Labor Relations & Wages Hours Update
August 2014
Hot Topics in LABOR LAW:
Board ratifies non-adjudicative actions taken while quorum absent
By Pamela Wolf, J.D.
In the wake of the Supreme Court’s Noel Canning ruling, the NLRB has unanimously
ratified all of the administrative, personnel, and procurement matters taken by the Board
from January 4, 2012 to August 5, 2013 — the period during which it lacked a full
quorum. In an abundance of caution, the Board has also expressly authorized specific
actions taken during that non-quorum period, according to an August 4 Board statement.
However, the challenges to the Board’s non-adjudicative actions in the absence of a
quorum remain.
In January, the Supreme Court ruled in NLRB v. Noel Canning that Board Members
appointed on January 4, 2012, during what President Obama erroneously believed to be a
legislative recess, were not validly appointed. The Board regained a quorum on August 5,
2013. During the non-quorum period from January 4, 2012, to August 5, 2013, the Board
acted on various matters including the appointments of Regional Directors,
Administrative Law Judges, and restructurings of regional and headquarters offices. The
Board has now ratified these actions to remove any doubt as their validity.
“We believe that all the administrative, personnel and procurement matters described
above were timely and appropriate,” the Minute of Board Action on July 18 states.
“Nevertheless, in an abundance of caution, with a full complement of five Board
Members we now confirm, adopt and ratify nunc pro tunc all administrative, personnel
and procurement matters approved by the Board or taken by or on behalf of the Board
from January 4, 2012 to August 5, 2013, inclusive. This action is intended to remove any
question that may arise concerning the validity of the administrative, personnel, and
procurement matters undertaken during that period. The Board also expressly authorized
these actions:

The selection of Dennis Walsh as Regional Director for Region 4 (Philadelphia);

The selection of Margaret Diaz as Regional Director for Region 12 (Tampa);

The selection of Mori Rubin as Regional Director for Region 31 (Los Angeles);

The selection of Kenneth Chu, Christine Dibble, Melissa Olivero, Susan Flynn,
and Donna Dawson as Administrative Law Judges;

The restructuring of various Field Offices;

The restructuring of Headquarters’ Offices.
On Wednesday, July 30, Regional Directors Walsh, Diaz, and Rubin also ratified all
actions they took, and those taken on their behalf, from the dates of their initial
appointments and July 18, 2014. These ratifications include all personnel and
administrative decisions, all actions in representation case matters, and all actions in
unfair labor practice cases.
What does this Board action mean? “For the most part, this action was necessary from
a purely operational standpoint to wrap up any loose ends concerning the day-to-day
functioning of the Board, in particular the General Counsel’s operations — where much
of the heavy lifting occurs,” explained Employment Law Daily Advisory Board Member
Chris Bourgeacq, General Attorney with AT&T.
As to the three Regional Directors ratifying their action since appointment, Bourgeacq
thought the Board has likely “cleared the deck” of challenges to most, if not all, actions
preceding final decisions by the Board in D.C. “That action, in turn, allows the regions to
get on with their normal activities and leaves the more problematical policymaking to the
full board,” he suggested. “There still may be challenges on more esoteric bases — e.g.,
the Hooks case, challenging the GC’s appointment based on the Federal Vacancies
Appointment Act — but those challenges will likely be thwarted by the courts of
appeals.”
“Still in flux, however, are the Board’s adjudicative decisions during the invalid period of
its operations,” according to Bourgeacq. He predicts a possible spike in challenges to
those decisions, some of them relating to major decisions, as well as others involving less
notorious ones. “Losing parties in those cases, who did not pursue appeals previously —
both employers and unions — may also reconsider earlier decisions not to appeal and
take advantage of another bite of the apple,” Bourgeacq said.
In addition, regardless of when (not if) the Board finalizes its reissued revised
representation rules, “no doubt there will be court challenges to those rules, keeping them
in limbo for years to come,” Bourgeacq added. The original proposed rule — dubbed
“Quickie Election Rule” by many — was rescinded after the Board was forced to retreat
from its appeal of a district court decision invalidating the much fought-over revisions
due to a quorum issue. Earlier this year, on February 6, the Board reissued a proposal
substantively identical to the prior version.
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Another challenge ahead. Bourgeacq pointed to another potential challenge stemming
from the now-invalidated recess appointments — the President’s determination to appoint
Sharon Block to the Board. The AT&T attorney queried whether the Senate will be able
to confirm Block’s nomination to fill Member Schiffer’s appointment, which expires in
December. “If Block is not confirmed, then depending on this fall’s elections the Senate
may swing to the Republicans, possibly delaying confirmation of any Obama nominee to
the Board,” he explained. “That result would leave the Board deadlocked 2-2 on
management/labor side members, effectively putting an end to transformational activities
from the Board until the next general election.”
“Unprecedented” cooperative CBA between Spirit AeroSystems and IAM unravels
By Pamela Wolf, J.D.
The International Association of Machinists and Aerospace Workers (IAM) on Friday,
August 6, filed a lawsuit against Spirit AeroSystems challenging the company’s plans to
outsource IAM-represented jobs by selling a key fabrication operation and the use of
outside contractors to perform work currently done by IAM-represented Spirit
employees. The move would violate the terms of what was considered an
“unprecedented” cooperative labor contract between the parties. The union has asked a
federal district court in Kansas to issue an injunction barring Spirit from selling the
fabrication unit or outsourcing any union jobs pending arbitration.
Spirit employees in Wichita build fuselage sections for all current Boeing programs,
which includes the 737, 747, 767, 777, and 787 aircraft; nacelle, strut, and pylon
components for the 737, 747,767, and 777; as well as components for the Bombardier C
Series and the Mitsubishi Regional Jet.
Under the misnomer of “insourcing,” Spirit’s sale of its fabrication unit, a major
manufacturing operation, and plans to use outside contractor employees in tool supply,
shipping, paint stores, and other support functions will displace IAM-represented
workers, the union said in a release. These planned actions are a breach of the IAM-Spirit
AeroSystems agreement, the union contends.
Model 10-year CBA. Among other things, the union points in its complaint to an
“unprecedented” example of labor-management cooperation embodied in a ten-year CBA
under which the IAM gave up its right to strike, accepted lesser general wage increases
(only 4 percent over a 10-year period), and in some instances even accepted reduced
wages. In exchange, Spirit agreed “to maintain all major manufacturing operations in
Wichita, to preserve or expand all bargaining unit work, to maintain or increase the
number of unit employees, and to engage in an open dialogue with the Union regarding
any decisions that may affect unit employees throughout the duration of the agreement,”
according to the IAM. The contract remains in effect until June 27, 2020.
Planned sale and resulting layoffs. Union and company officials met to address
widespread rumors that Spirit intended to sell all or part of its operations, according to the
complaint. Spirit officials informed union representatives that the company planned to
sell its fabrication operation, which would result in a layoff of about 1,200 unit
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employees. The employer’s officials said they would provide additional information
about the sale on the condition that the Union enters into a non-disclosure agreement. “At
all times Spirit has sought to cloak its egregious violations of the CBA in secrecy,” the
IAM alleged.
“This information disclosed that after nine consecutive successful years — built in large
measure on the dedication, loyalty, skills and hard work of unit employees — Spirit had
betrayed the Union’s trust and had repudiated the central provisions of the CBA,” the
complaint states. “Spirit intentionally concealed its plan to sell the fabrication operation
from the IAM even though the Company undoubtedly had previously engaged the usual
array of consultants and financial advisors to pursue the sale.”
The union’s attempts to meet with company officials and pursue formal grievance
channels over the several contract violations that would purportedly result should the sale
go through allegedly have been rebuffed by the company. Moreover Spirit has refused
even to temporarily delay the sale pending arbitration of the dispute, the union said,
charging that the company “is seeking to consummate a sale before the matter can be
heard by an arbitrator.”
According to the union, Spirit is not requiring the prospective buyer to retain any
bargaining unit employees or to apply the CBA to the fabrication operation post-sale. The
company also purportedly said that prospective buyers are free to move the fabrication
operation off-site following a sale. “Upon closure of a sale, Spirit would be incapable of
fulfilling its contractual obligation to preserve unit jobs and work throughout the duration
of the CBA,” the complaint asserts. “The sale would result in the permanent loss of such
work and approximately 1,200 unit employees would lose their jobs. Consequently,
Spirit’s sale of the fabrication operation would irreparably harm all affected employees
who would lose their jobs, their wages and their employment benefits.”
Outsourcing. Spirit officials also told union representatives that the company planned to
outsource more than 200 unit jobs in shipping, tools supply, paint stores, and other
support functions and lay off the unit employees. When asked the reason why the jobs
were being outsourced, company officials purportedly stated that Spirit “just didn’t want
to do the work” and the company would not net any cost savings. The move would
violate the CBA, under which Spirit is prevented from any subcontracting unless it
becomes necessary for financial reasons or to make room for additional work, according
to the IAM.
The IAM asserts that the company also violated a CBA requirement that the company
notify the union in advance when outsourcing plans are contemplated. “The express
reason for such notice is to provide the Union with an opportunity to propose competitive
alternatives which would allow retention of the bargaining unit work,” the complaint
explains.
Injunction sought. The union is seeking an injunction in aid of labor arbitration that
would bar, pending arbitration, the sale of the fabrication operations and assets, enjoin
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fabrication unit employee layoffs, and prevent support function outsourcing and related
unit employee layoffs.
Union leader cites Boeing experience. “The new leadership at Spirit AeroSystems is
embarking on the same misguided approach that caused customers to wait an extra two
years for Boeing 787 Dreamliner deliveries,” said IAM International President R.
Thomas Buffenbarger. “IAM-represented employees have shown time and again that
they are the best aerospace workers in the world. They are the right choice to make Spirit
AeroSystems successful for customers and shareholders.”
“Boeing learned the hard way that the more outside contractors on a project, the more
production and delivery problems there are,” Buffenbarger contined. “That’s why our
agreement with Spirit AeroSystems calls for a strong partnership to make the company
successful and create jobs for our members, the people who have a stake in Spirit’s
success. We have worked hard to do our part, but the new leadership at Spirit seems
determined to follow a course that just doesn’t work in the aerospace industry.”
AFL-CIO urges SEC to quickly implement Dodd-Frank pay ratio and performance
provisions
By Jim Hamilton, J.D., LL.M
The AFL-CIO strongly urged the SEC to quickly complete the rules implementing the
two executive compensation provisions of Section 953 of the Dodd-Frank Act: the pay
ratio provision (953(b)) and the pay for performance provision (953(a)). In a letter to the
SEC, the labor organization said that implementation of these provisions is critical since
they are part of a comprehensive and interlocking set of reforms intended to align
executive pay with long term company performance. For example, the executive pay
disclosures required under Section 953 will help inform Section 951’s say-on-pay votes.
Section 953. Section 953(a) requires disclosure on the relationship between executive
compensation and the company’s financial performance, while 953(b) requires disclosure
of the ratio between CEO compensation and employee compensation. The SEC has
proposed but not yet finalized rules implementing Section 953(b), and has not yet
proposed rules implementing Section 953(a). According to the Office of Management
and Budget’s Unified Agenda, the SEC’s Division of Corporate Finance is scheduled to
recommend proposed rules to implement Section 953(a) by October 2014. A final rule
implementing Section 953(b) on pay ratio disclosure is also scheduled for October.
In the letter, the labor group said that the rules proposed to implement Section 953(a)
should not alter the Summary Compensation Table as required to be disclosed under Item
402 of Regulation S-K. In its present form, the Summary Compensation Table captures
current compensation over a three-year period for the top five named executive officers.
Investors rely on the Summary Compensation Table when casting say-on-pay advisory
votes, noted the group, as well as for the election of compensation committee members.
Disclosure. By requiring disclosure of all forms of executive compensation in a
standardized format, the Summary Compensation Table facilitates comparisons between
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companies and over time. Another important advantage is that it provides investors with a
summary of current compensation accrued by senior executives over the fiscal year. This
presentation of current compensation over the year in question helps investors evaluate
the annual compensation decisions that were made by boards of directors.
While some commentators have suggested that the SEC should adopt a realized pay
approach to satisfy the “executive compensation actually paid” language of Section
953(a), the AFL-CIO said that this is a flawed approach unsuitable for illustrating the
relationship of executive pay to performance. Most notably, realized pay calculations
include the value of stock option exercises. However, the year that a stock option is
exercised does not reflect the performance period when the option was earned (i.e. its
vesting period). In effect, reasoned the labor group, including option exercises in
executive pay calculations conflates changes in an executive’s liquid wealth with their
income. Such disclosure may also understate executive pay, warned the labor group,
since many stock options are exercised after an executive’s termination.
The labor group also urged the SEC to consider the merits of requiring the disclosure of
quantifiable performance metrics, numerical formulas and payout schedules. Such
metrics are routinely used to set executive pay formulas, said the group, but they are
rarely disclosed on a forward-looking basis. The labor organization believes that
requiring all companies to disclose this information will neutralize any competitive
disadvantage resulting from the disclosure of proprietary information.
Finally, in order to comport with the language of Section 953(a), the labor group urged
the SEC to require standardized disclosure of Summary Compensation Table data
compared to the company’s total shareholder return. For example, the SEC could require
a comparison of the percentage change in total shareholder return compared to the
percentage change in each named executive officers’ total compensation.
Proposed $2.1M settlement would end California FedEx package handlers’ class
claims
By Pamela Wolf, J.D.
