alleging that Valero Services’ social
media policy interfered with employees’ rights to discuss their terms and conditions of
employment on social media, Region 16 found merit to the allegations and issued a
complaint. During the hearing on the complaint, Associate Chief Administrative Law
Judge William N. Cates approved a settlement under which the company agreed to notify
employees that it will rescind its unlawful social media policy and post NLRB notices at
its 52 facilities nationwide. Valero also agreed to mail notices to employees, advising
them that they will not be prohibited from using social media to discuss their terms and
conditions of employment.
NLRB begins public hearing on proposed representation election rules
By Pamela Wolf, J.D. and Heidi Henson, J.D.
The NLRB on Thursday, April 10, began a public hearing on the agency’s proposed
Representation-Case Procedures Rule. The proposed rule would make substantial
changes to the Board’s current process related to union representation elections and the
determination of issues raised in relation to the election.
Proposed rule revisions. The proposal, if finalized, would make the following changes,
among others:

The list of eligible voters in the election would include phone numbers and email
addresses (if available).

The litigation of eligibility issues involving less than 20 percent of the bargaining
unit would be deferred until after the election. According to the NLRB, in many
cases, the eligibility issues would be rendered moot by the election results, so no
litigation would be necessary even after the election.

Parties would be required to state their positions no later than the start of the preelection hearing in order to ensure that hearings are limited to resolving genuine
disputes.

Parties would be permitted to seek review of all Regional Director rulings through
a single, post-election request, if the election results have not made those rulings
moot.
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
The Board would have the discretion to deny review of post-election rulings, the
same discretion now exercised with regard to pre-election rulings.

The Regional Director would set a pre-election hearing to begin seven days after a
hearing notice is served (absent special circumstances) and a post-election hearing
14 days after the tally of ballots (or as soon thereafter as practicable).

According to the NLRB, representation elections are routinely delayed 25-30 days
to permit parties to seek Board review of Regional Director rulings despite the
fact that such requests are rarely filed, even more rarely granted, and they almost
never result in a stay of the election. The proposed revisions would eliminate the
pre-election request for review, along with the unnecessary delay.
SHRM. At the hearing on April 10, the Society for Human Resource Management
(SHRM) expressed strong opposition to the agency’s proposed rule. Speaking on behalf
of the more than 275,000-member SHRM, Roger King, a lawyer at Jones Day and
SHRM member, said, “The board’s proposed new election rules, if adopted, will have a
substantial adverse impact on two of the board’s major stakeholders — employees and
employers.”
According to SHRM, the NLRB’s proposed rule would shorten the time between when a
representation petition is filed with the NLRB and when a union election is held from an
average of 38 days to as few as 10 days.
On April 7, SHRM submitted comments to the NLRB in response to these proposed
changes. As in 2011, the association’s response to the proposal included heavy member
participation. More than 4,600 SHRM members registered their concerns with the NLRB,
and 96 SHRM state councils and chapters signed SHRM’s comment letter, which was
filed in conjunction with the HR Policy Association.
In his testimony, King further explained that the board did not provide an adequate
justification for changing the current election rules, noting that a “shortened timeframe
would provide little or no opportunity for employees to obtain objective information
regarding the impact of unionization in the workplace.”
As another main point, he added, “The new election rules related to voter lists infringe on
employee privacy rights, fail to provide adequate safeguards for the protection of private
employee information, and are overly burdensome for employers.”
Retail Industry Leaders Association. Another Jones Day attorney, Doreen S. Davis,
offered comments on behalf of the Retail Industry Leaders Association. According to
Davis, the 20-percent rule (that would defer eligibility issues involving less than 20
percent of the workforce until after the election) is a “solution in search of a problem.”
Davis also pointed out that delaying the determination of whether a particular individual
is a supervisor, and thus ineligible to vote in the election, until after the election presents
a risk to the both parties. For example, where a “supervisor” is in favor of union, there is
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a risk that a union win can be later overturned due to the supervisor having tainted the
election.
Council on Labor Law Equality. Homer Deakins, a founding Shareholder of Ogletree
Deakins and a 50-year labor law practitioner, provided testimony on four separate panels
on behalf of the Council on Labor Law Equality. He offered several criticisms of the
proposed rule changes.
“These proposed Rules make revolutionary changes in the Board's traditional
representation election process for no apparent reason other than to help unions win
elections by, in the words of then-Senator John F. Kennedy ‘rushing employees into an
election where they are unfamiliar with the issues.’”
According to Deakins, the proposed rules “turn the old saying ‘Justice delayed is justice
denied’ on its head. Under these rules, “justice is denied” by a mad-dash rush to
judgment before employers can exercise their statutory right to educate employees so
employees are fully informed by both sides — not simply the union — prior to making
the most important decision in their working lives.”
Deakins says the revisions would deny employees the right to become informed before
they cast their vote — essentially, the right to “think,” which legendary labor leader
Samuel Gompers described years ago as “the most valuable thing on earth: time to think,
time to act, time to extend our fraternal relations.” Yet, time to think is exactly what the
proposed rule revisions would deny to employees.
The new rules, according to Deakins, would reduce the time for an election to as little as
nine to 10 days from the union's petition for an election. “Even Senator Kennedy stated in
1959 that elections should not be scheduled for a minimum of 30 days as a safeguard,”
Deakins pointed out. “There is no credible empirical evidence that the current time period
— elections within 31 days — does not result in fair elections which unions already win
two-thirds of the time.”
The hearing will continue on Friday, April 11, and is accessible via live-stream.
Attorneys: Roger King and Doreen S. Davis (Jones Day); Homer Deakins (Ogletree
Deakins).
Testimony underscores conflicting views on NLRB’s proposed election rule
revisions
By Pamela Wolf, J.D.
On Friday, April 11, the NLRB continued its public hearing on the proposed
Representation-Case Procedures Rule and, as it did the day before, the testimony revealed
sharply different perspectives on the revisions under discussion. On this second day, the
Board focused on issues surrounding the setting of the election date, voter lists, and
special questions of interest to the Board. Among the slated speakers were attorney
Melinda S. Hensel, on behalf of the International Union of Operating Engineers (IUOE)
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Local 150, and Brenda Crawford, an RN who worked for Universal Health Systems, Inc.,
but was testifying on her own, and not her employer’s behalf.
Jones Day attorneys Doreen S. Davis and F. Curt Kirschner, Jr., both of whom testified
on Thursday, also returned on Friday to provide additional comments on behalf of the
Retail Industry Leaders Association (RILA) (Davis), and the American Hospital
Association and subsidiaries American Society of Healthcare Human Resources
Association and American Organization of Nurse Executives (Kirschner).
Employee contact information. In written comments submitted to the Board, Davis and
Jones Day attorney G. Roger King, who testified on Thursday on behalf of the HR Policy
Association and the Society for Human Resource Management SHRM, voiced
disapproval of a proposed revision that would require employers to provide employees’
telephone numbers and, where available, email addresses to union organizers, calling it
an “an unreasonable invasion of privacy.” “Ironically, even the Board’s solicitation of
comments recognizes the sensitive nature of this type of information; it cautions against
including ‘personal information such as . . . telephone numbers, and email addresses’ in
submitted comments. …Yet the Board now appears to take the position that an employee
who provides his personal e-mail or cell phone number to his employer — for example,
as a means of emergency contact — thereby consents to have this information shared
with strangers in the event of organizing.”
According to Davis, “The Board’s proposed amendments are especially troubling given
the numerous examples of harassment arising under the current practice of providing
organizers only with employees’ home addresses. One RILA member reported that its
employees have complained about home visits from five or more organizers, who insisted
on speaking with them at 11:00 at night.”
Crawford, however, saw it differently. Offering the organizing employees’ point of view,
she painted a picture of a very un-level playing field with regard to employee contact
information. She said that during a campaign for union representation, she and her
colleagues were provided only employee addresses, and that it was very difficult to find
ways to get information out to employees. Because nurses work such long shifts, just
showing up at a nurse’s home would not be well taken by employees.
On the other hand, her employer had access to employees on a daily basis to share
information through company email, mandatory meetings and texts to personal cell
phones. The employer’s free speech rights would not be impeded by the revisions, she
contended. Crawford said that she and her colleagues were quite shocked when their
employer sent out union-related text blasts on their personal cell phones. In the past, the
employer only used employees’ personal cell phones to communicate scheduling matters.
According to Crawford, employees who hoped to organize were stuck with only
outmoded methods of communication, while the employer had all resources available to
get its message out to employees. It would be more fair to all, she said, if employees’
personal contact information was available to both sides. It would also be less intrusive
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because a text message, for example, can just be deleted, while employees might
otherwise be stuck with having to deal with a person who shows up at their home.
Election date. Although many have expressed opposition to proposed revisions that
would shorten the time between the filing of a petition and the election date to as few as
10 days, thus “taking the employer by surprise” and preventing it from having a fair
opportunity to express its views, Hensel offered a different take from the union’s point of
view. She said that in her experience, by the time employees have collected a sufficient
number of authorization cards, they have already tried to obtain what they hope to
achieve but failed. Employees have already asked employers about raises, for example,
but the employer has rejected the request. During these employer-employee sessions, the
employer has had ample opportunity to discuss the issues, share its views with the
workforce, and create a satisfied workforce, Hensel pointed out. It is generally only when
workers have failed to get results that they turn to a union.
Hensel also said that she has never had an employer agree to hold a representation
election prior to the 42nd day after the filing of a petition, as permitted under the current
guidelines. She said that employers don’t need six weeks to figure out what employees
want and try to change their minds.
Republican legislation. Meanwhile, the House Education and the Workforce Committee,
chaired by Representative John Kline (R-Minn) on Wednesday, April 9 — the eve of the
NLRB’s public hearings — approved two legislative proposals designed to counter the
proposed new election rules. As part of the Republican Congressional response to
NLRBs proposed revisions two new bills were introduced in House on March 27: The
Workforce Democracy and Fairness Act (H.R. 4320) and The Employee Privacy
Protection Act (H.R. 4321). The committee approved an amended version of H.R. 4320
by a 21-14 vote and an amended H.R. 4321 by a 21-17 ballot.
“Today the committee acted not only to push back broadly against the NLRB’s ambush
election rule,” said Rep. Phil Roe (R-TN), chairman of the Subcommittee on Health,
Employment, Labor, and Pensions, “but also to protect the privacy of American workers.
Employees have the right to form a union, but the unionization process must be open,
transparent, and fair. Every worker deserves to make his or her own decision about
whether to join a union, free from intimidation or coercion — by the union or the
employer.”
The committee said the legislation it approved on April 9 would:

Guarantee workers have time to gather all the facts to make a fully informed
decision in a union election. No union election will be held in less than 35 days.

Ensure employers are able to participate in a fair union election process. The bill
provides employers at least 14 days to prepare their case to present before a
NLRB election officer.
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
Reassert the Board’s responsibility to address critical issues before a union is
allowed to represent workers, such as questions concerning voter eligibility or
allegations of misconduct during the election.

Empower workers to control the disclosure of their personal information.
Employers would have seven days to provide a list of employee names and one
additional piece of contact information chosen by each individual employee.
Offered by Representative Tom Price (R-Ga) as a response to the NLRB’s Specialty
Healthcare decision, in addition an amendment to H.R. 4320 was passed that would
restore the traditional standard for determining the unit of workers to be included in the
union.
Hearing on $4M fine levied against Kaiser HMO to remain public
By Pamela Wolf, J.D.
Kaiser Permanente has failed in its attempt to keep under the public radar a hearing
regarding a multi-million dollar fine levied against the HMO, according to the National
Union of Healthcare Workers (NUHW)/California Nurses Association. The NUHW,
which has been unsuccessful so far in its attempt to wrestle Kaiser Permanente
employees out from under the representation of the SEIU-United Healthcare Workers
West, is one of several organizations that pressed for the hearing to remain within the
public view in the wake of Kaiser’s move to close it off to the public and journalists.
On Friday, April 11, Judge Ruth S. Astle of the California Office of Administrative
Hearings denied Kaiser’s request to bar the public from a hearing regarding a $4 million
fine issued by California’s Department of Managed Health Care (DMHC). The fine —
the second largest issued in the DMHC’s history — was levied in June 2013 for multiple
violations of California law that denied patients appropriate access to mental health care,
the union said.
Astle dismissed Kaiser’s effort to bar the public and journalists on the grounds that these
are public hearings and that she would not close them or seal the hearing documents from
public view. In so concluding, Astle cited several letters submitted by organizations
including: Mental Health Association of California; California Psychological
Association; California Association of Marriage and Family Therapists; California
Psychiatric Association; California Chapter of the National Association of Social
Workers; and the NUHW.
The hearing will be held in Oakland on May 12, 2014. Kaiser’s patients and mental
health clinicians will testify about the HMO’s purported violations and their impact on
patients and their families.
According to the NUHW, Kaiser is trying to avoid paying the DMHC fine, which was
levied in response to an exhaustive complaint filed by Kaiser’s own clinicians working
through the union. DMHC investigators confirmed the details of violations set forth in an
16
NUHW report, Care Delayed, Care Denied, the union said, adding that DMHC
investigators found Kaiser guilty of “serious” violations in its mental health care services.
In June 2013, the DMHC cited Kaiser for illegally delaying patients’ access to mental
health services and violating the California Mental Health Parity Act in addition to other
violations, according to NUHW. “Lengthy wait times for Kaiser members in need of
psychiatric care often result in severe hardships for patients and their families, and in
various cases the consequences are fatal,” the union said. The HMO is facing several
lawsuits for these failures including a class-action suit filed by patients and families.
The union cited the same $4-million fine in support of its move in September 2013 to
block Kaiser Permanente from participating in California’s Health Benefit Exchange. The
complaint filed in state court by the union seeks to compel the exchange to comply with
mandatory provisions of the California Government Code that relate to the state’s
enactment of the federal health care legislation. According to the plaintiffs, “the
Exchange has failed to honor a clear and present mandatory statutory duty requiring the
Exchange to only contract with health plans that have a license or certificate of authority
from and are in good standing with their respective regulatory agencies.” The litigation is
still pending.
Anti-union employees will have a voice in hearings on UAW’s objections to election
at Chattanooga Volkswagen plant
By Pamela Wolf, J.D.
The NLRB has denied the UAW’s attempt to obtain relief from a decision permitting
seven anti-union employees and a like-minded corporation, Southern Momentum, to
participate in the hearings on the union’s objections to the controversial representation
election held in February at the Volkswagen plant in Chattanooga, Tennessee. The Acting
Regional Director (Region 10) determined that the employees, one of whom is a director
of Southern Momentum, will be permitted to participate in the hearings to the limited
extent of offering evidence in opposition to the objections, cross-examining witnesses,
and filing briefs.
Controversial election. The VW election drew national attention due to what union
supporters called unprecedented threats made by government officials that helped defeat
the union. Moreover, if chosen as the bargaining representative, the UAW likely would
have ushered in the European-style works council model of cooperation between
management and workers that is a feature of labor-relations at VW’s overseas locations.
Traditionally, unions have not been favored in Tennessee. On the eve of the election
campaign, politicians purportedly made statements calculated to undercut the union,
implying, for example, that previously available economic incentives would no longer be
offered to VW if the union won and that VW would plan to manufacture an additional
vehicle in Tennessee (thus bringing more work) if the union were defeated.
17
Those opposed to the union argued that VW and the UAW entered into a neutrality
agreement that prevented workers from getting other points of view (against
unionization) that might otherwise have been offered by managers and supervisors.
Objection to the election. In February, the UAW filed objections with the NLRB over
what the union saw as interference by politicians and outside special interest groups in
the election that resulted in a union defeat by a vote of 712-626. The UAW is asking the
NLRB to set aside the election results due to third-party misconduct and to hold a new
election.
Appeal to the Board. After the Acting Regional Director determined that Southern
Momentum and several anti-union employees would be permitted to participate in the
hearings on the UAW’s objections, the union sought leave from the Board to file a
special appeal of the Acting Regional Director’s order. In an order issued on April 16, the
NLRB found that under the circumstances, which the Acting Regional Director had
described as ‘“non-precedential” and based on the ‘unique circumstances of the case,’”
there had been no abuse of discretion in permitting the limited participation in the
hearing.
The NLRB’s order also noted that some of the union’s objections had specifically named
Momentum and at least one of the ant-union employees who had sought intervention.
Moreover, evidence and argument on the union’s objections would otherwise only be
offered by the union. The Board thus granted leave for the union to bring its special
appeal and also denied it on the merits in the same order.
NLRB Regional Director moves for injunctive relief to get locked-out Kellogg
workers back on the job
By Pamela Wolf, J.D.
NLRB Regional Director M. Kathleen McKinney (Region 15) has filed a petition seeking
injunctive relief under Sec. 10(j) of the NLRA in the ongoing lockout of employees at
Kellogg’s ready-to-eat cereal plant in Memphis, Tennessee. The controversial labor
dispute — about 225 employees have been locked out since last October — has drawn
national attention. The Regional Director is now asking a federal court to force the
company to bargain in good faith with the union and reinstate locked-out workers, among
other things.
Represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union
(BCTGM) Local 252G, the locked-out workers contend that the giant cereal
manufacturer wants to destroy middle-class jobs and replace them with a cheaper
workforce, while the company insists that it must cut costs to be competitive.
Administrative complaint. The NLRB’s Region 15 issued a complaint against Kellogg
on March 27, based on a series of charges filed by the union. The complaint alleges that
Kellogg violated the NLRA during bargaining with the union over a supplemental local
agreement at the Memphis food processing and packaging facility. The company
purportedly violated the Act “by insisting to impasse on bargaining proposals that would
18
constitute midterm modifications to the wage and benefit provisions of the Master
Agreement between Kellogg and the Union, by locking out approximately 225 Memphis
unit employees in furtherance of its bad-faith bargaining position, and by failing to
provide requested information that would assist the Union in its representational capacity
and in assessing Kellogg’s bargaining proposals,” the NLRB said.
Injunction request. In this most recent development, the Regional Director has turned to
a federal district court in the Western District of Tennessee with the goal of attaining a
temporary injunction pending the disposition of the administrative complaint.
Specifically, the petition filed by the Regional Director on April 15 seeks an order
directing the company, its officers, representatives, supervisors, agents, employees,
attorneys, and all persons acting on its behalf or in participation with it, to cease and
desist in the interim:

Refusing to bargain in good faith with the BCTGM as the exclusive collectivebargaining representative of the unit employees by insisting to impasse on
bargaining proposals that are non-mandatory subjects of bargaining.

Locking out the bargaining unit employees in furtherance of unlawful conduct
calculated to frustrate its employees' bargaining rights.

Threatening to lock out the bargaining unit employees in furtherance of unlawful
conduct calculated to frustrate its employees' bargaining rights.

In any other manner interfering with, restraining or coercing its employees in the
exercise of their Section 7 rights.
The Regional Director is also asking, among other things, that Kellogg and the same
individuals be required to take the following affirmative actions deemed necessary to
effectuate the policies of the NLRA pending the final outcome of the matters before the
Board:

Recognize and, upon request, bargain in good faith with the BCTGM as its
employees' exclusive collective-bargaining representative concerning their wages,
hours, and other terms and conditions of employment.

