Labor Relations & Wages Hours Update
June 2013
Hot Topics in LABOR LAW:
Recess appointments to the NLRB will get constitutional vetting from on high
By Pamela Wolf, J.D.
The U.S. Supreme Court today announced that it will hear the highly controversial NLRB
v. Noel Canning (Dkt No 12-1281) case to determine whether President Barack Obama’s
three recess appointments to the Board in January 2012 pass constitutional muster. The
District of Columbia Circuit Court of Appeals held they did not just over a year after the
polarizing appointments were announced. After the federal government filed a petition
asking the Supreme Court to review the decision, Noel Canning did not oppose a grant of
certiorari. Forty-five Republican Senators had also urged the Court to take the case and
invalidate the recess appointments.
Amid the firestorm that erupted following the NLRB recess appointments, the House
passed the Preventing Greater Uncertainty in Labor-Management Relations Act, H.R.
1120, despite a presidential veto message. The bill, which passed the House in April and
has been referred to the Senate, would require the NLRB to cease all activity that requires
a quorum of Board members. The legislation would also prohibit the Board from
implementing, administering, or enforcing any decision, rule, vote, or other action
decided, undertaken, adopted, issued, or finalized on or after January 4, 2012, that
requires a quorum of the Board members.
Where it all started. The road to the Supreme Court began when employer Noel
Canning petitioned for review of an NLRB decision holding that the employer acted
unlawfully when it refused to reduce to writing and to execute a CBA reached with the
Teamsters. The employer questioned the authority of the Board to issue the order on two
constitutional grounds. First, it asserted that the Board lacked authority to act for want of
a quorum on the theory that three members of the Board were never validly appointed
since they took office under recess appointments when the Senate was not in recess.
Second, according to the employer, the vacancies that these three members purportedly
filled did not “happen during the Recess of the Senate,” as required for recess
appointments under the Constitution.
Constitutional challenges. The D.C. Circuit sided with the employer on its constitutional
challenges, holding that when the Board issued the findings and order in this case, it
could not lawfully act because it did not have a quorum.
Although no jurisdictional question was raised by the parties, the appeals court examined
its jurisdiction to decide the relevant constitutional issues raised by the petition. Here, the
court determined that it was faced with facts that triggered the Yardmasters exception
(Railroad Yardmasters of America v Harris challenged the authority of the National
Mediation Board on the basis that it had no quorum), and held that it could exercise
jurisdiction under NLRA Sec. 10(e) because a constitutional challenge to the Board’s
composition creates “extraordinary circumstances” excusing failure to raise the argument
below.
In this case, the D.C. Circuit concluded, there was “no order to enforce” because there
was no lawfully constituted Board. As a result, the challenged order was outside the orbit
of the authority of the Board because it had no authority to issue any order — it had no
quorum. This, held the appeals court, constituted an extraordinary circumstance within
the meaning of the NLRA.
Recess appointments. On the date that the NLRB issued the ruling in this case, it
purportedly had five members. It was undisputed that two Board members had been
validly appointed by Senate confirmation. The remaining three members were all
appointed on January 4, 2012, ostensibly via the Recess Appointments Clause of the
Constitution (Art. II, Sec. 2, cl. 3). However, at the time the president made these recess
appointments, the Senate was operating pursuant to a unanimous consent agreement,
which provided that the Senate would meet in pro forma session every three business
days from December 20, 2011, through January 23, 2012, but that “no business would be
conducted” during those sessions.
According to the employer, “the Recess” in the Recess Appointments Clause referred to
the period between sessions of the Senate when the Senate is, by definition, not in session
and, therefore, unavailable to receive and act upon nominations from the president. The
Board, however, asserted that “recess” means breaks in the Senate’s business when it is
otherwise in a continuing session. The D.C. Circuit found arguments supporting the
intrasession interpretation of recess unconvincing and disagreed with the Eleventh
Circuit’s ruling in Evans v Stephens, cited by the Board. Rather, the appeals court agreed
with the employer’s position, finding that history supported its interpretation and holding
that “the Recess” is limited to intersession recesses.
Because the Senate was not in recess, the president’s recess appointments to the Board
were invalid and the Board, accordingly, was operating without a quorum. Citing New
Process Steel, LP v NLRB, which holds that the Board cannot act without a quorum of
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three members, the appeals court held the Board was not authorized to conduct business
on the day that it issued the challenged ruling.
Questions presented. The federal government filed a petition for certiorari, asking the
High Court to decide two questions:


Whether the president may use the recess-appointment power during intrasession
Senate recesses or whether the power is limited to intersession recesses; and
Whether the president’s recess-appointment power is exercisable for vacancies
that exist during a recess or whether the power is limited to vacancies that first
arose during that recess.
In its order granting the certiorari, the Supreme Court added a third question to the list,
one that was urged by Noel Canning:

Whether the President’s recess-appointment power may be exercised when the
Senate is convening every three days in pro forma session.
Pro forma sessions. Noel Canning noted in its reply brief that the D.C. Circuit had not
addressed whether three-day pro forma Senate sessions constitute “the Recess.”
According to Noel Canning, they do not, and allowing recess appointments during pro
forma sessions would unwisely expand presidential appointment powers. In theory, said
Noel Canning, a president could use any period (e.g. weekends) as the basis for making
recess appointments. Moreover, Senate has taken action at previous pro forma sessions,
including the passage of legislation in August and December of 2011. The company also
noted that President Obama made the NLRB recess appointments one day after the
Senate met to convene the 112th Congress’s second session.
Narrow affirmance urged. Acknowledging that the High Court may be reluctant to
adopt the company’s broadest arguments against an intrasession presidential recessappointment power, the employer suggested a path that would permit affirmation of the
D.C. Circuit on narrow grounds. Noel Canning repeatedly noted that the Senate relies on
three-day pro forma sessions because the Senate cannot adjourn more than three days
without the House’s consent. As a result, according to the employer, the Supreme Court
could at least affirm the appeals court on the narrow ground that the Senate had not
adjourned beyond three days when President Obama made the January 4, 2012, recess
appointments. As a result, the narrow holding would invalidate only the January 4, 2012,
recess appointments.
If the addition of this question to those presented by the case for review is any indication,
the Court appears at least open to the argument.
What’s at stake? This case has much broader implications than just the fight between
the Noel Canning and the NLRB, or even whether all of the NLRB decisions since the
president’s January 2012 recess appointments are invalid — a prospect that alone has
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huge implications. It will also impact the raging battle between President Obama and a
Congress that has been more than just sluggish regarding the confirmation of his
nominees, particularly with regard to the NLRB. Some would characterize the
nomination logjam as a strategy to render impotent an agency whose determinations have
been largely viewed by Republicans as inappropriately overreaching.
Cert granted on what sort of employer organizing assistance is a “thing of value” for
LMRA purposes
By Pamela Wolf, J.D.
The question of exactly what is a “thing of value” for purposes of the Labor Management
Relations Act’s ant-bribery provisions in Sec. 302 will be under the Supreme Court’s
microscope given its grant of certiorari on Monday, June 24, in UNITE HERE, Local 355
v. Mulhall (Dkt No 12-99). Contrary to Third and Fourth Circuit Court of Appeals
rulings, the Eleventh Circuit held below that organizing assistance offered by a casino
employer to a union can be a “thing of value” under Sec. 302, which bars an employer
from giving or a union from receiving any “thing of value” for organizing purposes,
subject to limited exceptions.
Organizing assistance. The casino and the union entered into an agreement in which the
casino promised to: (1) provide union representatives with access to nonpublic work
premises to organize employees during nonworking hours; (2) provide the union with a
list of employees, their job classifications, departments, and addresses; and (3) remain
neutral when faced with a union organizing campaign. In return, the union promised to
lend financial support to a ballot initiative regarding casino gaming. Additionally, if
recognized as the exclusive bargaining agent for the casino’s employees, the union
promised to refrain from picketing, boycotting, striking, or undertaking other economic
activity against it.
The employee who brought the issue before the Eleventh Circuit had opposed
unionization and sued to enjoin enforcement of the agreement, claiming that it violated
Sec. 302. In a prior appeal addressing standing, the Eleventh Circuit had ruled that he
“adequately alleged that the organizing assistance promised by [the casino] in the
[agreement] is valuable, and indeed essential, to [the union’s] effort to gain recognition.”
In its review of case law discussing Sec. 302’s “thing of value,” the appeals court
followed the Second Circuit’s reasoning: “[v]alue is usually set by the desire to have the
‘thing’ and depends upon the individual and the circumstances.” The Second Circuit
recommended that common sense should inform determinations of whether an improper
benefit has been conferred.
The Eleventh Circuit further noted that Sec. 302 also prohibits payment of a “thing of
value,” and that intangible services, privileges, or concessions can be paid or operate as
payment. Further, whether something qualifies as a payment depends not on whether it is
tangible or has monetary value, but on whether its performance fulfills an obligation. “If
employers offer organizing assistance with the intention of improperly influencing a
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union, then the policy concerns in Sec. 302 — curbing bribery and extortion — are
implicated,” the appeals court added. “Innocuous ground rules” can become illegal
payments if used as consideration in a plan to corrupt a union or to extort a benefit from
an employer.
In his complaint, the employee alleged, “and a jury could find,” that the casino’s
assistance had monetary value. As evidence of the value, the employee pointed to the
$100,000 that the union spent on the ballot initiative that was consideration for the
organizing assistance. In a 2-1 decision, the Eleventh Circuit ruled that the employee’s
allegations were sufficient to support a Sec. 302 claim. The case was thus reversed and
remanded for the district court to consider the claim and determine why the union and
employer agreed to cooperate with one another.
Question to be resolved. In this case, the Supreme Court will resolve the question of
whether an employer and union may violate Sec 302 by entering into an agreement under
which the employer exercises its freedom of speech, by promising to remain neutral to
union organizing; its property rights, by granting a union representative limited access to
the employer’s property and employees; and its freedom to contract, by obtaining the
union’s promise to forego its rights to picket, boycott, or otherwise put pressure on the
employer’s business.
The union contends that the Eleventh Circuit ruling departs from decades of
jurisprudence holding that agreements of the sort entered into by the UNITE HERE,
Local 355 and the casino in this case are lawful. “Only now, 65 years after the passage of
the Taft-Hartley amendments to the National Labor Relations Act … has the propriety of
this important part of cooperative labor-management relations been put in doubt,” wrote
the union in its petition for certiorari.
NLRB brief urges constitutionality of recess appoints
By Mark S. Nelson, J.D.
The NLRB has once again urged a federal circuit court to uphold a board action because
it believes President Obama’s January 2012 recess appointments to the NLRB passed
constitutional muster. The NLRB’s filing in the Eleventh Circuit is the third time that a
federal circuit court has been asked hear the January 2012 recess appointments issue
(NLRB v. Gaylord Chemical Company, LLC, Brief for NLRB, Filed June 13, 2013).
Supreme Court petition. This past April, the NLRB asked the Supreme Court to hear an
appeal from a January 2013 D.C. Circuit Court opinion ruling for Noel Canning and
against the NLRB. Noel Canning’s reply brief did not oppose the granting of certiorari.
An amicus brief submitted by 45 Republican senators urged the Supreme Court to take
the case.
The D.C. Circuit in Noel Canning held that the term “recess” in the U.S. Constitution’s
Recess Appointments Clause means “intersession recess.” The court also held that recess
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appointments must “happen” or “arise” during the recess. Because certain NLRB
members were not validly appointed, the board lacked a quorum, and the challenged
board action was deemed void. In May, the Third Circuit ruled against the NLRB for
similar reasons.
Eleventh Circuit precedent. The NLRB’s brief in Gaylord presents an argument in
favor of President Obama’s recess appointments that may not exist in other federal circuit
courts. Here, the Eleventh Circuit’s en banc 2004 opinion in Evans v. Stephens upheld
President George W. Bush’s recess appointment of a federal circuit court judge, who was
later confirmed by the Senate (the Supreme Court denied certiorari in Evans in 2005).
The Evans opinion, noted the NLRB, said the “main purpose” of the Recess
Appointments Clause is to let presidents fill vacancies to ensure that the federal
government can function. According to the NLRB, the 20-day break during which
President Obama made his NLRB recess appointments was 10 days longer than the break
in Evans. The NLRB also said that Evans had stated a policy against “extended”
vacancies.
The NLRB concluded: “In any event, the facts of this case are clear: the Senate took a
twenty-day break during which it was not available to provide advice and consent. Under
the practical construction given the Recess Appointments Clause by the Senate, by
Presidents of both parties for nearly a century, and by this Court itself in Evans, that
period was a ‘Recess of the Senate.’”
The D.C. Circuit in Noel Canning discussed the Eleventh Circuit’s Evans opinion at
length. That court said the Eleventh Circuit failed to quote the entire passage it cited on
the purpose of the Recess Appointments Clause. Specifically, the D.C. Circuit said Evans
should have said the purpose is to ensure a functioning federal government but that recess
appointments are to occur “only when the Senate is unable to provide advice and
Consent.”
The D.C. Circuit also disagreed with the Evans court’s too-broad definition of “recess”
stripped of its definite article (i.e., “the”). Lastly, the D.C. Circuit said Evans failed to
distinguish between “adjournment” and “recess.” The Third Circuit’s May 2013 opinion
also noted flaws in Evans.
The case is numbers 2-15404-BB and 12-15690-BB.
Companies: Gaylord Chemical Company, LLC; United Steel, Paper and Forestry,
Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International
Union, AFL-CIO.
4thCir: NLRB’s notice posting rule invalidated; Board exceeded authority in
promulgating rule
By Ronald Miller, J.D.
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The Fourth Circuit invalidated the NLRB’s notice posting rule that required employers
subject to the NLRA to post an official Board notice informing employees of their rights
under the Act (Chamber of Commerce of the United States v NLRB, June 14, 2013,
Duncan, A). The appeals court determined that the rulemaking function provided for in
the NLRA only empowers the NLRB to carry out its statutorily defined reactive roles in
addressing unfair labor practice (ULP) charges and conducting representation elections
upon request. Thus, it concluded that the Board exceeded its authority in promulgating
the challenged rule.
The Fourth Circuit joined the D.C. Circuit in invalidating the notice-posting rule. In Nat’l
Ass’n of Mfrs v NLRB, the D.C. Circuit concluded that the rule violated Sec. 8(c) of the
NLRA, which prohibits the Board from finding employer speech that is not coercive to
be a ULP or to constitute evidence of a ULP. In this case, the Fourth Circuit focused on
Sec. 6 of the NLRA. That provision confers rulemaking power on the Board, providing it
with the authority from time to time to make, amend, and rescind, in the manner
prescribed by the Administrative Procedure Act, such rules and regulations as may be
necessary to carry out the provisions of the NLRA. The core, specified functions of the
NLRB are: (1) to conduct representation elections; and (2) to prevent and resolve ULPs.
Although the Board is specifically empowered to “prevent” unfair labor practices, it may
not act until an unfair labor practice charge is filed alleging a violation of the Act.
NLRB rulemaking. The Board promulgated the challenged rule, titled “Notification of
Employee Rights Under the National Labor Relations Act,” on August 30, 2011, after a
notice and comment period. Under the rule, any employer failing to post the notice would
be subject to: (1) a finding that it committed an unfair labor practice; (2) a tolling of
statutes of limitation for charges of any other unfair labor practices; and (3) a finding of
anti-union animus that would weigh against it in any proceedings before the Board. The
agency’s principal rationale for introducing the notice-posting rule was that “American
workers are largely ignorant of their rights under the NLRA, and this ignorance stands as
an obstacle to the effective exercise of such rights.” The challenged rule is unusual in
several respects. The Board has only rarely engaged in rulemaking during its 77-year
history, and has never promulgated a notice-posting rule of any kind.
Before the rule went into effect, the Chamber of Commerce filed a complaint for
injunctive relief. The district court granted summary judgment to the Chamber after
determining that, in promulgating the notice-posting rule, the Board exceeded its
authority, in violation of the APA. This appeal followed.
Chevron analysis. After first determining the appropriate framework for analyzing the
NLRB’s authority to issue the challenged statute, the Fourth Circuit examined the noticeposting rule under Chevron U.S.A., Inc v Natural Resources Defense Council, Inc. The
court’s analysis focused on the question of whether Congress intended to grant the NLRB
the authority to issue the challenged rule — not whether Congress intended to withhold
that power. The court asked whether Congress has directly spoken to the precise question
at issue. Only “if the statute is silent or ambiguous with respect to the specific issue” are
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we to proceed to Chevron’s second step, asking “whether the agency’s answer is based
on a permissible construction of the statute.”
The Fourth Circuit began by examining the plain language of the NLRA. In agreement
with the Chamber, the appeals court read the language of Sec. 6 as requiring that some
section of the Act provide the explicit or implicit authority to issue a rule. Because
nowhere in the plain language of the NLRA was the Board charged with informing
employees of their rights under the Act, the court found no indication that Congress
intended to grant the Board the authority to promulgate such a requirement.
The appeals court rejected the Board’s reading of the statute, which argued that the word
“necessary” was inherently ambiguous, thereby bringing us directly to Chevron’s step
two. However, a court must first determine that a statute is ambiguous — that is, a court
is only to defer to an agency’s interpretation of what is “necessary” once it has
progressed to step two. Moreover, even if the term “necessary,” standing on its own, may
be deemed ambiguous, a court need not automatically defer to the Board’s interpretation.
Rather, “the ambiguity must be such as to make it appear that Congress either explicitly
or implicitly delegated authority to cure that ambiguity.”
As the district court had observed, “[t]he Board may not disregard restrictions Congress
has imposed on its authority in other sections of the governing statute by relying on
Section 6 in isolation to these substantive provisions.” The substantive provisions of the
Act make clear that the Board is a reactive entity, and thus do not imply that Congress
intended to allow proactive rulemaking of the sort challenged here through the general
rulemaking provision of Sec. 6.
Continuing its analysis of the rule under Chevron’s first step, the appeals court next
considered the structure of the NLRA. In addition to the language of Sec. 6 itself, the
court had to look to “the specific context in which that language is used, and the broader
context of the statute as a whole.” An examination of the rest of the Act reveals no
provision that a notice-posting rule is “necessary” to carry out. Specifically, no provision
of the Act requires employers who have not committed labor violations to be subject to a
duty to post employee notices. Rather, the NLRB serves expressly a reactive role. The
notice-posting rule is not “necessary to carry out” Sections 9 and 10, which set forth the
Board’s responsibilities for conducting representation elections and adjudicating ULP
charges.
History of NLRA. The Fourth Circuit also found that the NLRA’s history provided no
countervailing evidence of an intent to bestow the Board with the power to enact the
challenged regulation. Congress considered and rejected a different notice provision in
the NLRA that would have required any employer that was a party to a contract that
conflicted with the Act to notify its employees of the violation and indicate that the
contract would be abrogated. Moreover, at the same time as it excluded a notice provision
from the NLRA, Congress amended another labor statute, the Railway Labor Act, to
include two notice provisions.
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A comparison of the NLRA to subsequent labor legislation provides additional evidence
that Congress did not intend to grant the NLRB the authority to issue a notice-posting
requirement. Several labor statutes passed during the span of years between 1935 and
1974, during which the NLRA was amended three times, provide for the posting of
notices. Other agencies that have promulgated notice-posting requirements have
proactive mandates, while the NLRB’s core functions are reactive ones. Thus, the court
concluded that Congress’s continued exclusion of a notice-posting requirement from the
NLRA, while granting such authority to other agencies, can fairly be considered
deliberate. Consequently, the judgment of the district court was affirmed.
The case number is 12-1757.
Attorneys: Dawn L. Goldstein for NLRB. Lemuel Gray Geddie, Jr. (Ogletree Deakins)
for Chamber of Commerce.
“Fight for $15” expands to Seattle as striking workers force local fast food
restaurants to close doors early
By Pamela Wolf, J.D.
Washington CAN! — the Evergreen State’s largest grassroots community organization
— threw its support into the mix as its staff and members joined striking workers in
Seattle on May 30 in a call to “Strike Poverty and Raise Seattle.” Workers walking out of
at least eight fast-food chain stores forced the employers to temporarily shut their doors.
Seattle is the latest city to join the national surge of job actions by fast food workers,
which in the last two months has caught fire from New York to Chicago, Detroit, St.
Louis, and Milwaukee.
Despite the boom at the top tier of Seattle’s economy, 7 of the 10 fastest-growing jobs in
the region pay poverty wages, according to Washington CAN! The citywide strike
launched late on May 29, when a strike that forced a Taco Bell to close its doors early
expanded to several dozen other national fast food chains, including Burger King,
McDonald’s, Subway, Arby’s, and Qdoba.
In mid-May, “Fight for $15,” as the movement has been dubbed in light of its quest for a
living wage of $15/hour and the right to form a union without retaliation, held a strike in
Milwaukee, where hundreds of fast food restaurant employees walked off the job in a
planned protest. The one-day strike there followed walkouts in New York, Chicago, St.
Louis, and Detroit. “Fast food and retail outlets are the ‘new’ factory floors,” according
to a union statement in support of the workers.
In Seattle, the striking workers are united in Good Jobs Seattle, a growing movement that
seeks to build a sustainable future for Seattle’s economy by turning poverty-wage jobs in
fast food and other industries into good jobs that offer opportunities for a better future
and pay enough for workers to afford basic necessities like food, clothing and rent. Good
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Jobs Seattle is supported by organizations including Washington Community Action
Network, Working Washington, OneAmerica, and hundreds of grassroots supporters.
Nationally, fast-food workers make a median wage of $8.78 an hour, lower than all other
reported occupations, according to a Good Jobs Seattle fact sheet. Moreover, these
workers are employed on average only 24 hours a week, further reducing their low
wages. A 24-hour-a-week worker making the Seattle median fast-food wage of
$9.50/hour would earn only $11,856 in a year. Almost a quarter of all jobs in America
now pay wages below the poverty line for a family of four, according to the fact sheet.
Unions slam Wal-Mart and Gap for failure to sign on to binding safety plan for
Bangladesh workers, joining other retailers seeking alternative solutions
By Pamela Wolf, J.D.
The AFL-CIO and ChangetoWin issued a joint statement on May 30 slamming Wal-Mart
and the Gap for refusing to sign on to a binding safety plan for Bangladesh, where more
than 1,000 workers have died in the recent factory tragedies. The unions criticized the
two giant retailers’ plans to move forward with “a corporate-controlled, nonbinding
process for adopting building safety standards in Bangladesh.”
BPC meetings. A group of leading retailers and brands met that same day in New York
to develop and implement a new program that would improve fire and safety regulations
in the garment factories of Bangladesh. The meeting was organized by the Bipartisan
Policy Center (BPC) and co-chaired by former Senate Majority Leader and BPC CoFounder George J. Mitchell and former Senator and BPC Senior Fellow Olympia Snowe.
The alliance includes representatives from retailers and brands, as well as participants
from industry associations, including the American Apparel & Footwear Association
(AAFA), National Retail Federation, Retail Industry Leaders Association, and the Retail
Council of Canada.
The meeting was the first of several working sessions to be held by the BPC over the next
month in New York and Washington, DC. “The alliance of retailers and brands requested
that the BPC convene these discussions and that Senators Mitchell and Snowe serve as
independent facilitators,” the BPC explained in a press release. “The alliance is driving to
develop a single, unified action plan and schedule for implementation that will achieve
effective and long-lasting change for the garment industry and its workers in Bangladesh.
The alliance intends to release this plan by early July.”
According to BPC President Jason Grument, “Since the recent tragedy, the retailers,
brands, and trade associations have made considerable individual and collective progress
developing new worker safety programs. Over the next several weeks, we look forward
to building on the efforts of the Safer Factory Initiative (SFI) and seeking input from key
stakeholders to forge an effective response.”