Under a proposed settlement agreement, FedEx Ground Package Systems, Inc., would
shell out $2.1 million to resolve class claims that employer did not give package handlers
required rest and meal breaks, among others. On Monday, August 8, the plaintiff filed a
motion for preliminary approval of the settlement and certification of a settlement class
that would include some 15,790 current and former package handlers.
Meal and rest period claims. The lead plaintiff, who seeks appointment as class
representative, filed a class action complaint in a California state court in September
2013, according to the memorandum in support of the proposed settlement. The case was
later removed to federal court. The plaintiff challenged certain FedEx policies and
practices under which package handlers in California who worked three- to four-hour
shifts known a “sorts” were not afforded rest periods when they worked less than 3.5
hours. He also alleged they were not provided a second rest period when they worked
more than one sort in a day (thus, more than six hours).
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The plaintiff also challenged a FedEx Ground policy that neglected to give package
handlers a duty-free meal break when they worked more than one sort in a day.
Other claims. Although the meal and rest period claims were the ones that the plaintiff’s
counsel believed most likely to succeed, he also raised claims for unpaid wages during
mandatory security checks that took about five minutes daily, vacation pay, reporting
time pay, failure to pay all wages due at termination, recordkeeping violations, and unfair
business practices.
Settlement terms. Under the proposed deal, FedEx Ground would pay a gross of $2.1
million to resolve what the plaintiff’s attorneys, who seek to be appointed class counsel,
estimated to be a maximum exposure of $22 million in claims — within the “range of
reasonableness,” they argued. FedEx would also clarify its meal and rest period policies
at an estimated cost to the company of $100,000, which would bring the total settlement
value to $2.2 million, according to would-be class counsel. This part of the settlement
will continue to benefit future employees, of course.
From the gross settlement amount, attorneys’ fees of up to $700,000 and costs and fees of
up to $40,000 would be deducted. Up to $7,500 would be allotted as an enhancement
award to the class representative. FedEx Ground’s payroll taxes and the first $50,000 and
any amount over $65,000 for administrative costs would also come out of the gross
settlement amount.
Proposed class. The class, which is estimated at 15,790 members, would include
everyone employed by FedEx Ground in California in the non-exempt position of
package handler at any time from September 24, 2009 to the earlier of (1) the date of
settlement’s preliminary approval, or (2) September 1, 2014.
Can agency excluded from FSLMRS coverage be agency representative in ULP
case?
By Pamela Wolf, J.D.
The Federal Labor Relations Authority (FLRA) is soliciting amici briefs on what it
considers a significant issue arising in a currently pending case. At issue is whether a
presidential order issued under Section 7103(b)(1) of the Federal Service LaborManagement Relations Statute (FSLMRS) to exclude an agency subdivision “from
coverage under” the statute precludes the FLRA from finding that excluded subdivision’s
employee has acted as a “representative of the agency” under FSLMRS Sec.
7114(a)(2)(A) and (B).
The FLRA is considering the case pursuant to its responsibilities under the FSLMRS and
its unfair-labor practice (ULP) regulations at 5 C.F.R. Part 2423, according to a notice
scheduled for publication in the Federal Register on Friday, August 15.
In Case No DE-CA-08-0046, the FLRA’s Chief Administrative Law Judge issued a
recommended order to dismiss an ULP complaint against the U.S. Department of the Air
Force, Ogden Air Logistics Center, Hill Air Force Base, Utah (respondent) for alleged
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violations of FSLMRS Secs. 7114(a)(2)(B), 7116(a)(1), and 7116(a)(8). As the ALJ saw
it, Executive Order (EO) 12,171 excluded the respondent’s sister sub-agency (Air Force
Office of Special Investigations) from coverage under every aspect of the FSLMRS.
Because the sister sub-agency could not have acted as a representative of the respondent,
the respondent could not have committed the ULP via the sister sub-agency’s actions as
alleged. The ALJ thus recommended that the FLRA dismiss the complaint.
The FLRA’s Office of the General Counsel (GC) saw it differently, however, and filed
exceptions to the recommended dismissal order. The GC argued that an agency may be
excluded from coverage under the FSLMRS, yet still be found to act as a representative
of an agency.
Matter of first impression. The FLRA said that because it has not directly addressed the
issue raised in the GC’s exceptions before, there is an absence of controlling precedent.
Moreover, since the matter is likely to be of concern to agencies, labor organizations, and
other interested persons, the FLRA deemed it appropriate to provide for the filing of
amici briefs addressing the matter.
Therefore, in connection with the above-captioned case, the FLRA is providing an
opportunity for the parties and other interested persons to file briefs addressing the
following questions:

When the President issues an order under Sec. 7103(b)(1) and excludes an agency
or subdivision thereof “from coverage under” the FSLMRS, does such an order
preclude the agency or subdivision from being a “representative of the agency”
under Sec. 7114(a)(2)(A) and (B)?

Should the Authority interpret EO 12,171 as having that effect with regard to the
Air Force Office of Special Investigations?
In answering these questions, the parties and other interested persons should address: (1)
the wording of the FSLMRS and EO 12,171; (2) principles of statutory construction; (3)
legislative history regarding Sec. 7103(b)(1), Sec. 7114(a)(2)(A) and (B), and any other
relevant provisions of the FSLMRS; (4) any information regarding the history and
purposes of EO 12,171; (5) any applicable precedent, including the relevance, if any, of
exclusions that occurred under Sec. 3(b)(3) of EO 11,491; and (6) policy considerations.
Amici briefs must be received on or before 30 days after the notice’s publication of the
Federal Register, according to the notice, which also provides additional details about the
pending case and information on the format and filing requirements of the briefs.
Virgin America flight attendants vote for TWU representation
Virgin America flight attendants have voted in favor of union representation by the
Transport Workers Union of America (TWU) — the first work group at the Californiabased airline to vote for a union, according to an August 13 TWU release. The National
Mediation Board reported that TWU received 430 votes, 58 percent of those voting,
compared with 307 who voted against forming a union. The election was conducted
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between July 16 and August 13 by telephone and Internet; 828 Inflight Team Members
(ITMs) were eligible to vote.
According to the union, many ITMs at Virgin America were drawn to the TWU because
of its success in bargaining contracts for 11,000 flight attendants at Southwest Airlines.
“Virgin America bills itself as an ‘upscale’ airline and prides itself on that service that
‘team members’ offer,” said TWU’s International Executive Vice President John
Samuelsen, who attended the vote count at the NMB with a group of Virgin flight
attendants. “With this vote, flight attendants will have a say on how to further improve
Virgin along with their own work lives. This is a chance to make the airline better for
both customers and workers.”
In July, the privately held company filed for an initial public offering with the U.S.
Securities and Exchange Commission. On August 12, Virgin America Inc. reported that
its second-quarter profit and revenue increased, largely due to the airline filling more
seats.
“We want to see Virgin America prosper,” said TWU International President Harry
Lombardo. “As the airline grows and becomes an increasingly profitable and larger
public company, we also want our members to be recognized for their contribution to the
airline’s success. We will now focus on gaining a contract that’s fair for our new
members.”
Negotiations for a first contract will begin in the fall.
The TWU, an affiliate of the AFL-CIO, represents 200,000 workers and retirees in
commercial aviation, public transportation, and passenger railroads, including 11,000
flight attendants at Southwest Airlines and 500 flight attendants at Allegiant Air.
New MOU aimed to connect NLRB with Ecuadorian workers, employers
The NLRB has entered into a memorandum of understanding (MOU) with the Ministry
of Foreign Affairs and Human Mobility of Ecuador in order to strengthen their
collaborative efforts. The move will provide Ecuadorian workers, their employers, and
Ecuadorian business owners in the United States with information, guidance, and access
to education regarding their rights and responsibilities under the NLRA.
Under the framework announced on Tuesday, August 19, the NLRB and the Ecuadorian
Embassy in Washington, D.C., as well as NLRB Regional Offices and Ecuadorian
Consulates nationwide, will now cooperate to provide outreach, education, and training,
and to develop best practices. The same framework has been used by other federal labor
agencies, including the DOL, that have similar agreements with the Ecuadorian Embassy
and its consulates.
The new agreement is intended to spawn broader awareness within the Ecuadorian
community of the rights and responsibilities of employees and employers, along with the
services provided by the NLRB.
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Coordinating with the consulates, the NLRB says it will meet with Ecuadorian workers
around the country to help forge innovative solutions to issues specific to their needs. The
MOU will also increase the NLRB’s ability to provide employers, including Ecuadorian
business owners in the United States, with resources directly available to them, including
access to education and training resources regarding rights and responsibilities under the
Act.
Minnesota healthcare workers choose SEIU in state’s largest union election
In what has been billed as the biggest union election in Minnesota history, nearly 27,000
home care workers have voted to join SEIU Healthcare Minnesota. Home care workers
across the state voted overwhelmingly to form a union with the aim of making sure they
are paid a living wage and improving the quality of care for Minnesota seniors and
people with disabilities, according to an August 26 SEIU announcement.
The union pointed out that Minnesota home care workers are primarily female, middleaged, and living near poverty. The union also cited a 2012 report by the Paraprofessional
Healthcare Institute which found that more than 40 percent of Minnesota's direct-care
workers (which includes home care workers and home health aides) live in households
relying on some form of public assistance, such as food stamps or Medicaid. These
factors contribute to extremely high turnover rates in a field that is physically and
emotionally demanding.
Apparently referring to Harris v. Quinn, the union also noted the U.S. Supreme Court’s
ruling two months ago that Illinois home care workers are not entitled to the same rights
as other public employees. According to the SEIU, the ruling has not deterred home care
workers from joining together in Minnesota, or in states like Connecticut, Illinois,
Massachusetts, Ohio, Pennsylvania, Washington, and Washington, D.C. — where
thousands of working families have rallied to call attention to how poverty wages are
holding back Americans, destabilizing communities and the economy.
“Today, working women and men throughout Minnesota have taken an historic first step
to unite their voices to make home care jobs good jobs that can sustain a family,”
remarked SEIU International President Mary Kay Henry. “Now more than ever,
Americans are not waiting for change, we are coming together and rising up to demand it.
Nowhere is that change more overdue or more urgent than within home care.”
Healthcare employer files racketeering suit against SEIU
Contending that the SEIU has engaged in a campaign to “extort, threaten, and force it to
enter into a neutrality agreement” with the union, a California healthcare corporation has
filed a federal racketeering suit against the union, its president, Mary Kay Henry, and
several affiliates (including California-based SEIU-UHW) and other union officials.
Complaint allegations. Prime Healthcare Services, a California-based hospital
management organization, filed a complaint in the Northern District of California
alleging that, in its effort to impose a neutrality agreement “that would enable SEIU to
force all employees into the union regardless of employee choice,” the union violated
RICO. The company accused SEIU of issuing “malicious and false statements” and of
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funding union operations with money unlawfully received in violation of federal law.
Prime Healthcare also alleged the union “coerced the California Hospital Association to
impose neutrality agreements on its members including Prime Healthcare” and threatened
to prevent the company from acquiring hospitals unless it concedes to the union’s
demands and gives the union “control of all Prime Healthcare hospitals.”
According to the company, it has suffered substantial injury as a direct result of the
SEIU’s racketeering activity, including lost hospital acquisitions and lost patients, as well
as legal fees, public relations expenses, and costs incurred due to SEIU-instigated
regulatory investigations and examinations by accreditation authorities. Also, SEIU’s
publication of false and disparaging statements about Prime Healthcare, and sham
petitioning activity, resulted in further costs to the company, including lost business
goodwill and customer revenues, and additional expenses.
Dueling accusations. The “campaign of extortion” is all part of the SEIU corporate
campaign playbook, the company charged, and it’s been going on for years. Prime
Healthcare said it filed suit in an effort to reveal the union’s unlawful conduct and to
protect the rights of its hospitals. “Unfortunately, due to SEIU's self-serving and illegal
actions, Prime Healthcare has had to file this lawsuit to protect the rights of hospitals and
allow them to focus on providing patient care to the communities they serve,” according
to Troy Schell, Prime Healthcare’s general counsel.
Responding with a statement decrying Prime Healthcare’s “gold-plated toilets and federal
lawsuit,” SEIU-UHW shot back that the company was trying to silence its critics. For its
part, the union said the court complaint was “a mixture of old allegations that were
thrown out of federal court multiple times last year, and equally spurious new
accusations.” SEIU-UHW also accused Prime Healthcare of demanding the union’s
support for its purchase of a hospital system in exchange for dropping the lawsuit. SEIUUHW opposes the acquisition.
As for the “gold-plated toilets”: it’s a reference to a newly released video in which the
union accuses Prime Healthcare of using taxpayer-supported money on private luxuries.
The video is said to feature the company’s founder and CEO discussing the presence of
such high-end fixtures in his Beverly Hills home, and also making disparaging comments
about low-income patients and the uninsured.
SEIU-UHW represents workers at three Prime Healthcare-owned hospitals in California.
The parties are currently embroiled in a labor dispute.
Machinists appeal to NMB in contract negotiations with Southwest Airlines
After more than two years of direct talks with Southwest Airlines, the International
Machinists announced earlier this week that it will file for mediation with the National
Mediation Board. Noting that the airline is on pace to improve on its billion-dollar
earnings last year, IAM District 142 president Tom Higginbotham said despite having
“the most productive workforce in the airline industry,” Southwest refuses to offer
desired contract improvements.