Within five days of the district court's order, offer each and every bargaining unit
employee locked out on October 22, 2013, full and immediate interim
reinstatement to his or her former position under the terms and conditions in
effect on that date, or, if those positions no longer exist, to substantially
equivalent positions, without prejudice to their seniority or other rights and
privileges, displacing, if necessary, any newly hired or reassigned workers.
Union reaction. The union was pleased with the news that the Regional Director was
going to pursue injunctive relief. “The Board’s action to seek injunctive relief magnifies
the depth and severity of these violations and the callous human tragedy brought on by
Kellogg’s illegally conceived and brutally implemented plan of action,” BCTGM
International President David Durkee said in a statement. “The harm that those violations
19
are causing Kellogg workers have been clearly recognized by the federal government,
which is apparent in the NLRB five- member board unanimously seeking this injunctive
relief.”
A hearing on the administrative complaint filed against Kellogg is scheduled for May 5 at
the NLRB regional office in Memphis.
UAW drops challenge to VW election
By Pamela Wolf, J.D,
In a surprising move on Monday, April 21, the UAW announced that it is withdrawing its
NLRB objections challenging the controversial election held at the Volkswagen plant in
Chattanooga, Tennessee in February. The UAW was defeated in a 712-626 vote. The
union’s withdrawal of its objections puts an end to the NLRB review process.
Third party interference. The election drew national attention due to what union
supporters called unprecedented threats made by government officials that helped defeat
the union. The UAW said the campaign included publicly announced and widely
disseminated threats by elected officials that state-financed incentives would be withheld
if workers exercised their protected right to form a union. The union also pointed to
threats by U.S. Senator Bob Corker (R-Tenn.) related to promises of a new product line
that would be awarded to the plant if workers voted against UAW representation.
Just last week, the NLRB issued an order finding that the Acting Regional Director had
not abused her discretion in ruling that anti-union employees and like-minded Momentum
would be permitted to participate during the hearing on the union’s challenges to the
election.
Challenge dropped. The sudden reversal, according to UAW President Bob King, was
made in the best interests of Volkswagen employees, the automaker, and economic
development in Chattanooga. The union based its decision on the grounds that the
NLRB’s “historically dysfunctional and complex process potentially could drag on for
months or even years.” The union also pointed to refusals by Tennessee Governor Bill
Haslam and U.S. Senator Bob Corker to “participate in a transparent legal discovery
process,” which the union characterized as undermining public trust and confidence.
“The unprecedented political interference by Gov. Haslam, Sen. Corker and others was a
distraction for Volkswagen employees and a detour from achieving Tennessee’s
economic priorities,” King said. “The UAW is ready to put February’s tainted election in
the rearview mirror and instead focus on advocating for new jobs and economic
investment in Chattanooga.”
The union is advocating for Volkswagen to create more jobs in Tennessee by adding a
new SUV line at the Chattanooga plant. The Haslam administration in August offered
nearly $300 million in incentives to bring the new SUV to Chattanooga, according to the
UAW, but attempted to make the investment contingent on whether the Chattanooga
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plant is organized. The Haslam administration’s contingency is contrary to Volkswagen’s
successful business model, which is premised on worker representation, the union said.
The union is urging Haslam “to immediately extend the incentives that previously were
offered to Volkswagen for this new SUV line, and do so unconditionally.”
“The UAW’s objections informed the public about the unprecedented interference by
anti-labor politicians and third parties who want to prevent workers from exercising their
democratic right to choose union representation,” King said.
Outdated federal laws governing the NLRB never contemplated the level of “extreme
intimidation and interference” that occurred in Chattanooga, according to King.
Moreover, even if the NLRB ordered a new election, which is the Board’s only available
remedy under current law, there would be nothing to prevent politicians and anti-union
organizations interfering again.
Congressional inquiry. The union says that congressional inquiry into the Haslam
administration’s incentives threat to Volkswagen is the best opportunity for additional
scrutiny. The UAW is asking Congress to examine the use of federal funds in the state’s
incentives threat in order to protect Tennessee jobs and workers in the future.
“Frankly, Congress is a more effective venue for publicly examining the now welldocumented threat,” King said. “We commend Congressmen George Miller and John
Tierney for their leadership on this matter, and look forward to seeing the results of their
inquiry.”
Successor employer at California nursing center pays $1M in back pay after
refusing to recognize union
Under a settlement with the NLRB, the owners of the Yuba Skilled Nursing Center in
Yuba City, California, have paid $1 million to compensate current and former employees
for the loss of pay and benefits that occurred when the owners refused to hire them in
2011. The NLRB’s San Francisco Regional Office announced receipt of the funds on
April 17.
The Service Employees International Union, United Healthcare Workers West,
represented employees at the nursing center before it was purchased by Nasaky, Inc., in
2011. Pursuant to the NLRA, owners that hire a majority of employees previously
employed by the former owner must recognize and bargain with the existing union as a
successor employer. Here, the union alleged in NLRB charges that the new owners failed
to hire the longtime employees in order to avoid that obligation.
The Region issued complaint and, after a hearing, Administrative Law Judge Gerald M.
Etchingham found the employer had unlawfully refused to hire employees in order to
avoid its obligation to recognize and bargain with the union. In September 2012, the
Board ordered the nursing center to offer jobs to employees of the former owner, restore
21
the terms and conditions of employment that existed before the successor employer
assumed control of the business, recognize and bargain with the union, and pay back pay.
While the successor employer made offers of employment to those employees, many of
whom are currently working at the nursing center, and recognized the union as the
employees’ bargaining representative, there remained a dispute over the back pay
amount.
The NLRB said the $1,000,000-settlement came after an extensive investigation into the
employer’s finances by Region 20 agents, with assistance from its Division of Legal
Counsel, including the issuance of dozens of investigative subpoenas, depositions of the
employer’s accountant and operating officers, and proceedings in federal district court.
Chicago Regional Office steps up collaboration with CCHR and IDOL
The NLRB’s Chicago Regional Office is stepping up its collaboration with the Chicago
Commission on Human Relations (CCHR) and the Illinois Department of Labor (IDOL).
NLRB Regional Director Peter Sung Ohr and Mona Noriega, CCHR Chairman and
Commissioner, have entered into a Memorandum of Understanding (MOU) between the
NLRB’s Chicago Regional Office and the CCHR. A similar MOU was signed in March
by Regional Director Ohr and Joseph Costigan, the Director of the IDOL, according to an
NLRB announcement on April 21.
Under the new MOUs, if, during interviewing or case processing, one agency determines
that alleged conduct falls within the jurisdiction of the other agency, the former agency
will, with the individual's consent, refer the charge to that other agency. There will also
be cross-training between agencies and procedures related to sharing information where
appropriate.
JetBlue pilots vote for ALPA representation; regional pilot unions to “stand
together” in negotiations
The 2,600 pilots at JetBlue Airways voted overwhelmingly to join the Air Line Pilots
Association, International (ALPA) union, the National Mediation Board announced on
Tuesday, April 22. Of the votes cast, 71 percent of the pilots voted in favor of union
representation. ALPA is the world’s largest pilot union, representing nearly 50,000 pilots
at 31 airlines in the United States and Canada.
“ALPA welcomes the JetBlue pilots,” said Capt. Lee Moak, ALPA president. “The
Association is ready to work with JetBlue pilots to achieve their goals. They make our
union stronger by adding their unified voices to the Association's strong bargaining and
advocacy efforts. ”
In related news, the Teamsters announced that the head of one of its largest pilot unions
joined other union leaders across the industry in spearheading an agreement to set new
standards for regional pilot contracts and to stand together during negotiations. Craig
Moffatt, Teamsters Local Union 357 Executive Board President, joined leaders for 12
other regional pilot unions in signing a joint agreement to work together against
22
concessionary contracts and “to stand up against ploys by corporate airline managements
to play one group against another, a tactic commonly called ‘whipsawing.’”
Earlier this month, Local 357 pilots who work for Indianapolis-based Republic Airways
Holdings overwhelmingly rejected a four-year contract, with 85 percent of those who
voted casting votes against. Republic Airways Holdings owns and operates three regional
carriers — Chautauqua Airlines, Republic Airlines, and Shuttle America Airlines which,
in turn, fly for American, United, US Airways, and Delta. Pilots at two other carriers —
Envoy and ExpressJet — also rejected new contracts earlier this year.
“By standing together, we can stop this race-to-the-bottom game that managements play
and give regional pilots across the industry the decent pay, quality benefits and work
rules that they, as professionals, deserve,” Moffatt said.
U.S. Chamber of Commerce issues report on worker centers and “members-only”
union representation
A new report by the U.S. Chamber of Commerce’s Workforce Freedom Initiative (WFI)
examines the growing role that “worker centers” play in union organizing and corporate
campaigns and the “subtle” labor law changes being made by the NLRB and DOL to
empower these groups. The report, entitled “The Blue Eagle Has Landed: The Paradigm
Shift From Majority Rule to Members-Only Representation,” contends the “membersonly” representation system that these developments advance “would be fundamentally at
odds with the principles of workplace democracy as we have known them for decades.” It
also runs counter to the intent of the NLRA, which sought “to strike a balance between
the right to freedom of association and collective bargaining, and the free flow of
commerce,” according to WFI.
The majority representation system put in place in the United States with enactment of
the NLRA “differs from that which exists in other parts of the world, most notably in
Europe, where employers are regularly required to bargain with unions solely on behalf
of their members under a system known as minority, or members-only, unionism.”
According to the WFI report, Congress contemplated such a system during debate over
passage of the NLRA and the Taft-Hartley Act, but it was expressly rejected.
In an effort to offset their continued decline, though, traditional labor unions have
recently begun to embrace and even finance “so-called worker centers,” according to
WFI. Worker centers seek to negotiate with employers on behalf of employees whom
they may not actually represent. “In fact,” the report contends, “many of the recent
protests promoted by worker centers are conducted with the support of, at most, a handful
of employees. There is no evidence that a majority of workers wants these groups to
advocate or negotiate for them.” And organized labor has yet to formulate a strategy for
turning its investment in worker centers “into actual union members with an
accompanying revenue stream.” The solution, WFI suggests, may lie in the membersonly union model.
23
Meanwhile, “at the same time worker centers have become an increasingly important part
of the union strategy for renewal, the institutions charged with administering the nation’s
labor laws have started to subtly accommodate or even promote members-only
representation.” Among the principal actors, the report contends, are the NLRB — which
has issued numerous rulings “that empower small groups of workers and enhance their
ability to influence employers” as well as prosecutorial decisions that also favor
members-only representation — and the DOL, which has awarded grant funding to
worker centers and accorded them “a special role as advocates for workers.”
“This shift toward a members-only model could represent the leading edge of a
significant change in labor law — with far-reaching effects,” the WFI report concludes.
“Not only would a members-only system empower and embolden groups that have not
been selected by a majority of employees to speak on its behalf, but it would also enable
traditional labor unions to organize and begin collecting dues from small pockets of
workers recruited through worker centers.”
Absent legislative action to provide for an alternative labor representation structure, the
report argues, “the agencies responsible for administering that law should stay true to that
mandate.”
Successor facility operator settles allegations that it failed to hire predecessor’s
drivers to avoid recognizing existing union
Commodity Trucking Acquisition, LLC, dba Dispatch Transportation, has agreed to pay
drivers $262,000 in back pay and has also signed a union contract, the NLRB announced
on Tuesday, April 29. The development follows NLRB Region 20’s issuance of a
complaint against the employer for failing to hire the predecessor’s drivers in an effort to
avoid dealing with the existing union.
Background. Valley Aggregate Transport, Inc. operated an aggregate hauling facility out
of Yuba City, California, for years, according to the NLRB. Soon after Teamsters Local
137 was certified as the bargaining representative for the company’s drivers, Dispatch
Transportation assumed control and began operating the predecessor’s facility. New
owners that hire a majority of employees previously employed by the former owner are
obligated under the NLRA to recognize and bargain with the existing union as a
successor employer. Here, the union filed charges with the NLRB alleging that the new
owners failed to hire longtime employees in order to avoid that obligation.
Dispatch Transportation purportedly made it clear that it was not interested in operating a
unionized facility and hired only a few of the predecessor’s drivers. The company
thereafter refused to recognize and bargain with the union. Following an investigation of
the charge field by the union, Region 20 determined that the Dispatch Transportation
would have hired many more of the predecessor’s drivers but for its desire to avoid a
bargaining obligation. Thus the company’s subsequent refusal to recognize and bargain
with the union was unlawful.
24
Settlement. After the Region issued a complaint, Dispatch Transportation and the
Teamster Local 137 entered into a Board settlement. Under the agreement, the company
will pay a total of $262,000 in back pay to the drivers and restore the predecessor’s
policy of recalling and dispatching drivers by seniority. In addition to the settlement, the
Dispatch Transportation and the union mutually agreed to a three-year CBA.
LEADING CASE NEWS:
6th Cir.: Union had to arbitrate its attempt to enforce a settlement agreement
By Lisa Milam-Perez, J.D.
A Teamsters local had to arbitrate its claims that UPS breached a settlement agreement
purportedly resolving a dispute over work assignments for “shifters,” who drive semitractor trailers as part of the company’s loading-dock operation, a divided Sixth Circuit
held. The parties agreed under their CBA to resolve all disputes related to “interpretation,
application or observance” of the contract through the grievance procedures therein.
Because the alleged breach of the settlement agreement constituted a violation of the
CBA, the union had to exhaust the grievance procedures before seeking judicial relief
(Teamsters Local Union 480 v United Parcel Service, Inc, April 4, 2014, Boggs, J).
“This case fits comfortably within existing Supreme Court precedents recognizing the
policy in favor of resolving labor disputes through the parties’ own agreed-upon
processes,” the majority wrote. While requiring parties to resort to their contractual
grievance procedures may result in delay, “that is sometimes — though certainly not
always — the case with arbitration,” the court noted. And while it’s possible that making
and then breaking a settlement agreement “could be a ploy to prevent ultimate judicial
enforcement of a resolution to a labor dispute,” there was no suggestion here that UPS
was “continually duping the Union into an unwinnable game.” Enforcing the contract
under these circumstances, the court added, “stands to benefit both unions and employers,
as both may be assured that their freely contracted promises are binding.”
Shifters’ dispute settled. The shifters were covered by a bargaining agreement with
UPS consisting of two documents: the national master agreement and a (regional)
supplemental agreement to the master agreement. The master agreement contained
elaborate grievance procedures for resolving disputes; the supplemental agreement
further detailed the dispute resolution procedures that the parties agreed to follow. After
the union filed a series of grievances over the company’s methods for assigning work
opportunities to the shifters, the parties entered into a settlement agreement resolving the
matter. However, contending that UPS had not abided by the settlement’s terms, the
union filed suit under the LMRA, seeking a declaration ordering the company to do so.
At issue was whether the union had to pursue the contractual grievance process before it
could seek relief in federal court. UPS argued that the union’s allegations that it breached
the settlement agreement fell within the grievance procedures in the CBA, in particular,
its broad arbitration clause. The district court agreed and dismissed the union’s complaint
for lack of subject matter jurisdiction.
25
Lower court had jurisdiction. While the parties exerted little effort discussing the
jurisdictional question, the Sixth Circuit concluded, contrary to the court below, that
jurisdiction was proper. The dispute centered on the interpretation of contracts between
an employer and union — specifically, whether the CBA and the settlement agreement
required the union to submit an alleged breach of the settlement agreement to the CBA’s
internal grievance procedures. Both parties acknowledged that they were bound by the
contracts; they simply quarreled over the meaning of their terms. Therefore, the LMRA
provided jurisdiction.
Jurisdiction notwithstanding, though, courts may not adjudicate a grievance “when a
collective bargaining agreement expressly binds the parties to resolve the grievance
through alternate means,” the appeals court noted. That was the case here.
Dispute subject to grievance procedures. In deciding whether the union’s claims of
noncompliance with the settlement agreement were subject to the CBA’s grievance
procedures, the central issue, the appeals court noted, was whether UPS and the union
intended to arbitrate such disputes. The contract itself, of course, was the best evidence.
Here, expansive language in the contract favored resolving grievances through nonjudicial means: a grievance is “any controversy, complaint, misunderstanding or dispute
arising as to interpretation, application or observance of any of the provisions of this
Agreement.” Also, the CBA provides that any complaint or dispute “shall be handled”
using these agreed procedures. Under the contract, it is only at the end of that process —
after arbitration — that a party may sue in court to enforce the arbitral decision against
the losing party.
Moreover, the dispute over the alleged breach is one “arising as to interpretation,
application or observance” of the CBA. In fact, the majority concluded that the union had
conceded as much, having expressly asserted that the alleged breach “constitutes a
violation of the arbitration provisions of the CBA.” Thus, the dispute was a “grievance”
under the contract and had to be handled through its grievance procedures.
Settlement not result of grievance procedure. For its part, the union argued that the
settlement agreement was judicially enforceable because it enjoyed “final and binding”
status under the CBA — indeed, as final and binding as an arbitration award, it urged.
But the union cited no specific clause in the contract in support of this contention. In
contrast, the court noted, one provision stated that “decisions reached at each step of the
grievance procedure . . . shall be finding and binding.” But the settlement agreement was
not a decision reached at any step of the grievance procedure; consequently, it was not
final and binding under this clause.
“It is true enough that settlements entered into at different phases of a grievance process
may be judicially enforceable, if the CBA or the settlement agreement so provides,” the
court said. “But, as explained, the record does not show that this Settlement Agreement
was entered into through the formal grievance process.”
And “there is no oddity,” the court wrote, in finding that the settlement agreement is
covered by the CBA’s arbitration clause even if it was not reached at any step of the
26
contractual grievance process. “Whether the Settlement Agreement falls within the
arbitration clause simply does not turn on whether it was a decision reached through the
grievance process.” It was enough that the dispute over the employer’s noncompliance
with the settlement involved contract interpretation. Thus, it was subject to arbitration,
and was properly dismissed.
Dissent. Judge Clay, dissenting, disagreed with the majority’s conclusion that the union
had to utilize the grievance procedure before seeking judicial enforcement of the
settlement agreement. That agreement “memorialized a final, complete settlement of
several individual grievances,” Clay wrote, and was capable of being interpreted and
enforced without reference to the CBA or other documents. He therefore concluded that
the dispute did not concern “interpretation, application, or observance” of the CBA, and
accordingly, did not fall within the grievance provisions.
The dissent “strongly” rejected the notion that the union’s “passing statement” that the
settlement breach constituted a violation of the CBA’s arbitration provisions amounted to
a concession that the dispute concerned interpretation of the contract. Indeed, if resort to
the CBA’s grievance procedures is required here, he asked, would the majority have the
union begin at stage one, as outlined in the CBA? That would mean starting with the shop
steward, who must attempt to adjust the matter with the supervisor. “In addition to being
impractical, this outcome is legally incorrect.”
According to the dissent, both parties had conceded in their arguments on appeal that the
settlement agreement was not reached via the CBA’s grievance procedures. “This
particular settlement agreement by its terms was a final, complete agreement that
concluded and superseded the parties’ prior dealings under the CBA. It is a freestanding
document that does not refer to the CBA or any provision therein. To hold otherwise
would subvert the parties’ agreement to resolve their differences pursuant to the
settlement agreement into which the parties entered in lieu of the CBA grievance
process.”
The case number is: 12-6253.
Attorneys: Waverly D. Crenshaw, Jr. (Waller, Lansden, Dortch & Davis) for United
Parcel Service, Inc. Lesley Cook (Godwin, Morris, Laurenzi & Bloomfield) for
Teamsters Local Union 480.
6th Cir.: Arbitrator without authority to alter CBA to grant union’s solution to
resolve parties’ dispute regarding pension contributions
By Ronald Miller, J.D.
Following an employer’s expulsion from a union pension fund for refusing to agree with
the fund’s unilateral increase in pension contributions, a union was properly denied a
motion to compel the employer to submit the dispute to arbitrator, ruled a divided Sixth
Circuit in an unpublished opinion. Because the solution that the employer proposed —
that the pension contributions be paid to the employees in the form of wages— required
altering the parties’ collective bargaining agreement, the appeals court agreed with a
27
district court that, under the terms of the CBA, an arbitrator would not have the authority
to grant the union’s request. Judge Moore filed a dissent (O-N Minerals Co dba
Carmeuse Lime & Stone, Calcite Plant v International Brotherhood of Boilermakers,
Iron Ship Builders, Blacksmiths, Forgers, & Helpers, April 18, 2014, Korman, E).
A dispute arose among the parties concerning the interpretation of a collective bargaining
agreement provision pertaining to the employer’s obligation to contribute to an employee
pension fund. This dispute arose out of the interaction of three provisions of the CBA that
established the hourly wages of employees, the contribution scale for the pension fund
and the procedure by which grievances between the parties are to be settled. For each
hour worked by an employee, the employer was to contribute $2.10 to the Pension Trust
in year one of the Agreement, $2.20 in year two, $2.25 in year three and $2.30 in year
four.
On November 1, 2009, the pension fund notified the employer that it was increasing the
employer’s required minimum contribution rate annually over the next five years. The
employer informed the pension fund that it would not agree to the increase because the
new minimum contribution rates contravened the previously negotiated rates. Although
the parties began negotiations to address the pension fund’s attempt to enact a unilateral
rate increase, they were never able to resolve the dispute. Consequently, the pension fund
expelled the employer and stopped accepting its contributions. Thereafter, the employer
placed the funds earmarked for the pension fund in an escrow account. The union
requested that the contributions not be placed in an escrow account but added to the
employees’ wages. The employer rejected this proposal.
At this point, the union requested the appointment of an arbitration panel to resolve the
dispute. In response, the employer commenced an action for a declaratory judgment in
federal district court, seeking a ruling that the union could not compel arbitration. The
union filed a counterclaim seeking an order to compel arbitration. The district court
granted summary judgment in favor of the employer on grounds that an arbitrator lacked
authority to resolve the grievance. This appeal followed.
As an initial matter, the Sixth Circuit began with “the presumption that national labor
policy favors arbitration.” Under the “Steelworkers Trilogy,” “the question of arbitrability
— whether a collective-bargaining agreement creates a duty for the parties to arbitrate the
particular grievance — is undeniably an issue for judicial determination.” The court faces
a two-fold inquiry: first whether the reluctant party has agreed to arbitrate the grievance,
and second, whether it has given the arbitrator the power to make the award.
In this case, the appeals court dealt with a pre-arbitration challenge by the employer to
the application of this arbitration clause based on the foregoing limitation. That fact
complicated the matter because there was no award to simply ask whether the arbitrator’s
award “draws its essence from the collective bargaining agreement.” Instead, the court
was being asked to decide in advance that any remedy the arbitrator could award would