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Binding safety plan. The two unions, however, were not impressed: “While former
Senators George Mitchell and Olympia Snowe are both respected for their ability to forge
compromises, we cannot afford to compromise the lives of Bangladeshi workers. We are
determined to get this process right, and we will express our concerns to both former
Senators and ask that they not participate in undermining the ongoing and more
productive process led by IndustriAll and UNI global labor federations.
AFL-CIO and ChangetoWin noted that 40 retailers from all over the world, including
H&M, PVH, and Loblaws, have agreed to a binding comprehensive safety plan for
Bangladesh. “No amount of bipartisan window dressing can change the fact that WalMart and the Gap have refused to take this important step. This is a matter of life or
death. Quite simply, nonbinding is just not good enough.”
The unions are not alone in their frustration. Earlier this month, Representative George
Miller (D-Cal), the senior Democratic member of the House Education and Workforce
Committee, called on the retailer to memorialize its commitment: “Wal-Mart needs to
stop stonewalling and sign the binding agreement that a dozen other companies have
signed.” Wal-Mart's announcement that it would conduct its own safety efforts “is just an
attempt to allow their company to continue a shameful race to the bottom that endangers
the lives of factory workers in Bangladesh,” according the Congressman.
Court puts a wrench in demonstrations against Wal-Mart
By Pamela Wolf, J.D.
Wal-Mart Stores Inc. protesters suffered a blow on June 3, when a Benton County,
Arkansas, Circuit Court Judge issued a temporary restraining order against the United
Food and Commercial Workers International Union (UFCW), the Organization United
for Respect at Walmart (OUR Walmart), and other individuals.
The order prohibits the defendants, their officers, employees, agents, affiliates, and all
other persons or entities who act in concert with them (except for current Wal-Mart
employees) from entering Wal-Mart’s private property in Arkansas without the retail
giant’s permission for any reason other than shopping or purchasing merchandise. The
order expressly states that the defendants cannot enter Wal-Mart’s private property to
engage in picketing, patrolling, parading, demonstrating, “flash mobs,” handbilling,
solicitation, manager confrontations, and other similar activities.
Judge John Scott, apparently alert to the strong role that social media has played, also
ordered the defendants to immediately post the court’s order on their websites, Facebook
pages, twitter sites, and any other internet or social media outlets under their control.
The order comes on the heels of a strike launched on May 28 over Wal-Mart wages,
working conditions, and purported retaliation against workers who have spoken out in
public about their disagreement with the retailer’s policies. OUR Walmart launched a
petition campaign—backed by UFCW—with a plan for workers to descend on Wal-
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Mart’s corporate headquarters in Bentonville, Arkansas, on June 7 to voice their concerns
at the company's annual shareholders’ meeting. OUR Walmart held demonstrations
outside the retailer’s headquarters on June 3.
The workers are demanding a raise in wages and increased access to full time hours so
that no Wal-Mart worker will make less than $25,000 per year. “Walmart is among the
most profitable companies in the US and is owned by the Walton Family, the richest
family in America, yet workers at Walmart must rely on food stamps and even go hungry
because of lack of hours and low wages,” according to the petition.
The UFCW and OUR Walmart have disclaimed any “intent to have Walmart recognize
or bargain with either organization as the representative of Walmart employees.”
Think tanks launch campaign to inform workers of their right to opt out of unions
By Pamela Wolf, J.D.
The Heritage Foundation announced on June 5 that it will participate in National
Employee Freedom Week, a “first-of-its-kind national campaign” intended to educate
union members about their options to leave their unions. The move follows a federal
agency effort to inform workers of a different set of union rights that was derailed last
month by a federal court of appeals.
Heritage Foundation, along with 40 state-based think tanks and alternative professional
organizations in some 30 states, will participate in a week-long public information
campaign from June 23-29. The groups will highlight what the Heritage Foundation
characterized as “the little-known fact” that unionized employees can opt out of union
membership and their union’s political activities. Campaign members will provide
educational material — including opt-out forms and websites — that outline options
available to workers so they can “make an informed decision about union membership
that’s best for them.”
“Some union members believe they get value for their dues,” said James Sherk,
Heritage’s senior policy analyst in labor economics. “Others don’t, yet they are unaware
that they can leave. Many professional organizations provide similar services at a fraction
of the cost of union dues. Workers should decide for themselves how to best use their
money.”
The conservative think tank’s public commitment to join National Employee Freedom
Week comes a month after the D.C. Circuit on May 7 issued a decision that struck down
another tool for providing workers with information about unions — the National Labor
Relation Board’s notice posting rule. The rule required employers to post a notice in the
workplace informing employees of their rights under the National Labor Relations Act,
and declared it an unfair labor practice for an employer to fail to post the notice. The rule
also included two additional enforcement devices that permitted the Board to suspend the
running of the six-month limitations period for filing any unfair labor practice charge,
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and to consider an employer’s “knowing and willful refusal to post the notice as evidence
of unlawful motive.”
NLRB detractors decried the rulemaking as an unprecedented power grab, finding
particularly troublesome the rule’s enforcement provisions. Many also raised the
objection that the notice posting rule failed to require the inclusion of information about
how unions may be decertified.
Meanwhile, the Heritage Foundation will be polling union households to explore the
interest of union members in remaining in or leaving their unions.
The inaugural National Employee Freedom Week is spearheaded by the Nevada Policy
Research Institute and the Association of American Educators.
Dallas plastic surgery center agrees to settle allegations it unlawfully fired
employees and its attorney coercively represented workers during NLRB
investigation
Advanced Facial Plastic Surgery Center, PA, located in Dallas, will pay more than
$300,000 to settle charges that it unlawfully fired two employees and then sued one of
them in state court after she sought help from the NLRB's Fort Worth office, according to
an agency release on June 6.
The surgery center also agreed to drop the state lawsuit, to rescind a rule prohibiting
wage discussions by employees, and to cease paying its attorney to unlawfully and
coercively represent its employees. The NLRB issued an order on May 29, approving the
terms of the formal settlement.
In December 2010, a medical technologist at the center was fired for discussing bonuses
with other employees, which is contrary to provisions of the NLRA, the NLRB said. The
technologist filed a charge with the NLRB office in Fort Worth and, following an
investigation, the Regional Director issued a complaint and scheduled a trial before an
ALJ.
The center then fired another employee, a surgical consultant, after she defended her
coworkers in a meeting and engaged in other protected concerted activity, according to
the NLRB. That employee also filed a charge with the Fort Worth office, which issued a
second complaint and consolidated the two cases.
The center's attorney claimed to represent center employees and required all contact with
employees to go through his office during the NLRB’s investigation of the charges. In
her charge, the surgical consultant alleged she had been coerced into being represented by
the company attorney.
After the surgical consultant filed NLRB charges, the company attorney filed a lawsuit in
state court against her, alleging she had been negligent and breached certain fiduciary
13
duties. The NLRB's investigation and analysis determined that the lawsuit was baseless in
fact, unsupported in the law, and retaliatory.
A three-day trial was held in October 2012 before an ALJ. Before a decision issued, the
company, the discharged employees, and counsel for the Acting General Counsel entered
into a settlement agreement that was approved by the ALJ and forwarded to the Board for
final approval.
The $315,000 settlement covers lost wages and benefits for the employees, who waived
their right to reinstatement to their former positions, as well as attorneys' fees incurred in
defending the retaliatory lawsuit in state court. The agreement also called for the center to
withdraw the state court lawsuit, terminate the representation of employees by its
attorney, and post, read, and mail a notice informing current and former employees of
their rights.
House Republicans continue fight to get rid of union card check, derail micro-union
ruling
By Pamela Wolf, J.D.
House Republicans introduced two legislative proposals on June 13 that “would protect
workers’ right to secret ballot union elections” and “roll back” the NLRB’s Specialty
Healthcare decision, which allows unions to form smaller bargaining units — so-called
“micro-unions.” The Subcommittee on Health, Employment, Labor, and Pensions is
slated to discuss both proposals at a hearing on June 26.
Secret ballot measure. Introduced by the Subcommittee Chairman Phil Roe (R-TN), the
Secret Ballot Protection Act ensures that workers will have the right to vote by secret
ballot in union elections. Under the bill, a labor organization would be recognized as the
bargaining representative only after a secret ballot election in which a majority of the
employees in the bargaining unit selected the union as its representative. Decertification
of a union would also require a secret ballot election.
The secret ballot measure proposed “guarantees individuals can vote their conscience,
free from pressure or threat of retribution,” according to House Republicans. It would
also do away with what they characterize as “a ‘card check’ scheme that would deny
workers secret ballot union elections.”
A similar measure introduced in the House earlier this year by Representative Steve
Stockman (R-Tex), the “Union Coercion Prevention Act” (H.R. 1815) would also
eliminate the card check system and mandate that unions only be chosen via secret-ballot
elections. However, HR 1815 would expressly require a union to be supported by a
majority of all bargaining unit members, not just a majority of employees voting in the
election, in order to be certified as bargaining representative.
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Bargaining unit proposal. Introduced by Representative Tom Price (R-GA) and Senator
Johnny Isakson (R-GA), the Representation Fairness Restoration Act would “replace the
board’s micro-union scheme with traditional policies that would encourage greater unity
in the workplace,” according to House Republicans. The proposal would require use of
an eight-factor “community of interest” test in determining an appropriate bargaining
unit.
This is not the first legislative effort to derail the Specialty Healthcare decision. The
same eight-factor test was set forth in a bill (H.R. 3094) that passed the House on
November 30, 2011, by a largely party-line vote of 235-188, but went nowhere after that.
A year ago to the day, Democrats on the Senate Appropriations Committee thwarted an
attempt to use the appropriations process to overturn Specialty Healthcare. The
amendment to the 2013 Labor, Health and Human Services appropriations measure was
defeated on a 15-to-15 vote.
More than 700 corrections officers at Florida prison to share $600,000-plus award
after Teamsters file wage and hours complaint
The DOL will oversee an award of $603,237 to current and retired employees of the State
Prison Facility in Raiford, Florida, after finding that more than 700 corrections officers
were not being properly compensated, according to a Teamsters announcement on June
12. The monetary fund results from a settlement resolving a complaint filed by the
Teamsters Union in the fall of 2011, alleging that the Florida Department of Corrections
(DOC) was violating wage and hour rules. An extensive investigation followed.
Both current and retired officers assigned to the State Prison Facility in Raiford will be
receiving monetary payments or compensatory time off for overtime worked between
December 2009 and December 2011, the Teamsters said. The DOL is working to ensure
that the DOC complies with the terms of the settlement.
“The settlement is a great benefit for correctional officers and recognizes the fact that
preparing for duty after entering the facility is an essential part of the job,” remarked
Teamsters Public Services Director Michael Filler. “This problem should not continue as
the department has updated its timekeeping system to ensure that officers will be paid for
all compensable time worked.”
Patriot Coal comes down hard on UMWA after union issues press release about
negotiations
By Pamela Wolf, J.D.
Patriot Coal Corporation has issued a response to a United Mine Workers of America
statement regarding negotiations between Patriot and the UMWA. Patriot said that
contrary to the UMWA's assertion, the company has not “walked out” of negotiations
with the UMWA.
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The negotiations relate to a May 29 Missouri bankruptcy court decision that overruling
the UMWA’s objections, gave Patriot Coal and its subsidiaries permission to reject its
collective bargaining agreements and modify its retiree health care plan (In Re Patriot
Coal Corp). The ruling gave the employer the green light to reduce wages by several
dollars per hour (“to a level consistent with the regional labor market,” Patriot says),
eliminate paid time off by one-third, alter collectively bargained work rules, sharply
increase workers’ out-of-pocket health care costs, and eliminate retiree health care for
current employees.
The union version. As of press time, Employment Law Daily was unable to gain access
to the original UMWA press release that is the subject of Patriot’s ire. However, media
reports indicate that the union accused company negotiators of walking out of talks on
June 12. The union also said the company cancelled negotiations scheduled for the
remainder of the week and into week, according to these reports.
“We are very disappointed by this action,” UMWA President Cecil E. Roberts
purportedly said in the UMWA press release. “We had made significant progress toward
reaching an agreement that provided a workable alternative to the severe terms Patriot
asked for last spring and that were approved by the bankruptcy court in St. Louis. The
union had agreed to more than $400 million in savings for the company over the life of
the current contract, which gives them the money they say they need to survive. But that
still wasn’t enough for them.”
Roberts also is reported to have said: “When the company walked out, we were only
about $30 to 35 million apart, which given the scope of this problem really isn’t all that
much. A big chunk of that money is in bonuses the company wants to pay management
personnel into the future.” He purportedly stated that Patriot had indicated it would
implement the terms and conditions approved by the judge, effective July 1.
The company’s side of the story. Patriot, however, painted a different story. The
company said that it only learned that next week's planned negotiating meetings were
cancelled via the union’s press release. The company stated that it “continues to be ready
to reach a consensual agreement.”
Under the plan approved by the court, retiree healthcare obligations would be transitioned
to a Voluntary Employee Benefits Association, Patriot explained. The VEBA would be
funded with hundreds of millions of dollars, consisting of (1) a 35 percent ownership
stake in the reorganized company which the UMWA would monetize for a substantial
cash contribution, (2) an initial cash contribution of $15 million, (3) royalty contributions
for every ton of coal produced by Patriot and (4) profit-sharing payments. The company
said that although it was under no obligation to do so, it has voluntarily continued to
bargain with the UMWA in an effort “to reach a consensual agreement on terms more
favorable to the UMWA than the proposals approved by the Court.”
“Patriot has been working diligently with the UMWA in efforts to address their concerns
about the contractual changes found to be necessary, fair and equitable by the Bankruptcy
16
Court,” stated Patriot President and CEO Ben Hatfield. “If our goal was to force
acceptance of the court-approved contract as is, no further discussions would have been
necessary, as that option has been available to us since May 29. Instead, we have offered
up millions of dollars in additional contract enhancements, including wage increases,
healthcare improvements, life insurance, and paid personal time off. The two-day recess
in negotiations that the Company requested for the current week was needed for financial
analysis of UMWA demands that Patriot roll back the majority of cost relief approved by
the Bankruptcy Court. It remains the assessment of Patriot management that agreeing to
the UMWA’s demands would sacrifice any chance of making the Company viable.”
Hatfield said that Patriot continues “to respect the need for confidentiality in the
negotiations if the parties are to make progress,” unlike the UMWA, which Hatfield
accused of grandstanding in the media and issuing press releases about the parties
discussions. As to the UMWA’s threatened strike if the company implements the
proposals approved by the court, Hatfield said: “A strike would put the company on a
path to liquidation, which is the worst possible outcome for UMWA employees and
retirees. Patriot's unionized work force would be left with limited job opportunities in a
difficult coal market, and our UMWA retirees would likely be left with zero healthcare
coverage.”
Media reports indicate that both parties are now ready to resume negotiations.
NYCtApp: Court interprets Sec 196-d in Starbucks litigation: Participation in tip
pool not barred by limited supervisory responsibilities; test is meaningful authority
or control
By Joy P. Waltemath, J.D.
Answering questions certified from the Second Circuit, the New York Court of Appeals
interpreted Labor Law Sec. 196-d to mean that even if employees have limited
supervisory responsibilities, where their personal service to patrons is a principal or
regular part of their duties they may participate in an employer-mandated tip allocation
arrangement (Barenboim v Starbucks Corp, June 26, 2013, Graffeo, V). But an employee
who has been granted meaningful authority or control over subordinates can no longer be
considered similar to waiters and busboys within the meaning of that section, said the
court, and is not eligible to participate in a tip pool. The court also generally agreed that
Sec. 196-d does not require including within an employer-mandated tip pool all
employees not statutorily barred from participating in that pool, but it suggested there
might be “an outer limit” to an employer's ability to keep certain classes of employees
from participating.
Tip-sharing arrangement. The court carefully laid out Starbucks’ hierarchy of storebased employees as well as its written policy governing customer tips. Under its policy,
each Starbucks store places a container at the counter where patrons may deposit tips.
Once full, Starbucks requires the tips to be collected, stored in a safe, and at the end of
each week, tallied and distributed in cash to two categories of employees (baristas and
17
shift supervisors) in proportion to the number of hours each employee worked. Assistant
store managers and store managers may not share in the weekly distribution of tips.
One lawsuit filed against the company in the Southern District of New York alleged that
shift supervisors should not be able to receive distributions from a store's tip pool because
they were Starbucks “agents” under Sec. 196-d, meaning that tip jar proceeds would
belong exclusively to Starbucks baristas. Another suit filed by (you guessed it) assistant
store managers, the next rung on the Starbucks employment hierarchy, claimed that
assistant store managers were not ineligible as “agents” under Sec. 196-d and should be
entitled to participate in the tip pools.
Both cases were appealed to the Second Circuit, which certified two unresolved questions
of New York law regarding Sec. 196-d. The law reads: “No employer or his agent or an
officer or agent of any corporation, or any other person shall demand or accept, directly
or indirectly, any part of the gratuities, received by an employee, or retain any part of a
gratuity or of any charge purported to be a gratuity for an employee. … Nothing in this
subdivision shall be construed as affecting the … sharing of tips by a waiter with a
busboy or similar employee.”
Plaintiffs in the first case argued that any supervisory responsibility, however slight,
made an employee (such as a shift supervisor) an agent and, therefore, ineligible to
participate in a tip pool. Plaintiffs in the second case argued the opposite, that only
employees with “full” managerial authority (e.g. to hire and fire) should be viewed as
agents so that assistant store managers would remain eligible for tip-pool participation.
Starbucks claimed that shift supervisors were sufficiently similar to waiters, busboys, and
the like, and should be eligible to share in tips, while assistant store managers, by virtue
of their significant managerial responsibility, differed from baristas and shift supervisors,
making them tip-pool ineligible.
First certified question. Taking up the NY DOL’s reframing of the first question, the
court first addressed “what factors determine whether an employee is eligible or
ineligible to receive distributions from an employer-mandated tip-splitting arrangement?”
The court examined the NY DOL's interpretation of the tip-sharing language of section
196-d and, in particular, the meaning of the phrase “similar employee.” Specifically, the
Hospitality Industry Wage Order’s language limiting tip-pool eligibility to workers who
“perform, or assist in performing, personal service to patrons at a level that is a principal
and regular part of their duties and is not merely occasional or incidental” limited
mandated tip-pools to employees who, like waiters and busboys, are ordinarily engaged
in personal customer service.
The court pointed out that the NY DOL had consistently said that employees who
regularly provide direct service to patrons remain tip-pool eligible even if they exercise a
limited degree of supervisory responsibility. Thus, it did not agree with any interpretation
that even the slightest degree of supervisory responsibility (as exercised by shift
supervisors) would automatically disqualify an employee from sharing in tips. Further,
with respect to assistant store managers, the court said there was a point at which the
18
degree of managerial responsibility would become so substantial that an individual could
no longer fairly be characterized as an employee similar to general wait staff, as the law
required.
Accordingly, the court held the line should be drawn at “meaningful or significant
authority or control over subordinates,” which might include disciplining subordinates,
assisting in performance evaluations, participating in hiring or firing, as well as having
input into employee work schedules. But the power to independently hire and fire was
not the test. “Meaningful authority, not final authority, should be the standard,”
concluded the court.
Second certified question. The second question asked whether an employer may deny
tip pool distributions to an employee who is nevertheless eligible to split tips under Sec.
196-d. The answer would impact assistant store managers if the Second Circuit found
them eligible to participate in tip pools (on the basis that they did not meet the
“meaningful authority” test), because Starbucks' policy excluded them from the tipsharing arrangement. Although the court generally agreed that Sec. 196-d excluded
certain classes of employees from an employer-mandated tip pool, it did not require the
inclusion of all employees not statutorily barred from participation. Still, the court was
careful to leave open the possibility of an outer limit to what classes of employees an
employer could exclude, but determined it need not address the question here “because it
is clear that Starbucks' decision to exclude assistant store managers from the tip pool is
not contrary to Labor Law Sec. 196-d.”
Two judges dissented in part in separate opinions.
The case number is 122.
Attorneys: Shannon Liss-Riordan (Lichten & Liss-Riordan) for Jeana Barenboim. Adam
T. Klein (Outten & Golden) for Eugene Winans. Rex S. Heinke (Akin Gump) for
Starbucks Corporation.
SEIU reaches tentative contract for California state workers
SEIU Local 1000 last week reached a tentative agreement on behalf of California state
workers that would include a wage increase, a guarantee of no new furloughs, and other
improvements to workers’ rights and working conditions. Wage increases, however are
conditioned in part on the state meeting certain revenue targets, according to the deal
announced by the union.
Under the tentative agreement, members will receive an across-the-board wage increase
totaling 4.5 percent over three years, which will take place in one of two ways:
(1) A 2-percent raise that would be effective July 1, 2014, if the state achieves certain
revenue targets, that would be followed by an additional 2.5 percent increase,
effective July 1, 2015; and a 50-cent hourly increase, effective July 1, 2014, for
19
seasonal clerks that is also contingent on meeting revenue targets; OR
(2) If the state does not achieve those revenue targets, the entire 4.5-percent and 50cent increase would be effective July 1, 2015.
The union listed several other “key contract victories” that affect all Local 1000represented employees, including: no new furlough or PLP days during the term of the
contract; reduction in health care dependent vesting from two years to only one; increases
in business and travel expenses; removal of the expiration date for PLP earned in 2010
and 2012; workplace violence and bullying prevention; and another grievance procedure
added to the dignity clause.
The nine bargaining teams each also reached agreement on a number of issues relating to
their specific units. The tentative agreement must now be ratified by the union
membership.
“We have achieved each of the four top priorities identified by our members,” said
Yvonne R. Walker, president of Local 1000. “Protecting retirement security, preserving
our 80/20 health benefit premiums, no new furloughs or PLP days, and a wage increase
for everyone.”
USW applauds Par Petroleum’s purchase of Hawaiian refinery after campaign to
smooth the way
The United Steelworkers (USW) Union enthusiastically welcomed the sale on June 18 of
Tesoro’s Kapolei, Hawaii, refinery, logistics and retail system to Par Petroleum
Corporation. The move, which saved over a hundred jobs, came after extensive efforts on
the part of the union and its membership.
Under the successorship clause in the current CBA, Par Petroleum will honor the existing
three-year contract through its expiration date on January 31, 2015, the USW said in a
statement. None of the 119 production, maintenance and lab workers represented by
Local 12-591 were laid off; instead, they will all continue their employment.
Local 12-591 members played “a key role” in saving the refinery, according to the union
— they wrote letters to elected officials and lobbied them in Washington, D.C., to request
help in making the conditions favorable for a new owner. They also garnered thousands
of signatures from Hawaii’s residents in petitions to Governor Abercrombie and other
elected officials.
“If it weren’t for our members’ hard work, persistence and solidarity this refinery sale
would not have happened and Tesoro would have quietly turned the facility into an
import terminal,” said USW District 12 Director Bob LaVenture. “Everybody wins in this
deal — our members, Hawaii citizens, the state and Par Petroleum.”
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The USW counts this as the fourth refinery that it has helped to save. The other three
were PBS Energy in Delaware City, Delaware; Monroe Energy LLC in Trainer,
Pennsylvania; and Philadelphia Energy Solutions in Philadelphia.
“We look forward to establishing a new relationship with Par Petroleum,” said USW
International Vice President Gary Beevers, who heads the union’s oil sector. “Buying the
refinery was a smart business decision. This is a great opportunity for the company to be
profitable and fulfill Hawaii residents’ and businesses’ need for reasonably priced fuel.”
USW members ratify master global economic and security agreement covering 25
Packaging Corporation of American box plants
The United Steelworkers (USW) announced on June 20 that its members have ratified a
four-year master global economic and security agreement with Packaging Corporation of
America (PCA). The agreement, which was approved “by an overwhelming margin,”
covers over 1,900 workers at 25 box plants across the country.