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The union, which represents 6,000 passenger service and reservation agents at the carrier,
has never had to utilize the NMB’s mediation services in negotiations with Southwest,
according to an IAM statement issued Tuesday, August 26. “Management is hell-bent to
move to a risky variable compensation system as opposed to offering guaranteed wage
increases,” Higginbotham said. “It’s clear this is a numbers-oriented airline instead of a
people-oriented airline.”
“Southwest has merged its way to super-profits and is doing everything it can to
stonewall its employees from sharing fairly in the success they’ve worked so hard to
create,” continued Higginbotham. “This is greed, pure and simple and the IAM will not
stand for it.”
“While we will certainly honor the IAM’s desire to request national mediation assistance,
we are disappointed by this sudden request,” Southwest spokesperson Brandy King told
Employment Law Daily. She noted that the airline has thus far presented an initial
proposal on economics to IAM, including fixed wage increases, performance bonuses,
and other incentives, to which the union has “never formally responded.”
“We go into this request knowing that our Employees already have an industry-leading
contract that provides the best wages, benefits and work rules in the industry. We also
know that we have provided complete job security for our Employees during our 43-year
history, and there are few in the industry that can claim that track record,” King added.
“We are committed to negotiating in good faith and honoring our deep commitment to
the People of Southwest. Moreover, it is a top Southwest priority to reach a new contract
as soon as possible with IAM that provides flexibility, an industry-leading compensation
package, and continued job security for all Employees.”
If the IAM’s application for federal mediation is granted, the NMB then begins the
process of mediated discussions. If no agreement is reached, the parties can enter into
arbitration, or the union can call a strike.
LEADING CASE NEWS:
2d Cir.: Union medical fund unable to recover discontinued contributions in ERISA
suit
By Ronald Miller, J.D.
A union medical fund (UMM fund) that provided medical benefits to retired union
members could not recover payments that were discontinued after a union and
contracting employers amended collective bargaining agreements to reduce the payments
without its consent, ruled the Second Circuit. Here, the appeals court determined that the
terms of each CBA did not constitute the terms of an ERISA plan because no term of the
UMM fund trust indenture obligated employers to make prompt payments under their
CBAs, and the CBAs did not require the employers to bind themselves to the UMM fund
trust indenture. Judge Calabresi concurred in that part of the majority opinion finding that
the UMM fund’s claim under ERISA Sec. 515 was properly dismissed, but was not
12
prepared to find that there were no circumstances under which a CBA could ever be an
ERISA plan (Silverman v Teamsters Local 210 Affiliated Health and Insurance Fund,
August 1, 2014, Jacobs, D).
Under collective bargaining agreements entered into by multiple employers with a
Teamsters local union, the employers promised to contribute to the union’s health and
insurance fund (insurance fund). The insurance fund would, in turn, “unconditionally and
irrevocably” transfer 14 percent of the payments to a UMM fund, which provided
medical benefits to retired union members. Although the UMM fund received the bulk of
its funding from employer contributions pursuant to the CBAs, employers pay nothing to
the UMM fund directly. Both funds are group health funds governed by ERISA.
Reduction in contributions. For a number of years, the insurance fund duly paid the
UMM fund in accordance with the CBAs. But in 2006, the insurance fund established a
new medical plan for retirees and no longer needed the UMM fund. The CBAs were
amended with the consent of the employers, but not the UMM fund, to reduce payments
to the UMM fund by 98 percent. The UMM fund alleged that the reduction was
retaliation for a failed merger between the two funds, and brought this action to contest
the amendments of the CBAs without its consent, and to collect payments abated by the
amendments.
The district court construed all three of UMM’s claims as pleading a cause of action
under ERISA Sec. 502. Thus, the first two claims alleged that the insurance fund violated
the terms of an ERISA plan by failing to remit the amounts owed to the UMM fund. The
third claim was construed as asserting that the reduced payments violated ERISA Sec.
515, which requires an employer, or an entity acting in the interest of an employer, to
fulfill its CBA plan contribution obligations. The district court dismissed the Sec. 515
claim on the ground that the insurance fund was neither an “employer” nor an entity
acting “in the interest of an employer.” Two years later, the district court granted
summary judgment in favor of the UMM fund on its first two claims, concluding that
each CBA “established” an ERISA “plan,” and that the insurance fund violated a plan
term by reducing payments to the UMM fund. The insurance fund appealed the damages
award, and the UMM fund cross-appealed the dismissal of the Sec. 515 claim.
Sec. 515 claim. Taking up the Sec. 515 claim first, the Second Circuit agreed with the
district court that it was properly dismissed because the insurance fund was not an
employer, and its payments to the UMM fund were not made in the interest of an
employer. Subject matter jurisdiction over ERISA claims is conferred by Sec. 502(f),
which allows the federal district court to grant relief “provided for in subsection (a) of
this section.” A plan participant, beneficiary, or fiduciary have standing to bring suit for
violations of ERISA or the terms of the plan. The trustees of the UMM fund asserted
standing as fiduciaries. According to the UMM fund’s complaint the insurance fund was
obligated to contribute to it “in the interest of” the “employers” who were signatories to
the CBAs, and that the insurance fund failed to do so.
A person who acts in an employer’s interest is one who controls an employer or explicitly
assumes the employer’s obligations. However, absent some type of agency or ownership
13
relationship, or direct assumption of an employer’s obligations, an entity is not
considered to be acting “in the interest of” an employer for purposes of Sec. 515. The
UMM fund’s argument that the insurance fund actually assumed the employer’s
contribution obligation under the terms of the CBA did not withstand scrutiny. Here, the
CBAs contained no provision obligating the employer to pay the UMM fund, or an
assumption by the insurance fund of such an obligation. Rather, each CBA obligated the
employer to pay a contribution in full to the insurance fund, which in turn dispensed it.
The CBAs provided that a portion of the funds shall be “unconditionally and irrevocably”
allocated to the UMM fund. However, whether this provision contractually obligated the
insurance fund, a non-signatory to the CBAs, to remit these funds to the UMM fund was
a question of contract law. Because the insurance fund was not obligated to remit funds to
the UMM fund “in the interest of” an employer, the Sec. 515 claim was properly
dismissed.
ERISA plan. The remaining claims were understood by the district court to fall in a
category of civil ERISA claims that permit a fiduciary to seek “appropriate equitable
relief to enforce the terms of an ERISA plan. However, the Second Circuit found that the
terms of each CBA were not terms of an ERISA plan. The terms of an ERISA plan, and
the benefits it agrees to provide, are not set forth in a CBA; they are by definition set out
in a governing trust document and the summary plan description. Here, the Second
Circuit concluded that the district court’s opinion failed to consider how the terms of a
CBA, which is not a plan document, could constitute terms of an ERISA plan. Rather,
the appeals court agreed with the insurance fund that the district court lacked jurisdiction
over the two claims because: Sec. 502(a) permits an ERISA plan fiduciary to sue for
equitable relief only if (i) a party has violated an ERISA provision or (ii) a party has
violated “the terms of the plan.”
Because the insurance fund was not obligated to contribute funds to medical fund under
an ERISA plan, the district court lacked subject matter jurisdiction under ERISA,
concluded the appeals court. However, while the UMM fund failed to state a claim under
ERISA, its first two claims could be construed as stating state law breach-of-contract
claims. As a result, the Second Circuit vacated the grant of summary judgment in favor of
the UMM fund on the first two claims, and remanded for the district court to decide in the
first instance whether to exercise supplemental jurisdiction over them.
The case numbers are: 13-1175-cv(XAP) and 13-392-cv(L).
Attorneys: Roland Acevedo (Scoppetta Seiff Kretz & Abercrombie) for Teamsters Local
210 Affiliated Health and Insurance. Ryan J. Cooper (Lowenstein Sandler) for Leon
Silverman.
3d Cir.: Restriction on contributions to union political action committee by city
employees unconstitutional
By Ronald Miller, J.D.
14
A charter ban restricting the political activities of city employees that prevented members
of a police department from making contributions to their union’s political action
committee violated the First Amendment, ruled the Third Circuit. Despite the city’s valid
concerns regarding a history of political corruption adversely affecting the police force,
its fear of serious injury alone did not justify suppression of free speech and assembly.
Given the lack of fit between the city’s stated objectives and the means selected to
achieve that objective, the appeals court held the charter ban unconstitutional (Lodge No.
5 of the Fraternal Order of Police v City of Philadelphia, August 18, 2014, Hardiman,
T).
Charter restriction. In 1951, the Philadelphia city council enacted a home rule charter
that restricted certain political activities of city employees. Of relevance in this case, is a
home rule charter provision that prevented members of the Philadelphia Police
Department from making contributions to their union’s political action committee.
Specifically, the police union represented 6,600 active police officers employed by the
city. The union operated a political action committee (PAC) for the purpose of
distributing contributions to candidates for local and state office. Here, the union, PAC,
and certain officers challenged the constitutionality of Sec. 10-107(3) of the home rule
charter, which prohibits police officers from making contributions “for any political
purpose.” Police officers could not make donations to the PAC because it used some
funds for partisan political purposes.
The contribution ban prevented the PAC from accessing a potentially significant source
of funds — the union’s own members. In 2006, the city passed an ordinance that
authorized payroll deductions for FOP members who elected to contribute to the PAC. If
the ordinance were implemented, the PAC could receive funds that were automatically
deducted from officers’ paychecks on a biweekly basis. However, the current mayor
refused to implement the ordinance as violative of the charter ban. The charter’s
contribution ban was one of many prohibitions that aimed to insulate the police from
political influence. Regulation 8 of the Ethics Board bars all city employees from
engaging in a wide range of political activities — defined as “activity directed toward the
success or failure of a political party, candidate, or partisan political group.” But only the
police were subject to the contribution ban.
Constitutional infringement. For its part, the city maintained that police corruption
remained a serious concern, and pointed to articles detailing the department’s ongoing
efforts to address the “public’s confidence in the department’s ability to rid itself of bad
cops.” Previously, the charter ban originally applied to the fire department, but this
changed in 2003, when the firefighters union successfully challenged the ban as an
unconstitutional infringement on its members’ First Amendment rights. Relying on the
firefighters decision and the city council’s enactment of the payroll deduction ordinance,
the police union demanded that the city initiate payroll deductions to the PAC for its
members. After the city refused, the police union commenced this action claiming that
the ban violated their First Amendment rights to political expression and association.
The district court granted the city’s motion for summary judgment and dismissed the
case. The district court determined that the standard set forth in the Supreme Court’s
15
decision in United States v. National Treasury Employees Union (NTEU) controlled and
required the city to establish that “the interests of [police department] members, and of
the public, in [police department] members’ political contributions are outweighed by the
City’s interest in preventing those contributions’ necessary impact on the actual operation
of city government.” According to the district court, the ban’s impact on speech
regarding issues of public concern was mitigated by the fact that police officers could still
express their views about city government in a nonpartisan way.
Political contributions. The Third Circuit reversed the order of the district court and
remanded the case in favor of the union, the PAC, and union members. This case
presented a narrow question: whether the charter ban and its implementing regulation, as
applied to the union police officers, violated the First Amendment. Here, the court limited
its review to whether the charter ban, in the context of the other political activities
permitted and prohibited by Regulation 8, may constitutionally bar Philadelphia police
officers from making voluntary contributions to a PAC.
The city conceded that the charter ban on political contributions constituted a substantial
burden on the police officers’ First Amendment rights. Such restrictions significantly
curtailed the exercise of an individual’s right to participate in the electoral process
through both political expression and political association. In this instance, the police
officers claimed that their inability to contribute to the PAC had prevented them from
effectively advocating on issues of concern. The appeals court found that they presented
compelling evidence that the charter ban hurt the interest of the officers and that the
union, with depleted accounts, was unable to disseminate information or convince
legislators of police needs and concerns regarding wages, pension benefits, and working
conditions.
Real harms. Because the charter ban restricted officers’ rights to speak on matters of
public concern, the appeals court reviewed the ban using the framework of Pickering v.
Board of Education, balancing “the interests of the [public employee], as a citizen, in
commenting upon matters of public concern and the interest of the [government], as an
employer, in promoting the efficiency of the public services it performs through its
employees.”
To prevail, the city had to show: first, that it had “real, not merely conjectural” harms;
and second, that the ban as applied to the police officers addressed these harms in a
“direct and material way.” The appeals court agreed with the district court that the city
established real harm, but disagreed with its conclusion that the charter ban was an
appropriately tailored means of addressing those concerns. To demonstrate “real, not
merely conjectural” harms, a government must not only identify legitimate interests, but
also provide evidence that those concerns exist.
Historic harms. Here, the city articulated four legitimate interests drawn from its
experience with machine politics. First, the city must ensure that the police enforce the
law without bias or favoritism. Second, it seeks to enable employment and advancement
within the police department based on merit, not political affiliation or performance.
Third, the city wished to protect subordinate employees from having to support
16
candidates favored by their superiors. And finally, the city has an interest in maintaining
the efficiency and quality of the services provided by the police. The interests identified
by the city have been repeatedly recognized by the Supreme Court as justifying the
curtailment of public employee speech. However, Third Circuit found that the record in
this case was essentially devoid of the harms that motivated the charter’s passage.
Moreover, the statutory backdrop of the charter ban has changed significantly since 1951,
observed the court. Thus, while the city demonstrated historic harm, the evidence of
politically-orchestrated harm was non-existent.
Still, the Third Circuit found that the district court did not err when it found that the city
identified legitimate interests in the efficiency and integrity of its police. While there was
no recent evidence of systemic political corruption of the police, the union officers failed
to dispel the city’s legitimate historic concerns. Accordingly, the appeals court concluded
that the city had demonstrated “real, not merely conjectural” harms under NTEU.