not be consistent with his authority under the collective bargaining agreement. A party
seeking to enjoin arbitration based on the authority of the arbitrator bears the burden of
overcoming the presumption of arbitrability.
28
Here, the arbitration clause in the CBA explicitly stated that an arbitrator shall not have
jurisdiction or authority to alter in any way the provision of the agreement. Thus, the
issue turned on whether the restriction on the authority of the arbitrator “to alter in any
way the provisions of the agreement” was susceptible to an interpretation that would
justify the award that the union sought.
The union argued that despite the pension fund’s refusal to accept any further
contributions from the employer, it was violating the CBA by paying less than the
complete economic package that it agreed to pay for its employees’ benefits. The union
requested that the benefits be paid in the form of wages. However, the Sixth Circuit
determined that in this case is was possible to say with positive assurance that the
language of the arbitration clause was not susceptible to an interpretation that would
allow an arbitrator to convert the pension contributions into hourly wages. Such an
exercise would require the arbitrator to alter two separate provisions of the CBA — the
hourly wage scale and the contribution rate to the pension plan. Consequently, the
appeals court determined that the employer’s motion for declaratory judgment that the
union may not seek or compel arbitration was properly granted.
Dissent. In dissent, Judge Moore contended that the arbitrator’s authority to resolve a
dispute did not turn on whether the parties had requested the precise remedy, which the
arbitrator in its discretion may or may not award. Unlike the majority, Judge Moore
contended that she could not say “with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.” Therefore, she would
have granted summary judgment in favor of the union, and compel the employer to
arbitrate.
The case number is: 12-1633.
Attorneys: Charles R. Schwartz (Blake & Uhlig) for International Brotherhood of
Boilermakers. Donald H. Scharg (Bodman LLP) for O-N Minerals Co. dba Carmeuse
Lime & Stone, Calcite Plant.
7th Cir.: Wisconsin law restricting collective bargaining by most public employees
again passes constitutional muster
By Ronald Miller, J.D.
Reviewing more challenges to the constitutionality of Wisconsin’s Act 10, the Seventh
Circuit concluded that even though the unions’ First Amendment and Equal Protection
Clause theories were unique to this case, their arguments nevertheless failed to state a
constitutional violation. Because Act 10 imposed collective bargaining restrictions only
upon government employers, while general employees remained free to act in concert,
the appeals court found that it did not run afoul of the Petition Clause. Similarly, the court
concluded that the cumulative effect of Act 10 did not violate the unions’ associational
rights, since there was no attempt to punish union members or regulate the unions’
internal affairs (Laborers Local 236 v Walker, April 18, 2014, Flaum, J).
29
Restrictions on public employee bargaining. Wisconsin’s Act 10 made significant
changes to Wisconsin public-sector labor law: it prohibited government employers from
collectively bargaining with their general employees over anything except base wages,
made it more challenging for general-employee unions to obtain certification as exclusive
bargaining agents, and precluded general-employee unions from using automatic payroll
deductions and fair-share agreements. The plaintiffs, two public-employee unions and an
individual union member argued that these changes infringe their First Amendment
petition and association rights. They also argued that Act 10 denies union members the
equal protection of the laws.
Act 10 divided Wisconsin state and municipal employees into two categories: “public
safety employees,” including police officers, firefighters and the like; and “general
employees,” which included everyone else. Public safety employees, and their unions,
continue to enjoy the protections and privileges of Wisconsin’s preexisting scheme.
General employees, on the other hand, became subject to Act 10’s various restrictions. To
begin with, the Act reduced state and municipal employers’ collective-bargaining
obligations with respect to these employees. Now, public employers are required to
collectively bargain with their general employees over base-wage increases, but nothing
else. Act 10 also separately prohibited municipal employers from collectively bargaining
with their general employees about non-wage issues.
Further, Act 10 mandates that general-employee unions submit to a recertification
election every year (instead of allowing unions to remain certified indefinitely). State and
municipal employers are also barred from deducting union dues from their general
employees’ earnings. Finally, the Act prevented unions from imposing fair-share
agreements on general employees.
Prohibition on payroll deductions valid. Previously, in Wisconsin Education
Association Council v Walker (WEAC), the Seventh Circuit held that the Act’s
prohibition on payroll deductions did not violate the First Amendment. There, the appeals
court found that the unions’ previous use of the payroll system was the equivalent of the
state subsidizing the unions’ speech, therefore, Wisconsin was free to withdraw this
subsidy from certain groups so long as it did so on a viewpoint-neutral basis. Moreover,
the appeals court concluded that Act 10’s distinction between public safety employees
and general employees was viewpoint neutral.
Effect of Act 10 on municipal employees’ collective-bargaining rights. In the present
case, the Seventh Circuit noted that the parties had a fundamental disagreement about Act
10’s effect upon municipal employees’ collective-bargaining rights. Because the appeals
court’s Article III jurisdiction over most of the unions’ claims depended on the outcome
of this dispute, the court had to settle it before proceeding to the merits.
The unions argued that language in Act 10 (Wis. Stat. Sec. 66.058(1m)) prohibited
municipal employers from collectively bargaining with their general employees about
anything other than wages, even if the employer wanted to bargain outside the framework
of the Municipal Employment Relations Act (MERA). However, the state urged the
appeals court to read Sec. 66.058(1m) more narrowly. The state argued that Wis. Stat.
30
Sec. 66.058(1m) merely prohibited statutory collective bargaining for general employees
outside of MERA. The court observed that if that is so, then the constitutional “right” the
unions think Act 10 infringes is actually untouched by the Act. Most of the unions’
constitutional claims derive from the fact that in their view, Act 10 precludes their
employers from even voluntarily bargaining with them.
However, the appeals court found the unions’ interpretation of Sec. 66.058(1m) more
plausible. In the absence of an authoritative interpretation from the Wisconsin Supreme
Court, the Seventh Circuit interpreted Sec. 66.0508(1m) as it felt the state’s high court
would construe it. Therefore, giving effect to Sec. 66.0508(1m)’s plain language, the
appeals court interpreted the provision to prohibit municipal employers from reaching
binding agreements with their general employees on a collective basis, if the agreement
concerns anything other than the employees’ base wages.
First Amendment claim. Having concluded that Act 10 is as sweeping as the unions
believed, the Seventh Circuit turned to address the merits of their constitutional claims.
The unions made two distinct claims attacking Act 10 under the First Amendment: first,
that the collective bargaining prohibition — Sec. 66.0508(1m) — violates their members’
rights to petition the government for redress of grievances, and second, that Act 10’s
various restrictions, in their cumulative effect, violate their associational rights.
Petition Clause. As an initial matter, the Seventh Circuit noted that Sec. 66.0508(1m)
does not proscribe any conduct by the unions themselves. Instead, its collective
bargaining restriction acts upon government employers. The statute tells these employers
that they may not enter into binding agreements with their employees on a collective
basis about anything other than base wages. Thus, “[u]nder Act 10, general employees
remain free to associate and represent employees and their unions remain free to speak;
municipal employers are simply not allowed to listen.” Here, the appeals court agreed
with the district court that under Supreme Court precedent, such a law is constitutional.
Nevertheless, the unions contended that Wisconsin could not constitutionally deny
municipal employers their ability “to choose whether to listen.” However, the Seventh
Circuit pointed out that this argument was foreclosed by the Supreme Court’s decision in
Minnesota State Board for Community Colleges v Knight. In the instant case, the unions’
complaint is that Act 10 bars Wisconsin public employers from voluntarily entering into
binding negotiations with a group of employees. But that was the case in Knight as well.
Still, nothing in Wis. Stat. Sec. 66.0508(1m), or Act 10 generally, precluded the unions or
their members from expressing their views to their municipal employer or from trying to
persuade the employer to adopt a particular policy.
Next, the appeals court rejected the union’s assertion that the ability of municipal
employees to engage in the activity of bargaining collectively with their employers is a
fundamental right. The court noted several problems with that assertion. First, two of the
cases cited by the unions — NLRB v Jones & Laughlin Steel Corp and Amalgamated
Utility Workers v Consolidated Edison Co. of New York — involved private employers,
so the “right” the court was referring to could not have been constitutional. Second, the
relevant discussion in each case stands only for the proposition that individuals have a
31
right to associate together in a union, to discuss matters pertaining to union membership,
to select their own representatives, and to attempt to use their collective weight to
advocate for change. Thus, the Seventh Circuit concluded that Act 10’s prohibition on
collective bargaining did not run afoul of the Petition Clause.
Associational rights. The Seventh Circuit next addressed whether Act 10’s provisions
violated the union’s associational rights. Here, the court observed that Act 10 did not
punish group membership, interfere in the group’s internal affairs, or distort the group’s
message. Nothing in Act 10 prohibited unions from forming, meeting, or organizing.
Further, none of Act 10’s provisions disadvantaged employees who choose to join a
union. And the statute did not tell unions how to conduct their internal affairs. In short,
Act 10 places no limitations on the speech of general employee unions.
Instead, the unions complain that Act 10’s various restrictions and obstacles make it more
difficult for them to accomplish what they were formed to do — represent their members’
interests through the collective-bargaining process. However, the First Amendment does
not require the state to maintain policies that allow certain associations to thrive. Thus,
the court concluded that the unions could not wield the First Amendment to force the
state to continue its previous policies. For this reason, none of Act 10’s proscriptions
infringed the unions’ associational rights.
Equal Protection Clause. Finally, the unions argued that Act 10’s collective-bargaining
rules impermissibly disadvantaged “represented employees.” However, the Seventh
Circuit again rejected the unions’ characterization of the law. Wisconsin was not treating
employees differently based on the employees’ exercise of their associational rights.
Rather, the state has refused to participate in an activity that the represented employees
want the state to engage in. The association right does not compel public employers to sit
down at the table with whomever an employee may wish to represent them.
The case number is: 13-3193.
Attorneys: Steven C. Kilpatrick for Scott Walker. Bruce F. Ehlke (Ehlke, Bero-Lehmann
& Lounsbury) for Laborers Local 236.
NLRB strikes handbook rule that barred “negative comments” and “gossip;”
provision that employees act in “positive and professional manner” also unlawful
By Lisa Milam-Perez, J.D.
An employer’s “standards of behavior” policy prohibiting “negative comments” and
“negativity or gossip” could reasonably be construed by employees to prohibit NLRAprotected activity, a three-member NLRB panel ruled, finding the provisions violated
Sec. 8(a)(1). Moreover, contrary to the law judge (and Member Johnson, dissenting on
this point) a provision directing employees to represent the employer “in a positive and
professional manner” in the community was also unlawful (Hills and Dales General
Hospital, April 1, 2014)
32
“Standards of behavior.” At issue were three provisions of an employer’s “values and
standards of behavior” policy, which the General Counsel asserted were unlawful on their
face. One provision stated that employees were not to make “negative comments about
our fellow team members,” including coworkers and managers. A second provision
mandated that employees “will not engage in or listen to negativity or gossip.” The final
clause at issue states that employees will “represent [the Respondent] in the community
in a positive and professional manner in every opportunity.”
Agreeing with the law judge, the three-member panel found the prohibitions on “negative
comments” and “negativity” were unlawfully overbroad and ambiguous by their own
terms. While the employer argued that the rules cannot be found facially unlawful
without evidence that the restrictions were tied to protected, concerted activity, the judge
correctly relied on controlling Board precedent which makes clear that extrinsic evidence
is not required to find that a work rule is unlawfully overbroad and ambiguous by its
terms.
Employee input irrelevant. The employer argued to no avail that the evidence of
employee involvement in developing the rules removed any impermissible ambiguity as
to their meaning and purpose. “As a general matter,” the Board wrote, “such employee
involvement is no guarantee that work rules will not infringe on Section 7 rights;
employees might well endorse an unlawful rule, knowingly or not, but their consent or
acquiescence cannot validate the rule.”
At any rate, the record here was unclear as to what role employees played in drafting the
provisions. There was no evidence that employees who may have had a hand in creating
the rules “were assured or reasonably believed” that the version finally implemented
would not interfere with employees’ exercise of protected Section 7 rights. “Nor would
the prior involvement of some employees have determined how other employees
reasonably construed the rules, even if they were fully informed of the rules’ origins.”
“Positive and professional manner.” The majority also found equally overbroad and
ambiguous — and thus unlawful — a provision stating that employees were to represent
the employer out in the community “in a positive and professional manner.” Especially
when considered in context with the other unlawful provisions, employees would
reasonably view this language as barring them from engaging in any public activity or
making any public statements on work-related matters that were not perceived as
“positive” towards the employer. As such, it would discourage them from engaging in
protesting unfair labor practices or making statements to third parties protecting their
terms and conditions of employment — “activity that may not be ‘positive’ towards the
Respondent but is clearly protected by Section 7,” wrote the Board.
In finding no violation, the law judge had relied on Tradesmen International (2002), in
which a “conflicts of interest” work rule that required employees “to represent the
company in a positive and ethical manner” was found lawful. But the rule in that case
was distinguishable from the provision challenged here, the Board said. First, the rule in
Tradesmen did not include closely related unlawful provisions; it was in the context of a
33
rule addressing conflicts of interest generally, and thus was unlikely to lead employees to
fear their Section 7 rights might be implicated.
Also, parsing the specific language of both provisions in context, the Board reasoned that
the phrase “positive and ethical manner” in Tradesman would be construed quite
differently than the phrase “positive and professional manner” at issue here. “Coupled
with the word ‘ethical’ in a rule addressing conflicts of interests, the term ‘positive’ has a
significantly narrower scope of meaning than the same term coupled with the word
‘professional,’ a broad and flexible concept as applied to employee behavior.”
Member Johnson disagreed, rejecting the notion that there was any meaningful
distinction between a rule requiring “positive and ethical” public behavior and one
requiring “positive and professional” behavior. Further, in his view, the provision at issue
here was more akin to the rule found lawful in Costco Wholesale Corp. requiring
“appropriate business decorum” in communicating with others. Thus, he would adopt the
judge’s finding that this clause was lawful.
The slip opinion is: 360 NLRB No 70.
Attorneys: Timothy Ryan (Jackson Lewis) for Hills and Dales General Hospital.
NLRB: Some handbook rules survive Board scrutiny, others violated the Act; oral
rule denying union access to property also unlawful
By Lisa Milam-Perez, J.D.
Several rules set forth in a bus company’s employee handbook were overbroad and thus
violated the NLRA, a three-member panel of the NLRB ruled, affirming a law judge’s
findings in part. Unlawful provisions included rules barring disclosure of “any company
information,” including wage and benefit information; prohibiting employees from
making statements about work-related accidents to anyone but the police or company
management; prohibiting “false statements” about the company; and barring participation
in outside activities that would be “detrimental” to the company’s image, among others.
However, the Board rejected the ALJ’s finding that certain challenged provisions were
permissible, while also concluding to the contrary that certain other rules passed muster
(First Transit, Inc, April 2, 2014).
The employer also unlawfully promulgated an oral work rule barring employees from
meeting with union reps anywhere on its premises at any time, the NLRB ruled, and
further violated the Act when it terminated a meeting in the break room between off-duty
employees and three union reps. Although the employer could lawfully limit nonemployee union reps from the premises, one of the reps was also a bus company
employee, and thus was lawfully on the property. Accordingly, the oral rule and meeting
disruption violated her protected rights, as well as the right of other employees to
participate in union activity.
34
Use of company property. One clause prohibiting employees from “using Company
property for activities not related to work anytime” was rejected by the ALJ as overbroad.
According to the ALJ, “company property” would be seen as encompassing a physical
presence, in nonwork areas, where employees should be lawfully entitled to engage in
protected activities. However, the challenged provision was embedded in a larger rule
addressing stealing and theft, unauthorized removal of property, failing to account for
company funds, and similar directives. In context, then, the Board determined that
employees would construe the ban on the use of company property as referring to
misappropriation, not as covering protected, concerted activity.
Work rules and performance. Similarly, a provision barring “poor work habits” such as
“loafing, wasting time, loitering, or excessive visiting” was unlawfully overbroad,
according to the ALJ, as it could be interpreted it as prohibiting protected activities
during nonwork times. But the Board disagreed, finding “poor work habits” would be
construed as a failure to perform one’s duties during what should be productive time.
“In our view,” wrote the Board, “the General Counsel’s isolation of the word ‘loitering’
from its context is an unpersuasive attempt to align this rule with Board cases involving
rules both broader in scope or more ambiguous in meaning; indeed, most of the noloitering cases cited by the judge are distinguishable because they explicitly prohibited
loitering outside of employees’ working hours.”
Personal conduct. A handbook rule barring “discourteous or inappropriate attitude or
behavior” to passengers, coworkers, or the public,” and engaging in “disorderly conduct
during working hours,” was unlawfully overbroad. It could reasonably be seen by
employees as “limiting their communications concerning employment.”
On the other hand, the second bullet point of the same rule, which prohibits “profane or
abusive language where the language used is uncivil, insulting, contemptuous, vicious, or
malicious,” was not “so patently ambiguous,” in the Board’s view, as to render the
provision overbroad. The “clear thrust” of the rule was to deter profane or abusive
language, the Board reasoned, and the words “uncivil” and “insulting,” which troubled
the General Counsel, when interpreted in this larger context, would be perceived by
employees as merely requiring “that they comport themselves with `general notions of
civility and decorum.’” On this point, Chairman Pearce disagreed, though. He contended
the words “uncivil” and “insulting” were so “sufficiently imprecise that [they] could
encompass any disagreements or conflicts among employees,” including protected
discussion.
Freedom of association policy. The employer urged that the challenged handbook
provisions should also be considered in the larger context of the handbook’s “freedom of
association” policy. That provision expressly states that management supports
employees’ right to vote for or against union representation without interference from the
company. While the Board acknowledged that an express notice advising employees of
their Section 7 rights could serve to clarify an otherwise ambiguous rule, under the
circumstances here, inclusion of this provision “does little to ensure” that employees
would not read otherwise overbroad rules as restricting their rights under the Act. Here,
35
the specific provision focused solely on union organizational rights, while an effective
“savings clause,” according to the Board, should address “the broad panoply of rights
protected by Section 7.”
Also problematic was the rule’s placement within the handbook — “neither prominent
nor proximate to the rules it purports to inform.” Located on page 20 of a 73-page
handbook, it was too far removed from the personal conduct rules at issue, which did not
begin until page 33. Nor did the policy reference those rules, or vice versa.
Moreover, the employer had committed unfair labor practices that directly contradicted
the policy. As such, the freedom of association policy could not insulate the employer
from liability. “Certainly, the Respondent’s employees, once aware of these violations in
response to union organizing, would not reasonably read the policy as a safeguard of their
Section 7 rights.”
The slip opinion is: 360 NLRB No 72.
Attorneys: Frederick C. Miner (Littler Mendelson) for First Transit, Inc.
NLRB: No Section 8(a)(1) violation where manager began questioning union
employee without knowing he’d asserted Weingarten rights
By Marjorie Johnson, J.D.
The United States Postal Service (USPS) did not violate NLRA Sec. 8(a)(1) when a
manager began to question a union employee about his leave request after he previously
asserted his Weingarten rights outside of her presence, a three-member panel of the
NLRB ruled, affirming an administrative law judge’s rulings in part and reversing them
in part. Significantly, there was no evidence that the manager was aware of his previous
Weingarten request, and the record revealed that she stopped her questioning once he
asked to be represented by the union president (United States Postal Service, April 22,
2014).
Employee requests union president at meeting. On February 23, the employee
completed a written request for leave from March 1-4, but mistakenly dated the request
February 24. An unidentified supervisor signed and approved the request on February 23.
On March 1, while working on a project at a different office, the employee informed a
supervisor of his upcoming scheduled leave. The supervisor asked if he had an approved
leave slip and he answered yes. When the supervisor requested a copy of the leave slip,
the employee stated that he was invoking his Weingarten rights and that he wanted the
union president to represent him. The supervisor told the employee that their discussion
would not lead to discipline and, at the employee’s request, stated such in writing. The
employee then showed the supervisor the approved leave slip but refused to give it to
him. The supervisor then left the room.
A short time later, the manager of customer service operations (a higher-level official
than the supervisor), entered the room and asked the employee if he had scheduled leave.
36
The employee responded in the affirmative and stated that he was invoking his
Weingarten rights and wanted the union president to represent him. The manager said,
“Are you kidding?” to which the employee replied, “No, I am not.” The manager did not
question him any further.
ALJ finds Weingarten violation. Concluding that USPS violated Section 8(a)(1), the
ALJ first found that when the supervisor questioned the employee about his leave
request, he reasonably believed that the questioning could lead to discipline because of
the date discrepancy. Although the supervisor’s written assurance neutralized his
concern, when the manager came in the room and asked him additional questions, USPS
“ratcheted up the seriousness of the interview” and negated the supervisor’s assurances of
no discipline. In the ALJ’s view, this conduct triggered USPS’s obligation under
Weingarten to exercise one of three options: honor the employee’s earlier request for
union representation, give him the option of going forward without a representative, or
stop the interview. USPS continued the questioning without giving him any of these
choices and thus violated Section 8(a)(1).
Manager unaware of Weingarten request. However, the NLRB panel disagreed. Even
assuming that the employee had an objectively reasonable basis to fear discipline, the
right to Weingarten representation is triggered when the employee requests it. Moreover,
a request need not be repeated if it has been communicated to the person conducting the
interview. Here, however, there was no evidence that the manager knew about the
employee’s earlier request for union representation when she took charge and asked him
if he had scheduled leave. When he told her that he wanted union representation, she
discontinued the interview. Accordingly, the ALJ’s finding that USPS’s questioning of
the employee violated Section 8(a)(1) was reversed.
The slip opinion is: 360 NLRB No. 79.
Attorneys: David Pratt (National Association of Letter Carriers) for National Association
of Letter Carriers, Sunshine Branch 504. Roderick D. Eves (U.S. Postal Service) for US
Postal Service.
NLRB: Unit clarification not appropriate path to resolve bargaining unit make-up;
deferral to parties’ grievance procedure appropriate
By Ronald Miller, J.D.
The NLRB reversed a regional director’s decision clarifying a bargaining unit and
dismissed the underlying petition filed by an employer. After first passing on the question
of whether it should or should not entertain a unit clarification petition in the context of
an 8(f) relationship, the Board rejected the regional director’s determination that deferral
to the parties’ contractual grievance procedure was inconsistent with Board law. Rather,
the Board noted that questions regarding the bargaining unit’s make up turned on whether
there was a valid agreement between the employer and the union regarding unit status,
the terms of that agreement, and whether the employer had breached it. Because those
37