The new global agreement sets key economic and security terms and stipulates that
during local bargaining, no changes may be made to existing local agreements unless
mutually agreed to by the local union and the company, while fixing the term of those
local contracts at four years.
When each local union contract expires, wages will increase 2.5 percent the first and
second years; 2 percent the third year; and 2.5 percent the final year, according to the
USW. The agreement also improves retirement security, vacation provisions, the dental
plan, and adds a vision program. The current health care plan and premium contributions
are locked in for the life of the current and the next local union agreements.
All local union contracts will continue their contract protection clause in the event a
facility is sold. There is also improved organizing language that showcases the
relationship between the USW and PCA at both the international and local level.
“With continuing consolidation in the industry, contract protection provisions are
especially important, and USW PCA workers will continue to know that their jobs won’t
be affected if a facility is sold. The organizing language will assist us in improving our
union density in the converter sector of this industry,” said USW International Vice
President Jon Geenen, who oversees bargaining in the paper sector.
“One of the key achievements of this global agreement was locking in our high quality
health care plan and maintaining current percentages on premium contributions to keep
health care costs from escalating for the PCA box plant workers,” said Leeann Foster,
Assistant to the International President and PCA bargaining chair.
Later this summer, the USW, local affiliates and PCA will enter negotiations for a master
global economic and security agreement that covers workers at the company’s four mill
operations, the union said.
21
Teamsters approve UPS contract but not 17 local riders; UPS Freight contract
rejected
The Teamsters Union announced on June 26 that a majority of UPS Teamsters have
voted to approve a new five-year national contract that contains significant wage
increases and other improvements. The vote on the contract, the largest CBA in North
America, was 34,307 to 30,202.
However, UPS Freight Teamsters have rejected a proposed five-year national agreement
with UPS Freight by a vote of 1,897 to 4,244. The agreement included a two-tier deal to
create “Line Haul” drivers at what the Teamsters for a Democratic Union characterized
as essentially nonunion wages and conditions.
The new UPS contract, which covers about 240,000 union-represented employees,
includes wage increases totaling $3.90 per hour over the five-year term of the agreement,
an increase in the starting part-time wage rate, the creation of 2,350 full-time jobs,
protections from harassment and intimidation by supervisors, protections for employees
who choose to work fewer hours in a day, and guaranteed vacation time for employees
coming back from military leave. The agreement also maintains the current arrangement
of no employee contributions for monthly premiums for health insurance.
Seventeen local supplements and riders to the national agreement have been rejected,
however, due to a contract provision that changes the health care plan for some UPS
Teamsters. That provision would move 140,000 UPS Teamsters from their current UPS
health plan into a new plan that would be jointly administered by the Teamsters Union
and employers. According to the union, that change was made because during
negotiations because UPS said it would cut health benefits members currently receive in
the company plan and raise the cost to employees significantly.
Union negotiating committees will be reaching out to members with regard to the
rejected supplements and riders. In the meantime, the Teamsters Union will schedule
meetings to engage the company in further negotiations.
The Teamsters National UPS Freight Negotiating Committee will also schedule
negotiations with UPS Freight in order to address members’ concerns about the rejected
contract proposal. That agreement, which covers about 10,000 union-represented
workers, will then need to be voted on again by the members.
LEADING CASE NEWS:
3rdCir: Discipline of union official didn’t infringe on his free speech rights where he
engaged in conduct detrimental to union
By Ronald Miller, J.D.
22
On a second appeal, the Third Circuit ruled in an unpublished decision that the financial
secretary for a union was not entitled to back pay for lost wages based on his claim that
his removal from office infringed on his free speech rights (Knight v International
Longshoremen’s Association, May 31, 2013, Nygaard, R). The official was disciplined
for engaging in conduct detrimental to the union, including accepting funds from a port
authority officer and misleading another official into believing that a meeting was a
union-sponsored event. As a consequence, the appeals court affirmed the judgment below
that the official was not disciplined for exercising any free speech.
In disciplining the official for conduct detrimental to the union, the union’s disciplinary
committee was especially troubled because, as financial secretary of the local, he should
have been aware of restrictions on payments to union officials. Further, the record
contained testimony of disciplinary committee members confirming that accepting funds
from the port authority officer and subsequently misleading another official were the
reasons for his discipline.
Waiver of lost wages claim. In this appeal, the Third Circuit concluded that even if it
found the official’s lost wages claim valid, it would deem it waived. The appeals court
noted that the official raised this claim on summary judgment during the first trial and
lost. The district court initially ruled that the official’s suspension was not discipline and
that he failed to present evidence showing that the union infringed on his free speech
rights. After trial, the district court reconsidered the issue and again ruled that there was
no evidence to support a violation of the official’s free speech rights. This ruling was not
challenged on appeal. The appeals court observed that an issue not addressed in an
appellant’s appeal brief is deemed waived on appeal, noting that it has consistently
rejected attempts to litigate on remand issues that were not raised in a party’s prior appeal
and that were not explicitly or implicitly remanded for further proceedings.
Moreover, the official’s claims were not somehow resurrected when the appeals court
remanded the action following the first appeal. Here, the official maintained that his
claim for back pay was part of his claim that the union constitution was overbroad.
However, the appeals court rejected this contention. The employee did not present the
issue of whether he was entitled to back pay for lost wages in the first appeal. On remand,
he attempted to bring this claim only to have the district court correctly determine that the
appeals court remanded for consideration the overbreadth issue, not the back pay issue.
The fact that the district court refused to disturb its prior ruling on remand did not revive
the official’s ability to challenge this claim.
Punitive damages not warranted. The appeals court also rejected the official’s claim
that he was entitled to punitive damages under the LMRDA. Whether the official had to
demonstrate actual malice or the lesser standard of reckless indifference was immaterial,
because the appeals court determined that the official presented no evidence to meet even
the lesser standard. Although the official laid out a lengthy and detailed chronology of
events as evidence of a pattern of reckless indifference on the part of the union, the
district court determined that the timeline showed at most a contentious history between
the parties. Thus, the district court did not abuse its discretion.
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No due process violation. On cross-appeal, the union argued that the district court erred
when it held that the official’s due process rights were violated because he was convicted
of conduct for which he was never charged. Here, the district court erred in that respect.
Although the union used language about the official “violating the spirit and intent” of
the statute, it made a point that directly related back to the official’s accepting money
from the port authority official — conduct with which he was clearly charged. Although
the official’s accepting money did not technically violate any laws because the port
authority was not a public entity, that charge was not dismissed. Still, the official was
found to have engaged in conduct detrimental to the union. Thus, the appeals court
reversed the district court’s ruling that the official’s LMRDA Sec. 105 due process rights
were violated.
The case numbers are 10-3426 and 10-3486.
Attorneys: Michael J. Goldberg (Michael J. Goldberg & Associates) for Employees. John
P. Sheridan (Marrinan & Mazzola Mardon) for Union.
4thCir: Union pension funds could not snare delinquent employer by garnishing its
payments from state construction project
By Lisa Milam-Perez, J.D.
A group of union pension funds failed in their bid to secure unpaid fund contributions by
garnishing the payments made to the delinquent employer pursuant to a state construction
contract (Carpenters Pension Fund of Baltimore, Maryland v Maryland Department of
Health and Mental Hygiene, June 26, 2013, Diaz, A). Because the Eleventh
Amendment’s jurisdictional shield insulates the state from a writ of garnishment, the
pension funds could not compel the state to serve as its collection agency, the Fourth
Circuit held on interlocutory appeal.
Default judgment. The pension funds filed an ERISA action against Tao Construction
Company for delinquent contributions and secured a default judgment for more than
$16,000 after the employer failed to answer the complaint. In an effort to collect the
judgment, the funds filed an enforcement action in federal court. After failed attempts to
locate any assets owned by Tao, the funds discovered that the company’s CEO had
contracted with the state department of health to perform construction work under
another company name. Finding sufficient evidence that the other company was an alter
ego of Tao, the court issued a writ of garnishment against the department of health for
amounts due.
The department moved to quash the writ on grounds of sovereign immunity, but the
district court denied the motion, concluding that the garnishment action was not a “suit”
against a state entity. Even though it resembled a suit in the procedural sense, in
substance it was not, the lower court reasoned, because the department was not a real
party in interest; rather, it was a “mere custodian” of the contract sums. The department
filed an interlocutory appeal.
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Constitutionally forbidden. “A federal proceeding that seeks to attach the property of a
state to satisfy a debt, whether styled as a garnishment action or an analogous common
law writ, violates the Eleventh Amendment,” the Fourth Circuit held, remanding with
instructions to quash the writ of garnishment. The writ would leave the department of
health with two options: answer it and appear before the court to defend itself, or ignore it
and have a default judgment imposed against the state treasury. Because it is “the
compulsory aspect of one sovereign exerting its jurisdiction over another that concerns
the Eleventh Amendment,” the appeals court wrote, a proceeding that would encumber
the property of a sovereign unless it participates surely amounts to unconstitutional
coercion of the state by the federal court. That the pension fund claimed the department
had admitted its indebtedness to the employer was irrelevant, the appeals court noted.
“The Eleventh Amendment is a matter of jurisdiction, not liability.”
No “mere custodian.” Especially problematic was that the garnishment action demanded
recovery from the state treasury. “From the outset of the Republic a sovereign has
enjoyed immunity from suits to attach its property,” wrote the court, “and this principle
applies equally to efforts to attach the funds of the sovereign to satisfy the debt of
another.” Indeed, as early as 1846, the Supreme Court rejected efforts by creditors to
garnish the wages of navy seamen from the federal treasury. Although it acknowledged
that the disbursements were owed, the High Court applied sovereign immunity to prevent
the disruption on government functions that would attend the garnishment of public funds
held in the treasury. Recent precedent has confirmed that holding, according to the Fourth
Circuit. And while these cases address federal government immunity from post-judgment
attachment, “we see no reason why a state should not enjoy this immunity as well.”
The appeals court rejected the district court’s reasoning that the state department of
health was a “mere custodian” for sums it admittedly owed to the alter ego employer.
“This characterization is true of all monies held in the state treasury in the sense that they
are all allocated for some governmental purpose or obligation.” Regardless of how the
pension funds characterized their claim, they were ultimately seeking recovery from the
Maryland treasury. Thus, as a matter of procedure and substance, the garnishment
proceeding was a “suit” under the Eleventh Amendment. As a result, the department was
entitled to sovereign immunity, and the lower court was directed to quash the writ of
garnishment.
The case number is 12-1480.
Attorneys: William F. Brockman, Office of the Maryland Attorney General, for Maryland
Department of Health and Hygiene. Brian G. Esders (Abato, Rubenstein & Abato) for
Carpenters Pension Fund et al.
5thCir: NLRB conflated Secs. 8(a)(1) and 8(a)(3), violated trade group’s due process
rights
By Lisa Milam-Perez, J.D.
25
The NLRB denied the due process rights of an electrical contractor trade group when it
ruled that the group’s employment programs for its members violated the NLRA because
they had a “coercive impact” on the protected rights of union members and “salts,” a
divided Fifth Circuit panel held (Independent Electrical Contractors of Houston, Inc v
NLRB, June 17, 2013, Jones, E). The association had been charged and tried under Sec.
8(a)(3) while, in two separate rulings, each Board panel rejected the ALJs’ finding of
liability under Sec. 8(a)(3) and instead found violations of Sec. 8(a)(1). These two
provisions “are not coterminous,” and they require different proof as to motive. Because
the NLRB’s shifting theory of liability was reason enough to grant the trade association’s
petition for review on due process grounds, the appeals court declined to consider the
substance of the “novel” disparate impact theory of liability on which the Board based its
findings of a Sec. 8(a)(1) violation. Judge Graves dissented.
Employment programs. The Independent Electrical Contractors of Houston (IECHouston) administered a “shared man” program through which the group’s member
contractors could borrow workers from other members for up to 60 days. The program
had several benefits: the borrowing contractor gained access to trained electricians; the
lending contractor avoided paying unemployment benefits; and the employees avoided
breaks in employment. The program had been in place since 1955, but it was formalized
in writing in 1989.
The trade group also had an application referral service — instituted years before the
union salting campaign that precipitated the charges at issue here — that was intended to
save its members the time and expense of running employment ads and dealing with
staffing agencies. Electricians looking for work filled out applications at the IEC-Houston
offices, which were filed according to the applicant’s experience level and then placed in
an “active” file for 30 days. When a member asked to review the job applications, IECHouston forwarded all of them; none were withheld or modified based on an applicant’s
union affiliation. The association kept no records showing which applications went to
which recipients, nor did it inform applicants where their applications had been sent.
Board rulings. In a case concerning an IEC-Houston member, the Board upheld the
shared-man program, concluding it did not discriminate against union supporters. Then,
nearly a decade after the ALJ issued a finding that the application referral program
violated Sec. 8(a)(3), the NLRB in Kenmor Electric Co held that program interfered with
the rights of union members and salts to be hired on an equal basis with other nonunion
job applicants, in violation of Sec. 8(a)(1). The Board also held the shared-man program
was not unlawful in itself but, in tandem with the application referral service, tended to
ensure that union applicants would not be hired by IEC members. Finally, the Board held
the referral service as a whole had a “coercive impact” because not one of the named
union applicants was hired, while less qualified electricians were given work. In reaching
this conclusion, the Board cited two articles in the trade group’s newsletters alluding to
the benefits of the organization’s longstanding programs in avoiding union “salting.”
Member Schaumber issued a strong dissent, noting in part that the majority’s finding of a
Sec. 8(a)(1) violation was based on a strict liability disparate impact theory that had no
26
basis in Board case law and marked a dramatic departure from “any previously
recognized theory of liability.” The dissent also contended the ruling went “well beyond”
anything alleged in the complaint or argued by the General Counsel and thus denied IECHouston due process of law.
The Board incorporated its KenMor reasoning in a subsequent case in Independent
Electrical Contractors, performing no independent legal analysis. In the majority’s view,
the issues of law and much of the material evidence in the cases were virtually identical.
Having already concluded that the trade group’s employment services violated Sec.
8(a)(1), the majority dismissed the new charges against IEC-Houston because any further
remedy would be redundant. The dissent — this time, Member Hayes — agreed that
dismissal was warranted, but on the ground that the programs did not violate the Act. In
his view as well, the KenMor majority created a new theory of liability in “an apparent
attempt to circumvent both the lack of evidence of discriminatory motivation in the
operation of the system and the legal barrier to disparate impact litigation under our Act.”
Extraordinary circumstances. As an initial matter, the Fifth Circuit on review rejected
the contention, put forth by the union as intervenor and by the dissent, that the court
lacked jurisdiction under Sec. 10(e) to consider the due process challenge because the
trade group failed to raise this issue before the Board. The court does not lack
“jurisdiction” to consider the merits of an NLRB order if the Board itself chooses not to
raise a Sec. 10(e) exhaustion defense. “This provision is for the benefit of the Board, not
a sword for intervenors,” the appeals court said. Moreover, although case law generally
supports the notion that a party must exhaust issues before the Board before raising them
on appeal, some courts construing Sec. 10(e) have concluded that “when the policies
underlying the rule are not implicated,” issues not directly raised to the Board may be
considered on appeal.
In this case, a review was warranted under the “extraordinary circumstances” exception,
for several reasons. Among them: eight and nine years, respectively, had elapsed between
the ALJ decisions and those of the Board. “Surely, it was unnecessary for an aggrieved
party to extend a process that had already gone on intolerably long; IEC had no reason to
think that the Board would rule more expeditiously on a motion for rehearing than it had
on the appeals in the first place,” the court observed. Moreover, “not only did the Board
deny due process by relying here on a novel theory, it preemptively denied that it had
denied due process. Any attempt by the IEC to add to the debate already undertaken by
the Board would have been futile.”
Changing theory of liability. The appeals court next found on the merits that the trade
group was deprived of due process of law. At trial in KenMor, the attorney for the
General Counsel stated that she would show that IEC’s hiring system was discriminatory
and that it violated the Act “because it discriminates against Union organizers.” There
were no independent allegations of interference with employee rights under Sec. 7.
Moreover, the ALJ’s conclusion of law in Kenmor stated that IEC-Houston violated Sec.
8(a)(3) and (1) “because its programs discriminated against union members.” And, in
27
Independent Electrical Contractors, IEC-Houston restricted its defense to the accused
Sec. 8(a)(3) violations. “The Board’s change of liability theories on appeal was error.”
Provisions “not coterminous.” And it was not harmless error, the appeals court
explained: Applicants who are individually denied employment ordinarily proceed under
Sec. 8(a)(3). By contrast, Sec. 8(a)(1) concerns interference with the Sec. 7 rights of
employees. As in this case, the General Counsel often charges employers with violating
both provisions, which amounts to a primary violation of Sec. 8(a)(3) and a derivative
violation of Sec. 8(a)(1). Violations of Sec. 8(a)(3) may separately violate Sec. 8(a)(1)
when “the employer’s acts served to discourage union membership or activity.” But the
two provisions “are not coterminous.” Moreover, a derivative violation of Sec. 8(a)(1)
stemming from a Sec. 8(a)(3) charge will not be reviewed independently; only the Sec.
8(a)(3) charge will be considered. For a Sec. 8(a)(1) violation to be considered on its own
merit, it must be independently charged. “The Board was not at liberty to ignore the
distinction between [Secs.] 8(a)(1) and (3).”
Different evidentiary standards. In addition, the nature of the violations required
different proof, the appeals court noted. While anti-union animus or discriminatory
motive must be shown to establish a Sec. 8(a)(3) violation, a Sec. 8(a)(1) interference
allegation is considered based on the totality of circumstances. The Board must allow an
employer to demonstrate a legitimate and substantial business justification for its
conduct, and then balance the asserted business justifications and the invasion of
employees’ rights. “Whether IEC-Houston could have offered additional justifications for
its practices, or disproved the alleged systemic disadvantage imposed on union applicants
through its programs, is unknown,” though, because the organization had no notice that it
was necessary to do so, the court wrote. “Equally unfortunate, the Board, having deviated
from the charges that had been pled and tried, then refused to expressly balance IECHouston’s business justifications as required.”
Further illustrating the “no-win situation” in which the trade association had been placed,
the appeals court noted that, on one hand, the Board acknowledged that it was irrelevant
under Sec. 8(a)(1) whether the respondent had an adverse motive. But then it “stacked the
elements of the shared man program and application referral service,” both of which had
previously been upheld as legal (either by the Board or a court), and found them
collectively unlawful when considered in light of the newsletter articles describing the
benefit of the employment programs for avoiding union salting. ”Even if this internally
inconsistent theory had been timely asserted, the Respondent could not have known what
kind of defense to pursue,” the court lamented.
Disparate impact theory. Finally, the very novelty of the Board’s theory of liability
supported a finding that IEC-Houston had insufficient notice of the basis for finding a
Sec. 8(a)(1) violation, the appeals court said. It was unnecessary, however, for the court
to decide whether the Board had adopted an impermissible disparate impact theory
because the court’s decision denying enforcement of the Board’s order was predicated on
due process grounds. In addition, there was no evidence that the challenged programs
28
applied differently to union and nonunion applicants. Further, the Board offered no
factually or legally-related Sec. 8(a)(1) precedents.
“We do not question the Board’s authority to fashion novel remedies where novel facts
show violations,” wrote the court. Here, though, the referral service predated the union’s
salting program by several years and, as such, could not have been motivated by an anti“salting” animus. Moreover, the shared man program was longstanding — and had been
upheld by the Board. Finally, the appeals court scolded, “[i]f the General Counsel had
chosen to pursue a novel Sec. 8(a)(1) violation premised on these facts, it should have
been done in the regular adjudicative process, and not as an afterthought imposed by the
Board on review.” Accordingly, the appeals court granted the trade association’s petition
for review.
The case number is 10-60822.
Attorneys: Frank L. Carrabba (Law Office of Frank L. Carrabba) for Independent
Electrical Contractors of Houston, Inc. Nora Leyland (Sherman, Dunn, Cohen, Leifer &
Yellig) for Local 716, International Brotherhood of Electrical Workers. Linda Dreeben
for NLRB.
6thCir: Layoffs precipitated by bankruptcy of major customer qualified as
unforeseeable business circumstance for WARN notice requirement
By Ronald Miller, J.D.
A parts supplier in the automobile industry was entitled to invoke the “unforeseeable
business circumstances” exception to the Worker Adjustment and Retraining Notification
Act’s (WARN) 60-day notice requirement, where it laid off workers following the
bankruptcy filing of Chrysler, ruled the Sixth Circuit in an unpublished decision (Pearce
v Faurecia Exhaust Systems, Inc, June 19, 2013, Suhrheinrich, R).
The employer was a just-in-time manufacturer, meaning it produced products for its
customers on demand, when the product was needed by the customer. In 2008 and early
2009, the plant in question supplied parts for Chrysler and General Motors. However, in
April 2009, Chrysler filed for bankruptcy and announced the closure and sale of multiple
plants. After the employer was notified that Chrysler plants it supplied would be idle
during the bankruptcy, the employer verbally instructed certain employees not to report
work. Less than a week later, the employer mailed letters announcing the permanent
layoff of the plant’s employees, except production lines that did not supply Chrysler. It
also included an explanation of the shutdown decision.
Seventy-five employees filed a complaint asserting a claim under the WARN Act for
failure to give a 60-day notice of a mass layoff. In response, the employer filed a motion
for summary judgment, claiming that it was entitled to invoke the “unforeseeable
business circumstances” exception to the notice requirement. The district court granted
the employer’s motion and the employees appealed.
29
Unforeseeable business circumstances. As an initial matter, the appeals court noted that
the “unforeseeable business circumstances” exception had to be narrowly construed, and
that the employer bears the burden of persuasion. In order to qualify for the exception in
29 USC Sec. 2102(b)(2)(A), the employer had to prove two elements: (A) that the
circumstances complained of were unforeseeable; and (B) that the circumstances
complained of actually caused the mass layoff or plant shutdown. The employees
challenged only the “unforeseeability” element.
The Department of Labor “refuses to classify certain types of circumstances as per se
unforeseeable and suggests that courts examine each cause on its own merits to determine
whether the employer in the exercise of ‘commercially reasonable business judgment’
could have foreseen the particular circumstances that caused the closing” 60 days prior to
the mass layoff. A “sudden, dramatic, and unexpected action or condition outside the
employer’s control” is an indicator of a business circumstance not reasonably
foreseeable, and that includes where an employer unexpectedly loses a major customer,
explained the court.
Knowledge of bankruptcy. The employees argued that the employer had actual
knowledge that Chrysler’s bankruptcy would occur before it was announced; that a
similarly situated employer would have foreseen the bankruptcy; and that, at the very
least, conditional notice should have been given. As to the question of actual knowledge,
the employees offered the testimony of an employee who saw letters in HR department
that looked like the letters the employees later received. They also presented testimony of
“rumors” circulating among employees prior to the Chrysler bankruptcy. Here, the court
concluded that such unsubstantiated arguments were no more than mere speculation and
failed to show that the employer had actual knowledge.
The court next rejected the employees’ challenge that a reasonable and similarly situated
employer would have been able to predict the Chrysler bankruptcy. They argued that
Chrysler’s impending bankruptcy was common knowledge because of the economic
recession and decreased automobile sales. However, the appeals court noted that there
was no “reliable source of verification” for this fact, as required to take judicial notice.
Again, the plaintiffs offered only their own depositions stating that the bankruptcy was
common knowledge. Thus, there was no proof that the employer had any advance
knowledge of the bankruptcy, and it certainly was not involved in the filing.
Lastly, the employees alleged that by failing to issue a conditional notice, the employer
did not “even try to comply with the WARN Act.” Here, the appeals court observed that
while the WARN regulations permit conditional notice, they do not require it. Thus,
failure to circulate conditional notice could not justify imposition of WARN liability.