Alleviating harm. However, this showing of harm did not render the charter ban
constitutional; rather, the city next had to satisfy NTEU’s second prong — the ban will
“in fact alleviate [its proposed] harms in a direct and material way.” Traditionally,
contributions are not afforded the same protections as direct forms of political expression.
Still the Third Circuit found that the charter ban, as implemented and applied in this case,
was poorly tailored to the city’s articulated interests. Because the ban was not “closely
drawn to avoid unnecessary abridgment of associational freedoms,” it unconstitutionally
restricts the union officers’ participation in the political process.
This appeal did not involve officers’ direct contributions to political candidates, and thus
did not implicate the Eighth Circuit’s concerns in Reeder v Bd. of Police Comm’rs about
quid pro quo corruption. Here, the officers wished to contribute to a PAC that served as
an intermediary between donors and candidates. Donors have no say in how the funds are
disbursed. In light of this separation, courts of appeal have consistently invalidated
restrictions on contributions to PACs. Thus, the Third Circuit was unpersuaded by the
city’s reliance on the Reeder decision to justify the charter ban’s restriction on the
officers’ First Amendment rights. As a result, the appeals court found that the lack of fit
between the city’s purported interests and the charter ban rendered the restriction an
unacceptable response to the posited harm.
Political practices. Only the city’s third rationale for the ban — protecting officers from
politically motivated practices — had force. The city contended that officers may be
subject to subtle pressures to contribute to the PAC, and thus “an officer [may] make[] a
contribution based on a desire to please or avoid the displeasure of superior officers.”
However, the court observed that if the city was truly concerned about insulating its
police from such subtle pressures, the solution would be to repeal the payroll deduction.
Further, the city could enforce a more direct restriction in Regulation 8, which prohibits
employees from soliciting contributions at the workplace.
The case number is: 13-1516.
17
Attorneys: Eleanor N. Ewing (City of Philadelphia Law Department) for City of
Philadelphia. Thomas W. Jennings (Jennings Sigmond) for Lodge No. 5 of the Fraternal
Order of Police.
3d Cir.: Jurisdiction retained over proceedings filed in Virgin Island courts prior to
federal law’s enactment date
By Kathleen Kapusta, J.D.
Broadly construing a 2012 federal law that eliminated the Third Circuit’s certiorari
jurisdiction over final decisions of the Virgin Islands Supreme Court — replacing it with
direct review of the U.S. Supreme Court — the federal appeals court in Philadelphia
found on rehearing that it retained certiorari jurisdiction over proceedings filed in the
Virgin Island courts before the law’s enactment date. Although the court, as a result,
possessed certiorari jurisdiction with respect to proceedings filed by a union and the
Virgin Islands government regarding a discharged assistant attorney general, it
nonetheless dismissed the union’s petition as moot because the employee had since
passed away (United Industrial, Service, Transportation, Professional and Government
Workers v Government of Virgin Islands, August 25, 2014, Cowen, R).
Discharged attorney. The underlying lawsuit arose from a grievance filed on behalf of
the assistant AG by his union after his suspension and subsequent discharge. An
arbitrator concluded the governor lacked just cause to remove him and awarded
immediate reinstatement. The Virgin Islands government sued to vacate the award,
seeking as well a declaratory judgment that it was not required to reinstate the employee,
and the union filed a cross-complaint seeking to confirm the arbitrator’s decision.
After the cases were consolidated, a lower court held the arbitrator exceeded his authority
by granting relief based on a July 1, 2010, letter of termination (or the employee’s
suspension one month earlier) because the union had withdrawn its grievance over the
termination letter and never filed a grievance over the earlier suspension. Thus, the court
vacated the arbitration award to the extent it granted relief prior to July 23, 2010, but
otherwise confirmed, ordering reinstatement and back pay to that date. The Virgin Islands
Supreme Court reversed the reinstatement, prompting the union to petition the Third
Circuit for review.
Jurisdictional issue. The union also moved to dismiss the government’s appeal,
contending the Virgin Islands Supreme Court lacked appellate jurisdiction. Because
neither the Virgin Islands superior court nor the arbitrator ever established the amount of
back pay owed to the reinstated employee, the union contended the absence of a clear
monetary judgment rendered the opinion and judgment non-final and not ripe for review.
The government, however, invoked the practical finality rule and, alternatively, asserted
that there was appellate jurisdiction anyhow based on the reinstatement mandate, which
amounted to an “appealable injunction” under the Virgin Islands Code. The Virgin
Islands Supreme Court agreed with the latter argument in favor of jurisdiction, but
declined to take up any issues outside of reinstatement. The union then filed a motion
with that court to stay enforcement of the judgment pending the union’s writ of certiorari
to the Third Circuit.
18
Meanwhile, on December 28, 2012, H.R. 6116 was signed, eliminating the Third
Circuit’s certiorari jurisdiction over final decisions of the Virgin Islands Supreme Court.
Additionally, the discharged employee at the center of the ongoing dispute passed away,
leaving the appeals court to consider whether it maintained certiorari jurisdiction over
proceedings filed in the Virgin Islands courts before the date of enactment of H.R. 6116
and, if so, whether the employee’s death mooted the current certiorari proceeding.
Jurisdiction retained. Although the Third Circuit concluded that it continued to retain
jurisdiction over proceedings filed with Virgin Islands courts prior to enactment of the
legislation, including the case at hand, it nonetheless found that the union’s certiorari
petition was moot in light of the employee’s subsequent death.
Rehearing granted. After granting the union’s petition for panel rehearing, the court
again turned to the question of whether it retained certiorari jurisdiction over proceedings
filed in the Virgin Islands before the date of enactment of H.R. 6116. Once again, it
found that it did. Examining the “effective date” language of H.R. 6116, which provides
that “[t]he amendments made by this Act apply to cases commenced on or after the date
of the enactment of this Act,” (December 28, 2012), the court noted that the issue was
whether “cases commenced” broadly refers to the filing of a complaint in the Superior
Court or more narrowly refers to the filing of a certiorari petition. After examining
analogous legislation and prior case law, the court concluded that the language at issue
“carries a broader meaning” and refers to the filing of a complaint in the Virgin Islands
Superior Court.
If Congress had meant to strip the appeals court of certiorari jurisdiction over
proceedings already filed in the Virgin Islands courts before the enactment date of the
legislation, it “could have done so far more clearly,” the appeals court reasoned, “by
simply omitting any reference to an effective date.” That’s what Congress did with
respect to the Ninth Circuit’s jurisdiction over the Guam Supreme Court. Also, the court
noted, when Congress stripped the First Circuit of its jurisdiction over the Puerto Rico
Supreme Court, it expressly stated that “such repeal shall not deprive the Court of
Appeals of jurisdiction to hear and determine appeals taken to that court from the
Supreme Court of Puerto Rico before the effective date of this Act.” Accordingly, the
Third Circuit was confident that Congress intended it to exercise jurisdiction here.
The court also rejected the government’s assertion that the intent of H.R. 6116 could only
be accomplished if the U.S. Supreme Court assumed exclusive jurisdiction over certiorari
petitions filed after December 28, 2012. Here, the court found it “improbable that H.R.
6116 was ever meant to strip” it of certiorari jurisdiction when the enactment date of the
legislation “fell right in the middle of the applicable time period” for filing a certiorari
petition with the appeals court.
Petition moot. Nonetheless, the union’s certiorari petition was moot in light of the
employee’s subsequent death, the appeals court held, finding it could not award
meaningful relief in light of the changed circumstances and rejecting the notion that the
“capable of repetition yet evading review” doctrine applied here. “A statute stripping a
federal circuit court of certiorari jurisdiction over final decisions of the highest court of a
19
territory (and vesting the United States Supreme Court with certiorari jurisdiction at least
with respect to questions of federal law) does not appear to represent the type of
occurrence that could implicate this doctrine.” In any event, the appeals court noted, it
already found it retained certiorari jurisdiction with respect to proceedings filed in the
Virgin Islands courts before H.R. 6116’s enactment, including the proceedings filed in
this case, in 2011.
Furthermore, it was the employee’s death that mooted the current certiorari proceeding,
“and this unfortunate and seemingly unexpected occurrence does not render this case
capable of repetition yet evading review.”
The union vigorously argued that it was the real party in interest, and the appeals court
conceded that a union’s interest could extend beyond merely protecting the rights of an
aggrieved employee such that it “may have a right to advocate on behalf of other
similarly situated members as well as the collective bargaining unit as a whole.” But the
current proceeding presented a unique set of circumstances, it observed: the Virgin
Islands Supreme Court’s order was premised entirely on the employee’s reinstatement; it
dismissed the appeal with respect to all other issues since it concluded that the ongoing
disagreement as to the calculation of back pay precluded its exercise of jurisdiction over
those matters. The dispute over reinstatement, then, was the “hook” on which the
certiorari proceeding rested. Because the employee’s death obviously mooted any
reinstatement claim on his behalf, the parties lacked a legally cognizable interest in the
outcome of the certiorari proceeding itself.
The case number is: 13-1247.
Attorneys: Joss N. Springette for Government of the Virgin Islands. Namosha Boykin
(Law Offices of Pedro K. Williams) for United Industrial, Service, Transportation,
Professional and Government Workers.
3d Cir.: No-cost retiree health benefits not vested where parties “may agree
otherwise”
By Joy P. Waltemath, J.D.
Agreements governing health insurance benefits for retirees, which were incorporated by
reference into the parties’ relevant collective bargaining agreements, contained a
continuation of coverage provision that, although providing that retirees’ coverage would
not be terminated or reduced, expressly allowed the company and the union to “agree
otherwise.” Consequently, in an unpublished opinion the Third Circuit ruled that the plain
language of the unambiguous provision precluded retired union members’ breach of
contract claims that followed an agreed-upon change that that those “no cost” provisions
would be replaced by coverage that required premium payments (Lewis v Allegheny
Ludlum Corp, August 27, 2014, Shwartz, P).
Continuation of coverage. These agreements governing health insurance benefits for
retirees were set forth in the Program of Hospital-Medical Benefits for Eligible
Pensioners and Surviving Spouses. As relevant here, since 1981 they had provided that
20
retirees covered by the plan “shall not have such coverage terminated or reduced (except
as provided in the Plan) so long as the individual remains retired from the Company or
receives a Surviving Spouse’s benefit, notwithstanding the expiration of this Agreement,
except as the Company and the Union may agree otherwise.”
Agreed-upon change. In October 2007 the company sent a letter to plan participants
announcing it had agreed with the union that those “no cost” provisions would be
replaced by coverage that required premium payments, effective January 1, 2008. In
November 2011, the retirees filed suit alleging that their “no cost” health benefits were
vested, lifetime health benefits that could not be changed after retirement, and therefore
the premiums charged violated the LMRA and ERISA; they also included a breach of
fiduciary duty claim under ERISA. They appealed the dismissal with prejudice of their
second amended complaint.
On appeal, the retirees claimed that their “no cost” lifetime health benefits were vested
and the company had no right to change those benefits. ERISA does not require welfare
plan benefits for retirees to automatically vest because the costs of such plans can
fluctuate due to, among other things, increased treatment costs, the court noted. As such,
an employer’s commitment to vest retiree welfare benefits “is not to be inferred lightly”
and “must be stated in clear and express language.” But the retirees here did not identify
clear and express language; instead, said the court, the continuation of coverage provision
explicitly reserved the right to change the health benefits for retirees through future
agreement.
No ambiguity. Attempts to create ambiguity in the continuation of coverage through
deposition testimony, the retirees’ own understanding, and references to the lifetime
nature of the benefits elsewhere in plan documents were unavailing. The clause itself was
clear, the language was plain, and the court saw no reason to resort to extrinsic evidence.
Nor was the court going to be influenced by holdings from courts within other circuits,
such as the Sixth, which has held that there is a presumption in favor of vesting for
welfare benefits, a position the Third Circuit has “expressly rejected.” Similarly, the
court would not read into the “agree otherwise” language in the continuation of coverage
provision that it should apply only to future retirees; nothing in the CBAs or retiree health
insurance agreements suggested that the union’s authority was restricted to matters
impacting active employees.
Not illusory. Claiming the provision created an illusory promise because it gave the
company “unfettered freedom” to modify or terminate the healthcare benefits” was also
an unsuccessful argument for the retirees. The court pointed out that the promise was not
illusory because it did not allow for modification solely by the company; instead, it
allowed for modification only upon the agreement of both parties. “The fact that retirees
are impacted by the changes to the agreement does not make it illusory.”
Early retirees. Individuals who opted for early retirement pursuant to the Transition
Assistance Program (TAP retirees) fared no differently, because the CBA governing the
TAP’s terms stated that TAP retirees were entitled to the health benefits offered under the
same retiree health insurance benefit agreements. TAP or non-TAP, all retirees were
21
subject to the same “continuation of coverage” provision. The General Waiver and
Release Agreement that individuals had to sign to participate in TAP did not change their
health benefits, because it specifically incorporated by reference an “informational
packet” that identifies the actual benefits being provided, including “medical coverage
under a Company-sponsored medical plan for Eligible Retirees and Surviving Spouses.”
Because the retirees failed to identify any clear and express language that vested their
health benefits, their breach of contract claims were appropriately dismissed.
Breach of fiduciary duty. Agreeing with the company that the retirees’ breach of
fiduciary duty claim was time-barred, the appeals court noted that ERISA prohibits filing
suit for fiduciary duty violations more than three years after the plaintiff had “actual
knowledge of the breach or violation.” The retirees had actual knowledge of the
purported breach of fiduciary duty no later than January 1, 2008, when they began paying
increased premiums, and they received notice of the event that constituted the alleged
breach through the October 2007 letter that stated that they would owe these premiums.