were classic questions of contract, not unique to the Board, deferral to the grievance
procedures was appropriate (Appollo Systems, Inc, April 24, 2014).
For many years, the employer, an electrical contractor, served residential customers. In
2004, it added a commercial division by acquiring another business. Shortly after the
acquisition, the employer agreed to recognize the union as representative of the
employees of the commercial operation. A relationship had previously existed between
the union and the previous owner of the business, and the employer continued this
voluntary arrangement. The parties further agreed that their collective bargaining
relationship would not encompass the residential employees, who had never been
represented by any labor organization.
In 2007, the employer began referring to its commercial operation as “Appollo Systems
Commercial Services,” while referring to its residential operation as “Appollo Systems
Residential Services.” In 2009, the union filed a contractual grievance asserting that the
“two divisions” had become “one company,” and therefore the residential employees
should be included in the bargaining unit represented by the union. The employer
asserted that notwithstanding the name change, the commercial and residential aspects of
its business remained separate. The union was not persuaded and preceded with its
grievance.
In response, the employer filed this petition for unit clarification, seeking a determination
from the NLRB that its residential employees were excluded from the bargaining unit.
The union opposed the petition, contending that (1) the Board’s unit clarification
procedure is not available where, as here, the collective-bargaining relationship is
governed by Section 8(f), and the parties should instead settle the dispute through the
contractual grievance and arbitration procedure; and (2) in any event, a clarified unit must
include the residential employees, because their previous exclusion was predicated on the
understanding that they would work in an operation entirely separate from the
commercial operation, and the employer breached that understanding by changing its
corporate identity in 2007.
Section 8(f) relationship. The regional director rejected the union’s contention that the
Board cannot entertain and determine unit clarification issues when they arise in the
context of an 8(f) relationship. The regional director also rejected the union’s argument
that the unit placement of the residential employees was a contractual matter best left for
resolution through the parties’ contractual grievance and arbitration procedure. With
respect to the merits of the dispute, the regional director found that the employer’s action
in 2007 amounted to a name change and did not alter the historical bargaining unit.
Unit clarification. The NLRB passed on the question of whether it should or should not
entertain a unit clarification petition in the context of an 8(f) relationship. Rather, the
Board, under the particular circumstances of this case, it rejected the regional director’s
analysis insofar as he suggested that it would be improper or inconsistent with Board law
to defer to the parties’ contractual grievance and arbitration procedure. The Board
explained that it is not that it “never defers to arbitration cases involving representation
38
issues,” rather, “deferral is appropriate when resolution of the issue turns solely on the
proper interpretation of the parties’ contract.”
The present dispute turned on whether there was a valid agreement between the employer
and the union as to their unit status, what the terms of any such agreement were, and
whether the employer subsequently breached that agreement. These are classic questions
of contract and are not the unique province of the Board. Instead, they may reasonably be
left to the parties’ contractual grievance and arbitration procedure. Accordingly the Board
deferred to that procedure and reversed the regional director’s findings in regard to the
merits of the unit placement question.
The slip opinion is: 360 NLRB No. 80.
Attorneys: Daniel Wachtler (Briggs & Morgan) for Appollo Systems, Inc. International
Brotherhood of Electrical Workers, Local 292, pro se.
NLRB: Board grants union’s negotiating expenses, one-year extension of
certification period in bad-faith bargaining case
By Lisa Milam-Perez, J.D.
Concluding that a hospital’s continued bad-faith bargaining was sufficiently egregious to
have “infected the core of” the bargaining process for a first contract, an NLRB majority
ordered the employer to reimburse the California Nurses Association (CNA-NNOC) for
six months’ worth of negotiating expenses, including salaries, travel expenses, and per
diems. The Board also extended the union’s certification year by 12 months, finding the
six-month extension recommended by the law judge was insufficient under the
circumstances. Such relief was necessary “to fully remedy the detrimental impact the
Respondent’s unlawful conduct has had on the bargaining process,” according to the
majority (Fallbrook Hospital, April 14, 2014).
Bad-faith bargaining. The NLRB issued the CNA a certification of representation for a
unit of registered nurses at the respondent Fallbrook Hospital. During the first bargaining
session, the union presented more than 30 initial proposals, but the hospital’s attorney
said the employer would not submit any proposals or counterproposals until the union
provided all of its proposals in full. The hospital then continued to withhold any
proposals of its own over the course of seven more bargaining sessions. A subsequent
ULP charge alleged the hospital unlawfully refused to bargain unless the union agreed to
discontinue nurses’ use of “assignment despite objection” (ADO) forms, which the union
had created for nurses to use in documenting assignments or situations they felt were
unsafe for the patient or might compromise a nurse’s license. Complaints were issued and
the Board regional director secured a 10(j) injunction pending resolution of the charges.
The ALJ found the hospital’s conduct of “steadfastly refusing” to submit any proposals
or counterproposals violated Sec. 8(a)(5). The ALJ also concluded that the hospital
violated the Act by refusing to bargain over the discharge of two bargaining unit
employees and by refusing to furnish requested information relevant to their terminations.
39
The ALJ recommended a six-month extension of the certification year, but declined the
union’s request for negotiating expenses, finding the hospital’s conduct was not so
egregious as to warrant this remedy. The Board majority disagreed.
Negotiating expenses. Employers are seldom ordered to pay a union’s negotiating
expenses for violating Sec. 8(a)(5). The NLRB set forth the standard for determining
whether such expenses should be awarded in Frontier Hotel & Casino. In that 1995
ruling, the Board established that such relief was warranted where “unusually aggravated
misconduct” has so “infected the core” of bargaining procedures that traditional remedies
alone will not undo the detrimental effects. In such cases, an order requiring
reimbursement of negotiation expenses is necessary “both to make the charging party
whole for the resources that were wasted because of the unlawful conduct, and to restore
the economic strength that is necessary to ensure a return to the status quo ante at the
bargaining table” (quoting Frontier Hotel).
Here, the hospital “deliberately acted to prevent any meaningful progress during
bargaining sessions that were held,” the Board observed. The employer refused to
provide any proposals or counterproposals during the first eight bargaining sessions until
it received a full set of proposals from the union, left a bargaining session abruptly and
without explanation, and left another session three minutes after arriving. Although the
employer proffered some proposals during the next three bargaining sessions, it then
threatened that it would not continue to negotiate if the union persisted in encouraging
employees to use the disputed ADO forms. At one session, it falsely claimed that the
nurses’ use of the ADO forms caused the parties to be at impasse, refused to bargain
further, and left the meeting after 15 minutes. Finally, the hospital reaffirmed its refusal
to bargain when it refused to respond to the union’s requests for future bargaining dates.
Under these circumstances, the Board majority found the hospital’s misconduct “infected
the core of the bargaining process to such an extent that its effects cannot be eliminated
by the mere application of our traditional remedy of an affirmative bargaining order.”
Extension of certification year. Given the record evidence of bad-faith bargaining
conduct, a full one-year extension of the union certification year (pursuant to Mar-Jac
Poultry) was warranted s well. The hospital embarked on such conduct at the outset, and
its bad-faith bargaining continued until the final bargaining session and its refusal
thereafter to respond to any of the union’s requests for future bargaining dates. In so
doing, the hospital “effectively precluded any meaningful bargaining for virtually the
entire certification year.” Thus, the Board extended the union certification for one year,
beginning when the parties commence good-faith negotiations.
Relief denied. The Board did, however, decline the union’s request to be reimbursed its
litigation expenses, finding the employer’s defenses, while lacking in merit, were not
frivolous. It also denied the union’s request that the hospital be ordered to read the
Board’s remedial notice to assembled employees during paid working hours. The union
failed to show such a measure was necessary to remedy the effects of the employer’s
unlawful conduct, the Board found.
40
Partial dissent. Member Johnson agreed with the majority’s finding that the employer’s
overall conduct violated Sec. 8(a)(5), but he disagreed that the employer’s request for a
full set of proposals from the union reflected an unlawful refusal to bargain. In his view,
such a position may, in other circumstances, “serve to speed bargaining to either
agreement or a good-faith impasse and thus serve the Act’s goals.” Dissenting too on the
extraordinary relief granted, he argued an award of negotiating expenses was
unwarranted, and would find the recommended six-month certification year extension
was sufficient.
The slip opinion is: 360 NLRB No. 73.
Attorneys: Don Carmody (Don T. Carmody, Esq., P.C.) for Fallbrook Hospital Corp.
NLRB: Standard notice posting form will include hyperlink to underlying decision
on Board’s website
By Lisa Milam-Perez, J.D.
Noting that “[m]aking the Board’s decisions and orders more readily accessible to
employees will facilitate a better understanding of what the respondent did, why it was
unlawful, and why the Board granted (or denied) particular remedies,” a full panel of the
NLRB has amended the agency’s standard notice posting order to state that a copy of the
Board’s full decision and order in an underlying case can be found on the agency’s
website (Durham School Services, L.P., April 25, 2014).
In the underlying case, the NLRB adopted a law judge’s findings that an employer
unlawfully discharged an employee because of her union activities and to discourage her
from voting in a representation election, as well as the ALJ’s determination that the
objectionable conduct warranted setting aside the results of the election. The charging
party, a Teamsters local, asked the NLRB to modify its current standard notice to inform
employees that a copy of the Board’s full decision and order can be found on the
agency’s website. Concluding the request had merit, the Board honored it, noting that its
authority under Sec. 10(c) to order a respondent to post notice of its intent to fulfill the
obligations imposed by the Board’s order “necessarily includes the power to modify the
standard notice language.”
Accordingly, the Board revised the notice in this case — and the standard notice
language in future cases — to include a hyperlink to a copy of the decision on the
Board’s website. “Even if employees cannot use the hyperlink, it will give them an
electronic address where they can obtain a copy of the decision,” the Board said. And, for
employees without access to a computer, the notice also will provide an address to which
they may write, and a telephone number to call, to obtain a printed copy of the decision.
The slip opinion is: 360 NLRB No. 85.
41
NLRB: Union lawfully accepted members’ dues withheld through checkoff
provision up until deauthorization vote was certified by Board
By Lisa Milam-Perez, J.D.
The United Workers of America did not unlawfully accept union dues deducted from
employees’ paychecks after the employees had revoked their checkoff authorizations but
before the Board certified their deauthorization vote, a three-member NLRB panel held.
Concluding that the revocations were not effective when executed following the
deauthorization vote – but before the Board had actually certified the results of that vote,
the Board reversed a law judge’s finding that the union violated NLRA Sec.
8(b)(1)(A). “While there is no precedent directly on point, both the Act and closely
related precedent support this brightline approach,” the Board said (United Workers of
America, Local 621, April 29, 2014).
Deauthorization vote. The union had been the exclusive bargaining representative of the
employees of Gretsch Condominium and AKAM Associates, joint employers. The
union’s CBA with the employer, ostensibly in effect through March 2014, contained a
union security clause and a dues-checkoff authorization provision. However, a
September 2012 deauthorization election resulted in a unanimous (9-0) vote among
bargaining unit members to withdraw the union’s authority to require union membership
as a condition of employment. The region certified the results of that election on October
11. Earlier, on October 1, though, the employees sent individual letters to the union (and
the employer) resigning from membership and revoking their union-dues deduction
authorizations. Nonetheless, the employer continued to deduct and forward dues, and the
union accepted these payments for several months thereafter.
A law judge found that, as of October 11 (the date the election results were certified), the
union violated Sec. 8(b)(1)(A) by accepting the union dues that were deducted from
employees’ paychecks. He treated the employees’ revocations of dues-checkoff
authorization submitted prior to the certification date as having been held in abeyance
until the Board certified the election. According to the law judge, the subsequent
certification of the results by the Board amounted to a validation of the employees’
premature revocations — at which point those revocations should have been given effect.
Revocations of dues-checkoff premature. Reversing the law judge, the Board held that
“premature revocations of dues-checkoff authorizations do not become valid upon
certification of deauthorization election results.” Rejecting the notion that the revocations
“ripened” at that point, the Board found the revocations were simply invalid because they
were executed prior to the certification of the election results. The law judge had relied
on the contrary opinion of former Member Truesdale, concurring in two analogous cases,
that premature revocations should be held in abeyance until they become effective upon
Board certification. But that reasoning runs counter to the thrust of Board precedent, the
panel said.
Certification is the critical step. The NLRA reflects Congress’ emphasis on Board
certification “as a critical step in creating or dissolving statutory obligations,” wrote the
42
Board, calling certification “the seminal event identified in the Act and our precedent as
both establishing and terminating the statutory dues obligation.” The union’s statutory
authority under Sec. 8(a)(3) to negotiate a union-security provision is not revoked unless,
following an election, “the Board shall have certified that at least a majority of the
employees’ desire recission.” As such, the Board has long held that “an affirmative vote
to deauthorize suspends an agreed upon union-security clause upon certification of
results, not immediately as of the election date.” And, there is ample Board precedent to
support this general rule.
Noting that a union may continue to enforce checkoff authorizations executed under a
union-security clause at least until the certification date, the Board reasoned that “it is but
a small step further to hold that the revocations of such authorizations must also be
executed after certification."
The slip opinion is: 360 NLRB No 89.
Attorneys: Bryan McCarthy (Chalos O'Connor) for United Workers of America, Local
621.
NLRB: Cash payment to employees to cover paycheck shortfall was objectionable
election conduct
By Lisa Milam-Perez, J.D.
An employer improperly interfered with a union election when it issued supplemental
cash payments to its workers to compensate for a shortage in their weekly paychecks, a
three-member NLRB panel held. Rejecting a law judge’s finding that the supplemental
payments did not confer a benefit to bargaining unit members but were simply a
permissible change in the employer’s paycheck procedures, the Board noted that the
payouts were unprecedented, that they were a response to a heretofore unaddressed (but
long vocalized) concern, and that the accompanying letter of apology contained the
implicit message that a union wasn’t needed (Durham School Services, LP, April 29,
2014).
Unprecedented cash payment. One week before a scheduled representation election
among school bus drivers and monitors, the employer, a school bus company, responded
to employees’ complaints about shortfalls in their paychecks by providing them with cash
payments equal to the amount of the shortfalls. It was the first time the employer had ever
done so, even though the employees’ weekly paychecks were often short of the full
amount of pay they were owed. Usually the employer simply added the reported shortfall
to the following week’s checks. But the recurring problem of paycheck shortfalls became
a core issue in the organizing campaign and also was the source of a pending wage suit.
Notably, the unprecedented cash payments came on the day the bus company’s labor
relations attorney was onsite to prepare for the coming election. As was typical, when the
employees received their paychecks that day, more than half found their paychecks were
short and reported the shortages. The attorney decided to compensate them for the
43
shortages by cash, directing the regional manager to use the company credit card to
withdraw $10,000 from the bank for that purpose.
Letter of apology. The regional manager gave the affected employees an envelope
containing the cash and a letter of apology. “Please allow me to personally apologize for
the error on your paycheck, today,” the letter stated. “It is totally frustrating for you, and I
understand that. Trust me, it is totally frustrating to me, too. You work hard for your pay
and we should have gotten it right. Durham is trying to correct this error today, by
determining how much you are owed and issuing cash payments for the amount missing
in this paycheck, only, to as many folks as we can. I’m sincerely sorry for this error.”
Noting that the employer was only paying its employees what it owed them, that the cash
payments did not occur within 24 hours of the election, and that there was no apparent ill
will toward the union as a result, the ALJ found the payments were simply a
(permissible) payroll processing change. Contrary to the judge, however, the Board
agreed with the union that the cash payments constituted an objectionable grant of
benefit.
Grant of benefits. A change in payroll procedures during the critical election period is
an objectionable grant of benefits when the change is in response to employee concerns
voiced well before the union organizing campaign, the Board said. Here, the cash payout
“provided employees with the corrected amounts a week earlier than employees expected
to receive them under the Employer’s past practice.”
Moreover, the accompanying letter of apology “evinced an attempt to fix a longstanding
problem of great concern to the employees, one that the Employer had not addressed
prior to the organizing campaign.” As such, the letter implied that a union was
unnecessary — a message “that would not be lost on the employees.” Accordingly, the
Board directed a second election.
The slip opinion is: 360 NLRB No. 86.
Attorneys: Charles P. Roberts III (Constangy, Brooks & Smith) for Durham School
Services, L.P.
Mass. Sup. Ct.: Union providing support for taxpayer litigation engaged in
protected petitioning under anti-SLAPP law
By Brandi O. Brown, J.D.
In an issue of first impression, the Massachusetts Supreme Judicial Court held that an
association — a union that had provided support for taxpayer litigation against a town
based on alleged fraud in a bidding process for construction of a high school — had
engaged in protected petitioning under the state’s anti-SLAPP statute by supporting the
taxpayer litigation. Several groups, including the ACLU and GLAD, filed amicus briefs,
which were acknowledged by the court. The union’s special motion to dismiss was
allowed and the case was remanded for entry of an order granting the motion and for
44
award of costs and reasonable attorney’s fees (Town of Hanover v New England Regional
Council of Carpenters, March 25, 2014, Ireland, R).
Construction bids. In 2009, the Town of Hanover awarded a bid for the construction of
a new high school to the lowest formal bid. However, after a subcontractor filed a bid
protest and the attorney general’s office investigated, the attorney general found that the
winning bidder had engaged in fraud during the prequalification stages of the bidding
process. Nonetheless, the town continued to honor the contract and work with that
contractor. Ten taxpayers, with the support of the defendant union, initiated an action
against the town seeking an injunction preventing the town from paying the contractor
and requiring the town to rescind the contract. A superior court judge allowed the
taxpayers’ motion for a preliminary injunction and construction was halted for a brief
time. After appeals, the town was permitted to adhere to the contract and the parties
stipulated to a dismissal with prejudice.
In October 2011, the town filed a complaint against the defendant union, alleging that it
had engaged in an abuse of process by supporting the taxpayers in the earlier litigation by
commencing and maintaining it, by providing legal counsel for the litigation, and by
controlling the taxpayers’ interests. The union, in turn, filed a special motion to dismiss
under the state’s anti-SLAPP statute, asserting that the claims were based solely on its
right to petition, which it contended was constitutionally protected. A superior court
judge denied the motion, finding that the union did not have standing to bring it because
it was not a named party in the earlier litigation and had not established that it engaged in
petitioning activities. On its own initiative, the Massachusetts Supreme Judicial Court
transferred the case from the appeals court.
Entitlement to protection. First, the court considered whether the union’s act of
supporting the taxpayers qualified as protected petitioning activity under the statute.
Constitutional petitioning activity under the anti-SLAPP statute was “not limited to being
a named party in litigation,” the court explained, and included various other activities like
“writing to government officials” and “reporting violations of law.” A petitioning party
did not need to directly initiate proceedings but needed to have more than “a mere
contractual connection” to the petitioning activity. Several types of statements were
protected and the court had previously held that “parties other than named parties” who
had been sued “for their involvement with petitioning activity in an underlying lawsuit”
had engaged in protected actions.
In this case, the union’s support of the taxpayers in their litigation “constitutes the
practice of reporting a violation of law.” The union’s role in the underlying 2009 lawsuit
fell within the scope of protected activities under the statute. Moreover, its involvement
fell within the statute’s definition of “statement” because it was “likely to encourage
consideration by the courts and enlist the participation of the public.” Such support
constituted petitioning activity. The court also rejected the town’s reliance on an earlier
decision in Kobin v. Gasfriend, and language indicating that the party seeking to invoke
anti-SLAPP protection in that case was not petitioning “on his own behalf.” That phrase
did not indicate that only named parties had standing under anti-SLAPP, the court
45
explained. Associations, such as the union, have petitioning rights of their own and could
share the taxpayers’ interests.
Moreover, “[p]unishing organizations that support constitutionally protected petitioning
activity would only serve to inhibit both individual and organizational rights of
petitioning” and would “eliminate rights to petition granted by the statute” and
“ultimately diminish discussion of legal issues in the courts.” The court’s conclusion was
“in accord with the reasons underlying the statute’s enactment,” i.e., to protect the
constitutional right to petition the government to redress grievances.
Two-part inquiry under anti-SLAPP. The union’s special motion to dismiss should
have been granted. It had made a threshold showing that the claims against it were based
on petitioning activity. The town’s claim was “primarily” related to the 2009 litigation
and the union’s involvement in that litigation. The town alleged that the union abused
process by supporting the taxpayers’ suit and by having a deficient number of taxpayers
for the litigation. Underlying those allegations was the contention that the union had used
the courts to redress a government wrong and there was nothing in the record suggesting
that there was any other substantial basis for the town’s claims. In turn, the town did not
meet its burden of showing that the union’s exercise of its petition rights was either
“devoid” of factual support or basis in law. There was “ample factual support” that the
2009 litigation was started to redress grievances against the town and was based on the
attorney general’s findings. The town also had not shown a defective complaint, thus
negating its argument that there were too few taxpayers in the 2009 suit.
The court remanded the case for entry of an order granting the union’s special motion to
dismiss and for award of costs and attorney’s fees.
The case number is: SJC-11396.
Attorneys: Christopher N. Souris for New England Regional Council of Carpenters.
James A. Toomey (Murphy, Hesse, Toomey & Lehane) for Town of Hanover.
Pa. Sup. Ct.: Union benefit trust can’t pursue delinquent employer contributions
under mechanic’s lien law
By Ronald Miller
Union workers were not subcontractors within the meaning of Pennsylvania’s mechanics’
lien statute, so that a union benefit trust fund was not authorized to file a mechanic’s lien
claim on behalf of union members who performed work for a construction contractor,
ruled the Pennsylvania Supreme Court. Although the statute was intended to protect
subcontractors who suffer harm occasioned by a primary contractor’s failure to meet its
obligations, the state high court determined that the legislature did not intend the term
“subcontractor” to subsume employees of the primary contractor. Further, the court
determined that an appellate court erred in overturning a developer’s demurrers based on
an implied-in-fact contract theory (Bricklayers of Western Pennsylvania Combined
Funds, Inc v Scott’s Development Co, April 17, 2014, Saylor, T).
46
Union benefit contributions. According to the trust fund’s complaint, a construction
contractor entered into collective bargaining agreements with two unions. The CBAs
required the contractor to make contributions for employee benefits, such as health and
retirement. Contributions were to be reflected in monthly reports and paid directly to the
trust fund on behalf of union workers. A developer hired the contractor to complete a