Accordingly, the judgment of the district court was affirmed.
The case number is 12-3983.
Attorneys: Dwight D. Brannon (Brannon & Associates) for Brenda Pearce. Kathleen M.
Anderson (Barnes & Thornburg) for Faurecia Exhaust Systems, Inc.
30
7thCir: Employees failed to sufficiently allege union breached fair representation
duty, so claims against employer for breach of CBA fail
By Ronald Miller, J.D.
Laid-off union workers could not pursue their claims that Navistar breached a collective
bargaining agreement by not rehiring them as work became available because it
subcontracted their work to nonunion plants in contravention of the CBA, ruled the
Seventh Circuit (Yeftich v Navistar, Inc, June 18, 2013, Sykes, D). Although the
employees’ complaint identified the elements of a duty-of-fair-representation claim
against their union, the appeals court observed that the allegations were almost all
conclusory, so the complaint lacked the necessary factual content to state a plausible
claim under Sec. 301 of the LMRA.
The employees worked at an engine manufacturing plant and their employment was
subject to the terms of the CBA. They alleged that they were laid off from their jobs at
the plant ostensibly due to a lack of work. However, they asserted that Navistar in fact
subcontracted their work to nonunion plants. They also alleged that the employer failed to
recall them as work became available. Moreover, the employees claimed that they filed
numerous grievances with their union and were assured that the grievances were being
processed. Ultimately, Navistar informed the union that it was closing the plant.
Thereafter, the employees sued Navistar under Sec. 301.
Duty of fair representation. A successful Sec. 301 claim requires not only a breach of
contract by the employer but also a breach by the plaintiffs’ union of its duty of fair
representation. Only when the union fails to carry out that duty may union members
pursue Sec. 301 litigation against their employer. The district court dismissed the LMRA
claim for failure to state a claim, reasoning that the plaintiffs had failed to adequately
plead sufficient facts regarding the prerequisite element of the union’s breach of its duty
to fairly represent its members. This appeal followed.
On appeal, the employees focused on the union’s failure to fairly represent them. The
union’s obligation is “to serve the interests of all members without hostility or
discrimination toward any, to exercise its discretion with complete good faith and
honesty, and to avoid arbitrary conduct.” However, the union has wide latitude in
performing this obligation. “A breach of the statutory duty of fair representation occurs
only when a union’s conduct toward a member of the collective bargaining unit is
arbitrary, discriminatory, or in bad faith.”
Allegations of union bad faith. Here, the employees focused on bad faith and
arbitrariness, arguing that the allegations in their complaint were sufficient to give rise to
an inference that the union treated their grievances perfunctorily or not at all. Their
complaint generally alleged that the union knew that Navistar had acted in contravention
of the CBA, along with some other superficial allegations. However, measured against
the Twombly/Iqbal plausibility standard, these allegations were insufficient to state a
claim for breach of the duty of fair representation. Although the employees generally
31
alleged that the union was guilty of bad faith because it “diverted, stalled and otherwise
terminated” their grievances, their complaint lacked the factual specificity required to
state a plausible breach-of-fair-representation claim.
Whether or not a union’s actions are in bad faith calls for a subjective inquiry and
requires proof that the union acted (or failed to act) due to an improper motive. Bare
assertions of the state of mind required for the claim must be supported with subsidiary
facts. In this instance, the employees offered nothing to support their claim of bad faith
apart from conclusory labels and offered no factual detail to support these allegations.
Arbitrariness allegations. Similarly, the appeals court determined that the employees
did not offer plausible allegations of arbitrariness. “A union’s actions are arbitrary ‘only
if . . . the union’s behavior is so far outside a wide range of reasonableness’ as to be
irrational.” While “a union may not arbitrarily ignore a meritorious grievance or process
it in perfunctory fashion,” it “has discretion to act in consideration of such factors as the
wise allocation of its own resources, its relationship with other employees, and its
relationship with the employer.”
Here, the employees generally alleged an arbitrary failure to act on grievances but failed
to offer factual detail in support of their conclusory allegations. They did not identify the
union official who allegedly filed the grievances or otherwise describe the contents of the
grievances. Nor did they identify the union official who allegedly told them that their
grievances were being processed. More importantly, the employees did not explain how
long they waited after filing a grievance before concluding that it had been abandoned, or
how they knew that such a wait time was an abnormal and arbitrary delay.
However, the court noted that the employees did allege that the union lied to them by
saying that the grievances were being processed. Dishonesty can be evidence of bad faith,
and a lack of action on grievances can be evidence of arbitrariness. But absent some
specific factual detail to color these bare conclusory allegations, the court concluded that
the complaint did not plausibly state a claim under Sec. 301. Thus, the district court
properly granted Navistar’s motion to dismiss.
The case number is 12-2964.
Companies: Navistar, Inc; Indianapolis Casting Co
Attorneys: W. Russell Sipes (Sipes Law Firm) for Robert Yeftich. Thomas J. Posey
(Franczek Radelet) for Navistar, Inc.
7thCir: Arbitrator interpreted the CBA when he upheld an employer’s attendance
policy revision; under RLA, that was enough
By Lisa Milam-Perez, J.D.
32
An arbitrator reasonably construed the attendance and leave provisions of a 1952
bargaining agreement when he upheld an employer’s unilateral change to its attendance
policy in the face of a union challenge, the Seventh Circuit ruled (Brotherhood of
Locomotive Engineers and Trainmen, General Committee of Adjustment, Central
Conference v Union Pacific Railroad Co, June 21, 2013, Hamilton, D). Affirming a
lower court’s refusal to vacate the arbitration award, the appeals court held the award
passed muster under the Railway Labor Act and “one of the most deferential standards of
judicial review in all of federal law.”
Because a 1952 collective bargaining agreement had no expiration date, it remained in
effect when Union Pacific Railroad in 2003 revised its attendance policy. Contending the
new policy violated the 1952 contract, the union demanded arbitration. An arbitrator
found the new policy did not conflict with the CBA, and a district court refused to vacate
his award. The union appealed, asserting that the arbitrator exceeded his jurisdiction by
failing to interpret the CBA when he determined that the railroad could implement its
2003 attendance policy.
Relevant provisions. The relevant contract provision stated, “When employees in engine
service are permitted to lay off they must not be absent in excess of 30 days, except in
case of sickness or injury, without having formal leave, in writing, granted in accordance
with the provisions of this agreement.” The 2003 policy provided that, “It is your
responsibility to notify your manager, in advance of layoffs if possible, on personal or
family issues that may affect your ability to work full time. Substantiating documentation
is expected and may be required. However, notification and documentation alone do not
excuse your responsibility to protect your job. You may be considered in violation of this
policy regardless of the explanation offered if you are unable to work full time and
protect all employment obligations.” The policy went on to note that employees could be
disciplined for violations of the attendance policy, including excessive absenteeism.
When several engineers were disciplined under its terms, the union objected. In its view,
the 1952 CBA allowed engineers to “lay off” for 30 days, and disciplining employees for
taking absences approved by a “crew caller” violated that contract.
Arbitration award. Parsing the language of the contract and interpreting specific terms,
the arbitrator found the CBA did not provide automatic permission for layoffs or
absences of 30 days or less. The language could be read as implying that employees have
a right to take “lay-offs” of up to 30 days without explanation or consequence, but that
isn’t the only way to read that provision. On the whole, he found the CBA merely created
a procedure for requesting leave; it did not give railway employees substantive rights to
lay off. Thus, he found the new attendance policy did not conflict with the CBA.
The arbitrator did find, however, that the railroad’s use of an average number of missed
days of all employees as a yardstick for determining individual absenteeism was arbitrary
and unreasonable. Therefore, he ruled the railroad could not use average missed days to
determine whether individual employees were in violation of the attendance policy. And,
in a subsequent clarification, he explained that the railroad may not discipline employees
33
if they lay off for cause (such as illness, the occasional holiday or weekend, or recurring
issues with adequate justification). He said too that the union could refer to this decision
and use it to defend against any unfair future discipline.
Award construed the CBA. In finding that the CBA merely created a procedure for
formal leave and not substantive protections for engineers who wanted to lay off from
work, the arbitrator “took away all critical meaning” from the contract and thus could not
have interpreted it. But the arbitrator did not nullify this provision, as the union
suggested; he simply interpreted it to mean something other than what the union had
hoped. He looked to the meaning of specific words and phrases and determined those
definitions based on surrounding language, the appeals court found.
The court also rejected the notion that there was “no interpretive route” from contract to
award. It would be unfair, the union said, to allow employees to be punished for an
absence that was preapproved by a crew caller—as such, this conclusion must not have
arisen from an interpretation of the CBA. Yet, as the district court explained, while
individual absences may be permitted by the crew caller, an employee’s total absences
may later reveal a pattern of abuse. So even if the crew caller permitted each individual
layoff, the employee might still be excessively absent and subject to discipline. As such,
the union failed to show that the conclusion that permitted absences could result in
discipline was an impossible interpretation of the CBA.
Next, the union argued, to read the provision as only conferring on employees “the right
to ask for permission to lay off” is a right so trivial that it cannot be a reasonable
construction of the contract. However, the arbitrator considered the words, phrases, and
grammar of the CBA to reach his conclusion that the purpose of this language was to
create leave procedures and not to confer substantive rights to be absent at will, without
consequence or explanation, for up to 30 days at a time. “This interpretation may or may
not be correct,” the court wrote, “but it is not untethered from the agreement’s text.”
Other considerations. Nor did the arbitrator exceed his jurisdiction by considering
factors outside the four corners of the 1952 CBA. While the union claimed the arbitrator
based the award on his own sense that the railroad had an “inherent right to control the
attendance of its employees,” he had first analyzed whether the railroad could develop an
attendance policy at all, concluded the railroad reserved an “inherent” managerial right to
do so, and then found this right had not been contracted away under the CBA. The
arbitrator had also permissibly referred to past practice and considered the relative
interests of the parties. Accordingly, the district court’s decision refusing to vacate the
arbitration award was affirmed.
The case number is 12-2913.
Attorneys: Companies: Union Pacific Railroad Company
34
Thomas H. Geoghegan (Despres, Schwartz & Geoghegan) for Brotherhood of
Locomotive Engineers and Trainmen. Donald J. Munro (Jones Day) for Union Pacific
Railroad Company.
9thCir: Change in bankruptcy law meant that former union official may be able to
discharge debt stemming from diversion of union funds
By Ronald Miller, J.D.
A Bankruptcy Appellate Panel of the Ninth Circuit vacated a bankruptcy court’s ruling
that a former union official could not discharge a debt based on a judgment that he
violated his fiduciary duty by unlawfully diverting unions funds (In re John Ernest
Borsos (Borsos v United Healthcare Workers-West)), June 10, 2013, per curiam). In
Bullock v BankChampaign, the Supreme Court interpreted Sec. 523(a)(4) of the
Bankruptcy Code to require a specific state of mind to except a debt from discharge
based on fiduciary defalcation. Because the bankruptcy court did not make any findings
regarding the official’s state of mind, the appellate panel in an unpublished decision
vacated and remanded for further findings in light of Bullock, which abrogated Ninth
Circuit law.
This appeal represents a skirmish in the larger battle between the Service Employees
International Union (SEIU) and the former leadership of United Healthcare WorkersWest (UHW). Disagreements between SEIU and its affiliate UHW came to a head in
January 2009, when the leaders of UHW refused to cooperate with a SEIU order to
transfer 65,000 UHW members to a different SEIU local affiliate. In response, SEIU
appointed a trusteeship over UHW affairs. Still, UHW management resisted the
trusteeship. Key union records and other assets were misplaced, removed and/or
destroyed. Additionally, the UHW leadership formed a rival union, the National Union of
Healthcare Workers (NUHW). Ultimately, a district court found that the former UHW
officers breached their fiduciary duty under ERISA and the Labor-Management
Reporting and Disclosure Act.
Diversion of union funds. The plaintiff was a former elected officer of the UHW. A jury
found the plaintiff and others liable for diverting UHW resources for non-UHW purposes
and entered judgment against him for $66,600. Later, the plaintiff filed for bankruptcy.
However, UHW filed a nondischargeability complaint against him under Sec. 523(a)(4)
of the Bankruptcy Code, based on district court findings that the judgment debt arose
from a fiduciary defalcation not subject to discharge. The bankruptcy court did not make
any findings regarding the plaintiff’s state of mind because the Ninth Circuit did not
require any particular state of mind to except a debt from discharge based on fiduciary
defalcation. During the pendency of the plaintiff’s appeal, however, the Supreme Court
decided Bullock, interpreting Sec. 523(a)(4) defalcation as requiring a specific subjective
state of mind. Bullock’s scienter requirement effectively abrogated Ninth Circuit law.
On appeal, the plaintiff contended that the conduct for which he was found liable did not
qualify as defalcation under Sec. 523(a)(4). Moreover, he asserted that Sec. 501 of
ERISA did not impose upon him they type of fiduciary capacity covered by Sec.
35
523(a)(4). Defalcation occurs for purposes of Sec. 523(a)(4) if a fiduciary either
misappropriates trust assets or fails to account for them. In turn, a fiduciary
misappropriates trust assets if he uses them for an improper purpose in light of the trust’s
terms.
Scienter component. All of the liability findings against the plaintiff were based on his
diversion of his work time and other UHW resources for non-UHW purposes. This
conduct squarely falls within the definition of misappropriation, which in turn satisfies
the conduct component of Sec. 523(a)(4)’s defalcation requirement. However, that did
not end the inquiry, because the Supreme Court recently held in Bullock that Sec.
523(a)(4)’s defalcation requirement consists of a scienter component as well as a conduct
component. As a result, in order to qualify as a Sec. 523(a)(4) defalcation, debtors must
have acted either with knowledge that their conduct would constitute a breach of their
fiduciary duty or with conscious disregard or willful blindness to “a substantial and
unjustifiable risk” that their conduct would constitute a breach of their fiduciary duty.
In excepting from discharge the judgment debt, the bankruptcy court explicitly ruled that
the plaintiff’s conduct constituted defalcation under Sec. 523(a)(4). But it did not make
any findings regarding the plaintiff’s mental state. Thus, the appeals court concluded that
the bankruptcy court did not apply the correct legal standard. Consequently, because the
appeals court could not ascertain the plaintiff’s mental state either from the bankruptcy
court record or from its findings, the case was vacated and remanded to the bankruptcy
court.
The case number is EC-12-1163-MkDJu.
Attorneys: Daniel M. Siegel (Siegel & Yee) for Debtor. Jeffrey B. Demain (Altshuler
Berzon) for Union.
9thCir: Arbitrator arguably construed CBA, acted within scope of authority; award
in favor of union confirmed after arbitrator framed issues for decision
By Ronald Miller, J.D.
The Ninth Circuit, in an unpublished decision, affirmed a lower court ruling that
confirmed an arbitration award in favor of a union representing a bargaining unit
composed of an employer’s former employees, after finding that the arbitrator arguably
construed or applied a collective bargaining agreement and acted within the scope of his
authority (American Medical Response of Southern California v National Emergency
Medical Services Association, June 19, 2013, per curiam). Here, the appeals court
determined that the arbitrator acted within the scope of his authority in framing the issues
for decision after the parties were unable to agree on a formulation of the issues to be
presented for arbitration.
The appeals court concluded that the arbitrator’s decision was based on “a plausible
interpretation” of the CBA and therefore “draws its essence from the contract.” Here, the
36
court determined that the arbitrator permissibly went beyond the literal terms of the
contract and determined that a contract provision did not allow the employer complete
discretion in the scheduling of special event shifts. Testimony in the record supported the
arbitrator’s conclusion that the terms of the CBA did not include “an undisclosed and
non-negotiated erosion of special event shift assignments historically performed by
bargaining unit members, in contrast to the fully negotiated and substantially discussed
loss of seniority as the basis for special event assignments.
Further, the arbitrator acted within the scope of his authority by framing the issues for
decision after it became clear that parties could not agree on a formulation. The appeals
court noted that an arbitrator’s definition of the scope of the issues submitted to him is
entitled to “the same deference accorded his interpretation of the collective bargaining
agreement.” Contrary to the employer’s contention, the contract did not withdraw all
authority from the arbitrator simply because the parties did not agree on the scope of the
issues. Here, each party submitted their own interpretation of the issues before the
arbitrator, and the arbitrator plausibly determined that the grievance was properly before
him.
Moreover, the court rejected the employer’s contention that it agreed to arbitrate only an
unfair labor practice charge instituted by the NLRB, not the union’s grievance that it
violated the CBA. Here, the record contained sufficient evidence that the employer
agreed to arbitrate the substance of the grievance — that it was handing over bargaining
unit work to non-unit employees. The NLRB’s deferral letter stated that the employer
was willing to process a grievance and to waive any time limitations in order to ensure
that the arbitrator addressed the merits of the dispute. The letter when on to describe the
amended charge as “unlawfully subcontracting out bargaining unit work to nonbargaining unit employees,” which was similar to how the union framed its grievance.
The employer did not dispute the accuracy of the NLRB’s deferral letter until the
arbitration proceeding itself. Having taken advantage of the NLRB’s decision to defer the
unfair labor practice charge against it pending the arbitration of the union’s grievance, the
employer cannot now complain that it did not agree to that arbitration.
Enforcement of arbitration award. Finally, the court concluded that the record did not
support the employer’s contention that a new union was now representing the bargaining
unit employees. The court observed that an NLRB proceeding had blocked pending
decertification petitions. Thus, the union was still certified as the exclusive bargaining
representative of the bargaining unit employees. Consequently, the lower court judgment
confirming the arbitrator’s award was affirmed.
The case number is 2:10-cv-09672-JHN-MAN.
Attorneys: Matthew J. Cute (Payne & Fears) for American Medical Response of
Southern California. Matthew Allyn Link-Crosier (Talbot Law Group) for National
Emergency Medical Services Association.
37
11thCir: District court lacked jurisdiction to review NLRB investigation of unfair
labor practice charges against employer
By Ronald Miller, J.D.
A federal district court properly dismissed an employer’s suit seeking a declaratory
judgment that the NLRB lacked jurisdiction to conduct a preliminary investigation into
an unfair labor practice charge against it by a union on behalf of its cargo handlers, ruled
the Eleventh Circuit in an unpublished decision (Amerijet International, Inc v NLRB, May 29,
2013, per curiam).
The appeals court observed that Sec. 3(d) of the NLRA commits to the NLRB General
Counsel the unreviewable authority to initially investigate unfair labor practice charges in
order to determine whether to file a formal agency complaint. Moreover, the Supreme
Court, in Newport News Shipbuilding & Dry Dock Co v Schauffler, has long held that the
NLRB’s decision to investigate an unfair labor practice charge is unreviewable by the
federal courts.
Jurisdictional hurdle. In this instance, Amerijet claimed that the Supreme Court’s
decision in Leedom v Kyne, and the Eleventh Circuit’s ruling in Fla Bd of Bus Regulation
v NLRB, provided an exception that carried it over the jurisdictional hurdle imposed by
Sec. 3(d). However, the appeals court observed that neither of those cases addressed Sec.
3(d), but dealt with NLRB representational proceedings that arose under a different
section of the NLRA.
Rejected also was the employer’s contention that the district court could exercise
jurisdiction over the matter anyway because resolution of the merits was clear. However,
the appeals court reiterated that it could not create jurisdiction in the district court in the
face of a congressional pronouncement that leaves the power to conduct an initial inquiry
solely in the hands of the General Counsel.
Finally, the appeals court was unpersuaded by Amerijet’s suggestion that the court’s
ruling left it without any other recourse for challenging the NLRB’s jurisdiction in
federal court. Rather, the court observed that if the NLRB sought to enforce a subpoena
under Sec. 11(2), it must do so in the district court and the employer was free to
challenge the Board’s jurisdiction at that point. Moreover, if the Board issues a formal
complaint and subsequently orders that relief be granted, the employer may challenge the
Board’s final order before the appeals court, including jurisdiction.
The case number is 12-14657.
Attorneys: Joan M. Canny, Amerijet International, Inc, for Employer. Mark Glenn
Eskenazi for NLRB.
NLRB: Employer’s bad-faith bargaining warranted order requiring reimbursement
of union’s negotiation expenses
38
By Ronald Miller, J.D.
The NLRB denied an employer’s motion for reconsideration of Board findings that it
engaged in bad-faith bargaining by adhering to an overly broad management-rights
proposal while simultaneously committing numerous unfair labor practices away from
the bargaining table, and requiring that it reimburse the union for negotiation expenses
(Ampersand Publishing, LLC dba Santa Barbara News-Press, May 31, 2013). None of
the employer’s arguments raised in its motion for reconsideration satisfied the
“extraordinary circumstances” requirement under Section 102.48(d)(1) of the Board’s
Rules and Regulations, the NLRB found.
Reimbursement not sought. To remedy the employer’s bad-faith bargaining, the NLRB
ordered that it reimburse the union for its negotiation expenses. The employer argued that
the Board’s order improperly deviated from precedent. Specifically, the employer argued,
in each case where the extraordinary remedy of reimbursed bargaining expenses was
ordered, the remedy was sought in a complaint or through a motion. According to the
employer, the remedy was waived when neither the acting general counsel nor the union
requested this remedy from an administrative law judge at a hearing. However, the Board
found no merit to these arguments, noting that its authority to order reimbursement of
union bargaining expenses in the absence of a request to the ALJ was well supported by
precedent.
Like the union in Regency Service Carts, the union in this instance requested a
reimbursement remedy in cross-exceptions to the Board. Relying on its “broad discretion
in determining the appropriate remedies to dissipate the effects of unlawful conduct,” the
Board granted the request. Moreover, because the employer had not previously raised the
argument that its bargaining conduct was not sufficiently egregious to warrant the
reimbursement of bargaining expenses, the argument did not merit reconsideration.
Editorial control. In a related case, the Santa Barbara News-Press v NLRB (Santa
Barbara I), the D.C. Circuit determined that the First Amendment affords a publisher —
not a reporter — absolute authority to shape a newspaper’s content, and the publisher’s
editorial policies did not constitute a “term and condition of employment” under Section
7. In the current case, the employer asserted that the union’s bargaining proposals and
refusal to bargain allegations continued the employees’ unprotected quest for editorial
control of the newspaper. However, the NLRB concluded that the record did not support
those assertions.
The union proposed that the employer’s right to control editorial content did not extend to
the use of an employee’s byline. The employer contended that the union’s proposal
sought content control. But the Board disagreed; it has long held that byline protection
clauses are mandatory subjects of bargaining, rather than an impingement on a newspaper
publisher’s right to control the content of its product. The NLRB also rejected the
employer’s contention that the union sought content control by opposing the publisher’s
right to discipline or discharge an employee for “biased reporting.” The union in fact
agreed that biased reporting constituted just cause for discipline, and it had proposed only
39
that the employer provide some definitional guidelines so that employees would
understand how this disciplinary rule would be applied. In view of the fact that the union
was willing to concede the employer’s right to editorial control, the Board rejected the
employer’s content control defense to bargaining violations found by a law judge.
Cease-and-desist order. Notwithstanding the fact that it no longer relied on the
violations found in Santa Barbara I as support for the remedies ordered in this case, the
Board still found that its remedies remained appropriate. First examining the board ceaseand-desist order, the Board adhered to its previous finding that the employer’s violations
in this case alone were sufficient to justify a broad order the “egregious and widespread
misconduct” standard of Hickmott Foods without reliance on the alternative standard of
proclivity to violate the Act. Here, the Board determined that the employer’s conduct
showed an unmistakable campaign to undermine the Sec. 7 rights of its unit employees.