Finding that because the retirees had knowledge of the harm no later than January 1,
2008, the three year statute of limitations had expired on January 1, 2011, the court held
that the fiduciary duty claim was time-barred.
The case number is: 13-3636.
Attorneys: David J. Kolesar (K&L Gates) for Allegheny Ludlum Corporation. Gregory F.
Coleman (Greg Coleman Law) for Larry Lewis.
5th Cir.: Arbitrator’s finding that employer unlawfully suspended 401(k)
contributions reversed
By Ronald Miller, J.D.
The Fifth Circuit reversed a district court judgment upholding an arbitration award
finding that a bankrupt employer violated a collective bargaining agreement by
suspending matching contributions to its employees’ 401(k) plans. The appeals court first
rejected the employer’s contention that the district court did not properly exercise
subject-matter jurisdiction over this suit. However, it found that the union failed to carry
its burden of establishing that the parties “clearly and unmistakably” agreed to have the
arbitrator decide the arbitrability of their dispute. As a consequence, the appeals court
reversed the judgment upholding the arbitrator’s award in favor of the union. Judge E.
Grady Jolly filed a separate concurring opinion, while Judge Stephen Higginson filed a
separate opinion concurring in part and dissenting in part (Houston Refining, LP v United
Steelworkers and Steelworkers Local No 13-227, August 25, 2014, Garza, E).
The employer operated an oil refinery in Houston; many refinery employees were union
members. The parties had a CBA that governed wages, hours, and conditions of
employment, and set forth a grievance procedure. It also provided that employees were
eligible to participate in various benefit plans, including a 401(k) savings plan. With
respect to the benefit plans, the agreement provided that the company would give
advance notice of any proposed changes. Although the parties reached a tentative
22
agreement on a successor 2009 CBA, the union refused to sign the contract, and it never
took effect.
401(k) contributions suspended. In March 2009, the employer filed for bankruptcy and
informed the union that it would suspend its matching contributions to employees’ 401(k)
plans. In response, the union filed a grievance demanding that the employer resume
matching contributions. The employer refused to process the grievance, claiming that the
suspension was not a grievable issue. Thereafter, the union commenced an adversary
proceeding in the bankruptcy court to compel the employer to arbitrate the grievance
under the 2009 CBA or, in the alternative, the 2006 CBA. Ultimately, the parties reached
a settlement agreeing to submit the grievance to arbitration, which the bankruptcy court
approved.
An arbitrator rendered an award in favor of the union, concluding that the employer
violated the CBA by unilaterally amending the 401(k) plan. The employer filed suit
seeking to vacate the arbitration award, and the union counterclaimed to enforce the
award. Both parties moved for summary judgment. On the merits, the district court
upheld the arbitrator’s finding that the employer violated the 2006 CBA. It accordingly
denied the company’s motion and granted the union’s motion in part, but remanded to the
arbitrator for clarification of the award’s monetary value. The employer appealed.
Subject matter jurisdiction. The employer contended that the existence of an applicable
CBA was necessary for subject matter jurisdiction under Section 301 of the LMRA.
Thus, the first question was whether the existence of a labor contract was a jurisdictional
requirement. The Fifth Circuit observed that in the past, it read Sec. 301(a) as a
jurisdictional requirement. Thus, it concluded, Alexander v. International Union of
Operating Engineers establishes that an allegation of a contractual violation is necessary
for Sec. 301(a) jurisdiction.
The Supreme Court subsequently answered the question of whether such an allegation
was sufficient for such jurisdiction in Textron Lycoming Reciprocating Engine Div.,
AVCO Corp. v. United Auto., Aerospace & Agric. Implement Workers of Am., Int’l
Union. The Supreme Court explained that Sec. 301(a) “confers federal subject-matter
jurisdiction only over ‘[s]uits for violation of contracts,’” and that such suits do not
include “suits that claim a contract is invalid.” Thus, Textron teaches that an “alleged
violation” satisfies Sec. 301(a)’s jurisdictional requirement. Consequently, an allegation
of a labor contract violation is both necessary and sufficient to support subject matter
jurisdiction under Sec. 301(a).
In the instant case, the Fifth Circuit found that no authority supported the proposition that
arbitration alters the teachings of Alexander and Textron on the jurisdictional requirement
of Sec. 301(a). Lastly, Sec. 301(a) jurisdiction cannot be so permissive as to reach any
action filed “because a contract has been violated.” Nor could Sec. 301(a) jurisdiction
reach any “controversies involving collective bargaining agreements.” To allow any suit
merely “involving” a CBA — even lacking an alleged violation — would run afoul of
Textron. Because a party need only allege the violation of a labor contract to invoke
23
federal subject matter jurisdiction under Sec. 301, this requirement was easily satisfied
here.
This suit involved at least two alleged violations of a labor contract. First, the employer’s
complaint claimed that the union alleged the company had violated a CBA. Second, in
requesting vacatur of the arbitral award, the employer alleged that the award violated the
terms of the 2006 CBA — assuming arguendo its existence. Accordingly, the district
court properly exercised subject matter jurisdiction over this suit for “violation of
contracts between an employer and a labor organization.” Additionally, because Sec.
301’s jurisdictional requirement does not require factual proof of a valid labor contract,
the employer’s collateral attack on arbitrability was meritless.
Determination of arbitrability. The employer next contended that the district court
erred in deferring to the arbitrator’s determination of the grievance’s arbitrability.
According to the company, because the parties never agreed in clear and unmistakable
terms to give the issue of arbitrability to the arbitrator, the district court was obligated to
decide the issue independently. When a party calls upon a court to decide a dispute’s
arbitrability, the court must determine whether the dispute falls within the ambit of the
parties’ agreement to arbitrate. But even the gateway question of arbitrability can be
given to an arbitrator, if the parties so choose. Here, the court first considered whether the
union carried its burden of proving that the parties “clearly and unmistakably” agreed to
have the arbitrator decide arbitrability. The union asserted that the parties expressly
agreed to arbitrate arbitrability both by their conduct in arbitration proceedings and by the
settlement agreement.
As for their conduct at arbitration, the employer argued at length about arbitrability
before the arbitrator. But the Fifth Circuit observed that “merely arguing the arbitrability
issue to an arbitrator does not indicate a clear willingness to arbitrate that issue.” Further,
the settlement agreement was also unavailing because its terms were too ambiguous to
evince a “clear and unmistakable” agreement to arbitrate arbitrability. Thus, the appeals
court concluded that the union failed to carry its burden of establishing that the parties
“clearly and unmistakably” agreed to arbitrate arbitrability. Accordingly, it held that the
district court erred as a matter of law in failing to decide arbitrability just as it would
decide any other question that the parties did not submit to arbitration.
Arbitrability questions. Observing that this appeal presented three distinct arbitrability
inquiries, and that the district court is better positioned to assess the parties’ arguments in
the first instance, the Fifth Circuit declined to decide whether the union’s grievance was
arbitrable. The first arbitrability inquiry was whether the 2006 CBA existed when the
union filed its grievance. The parties agreed that if no CBA was in effect at all, then
arbitration would be unavailable. The second and third arbitrability inquiries concerned
whether, even if the 2006 CBA existed, the arbitrator exceeded his authority under that
CBA.
The case number is: 13-20384.
24
6th Cir.: Employer can’t maintain negligence claim against trustees of union
pension plan
By Ronald Miller, J.D.
There was no substantive basis for an employer’s negligence claim under ERISA or
federal common law asserting that trustees mismanaged a union pension plan so as to
increase the company’s withdrawal liability, ruled the Sixth Circuit. In view of the
extensive statutory framework established by Congress under ERISA, the appeals court
held that a contributing employer to a multiemployer pension plan has no cause of action
against the plan trustees for negligent management under the federal common law of
ERISA pension plans. Importantly, the court declined to utilize its lawmaking powers
under federal common law to create a negligence claim in favor of contributing
employers (DiGeronimo Aggregates, LLC v Zemla, August 14, 2014, Griffin, R).
Withdrawal liability. An employer that contributed to a multiemployer pension plan
governed by ERISA filed a complaint alleging that the trustees negligently managed the
plan, causing it to suffer increased withdrawal liability when a majority of contributing
employers withdrew. The trustees terminated the plan in December 2009 because
substantially all of the plan’s contributing employers withdrew from paying
contributions. They assessed $1,755,733 in withdrawal liability to the employer, which
represented its share of the $49,000,000 in unfunded, vested benefits that the employers
owed to the plan.
The employer filed this action. It did not challenge the assessment of liability or the
trustees’ mathematical calculation. Rather, it contended the trustees negligently managed
the plan, primarily by ratifying contribution rates that were insufficient to support the
benefits owed by the plan and, in doing so, directly caused a large portion of the
$1,755,733 in withdrawal liability with which the employer was assessed. The trustees
filed a motion to dismiss under Rule 12(b)(6), arguing that the employer failed to state a
viable claim for relief because ERISA, Sec 1451(a) conferred no substantive rights.
Negligence cause of action. The employer recognized that Sec. 1451(a), by itself, did not
provide a legal basis for a negligence cause of action, but urged the district court to
exercise its limited law-making authority under the federal common law of ERISA
pension plans and recognize a new legal basis for its negligence claim. The district court
declined and granted the trustees’ motion to dismiss.
On appeal, the Sixth Circuit agreed with the trustees that the employer had no cause of
action under the federal common law of ERISA pension plans. Congress enacted ERISA
to ensure that “if a worker has been promised a defined pension benefit upon retirement
— and if he has fulfilled whatever conditions are required to obtain a vested benefit — he
actually will receive it.” Congress later enacted the Multiemployer Pension Plan
Amendment Act (MPPAA), providing that an employer withdrawing from a
multiemployer fund must make a payment of “withdrawal liability,” which is calculated
as the employer’s proportionate share of the fund’s “unfunded vested benefits[.]”
25
Creating federal common law. As in the district court, the employer acknowledged that
no negligence claim is authorized by any section of ERISA, but urged the Sixth Circuit to
utilize its lawmaking powers under the federal common law to create a new negligence
claim in favor of contributing employers. At the time of ERISA’s enactment, Congress in
general encouraged the courts to develop a federal common law of employee benefits
because many issues relating to employee benefits would arise where there would be no
specific rule to govern the question. However, the Supreme Court has recognized that the
creation of federal common law should only be indulged “in a few and restricted
instances.” Moreover, Congress has established an extensive regulatory network and
announced its intention to occupy the field.
Previously, the Sixth Circuit has held that its authority to create federal common law in
this area is restricted to instances in which (1) ERISA is silent or ambiguous; (2) there is
an awkward gap in the statutory scheme; or (3) federal common law is essential to the
promotion of fundamental ERISA policies. The employer insisted that its proposed
negligence claim satisfied all three conditions. The appeals court disagreed, noting that
ERISA is not silent on who holds a claims against trustees for negligent management of
plan assets — participants and beneficiaries.
Further, the court concluded that recognition of a new negligence cause of action would
not close an “awkward gap in the statutory scheme.” The employer argued that failing to
create a new cause of action would grant the trustees immunity with respect to the
tortious management of the plan’s assets. However, the court presumed that Congress
deliberately omitted this remedy from the statutory scheme because the trustees’ planmanagement duties flow to participants and beneficiaries, not contributing employers.
Moreover, the appeals court determined that allowing contributing employers to sue
trustees for negligent management is not essential to the promotion of fundamental
ERISA policies — ensuring that private-sector workers would receive the pensions that
their employers have promised them. Finally, the employer cited no authority to support
its novel common law negligence cause of action under ERISA or the MPPAA.
The case number is: 13-4389.
Attorneys: Heather M. Kern (McDonald Hopkins) for Michael H. Zemla. Shaylor R.
Steele (Benesch Friedlander, Coplan & Aronoff) for DiGeronimo Aggregates, LLC.
7th Cir.: $400,000 fee award upheld to retirees denied medical benefits provided for
in plant-closing agreement
By Brandi O. Brown, J.D.
Affirming a district court’s award of over $400,000 to a class of retired employees who
were denied medical benefits and who settled their claims with the defendant after
protracted litigation, the Seventh Circuit, in a per curiam decision, held that the lower
court did not abuse its discretion in making the award. Had the employees won at trial the
benefits provided for by the settlement agreement, they would have been considered the
“prevailing party,” the appeals court noted, observing that although they did not achieve
26
total success, they achieved “some degree of success,” which was sufficient. Moreover,
because the defendant persisted in denying the benefits to which the appeals court had
previously held they were entitled, resulting in an injunction being granted, that degree of
culpability pointed toward an award of fees (Temme v Bemis Co, Inc, August 6, 2014, per
curiam).
For over 20 years, a group of retirees received health care coverage from the employer
and its successor as a result of a 1985 plant-closing agreement. In 2005 and 2007, the
successor reduced the benefits provided for under the agreement, first by increasing
copays and deductibles and second by eliminating the prescription drug program. The
retirees sued, alleging that the changes breached the plant-closing agreement. A class was
certified, but summary judgment was granted to the successor employer by the federal
district court, which concluded the agreement did not include a promise of lifetime
benefits to retirees. A month later, the employer eliminated all medical benefits under the
agreement. An appeal ensued and the Seventh Circuit reversed, ruling that the parties
intended to grant retired plant maintenance workers a lifetime entitlement to medical
benefits.