construction project. The contractor hired union workers for the project. However, while
the contractor filed monthly reports as required, it failed to supply the benefit
contributions to the trust fund. As a consequence, the trust fund filed a statement of
mechanic’s lien against the developer.
The developer objected to the trust fund’s actions, alleging that it lacked standing to
assert a mechanic’s lien claim on behalf of unionized workers because such workers were
not employees of the contractor, and as such were neither “contractors” nor
“subcontractors.” Further, the developer argued that the trust fund sought to force it to
fund the contractor’s obligations to the trust fund. The trial court agreed with the
developer’s position, concluding that the union members who provided labor for the
construction project were employees of the contractor and not employees of the unions or
of the trustees. As a result, the trial court held that the unionized workers did not come
within the meaning of “subcontractor” as that term was defined by the mechanic’s lien
statute.
Implied-in-fact contracts. However, an appeals court reversed. The majority determined
that the term “subcontractor” should be given a broad interpretation, as the mechanic’s
lien law is remedial in nature and, as such, should be liberally construed to further its
purposes. The appellate court agreed with the developer and trial court that the CBAs did
not constitute subcontracts between the contractor and unions, but that they merely
established the contractor’s obligation to employ union members and governed the terms
of their employment. Nonetheless, although the trust fund did not raise an impliedcontract theory, the appellate court determined that implied-in-fact contracts could be
discerned from the allegations in the complaint.
The appeals court majority reasoned that the unions furnished its members to the
contractor to perform the necessary work on the project, and those individuals undertook
such work with an expectation that the contractor would fulfill its obligations under the
CBAs’ employee-benefit provisions. Therefore, according to the majority, the
complaint’s allegations established that the unions were subcontractors for purposes of
the mechanic’s lien law. However, the dissent argued that the majority’s interpretation
effectively made the developer a surety for the contractor’s independent obligations,
thereby burdening the wrong entity.
Strict construction urged. On appeal to the Pennsylvania high court, the developer
argued for a strict construction of the mechanics’ lien statute. As an initial matter, the
high court observed that mechanics’ liens were unknown at common law and are entirely
a creature of statute. Such liens are designed to protect persons who, before being paid
(or fully paid), provide labor or material to improve a piece of property. They accomplish
47
this goal by giving lienholders security for their payment independent of contractual
remedies.
The primary interpretative matter in this case involves the scope of the term
“subcontractor” as defined in the mechanics’ lien statute. In defining “subcontractor,”
Sec. 201(5) states that any person who furnishes labor to an improvement pursuant to a
contract with the contractor qualifies as a subcontractor. On the other hand, Sec. 303(a)
states that no lien is allowed in favor of any person other than a contractor or
subcontractor, even though such person furnishes labor or materials to an improvement.
If taken literally without reference to historical context, these provisions are at odds with
one another. Section 303(a) plainly contemplates a class of persons who furnish labor to
an improvement, but who are not subcontractors and therefore are not entitled to file a
mechanics’ lien. Thus, the court had to determine whether the union members were
meant to be included as subcontractors by Sec. 201(5), or excluded by Sec. 303(a).
Subcontractor defined. A subcontractor is generally understood to be a person or
business “who performs for and takes from the prime contractor a specific part of the
labor or material requirements of the original contract, thus excluding ordinary laborers
and materialmen.” Consistent with this understanding, the Pennsylvania high court has
uniformly held that a contractor’s employees do not constitute subcontractors covered by
mechanics’ lien legislation. Moreover, the legislature’s choice of the word
“subcontractor,” as opposed to “employee,” together with the court’s precedent, and
commentary by a joint state government commission report, all militated against an
interpretation whereby any employee of a contractor is considered a “subcontractor.”
Additionally, the high court presumed that the legislature had some reason for including
Sec. 303(a) as part of its 1963 version of the statute. In particular, the legislature must be
assumed to have had in view some actual class of “person[s who] furnish[] labor or
materials to an improvement,” but who were not intended to qualify as contractors or
subcontractors. If all of a contractor’s employees were automatically deemed to be
subcontractors, it is difficult to imagine who this class of persons might be, reasoned the
court.
Finally, the court examined the consequences of different interpretations. Pennsylvania
permits a subcontractor to file a lien claim directly against the property, even if the owner
is not in default. Although the legislative body has thus chosen to permit a property
owner to be held responsible to ensure that subcontractors are paid, construing the class
of claimants to include all of a contractor’s employees would force private property
owners to become guarantors of contractors’ general employment obligations and create
an entirely new class of “subcontractors.” Such a regime would be burdensome to the
undertaking of new construction. Absent legislation that more clearly evinces that intent,
the court concluded that it would be improper to endorse such a change.
The case numbers are: 36 WAP 2012 and 37 WAP 2012.
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Attorneys: Kenneth Weller Lee (Tucker Arensberg) for Bricklayers of Western
Pennsylvania Combined Fund, Inc. Bryan Geoffrey Baumann (Knox, McLaughlin,
Gornall & Sennett) for Scott's Development Co.
Hot Topics in WAGES HOURS & FMLA:
David Weil confirmed to serve as Administrator of Wage and Hour Division
By Pamela Wolf, J.D.
On Monday, April 28, the Senate confirmed David Weil to serve as Administrator of the
DOL’s Wage and Hour Division. The 51-42 vote ran along party lines, with seven
Senators not voting. The president’s pick for the job actually was approved twice by the
Senate Committee on Health, Education, Labor, and Pensions (HELP) — on December
18, 2013, and January 29, 2013 — before getting to the full Chamber for a vote. The
legislative session ended before the full chamber was able to vote after the committee’s
first approval of the nomination.
Weil is Professor of Markets, Public Policy, and Law, and the Everett W. Lord
Distinguished Faculty Scholar at Boston University School of Management, where he has
worked since 1992. He is also Senior Research Fellow and Co-Director of the
Transparency Policy Project at the John F. Kennedy School of Government at Harvard
University, a position he has held since 2002. Weil has also been a lecturer and Research
Fellow at the Harvard Law School Labor and Worklife Program since 1987. He is the
recipient of the Broderick Prize in Research and the Broderick Prize for Teaching at
Boston University, the Shingo Prize for Research on Manufacturing Innovations, and
Boston University School of Management Best M.B.A. Instructor of the Year in 2011
and 2012.
Weil received a B.S. from the School of Industrial and Labor Relations at Cornell
University, an M.P.P. from the John F. Kennedy School of Government at Harvard
University, and a Ph.D. in Public Policy from Harvard University.
Leading wage and hour expert. HELP Committee Chairman Tom Harkin (D-Iowa)
praised the Senate action. “I can think of no one better to lead the Division than Dr.
David Weil,” Harkin said in a statement. “He is one of the nation’s leading experts on
wage and hour laws and how these laws can be efficiently and effectively enforced.
Because of his expertise, he already served as an advisor to the Division under both
Democratic and Republican Administrations. I have every confidence that Dr. Weil will
work to ensure a fair workplace for every worker, as well as ensure that employers have
the information they need to understand and comply with the law. I am pleased the
Senate has acted today to confirm him.”
Expansive view. Senator Lamar Alexander (R-Tenn), however, expressed great concern
about the nominee, pointing to a book authored by Weil, “The Fissured Workplace: Why
Work Became So Bad for So Many and What Can Be Done to Improve It.” “In this book,
he suggests the Department of Labor Wage and Hour Division — the division he is
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nominated to lead — could look for ways to expand its current interpretations of labor
law and should target employers who use certain business models,” Alexander said.
“I cannot support a nominee who has advocated expanding current law beyond what
Congress intended,” Alexander said. “Nor could I support a nominee who is a proponent
of targeting industries and employers who use certain business models rather than being
responsive to complaints of breaches of the law. Or one that has the underlying goal of
increasing unionization, without regard to the desires of employees themselves.”
Class complaint alleges cleaning franchiser targeted immigrants, misclassified them
to avoid wage laws
By Pamela Wolf, J.D.
A “franchisee” who speaks on Spanish has filed a lawsuit against CleanNet USA, Inc.
and CleanNet of Illinois, Inc., asserting that in order to avoid minimum wage and
overtime requirements of the FLSA and the Illinois Minimum Wage Law, the janitorial
services franchisers have created a business model that “essentially sell[s] low wage jobs
to unskilled laborers, particularly in immigrant communities, through a fictional
‘franchise agreement.’” The individuals who signed these agreements are really
misclassified “employees,” the plaintiff contends.
According to the complaint filed on March 26, the plaintiff and putative class members
were “enticed” with the prospect of running and being the boss of their own businesses to
purchase the franchise for thousands of dollars. What they got were low-skilled cleaning
jobs, largely purchased with money that was financed by the defendants themselves “at
high interest rates.”
Discussions with the plaintiff about the franchise opportunity were allegedly conducted
in Spanish, the only language spoken by the plaintiff, and a written summary of the terms
of the agreement was never provided to him in Spanish. The complaint alleges that the
franchisers targeted “individuals with limited fluency in English because they are easily
victimized by CleanNet's misrepresentations and other systemic legal violations.”
The more than 40-page franchise agreement is full of fine print and is often written in a
language not spoken by the cleaning workers who signed the agreement, according to the
plaintiff. The terms of the agreement, the complaint alleges, make it clear that the
franchisers have exclusive authority to control just about every aspect of the “franchised”
business, including customer relations, customer contract negotiations, work assignments,
the manner of performing the work, and the materials and equipment to be utilized.
As a result of the alleged practices, the franchisers have “secured a national workforce of
sub-minimum wage cleaners denied overtime wages who are dependent on and often in
debt to CleanNet and unable to leave the employment relation without significant loss,”
the complaint contends.
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Among other things, the franchisers allegedly deducted excessive fees from the wages of
the plaintiff and putative class members, including deductions and fees for insurance,
cleaning supplies, royalties and management, and payments on promissory notes and
interest. They also barred the purported franchisees from performing commercial
cleaning work unless the customer a signed contract with the franchiser, was billed
through the franchiser, and royalty and management fees were taken out of the plaintiff’s
and putative class members’ wages.
The plaintiff seeks to certify a Rule 23 class of at least 100 and raises minimum wage and
overtime claims under both state and federal law and fraud in the inducement, among
others.
IRS audit report letter that workers not independent contractors reviewable by Tax
Court
By Joy P. Waltemath, J.D.
Internal Revenue Code Sec. 7436 allows the Tax Court to determine if an IRS
“determination” of employee status was correct, giving the court jurisdiction over a
dispute involving an employer’s worker classification determination, so motions to
dismiss for lack of jurisdiction filed by both the IRS and the employer were denied by the
Tax Court. An audit report letter (30-day letter) sent by the IRS constituted a
“determination,” even though it was not a Notice of Determination of Worker
Classification (NDWC), said the court. Moreover, that determination related to an actual
controversy in connection with an audit, and the employer’s petition itself was timely.
The employer, SECC, had classified its workers two ways, both as employees and
independent contractors. The IRS disagreed with the independent contractor classification
and in its audit report reclassified some of the payments as wages, making the employer
liable for employment taxes. Two judges, Goeke and Kerrigan, dissented (SECC Corp v
Commissioner of Internal Revenue, April 3, 2014, Colvin, J).
Wages and “rental payments.” SECC performed cable splicing for corporate and
residential customers and employed 117 to 145 workers. During the periods in issue,
SECC paid its workers in dual capacities: as employees and as independent contractors,
i.e., as lessors to SECC of tools and vehicles the workers were required to provide in
connection with providing services for SECC. SECC reported taxable hourly wages for
its workers on Forms W-2, Wage and Tax Statement, but it also made payments to its
workers for its purported rental of tools and vehicles from them (equipment lease
payments). SECC did not classify its workers as employees for purposes of this
equipment rental. SECC reported the equipment lease payments on Forms 1099-MISC,
Miscellaneous Income, as nonemployee compensation for one year and as rent for the
next two years.
Employment taxes owing. SECC received an audit report (30-day letter) stating that the
IRS Examination Division had concluded that it was liable for FICA and withholding tax
increases and penalties as a result of the Commissioner’s classification of the equipment
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lease payments to SECC’s workers as wages, which would increase the employer’s FICA
and withholding liability by $1.2M and add penalties of $22K. The 30-day letter said that
the Examination Division had made a “final determination on this issue” but also said
that the “changes to your employment taxes are not based on a worker classification
determination.” The employer protested and sought a hearing. An Appeals Case Memo
specifically found that the workers were not independent contractors; there was no
evidence that the workers were in business for themselves or were working under a dual
capacity or that they had a bona fide rental contract.
“Determination?” Nonetheless, the Commissioner did not issue SECC a Letter 3523
NDWC with respect to the tax periods in issue, but it did send a notice of adjustment
assessing the tax increases and penalties. After the SECC filed a petition with the Tax
Court, both parties moved to dismiss the case because the IRS did not issue an NDWC,
with different expectations as to the consequences of a dismissal. Specifically, the
Commissioner contended that dismissal would deprive the Tax Court of jurisdiction over
this case, leave the assessment in place, and allow the IRS to proceed with collection of
employment taxes and penalties. Not surprisingly, SECC argued that the failure to issue
an NDWC meant the assessment was invalid and the IRS could not collect the disputed
employment taxes unless and until an NDWC is sent.
Code Sec. 7436 allows the Tax Court to determine if an IRS "determination" of employee
status was correct. The letter sent by the IRS constituted a determination, the Tax Court
held, even though it was not an NDWC. The “determination” related to an actual
controversy in connection with an audit. Additionally, the petition was timely; although
the petition was filed more than 90 days after the determination, the 90-day limit of Code
Sec. 7436(b)(2) applies only in cases where the notice of determination is sent by
registered or certified mail, which was not the case here. Thus, the court retained
jurisdiction over the dispute.
The case number is: 3937-12.
Attorneys: Vladislav M. Rozenzhak for Commissioner of Internal Revenue. Alvah Lavar
Taylor (Law Offices of A. Lavar Taylor) for SECC Corp.
Michigan farm ordered to stop misclassifying migrant workers, comply with
housing standards, stop investigation interference
The DOL’s Wage and Hour Division (WHD) announced on April 7 that a federal judge
in Michigan has ordered Darryl Howes and his business, Darryl Howes Farms, located in
Copemish, Michigan, to stop misclassifying his migrant workers as independent
contractors, to comply with FLSA recordkeeping provisions and Migrant and Seasonal
Agricultural Worker Protection Act (MSPA) housing standards, and to cease interfering
with DOL investigations.
Darryl Howes Farms employed about 38 workers for the 2011 harvest when it was
investigated by the WHD. The migrant agricultural workers were incorrectly classified as
52
independent contractors rather than employees entitled to minimum wage and other
provisions of the FLSA and MSPA.
The opinion and order of the judge upholds the DOL’s findings of recordkeeping and
housing violations at Howes’ 60-acre cucumber farm and migrant housing camp during
the 2011 harvest. The DOL filed a complaint in federal court in 2012 alleging minimum
wage, recordkeeping, and housing violations following investigations conducted by the
WHD. The minimum wage violations are still being litigated now that the threshold issue
of employment status has been determined, the WHD said.
The court also determined that Howes controlled a housing camp, known as the “Green
Camp,” and provided substandard housing to migrant workers, in violation of the MSPA.
The violations include failure to provide adequate shelter; prevent insect or pest
infestation; remove standing wastewater; repair broken screen doors and showers; and
maintain toilets in a sanitary condition. Howes has been ordered to ensure that all MSPA
housing he owns or controls complies with the MSPA.
Beyond the labor violations, the court found that Howes had interfered with the DOL’s
investigation. The DOL’s complaint cited four instances when interviews of agricultural
workers had to be terminated because Howes or one of his employees attended the
interviews with cameras and refused to leave. Howes has been ordered not to interfere
with future investigations.
The DOL filed its lawsuit in the Western District of Michigan, Southern Division; the
case number is 1:12-cv-00888.
McDonald’s franchise operators to pay $250,000-plus to settle FLSA violations
Two McDonald’s franchise operators have agreed to pay $254,224 in back wages and
liquidated damages to 138 employees after a DOL Wage and Hour Division (WHD)
investigation found FLSA minimum wage, overtime, and child labor violations had
occurred at nine of the operators’ Maryland restaurant locations. Gold Hat Inc. and Gold
Hat II Inc., which share the same owner and are based in Annapolis, have also agreed to
pay $4,300 in civil money penalties for the child labor violations, according to the WHD.
Gold Hat Inc. operates four McDonald’s restaurants, and Gold Hat II Inc. operates
another five restaurants. Investigators found that when employees worked at more than
one location for the employer during the same workweek, the hours they worked at the
different locations were not totaled to determine if overtime was due. Instead, employees
purportedly received separate checks from each location, all at straight-time rates, even if
they had worked a total of more than 40 hours in the workweek.
Both operators also took deductions from employees’ pay for cash register shortages,
according to the WHD, which illegally reduced some employees’ rates of pay below the
mandatory minimum wage. In addition, investigators determined that ten 14- and 15-year
old employees worked outside of the hours permitted by federal child labor regulations.
53
The Gold Hat companies, in addition to paying the back wages, liquidated damages, and
penalties, also agreed to enhanced compliance measures, including conducting an internal
audit to evaluate compliance with minimum wage, overtime, wage deductions, child
labor, and worker classification requirements; providing training on the employers’
responsibilities under the FLSA; and implementing practices with respect to the FLSA’s
child labor provisions, including highlighting the names of minor workers on the
schedule to alert managers to their status and posting child labor requirements in a
conspicuous place.
“The restaurant industry employs some of the most at-risk workers that we see,”
remarked WHD Baltimore District Director Mark Lara.
Metlife agrees to pay $1.9M to resolve wage payment claims on behalf of 431
financial services representatives
By Pamela Wolf, J.D.
Under a proposed settlement agreement submitted to the court on Friday, April 11,
Metlife, Inc. would pay $1.97 million to resolve class allegations that it unlawfully failed
to pay California financial services representatives (FSR) their commissions, debited
their accounts for company operating expenses, and neglected to pay overtime, and/or
reimburse them for business expenses (Johnson v Metlife, Inc, CDCal).
The class action challenges Metlife policies under which FSRs who separate from the
company before the end of the 12th quarter lose the balance of earned commissions
accumulated in their FSR Accounts, even though the funds had already been placed in
their accounts for future distribution. Also challenged is a policy under which FSRs who
are employed more than 10 quarters (and are employees and not independent
contractors), are charged with costs of goods and services known as COGS — a
percentage of Metlife’s costs of running each office, including rent, secretaries, etc., with
a share charged against each FSR’s commissions.
The initial class complaint alleged causes of action for unpaid overtime in violation of the
FLSA; prohibited wage chargebacks; failure to provide meal and rest periods; failure to
reimburse business expenses; failure to provide timely wages; wage statement defects;
and violation of California’s Unfair Competition Law. After an amended complaint was
filed and the parties had engaged in substantial discovery, they engaged in an all-day
mediation session in January 2014. Following further negotiations, the parties agreed in
principle and later executed a final settlement agreement on April 11.
If approved by the court, the agreement provides for a total settlement amount of
$1,970,000 for payments to Class Members, attorneys’ fees and costs, enhancement
payments to class representatives, and costs of claims administration. By agreement, up
to $492,500 (25 percent) may be allocated to pay attorneys’ fees and another $30,000 can
be used to reimburse litigation costs and expenses. The costs of the claims administrator
are not to exceed $19,000.
The remaining settlement proceeds would be distributed to a class of 431 FSRs.
54
According to the memorandum filed by the plaintiffs, the settlement proposal represents
53 percent of “the realistic maximum recovery for Plaintiffs’ liquidated claims, without
any risks, costs and uncertainty of prolonged litigation.”
The lawsuit was filed in the Central District of California; the case number is 8:13-cv00128-JLS-RNB.
Hawaiian farm will pay $460,000 to resolve FLSA violations, migrant worker
housing abuses
Fat Law’s Farm Inc. has agreed to pay $428,800 in back wages and liquidated damages
to workers in the wake of a DOL Wage and Hour Division (WHD) that found the Oahubased employer had violated FLSA minimum wage, overtime, and recordkeeping
provisions. The WHD said the company will also pay $31,200 in civil money penalties
due to what the agency called deplorable housing, safety, and health conditions for
workers that violated the Migrant and Seasonal Agricultural Worker Protection Act.
Fat Law’s Farm produces and supplies herbs and vegetables in Hawaii and is the main
exporter of Hawaiian-grown basil to the U.S. mainland and Canada, which is sold locally
by retailers, such as Safeway Inc. The DOL executed a search warrant issued by the U.S.
District Court in Hawaii that permitted WHD investigators to gain access to Fat Law’s
Farm.
The company and its three owners failed to pay minimum wage for all hours worked and
did not pay employees overtime at time and one-half their regular rates of pay for all
hours beyond 40 in a workweek, contrary to FLSA requirements, according to the WHD.
The company’s Filipino workers were predominantly paid at $7.25 an hour, with
overtime compensation. But other workers, mainly from Laos, were purportedly paid $5
an hour in cash, without overtime, for 70 hours a week on average.
The consent judgment entered in the District of Hawaii also permanently enjoins and
restrains the family-owned company from violating the provisions of the FLSA.
“The department made use of a search warrant to get an honest snapshot of the pay
practices and working conditions established by the employer and the documented effort
to hide evidence and witnesses from inspection,” said Juan Coria, acting regional
administrator for the WHD in the Western Region. “With the warrant, we obtained
unhindered access to employee and payroll documents reflecting names and payment
disbursements to workers employed at the farm, including employees paid only in cash.”
“Failure to pay minimum wage and overtime to agricultural workers has become
distressingly common when large agricultural actors, such as Fat Law’s Farm, establish a
clear system of nonpayment or underpayment of wages,” said Janet Herold, the DOL’s
regional solicitor in San Francisco. “This judgment makes clear that the department will
not permit the creation of a second-tier workforce in which coercion, substandard
housing and underpayment of wages rule the day.”
55
Consent judgments entered against Long Island restaurants reap more than $1.6M
in back wages to low-wage workers
By Pamela Wolf, J.D.
The DOL has obtained consent judgments in the Eastern District of New York against
seven Long Island restaurants that collectively will pay a total of $1,693,507 to 363 lowwage workers, primarily servers and kitchen employees. In total, the restaurants will also
pay $114,738 in civil money penalties and interest to the DOL for willful violations of
the FLSA, the agency announced on April 16.
The DOL’s Wage and Hour Division (WHD) found widespread violations by the
restaurants of the FLSA’s minimum wage, overtime, and recordkeeping requirements.
According to the WHD investigation, the employers engaged in unlawful activities, such
as paying below the federal minimum wage; paying cash off-the-books; not paying
overtime; illegal tip pools; failing to pay wages to certain employees; and not keeping
records of hours worked and wages paid to employees.
The investigations were conducted under the WHD’s multiyear enforcement initiative,
which is focused on strengthening labor compliance in Long Island’s restaurant industry.
The restaurants that were investigated and agreed to consent judgments, along with the
total amounts (rounded to the nearest dollar) they have agreed to pay, including back
wages and interest, damages and prejudgment interest, and civil money penalties and
interest, are:

Good Taste Buffet in Commack (Wei Mei Restaurant Corp., No 14-CV-1119):
$362,479

Kumo Sushi & Steakhouse in Stony Brook (SBKU Services Inc., No. 14-CV1118): $270,995

Crystal Garden in Ronkonkoma (DRMA Corp., No. 14-CV-1116): $320,105

Nishiki in Selden (Wasabi Japan Inc., No. 14-CV-1114): $299,955

Hotoke in Smithtown (JTBR Corp., No. 14-CV-1117): $241,235

Crystal Garden Buffet in Riverhead (LLP Restaurant Inc., 14-CV-1121):
$164,753

Kashi Sushi & Steakhouse in Rockville Centre (KJSS Corp., No. 14-CV-1120):
$148,725
Further information regarding the breakdown of the amounts paid by each employer is
provided in the DOL’s press release.
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In fiscal year 2013, the multiyear enforcement initiative cases conducted by the WHD’s
Long Island office resulted in $6.4 million in back wages for more than 1,300 workers
and reflected 71 consent judgments.
Owner-operator of five Ohio hotels and company that provided staff facing FLSA
suits for unpaid wages of 89 workers
The DOL has filed a pair of lawsuits against Hilliard, Ohio-based Darpan Management
Inc., five hotels the company owns and manages, and three company owners. One suit
asserts FLSA minimum wage and overtime violations related to hotel staff directly
working for Darpan Management; the other suit levels similar violations for workers
jointly employed by Fantastic Cleaning Ltd., a company that provided hotel staff to
Darpan Management. In the two suits, the DOL is seeking back wages and an equal
amount in liquidated damages for 89 workers.
The alleged FLSA violations occurred at the Baymont Inn & Suites, the Country Inns &
Suites, and two Four Points by Sheraton in Columbus, as well as the Holiday Inn Express
& Suites in Reynoldsburg, Ohio. Wage and Hour Division (WHD) investigators found
FLSA’s minimum wage, overtime and recordkeeping violations for 61 workers jointly
employed by Darpan Management and Fantastic Cleaning. According to the WHD,
Fantastic Cleaning, which provided housekeepers, attendants, and laundry staff for the
five hotels, misclassified the housekeepers, who were employees, as independent
contractors. These employees were purportedly paid by the room and often did not earn
enough to make the federal minimum wage. Employees also were not paid the legally
required overtime at time and one-half the employees’ regular rate when they worked
beyond 40 hours in a workweek, the WHD found.
Investigators determined that a total of $42,288 in back wages is owed to the 61 workers
jointly employed by Darpan Management and Fantastic Cleaning.
A second WHD investigation found that 28 workers directly employed by Darpan
Management as hotel staff are due $11,181 in unpaid minimum wages and overtime. The
company also allegedly failed to pay some workers for training time, resulting in
minimum wage violations. Moreover, workers were only paid overtime after they had
worked over 80 hours in a two-week period, as opposed to after 40 hours in a work week
as required by law, according to the WHD. In addition, hours worked were not computed
accurately by the employer, resulting in uncompensated overtime, and some employees
were wrongly classified as exempt from overtime, the WHD said. Darpan Management
also purportedly failed to maintain accurate and complete payroll records.
The DOL filed its lawsuits in the Southern District of Ohio; the case numbers are 2:14cv-00351 and 2:14-cv-00352.
Federal contractor debarred for three years following DOL investigation
Garcia Forest Service LLC and its president, Samuel Garcia, have been debarred from
eligibility for further service contracts with any U.S. government agency for three years,
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the DOL announced Thursday, after an investigation by the Wage and Hour Division’s
district office in Minneapolis found the Rockingham, NC-based company violated the
McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety
Standards Act by failing to pay fringe benefits, minimum wage, overtime, and holiday
pay to workers hired for a reforestation project in the Superior National Forest in
Minnesota.
The company entered into a contract in 2007 with the U.S. Forest Service, an agency of
the U.S. Department of Agriculture, for reforestation services, such as planting seedlings
and clearing brush in the Superior National Forest. The company primarily uses the H-2B
visa program to recruit and employ foreign guest workers to perform seasonal work
under its contracts. The DOL found that the company violated the SCA and the
CWHSSA by failing to ensure hours worked were accurately reported, resulting in
minimum wage violations, and not paying required fringe benefits, overtime, and holiday
pay.
Garcia Forest Service had previously been investigated by the Wage and Hour Division
regarding three contracts during 2005-2006. That investigation found the company had
failed to pay holiday pay under these contracts. The company provided back wages to the
affected employees as a result of the investigation. The company and its president
cooperated fully with the most recent investigation and subsequently paid 12 workers
$27,489 in back wages. An ALJ issued the debarment order. The consent findings were
filed by the DOL’s regional office of the solicitor in Chicago.
“Contractors that do business with the federal government have an obligation to abide by
the law, pay their employees the required contractual rates and benefits, and keep
accurate and complete required records,” said Laura A. Fortman, principal deputy
administrator of the Wage and Hour Division. “The Service Contract Act requires
debarment when violations are found unless the high standard of ‘unusual circumstances’
is met. Debarring this employer illustrates the department’s commitment to vigorous
enforcement of government contracting laws and helps level the playing field for lawabiding employers.”
The SCA requires that contractors and subcontractors performing services on covered
federal contracts in excess of $2,500 must pay their service workers no less than the
wages and fringe benefits prevailing in the locality. The statute applies to every contract
entered into by the United States or the District of Columbia, the principal purpose of
which is to furnish services in the United States through the use of service employees.
Agreement resolves alleged child labor violations after 17-year-old loses his arm
S & H Pallet Industries has reached an agreement with the DOL to settle allegations of
FLSA child labor violations after a 17-year-old worker’s arm was severed in an accident
at the Waveland, Indiana-based wood pallet manufacturing plant in 2010. A DOL Wage
and Hour Division (WHD) investigation found the company also employed three other
minors, including an 11-year-old, who were unlawfully operating hazardous equipment,
according to an April 12 WHD announcement.
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The 17-year-old was reportedly operating a power-driven wood pallet notcher when his
right arm was severed above the elbow. The company was cited for permitting minors to
operate woodworking machinery, a violation of Hazardous Occupations Order No. 5.
The WHD said that the three other minors, ages 11 to 17, were children of two full-time
machine operators. The minors purportedly assisted in operating machinery, a violation
of Child Labor Regulation 3, which prohibits employees under 16 from working in
manufacturing occupations. According to the WHD, the minors regularly assisted in the
performance of prohibited hazardous tasks, such as operating power-driven band saws,
circular saws, nail guns and other power-driven woodworking machines. Children under
age 14 are not permitted to be employed.
Pursuant to the settlement agreement, S&H Pallet will pay $56,505 in civil money
penalties. The penalties were assessed as part of the DOL’s Child Labor Enhanced
Penalty Program, as established under the Genetic Information Nondiscrimination Act,
which allows greater penalties to be assessed in cases involving violations of child labor
provisions that cause the death or serious injury of a minor.
“The severe injury suffered by this minor employee is a grim reminder of what can
happen when children are illegally permitted to operate hazardous equipment,” said
WHD District Director Patricia Lewis. “The department will continue to use all
enforcement tools available, including the assessment of civil money penalties, to achieve
compliance with these regulations and to ensure the safety of our working youth.”
Minimum wage bill fails to advance to up-or-down vote in Senate
By Pamela Wolf, J.D.
On Tuesday, April 29, the Senate took up consideration of the Minimum Wage Fairness
Act, a bill that would raise the federal minimum wage to $10.10 an hour in three steps
and then provide for automatic, annual increases indexed to the cost of living. The
proposal would also gradually raise the minimum wage for tipped workers, which is now
just $2.13 an hour, to 70 percent of the regular minimum wage. At least for now, though,
the bill is stalled on the Senate floor.
Senator Tom Harkin (D-Iowa), Chairman of the Senate Health, Education, Labor, and
Pensions (HELP) Committee, who introduced S. 2223, opened the debate. “When people
who are working hard and playing by the rules must rely on food stamps and food banks
to feed their children because their full-time wages trap them in poverty, that is
unacceptable,” Harkin said. “In fact, it is un-American. That is not what our great nation
is supposed to be about.”
Bill fails to make it to a vote. By the end of the day on Tuesday, there was a unanimousconsent agreement providing that at noon Wednesday, April 30, there would be a Senate
vote on whether cloture will be invoked on the motion to proceed to consideration of the
bill. The vote on cloture was indeed taken, but not with the outcome desired by Harkin
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and those who support the minimum wage bill. By a vote of 54-42, cloture was defeated,
giving the bill’s opponents the ability to keep it from advancing to an up-or-down vote.
The ballot fell along party lines, with all but one Democrat voting in favor of cloture and
all but a single Republican voting against it. Democrat Harry Reid (Nev.) voted against
cloture, while Republican, Bob Corker (Tenn.) voted for it.
Harkin quickly issued a statement regarding what he called “Republican Obstruction” of
the measure: “I am disappointed that Senate Republicans blocked my minimum wage bill
from moving forward. But not as disappointed as the 28 million workers who would have
seen a raise and as the 14 million children whose parents would have benefited. I am not
as disappointed as the 15 million women — many of them working parents — who
would have had additional income to buy clothes and food for their families. I am not as
disappointed as the business owners who would have benefitted from local workers
having more money in their pockets to spend. And I am not as disappointed as the
American people, who support this bill by overwhelming margins and have been calling
on their elected leaders to give America a raise.”
As to the issue of compromise, Harkin said he’s open to discussing how to get the bill to
the President’s desk, but not on the $10.10 amount that he characterized as a wage that
would lift working families above the poverty line. “We cannot compromise on helping
tipped workers get their first raise in twenty years,” he said. “And we cannot compromise
on indexing the wage to inflation. I cannot and will not support a bill that traps a full-time
worker and his or her family in poverty. That’s not good for our country or our
economy.”
Opposition to raising minimum wage. Senator Lamar Alexander (R-Tenn.) also issued
a statement explaining his vote against advancing to consideration of the minimum wage
proposal: “Surely Senate Democrats could come up with a better jobs program than one
that the nonpartisan Congressional Budget Office says would destroy 500,000 jobs,”
Alexander said. He pointed to a Congressional Budget Office estimate that that the
proposal would reduce total employment by about 500,000 workers and concentrate 80
percent of the benefits on families above the poverty level.
The White House has addressed the job elimination finding, characterizing it as a 0.3
percent decrease in employment that would be “essentially zero.” The Administration
also cited the statement of seven Nobel Prize winners and more than 600 other
economists: “In recent years there have been important developments in the academic
literature on the effect of increases in the minimum wage on employment, with the
weight of evidence now showing that increases in the minimum wage have had little or
no negative effect on the employment of minimum-wage workers, even during times of
weakness in the labor market.”
Nonetheless, according to Alexander, a raise in the minimum wage is not what’s needed,
but yet “The issue is right — it’s jobs.” He said that Americans want it to be easier to find
a good-paying job. To that end, he highlighted several bipartisan proposals that he
believed would help create jobs:
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
Increase the Earned Income Tax Credit

Change Obamacare’s definition of fulltime employment from 30 to 40 hours

Reform federal job training programs

Pass the “Scholarships for Kids Act”