Despite the employee’s election of a bargaining representative, the employer sought to
maintain unilateral control of their terms and conditions of employment. It disregarded
their rights by transferring unit work to non-unit freelance reporters; prohibited
employees from discussing matters related to terms and conditions of employment
outside its employee meeting; bargained in bad faith by insisting on proposals that
employees’ status remained at-will; direct dealing with employees; and implementing
unilateral changes concerning mandatory subjects of bargaining. These violations directly
affected the entire bargaining unit and sent a clear message that the employees’ decision
to be represented by the union would only be to their detriment.
Moreover, in view of its broad scope and severity, the employer’s misconduct provided
more than a sufficient “objective basis for enjoining a reasonably anticipated future threat
to employees’ Section 7 rights” in accordance with Five Star Mfg. The employer was
found to have served subpoenas on employees prior to the hearing in this case,
demanding copies of their confidential affidavits to the Board during the investigation of
this case. Since the employer was aware that it was not entitled to such affidavits, the
Board concluded that its conduct had a chilling effect on employees’ rights to participate
in Board investigations. Thus, the Board reaffirmed its broad cease-and-desist order.
The NLRB slip opinion number is 359 No 127.
Attorneys: Ira Gottlieb (Bush Gottlieb Singer Lopez Kohanski Adelstein & Dickinson)
for Union. Glenn Plosa (The Zinser Law Firm) for Employer.
NLRB: Freelance engineer had apparent authority to speak on behalf of union;
threats to unit employee warranted setting aside election
By Ronald Miller, J.D.
Threats made by freelance audio engineer to a bargaining unit employee warning him
that he “better not vote” and that if the vote when through he would be “toast,” was
objectionable conduct that was attributable to a union, ruled a three-member panel of the
40
NLRB (Bellagio, LLC, May 31, 2013). By failing to clarify to bargaining unit members
the role of the freelancer at a union organizing meeting at which he was in attendance, a
union business agent created an impression that he had apparent authority to work on
behalf of the union, such that the threats were attributable to the union. Because the
threats were made just two days before an election and were disseminated to two other
bargaining unit members, they affected a significant number of voters to have potentially
changed the outcome in view of a one-vote margin.
The employer operated a hotel and casino in Las Vegas. The union petitioned to represent
its audio-visual technicians and stage hands in its production services department.
Although the freelance engineer had worked for the employer in the past, he was not
employed at any time during the union organizing campaign. Before the petition was
filed, the freelance engineer visited the union’s hiring hall and met with its business agent
to offer his help with the union’s organizing efforts. Although the business agent declined
the offer, the freelance engineer nevertheless contacted the individual believed to be the
swing vote in the election, falsely stated that the business manager had asked him to
speak with the employee, and them spoke to him about the benefits of union
representation.
Thereafter, the swing voter and several other employees attended an organizing meeting
at the union’s hiring hall. The freelance engineer was also in attendance at the meeting.
Despite noticing his presence, the business agent did not ask him to leave. The employer
also held a meeting regarding the upcoming election. During this meeting, the swing
voter identified two employees as leaders of the union organizing effort and voiced his
opposition to that effort. Two days prior to the election, the swing voter received a text
message from the freelance engineer. In response, the swing voter immediately contacted
the freelance engineer and during the ensuing conversation, the threats were made.
Apparent authority. A hearing officer found that the freelance engineer was not an
agent for the union, so that his comments did not constitute objectionable conduct.
Moreover, the hearing officer determined that his conduct was not objectionable thirdparty conduct. On review, the NLRB reversed that ruling, finding that the freelance
engineer’s agency status was established under the doctrine of apparent authority, and
that his comments to the swing voter constituted objectionable conduct warranting setting
aside the election.
The Board applies common law principles when considering whether an individual is an
agent of the union. “Apparent authority results from a manifestation by the principal to a
third party that creates a reasonable basis for the latter to believe that the principal has
authorized the alleged agent to perform the acts in question.” In evaluating whether an
individual is vested with apparent authority to act as the principal’s representative, the
Board also considers “whether the statements or actions of an alleged . . . agent are
consistent with statements or actions of the principal.”
Here, the Board found that under the totality of the circumstances, the union business
agent should have realized that employees reasonably would have believed the freelance
41
engineer was an agent of the union. The business agent observed the freelance engineer,
who was a union member, but not in the bargaining unit, in attendance at the union
organizing meeting, but did nothing to clarify for the employees the purpose of his
attendance. Instead, he simply allowed the freelancer to remain present at the meeting.
The freelancer’s presence at the meeting reasonably created the impression among the
employees that he was working on behalf of the union in the organizing campaign.
Moreover, the freelancer’s statement to the swing voter that the business agent had asked
that he contact him, although false, was conduct consistent with the impression created
by the business agent in allowing the freelancer to attend the union meeting. This action
also supported a finding of apparent authority on the part of the freelancer. The Board
disagreed with the hearing officer’s conclusion that a finding of apparent authority
necessarily requires evidence that the freelancer spoke on behalf of the union at the union
meeting.
The slip opinion number is 359 NLRB No 128.
Attorneys: Gary Moss (Jackson Lewis) for Employer. Kristina Hillman (Weinberg, Roger
& Rosenfeld) for Union.
NLRB: Objectionable statements by employer agents during election campaign not
disseminated, didn’t affect outcome
Ronald Miller, J.D.
Although an employer engaged in objectionable conduct during a union election
campaign by making objectionable statements to two bargaining unit employees,
threatening retaliation against employees if a challenging union won the election, the
NLRB declined to overturn the results of the election won by the incumbent union
(Sanitation Salvage Corp, June 5, 2013). The statements were not disseminated beyond
the two employees and the challenger lost the election by such a wide margin that the
objectionable statements were insufficient to affect the election’s outcome.
Two rival unions competed for the right to represent a bargaining unit of sanitation
workers. During the campaign, an employee stated to a coworker that the employer
would reduce employees’ overtime if the challenging union won the election. In another
instance, a supervisor made statements to the employee and another coworker threatening
employees with discharge in retaliation for support of the challenger, creating the
impressions of that employees’ union activities were under surveillance, and conveying
the impression that voting for the challenger would be futile. The tally of ballots showed
ten votes for the challenging union, 32 votes for the incumbent union, two votes against
unionizing and five challenged ballots, an insufficient number to affect the results.
The Board will set aside an election when “the objectionable conduct so interfered with
the necessary ‘laboratory conditions’ as to prevent the employees’ expression of a free
choice in the election.” The evidence in this case showed that the employer made several
42
threats to two employees. There was no evidence in the record, however, that the
objectionable conduct was disseminated beyond the two employees directly affected by
it. Consequently, because the employer’s misconduct affected only two employees and
the challenger lost the election by a wide margin, the Board found that a new election
was not warranted.
The slip opinion number is 359 NLRB No 130.
Attorneys: Denise Forte (Trivella & Forte) for Employer. Haluk Savci, for Local 79,
Construction & General Building Laborers.
NLRB: Union’s requirement that Beck objectors annually renew dues objections
unlawful
By Ronald Miller, J.D.
A union violated its duty of fair representation by requiring nonunion employees, who
sought objector status with respect to union dues, to annually renew their objections,
ruled a three-member panel of the NLRB (Communications Workers of America (AT&T
Teleholdings, Inc d/b/a AT&T Midwest), June 10, 2013). The union’s annual renewal
requirement was arbitrary and so violated Sec. 8(b)(1)(A) of the NLRA, contrary to the
requirements outlined by the Board in L-3 Communications.
The plaintiff was employed by AT&T Midwest and represented by the Communications
Workers of America (CWA), which was responsible for formulating and administering
the system used by its subordinate locals to satisfy the rights of objectors as outlined in
the Supreme Court’s ruling in Communications Workers of America v Beck. The CWA
administers its system on an annual basis—that is they require would-be or current Beck
objectors assert that status annually during the month of May. Individuals who fail to file
their objections are not treated as objectors during the upcoming yearly cycle and are
charged full dues and fees.
The union mails a copy of its Beck policies, including annual renewal requirement, to all
employees they newly represent and to employees who resign their membership and
become agency fee payers. The policies are also published annually in the union’s spring
newsletter. It did not send out renewal reminders to objectors. In September 2004, the
employee resigned from the union and registered a Beck objection. Her letter did not
request a continuing objection and she failed to subsequently renew her objections
annually. The union continued to charge her full dues and fees.
Renewal requirement. In L-3 Communications, the Board determined that a union’s
maintenance of an annual renewal requirement for Beck objectors is unlawful unless the
burden it imposes is de minimis or the union demonstrates a legitimate justification for
the requirement. In this instance, the union did not assert that an administrative law judge
erred in finding that its policies imposed more than a de minimis burden on objectors.
Rather, it contended that the ALJ erred in rejecting its asserted justifications.
43
Specifically, the union asserted that it forwarded statistics for each objection period to its
local unions. According to the union, its identification of pockets of Beck objections
assisted the locals in assessing how their performance was perceived by the employees
they represent. However, the Board determined that the union failed to show how it used
this information as the basis for any action with respect to objectors. The mere collection
of data is not a sufficient justification for an annual renewal requirement, concluded the
Board. Because the union failed to articulate a legitimate justification for the burden its
annual renewal requirement imposed on potential objectors, the union violated its duty of
fair representation, and accordingly acted unlawfully by maintaining the requirement.
The slip opinion number is 359 NLRB No 131.
Attorneys: Susan Fernandez, for General Counsel. Theodore E. Meckler for Employer.
John C. Scully for Union.
NLRB: Informational notice that specifically targeted union representatives’ use of
employer’s email system unlawful
By Ronald Miller, J.D.
An employer’s company informational notice (CIN) that specifically targeted email
messages sent by union representatives discussing union related business was unlawful,
ruled a three-member panel of the NLRB (Weyerhaeuser Co, June 20, 2013). In finding
that the CIN was facially discriminatory, the Board noted that the employer did not argue
it was an application of its existing electronic media use policy, which pre-dated the CIN
by six years, and was promulgated on a companywide basis. However, the employer’s
maintenance of the electronic media use policy that restricted employee use of its
electronic media to “business purposes only” and provided for limited personal use only
with managerial consent was lawful.
Prior to June 15, 2010, union representatives regularly used the employer’s email system
to communicate about contract administration matters. On that date, management
promulgated a company informational notice (CIN) that allegedly superseded all previous
“discussions” on use of the company email system by union reps. The CIN applied only
to union representatives at this particular facility. The employer asserted that it
implemented the CIN because it believed that union reps were spending too much work
time sending emails and because its email system was not a “debating society.”
Thereafter, the union instructed its members to cease conducting most union business via
email.
The acting NLRB general counsel alleged that the employer’s maintenance of the CIN
unlawfully interfered with the employee’s rights under the NLRA. Specifically, the
general counsel asserted that the rule unlawfully discriminated on its face. By its own
terms, the CIN placed limitations only on email messages sent by union representatives
related to union business. As opposed to an existing electronic media use policy which
was promulgated on a companywide basis, the CIN was specific to the particular facility
and was promulgated in response to email use by union representatives at that facility.
44
Thus, the Board concluded that the CIN was a freestanding restriction on union-related
email that the employer put in place independently of its previous efforts to regulate the
use of its electronic media.
The slip opinion number is 359 NLRB 138.
Attorneys: Ryan Connelly for General Counsel. Charles Cohen (Morgan, Lewis &
Bockius) for Weyerhaeuser Co.
NLRB: Employer unlawfully withdrew recognition from one union, extended
recognition to new union and applied existing CBA to bargaining unit employees
By Ronald Miller, J.D.
Pacific Marine Maintenance Company (PMMC) acted unlawfully when it transferred
work and the employees who performed that work to a related company Pacific Crane
Maintenance Company (PCMC), withdrew recognition from the Machinists union that
represented the bargaining unit employees and recognized in its place the
Longshoreman’s union that represented PCMC’s preexisting complement of employees,
ruled a three-member panel of the NLRB (PCMC/Pacific Crane Maintenance Co, Inc,
June 24, 2013). Because the two companies were at all times a single employer, the
Board found that it was obligated to bargain with the Machinists over the layoff of unit
employees from PMMC and the terms and conditions under which they would be offered
continued employment with PCMC.
PCMC was incorporated in 1990 to perform maintenance and repair work at shipping
terminals. After joining the Pacific Maritime Association (PMA), a multiemployer
association, it agreed to honor a PMA’s collective bargaining agreement with the
Longshoremen’s union. In 1999, it formed a partnership with Marine Terminals Corp to
form PMMC and to bid on work previously performed by employees of Sealand. The
work at these terminals was required to be performed by employees represented by the
Machinists union. Ultimately, PMMC began performing this work with mechanics
represented by the Machinists. Over time, the terminal owner that had contracted with
PMMC became dissatisfied with the labor costs of the Machinists agreement, and asked
PMMC to submit a new bid in order to retain the work.
The terminal owner contacted PCMC and advised it that the Machinists CBA was set to
expire and asked if it could perform the work at a lower cost than PMMC. PCMC
responded that it could because of its lower cost agreement with the Longshoremen.
Thereafter, the employer met with both PCMC and PMMC to discuss how they could
transition the Machinists to the Longshoremen work force. Subsequently, the PMMC
contract was terminated and the work transferred to PCMC and employees were notified
to that effect. Thereafter, the Machinists sought to negotiate with PMMC over the
decision to cease work and the effects of that decision on unit employees. PMMC laid off
its Machinists employees and most were offered employment with PCMC in a unit that
recognized the Longshoremen.
45
Single employer status. The Acting General Counsel filed a complaint alleging, among
other things, that PMMC and PCMC constituted a single employer and acted unlawfully
by laying off employees from PMMC and reemploying them as members of an existing
Longshoremen represented work force employed by PCMC. Despite the parties
stipulating that they were a single employer, an administrative law judge found they acted
independently of one another, and dismissed the allegations. However, the Acting
General Counsel asserted that the ALJ erred in discounting the single-employer
stipulation, and treating PMMC and PCMC as independent actors. The NLRB found
merit in this contention and reversed the law judge’s decision.
As a single employer, PMMC/PCMC could not escape its bargaining obligation by the
simple device of laying off the Machinists-represented employees from PMMC, and then
rehiring them as “new” employees of PCMC. Rather, if the employer wanted to
cooperate with the terminal owner in effecting the transfer of the unit work and unit
employees from PMMC to PCMC, it was first obligated to bargain with the Machinists
about any changes in unit employees’ terms of employment from PMMC, whether they
would be reemployed by PCMC, and what their initial terms and conditions would be.
Changed circumstances. The law judge found no obligation to bargain because the
changes were the direct result of the terminal owner’s decision to award the unit work to
PCMC, a decision outside the employer’s control, and they were exempt from bargaining
under First National Maintenance. However, the Board determined that the layoff,
reemployment, and unilateral changes were not an inevitable consequence of the terminal
owner’s decision, but were only “one of a number of responses to changed
circumstances.” Contrary to the judge’s findings, the layoff and unilateral changes did not
constitute a core entrepreneurial decision exempt from bargaining under First National
Maintenance. Rather, the overwhelming record evidence established that the decisions at
issue were motivated by a desire to reduce labor costs. The employer could have
bargained with the Machinists to see if it would make concessions on wages, hours,
benefits and staffing levels.
The Board also reversed the ALJ’s findings that the historical bargaining unit did not
survive the transfer of unit work from PMMC to PCMC, and that the PMMC-mechanics
were lawfully merged into the Longshoremen bargaining unit. Here, the Board ruled that
employer failed to establish that “compelling circumstances” existed so as to overcome
the nearly 40-year history that the Machinists had in representing the bargaining unit.
Following the transfer, there were no significant changes to the former PMMC unit
employees’ terms and conditions of employment that might warrant a finding of
“compelling circumstances.” The unit generally continued to perform the same work at
the same location, with the same tools and equipment as they had prior to the merger,
working under separate immediate supervision from the Longshoremen-represented
employees.
Consequently, by failing to bargain with the Machinists over the terms and conditions of
employment under which the PMMC employees would be offered employment with
PCMC, the employer violated the Act. Accordingly, the employer could not rely on the
46
results of those unfair labor practices to establish an integration of operations requiring
merger of bargaining units.
The slip opinion number is 359 NLRB No 136.
Attorneys: Valerie M. Hardy-Mahoney for General Counsel. Howard C. Hay, Esq. (Paul,
Hastings, Janofsky & Walker) for Pacific Crane Maintenance Company, Inc. David A.
Rosenfeld (Weinberg, Roger & Rosenfeld) for International Association of Machinists
and Aerospace Workers of America, District Lodge 190, Local Lodge 1546. Terry C.
Jensen (Robblee Brennan & Detwiler) for International Association of Machinists and
Aerospace Workers of America District Lodge 160. Matthew D. Ross (Leonard Carder)
for International Longshore and Warehouse Union.
Quicken Loans required to delete non-disparagement provisions, limit scope of
proprietary/confidential info in mortgage bankers agreement
The NLRB has ordered Quicken Loans to remove a non-disparagement clause in its
entirety and limit the scope of protected proprietary and confidential information
referenced in its Mortgage Bankers Employment Agreement that unlawfully restricted
employees’ Sec. 7 rights (Quicken Loans, Inc, June 21, 2013).
The employer’s proprietary/confidential information rule defined proprietary and
confidential information as “non-public information relating to ... the Company’s
business, personnel ... all personnel lists, personal information of co-workers ... personnel
information such as home phone numbers, cell phone numbers, addresses and email
addresses.” These restrictions would substantially hinder employees in the exercise of
their Section 7 rights because employees were not permitted to discuss with others,
including their fellow employees or union representatives, the wages and other benefits
that they receive, the names, wages, benefits, addresses, or telephone numbers of other
employees.
Accordingly, Quicken was ordered to delete the offending language from the
proprietary/confidential information rule in its Mortgage Banker Employment
Agreement, specifically definitional language including the following: (1) “non-public
information relating to or regarding ... personnel” and (2) “personnel information
including, but not limited to, all personnel lists, rosters, personal information of coworkers” and “handbooks, personnel files, personnel information such as home phone
numbers, cell phone numbers, addresses, and email addresses.”
The Board, adopting a law judge’s findings, ordered the non-disparagement provision
removed completely. That provision stated that employees must not “... publicly criticize,
ridicule, disparage or defame the Company or its products, services, policies, directors,
officers, shareholders, or employees, with or through any written or oral statement or
image (including, but not limited to, any statements made via websites, blogs, postings to
the internet, or emails and whether or not they are made anonymously or through the use
of a pseudonym).” An employee reading these restrictions could reasonably construe
them as restricting his right to engage in protected, concerted activities because within
47
certain limits, employees are allowed to criticize their employer and its products as part
of their Section 7 rights.
The NLRB slip opinion number is 359 No. 141.
Hot Topics in WAGES HOURS & FMLA:
FMLA absences continue to rise
Family and Medical Leave Act (FMLA) absences are on the rise, and some sectors —
call centers, hotels, government entities, manufacturers and health care organizations—
far surpass others in terms of absenteeism rates, according to a new report by
FMLASource®, Inc, a ComPsych® company. From 2008 to 2012, FMLASource reports
the following trends:



Average length of continuous leave for health care employees jumped 27 percent
to 28 days.
Total FMLA time off for manufacturing companies increased by 62 percent to
26.9 days.
Total FMLA time off for call center companies increased by 30 percent to 27.2
days.
According to the report, hospitality providers had the most overall FMLA absences, with
49 percent of employees with an open FMLA leave at any given time. Health care
employers had the second highest rate of FMLA absences, with 39 percent of their
workforce having an open FMLA leave at any given time. By contrast, just 7 percent of
professional services employees have an open FMLA leave at any given time.
Hospitality providers also had the highest rate of intermittent leave at 58 percent, with
average leave per employee equaling 17 days. And manufacturing employers had the
highest rate of continuous FMLA leave at 76 percent, with average leave per employee
equaling 31.4 days.
The full report is available at http://bit.ly/18LhQKC.
Obama pushing to cap federal contractor compensation at salary of top federal
executive
By Pamela Wolf, J.D.
In a move intended to curb “excessive contractor compensation,” President Barack
Obama has proposed that contractor salaries be tied to the salary of the president rather
than using the current statutory formula that is tied to private sector salaries, according to
the Office of Management and Budget (OMB). Obama previously asked Congress to
repeal the current formula, but the only thing legislators could agree on was a modest
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change expanding application of the statutory cap for a defense contractor’s senior
executives to all of its employees.
Big raises under current system. Currently, contractors that are paid based on their
incurred costs may demand reimbursement for executive salaries, bonuses, and other
compensation up to the level of the top private sector CEOs and other senior executives.
Since the law was enacted in the mid-1990s, this taxpayer reimbursement level has
skyrocketed by more than 300 percent, the OMB noted.
For fiscal year (FY) 2010, the cap was raised to $693,000; it accelerated to $763,000 for
FY 2011. The cap will soon need to be raised again for FY 2012 — to $950,000 under
the current formula. This path of cap increases “is far outpacing the growth of inflation
and the wages of most of America’s working families,” wrote Joe Jordan, Administrator
for Federal Procurement.
Tying cap to top federal executive. The White House proposal would abolish the
current formula and instead tie the reimbursement cap to the president’s salary and apply
it across-the-board to all defense and civilian cost-reimbursement contracts. “Tying the
cap to the President’s salary provides a reasonable level of compensation for high value
Federal contractors while ensuring taxpayers are not saddled with paying excessive
compensation costs,” Jordan explained.
An exemption would apply under the President’s proposal if, and only if, an agency
determines that additional payment is necessary to ensure access to the specialized skills
required to support mission requirements, such as for certain key scientists or engineers.
Jordan stressed that nothing in the proposal limits the amount contractors pay their
executives.
Union support. The National Federation of Federal Employees (NFFE) offered support
for the White House proposal. “It is absolutely unconscionable that contractor bosses are
getting five and six figure raises from the taxpayers while federal workers have had their
pay frozen,” said NFFE National President William R. Dougan. “We should be
rewarding the employees on the ground actually doing the work, not contractor
executives. Federal workers have sacrificed more than any other group and they deserve a
fair pay adjustment.”
Dougan called for further action, however: “We are encouraged that the President is
tackling this issue, but there is more that can be done. Addressing contractor
reimbursements is just one side of the matter, and it is long past due that we address the
other. Federal workers have endured four years of sacrifice after sacrifice, and the time
for a pay increase has come.”
Agency recovers $687,000 in overtime back wages for roughnecks and crane
operators in Houston
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The DOL’s Wage and Hour Division announced on June 3 that Honghua America LLC
has paid $687,469 in overtime back wages to 133 roughnecks and crane operators
following a Division investigation that found FLSA overtime violations at the company’s
equipment manufacturing facility in Houston. Honghua is one of 10 subsidiaries of
Honghua Group Limited, a large-scale equipment manufacturer and drilling service
provider; it is the biggest exporter of drilling rigs in China, and one of the largest land
drilling rig manufacturers in the world.
The Division’s investigation revealed that Honghua improperly labeled workers who
were employed as roughnecks and crane operators as independent contractors. The firm
had paid the workers straight time for hours worked over 40 in a week, rather than time
and one-half their regular rates of pay for hours worked in excess of 40 in a workweek.
The mislabeled employees purportedly worked as many as 80 hours a week at the
company’s 20-acre Houston facility, without any overtime compensation, as required
under the FLSA.
Business models and practices often result in employees being misclassified as something
other than an employee, such as independent contractors or LLCs, the Division noted.
However, whether someone is an employee is determined by the actual relationship
between the worker and the business — not by label or registration. Likewise, giving
employees 1099 forms instead of W-2s does not transform them into legitimate
independent contractors under the FLSA.
“The misclassification of employees as independent contractors is a serious threat to both
workers, who are entitled to good and safe jobs, and to employers who obey the law and
are undercut when others use illegal practices,” noted Cynthia Watson, the Wage and
Hour Division’s regional administrator for the Southwest. “The department is committed
to remedying employee misclassification, which is a problem we commonly come across
in the oil and gas industry.”