Settlement. On remand, the retirees amended their complaint and also sought a
preliminary injunction forcing the employer to restore the benefits that had been
eliminated, as well as a basic Medicare Part D drug benefit. Even after the appeals court
decision, the employer did not restore any benefits. The injunction was granted. After a
motion by the retirees, a magistrate judge bifurcated the pending trial into a liability and
damages phase. She rejected the employer’s attempt to decertify the class. Just before
trial, the parties settled. The settlement required the employer to pay for plaintiffs’
participation in the Medicare Part D prescription drug benefit, as well as the Medicare
supplement plan. It also required the employer to reimburse the plaintiffs’ out-of-pocket
costs from 2007 to 2011.
However, the parties were unable to resolve the attorneys’ fees issue. The magistrate
judge awarded over $400,000 in fees to the retirees, finding that the factors in the
Seventh Circuit decision in Kobe & Kobe Health & Welfare Benefit Plan v Med Coll of
Wisconsin, Inc. weighed in favor of a fee award. The employer appealed. Rejecting the
employer’s argument that a stricter standard should apply, the appeals court applied an
abuse of discretion standard of review in reviewing the lower court’s award.
ERISA as proper authority for fees. The court also rejected the employer’s argument
that the LMRA, and not ERISA, was the proper authority to consider with regard to a fee
award. First, the court rejected the employer’s rehashed argument regarding the terms of
the agreement and whether enforcement was possible under ERISA, noting that it had
previously determined that the terms of the plan were found only by reading the
collective bargaining agreement and plant closing agreement jointly and that the prior
decision had determined “what was ‘part of the plan,’ and that included both documents.”
The court also disagreed with the employer’s assertion that the case did not involve an
ERISA plan because it simply provided for the employer’s payment of benefits received
from a “third-party provided insurance.” Rather, the court explained, the employer had
contracted with the retirees to provide lifetime benefits in the form of healthcare cost
27
reimbursements and breach of that collectively bargained agreement violated “ERISA in
addition to the LMRA.”
Award was proper. Under ERISA, the appeals court explained, fees could be awarded to
a party that achieved “some degree of success on the merits.” Two different tests could be
used to determine whether an award was appropriate: the five factor test used by the
magistrate judge or a test that only asked whether the position of the party against whom
fees were being sought was “substantially justified.” The appeals court observed that an
open question remained as to whether the U.S. Supreme Court’s decision in Hardt v
Reliance Standard Life Ins. Co., which introduced a “some degree of success” principle,
did away with those tests, but noted that no Court of Appeals had yet abandoned the fivefactor test. In fact, the district court below had analyzed the fee request using the fivefactor test and concluded that “some degree of success” had been achieved by the
retirees, thus satisfying Hardt. The court found that the district court had not abused its
discretion in its analysis.
Addressing the first argument made by the employer, that the retirees had not achieved
any degree of success on the merits, the appeals court concluded that the employer’s
argument “goes nowhere.” After settlement, the retirees’ benefits were commensurate
with those that they had before 2007. “Had they won the same after a trial, we would
consider them a ‘prevailing party,’” the court explained. Although the employer
contended that the retirees had not achieved what they initially sought — restoration of
the level of benefits they enjoyed in 1985 — the appeals court again noted that the
standard was for “some success,” even if that success was not major. The court had “no
trouble concluding” that the retirees had met that standard.
Likewise, the court was not persuaded by the employer’s contention that its litigation
position was substantially justified, even if the retirees had achieved some success. First,
the court explained, the “merits of the loser’s position” was only one of the five factors
considered and it was not to be considered in isolation. In fact, the court explained, the
employer “says nothing significant about the other four factors, or anything other than its
supposedly substantially justified litigation position.” Even if considered as a separate
test, it did not turn in the employer’s favor, the court explained, because the employer had
not addressed its prelitigation behavior, as required.
In addition, the fact that the employer “won at some point in the litigation” did not
indicate that it was “substantially justified” in its position. Rather, the court explained, the
relevant inquiry focuses on the litigation as a whole. In this case, the employer quit
providing a benefit to which the retirees had been held to be “clearly entitle[d]” and it
was later required, by injunction, to comply with that decision. In fact, the court
explained, that scenario also pointed towards the employer’s culpability as a defending
party. A full view of the litigation also indicated that another factor in the five-factor test
was at play, i.e., the deterrent effect of an award where it was desirable to prevent “other
companies from cutting off or needlessly delaying benefits in a similar manner.”
Therefore, the court concluded that the district court had not abused its discretion in
awarding the fees and it rejected the employer’s request to reduce the amount.
28
The case number is: 14-1085.
Attorneys: Kevin J. Kinney (Krukowski & Costello) for Bemis Company, Inc. William
Arthur Wertheimer Jr. (Law Office of William A. Wertheimer, Jr.) for Shirley Temme.
7th Cir.: Grievance over plant access privileges within terms of arbitration clause
By Ronald Miller, J.D.
A union grievance asserting that a nuclear power plant improperly withdrew an
employee’s access privileges, on its face, fell within the scope of the arbitration clause in
the parties’ collective bargaining agreement, ruled the Seventh Circuit. Here, the appeals
court found nothing in the plain language of the CBA that would defeat the union’s
contention that the dispute was covered by the arbitration clause. Moreover, the employer
provided no evidence from which the court could conclude with “positive assurance” that
the dispute was not arbitrable (International Brotherhood of Electrical Workers, Local
2150 v NextEra Energy Point Beach, LLC, August 11, 2014, Kanne, M).
“Unescorted access” revoked. A union representing employees at a nuclear power plant
sued the employer seeking to compel it to arbitrate the discharge of an employee
allegedly fired without just cause. The nuclear plant was governed by regulations issued
by the Nuclear Regulatory Commission which required, among other things, that
“unescorted access” to the facility be limited to those individuals who work within the
protected area of the plant and who meet and maintain compliance with certain
requirements. The employer required employees to maintain unescorted access privileges
as a condition of their employment.
In February 2012, a bargaining unit employee reported to his supervisor that he had been
arrested and criminally charged with operating a motor vehicle while intoxicated. The
employer revoked his unescorted access privileges. Because the maintenance of those
privileges was a necessary condition to continued employment at the plant, his
employment was terminated. The union filed a grievance asserting that the employee was
“discharged from employment without just cause due to an inappropriate site access
denial determination” in violation of the CBA. The employer denied the grievance and
refused to arbitrate. In response, the union filed suit to compel arbitration. The employer
was successful in opposing arbitration in the district court. This appeal followed.
Facial arbitrability. On appeal, the Seventh Circuit found that the dispute, on its face,
fell squarely within the coverage of the arbitration clause in the parties’ collective
bargaining agreement. As an initial matter, the court examined the grievance procedures
set forth in the CBA. If, after moving through the first three steps of the grievance
procedure (all of which involved some level of review by the employer) a grievance
involves compliance with the terms and conditions of the CBA, the union may submit a
dispute that is not “satisfactorily resolved” to a board of arbitration. The union rightly
noted that this language is of a type that the Seventh Circuit has referred to, in the past, as
broad enough to trigger the presumption of arbitrability.
29
Even without relying on the “broad language presumption,” the appeals court determined
that the CBA specifically contemplated arbitration of this kind of dispute. The grievance
claimed the employee “was discharged from employment without just cause due to an
inappropriate site access denial determination.” Employee discharge is specifically listed
in CBA as an appropriate subject for a grievance. More importantly, a “just cause”
requirement and certain procedural conditions attached to a discharge meant that a
grievance concerning the employee’s discharge went to the “terms and conditions” set
out in the CBA. As a consequence, the employee’s grievance was arbitrable on its face,
which meant the court must compel arbitration “unless it may be said with positive
assurance that the arbitration clause was not susceptible of an interpretation that covers
the asserted dispute.”
Disciplinary discharge. No such finding could be made under the circumstances of this
case. Although the employer conceded that a disciplinary discharge is generally
arbitrable, it nevertheless protested arbitration of this particular dispute. Specifically, it
argued that the employee’s discharge was not a disciplinary discharge, and that the
grievance in fact goes to the unescorted access termination, which was a non-arbitrable
issue, so that the discharge was excluded from arbitration.
The Seventh Circuit observed that the employer attempted to bring the employee’s
discharge outside the plain language of the arbitration clause by asserting that it was not a
“disciplinary” discharge. Instead, the employer asserted that the employee was
discharged for failing to meet the terms and conditions of his employment — maintaining
unescorted access privileges. However, a discharge for failing to meet the terms and
conditions of employment was a disciplinary discharge under any sensible understanding
of the term, concluded the appeals court. Thus, the employee’s discharge qualified as a
“disciplinary” discharge covered under the arbitration clause.
Reclassifying grievance. The employer also failed in its attempt to reclassify the
grievance as a management decision that was not arbitrable. The court first examined the
language of the grievance to determine the “true nature” of the dispute and it was
“substantively” arbitrable. Here, it was determined that the employer’s reliance on Intern.
Ass’n of Machinists Lodge No.1777 v. Fansteel, Inc. was misplaced. Fansteel’s
discussion of “substantive arbitrability” goes to the rule that a dispute which falls within
the arbitration clause on its face will nevertheless be excluded if “we can say with
positive assurance that the parties intended to exclude the involved dispute from
arbitration.”
The discharge fell within arbitration clause on its face. Thus, the court would not
preclude arbitrator review of the grievance unless it could be said with “positive
assurance” that the discharge based on the revocation of unescorted access privileges was
excluded from arbitration. The Seventh Circuit concluded that the employer provided no
evidence or legal argument that would cause it to say with positive assurance that the
grievance was excluded from arbitration. The CBA did not expressly commit unescorted
access decisions to either arbitration or to management’s sole discretion, so the court
refused to find that the matter was implicitly committed to management discretion.
30
On its face, the arbitration clause covered any grievance that a discharge did not meet the
requirements laid out in the CBA. Without an explicit exclusion of discharges based on
unescorted access revocations, the appeals court declined to contravene the language of
the agreement.
The case number is: 13-3851.
Attorneys: Jill M. Hartley (Previant, Goldberg, Uelmen, Gratz, Miller & Brueggeman)
for Int'l Brotherhood of Electrical Workers Local 2150. William G. Miossi (Winston &
Strawn) for NextEra Energy Point Beach, LLC.
8th Cir.: Arbitrator did not exceed authority by reinstating insubordinate employee
By Kathleen Kapusta, J.D.
An arbitrator did not exceed his authority by proceeding to a just cause analysis after
concluding that an employee had been insubordinate — a violation mandating discharge
under the parties’ collective bargaining agreement and the employer’s conduct standards
— and by reducing the penalty from discharge to suspension, an Eighth Circuit panel
ruled. Reversing a district court’s vacation of the arbitration award, the appeals court
found that whether the employee was discharged for just cause was a matter of contract
interpretation that was within the arbitrator’s authority (PSC Custom, LP v United
Steelworkers Local No. 11-770, August 19, 2014, Wollman, R).
Discharge for insubordination. When the employee failed to perform a task his
supervisor directed him to complete, he was discharged for insubordination under Article
29 of the CBA and the company’s Standards of Conduct, a rule manual created pursuant
to Article 29. Both Article 29 and the Standards of Conduct provided that termination
was the penalty for insubordination. Article 21 of the CBA, however, stated that “[n]o
employee shall be discharged, demoted, or otherwise disciplined without good and
sufficient cause.”
Arbitration. The union grieved the discharge and the issue was ultimately submitted to
an arbitrator. The parties stipulated the issue for the arbitrator as: “Did [PSC] have just
cause to indefinitely suspend and/or discharge the Grievant?” Although the arbitrator
concluded that the employee had been insubordinate in violation of Article 29 and the
Standards of Conduct, he conducted a just cause analysis in accordance with the parties’
stipulated issue and determined that the employer did not have just cause to discharge the
employee.
The arbitrator noted that just cause allows the termination of an employee in two different
situations: a final step in the progressive disciplinary process or a single incident of very
serious misconduct. After finding various mitigating circumstances, such as the fact that
the employee was ill on the day of the insubordination and his near perfect attendance
record, the arbitrator concluded that the employee’s single incident of insubordination
was not severe enough to constitute just cause for the discharge. Accordingly, he
answered the stipulated question in the negative and awarded the employee’s
reinstatement subject to a 10-day suspension.
31
Lower court proceedings. The company then sued the union seeking to vacate the
arbitrator’s award and the union counterclaimed to enforce it. Concluding that the
arbitrator exceeded his authority by modifying the penalty set forth in the CBA for
insubordination, the district court vacated the award.
CBA must be construed as a whole. On appeal, the employer argued that the plain
language of the CBA and the Standards of Conduct required that an employee found
guilty of insubordination be discharged; thus, after the arbitrator found the employee had
been insubordinate, he was required to uphold his discharge. Disagreeing, the appeals
court observed that the employer’s contention that the arbitrator ignored the plain
language of the CBA was based on a reading of Article 29 and the Standards of Conduct
in isolation. Noting that CBAs are to be construed as a whole with the terms read in the
context of the entire agreement, the court pointed out that Article 21 requires that no
employee be discharged without just cause.
Because there was nothing in Article 29 or the Standards of Conduct stating that Article
21’s just cause requirement did not apply when considering the discharge of an employee
pursuant to those provisions, the court found that it was for the arbitrator to “harmonize
any possibly discordant provisions within the CBA relating to the authority granted to
management to discharge employees for insubordination and the just cause requirement
limiting that authority.” While the arbitrator might reasonably have concluded that
Article 29 and the Standards of Conduct were not subject to Article 21’s just cause
requirement, it was just as reasonable for him to conclude that Article 21 gave him the
authority to conduct a just cause analysis. “Because the arbitrator had the authority to
adopt one reasonable interpretation of the CBA over the other, his interpretation must not
be disturbed,” the court explained.