Build the Keystone XL Pipeline

Pass the Trade Promotion Authority
Alexander also complained that lawmakers had been unable to offer amendments to S.
2223 at the committee stage.
LEADING CASE NEWS:
1st Cir.: Reducing per diem based on number of hours worked weekly meant per
diem operated as hourly wage; overtime liability attaches
By Joy P. Waltemath, J.D.
An employer’s formula that reduced the per diem paid to two engineers based on the
number of hours they worked each week meant that it operated as an hourly wage, and it
should have been counted as part of their regular rate for overtime purposes, the First
Circuit Court of Appeals ruled, reversing summary judgment for the employer. Instead,
the court remanded for entry of partial summary judgment to the engineers as to liability
(Newman v Advanced Technology Innovation Corp, April 18, 2014, Lipez, K).
Per diem rates. Two engineers whose new positions required them to work away from
home each signed a consulting agreement and offer letter listing an hourly wage, an
overtime rate more than one-and-a-half times that hourly wage, and a "per diem expense
reimbursement" in light of their remote work assignments. (The engineers were paid
different wage rates.) Each engineer also signed a Consultant Per Diem Certification that
provided for reimbursement "for any business expenses on a per diem basis" using the
relevant Internal Revenue Service Federal Travel Reimbursement rate.
The engineers contended that their employer wrongly labeled part of their regular hourly
wage a "per diem" and excluded the per diem when calculating the rate for overtime, thus
depriving them of overtime pay. They claimed that when they worked a full 40-hour
week, the per diem and hourly wage added up to $60 per hour, the regular wage that they
claimed they were promised when recruited. But when they worked less than 40 hours in
a week, the per diem payment was reduced, showing that the per diem was tied to hours
worked in a week and thus, in reality, was “a shadow wage.” They sued, contending that
their overtime had been improperly calculated. The district court granted summary
judgment in favor of the employer after examining the company's formula for calculating
the per diem, and the engineers appealed.
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Regular rate. According to the First Circuit, a per diem either can be excluded from, or
counted as, a regular wage depending on how it operates. Here, the engineers claimed
that the per diem operated like an hourly wage because their employer impermissibly tied
the per diem to hours worked. Typically, the regular rate does not include “reasonable
payments for traveling expenses, or other expenses, incurred by an employee in the
furtherance of his employer's interests and properly reimbursable by the employer; and
other similar payments to an employee which are not made as compensation for his hours
of employment,” the court pointed out.
Per diem varies with hours worked. Looking to the DOL’s Field Operations Handbook
as persuasive authority, Sec. 32d05a(c), the court found some “tension” in the
Handbook’s guidance. On the one hand, it says if the amount of per diem or other
subsistence payment is based upon and thus varies with the number of hours worked per
day or week, such payments are a part of the regular rate in their entirety. It goes on to
say, however, that employers can make “proportionate payments for that part of a day
that the employee is required to be away from home on the employer's business.” For
example, if an employee returns to his home or employer's place of business at noon, the
payment of only one-half the established per diem rate for that particular day would not
thereby be considered as payment for hours worked and could thus be excluded from the
regular rate.
Calculations in hours vs. days. The court resolved this conundrum by reasoning that the
Handbook's instruction means that the method of calculating the per diem “must use a
day as its measuring unit, and not an hour.” In other words, breaking a day into two
segments to reflect the presumably common practice of an early departure at week's end
is not the same as paying only a portion of the maximum weekly per diem based
precisely on the time worked during the week. According, said the court, if the per diem
method makes reductions from that maximum on an hourly basis — such that it would
reduce the total per diem by a mere hour's worth — it runs afoul of the Handbook's
guidance.
Here, the employer argued that it reduced the per diem only when the shortfall below 40
hours worked was entirely attributable to an early end of the work week, not based on
hours worked. However, the company treasurer’s formula made clear that the only factor
that mattered in calculating the weekly per diem was, in fact, the number of hours
worked. Explaining the company’s formula in some detail, the court remarked that it was
based on “straightforward division and multiplication” and resulted in a reduction to the
per diem that was “necessarily hours-based."
Rounding errors. In rejecting the engineers’ claim that the per diem was hourly, the
district court noted that their proposed "hourly per diem" figures did not yield results that
quite matched the weekly pay statements in the record. That was true, said the appeals
court, but only because the company's formula rounded at an intermediate step of the
calculations, thereby slightly altering the final number. Once those rounding steps were
identified, it was clear that the employer’s formula was “based upon and thus varies with
the number of hours worked per day or week." Given that the court saw no material
dispute of fact once the formula was closely examined, it reversed summary judgment for
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the employer and remanded for entry of partial summary judgment in the engineers’
favor as to liability.
The case number is: 13-1132.
Attorneys: Phillip Ben-Zion Leiser (Leiser Leiser Hennessy) for Eric Newman. Thomas
Joseph Gallitano (Conn Kavanaugh Rosenthal Peisch & Ford) for Advanced Technology
Innovation Corp.
3d Cir.: Requiring employee to sign and return offer and non-compete agreements
during FMLA leave is “de minimis” contact, not FMLA interference
By Brandi O. Brown, J.D.
The Third Circuit, in an unpublished opinion, affirmed the grant of summary judgment in
favor of an employer on a former sales executive’s claims that her employer interfered
with the exercise of her FMLA rights and retaliated against her by contacting her about
signing documents related to accepting a new position while she was on medical leave
and then terminating her employment when she failed to return the documents. The
contacts were “de minimis” and aimed only at retaining her as an employee and the
requirement that she sign the forms was made well before she invoked her rights under
the FMLA. In addition, her failure to sign the forms constituted a legitimate, nondiscriminatory reason for terminating her employment (O’Donnell v Passport Health
Communications, Inc, March 28, 2014, Shwartz, P).
In the fall of 2010, the employer was undergoing a reorganization. As part of that
reorganization, it was eliminating the employee’s Pennsylvania sales executive position,
which she had held for four years. She applied for a position in the Tennessee sales force
and was offered a job in January 2011 as a regional vice president in that state. She was
told that in order to assume the position, she had to sign a non-compete agreement. She
sought and received additional time for her legal counsel to review the agreement. She
was asked to return the signed forms four days after she was offered the position. On the
date they were due, she contacted the HR representative and told her that she was
negotiating her salary with her new boss and that she was continuing to seek the counsel
of her attorney.
Nine days later, she sought treatment from her physician for anxiety and panic attacks
and her physician advised her to take leave until the end of the month. She forwarded a
copy of her physician’s orders to her employer. Two days later her new boss agreed to a
salary raise and then told her they would work through HR, given her doctor’s orders. On
that same date, January 21, the HR representative sent her an email telling her that her
prior position had been terminated and offering her the option of either signing the noncompete agreement and accepting the new position or receiving severance for the old
position. The HR representative gave her a deadline to accept or reject the offer by
January 28 and explained that if she did not respond, it would be assumed that January 28
was her final day of employment. On January 28 the employee responded by email,
telling the representative that she was not voluntarily resigning. The HR representative
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stated that she had until the end of the business day to provide the signed offer letter and
non-compete agreement. The employee did not return the paperwork on that date or
thereafter. Her employment was formally terminated effective on January 28.
She filed suit, alleging that the employer had interfered with her leave in violation of the
FMLA and retaliated against her for taking leave. After discovery, both parties filed
motions for summary judgment and the district court granted judgment in favor of the
employer on the FMLA claim.
Interference. In order to prevail on the interference FMLA claim, the employee had to
show that she was entitled to benefits and that her employer denied them. While the
employer did not dispute that she was entitled to leave, it contended that it did not deny
her any benefits by requiring her to sign the offer letter and non-compete agreement and
by negotiating with her regarding her salary. There was no evidence that the employer’s
requirement regarding the forms, or the consequences for her failing to sign them, arose
because of her FMLA leave. The requirement was imposed “well before” the employee
invoked her rights under the FMLA. Moreover, the contacts with the employee were “de
minimis” and did not require her to perform work for the benefit of the employer and did
not “materially interfere” with her FMLA leave. Employees are not “completely absolved
of responding to the employer’s discrete inquiries” and the contacts in this case were
“aimed only at retaining” the plaintiff “as an employee.” Thus, there was no evidence that
the employer “in any way hampered or discouraged” the employee’s exercise of her
rights or “attempted to persuade her to return from her leave early.”
Retaliation. Unlike interference, retaliation claims require a showing of retaliatory
intent, the court explained, and this claim failed under the McDonnell Douglas burden
shifting framework. The parties’ argument focused on the element of causation. The
employee contended that HR’s email requiring her to return the documents or be fired
was sent only one day after she informed her employer about her FMLA leave. However,
the problem for the employee was that the requirement that she sign the forms had been
put in place two weeks before she took leave. The employee testified that she knew that
she had to sign the forms as a requirement of her new position. Even if the causation
element of the prima facie case were met, the employee’s claim would fail because her
failure to sign the forms was a legitimate, nondiscriminatory reason for her discharge.
The employee new about the reorganization, the elimination of her position, and the new
job offer contingent upon her signing the forms weeks before she invoked her rights and
she could not point to any evidence indicating the termination decision was pretextual.
“To the contrary,” prior to her termination, the employer had encouraged her to return the
forms and indicated that they were “glad” she was interested in accepting the position.
Thus, there were no facts from which a reasonable juror could conclude that her
discharge was based on anything other than that she failed to complete the necessary
paperwork.
The case number is: 13-2607.
Attorneys: Samantha S. Bononno (Jackson Lewis) for Passport Health Communications,
Inc. Alan B. Kane (Law Offices of Alan B. Kane) for Helene O'Donnell.
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3d Cir.: Successor in interest could be liable for predecessor’s FLSA overtime
violations under federal common law; joint employer theory was also viable
By Lorene D. Park, J.D.
Agreeing with two sister circuits that federal common law standards should determine if
a company was liable under the FLSA for overtime violations as a successor in interest,
the Third Circuit Court of Appeals vacated the dismissal of a mortgage underwriter’s
FLSA claims on this basis. It was enough that she alleged that all facets of the business,
such as operations, staffing, office space, email addresses, and employment conditions,
remained the same after the successor took over; that the successor had pre-transfer
notice of the overtime obligations because the same managers controlled payroll and
scheduling; and that the predecessor was now “defunct,” indicating it could not pay a
potential award. The employee’s direct liability and joint employer liability theories were
also revived, as were her claims against individual managers (Thompson v Real Estate
Mortgage Network, April 3, 2014, Vanaskie, T).
In June 2009, the employee was hired as a mortgage underwriter by Security Atlantic
Mortgage Company (Security Atlantic), a “nationwide direct mortgage lender.” However,
her training was led by a representative of another mortgage company, Real Estate
Mortgage Network (REMN), “a sister company,” according to the trainer. In February
2010, allegedly in response to a HUD investigation into Security Atlantic’s mortgage
practices, the employee and many coworkers were asked to fill out new job applications
to work for REMN. Thereafter, her paychecks were issued by REMN, though some
colleagues were still paid by Security Atlantic. Otherwise, there was no change in the onsite operations and the employee continued to do the same work, at the same desk, with
the same pay rate, work email, and direct supervisors.
According to the employee, throughout her employment, the defendants had her and
other underwriters regularly work overtime without being paid overtime pay. Filing a
“class and collective action” under the FLSA and New Jersey law, she claimed the
defendants uniformly misrepresented that the underwriters, closers, and HUD reviewers
were exempt employees ineligible for overtime pay. She sought relief from the
companies and two co-owners of Security Atlantic, who she claimed “made decisions”
on day-to-day operations, hiring, firing, personnel matters, schedules, pay policies, and
compensation. The district court dismissed her complaint.
Primary liability sufficiently pleaded. On appeal, the employee first challenged the
dismissal of her most straightforward claims: that (1) Security Atlantic committed
statutory violations by failing to compensate her appropriately between June 2009 and
her transfer to REMN in February 2010, and (2) REMN committed entirely separate
statutory violations by failing to compensate her appropriately between February 2010
and the conclusion of her employment in July 2010. The district court had not explained
its reasoning for dismissing the claims, but the defendants argued on appeal that the
allegations improperly grouped all defendants and failed to differentiate as to the alleged
wrongful conduct. Rejecting this argument, the Third Circuit found that the pleadings put
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the corporate defendants on fair notice that the alleged violations began when the
employee was hired by Security Atlantic and persisted during her tenure with the two
companies. It therefore vacated the dismissal of these claims under a theory of primary
liability.
Joint employment. The appeals court also vacated the dismissal of her claims insofar as
they depended on a theory of joint employment between Security Atlantic and REMN.
While the district court had emphasized that her employment by Security Atlantic was
separate and distinct from her employment by REMN, the appeals court found that she
alleged more. She claimed that an REMN employee conducted her training after she was
hired by Security Atlantic, indicating REMN had some authority to “promulgate work
rules and assignments” even before it hired her the following year. Moreover, the trainer
described REMN as Security Atlantic’s “sister company,” suggesting a broader degree of
corporate intermingling.
In addition, the employee’s allegation that she and virtually all other Security Atlantic
employees were abruptly and seamlessly integrated into REMN’s mortgage business
while some of those same employees continued to be paid by Security Atlantic supported
her claim that the two companies shared authority over hiring and firing. For these
reasons, and because she was a low-level employee with little opportunity for discovery
of payroll and taxation records or documents on internal corporate communications or
structure, the appeals court could not say that her amended complaint failed to state a
claim upon which relief can be granted.
Successor in interest. The employee alternatively sought to hold REMN liable for
Security Atlantic’s alleged violations as a successor in interest, obligated to assume that
company’s debts and liabilities. The parties disputed which law, state or federal,
governed the FLSA successor liability claims. The defendants urged the court to apply
New Jersey law, which holds that successor corporations are legally distinct and do not
assume debts or liabilities of the prior entity, with a few exceptions. The employee
argued that the federal common law standard that applies to LMRA, Title VII, and
ERISA claims should apply to her FLSA claim. The federal standard sets a lower bar for
imposing liability on successors and dictates consideration of only the following factors:
(1) continuity in operations and work force; (2) notice to the successor of the
predecessor’s legal obligation; and (3) the predecessor’s ability to provide adequate
relief.
Here, the appeals court agreed with two sister circuits that found the application of the
federal standard to FLSA claims to be a logical extension of existing case law. In
particular, the court drew from a Seventh Circuit decision, Teed v Thomas & Betts Power
Solutions, which reasoned that the logic behind having a distinct federal standard apply to
federal labor and employment statutes extends to the FLSA. Seventh Circuit Judge
Posner also wrote that: “In the absence of successor liability, a violator of the Act could
escape liability, or at least make relief much more difficult to obtain, by selling its assets
without an assumption of liabilities by the buyer . . . and then dissolving. And although it
can be argued that imposing successor liability in such a case impedes the operation of
66
the market in companies by increasing the cost to the buyer of a company that may have
violated the FLSA, it's not a strong argument. The successor will have been compensated
for bearing the liabilities by paying less for the assets it's buying.” The Third Circuit
found this opinion “well reasoned, directly applicable, and in accord with our own
jurisprudence.” Consequently, the federal standard applied to the employee’s FLSA
claim.
With that in mind, the appeals court concluded that the employee satisfied the federal
standard. The amended complaint alleged that essentially all facets of the business,
including operations, staffing, office space, email addresses, employment conditions, and
work in progress, remained the same after the February 2010 intercession of REMN. That
was sufficient to allege a plausible “continuity in operations and workforce.” As to pretransfer notice of the obligations, she alleged that both companies were essentially
controlled by a small group of managers who dictated payroll and scheduling and had an
ongoing knowledge of systematic FLSA violations. While the court found these
allegations made REMN’s notice of pre-transfer overtime practices unclear, this was not
a factor as to which the employee should be expected to come forward with detailed
proof at the motion to dismiss stage.
With respect to the third factor, the fact that the defendants represented that Security
Atlantic is now “defunct” indicated it was likely incapable of satisfying an award of
damages. Because all three factors were sufficiently alleged, dismissal of the successor
liability FLSA claim was not warranted under the federal standard. The appeals court
further concluded that dismissal was not appropriate on the state law claims under the
New Jersey standard for the same reasons.
Individual liability. The FLSA imposes individual liability on “any person acting
directly or indirectly in the interest of an employer in relation to an employee.” Aside
from the corporate entity itself, a company’s owners, officers, or supervisory personnel
may also constitute “joint employers” for purposes of liability. Courts consider whether
the individual exercised supervisory authority over the employee and was responsible in
whole or in part for the alleged violation while acting in the employer’s interest. The
focus is on the “totality of the circumstances rather than on technical concepts of the
employment relationship.”
Here, the amended complaint alleged that the individual defendants “made decisions
concerning Security Atlantic’s and REMN’s day-to-day operations, hiring, firing,
promotions, personnel matters, work schedules, pay policies, and compensation.” When a
work or personnel issue arose at Security Atlantic that the employee’s supervisor could
not address, he consulted with the individual defendants. And in June 2010, when the
employee asked one of the individual defendants about overtime compensation, he
responded that he “did not pay overtime to underwriters.” That was enough to draw a
reasonable inference that the individual defendants were liable for the misconduct
alleged, concluded the appeals court. Consequently, the dismissal of the claims against
them was also vacated.
67
The case number is: 12-3828.
Attorneys: Mitchell A. Schley (Law Offices of Mitchell Schley) for Patricia Thompson.
Ari Karen (Offit Kurman) for Real Estate Mortgage Network.
6th Cir.: Text of arbitration agreement, common expectations of parties
demonstrate that agreement designed to head off future suits, not cut off pending
one
By Sheryl Allenson, J.D.
Drawing both on the language of an arbitration agreement signed during an employee’s
second stint with Citigroup and the context surrounding it, the Sixth Circuit affirmed a
district court’s decision, ruling that Citigroup could not compel arbitration of a lawsuit
filed before the employee was rehired and signed the agreement that would cover his
claims. Looking as deep as the grammar used in the agreement, the appeals court decided
that it engendered the parties’ intent to head off future suits, not to cut off existing ones
(Russell v Citigroup, Inc, April 4, 2014, Sutton, J).
First suit. When the employee was first hired to work at a call center for Citigroup, he
signed a contract to arbitrate his disputes, which covered his individual claims but not
class actions. Three years after he left the company, he filed a class action wage claim,
alleging the employer failed to pay its employees for time spent logging into and out of
their computers at the beginning and end of the work day. The employer defended the
action in court and did not try to compel arbitration because the agreement did not cover
class claims.
New agreement. Later that year, with that suit still pending, the employee applied for an
open position at the employer’s call center. He was rehired and signed a newly drafted
arbitration agreement. This time, the agreement covered both individual and class claims.
In a strange coincidence, the employee started back to work in January, 2013, marking a
year since he had filed suit. Both parties were rather nonchalant about the employee’s
decision to enter into the new agreement: he did not consult his attorney and the
employer’s outside attorneys in the ongoing litigation did not even know that the
employee came back to work there. Ultimately, these were all factors in the appeals
court’s finding that the parties did not intend the second arbitration agreement to cut off
past litigation.
Nonetheless, soon after Citigroup’s outside attorneys found out that the employee had
rejoined the company and signed the new arbitration agreement; they filed a motion to
arbitrate the previously filed wage suit. The district court denied the motion.
Grammatical distinctions. On appeal, the Sixth Circuit first considered the text of the
arbitration agreement itself. Turning to grammatical distinctions, the appeals court said
that the “Scope of Policy” provision “suggests that the agreement does not evict pending
lawsuits from court.” The clause covered disputes that “arise between [the employee] and
68
Citi.” Use of the present tense supported the court’s position that it governed only
disputes arising in the present or future. The preamble to the agreement added further
force to this conclusion. There, the agreement said that the company “looks forward” to a
good relationship with [the employee], “not that it looks back on their earlier relationship
with fond memories.” The agreement also used other present verbs, all suggesting that
the parties signed the agreement to head off future suits, not to cut off existing ones.
Parties’ expectations. There was also the issue of common expectations, the Sixth
Circuit explained. The employee outright said he thought the second arbitration
agreement only applied to future suits. As to the employer, it seemed “doubly
improbable” that it would have expected the arbitration agreement to govern pending
suits. The employer, a sophisticated company, did not consult with its attorneys about the
second arbitration agreement, a schema unlikely if it thought it might bind itself under
that agreement.
There were ethical considerations, too. If the agreement was sent directly to the
employee, and there was an expectation that he was represented for purposes of that
agreement, the employer’s in-house counsel who may have prepared the contract would
have obligations regarding communication with the employee.
There was no evidence supporting an argument that the employer expected the agreement
to govern pending suits; to the contrary, because the employee definitely believed it
would only cover future suits and it seemed likely that the employer carried the same
expectation, the appeals court found that there was a common understanding, fixing the
meaning of the contract.
Although the employer relied on general terms in the arbitration policy, stating that it
covered “all employment-related disputes …which…arise between [the employee] and
Citi,” the Sixth Circuit, drawing far-out analogies, explained that “milieu limits the reach
of general words like ‘all.’” Here, the context provided by the document limits the more
general language, the appeals court explained.
The employer did make one argument not easily dismissed, leaning on the Federal
Arbitration Act for support. Though the Sixth Circuit acknowledged that the Act requires
the court to resolve “any doubts concerning the scope of arbitrable issues . . . in favor of
arbitration,” the parties’ most apparent intentions controlled, meaning that the agreement
here covered only future suits. There was “forceful evidence of a purpose to exclude a
claim” from the grips of the presumption of arbitrability. If the court applied that
presumption in such circumstances, it would lose sight of the purpose of giving effect to
the parties’ intent.
The case number is: 13-5994.
Attorneys: Richard M. Paul, III (Paul McInnes) for Keith Russell. Samuel S. Shaulson
(Morgan, Lewis & Bockius) for Citigroup, Inc. Citicorp Credit Services, Inc.
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7th Cir.: With no evidence of causation, summary judgment to employer affirmed
on employees’ retaliatory discharge claims
By Lisa Milam-Perez, J.D.
Two mortgage consultants for a nonprofit agency who made repeated complaints about
minimum wage violations and breaches of federal lending laws were unable to show they
were discharged in retaliation for their protected activity, the Seventh Circuit held,
affirming summary judgment in the employer’s favor. The employees could not establish
that the stated reason for their termination — violations of the employer’s “paperless
policy,” among other infractions — was pretext for retaliation. Nor could they create a
fact issue, based on an uninformed answer to an interrogatory, as to whether the CEO
who undisputedly had no knowledge of their litany of complaints was the final decisionmaker behind their terminations (Reid v Neighborhood Assistance Corp of America, April
1, 2014, Manion, D).
Squeaky wheels. The employees worked as mortgage consultants in the Chicago office
of Neighborhood Assistance Corp of America (NACA), a national nonprofit organization
that assists prospective homeowners in securing mortgages. Through the course of their
employment, they made a number of complaints to the office manager and the regional
manager that they were being paid less than the (recently increased) Illinois minimum
wage rate. On several occasions, they complained too that mortgage applications were
being prepared by unlicensed consultants (in violation of state and federal law) and then
signed by licensed consultants; they also complained that NACA was splitting the
commissions between licensed and unlicensed mortgage consultants and the company
itself. One of the employees also complained several times to management after he spoke
with state and federal regulators about the practices during an audit of NACA in 2010.
The other plaintiff raised similar concerns, as well as complaints that NACA had botched
his own licensing application, so he could not receive the full commission he would
otherwise have been entitled to.
The two plaintiffs were not alone, though. At least four other employees registered their
beefs about not being paid minimum wage or not getting proper overtime pay, and five
others complained about splitting commissions on mortgage applications prepared
between licensed and unlicensed mortgage consultants.
Discharge. The employees (and one other coworker) were discharged after a national
NACA official, visiting the Chicago branch one weekend and being taken on the
obligatory tour of the office, discovered that it was in violation of company policies.
Specifically, she saw alcoholic beverages in one plaintiff’s office and volumes of paper
copies of confidential documents, which violated NACA’s “paperless policy,” throughout
the branch. While the entire office was in violation of the paperless policy, only a few
employees, including the plaintiffs, were discharged. That was because they had other
strikes against them; NACA later explained, including one plaintiff’s “poor service” and
70
the other’s early departure one day earlier to attend a Bulls game, among other
infractions.
Retaliation claims. The employees filed suit asserting state-law retaliation claims,
contending they were really fired for their protected activity in lodging complaints about
NACA’s violations of state and federal law. The stated reasons for their discharge had
shifted, suggesting pretext; the timing was suspect; and initial responses to interrogatories
asserted that the CEO was not involved in the discharge decision, they argued, appealing
the lower court’s grant of summary judgment to the employer.
Retaliation claims under Illinois law differ from federal retaliation claims under the
McDonnell Douglas framework, the Seventh Circuit noted at the outset, in that Illinois