Electrical contractor pays overtime back wages to workers, including time for
company meetings
The DOL’s Wage Hour Division reported that electrical contractor Ludvik Electric Co, in
Lakewood, Colorado, has paid $75,020 in overtime back wages to 139 current and former
electricians after an investigation by the Division found violations of the FLSA’s
overtime and hours worked provisions.
The agency’s Denver District Office conducted an investigation and found that the
employer did not include nondiscretionary safety bonuses in the employees’ regular rate
of pay and when computing overtime compensation for those hours worked over 40 in a
workweek. The employer also did not compensate employees for overtime hours spent in
company meetings, in direct violation of the hours worked provisions of the FLSA, the
Division said.
The company has agreed to comply with the FLSA in the future by paying workers time
and one-half the employee’s regular rate of pay (which includes nondiscretionary
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bonuses) after 40 hours in a workweek, and by paying employees for all required meeting
and training time. Payment of back wages was made in full.
“Not paying for training time or required meetings is illegal and hurts workers and their
families,” said Cynthia Watson, regional administrator for the Wage and Hour Division
in the Southwest. “All hours worked more than 40 per week must be paid at time and
one-half the regular rate—this includes all company meetings.”
Wage and Hour Division targeting restaurants in Oregon, making unannounced
visits after finding low compliance levels
The DOL’s Wage and Hour Division is on the move in Oregon. The Division said on
June 6 that through its ongoing enforcement initiative aimed at the restaurant industry in
that state, it has found “widespread violations of the FLSA’s minimum wage, overtime,
and record-keeping provisions.” The Division is collaborating with state agencies,
industry associations, worker advocates, and other stakeholders to promote awareness
and strengthen compliance with federal labor laws. To that end, Division investigators
will be making unannounced visits to full-service restaurants in Oregon.
The Division’s Portland District Office, which has jurisdiction over Oregon, Idaho, and
southern Washington, conducted more than 110 restaurant investigations in fiscal year
2012 and found that 79 percent of all investigated employers were in violation of the
FLSA. These violations resulted in approximately $740,000 in minimum wage and
overtime back wages for 500 restaurant employees.
Unannounced, focused enforcement. The enforcement initiative will continue this year
with the goal of identifying and remedying common FLSA violations, such as failing to
pay for all hours worked, having employees perform work duties off the clock, and
incorrectly designating employees as exempt from overtime. The Division will also be
looking for other violations, including paying nonexempt employees a flat salary,
regardless of any overtime hours worked, and paying cash wages completely off the
books. Illegal deductions from workers’ wages for uniforms, breakages, customer
walkouts, and cash register shortages will also be on the agency’s radar, as well child
labor violations that include restaurant employers permitting minors to operate hazardous
equipment, such as dough mixers and meat slicers.
The Division said its investigators will make unannounced visits to full-service
restaurants to assess compliance. The agency will pursue corrective action when
violations are found, including payment of back wages, civil money penalties, and
liquidated damages, to ensure accountability and deter future violations. Information
about the establishments investigated will be included in the division’s enforcement
database.
Targeted outreach. In addition, the Division is conducting outreach — to workers,
employee associations, community organizations, state and local agencies, and other
stakeholders — to tell them about the ongoing initiative and encourage them to help
promote industry-wide compliance.
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Wages for tipped employees. The FLSA requires that covered nonexempt employees be
paid at least the federal minimum wage of $7.25/hour for all hours worked, plus time and
one-half their regular rates of pay for hours worked beyond 40 per week, the Division
instructed. Tipped employees must be paid no less than $2.13 an hour in direct wages,
provided that amount, plus the tips received, equals at least the federal minimum wage of
$7.25/hour. If an employee’s tips combined with the employer’s direct wages do not
equal the minimum wage, the employer must make up the difference. Employers also
must provide employees with notice of the FLSA tip credit provisions and maintain
accurate time and payroll records.
Younger workers. Employers are also obligated to comply with the restrictions on hours
and hazardous occupations that apply to workers under age 18. To that end, the Division
has developed a confidential Restaurant Employer Self-Assessment Tool to help
employers determine whether they are in compliance with child labor laws.
“The severity of labor violations in this industry is truly alarming,” said Jeffrey Genkos,
the Wage and Hour Division’s district director in Portland. “We found that only about 21
percent of the investigated restaurants were in compliance with the FLSA. This culture of
noncompliance harms low-wage, vulnerable workers and places honest employers at a
disadvantage because they obey the law.”
Noting that the restaurant industry employs some of the nation’s lowest-paid workers,
who are also vulnerable to disparate treatment and labor violations, the Division advised
that it has other ongoing enforcement initiatives nationwide to identify and remedy
violations common in the restaurant industry.
Agency files suit against Washington drywall installer alleging overtime violations
The DOL has filed a lawsuit against Washington-based Summit Drywall Inc. and its
owner after a Wage and Hour Division investigation found violations of the FLSA’s
overtime and recordkeeping provisions, according to an agency announcement on June
11. Summit Drywall provides drywall installation services for residential, commercial,
and multifamily construction projects throughout Washington.
An investigation by the WHD’s Seattle District Office found that the employer failed to
pay employees overtime at time and one-half their regular rates of pay for all hours
worked beyond 40 in a workweek, as required by the FLSA. Employees working as
drywall hangers and tapers also were paid on a piece-rate basis and were not
compensated for all hours worked, such as time spent traveling and transporting
equipment to the job site — another FLSA violation, according to the WHD. The
employer also failed to keep accurate records of hours worked, the WHD said.
The DOL’s lawsuit seeks to recover unpaid overtime compensation and liquidated
damages for more than 250 current and former drywall workers, as well as injunctive
relief to bar further violations.
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Training center for workers with disabilities loses authorization to pay
subminimum wage after investigation under FLSA Sec. 14 initiative
The DOL’s Wage and Hour Division (WHD) has revoked authorization that permitted
Training Thru Placement, Inc. (TTI), based in North Providence, to pay less than the
current federal minimum wage to its workers after an investigation of the nonprofit
educational and vocational training center found willful FLSA violations. The
development is the result of a new strategic enforcement effort to remedy labor violations
and protect workers with disabilities, the WHD said in an announcement on June 13.
TTP’s vocational programs provide workers with disabilities opportunities to perform
services such as product assembly and packaging, janitorial work, food processing and
packaging, and other work. The WHD, however, found that TTP failed to determine the
appropriate sub-minimum wage to be paid to each worker as permitted under Sec. 14(c),
to properly record and pay employees for all hours worked, and to determine the
prevailing wage rates for workers performing similar work in the area. According to the
WHD, the company also falsified documents with the goal of misleading investigators.
The FLSA includes provisions designed to promote employment opportunities for
individuals with disabilities. Section 14(c) of the Act allows employers, after receiving a
certificate of authorization from the WHD, to pay wages less than the federal minimum
wage to workers with disabilities when their disabilities impair their productive capacities
for the work being performed.
Retroactive revocation of authorization. Based on the severity and willful nature of the
violations, the Division issued a retroactive revocation of TTP's authorization to pay
subminimum wages between June 1, 2010, and January 31, 2013, the time during which
the agency found the company was operating contrary to the FLSA. Consequently, all
FLSA-covered employees performing work for TTP during that time period are owed no
less than the federal minimum wage of $7.25 per hour for all hours worked. TTP is
allowed under the law to file a timely appeal within 60 days.
Immediate corrective action. When notified that its authorization to pay workers subminimum wage rates would be revoked, TTP took immediate corrective action to come
into compliance with the law, the WHD said. The nonprofit has implemented significant
changes including replacing its board of directors in its entirety and removing or
replacing the management and administrative staff who were in charge during the period
in which the violations occurred. Further, TTP has contracted with a new provider of
services, Fedcap Rehabilitation Services, to assume day-to-day management of
operations, hire new staff, and provide proper training to ensure understanding and
compliance with Section 14(c).
Due to these corrective actions, its commitment to ensure future protection of its workers,
and a follow-up investigation, the WHD has determined that TTP can operate as a Sec.
14(c) certificate holder on a conditional basis until August. This permits the company to
continue operations with little or no interruption and ensures that workers with
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disabilities continue to receive income, as well as educational and vocational training.
The Division will closely monitor TTP’s adherence to the law.
Section 14 initiative. The WHD is pursuing new strategies to strengthen compliance
with Sec. 14(c) and maximize the impact of its benefits for workers with disabilities, their
employers, families and communities. These strategies include training more
investigators on the provisions of the law; using all available enforcement tools to
remedy and deter future violations; providing new compliance assistance materials and
tools; and hosting new compliance conferences for employers, community rehabilitation
programs, advocates, workers, and other interested parties.
“The intent of the law is clear — that workers with disabilities deserve an opportunity to
be given meaningful work and receive an income, and employers that provide those
opportunities may pay such workers below the current federal minimum wage, but only
when key conditions are met,” said Mary Beth Maxwell, acting deputy administrator of
the WHD. “However, not all employers are vigilant in maintaining a well-run program
that honors that intention and is in full compliance with the letter of the law.”
Ohio restaurant pays back wages, civil money penalties after WHD finds unlawful
tip pool arrangement
Sanchez Corp., which operates as Rancho Fiesta Restaurant in Mansfield, Ohio, will pay
a total of $51,949 in back wages to 18 employees after a DOL Wage and Hour Division
investigation revealed FLSA minimum wage, overtime pay, and recordkeeping
provisions violations. The company was also assessed a total of $2,772 in civil money
penalties for repeat FLSA violations, the WHD announced on June 13.
WHD investigators found that Rancho Fiesta had an illegal tip pool arrangement in which
management deducted 3 percent of a waiter’s gross sales from the waiter’s tips and used
it to pay non-tipped employees. The restaurant did not record the amount of tips withheld
from the waiters or to whom the money collected in the tip pool was paid, the WHD said.
There also were no records to indicate that tipped employees in the restaurant received
enough in tips to bring them up to the federal minimum wage.
Moreover, the restaurant failed to compensate employees for all hours worked, resulting
in additional minimum wage violations, according to the investigation. Rancho Fiesta
also failed to pay overtime premiums for hours worked beyond 40 in a workweek and
neglected to maintain accurate records of employees’ wages and work hours; there were
no payroll records for two employees.
The WHD also assessed civil money penalties totaling $2,772 for repeat FLSA
violations. The company was investigated in 2010 and paid $354 in back wages to one
employee.
“Because the employer failed to maintain accurate time and payroll records, as required
by law, investigators conducted interviews in Spanish to obtain an accurate accounting of
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workers’ wages and the restaurant’s business practices,” said George Victory, director of
the Wage and Hour Division’s district office in Columbus.
Tips are the property of the tipped employee and/or employees participating in a valid tip
pool under the FLSA, the WHD said, noting that an employer cannot require servers to
turn in tips. Moreover, an employer of a tipped employee must pay no less than $2.13 an
hour in direct wages, provided that amount, plus the tips received, equals at least the
federal minimum wage of $7.25 per hour. If an employee’s tips, combined with the
employer’s direct wages, do not equal the minimum wage, the employer has to make up
the difference. Employers also must give employees notice of the FLSA tip credit
provisions.
Construction services employment agency agrees to give backpay to workers after
allegedly mischaracterizing per diem payments
Savard Marine Services, Inc., a construction services employment agency, has agreed to
pay 107 workers $59,209 in back wages after an investigation by the DOL’s Wage and
Hour Division found the company utilized improper pay and recordkeeping practices that
resulted in workers being denied overtime in violation of the FLSA. Savard Marine
Services provides temporary skilled and unskilled labor to clients for various land and
marine-based construction occupations. The company is headquartered in Baton Rouge
and has branch establishments in Lafayette, Metairie and Gonzales.
Investigators from the WHD’s New Orleans District Office found the company
mischaracterized certain wages as per diem payments and impermissibly excluded these
wages when calculating overtime premiums, thereby denying employees earned overtime
compensation, according to a WHD announcement on June 17. This improper pay
practice also resulted in recordkeeping violations due to the employer’s failure to
maintain accurate records of employees’ wages and actual hours worked as required by
the FLSA.
Following the investigation, Savard Marine Services agreed to pay all back wages due to
the affected employees, the WHD said. The company also signed a settlement agreement
committing to specific compliance assurance measures to prevent future FLSA
violations. These measures include setting standards to identify and compensate workers
correctly who qualify for bona fide per diem payments; paying accurate overtime and
ensuring per diem payments are not automatically excluded from overtime calculations;
informing employees about their pay and employment conditions; and obtaining written
acknowledgment from employees that they understand the criteria for receipt of per diem
payments.
An employee’s regular pay rate, upon which overtime must be computed, includes all
wages for employment, except certain payments excluded by the FLSA, such as
reimbursements for work-related expenses, the WHD noted. Payments reasonably
approximating travel or other expenses incurred on the employer’s behalf may be
excluded from the employee’s regular rate of pay when computing overtime. However,
where an employee receives such payments but actually incurs no such additional
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expenses, those payments do not constitute bona fide reimbursements and must be
included in the employee’s regular rate of pay for purposes of computing an overtime
premium, the WHD explained.
“Unfortunately, we are seeing too many companies like Savard Marine Services utilizing
the same evasive pay practice to lower overtime premiums,” remarked Cynthia Watson,
regional administrator for the Wage and Hour Division in the Southwest. “We are
concerned that, in this competitive market, labor service providers are looking to each
other for new and creative ways to cut labor costs. We are focused on identifying and
remedying labor violations involving temporary employment arrangements, and we are
working with stakeholders and state agencies to ensure compliance with all applicable
laws.”
Division’s restaurant initiative reaps settlement agreement with Boston-area
restaurants
Three Boston-area restaurants, Pomodoro of Brookline, the North End Pomodoro of
Boston, and Matt Murphy’s Pub of Brookline, have agreed to pay a combined total of
$205,380 in back wages and liquidated damages to 13 workers after investigations by the
DOL’s Wage and Hour Division (WHD) found FLSA overtime and recordkeeping
violations.
The settlement agreement was reached in coordination with the department’s regional
Office of the Solicitor in Boston, the WHD said in an announcement on June 19.
WHD investigators found that kitchen employees at the restaurants were paid a weekly
salary for all hours worked with no overtime premium. The restaurants also failed to
combine hours worked by employees at different locations in the same workweek,
according to the WHD. Additionally, the employers failed to create and maintain records
of employees’ work hours and to record cash payments made to employees in violation of
FLSA recordkeeping provisions.
The investigations were conducted under the WHD’s multiyear enforcement initiative
targeting the restaurant industry in Massachusetts, where widespread noncompliance with
FLSA minimum wage, overtime and record-keeping provisions has been found. The
WHD has other ongoing enforcement initiatives throughout the United States to identify
and remedy violations that are common in the restaurant industry.
Letters of agreement stating employees would receive only straight time for all
hours worked don’t waive FLSA overtime rights
The DOL’s Wage and Hour Division (WHD) announced earlier this week that Farha
Group #4 Inc., which operates eight Subway restaurants in southeast Michigan, has
agreed to pay 53 workers back wages and damages totaling $51,872, following a WHD
investigation. The WHD investigation revealed violations of FLSA overtime and
recordkeeping provisions for failing to pay overtime to workers at one and one-half times
56
their hourly rates for all hours worked beyond 40 in a week, despite worker agreements
purporting to waive those rights.
Specifically, Farha Group #4 asked employees to sign letters of agreement stating that
they would be paid straight time for all hours worked, including their overtime hours,
according to the WHD investigation. Farha Group also purportedly failed to combine
employees’ hours worked at two or more of its locations during the same workweek
when determining whether overtime had been worked. Recordkeeping violations were
also cited during the investigation when the employer failed to maintain time records for
the employees.
Investigators found $25,936 in back wages due to 53 employees at the eight Subway
franchise locations operated by Farha Group #4. An equal amount in liquated damages
was assessed.
The WHD recently announced that it was collaborating with Subway’s corporate
headquarters to increase compliance with federal labor laws at Subway locations
nationwide. Although these restaurants are independently owned and operated, the
franchisor is providing a forum and resources to assist the Division in educating
franchisees, the agency said.
“An employer cannot avoid its overtime obligations by asking workers to sign
agreements to be paid straight time rates for all hours worked,” explained Timolin
Mitchell, the WHD district director in Detroit. “Employees cannot agree to waive their
rights under the law.”
Ohio gas stations operator facing suit for back wages and liquidated damages for 80
employees
The DOL’s Wage and Hour Division (WHD) announced on June 19 that it has filed a
lawsuit in the Western District of Ohio against R & R Takhar Operations Inc. to recover
back wages and liquidated damages due to 80 employees after an investigation uncovered
alleged violations of FLSA minimum wage, overtime pay and recordkeeping provisions.
The suit also requests the court to permanently enjoin the employer from committing
future violations of the FLSA.
The Dayton-based company operates 12 Ohio gas stations under the Sunoco, Marathon,
and Shell Oil brands, the WHD said. According to WHD investigators, the minimum
wage violations occurred when gas station workers regularly performed pre- and postshift work for which they were not compensated. The business also allegedly required
employees to pay back cash register shortages or drive-offs, either in cash or by working
additional hours without compensation.
The WHD said that worker salaries also did not include an overtime premium of time and
one-half workers’ regular rates of pay for hours worked beyond 40 in a workweek, as
required. Overtime was often banked as credit for time off or paid in cash at a rate of $7
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per hour. The investigation also revealed that payroll records were not maintained
accurately to reflect all hours worked, wages paid, and hours worked at multiple
locations.
While the FLSA provides an exemption from both minimum wage and overtime pay
requirements for individuals employed in bona fide executive, administrative,
professional and outside sales positions, as well as certain computer employees,
employees generally must meet certain tests regarding their job duties and be paid on a
salary basis of not less than $455 per week in order to qualify for exemption, the WHD
noted, also pointing out that job titles do not determine exempt status..
Gas stations on the DOL’s radar. “We are concerned about the prevalence of labor
violations among gas stations, particularly those employing low-wage workers, who are
often unaware of their rights and vulnerable to disparate treatment,” said George Victory,
director of the WHD’s Columbus office.
Wage-Hour Division recovers more than $150,000 in overtime back wages for
packaging facility workers
Food Evolution, a food packaging facility in Illinois, has paid 130 workers a total of
$150, 261 in back wages following an investigation by the DOL’s Wage and Hour
Division. The investigation found violations of the FLSA’s overtime and recordkeeping
provisions.
Food Evolution was found to have consistently altered time records to avoid paying
overtime premiums properly. The investigation determined that Food Evolution failed to
pay employees time and one-half for overtime hours by reducing the actual hours worked
over 40 by one-third and representing on the payroll records that the reduced overtime
hours were being paid at time and one-half. The result was that employees received
straight time for all hours worked.
The company has paid the back wages in full and agreed to comply with all provisions of
the FLSA in the future. Additionally, the firm signed an enhanced compliance agreement
in which it agreed to provide training to personnel who prepare payroll. It will install a
system in which manual edits on records of hours worked will be clearly explained.
Additionally, the company allowed Wage and Hour investigators to meet with its
employees and provide information related to the investigation and workers’ rights under
the FLSA.
Workforce Protections Subcommittee set to examine Davis-Bacon Act issues
The House Education and the Workforce Committee’s Subcommittee on Workforce
Protections will hold a hearing on Tuesday, June 18, to examine the challenges
surrounding the Davis-Bacon Act. Chaired by Representative Tim Walberg (R-MI), the
hearing has been dubbed “Promoting the Accuracy and Accountability of the DavisBacon Act.”
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The Davis-Bacon Act requires the payment of local prevailing wage rates to workers on
federal construction projects. Under the Act, the DOL is responsible for conducting
surveys to determine local prevailing wage rates for various job classifications. “Despite
numerous independent reports documenting flaws in the law’s implementation, the
department has failed to improve the law’s administration and enforcement,” the
Subcommittee says. The DOL also “continues to expand the scope of the law,” such as it
did in March 2013, when the DOL released a guidance letter “that overturned more than
50 years of policy to apply the Davis-Bacon Act to survey crews.”
The hearing will give members an opportunity to discuss long-standing challenges
surrounding the Davis-Bacon Act and recent changes in the law’s implementation.
The witness list includes Commissioner Erica Groshen, Bureau of Labor Statistics; Curtis
Sumner, Executive Director, National Society of Professional Surveyors; Ross Eisenbrey,
Vice President, Economic Policy Institute; and Maury Baskin, Shareholder, Littler
Mendelson P.C., Washington, DC.
The hearing is scheduled at 10:00 a.m. in room 2175 Rayburn House Office Building.
Battle over the Davis-Bacon Act reveals deep divide
By Pamela Wolf, J.D.
The House Education and the Workforce Subcommittee on Workplace Protections held a
hearing on Tuesday, June 18, at which Chairman Tim Walberg (R-Mich.) set the stage by
stating: “Unfortunately, independent reports reveal significant challenges surrounding
implementation of the Davis-Bacon Act. Most recently, a 2011 Government
Accountability Office report requested by Chairman Kline revealed widespread problems
with the accuracy, quality, bias, and timeliness of the surveys used to determine wage
rates.”
The Davis-Bacon Act requires that local prevailing wages be paid to workers on federal
construction projects. To determine local prevailing wage rates, among other things, the
DOL’s Wage and Hour Division (WHD) conducts surveys to collect wage and benefit
information for various job classifications in a given geographic location.
Walberg pointed out that of the surveys reviewed by the GAO, about 25 percent of the
final rates were based on the wages of fewer than seven workers. Moreover, 46 percent of
the prevailing wages for non-union workers were based on wages reported more than a
decade ago. Walberg underscored the GAO’s conclusion: “If the resultant prevailing
wage rates are too high, they potentially cost the federal government and taxpayers more
for publicly funded construction projects or, if too low, they cost workers in
compensation.”
The Subcommittee Chair went on to assail the Obama administration for what he
characterized as its failure to improve implementation of the Act and for exacerbating the
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problem “by expanding the scope of the law beyond its original intent,” citing three
developments in particular:



The GAO’s determination that the president’s 2009 stimulus plan applied DavisBacon to 40 new programs, and the resulting project delays as “states grappled
with the law’s time consuming administrative burdens.”
The DOL’s upending “of decades of policy to impose Davis-Bacon requirements
on a new group of workers” by reclassifying surveyors as laborers and mechanics
(they were previously exempt on the grounds that their work was “preconstruction” activity), and its failure to make a wage rate available to survey
crews.
The WHD’s determination that the Davis-Bacon Act applies to the CityCenter
construction project underway in Washington, D.C. The Act does apply to
construction contracts inside Washington D.C., but the project is being built with
private dollars on land leased to a private consortium for the next 99 years, and
the concern is that the “radical decision” could turn all private developments into
public works.
“At a time when millions are struggling to find work, federal debt is reaching historic
levels, and economic growth remains slow, the American people deserve more than a
flawed law that intrudes further and further into workplaces,” Walberg said.
Au contraire! Democrats, on the other hand, vigorously defended the benefits of the
Davis-Bacon Act to workers during the hearing, which they characterized as “designed
by the GOP to undermine the nation’s historic wage protection law.”
“For the last eight decades, the Davis-Bacon Act has provided millions of hard working
Americans fair wages for their hard work,” said Ranking Member Joe Courtney (DConn.), the senior Democratic member on the subcommittee. “During all these years, the
Davis-Bacon Act has done exactly what it was intended to do — prevent federal projects
from driving down local wage rates. To be sitting here today debating bureaucratic
churning about Davis-Bacon misses the point. The problem is more work. For people
who are in the construction trades today, this law is not the issue.”