Question of remedy. Moreover, the court observed, when undertaking the just cause
analysis, the arbitrator was concerned with a question of remedy: whether there was
sufficient just cause to warrant termination. Concluding that the employer did not have
just cause to terminate the employee, he instead found that suspension was the
appropriate remedy. Thus, he did not ignore the plain language of the CBA when he
determined that the employer did not have just cause to discharge the employee and when
he reduced the penalty from discharge to suspension.
Stipulation. In addition, the court pointed out, the parties’ stipulation gave the arbitrator
the authority to decide the issue of whether just cause for discharge existed. “Having
entered into a stipulation calling for a just cause analysis, [the employer] will not now be
heard to complain that the arbitrator performed the very analysis [it] asked him to
undertake instead of limiting his decision to the purely factual finding of whether [the
employee] had been insubordinate,” the court concluded.
The case number is: 13-2405.
Attorneys: Rick Eugene Temple (Rick E. Temple Law Office) for PSC Custom, LP.
Amanda Marie Fisher for United Steelworkers Local No. 11-770.
32
8th Cir.: Union benefit fund failed to show employees at new facility represented by
union
By Ronald Miller, J.D.
Affirming the dismissal of a union health fund’s suit to collect unpaid benefit
contributions, the Eighth Circuit agreed with a district court that the trustees’ contractual
claim failed on the merits. The governing Trust Agreement unambiguously required
contributions only for employees “represented by the Union,” and it was undisputed that
the employees in question were not “represented by the Union” (Kern v Goebel Fixture
Co, August 28, 2014, Loken, J).
Trustees of a union health fund brought an action under LMRA Sec. 301 and ERISA to
collect unpaid benefit contributions allegedly owed by the employer. The fund was a
multi-employer health and welfare plan created and regulated under the Acts. It was
governed by a trust agreement between an employer association and five locals of the
carpenters’ union. Under the terms of a collective bargaining agreement, “employee” was
defined to mean an employee “represented by the Union and working for an Employer”
who was required to make contributions into the trust fund.
For many years, the employer operated a manufacturing facility and certain employees
were represented by the union. In March 2010, the employer acquired another production
facility located 50 miles from its existing facility. Employees of the new facility had
similar job duties to employees of the existing facility who were union members, but the
union never represented them. The employer advised the trustees that it planned to
operate a nonunion shop. The CBA included no reference to the new facility. Employees
of the new plant were subject to different work rules and were paid different wages and
benefits than the existing employees. They were provided health insurance under a
company-sponsored plan, and the employer never made contributions to the fund on their
behalf.
When an audit revealed no contributions on behalf of the employees of the new facility,
the trustees brought this action to recover delinquent fund contributions for employees of
the new facility. The district court concluded that the CBA and trust agreement
unambiguously provide that the employer was not responsible for contributions for the
employees of the new plant because they were not “represented by the Union.” With
respect to the question whether the employer was required to make the new employees
become union members, the court concluded that this question was beyond its
jurisdiction. This appeal followed.
ERISA claim. On appeal, the employer argued that the NLRB’s primary jurisdiction to
decide representational issues deprived the district court of jurisdiction to consider the
merits of the trustees’ claim under ERISA Sec. 515. The Eighth Circuit observed that it
has not previously addressed the employer’s contention regarding jurisdiction of the
district court. However, the appeals court noted that it was telling, if not controlling, that
it resolved the merits of comparable claims under traditional principles of contract law in
Carpenters Fringe Benefit Funds v. McKenzie Eng’g and Cent. States, Se. & Sw. Areas
33
Pension Fund v. Indep. Fruit & Produce Co. Thus, the appeals court concluded that the
district court properly dismissed this contractual claim on the merits.
Contractual claim. Next, the appeals court turned to the merits of the trustees’ contract
claim. The trustees argued the district court erred in denying their cross motion for
summary judgment because the CBA’s requirement that the employer make contributions
to the Fund for “all employees of the Employer under this Agreement” unambiguously
included the employees of the new facility. Alternatively, they argued that, if the CBA
was ambiguous in this regard, the appeals court must remand for consideration of
extrinsic evidence to resolve the ambiguity under contract law principles.
However, the Eighth Circuit pointed out that these contentions ignored the district court’s
explicit basis for granting summary judgment dismissing the trustees’ contract claim —
the provisions in the trust agreement provided that the employer is only obligated to make
fund contributions on behalf of “employees,” a term defined as including “[a]ny
employee represented by the Union and working for an Employer as defined herein.” The
appeals court also read the trust agreement to unambiguously require that an employee is
actually represented by the Union at the time the fund claims delinquent contributions
were owed on behalf of that employee. Thus, the trustees failed to demonstrate the fund
was entitled to the contributions they sought under the terms of the trust agreement.
The case number is: 13-3185.
Attorneys: Corey J. Ayling (McGrann & Shea) for Donald Kern. Noah G. Lipschultz
(Littler & Mendelson) for Goebel Fixture Co..
10th Cir.: Employer threat of permanent replacements didn’t make lockout
unlawful
By Ronald Miller, J.D.
The fact that an employer threatened to hire permanent replacements of union workers
during a lockout, but then later retreated from that position, did not warrant holding the
lockout unlawful and awarding back pay to employees, ruled the Tenth Circuit. The
appeals court agreed with the NLRB that because the employer’s short-lived threat didn’t
materially affect negotiations during the lockout, an order requiring the employer to
desist from future threats and to post a notice promising its employees that much was a
sufficient remedy (Teamsters Local Union No. 455 v NLRB, August 27, 2014, Gorsuch,
N).
Validity of NLRB appointments. As an initial matter, the Third Circuit noted that this
case had been on hold until the Supreme Court ruled on the validity of President Obama’s
recess appointments of Board members during an intra-session Senate recess. In fact, the
Third Circuit had specifically declared the appointment of Member Craig Becker invalid
because it occurred during an intra-session recess. However, the Supreme Court’s ruling
in NLRB v Noel Canning clarified that the President’s recess appointment powers extend
to filling vacancies that arise during a Senate session and extend to filling vacancies
during intra-session recesses of a “sufficient” duration. In light of historical practice the
34
Court held that only recesses lasting fewer than ten days are “presumptively too short.”
Because Member Becker was appointed during an intra-session recess exceeding two
weeks his appointment was valid and the Board had the power to issue the order under
review.
Replacement workers. When negotiations between the union and employer reached an
impasse, management told the union that unless it would agree to the company’s final
offer it would lock out union members and “immediately begin hiring permanent
replacements for locked out employees.” After the union initiated legal action, the
company changed its tune. While it continued the lockout and began hiring new workers,
it said the workers would only be temporary. Still, the employer insisted that it had a right
to hire permanent replacements. Three months later, the company let the temporary
workers go and permitted union members to return to work.
The NLRB agreed with the union that the act of threatening to hire permanent
replacement workers was unlawful. Thereafter, the Board ordered the employer to cease
making such threats and to post a notice admitting its violation of the law. However, the
union claimed the Board’s order did not go far enough. It wanted the Board to hold not
only the threat unlawful but also the entire lockout, and to award the employees back pay.
Like the Board, the Tenth Circuit declined to find that the lockout itself was unlawful, so
that the employees were not entitled to back pay.
The Supreme Court has long instructed that an employer may, consistent with the NLRA,
lock out employees during collective bargaining negotiations to “bring[] economic
pressure to bear in support of [its] legitimate bargaining position.” It is equally settled
that during a lawful lockout an employer may hire temporary replacement employees to
get its work done. Thus, the appeals court declined to overturn such long-settled
precedent.
Here, the union contended that a previously lawful lockout becomes unlawful when a
company threatens to hire not temporary workers but permanent ones. According to the
union, the employer’s initial (if quickly withdrawn) threat to hire permanent replacement
workers tainted its otherwise lawful lockout and rendered it unlawful. Implicit in the
union’s position was its belief that hiring permanent workers during a lockout, or
threatening to do so, violated the NLRA. However, the appeals court pointed out that that
belief was not true.
No harm, no foul. Moreover, as the Board explained, there was no evidence in the
record that the hastily made and quickly withdrawn threat did anything to harm the
parties’ collective bargaining efforts or impeded resolution of their labor dispute. In
reaching this conclusion, the
Board relied on its decision in Peterbilt Motors Co. — which held that an employer’s
unlawful conduct during an otherwise lawful lockout won’t render the lockout itself
unlawful so long as the conduct doesn’t “materially affect the progress of negotiations.”
35
Still the union argued that the Board’s rule and its application in this case defied its own
administrative precedents. While the union correctly pointed out that an administrative
agency may not depart from a prior policy or simply disregard rules that are still on the
books, the appeals court determined that it could not discern any inconsistency in the
Board’s treatment of its own precedent. Here, the Board found that the employer’s threat
didn’t have a material impact on negotiations, and that finding was supported by
substantial evidence in the record. As a result, the union’s petition for review was denied.
The case number is: 12-9519.
Attorneys: Michael J. Belo (Berenbaum Weinshienk) for Teamsters Local Union No.
455. J. Thomas Kilpatrick (Alston & Bird) for Harborlite Corp.. Zachary Henige
(National Labor Relations Board) for National Labor Relations Board.
NLRB: Board majority clips another confidentiality rule, Johnson calls for
consistent approach
By Lisa Milam-Perez, J.D.
A grocery chain violated the NLRA by maintaining an overly broad confidentiality rule
in its “code of business conduct” that prohibited the disclosure of employee information,
a divided NLRB panel held. Dissenting, Member Johnson agreed with the law judge
below that employees would not reasonably construe the rule to inhibit their Section 7
rights. Given the frequency with which the Board was taking up these provisions, he
urged the use of a more consistent methodology — one that takes “context” into account
and does not “presume a malicious intent on the part of the employer.” (Fresh & Easy
Neighborhood Market, July 31, 2014).
Code of conduct. The employer, which operates a chain of grocery stores in California,
has a 20-page “code of business conduct” that is available to employees on its website.
Breaches of the code may result in disciplinary action, the code states. It discusses a
range of topics, including: restrictions on certain types of business dealings; ethical
considerations; protection of company and customer resources; equal employment
opportunity; and abusive and otherwise unacceptable employee behavior.
Contained within a broader discussion of the need to protect company resources is a
section on “Confidentiality and Data Protection,” which opens with an admonition of the
“important duty to our customers and our employees to respect the information we hold
about them and ensure it is protected and handled responsibly.” To that end, it offers
three bullet points for employees to heed: (1) Make sure any customer or staff
information you collect, is relevant, accurate and, where necessary, kept up to date. Keep
it for no longer than necessary; (2) Keep customer and employee information secure.
Information must be used fairly, lawfully and only for the purpose for which it was
obtained; and (3) Ensure that data is appropriately and securely stored and disposed of.
Be aware of the risk of discussing confidential information in public places. It was the
second bullet point that drew the foul call.
36
Interferes with protected activity. Agreeing with the General Counsel, the Board found
the clause would be reasonably construed as prohibiting the protected disclosure of terms
and conditions of employment, such as wages and working conditions. According to the
majority, the instruction to use information “only for the purpose for which it was
obtained” reinforced the impression that the rule bars Section 7 activity, given that the
employer’s business purpose “clearly does not include protected discussion of wages or
working conditions with fellow employees, union representatives, or Board agents.”
The majority dismissed the notion that the challenged rule related only to the
“consideration of ethical matters” and bore no resemblance to an employee handbook that
addresses working conditions, noting that, like an employee handbook, it covers a
number of topics related to work performance. “While some of these subjects facially
relate to classically ethical considerations, such as bribery or conflicts of interest, others
address broader work issues — e.g., information security, equal opportunity, and
unacceptable behavior,” it wrote. “The Code informs employees of established rules and
policies that govern the day-to-day handling of their work duties and may subject them to
disciplinary action for noncompliance. Thus, employees would reasonably view the Code
provisions as having the same import as any other work rules implicating terms and
conditions of employment.”
Straying from Lutheran Heritage? In finding that the rule at issue was unlawful, “the
majority signals its intent to steer the Board away from the carefully balanced framework
and practical approach established in Lutheran Heritage, towards a presumption that
certain rules are unlawful unless there is an explicit exception for Section 7 activity,”
Member Johnson wrote in dissent. He called it “debatable” whether the Board has
“adhered faithfully” to this precedent, and noted that given the large number of Board
cases addressing this issue (more than 50, for those keeping score), “it is a logical
assumption that these cases would reveal a frequently used methodology of analysis. But
they do not.”
Almost two-thirds of the cases involving such rules address the issue of whether
employees would reasonably construe a disputed provision to restrict Section 7 activity,
according to Johnson, and a majority of those cases arising do not involve employers
applying rules to restrict exercise of Section 7 activity or promulgating coercive rules in
response to union activity. And while the relevant question is whether employees might
perceive an infringement, and not whether an employer actually intended to infringe,
“this fact does not support construing rules to presume a malicious intent on the part of
the employer,” Johnson argued. “An employer’s primary purpose in drafting employee
handbooks and policies is not to stifle employee rights, but to attempt to comprehensively
cover many topics, including compliance with other workplace statutes and policies that
protect business interests and the workplace environment of its employees.”