law requires a plaintiff to offer affirmative evidence of causation to survive summary
judgment. The employees could not do so here.
Decision-maker. The employees first questioned the fact that NACA’s initial response to
interrogatories made no mention of the CEO’s involvement in their discharge. This
mattered because it was undisputed that the CEO had no knowledge of the employees’
ongoing complaints, and the employees sought to arouse disputed fact issues as to
whether he played any role in their demise. But “this initial omission is not a conclusive
admission,” the appeals court said. NACA’s in-house counsel answered the
interrogatories with the information available to him at the time. When every single
NACA manager later testified that the CEO was involved, the employer amended the
interrogatory answer and the CEO was deposed, and he testified that he was the final
authority on the firing decision.
“NACA changed its strategy to assert the same, no doubt pleased that the undisputed
evidence showed that [the CEO] had no knowledge of the plaintiffs’ complaints,” the
court noted. As such, a jury could not reasonably find that the CEO was uninvolved in the
discharge decision.
“Moving target” defense. Next, the employees questioned the employer’s “moving
target” defense — i.e., the seemingly shifting reasons for their discharge. Initially, NACA
said they were fired for violating the paperless policy, a reason the employees claimed
was pretextual because, for one, it didn’t merit discharge in their view. But every
manager who testified thought that a violation of the paperless policy was sufficient
grounds to fire an at-will employee.
Also, the CEO had conceded that the entire Chicago office could have been fired for this
violation, but contrary to the employees’ contention, this admission didn’t suggest
pretext. As the CEO explained, such a bloodbath would have left no one remaining to run
the office. So he selected the plaintiffs (and one other employee) for firing because they
had other infractions. Therefore, the reasons stated were not inconsistent, the appeals
court said, and did not represent a suspicious shift from the main reason for their firing.
Moreover, numerous other employees who complained and violated the policy were not
fired, while one employee who was fired alongside the plaintiffs had no record of
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complaints. Also noteworthy was that their manager was fired shortly thereafter, the CEO
having concluded that she should be held accountable for the pervasive violations of
company policy too.
“A jury might reasonably be suspicious if the people with additional problems who were
fired were complainers and those who were retained were non-complainers, but that is
not the case,” the court noted. “The reasons NACA offered, though they were later added
to in order to explain why others were not terminated, were not shifting or inconsistent,
and there was no suspicious pattern in the employees it chose to fire or retain.”
Timing. Nor was the element of timing on the employees’ side. While they argued that
they had complained three days and 11 days, respectively, before their firing, this did not
give rise to a reasonable inference of retaliatory animus given the evidence as a whole. In
context, the sequence of events leading up to their firing was six months of occasional
complaints. And there was no evidence that their complaints had recently escalated; if
anything, they had lessened in severity. One plaintiff had spoken to federal regulators
months before he was let go, but merely resorted to emails and comments in person or
over the phone after that high-mark of protected conduct. The other employee only made
the occasional email or remark.
Moreover, an intervening event had immediately preceded their termination — the visit
from the NACA official and her discovery of pervasive policy breaches. (That official, by
the way, was unfamiliar with the plaintiffs or their record of protected activity.) Thus, the
timing did not give rise to a reasonable inference of retaliatory intent.
Finally, although Illinois retaliatory discharge law does not require an employer to
proffer reasons for firing an employee, NACA did so convincingly here, the appeals court
found. Because an inference of retaliatory intent was not reasonable, the judgment of the
district court in favor of the employer was affirmed.
The case number is: 13-1768.
Attorneys: Michael L. Tinaglia (Law Office of Michael L. Tinaglia) for Kendall Reid.
Darren M. Mungerson (Littler Mendelson) for Neighborhood Assistance Corp. of
America.
9th Cir.: State employees entitled to informants’ privilege in FLSA suit; DOL need
not turn over identifying information to state agency
By Lorene D. Park, J.D.
Finding clear legal error in a district court’s conclusion that the government informant
privilege did not apply to 250 anonymous state employees because they provided
statements to the United States Department of Labor (DOL) after it filed an FLSA suit
against their state agency employer, the Ninth Circuit granted the DOL’s petition for a
writ of mandamus and ordered the lower court to enter a protective order. The appeals
court pointed out that the DOL’s case would depend on the information received from
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150 other state employees who had consented to the disclosure of their identities, and that
the state employer already had this information in its possession (Perez v United States
District Court, Tacoma, April 18, 2014, Trott, S).
In 2006, the DOL received a complaint from a social worker employed by the
Washington State Department of Social and Health Services (DSHS), alleging that she
was not paid overtime despite working an average 45-65 hours per week. An initial
investigation followed, during which approximately 50 other social workers made similar
claims. They were allegedly told by supervisors that it was DSHS’s policy not to
authorize overtime, except in emergencies, and to “flex” their schedules to make up for
the overtime worked. However, their heavy caseloads prevented them from taking “flex”
time.
The Secretary of the DOL filed suit against DSHS alleging violations of the FLSA’s
overtime and recordkeeping provisions. Early in the litigation, DSHS provided the DOL
with a list of all affected employees, totaling around 2,000 social workers. The DOL sent
1,500 employees a questionnaire asking about working conditions and assuring
confidentiality of identifying information absent their release or a court order. The DOL
received 350 responses.
Discovery dispute. Thereafter, DSHS served three interrogatories seeking the identities
of individuals with knowledge of the facts alleged. The DOL objected, invoking the
government’s informant privilege to protect against disclosing the identities of the
individuals who provided it with information. However, the DOL waived the privilege as
to 150 affected employees who authorized the disclosure of their identities and provided
DSHS with their statements.
As to the 250 employees who wished to stay anonymous, the DOL disclosed their
statements but redacted identifying information. Unsatisfied, DSHS filed a motion to
compel and the DOL filed for a protective order. The DOL argued that it already turned
over unredacted statements from 150 employees, along with the others’ redacted
statements, so it could only produce information that would reveal the identities of the
anonymous employees. Ordering the DOL to produce the information, the district court
found that the privilege protected only the 50 employees who gave their statements in the
initial investigation before the suit and that it was “essential” that DSHS receive the
information so it could rebut the Secretary’s evidence. To avoid disclosing the identities
of the informants, the DOL petitioned the Ninth Circuit for a writ of mandamus.
Mandamus factors. Noting its reluctance to interfere with a district court’s day-to-day
case management and that a writ of mandamus is a “drastic and extraordinary remedy,”
the appeals court pointed to five factors guiding its analysis: (1) whether the petitioner
had other adequate means to obtain relief; (2) whether the petitioner would be damaged
or prejudiced in a way not correctable on appeal; (3) whether the district court’s order
was clearly erroneous; (4) whether the order made an “oft-repeated error” or manifested
“a persistent disregard of the federal rules;” and (5) whether the order raised new and
important problems or legal issues of first impression. Not every factor had to be present
at the same time.
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While DSHS argued that the DOL had another means of relief because it could violate
the court order, receive dismissal as a sanction, and then appeal, the Ninth Circuit
explained that it does “not require a party like the Secretary to take such a drastic step in
lieu of filing a petition for mandamus.” The second factor was also met because, once the
anonymous informants’ identities were disclosed, they could not be protected again.
Moreover, the district court’s conclusion as to when the privilege attached was, as
explained later in the opinion, “novel, unjustified, and clearly erroneous as a matter of
law,” the appeals court noted. For these reasons, and because the lower court incorrectly
balanced the interests at stake, all but the fourth mandamus factors were met.
Timing of disclosures. Finding clear legal error in the district court’s distinction between
the employees who gave statements about their work condition before the DOL filed suit
versus those who gave statements after suit was filed, the appeals court pointed to
Supreme Court authority on the “modern formulation of the informants’ privilege.”
Basically, to promote law enforcement, the privilege protects the identity of those who
furnish information on violations of the law to officers charged with its enforcement from
“those who would have cause to resent the communication.” The temporal dividing line
drawn by the court below “promotes neither effective law enforcement nor fair trials,” the
appeals court averred.
Furthermore, informants are an “important lot because the FLSA, and the ‘great public
policy which it embodies’” relies for its enforcement on information received from
employees seeking to vindicate rights that have been denied. “The Secretary’s
dependence on these crucial employees continues even after the complaint is filed,” the
court explained, noting that in a typical suit, “it is after the commencement of litigation
that ‘parties . . . obtain the fullest possible knowledge of the issues and facts’ of their
case.” In addition, “the timing of the employee’s disclosure is unlikely to temper the
reaction of an employer who feels he has been betrayed by his employee,” and the
privilege “is a particularly effective means of preventing retaliation.” The DSHS’s
promise not to retaliate was simply not enough to dispel such fears. For these reasons, the
appeals court held that the 350 affected employees who provided the Secretary with
relevant information after the complaint was filed were informants eligible for the
privilege’s protection.
DSHS’s need for information not enough. For the informants’ privilege to give way,
the DSHS had to show that its need for the information outweighed the DOL’s interest in
nondisclosure. The DSHS argued that the information about all 2,000 affected
employees’ positions, regions, offices, duties, and more could allow it to “demonstrate
substantial differences among individuals and groups,” and the identities of the informers
would remain hidden in plain sight. The appeals court was not convinced. The DOL did
not have information as to all 2,000 affected employees. The only information came from
400 statements it received during the initial investigation and the responses to the
questionnaire. That fact “dramatically affects how the scales tip in this case,” the appeals
court found.
The appeals court explained that understanding the DOL’s burden required an
understanding of the Supreme Court’s decision in Anderson v Mt Clemens Pottery Co. In
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cases where an employer has not kept accurate records of employees’ time, Mt Clemens
Pottery allows the Secretary to prove an FLSA violation by showing that employees
performed work for which they were improperly compensated and producing some
evidence to show the amount and extent of that work “as a matter of just and reasonable
inference.” Under Ninth Circuit authority, such evidence may consist of “fairly
representative testimony” from a sample of employees.
Here, the DOL’s sample would come from the 150 employees who authorized disclosure
of their identities. Through their testimony, it could establish that their duties and hours
worked were a fair approximation for any other social worker employed by DSHS in the
state, and that all 2,000 affected employees’ work conditions were substantially similar so
as to merit class-wide relief. Significantly, DSHS knows all the details it seeks as to these
key employees, explained the appeals court, because the Secretary turned over their 150
statements in total. Moreover, DSHS already has the information needed to compare
these employees against the remaining 1,850 affected employees.
Only identities undisclosed. As to the remaining 250 statements provided by employees
who did not consent to having their identities revealed, much of the content of their
statements was turned over, including information on their hours worked. The
undisclosed information consisted of only the identifying information. While such
information may meet the general standard for relevance under Fed. R. Evid. 401, the
appeals was not convinced that its probative value was so great that it was “essential” to
DSHS’s defense. “DSHS cannot force the Secretary to reveal the identities of his
informants on such a weak showing,” the court concluded. For these reasons, the appeals
court vacated the district court’s order compelling a response to the DSHS’s
interrogatories and directed the lower court to enter a protective order consistent with the
opinion.
The case number is: 13-72195.
Attorneys: Kara A. Larson for Washington State Department of Social and Health
Services. Rachel Goldberg for Thomas E. Perez.
9th Cir.: Failure to notify employee of FMLA rights did not cause job loss;
employee’s misconduct did
By Joy P. Waltemath, J.D.
In an unpublished opinion, the Ninth Circuit affirmed summary judgment for an
employer on claims that it interfered with its employee’s purported FMLA rights by
failing to notify her of those rights. Although the employer apparently failed to notify the
employee of her rights, it was undisputed that her termination was a result of misconduct;
consequently, she had no evidence that she lost compensation or benefits, or suffered
other monetary losses, because of the employer’s failure to notify her (Silver v Corinthian
Colleges, Inc, April 25, 2014, per curiam).
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No loss from lack of notice of FMLA rights. Citing Ragsdale, the Ninth Circuit noted
that employers are liable only for compensation and benefits lost “by reason of the
violation,” for other monetary losses sustained “as a direct result of the violation,” and for
“appropriate” equitable relief — in other words, any damages must be due to the
employer’s failure to notify the employee of her FMLA rights. But the employee lacked
any evidence that she lost compensation or benefits, or otherwise suffered monetary
losses, due to the failure to notify. Instead, she admitted that her termination was the
result of “misconduct.”
And, although the employee did present evidence of her claim for equitable relief in the
form of front pay, the FMLA does not provide a remedy for an injury resulting solely
from termination for misconduct. Employees are not entitled to any benefit except one for
which the employee would have been entitled had he or she not taken leave; the FMLA
does not give them greater rights.
Termination not based on failure to notify. Similarly, the employee’s claim for
wrongful termination in violation of the public policy embodied in the FMLA failed
because she did not allege any causal connection between her termination and the
employer’s failure to notify her of her potential FMLA rights. Finally, the employee
abandoned her California state wage claim at the district court level. Summary judgment
for the employer was affirmed.
The case number is: 12-56221.
Attorneys: Price Kimberley Kent (Law Offices of Price K. Kent) for Sheryl Silver.
Jeffrey Kenneth Brown (Payne & Fears) for Corinthian Colleges, Inc.
11th Cir.: Severance agreement waived employee’s FMLA interference and
retaliation claims
By Ronald Miller, J.D.
By signing a severance agreement with her former employer, an employee waived her
claims of interference and retaliation under the FMLA, ruled the Eleventh Circuit in
affirming a district court’s grant of summary judgment to the employer. In a question of
first impression, the Eleventh Circuit rejected the employee’s interpretation of
“prospective rights” under the FMLA to mean “the unexercised rights of a current
eligible employee to take FMLA leave and to be restored to the same or an equivalent
position after the leave.” Because all of the allegedly unlawful employer conduct
occurred before the employee signed the severance agreement, her contention that her
FMLA claims were “prospective” and therefore not waivable under Department of Labor
regulations failed. Similarly, her alternative argument that her signing of the severance
agreement was not knowing and voluntary, and that the agreement was void as contrary
to public policy also failed (Paylor v Hartford Fire Insurance Co, April 8, 2014, Tjoflat,
G).
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While working at Hartford between January 2008 and September 2009, the employee
requested and received 390 hours of FMLA leave. Sometime in late August or early
September 2009, she required additional FMLA leave. According to Hartford, on
September 4, 2009, it approved the employee’s leave in an email that included various
administrative forms. The employee disputed this and asserted that she was first approved
for FMLA leave in a letter.
Severance agreement as bar to FMLA claims. The employee’s last performance
review, issued a week after the email, included a performance warning, criticized the
employee’s work, and explained what she needed to do to retain her employment. Several
days later, her supervisors initiated a meeting and gave her a choice: she could accept a
one-time offer of 13-weeks of severance benefits in exchange for signing a severance
agreement, under which she waived any claims she might have under the FMLA, or she
could agree to a performance improvement plan (PIP) requiring her to meet various
performance benchmarks or face termination. The employee signed the severance
agreement.
Thereafter, she joined two other employees in filing a complaint against Hartford for
alleged violations of the FMLA. In response, Hartford asserted that the employee’s
FMLA claims were barred by her execution of the severance agreement. Following
discovery, the district court granted Hartford’s motion for summary judgment, holding
that the Eleventh Circuit would find that the release was enforceable pursuant to 29
C.F.R. Sec. 825.220(d). The district court reasoned that the employee’s FMLA rights
were not “prospective” because the conduct she claimed was unlawful all happened
before she signed the severance agreement. This appeal followed.
Validity of severance agreement. Here, the Eleventh Circuit observed that there was no
dispute that the FMLA applied to the employer, that the plaintiff was an “eligible
employee” or that she was entitled to FMLA leave at the time she requested it. Moreover,
there was no question whether Hartford in fact interfered with or retaliated against the
employee because she asserted her FMLA rights. Rather, the appeal was concerned only
with the validity of the severance agreement.
The district court did not err in concluding that Hartford was entitled to summary
judgment on the employee’s FMLA claims, ruled the appeals court. The appeals court
first examined whether the employee waived her FMLA claims when she signed the
severance agreement. In this instance, the employee contended that the waiver could not
be enforced against her because the FMLA does not permit employees to waive
“prospective rights” without DOL or court approval. The employee asserted that her
rights were “prospective” in the sense that she had an outstanding request for FMLA
leave at the time she signed the agreement. It is well-settled that an employee may not
waive “prospective” rights under the FMLA, but an employee can release FMLA claims
that concern past employer behavior.
Unexercised right. In rejecting the employee’s interpretation of “prospective rights”
under the FMLA to mean “the unexercised rights of a current eligible employee to take
FMLA leave,” the Eleventh Circuit pointed out that all eligible employees possess an
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“unexercised” right, in the abstract, to FMLA leave. If “prospective” rights under the
DOL regulation really meant “unexercised” rights, the FMLA would make it unlawful to
fire any eligible employee, or at least any eligible employee with an outstanding request
for FMLA leave. However, that it not the law, declared the appeals court. The better
interpretation is that “prospective rights” under the FMLA are those allowing an
employee to invoke FMLA protections at some unspecified time in the future. Thus, an
employer could not offer all new employees a one-time cash payment in exchange for a
waiver of any future FMLA claims.
The employee’s circumstances were different. The severance agreement did not ask her
to assent to a general exception to the FMLA, but rather to release a claim of the specific
claims she might have based on past interference or retaliation. As a result, the appeals
court rejected the employee’s interpretation of “prospective” FMLA rights, concluding
that a “prospective” waiver means only that an employee may not waive FMLA rights, in
advance, for violations that have not yet occurred.
In this instance, the conduct that the employee complained about all happened before she
signed the severance agreement. Specifically, the employee alleged that Hartford both
interfered with and retaliated against her FMLA request when it asked her to choose
between the PIP and the severance agreement. However, that alleged conduct all occurred
prior to the employee signing the severance agreement. In signing the agreement, the
employee wiped out any backward-looking claims she might have had against her
employer. Thus, the district court did not err in concluding that the agreement was valid
and Hartford was entitled to judgment as a matter of law.
The case number is: 13-12696.
Attorneys: Mary Evelyn Lytle (Lytle & Barszcz Law Offices) for Blanche Paylor.
Hartford Fire Insurance Co., pro se.
Conn. Sup. Ct.: State law preempted by FLSA; employee not entitled to
compensation for commuting time
By Ronald Miller, J.D.
Because state regulations, Regs., Conn. State Agencies Sec. 31-60-10, as applied to the
facts of this case conferred lesser benefits on employees than those afforded by the
FLSA, the Connecticut Supreme Court concluded that federal preemption applied so that
an employee was not entitled to compensation for his commuting time. While the state
regulation did not provide compensation for an employee’s regular commute, under
certain circumstances, the FLSA allowed for compensation for an employee’s regular
commute. Moreover, the state high court affirmed the decision of the trial court denying
the employee’s motion for attorney’s fees. Justice McDonald, with whom Justice Palmer
joined, filed a separate concurrence (Sarrazin v Coastal, Inc, official release date April
29, 2014, Espinosa, C).
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The employer was a plumbing contractor engaged in the installation and repair of
plumbing systems in large construction projects. The plaintiff was a plumber. Each day,
he traveled directly from his home to the location of his current job assignment.
According to the employee, his daily commute to the various job sites was approximately
one hour each way so that his two-hour roundtrip commute required him to work in
excess of 40 hours per week. As a foreman, the employee was required to keep
equipment and tools in his company-owned truck so he could bring them to various job
sites. He was also occasionally directed to pick up tools from the employer’s warehouse
at the end of the workday, after regular work hours, for use at job sites. After the
company truck was totaled in an automobile accident, the employer paid the employee
$50 per week to use his personal truck, until the company vehicle was replaced. The
employee also alleged he spent 30 minutes daily cleaning the company truck.
The employee brought this suit seeking overtime wages for his daily commute between
home and job sites, and the one-half hour he claimed he spent cleaning the truck and
organizing tools, and occasional trips to the warehouse. Following a trial on liability, the
trial court found that the employer was liable for overtime payment only for the
occasional trips to the employer’s warehouse to pick up tools and equipment. With
respect to the employee’s claim for compensation for travel time, the trial court
concluded that the FLSA preempted applicable state laws. The trial court determined that
the employee was a foreman, not a driver, so that his use of the company vehicle for
commuting, pursuant to an oral agreement, was “one of the benefits of being a foreman,”
and the requirement that he carry tools was merely incidental to his use of the truck for
commuting. Finally, the trial court found that the distance was within the normal
commuting area of the employer’s business. The appellate court dismissed the
employee’s appeal. This appeal followed.
Applicability of savings clause. According to the employee, the trial court improperly
concluded that the FLSA preempted Connecticut statutes and regulations governing
overtime wages and travel time, and improperly applied federal principles to conclude
that he was not entitled to overtime compensation for his travel time. Specifically, the
employee relied on an interpretation of Sec. 31-60-10 of the regulations by the
Connecticut Department of Labor to argue that state law conferred greater benefits on
employees that the federal law. In contrast, the employer responded that the FLSA’s
savings clause, 29 U.S.C. Sec. 218 covered only minimum wage and overtime laws, not
travel time laws. Alternatively, it argued that because the applicable state laws were not
more beneficial to employees than the FLSA they were preempted.
As an initial matter, the Connecticut high court considered whether the provisions of the
Portal-to-Portal Act, preempted the state’s laws governing travel time and overtime. No
provision of the FLSA expressly preempts state law, observed the court. It is clear that
Congress did not intend the FLSA to occupy the field. Consequently, the FLSA preempts
only state law that is in ‘‘irreconcilable conflict’’ with federal law. Courts have
interpreted the FLSA’s savings clause as a national floor with which state law must
comply. State laws that provide the same or greater protection than that provided by the
FLSA are consistent with the federal statutory scheme and are thus not preempted.
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However, the court disagreed with the employer’s argument that the savings clause
applied only to overtime and minimum wage laws. First, preemption under the FLSA is
relatively narrow in scope, extending only to directly conflicting laws. Second, the court
recognized that laws governing travel time compensability are not easily separable from
overtime and minimum wage laws. Here, the compensability of the employee’s travel
time was inextricably linked to his entitlement to overtime. Accordingly, the savings
clause applied.
Federal preemption. To decide whether the FLSA preempted the applicable state laws,
the court had to compare the applicable state and federal provisions to determine whether
the Connecticut statute met the national floor. Preemption applied only if the state
overtime laws and related travel time regulations were less generous to employees than
the FLSA. With respect to overtime compensation, the state and federal laws were
virtually indistinguishable. For purposes of determining whether the employee was
entitled to overtime wages, his travel time counted toward his total weekly work hours
only if that time was compensable. Thus, the court had to examine the relative rights
available to employees under the federal and state laws and regulations governing the
compensability of travel time.
The Portal-to-Portal Act, establishes a general rule that commuting time, as well as
activities that are preliminary and postliminary to the employee’s principal work activity,
are not compensable.
Additionally, the final sentence of 29 U.S.C. Sec. 254 (a), which was added by the
Employee Commuting Flexibility Act, addresses the impact of an employee’s use of a
company vehicle for commuting, providing that such activity may be governed by an
agreement between the parties. Moreover, the courts interpreting the Portal-to-Portal Act,
have carved out an exception to the general rule that travel time is not compensable.
However, the employee bears the burden of demonstrating that his or her travel is
compensable, and that compensability turns on the question of whether the employee’s
travel time constitutes “work.”
Normal commuting area. To determine whether travel time constitutes compensable
“work” under the Portal-to-Portal Act, courts consider whether the employee’s
commuting time is integral and indispensable to the principal work activity. Put simply,
courts consider whether the “time is spent predominantly for the employer’s benefit or
for the employee’s [which] is a question dependent upon all the circumstances of the
case.” Thus, courts examine the degree to which the employer’s demands alter the
employee’s use of commuting time. If that burden is minimal, then the employer cannot
be said to be the predominant beneficiary of the travel time, and that time is not
compensable.
The present case involved use of the employer’s vehicle. To the extent that the employee
claimed that his travel time was compensable, he had to show that the travel was outside
the employer’s normal commuting area and that the vehicle was not subject to an
agreement.
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Lesser state law benefits. Because the state high court found that the state law conferred
lesser benefits to employees than the Portal-to-Portal Act federal preemption applied and
federal law governed the employee’s claims for compensation for his travel time. Section
31-60-10 (a) of the regulations defines “travel time” to mean ‘‘that time during which a
worker is required or permitted to travel for purposes incidental to the performance of his
employment but does not include time spent in traveling from home to his usual place of
employment or return to home ...” After examining the provisions of the regulation, the
court concluded that pursuant to the plain language of Sec. 31-60-10, it could not
conclude that the regulation provided compensation for an employee’s regular commute.
Because the FLSA allowed for compensation for an employee’s regular commute under
certain circumstances, preemption applied.
The case number is: SC 18877.
Attorneys: Leonard A. McDermott (Employee Advocates) for Brian Sarrazin. Steven R.
Rolnick (Rolnick & Reger) for Coastal, Inc.
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