Davis-Bacon ensures that workers are paid local prevailing wages on federal construction
projects so that government projects do not drive down local wages. A witness called by
the Republican majority advocated repeal of the Davis-Bacon law and also agreed that
workers’ wages would fall under repeal, the Democrats pointed out. House Republicans
have tried to repeal the Davis-Bacon protections nine times over the last two years in a
number of federal agency contracts, they noted. Nonetheless, the House has repeatedly
voted to retain these protections on a bipartisan basis.
“By protecting the wages of higher-skilled workers from low-wage, less-skilled
competition, Davis-Bacon raises employee productivity and offsets the cost of paying
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higher hourly rates,” said Ross Eisenbrey, vice president of the Economic Policy
Institute. “Better-managed firms and more skilled employees also tend to work more
safely, reducing the number of accidents, lowering workers compensation costs, and
preventing damage to materials and equipment.” Eisenbrey agreed with committee
Democrats that efforts to increase working families’ pay – like increasing the minimum
wage to $10.10 per hour, strengthening equal pay protections, among others — are vital
to increasing consumer demand and economic growth.
“I can’t think of anything more fundamental to protecting our workforce than seeing to it
that they are paid a fair wage,” said Representative Tim Bishop (D-NY). “I don’t think
you need to be a Nobel laureate in economics to figure out that if you pay people less,
they are going to spend less. If 70 percent of our economy is rooted in what people spend,
if we pay them less, that’s going to hurt our economy. What I want this committee to
look at is how we can protect wages.”
According Eisenbrey, a Republican bill proposed in Congress that would move DavisBacon wage determinations from the WHD to the Bureau of Labor Statistics would
seriously undermine worker wages.
LEADING CASE NEWS:
DCCir: City’s “double dipping” law offsetting rehired employees’ salaries by their
pension benefits ran afoul of FLSA
By Lisa Milam-Perez, J.D.
The District of Columbia government ran afoul of the FLSA when it implemented a
measure aimed at curbing “double dipping” (i.e., drawing both a salary and a pension) by
retired city workers who were reemployed, the D.C. Circuit held (Cannon v District of
Columbia, June 4, 2013, Griffith, T). When the city slashed the salaries of six rehired
employees by the amount of their pension payments, their pay fell below the statutory
minimum wage, the appeals court ruled, finding the pension payments did not count
toward their compensation for purposes of meeting the salary basis test. Had the city
invoked the double dipping provision to reduce their pay to $455 per week, it would have
satisfied the FLSA, the court noted. But the city went further, and violated the Act. Thus,
the appeals court reversed a grant of summary judgment to the city as to the plaintiffs
whose pay fell below the minimum wage due to their pension offsets.
Retirees rehired. The employees had retired from the Metropolitan Police Department
and were receiving annuities from the police officers’ retirement plan, to which they had
contributed a portion of their salaries, when they were rehired by the city to work in its
protective services department. Section 5-723(e) of the D.C. Code required the city to
reduce the salary of employees who were simultaneously drawing benefits from a
retirement plan by the amount of their pension payments. Notwithstanding this law, for
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three years the employees earned their full salaries although they continued to receive
their pension benefits. The pension offset was finally implemented—to dramatic effect:
one employee, for example, received no salary for the first pay period of 2012 once the
city deducted the amount he received in pension payments.
The employees filed suit. Some contended they did not receive the minimum wage
required by the FLSA, another employee asserted overtime violations. They also alleged
various constitutional claims.
Annuity payments not salary. The city contended the employees were bona fide
executives and thus were exempt from the FLSA’s minimum wage and overtime
protections. Because it was undisputed that their paychecks fell below $455 per week
since the offset was imposed, the crux of the matter was whether their pension payments
counted as compensation. If they did not, then the salary basis test was not met, and the
exemption did not apply.
“Under no reasonable reading of the term can the pension payments be considered
‘compensation’ for these plaintiffs’ current work,” the D.C. Circuit held. The money the
employees received from their pensions was a retirement benefit, earned over the course
of their past employment with the police department, not from their current jobs with the
city. Moreover, the pensions were funded in part by the employees’ own contributions,
which were automatically deducted from their paychecks, the appeals court observed.
The court rejected the city’s argument that the employees’ pension payments
becamesalary by operation of Sec. 5-723(e). The provision compelled a reduction in
salaries so that the sum of the employees’ annuity benefit and the “compensation for
employment” equaled the salaries they were otherwise entitled to receive in their current
positions. In the city’s view, this made the annuities the “functional equivalent” of salary.
But this was not a reasonable construction of the statute. Indeed, the court observed, “the
statute explicitly distinguishes between the annuities and ‘compensation.’”
Nor was the court convinced that the pension payments should be deemed compensation
under the FLSA because the employees were given the choice between taking the pay cut
and suspending their annuities. “Placing this choice in the plaintiffs’ hands merely
underscores the salient point in our analysis: their pensions are not contingent upon their
current work,” the court said. “Whatever else it may have authorized the District to do,
[Sec.] 5-723(e) surely does not allow the District to interfere with their pensions.”
Constitutional claims meritless. The D.C. Circuit agreed with the court below that the
pension offsets did not violate the employees’ constitutional rights, however. The court
rejected the employees’ assertion that they had a property interest in the simultaneous
receipt of their annuities and full salaries, and that the offset therefore amounted to an
improper taking and a violation of due process. Their equal protection claims failed as
well. While retirees who were rehired by the police department as senior officers were
given huge raises to offset the reduction in pay caused by the double-dipping law, the
plaintiffs were not so shielded from the full force of the statute. But the plaintiffs were
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not similarly situated; they had different job duties and experience, and they worked for a
different city department. In light of these distinctions, they could not show it was
arbitrary for the city to give raises to some senior officers and not them.
A First Amendment retaliation claim also lacked merit. Shortly after they filed suit, the
employees were not paid through direct deposit for the preceding pay period; they were
issued paper paychecks instead. While they contended the slightly delayed payday was
reprisal for their lawsuit, the appeals court found employees of ordinary firmness would
not be deterred by this minor slight from exercising their protected speech rights. Despite
the employees’ urging, the court didn’t feel the need to first investigate the city’s reason
behind the pay anomaly before disposing of their retaliation claim.
The case number is 12-7064.
Attorneys: Matthew August LeFande (Law Firm of Matthew August LeFande) for
Employees. Richard S. Love, Office of the Attorney General, for District of Columbia.
2ndCir: Certification of class action for assistant bank managers on state law wage
claims vacated on appeal
By Ronald Miller, J.D.
The Second Circuit, in an unpublished decision, vacated a district court ruling granting
certification of a Rule 23 class action filed by assistant bank managers (ABMs) alleging
that their employer violated the New York Labor Law by classifying them as exempt
from the state law’s overtime requirements (Cuevas v Citizens Financial Group, Inc, May
29, 2013, per curiam). In this instance, the appeals court determined that the district court
failed to rigorously analyze the record, weigh the conflicting evidence and resolve
material fact disputes so as to determine whether Rule 23 prerequisites were satisfied.
Commonality. The appeals court found that the district court committed error in failing
to resolve factual disputes relevant to Rule 23(a)(2)’s commonality requirement. Under
the Supreme Court’s decision in Wal-Mart Stores, Inc v Dukes, the commonality
prerequisite requires a showing that plaintiffs’ claims “depend upon a common
contention . . . that is of such a nature that it is capable of classwide resolution — which
means that determination of its truth or falsity will resolve an issue that is central to the
validity of each one of the claims in one stroke.” The Supreme Court repeatedly has made
clear that a district court must undertake “a rigorous analysis” in determining “that the
prerequisites of Rule 23(a) have been satisfied.”
In this case, the district court was presented with conflicting evidence concerning the
primary duties of the ABMs. While the plaintiff presented evidence suggesting ABMs
performed primarily the same duties company wide, the employer submitted evidence
tending to contradict that conclusion. These factual disputes were relevant to the
determination of whether the plaintiff had presented a claim capable of classwide
resolution, and must be resolved before a Rule 23(a) determination may be made. The
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district court did not analyze rigorously the conflicting evidence before it and resolve the
material disputed facts. Thus, the Second Circuit vacated the district court’s commonality
finding and remanded for reconsideration.
Predominance. The appeals court also agreed with the employer’s contention that the
district court erred in concluding that Rule 23(b)(3)’s predominance requirement was
satisfied without analyzing the record and resolving disputed facts. A court may certify a
class under Rule 23(b)(3) if it finds that “questions of law or fact common to class
members predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently adjudicating
the controversy.” Again, the district court must conduct a “rigorous analysis” in
determining whether Rule 23(b)’s requirements have been met.
Here, the district court held that the employer’s blanket exemption of all ABMs, along
with the policies set forth in its companywide documents, established that common issues
predominate over individual ones. However, it failed to address all of the evidence before
it and resolve the material factual disputes arising from conflicting declarations.
Resolving these issues was essential to determining whether ABMs actually shared
primary duties such that common issues predominate over individual ones. As a
consequence, the appeals court vacated the district court’s finding as to predominance
and remanded for further consideration.
The case number is 12-2832-cv.
Attorneys: Mark W. Batten (Proskauer Rose) for Employer. Peter Winebrake (Winebrake
& Santillo) for Employees.
2ndCir: Employee can’t bring third-party contract claim under state law to enforce
DBA’s prevailing wage schedules
By Ronald Miller, J.D.
A district court did not err in dismissing an employee’s prevailing wage claim that was
brought as a third-party contract action under state law aimed at enforcing the DavisBacon Act’s (DBA) prevailing wage schedules, ruled the Second Circuit (Carrion v Agfa
Construction, Inc, June 13, 2013, Cabranes, J). As the court explained in Growchoski v
Phoenix Construction, “to allow a third-party private contract action aimed at enforcing
those wage schedules would be inconsistent with the underlying purpose of the legislative
scheme and would interfere with the implementation of that scheme to the same extent as
would a cause of action directly under the statute.”
The employee brought this action against his sometime employer alleging that it
discriminated against him in violation of Sec. 1981 and state law by giving more work
opportunities and more pay to “Asian Indian” employees, and did not pay him the
prevailing wage as required by the DBA. After trial, a jury delivered a verdict partially in
the employee’s favor for his discrimination claims. On appeal, the employee alleged that
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the trial court erred in dismissing his prevailing wage claim and other claims. The
question presented was whether the Grochowski remains the controlling law of this
circuit.
The employee did not contest the district court’s conclusion that Grochowski foreclosed
his prevailing wage claim. Rather, he questioned whether Grochowski remained good law
and argued that it should be overruled or limited to its particular facts. However, the
appeals court explained that it was bound by the decisions of prior panels of the court
until such time as they are overruled by an en banc panel or by the Supreme Court.
Moreover, the court rejected the employee’s contention that it must reevaluate
Grochowski because the New York Court of Appeals reached a contrary conclusion in
Cox v NAP Construction Co. Consequently, a New York court’s differing view of the
preemptive scope of federal law does not allow a panel to reconsider controlling
precedent.
Finding that the Grochowski retains its vitality, the Second Circuit concluded that the
district court did not err in dismissing the employee’s prevailing wage claim. Thus, it
affirmed the lower court’s dismissal of the employee’s prevailing wage claim.
The case numbers are 11-5098, and 11-5334.
Attorneys: Michael G. O’Neill (Law Offices of Michael G. O’Neill) for Employee.
Joseph Martin Labuda (Millman Lubada Law Group) for Employer.
3rdCir: Production of personnel file on last day of trial was not willful; employee
was not prejudiced or surprised
By Lorene D. Park, J.D.
Because an employee failed to show “willful deception” or “flagrant disregard” of a court
order in the employer’s production of her personnel file on the last day of trial, and since
she was not prejudiced by the belated production, the Third Circuit, in an unpublished
opinion, found no abuse of discretion in the lower court’s denying the employee’s motion
for sanctions and a new trial (Waites v Kirkbride Center, June 24, 2013, Roth, J). The
appeals court also found that the jury verdict sheet’s use of the term “appropriate notice”
was not confusing or misleading.
The employee claimed that her termination for excessive absences violated the FMLA
and the ADA. In discovery, she sought production of her personnel file, but the employer
stated that it had produced all documents in its possession, custody and control that were
responsive to her request. Nonetheless, on the last day of trial, the employer’s attorney
produced the personnel file, explaining that it had been found the previous night in a
renewed search. The district court offered the employee’s attorney a recess to review the
file, but he elected to proceed. He then introduced a number of documents from the file
into evidence, including a letter stating that the employee had contacted her supervisor to
decline FMLA leave. The jury returned a verdict in favor of the employer on the FMLA
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claim and the employee filed a motion for Rule 37 sanctions, requested the judgment be
vacated, and sought a new trial. The motions were denied and the employee appealed.
Personnel file. The employee argued that the district court’s denial of her motion for a
new trial should be reversed because it erred by admitting into evidence documents from
her belatedly discovered personnel file. She argued the file should have been excluded as
a Rule 37 sanction because the employer violated Rule 26 by not producing the file until
the last day of trial and because the documents were not properly authenticated, contained
hearsay, and lacked proper foundation. The Third Circuit disagreed.
As to Rule 37, the exclusion of critical evidence is an extreme sanction not normally
imposed absent willful deception or flagrant disregard of a court order. Here there was no
evidence of such deception or disregard, nor was the employee “prejudiced or surprised”
by the evidence. Furthermore, the employee offered no proof that the documents from the
file were not properly authenticated or contained hearsay. Thus, the lower court did not
abuse its discretion in admitting the documents and denying a new trial on this basis.
Jury verdict sheet. Also rejected was the employee’s argument that the district court
erred by using a jury verdict sheet that confused and misled the jury. It queried, in
relevant part, whether the jury found the employee “has proven, by a preponderance of
the evidence, that she gave appropriate notice of her need to be absent from work.” The
employee argued the jury could be confused on whether “appropriate notice” referred to
the FMLA or the employer’s attendance policy.
Disagreeing, the appeals court first explained that the term was derived from the Third
Circuit’s Model Instructions after the parties failed to agree on a joint verdict sheet.
Furthermore, the district court, when presenting the verdict sheet, instructed the jury
regarding the FMLA claim and defined “appropriate notice” using Model Civil Jury
Instruction 10.1.1, which lists the elements of an interference claim and describes when
“appropriate notice” is given. Thus, the term was adequately defined. For these reasons,
the lower court did not abuse its discretion in denying a new trial.
The case number is 12-3448.
Attorneys: Thomas M. Holland (Law Offices of Thomas More Holland) for Bernadette
Waites. John F. O’Riordan (O’Riordan Law Firm) for Kirkbride Center.
5thCir: Texting need to be relieved from 24-hour call duty because father in ER not
request for FMLA leave; complaints of sleep deprivation not notice of disability
By Joy P. Waltemath, J.D.
A text message requesting to be taken off 24-hour-call duty one night was insufficient to
put an IT business analyst’s employer on notice that she was requesting FMLA leave to
care for her father, the Fifth Circuit ruled in an unpublished opinion (Lanier v University
of Texas Southwestern Medical Center, June 12, 2013, per curiam). Affirming summary
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judgment for the employer, the court also assumed without deciding that the employee
suffered from a disabling sleep disorder, but she provided no evidence that her employer
knew of her disorder or that she had tied her complaints about 24-hour-call duty to her
disability, and so no reasonable accommodation request had ever been made.
As an IT business analyst, the employee was required to take a week of 24-hour-call duty
every 12 weeks, during which she was required to have a pager and the on-call laptop
computer, and respond within 15 minutes to any requests for support. For over a year the
analyst had asked to change her seven-day call rotation to one involving only three or
four days because she complained of sleep deprivation and said it adversely affected her
job performance. Her requests were denied.
During one call rotation, the analyst texted her supervisor that her father was in the ER
and she would be unavailable to take calls that night. Another individual switched weekly
call rotation with her. When she began her make-up call rotation a few weeks later, she
failed to respond six times one night, and her supervisor was notified as back-up call. The
next morning he asked her to verify that she was following correct procedures; she
responded with an expletive, referenced her father’s heart attack, and left without any of
the equipment necessary to support call duty, going to the EAP office but not effectively
telling anyone where she was going. Management informed her it was accepting her
resignation.
FMLA interference. Affirming summary judgment on her FMLA claims, the appeals
court ruled the analyst’s statements were insufficient to invoke the FMLA. Her only
request for leave was a text message requesting relief from call for the evening; even if
her supervisor knew her father was elderly and in poor health, it was unreasonable to
expect him to inquire further or know her text was a request for FMLA leave. Having
taken FMLA leave in the past, the analyst was familiar with the proper way to request it,
yet she did not do so.
FMLA retaliation. Because the analyst did not make a proper request for FMLA leave,
she could not show that she engaged in protected activity to support a retaliation claim,
the court first noted. The analyst claimed she actually was discharged for complaining
about the denial of her FMLA leave request (the morning after she failed to respond
while on make-up call duty). Her argument assumed that her text message was a proper
FMLA leave request, and the court reiterated that it was not.
Nor was she more successful in arguing that her discharge was retaliation for seeking
help at the EAP office. Using EAP services is not protected activity under the FMLA,
and even if she received FMLA forms from the EAP office, the EAP was not involved
with processing FMLA claims. More importantly, there was no evidence that anyone in
the analyst’s supervisory chain knew that she had visited the EAP when the discharge
decision was made. Merely leaving voicemails with an individual who undisputedly did
not receive them because he was out of the office was not enough to establish knowledge
on the part of the employer.
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ADA/Rehab Act. The analyst also claimed she was discriminated against because her
employer discharged her rather than providing reasonable accommodations for her
sleeping disorder. For purposes of the appeal, the Fifth Circuit assumed without deciding
that she suffered from a disabling sleep disorder, but there was no record evidence that
her employer was aware she was disabled to make reasonable accommodations a
requirement. It was undisputed that the analyst never tied her request for a shorter on-call
rotation to insomnia or a sleeping disorder. Her complaints of being sleep-deprived
appeared to be a natural result of 24-hour call duty that would not trigger notice of a
disability. Accordingly, her requests to modify the on-call schedule were not a request for
reasonable accommodation.
Finally, the analyst failed to establish a causal connection between her disability or
request for accommodation and her loss of employment. None of her supervisors were
aware that she claimed to be disabled according to the record evidence, said the court,
again discounting her claims that her complaints of sleepiness while on-call were
sufficient notice of a disability and pointing out that she was not diagnosed with insomnia
until after she lost her job. Finding no evidence from which a reasonable jury could
conclude that the analyst’s purported disability or request for accommodation was the
reason she lost her job, the court affirmed summary judgment.
The case number is 12-10928.
Attorneys: Gabriel Hernandez Robles (Robles Law Firm) for Employee. Daniel Clark
Perkins, Office of the Attorney General, for Employer.
5thCir: K-9 highway patrol officers barred by Eleventh Amendment from pursuing
overtime claims against state officials in individual capacity
By Ronald Miller, J.D.
Because the state of Mississippi was the real party in interest, K-9 highway patrol officers
could not pursue monetary claims because such claims were barred by the Eleventh
Amendment sovereign immunity, ruled the Fifth Circuit in an unpublished decision
(Henley v Simpson, June 12, 2013, per curiam). As a consequence, a district court lacked
jurisdiction over the officers’ overtime claims filed against the state’s director of public
safety and director of the highway patrol in their individual capacities. That part of the
district court’s order denying the state officials relief in their individual capacities
pursuant to Eleventh Amendment sovereign immunity was vacated.
It was undisputed that the five K-9 officers of the highway patrol used their service dogs
for the purpose of apprehending criminals, detecting illegal narcotics, and promoting
public relations. Pursuant to agency policy, the officers were required to house, care for,
and train their dogs — which necessitated working more than 40 hours a week. In 2008,
they filed grievances asserting claims for overtime wages. The highway patrol denied
relief and the state personnel appeals board dismissed the appeal because it presented
nongrievable issues. Thereafter, the officers filed this action against the agency seeking to
recover overtime wages incurred in caring for their service K-9s while off-duty.
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The highway patrol invoked sovereign immunity under the Eleventh Amendment and
moved to dismiss. In response, the officers added the state’s director of public safety and
director of the highway patrol in their individual and official capacities. Thereafter, the
agency was dismissed. The individual defendants also raised Eleventh Amendment
sovereign immunity as an affirmative defense. Ultimately, the district court ruled that the
FLSA claims against the defendants in their individual capacities were permitted under
Modica v Taylor, a case primarily involving the Family and Medical Leave Act.
Sovereign immunity defense. The primary issue in this case was whether, despite
having the state officials named in their individual capacities, Mississippi was the real
party in interest. The Eleventh Amendment vests a state with immunity against an action
in federal court by a state’s citizens and so is a limitation on federal courts’ subject matter
jurisdiction. An action by a citizen against a state official in his official capacity is an
action against the state, and it is barred by the Eleventh Amendment, subject only to the
limited exception permitted in Ex parte Young. But, an action against a state official in
his individual capacity may not in all instances implicate the Eleventh Amendment.
In this instance, the officers relied on Modica to argue that the Fifth Circuit has said
generally that the Eleventh Amendment does not ordinarily immunize a public official
from an action against him in his individual capacity. Moreover, they contended that the
officials were “employers” as defined by the FLSA, and therefore, could be sued
individually. According to the plaintiffs, because the officials were their “employers,”
they were jointly and severally liable for FLSA violations resulting from their failure to
pay the alleged overtime wages.
Real party in interest. However, the Fifth Circuit has qualified the rule that an official is
not immune from suit in his individual capacity under the Eleventh Amendment by
acknowledging the fact-specific nature of the real-party-in-interest inquiry. Moreover, the
court ruled that the plaintiffs’ “employer” contention alone could not divest the state
officials of the immunity shelter. Here, the plaintiffs were challenging the state’s
compensation policy and whether their caring for, and training, service canines resulted
in an accrual of overtime hours. They did not allege that the officials acted contrary to the
written K-9 policy manual in order to misappropriate wages for their own benefit.
Moreover, the court found it relevant that the officials neither signed nor promulgated the
challenged state compensation policy.
In fact, the court determined that the plaintiffs attempted an “end run” around the
Eleventh Amendment by suing the officials in their individual capacity in order to cause
the state to accede to their view of the compensation policy and pay them accordingly.
Under such circumstances, the court noted that the state would have no choice but to
indemnify the officials; otherwise, the risk of personal liability for implementing a state
policy would guarantee no rational official would assume a state office position.
Consequently, a money judgment would “expend itself on the public treasury” and
“compel the [State]” to revise the K-9 policy manual. That part of the district court order
denying sovereign immunity to the state officials in their individual capacities was
vacated.
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The case number is 12-60608.
Attorneys: Eduardo Alberto Flechas (Flechas & Associates) for Employees. Harold
Edward Pizzetta, III, Office of the Attorney General for the State of Mississippi.
5thCir: Employee who drove specified route between convenience stores delivering,
selling goods properly categorized as outside salesman
By Kathleen Kapusta, J.D.
A route salesman who, after loading his truck the night before, drove to between 17 and
22 convenience stores daily following a route specified by his supervisor, and who
alleged that he restocked and arranged goods to conform with photographs his employer
provided, was properly categorized as an outside salesman, the Fifth Circuit ruled (Meza
v Intelligent Mexican Marketing, Inc, June 18, 2013, Prado, E). Thus the appeals court
affirmed a lower court’s grant of summary judgment to the employer on the employee’s
claim that he was entitled to minimum wage and overtime compensation pursuant to the
FLSA.
The employee worked for Intelligent Mexican Marketing, Inc (IMM), a company that
sells and delivers food and beverage items to convenience stores. He went to IMM’s
warehouse every morning to pick up a company truck he had loaded with goods the
evening before. At each store on his route, he greeted the store attendant, inspected IMM
goods, removed those that were past or close to their expiration date, and made a list of
goods that needed to be restocked. If a store did not carry a particular IMM product, he
would try to sell it. In addition, he was authorized to visit stores that did not carry IMM’s
products to try to develop new business. At the end of the day, he would return to the
warehouse and reload his truck.
The employee typically worked six days a week from 6:30 am to around 7:00 pm with a
20-minute lunch break. This meant he worked about seventy-two hours per week, at an
average wage of $6.66 an hour. After approximately 55 weeks of employment, he sued
IMM alleging statutory minimum wage and overtime violations. A federal district court
determined that he was properly categorized as an outside salesman and granted summary
judgment for IMM.
Factors to consider in determining if exemption applies. Noting that Congress did not
expressly define “outside salesman” in the FLSA, the court turned to Sec. 541.504 of the
DOL’s regulations, which addresses the situation in which employees both deliver and
sell products and provides a list of nine factors to consider in determining if an employee
is a deliveryman or an exempt outside salesman. The first factor — a comparison of the
driver’s duties with those of other employees engaged as truck drivers and as
salespersons — favored IMM. Here, the company’s route salesmen were the only
salesmen it employed. Further it also employed warehouse drivers who delivered goods
but they were not authorized to make sales. Thus, the existence of a formal division of
labor suggested that the route saleman’s job description contained responsibilities other
than making deliveries.
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Although the second factor, “possession of a selling or solicitor’s license when such
license is required by law or ordinances,” was inapplicable, the third factor, the “presence
or absence of customary or contractual arrangements concerning amounts of products to
be delivered,” was disputed by the parties. While the employee claimed that the store
attendants did not have authority to purchase new products, or even order goods to be
restocked, he did admit that supervisors were the only IMM employees who could
authorize “specials” or significant price reductions, implying that it was route salesmen
who were responsible for run of the mill sales. Indeed, one of his supervisors testified
that it would have been against company policy for a supervisor to make a sale to a store
directly. Thus, the court found that this factor favored IMM.
The fourth factor — the description of the employee’s occupation in collective bargaining
agreements — was also inapplicable but the fifth, “the employer’s specifications as to
qualifications for hiring,” favored IMM. Here, the position was advertised as a salesman
position and the employee represented himself to the company as having sales
experience. Turning to the sixth factor, “sales training,” the court noted that route
salesmen attended weekly sales training meetings where supervisors announced prizes
and incentives, explained sales tips, and notified the route salesmen of any products they
were hoping to promote that week. Moreover, the employee shadowed an experienced
saleman as part of his initial training. However, because route salesmen did not attend
sales conferences, the seventh factor — attendance at sales conferences — favored the
employee.
The eighth factor, however, “method of payment,” favored the company where the
employee was paid a base salary plus commissions. Finally, the court found it unclear
whether the ninth factor, “proportion of earnings directly attributable to sales,” favored
the employee or IMM. Finding that five of the seven applicable factors favored IMM, one
was inconclusive, and only one favored the employee, the court was inclined to hold for
IMM.
DOL’s examples. In an abundance of caution, however, it turned to the DOL’s listed
examples in the regulations of exempt and nonexempt drivers. Here, the court found that
the employee’s role at IMM had a number of characteristics listed in the descriptions of
exempt driver-salesmen including that he provided the only sales contact between IMM
and the customers visited, called on customers and took orders for products, delivered
products, and received compensation commensurate with the volume of products sold. In
contrast, the listed examples of non-exempt drivers mostly did not describe the kind of
work he performed.
Case law. Turning to case law cited by IMM, the court noted that in Jewel Tea Co v
Williams, the Tenth Circuit found that salesmen, paid on commission, who traveled a
specified route in company owned cars visiting potential customers’ homes in hopes of
selling coffee and tea products were primarily salesmen rather than deliverymen. Further,
in Hodgson v Krispy Kreme Doughnut Co, a federal court in North Carolina similarly
found that traveling doughnut salesmen were exempt because they were designated
“salesmen” on the payroll, nearly all of their work was performed away from the
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company’s place of business, and they were not delivering doughnuts pursuant to any
pre-existing contractual arrangements. The employee’s reliance on Skipper v Superior
Dairies, Inc, in which the Fifth Circuit found that the outside salesman exemption did not
apply to an employee who delivered dairy products to convenience stores owned
primarily by one company, was misplaced, however. In that case the employee did no
selling and the right to place the product in the store was obtained by negotiation between
the employer and the owner of the convenience stores.
Finally, the court rejected the employee’s reliance on Christopher v SmithKline Beecham
Corp, in which the Supreme Court emphasized that “the FLSA’s exemption for outside
salesmen . . . is premised on the belief that exempt employees typically earned salaries
well above the minimum wage and enjoyed other benefits that set them apart from the
nonexempt workers entitled to overtime pay.” Observing that no part of the opinion
suggests that earning less than minimum wage is itself sufficient for relief, the court here
noted that that there is no way to eliminate the possibility that the employee’s relatively
low compensation was due solely to poor salesmanship; thus, “(and perhaps for that very
reason), the regulations do not indicate that a court should consider a salesman’s effective
compensation in determining whether the exemption applies.” Accordingly, the court
concluded that for purposes of the FLSA, the employee was more similar to an outside
salesman than to a deliveryman.
The case number is 12-10785.
Attorneys: Robert L. Manteuffel (Law Offices of Robert Lee Manteuffel) for Florentino
Meza. John B. Brown (Dallan Forrest) for Intelligent Mexican Marketing Incorporated.
6thCir: Discharge for abuse of funeral leave not pretext for FMLA retaliation
By Joy P. Waltemath, J.D.
Investigations into an employee’s apparent misuse of FMLA leave were based on
articulated facts and did not create an inference that an employer’s reason for terminating
her — funeral leave fraud — was pretext, the Sixth Circuit ruled in an unpublished
opinion (Hall v The Ohio Bell Telephone Co, June 17, 2013, Quist, G). Affirming
summary judgment for the employer, the court also found that the employer’s
compensation policy, which allegedly did not lower team leaders’ sales goals when team
members took FMLA leave, neither encouraged team leaders to selectively punish
employees who used FMLA leave nor influenced the employer’s decision to terminate
the employee.
FMLA leave. The employee, a customer service representative, began taking approved
intermittent FMLA leave after she was diagnosed with an anxiety disorder in September
2007. The next month, a newspaper article was published about her because she had
written and self-published two novels; she spoke of what hard work it was, and was
quoted as saying “are you ready to give up your Saturday or Friday or take off of work to
make your dream come true?” The following month the employer requested an
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investigation of her leave, citing as “articulable suspicion of fraud” the article and the
timing of the book promotion.
Additionally, the employee began a pattern of exhausting all FMLA leave during the first
half of 2008 and 2009, and then working the remainder of each year with regular
attendance, a pattern that continued in early 2010 with the employee taking every
Monday as FMLA leave. In addition, the employee was disciplined for poor work
performance several times between 2008 and 2010, and was investigated again in 2009
and 2010 for her suspiciously timed FMLA leave.
Termination. In late August 2010 the employee’s step-grandchild died; the employee,
however, characterized her as her grandchild, a distinction that was pertinent to her
eligibility for paid funeral leave. The employee took paid and unpaid funeral leave —
more than the funeral of a step-grandchild entitled her to — and additionally received a
final written warning for taking two unauthorized breaks during a shift. After discovering
the discrepancy in the employee’s relationship, the employer began an investigation,
suspended the employee, concluded she had intentionally engaged in fraud, and fired her.
No pretext. As evidence that her termination was actually retaliation for exercising
FMLA leave rights and that the funeral leave fraud reason was pretext, the employee first
argued that the two-month period between her first FMLA leave request and the
employer’s first FMLA misuse investigation was evidence of pretext, at least in
combination with the employer’s alleged “heightened scrutiny” of her (twice
investigating her for leave fraud and harassing her for taking leave every Monday). The
appeals court disagreed.
In this case, the employer maintained contemporaneous records and articulated
particularized facts to support its investigations, including the newspaper article, the
pattern of exhausting all FMLA leave by mid-year, working the remainder of the year
with regular attendance, and resuming frequent FMLA leave beginning the next calendar
year. In 2010, the employee reported FMLA leave every Monday she was scheduled to
work. Further, the fact that one of her supervisors made repeated comments about her
FMLA leave patterns was not sufficient evidence of pretext because that supervisor was
not involved in the investigation or termination decision for funeral leave fraud.
The court emphasized that the better measurement of temporal proximity was three years
— the time between her first FMLA request and her termination — because the earlier
FMLA investigations did not result in any adverse employment action. Additionally, the
court distinguished between targeting an employee merely for taking FMLA leave and
investigating an employee “in good faith based on evidence suggesting that she might
have been abusing paid FMLA leave.”
Compensation policy. Nor was there evidence that the employer’s compensation policy
as administered was pretext supporting a finding of FMLA retaliation. However, the
record was unclear as to whether team leaders actually were penalized for the lack of
sales by employees on FMLA leave, which undercut the employee’s argument that the
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compensation system encouraged leaders to selectively punish FMLA users. Also, there
was no evidence that the allegedly unfavorable policy influenced the employer’s decision
to terminate the employee.
Funeral leave fraud. The employee was similarly unsuccessful in her argument that
because the employer had never before terminated an employee for funeral leave fraud,
this reason was pretext and a legally insufficient basis for her termination. Although the
employee suggested that the employer’s continued investigation of her funeral leave after
she admitted the child was not her biological grandchild was somehow evidence of
pretext, the court noted a lack of evidence that the investigation was a departure from the
employer’s normal practice. Further, the law does not require an investigation to be
conducted perfectly and, where the employee totally failed to present evidence of any
similarly situated employee who was not fired for a similar funeral leave violation, this
argument failed as well.
Finally, regardless of the employee’s protests that her violation of the funeral leave policy
was unintentional, the employer had articulated particularized facts to support an honest
belief that she had engaged in intentional funeral leave fraud. The court cited five facts
upon which the employer based its belief and it found them a reasonable basis on which
the employer concluded she had intentionally violated the funeral policy.
The case number is 12-4032.
Attorneys: Steven Forbes (Norchi Forbes) for Stella Hall. Mary Hirschauer Stiles (Tucker
Ellis) for The Ohio Bell Telephone Company.
6thCir: Jury properly determined that ultrasound technician was “independent
contractor” not “employee” within FLSA definition
A district court properly determined that there were disputed issues of material fact
Regarding an ultrasound technician’s employment status which could lead a reasonable
jury to determine that he was an independent contractor, ruled the Sixth Circuit in an
unpublished decision (Werner v Bell Family Medical Center, Inc, June 27, 2013, Cook,
D). Here, the evidence revealed a less permanent working relationship, wherein the
ultrasound technician retained independence over the marketing of his specialized
services, exercised unfettered discretion regarding their performance, and received his
requested rate. Given these facts, the jury could reasonably conclude that the plaintiff
operated as a business unto himself and qualified as an independent contractor.
The plaintiff, an ultrasound technician, was classified as an independent contractor by a
medical center and paid his requested hourly rate of $40, regardless of the frequency of
ultrasound orders. After filing a wage complaint with the U.S. Department of Labor, he
filed this lawsuit seeking unpaid overtime wages under the FLSA. Thereafter, the medical
center fired the plaintiff, prompting him to add a retaliation claim to his complaint. The
plaintiff contended his position as the medical center’s ultrasound technician qualified
FLSA protection as an “employee” instead of an independent contractor. Ultimately, the
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case proceeded to a jury trial, and the jury returned a verdict in favor of the medical
center.
Finding ample support in the record for the jury’s conclusion that the plaintiff was an
independent contractor, the district court denied his post-trial motion for judgment as a
matter of law or a new trial. This appeal followed.
“Economic reality” test. The plaintiff’s appeal hinged on whether he qualified as an
employee under the FLSA. In order to give full effect to the FLSA’s broad definition of
“employee,” the Sixth Circuit employed the “economic reality” test, asking “whether the
putative employee is economically dependent upon the principal or is instead in business
for himself.” The economic reality test encompasses the following non-exhaustive
considerations: (1) the permanency of the employment relationship; (2) the degree of skill
required for rendering services; (3) the worker’s investment in equipment or materials for
the task; (4) the worker’s opportunity for profit or loss, depending upon skill; (5) the
degree of the alleged employer’s right to control the manner in which the work is
performed; and (6) whether the service rendered is an integral part of the alleged
employer’s business.
While case law in the Sixth Circuit recognizes that courts usually should resolve the issue
of FLSA-employment status as a matter of law, in view of the fact-intensive nature of the
economic reality test, the appeals court has not demanded rigid adherence to this practice.
When presented with genuine disputes of fact, case law sensibly acknowledges that
courts may eschew summary judgment. Thus, to the extent that the plaintiff argued that
the district court, and not the jury, should have resolved any factual disputes, he waived
this stance in requesting a jury trial.
Fact dispute on “employee” status. Next, the appeals court examined whether the jury
could reasonably conclude on the evidence that the plaintiff worked as an independent
contractor. Here, the plaintiff asserted that the undisputed evidence compelled the
conclusion that he was an employee. However, as the district court explained, the
evidence pertaining to the “economic reality” factors permitted multiple inferences and
was thus an issue for the jury, and the jury reasonably concluded that the totality of the
circumstances weighed against finding that the plaintiff was an employee.
While the evidence pointed to “employee” status, implicating the first (permanence),
third (equipment), fourth (profit opportunity), and fifth (employer control of work)
“economic reality” factors, when viewed in light of the substantial contrary evidence
presented to the jury, the record did not compel the conclusion that the ultrasound
technician worked as an “employee” as opposed to an “independent contractor.”
The trial evidence showed that the plaintiff: (1) agreed to begin work as an independent
contractor believing the classification would provide tax benefits; (2) did not have an
exclusive working relationship with the centers; (3) began working part-time and chose to
work more hours and days at these facilities as the opportunities arose; (4) received
separate paychecks from each of the medical centers and prepared his income tax returns
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as an independent contractor; and (5) received the pay rate he requested, which was
significantly higher than his prior rate, that of his successor, and the market rate for
ultrasound technicians during this time period. Consequently, the appeals court affirmed
the district court’s denial of the employee’s motion for judgment as a matter of law.
The case number is 12-6059.
Attorneys: Heather Moore Collins (Law Offices of Heather Moore Collins) for Marcus
Werner. Stephen Walter Elliott (Howell & Fisher) for Bell Family Medical Center, Inc.
9thCir: Defendants may remove case outside the statutory 30-day time limit based
on independently discovered information that controversy is removable
By Lisa Milam-Perez, J.D.
The failure to timely file a notice of removal under 28 U.S.C. Secs. 1446(b)(1) or (b)(3)
does not prohibit a defendant from removing a state action to federal court if it discovers,
through its own investigation, that a case is removable, the Ninth Circuit held, addressing
the issue for the first time (Roth v CHA Hollywood Medical Center, L.P., June 27, 2013,
Fletcher, W).
“Section 1446(b)(1) and (b)(3) specify that a defendant must remove a case within thirty
days of receiving from the plaintiff either an initial pleading or some other document, if
that pleading or document shows the case is removable,” the appeals court wrote.
“However, these two periods do not otherwise affect the time during which a defendant
may remove. That is, the two periods specified in Sec 1446(b)(1) and (b)(3) operate as
limitations on the right to removal rather than as authorizations to remove.” The panel
therefore reversed a district court’s remand of a California wage-hour suit to state court.
Wage suit removed, remanded. A medical center employee filed a putative state-law
wage suit in April 2011, naming several corporate entities of the health care employer; in
May 2012, she filed an amended complaint naming the medical center as a defendant for
the first time. The defendants jointly removed the case pursuant to the Class Action
Fairness Act (CAFA), alleging diversity jurisdiction based on the citizenship of one
putative class member who had relocated to Nevada. The defendants also alleged the
amount in controversy was in excess of $5 million.
In opposing the plaintiffs’ motion to remand, the defendants submitted a declaration from
the Nevada-based putative class member along with declarations from the hospital
system’s VP of human resources and its general counsel, both attesting that the amount in
controversy exceeded the statutory minimum of $5 million. Nonetheless, the district court
granted the motion to remand, concluding that the defendant had not received proper
indication that the case was removable. The defendants could only remove based on
information contained in the amended complaint or other documents received from the
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plaintiffs, according to the court; they could not remove based on information that they
discovered. Also, the lower court reasoned, removal was improper even if the CAFA
jurisdictional requirements had been met, because neither of the 30-day periods specified
by statute had been triggered by documents received from the plaintiffs. The defendants
appealed.
Removal. 28 U.S.C. Sec. 1446 sets forth the procedures for removal of civil actions to
federal court. Sec. 1446(b)(1) states that actions may be removed by a defendant within
30 days of receipt of the initial pleading or service of summons. Sec. 1446(b)(3) provides
that, if the case stated by the initial pleading is not removable, then a notice of removal
may be filed within 30 days after receipt of an amended pleading or other paper “from
which it may first be ascertained that the case is one which is or has become removable.”
The question at issue here: whether one of the two 30-day periods set forth in these
provisions is the only time a case can be removed by the defendant.
The appeals court said no. Those provisions only restrict the times in which a case may
be removed based on information in the initial pleadings, amended complaints, or other
documents obtained from the plaintiff. But a defendant may remove a case outside these
periods on the basis of its own independently discovered information, “provided it has
not run afoul of either of the thirty-day deadlines.”
Independently discovered information. There is good reason to place strict limits on a
defendant who is put on notice of removability by a plaintiff. “A defendant should not be
able to ignore pleadings or other documents from which removability may be ascertained
and seek removal only when it becomes strategically advantageous for it to do so,” the
appeals court reasoned. “But neither should a plaintiff be able to prevent or delay
removal by failing to reveal information showing removability and then objecting to
removal when the defendant has discovered that information on its own.”
In the instant case, for example, the plaintiffs might well have suspected that one or more
of the potential class members had left the state, given the size of the class and duration
of the class period. But the class here would be comprised of employees whose names
and other identifying information were known to the employer—which was likely in a
better position to investigate the citizenship of those would-be class members. “It would
be odd, even perverse, to prevent removal in this case, and we see nothing in the text of
[the statutory removal provisions] to require such a result.”
The appeals court acknowledged that it was “at least theoretically possible” for
defendants to game the system in a CAFA case, waiting to file a notice of removal until
things were looking dicey in state court, or until the eve of trial. (That’s not what
happened here: the defendants had promptly investigated to determine whether the matter
was removable.) How might plaintiffs avoid such gamesmanship? As the appeals court
saw it, the best approach, when fearing that a defendant might delay seeking removal
until a strategically advantageous moment, was for the plaintiff to simply provide a
document from which removability may be ascertained—thereby triggering the 30-day
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removal period during which the defendant must file a notice of removal or forfeit the
right to do so.
As for whether the dispute at hand would ultimately prove removable, the Ninth Circuit
would not say, noting the amended complaint was at best “indeterminate” on its face as to
diversity of citizenship and the sufficiency of the amount in controversy. Rather, it held
only that removal was not foreclosed by Sec. 1446 (b)(1) or (b)(3).
The case number is 13-55771.
Attorneys: Louis M. Marlin (Marlin & Saltzman) for Amy Roth. Karin L. Bohmholdt
(Greenberg Traurig) for CHA Hollywood Medical Center, L.P.
11thCir: Nanny entitled to jury trial as to whether employers willfully violated
minimum wage laws; court must reconsider liquidated damages
By Kathleen Kapusta, J.D.
In light of evidence that a former nanny’s employers were aware of and disregarded
federal and state minimum wage laws, sometimes paid her in cash, failed to record her
hours, and made comments about her status as an alien, the Eleventh Circuit found that a
lower court erred when it entered judgment as a matter of law against her on her claim
that they willfully violated federal and minimum wage laws (Davila v Menendez, June
10, 2013, Pryor, W). Vacating and remanding the district court’s decision, the appeals
court directed the lower court to consider whether the employee was entitled to liquidated
damages.
The employee, who began working for the husband and wife in 2004 as a nanny for their
five-month-old son, was originally paid $350 per week. Approximately two-and-a-half
years later, her salary increased to $400 per week. When she was first hired, she arrived
for work early every weekday morning and left in the evenings after she put the child to
bed. When the couple moved into a large apartment, she lived with them from Sunday
evening through Friday afternoon. After she was terminated in 2010, she sued the couple
alleging violations of federal and state minimum wage laws. She contended that she
worked an average of 100 hours a week between July 2004 and February 2008 and was
paid $3.50 per hour for all hours worked. She alleged that between October 2008 and
March 2010 she worked 75 hours per week and was paid $4.00 per hour for all hours
worked. She claimed that her employers willfully and intentionally refused to pay her the
minimum wage and that they violated the minimum wage provision of the Florida
Constitution.
At trial, the couple testified that the nanny worked an average of 38 hours per week, that
she lived with them voluntarily because she did not have a permanent residence, that they
paid her when the child was on vacation, gave her money for living expenses, paid for an
airline ticket to Canada, and paid her credit card bills while she was in Canada for eight
months. The husband further testified that he had “an idea” what the minimum wage was
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and thought they paid her well above it. He also stated that he didn’t know he was
supposed to file W-2 forms for her. The employee, however, claimed that during her first
meeting with the couple, they asked her why an “illegal” would charge $350 per week,
mentioned several times that he was with the government, and told her she should not be
charging that much.
Lower court’s decision. At the close of all the evidence, the district court granted the
couple’s motion for a directed verdict on the issue of intentional recklessness or willful
behavior on their part. It found that while they were aware of the minimum wage
requirements, that awareness did not give rise to a jury question as to whether they
intentionally violated the requirement or showed reckless disregard for it. It next
concluded that their failure to investigate further did not create a jury question about
willfulness, noting that it was not a requirement. Although the jury returned a verdict in
favor of the nanny, finding that the couple owed her $33,025 in unpaid minimum wages,
the district court denied her motion for liquidated damages, ruling that the couple acted in
good faith in compensating her for all hours worked.
Willfulness. On appeal, the employee argued that the couple willfully violated the
minimum hourly wage laws of Florida and that their willful violation extended from four
years to five the time for which she could recover unpaid wages. Although the provision
of the Florida constitution upon which the employee relied did not define the term
“willful” it did provide that the standards developed under the FLSA could be used as
guidance. Applying those standards, the appeals court found that the lower court erred
when it entered judgment as a matter of law that the couple did not willfully violate the
minimum wage laws. The employee introduced evidence that that they knew of the
hourly wage laws but failed to investigate whether they had complied with them. In
addition, they did not sign a contract with her, did not record her working hours, and paid
her in cash. There was also evidence that the husband made threatening comments about
her alien status and his work for the government. Thus, a reasonable jury could have
found that the couple willfully violated the minimum wage laws and the district court
erred when it refused to submit the issue of willfulness to the jury. Accordingly, the
employee was entitled to a new trial before a jury to determine whether her former
employers willfully violated the minimum wage laws.
Liquidated damages. Because the employee was entitled to a new jury trial on the
willfulness issue, the lower court was required to reconsider whether she was entitled to
liquidated damages, the appeals court ruled. Here, the Eleventh Circuit found that before
making a determination as to the employee’s entitlement to liquidated damages, the lower
court was required to await the jury’s finding regarding willfulness. If the jury finds that
they acted willfully, then any good faith defense would necessarily fail, the court
observed, and the employee would be entitled to liquidated damages. However, if the jury
finds they did not willfully violate federal and state minimum wage laws, that
determination would not necessarily mean that they acted in good faith, the court pointed
out. Noting that that the couple admittedly did not inquire about their obligations under
the hourly wage laws, the appeals court found that the district court could infer that they
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lacked reasonable grounds for believing that their conduct comported with the Act.
Accordingly, the court vacated and remanded the lower court’s decision.
The case number is 12-11049.
Attorneys: Jamie H. Zidell (The Law Office of Eddy O. Marban) for Employee. Peter
Mineo (The Mineo Diener Law Firm) for Employers.
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