Johnson: context matters. As some means of ensuring “consistent and predictable
decisions that both employers and employees can rely on for guidance,” Johnson urged
the Board to conform to an approach that recognizes “the overall context of a disputed
rule” to give the rule its reasonable meaning. This is what Lutheran Heritage compels, he
said: focusing on “the other rules or language immediately surrounding the disputed rule,
37
the kind of work environment in which the disputed rule operates, and the disputed rule
itself.” And while they’re at it: adherence to standard concepts of statutory interpretation,
including the principle of “ejusdem generis.” Were that principle of construction applied
here, Johnson contended, it would be “clear that employees would not reasonably
interpret the rule to preclude the discussion of wages and other work conditions.”
As he noted, the rule was contained in a booklet expressly dedicated to ethical matters, so
employees already knew that terms and conditions of employment were not the intended
focus of the document. Moreover, the challenged rule itself appeared on page 16 of the
20-page booklet, by which time employees had already read about “a myriad of topics
and would reasonably understand, at the very least, that the Code is not an employee
handbook that primarily addresses wages and other terms and conditions of employment,
but instead is specifically focused on various ethical concerns.” Also, its inclusion in a
section on “confidentiality and data protection” meant that the only employee
information at issue is confidential employee information. Sandwiched, too, between two
other bullet points, the added context of the other provisions would reasonably inform
employees that “employee information” only refers to information that is collected and
meant to be held in confidence. “This type of limiting context is absent in cases where the
Board has found broad confidentiality rules unlawful.”
Scope “not so limited.” Disagreeing, the majority did not read the confidentiality
provision so narrowly. The sweeping introductory passage alluding to the “importance of
respecting and protecting customer and employee information” encompassed a wide
range of information, the majority observed, “and there is no language limiting the types
of employee information that employees may not disclose.” Contrary to Johnson, the
majority rejected the notion that references to “information you collect” and “the risk of
discussing confidential information in public places” overrides the broad introductory
language and the admonition to “keep customer and employee information secure” and
use it “only for the purpose for which it was obtained.” As the majority reasoned, “if an
employee had knowledge of a coworker’s wages that was obtained for some business
purpose, the admonition would discourage the employee from sharing that information
with others in an effort to improve terms and conditions of employment.”
Nor was the challenged provision “adequately limited by context.” In contrast to rule
provisions found lawful by the Board (in prior rulings cited by the dissent), the rule here
“impermissibly suggests that all employee information, which an employee could
reasonably conclude includes terms and conditions of employment, is confidential.”
No broad order to issue. However, the majority denied the complaining union’s request
for a broad remedial order, noting that the facts at hand did not suggest that the employer
“has a demonstrated proclivity to violate the Act or has engaged in such egregious or
widespread misconduct as to demonstrate a general disregard for employees’
fundamental statutory rights.”
The slip opinion is: 361 NLRB No. 8.
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Attorneys: Mary Kasper (Fresh and Easy Neighborhood Market) for Fresh & Easy
Neighborhood Market.
NLRB: Grocer must reinstate fired worker with backpay after refusing to delay
drug and alcohol test for union rep
By Lisa Milam-Perez, J.D.
A grocery chain unlawfully ordered an employee to submit to a drug and alcohol test
despite his request to consult with a union rep first, and suspended and then discharged
him for refusing to submit to the test without union representation. Because the
suspension and discharge was “inextricably linked” to his assertion of his Weingarten
rights, the Board determined a make-whole remedy was warranted. Member Johnson
dissented in part (Ralphs Grocery Co, July 31, 2014).
It was undisputed that the employee had refused to take the drug and alcohol test because
he wanted to consult with his union rep first. The employer allowed him to try to contact
his rep by phone, but he was unable to reach him. The employer then immediately
suspended and discharged the employee without waiting to see whether a union rep
would become available.
For its part, the employer insisted his refusal to take the test warranted immediate
discipline because it amounted to insubordination and an automatic positive test result
(based on the employer’s “automatic positive” policy). But the Board rejected this
defense, noting “there is simply no way to divorce” the employee’s refusal to submit
from the assertion of his Weingarten rights, and the employer’s unlawful denial of those
rights, which were triggered by the employer’s underlying investigation into allegations
of misconduct. Because the discharge was a direct result of the employee invoking his
Weingarten rights, reinstatement and backpay were warranted, the majority held.
Partial dissent. Member Johnson agreed that the employer unlawfully interfered with the
employee’s Weingarten rights, but he concluded that the suspension and subsequent
discharge resulted from the employer’s belief that the employee was intoxicated based on
his “strange behavior” — not because of his request for union representation — and as
such, a make-whole remedy was unnecessary. Johnson emphasized too that, given the
time-sensitive nature of sobriety tests, the employer had a legitimate interest in
conducting its investigation without delay, and there was no evidence that the employer’s
“automatic positive” policy was not in fact established or that it had been applied in
discriminatory fashion. The Board majority “provided no guidance or indication as to
how they believe the Respondent should have proceeded,” he noted.
But the employer’s interest in conducting timely drug and alcohol tests does not entitle
employers to take disciplinary action against employees for invoking their protected
Section 7 rights, the majority countered. It also rejected Johnson’s assertion that the
disciplinary action was based on information that it already had (i.e., the employee’s
apparent intoxication) and not on the refused drug test. The termination report made no
reference to the employee’s observed behavior or conduct prior to his refusal, and it made
39
no finding that he was under the influence (absent the “automatic positive”
determination).
At any rate, the majority said, the employer failed to show that the employee would have
been disciplined based on his refusal to take the drug test alone, given employer
testimony at arbitration that he “was terminated for insubordination, not for being under
the influence,” along with a statement from employer’s counsel that “if it weren’t for the
refusal of the grievant to take the drug test, we would [not] be here today.” That is, the
exercise of Weingarten rights was treated as a punishable offense in itself, “independent
of his presumptive intoxication,” the majority found.
The slip opinion is: 361 NLRB No 9.
Attorneys: Aurora Kaiser (Morrison & Foerster) for Ralphs Grocery Company. Joseph
Paller (Gilbert & Sackman) for United Food and Commercial Workers Union, Local 324.
NLRB: Bargaining unit clarification finds one manager excluded from coverage;
but two supervisors remain in unit
By Ronald Miller, J.D.
The NLRB affirmed the regional director’s findings that an assistant classified manager
and electrical manager were not statutory supervisors; however, it determined that an
editorial page editor should be excluded from the unit as a managerial employee. With
respect to the editorial page manager, the Board concluded that applying a “general
philosophy” to determine the paper’s published stance involved the exercise of sufficient
independent discretion to confer managerial status. However, the Board found that the
employer failed to carry its burden of proving that the assistant classified manager
effectively recommended the hiring of employees or that the electrical manager
disciplined or effectively recommended the discipline of employees (The Republican
Company, August 7, 2014).
For many years the employer, a newspaper, and union were parties to a collective
bargaining agreement covering full-time employees in various departments. In 2007, a
regional director issued a decision in a unit clarification proceeding in which the
employer sought to exclude 22 positions from the bargaining unit on the grounds that
they were supervisory, managerial, or confidential. The regional director excluded three
positions, but dismissed the petition with respect to the remaining positions. Thereafter,
the NLRB granted the employer’s motion to review the regional director’s findings with
respect to three additional positions.
Editorial page manager. The editorial page manager reported directly to the publisher
of the newspaper, and had two other managers reporting to him. He was generally
responsible for the content of the editorial page, and met with his subordinates daily to
discuss editorial topics. During these meetings, the editorial page manager had the
authority to veto a topic he determined was “not worthy of an editorial.” While there
were “institutional” positions that predated the publisher, the editorial page manager
40
could determine the paper’s stance on noninstitutional issues. The editorial page manager
was also free to decide which letters to the editor were published.
The Board found that the editorial page manager was a managerial employee in light of
his role in formulating, determining, and effectuating the newspaper’s editorial policies.
Moreover, the Board agreed with the employer that the cases cited by the regional
director in support of his finding that the editorial page manager was not a managerial
employee were distinguishable. In contrast to the employees in Suburban Newspaper
Publications, Inc. and Bulletin Co., the editorial page manager was responsible for the
content of the entire editorial page, and his authority to determine the topic and content of
editorials far exceeded that of the putative managers in Suburban Newspapers and
Bulletin.
Further, the Board rejected the contention that the discretion of the editorial page
manager was so circumscribed by existing policy that his selection of editorial topics and
positions did not raise to the level of true managerial authority.
Assistant classified manager. The assistant classified manager reported to the classified
manager, and worked with a staff of 17 advertising “takers,” who accepted unsolicited
classified ads for the newspaper, and eight or nine “inside advertising solicitors,” who
solicited potential customers. According to the advertising director, he usually followed
the recommendations of the assistant classified manager with respect to hiring. Here, the
Board agreed with the regional director that the employer did not satisfy its burden of
proving that the assistant classified manager hired or effectively recommended the hiring
of employees. The Board concluded that the classified manager’s direct participation in
the hiring process negated any support for the conclusion that the assistant classified
manager effectively recommended hiring.
Electrical manager. The electrical manager maintained the heating and air conditioning
systems, and electrical systems at the newspaper’s building. Three individuals reported to
him. The electrical manager worked under the newspaper’s production director, who
testified that he placed a great deal of importance on the electrical manager’s
recommendations in making hiring decisions because of his technical expertise. It was
also alleged that he had the authority to informally counsel employees and to issue verbal
warnings without consulting the production manager.
Again, the Board concluded that the employer failed to meets its burden of demonstrating
that the electrical manager effectively recommended hiring, or that he disciplined or
effectively recommended the discipline of employees. Here, the electrical manager’s role
in hiring was limited to assessing the technical qualifications of prospective candidates.
Providing assessments of that nature did not amount to effectively recommending hiring,
and thus did not indicate supervisory status, declared the Board. Further, the evidence
failed to establish that the electrical manager had veto power over hires.
With respect to discipline, evidence that the electrical manager twice became involved in
the disciplinary process was insufficient to establish that he disciplined employees or
effectively recommended discipline. In both incidents, the electrical manager’s
41
involvement was too minor to establish disciplinary authority. Otherwise, there was no
evidence that he recommended any discipline at that time. In these circumstances, the
Board found that a disciplinary note issued by the electrical manager was at most a report
of misconduct, and not actual discipline or recommendation of discipline.
The slip opinion is: 361 NLRB No. 15.
Attorneys: John O’Connor (Moriarty & Connor) for Springfield Newspaper Employees
Association. Nancy Merwin (Sabin Bermant & Gould) for The Republican Company.
NLRB: Legit Board reaffirms use of Latino Express remedy
By Lisa Milam-Perez, J.D.
Reaffirming a remedial policy originally established under an invalidly constituted
quorum, a (properly appointed) three-member NLRB panel has held that, when makewhole relief is granted to an employee who is the subject of an unfair labor practice, an
employer must reimburse that employee for the tax consequences of the backpay relief
owed. The Board also said it would routinely require employers to submit documentation
to the Social Security Administration so that when backpay is paid, it will be allocated to
the appropriate calendar quarters. Such remedies will apply going forward, and also
retroactively to pending cases, including those in the compliance stage (Don Chavas,
LLC dba Tortillas Don Chavas, August 8, 2014).
Unfair labor practices. The Board affirmed a law judge’s findings that an employer
unlawfully transferred an employee from the morning shift to the night shift after she
protested the sexual harassment of female employees at the hands of their supervisor.
That transfer amounted to a constructive discharge, the Board found, given that the
employer knew that the night shift would conflict with the employee’s childcare
responsibilities. In addition, the law judge found (and the Board agreed) that the
employer unlawfully threatened and discharged two other employees for engaging in a
work stoppage to protest poor conditions. Contrary to the law judge, though, the Board
concluded that the employer also violated the Act by transferring one of those employees
to the night shift, thereby constructively discharging her too. The panel found substantial
evidence that the employee’s transfer was motivated by animus due to her past protected
activity.
Law judge decision valid. In a footnote, the Board rejected the employer’s contention,
based on the Supreme Court’s decision in NLRB v Noel Canning, that the law judge’s
decision was invalid because she was appointed when the Board was without a quorum.
The panel noted that weeks ago, with a full complement of five validly appointed
Members, the Board had ratified nunc pro tunc the law judge’s appointment (along with
other administrative and personnel matters during the period in question) “in an
abundance of caution.”
Latino Express affirmed. After inviting interested parties to submit briefs on the issue
(given that it represented a change to current Board practice), the NLRB in Latino
Express, Inc ruled that, in awarding back pay, it would now require employers to submit
42
documentation to the Social Security Administration so that back pay is allocated to the
appropriate calendar quarters, and to pay for any excess federal and state income taxes
owed by the employee as a result of receiving a lump-sum payment. The Board applied
these new provisions retroactively.
In the case at hand, the law judge had recommended the remedies announced in Latino
Express, Inc. At the time that the December 2012 decision was issued, though, the NLRB
had two invalidly appointed members (as the Supreme Court held in Noel Canning),
leaving the Board now to revisit de novo the rationale for such relief. Once again, it
found those remedies “effectuate the policies of the Act.”
Social security reporting requirement. Explaining the rationale for the SSA reporting
requirement, the Board panel noted that when backpay is not properly allocated to the
years covered by a backpay award, an employee can be disadvantaged in several ways.
First, in order to qualify for old-age Social Security benefits, individuals must accumulate
40 Social Security credits. Individuals earn a maximum of four credits each calendar
year, and improper allocation of backpay could result in an individual not getting the
appropriate credit, depriving him or her of the ability to qualify. Also, improperly
allocating a multiyear backpay award as income for a single year could result in the SSA
treating an employee as having received wages in excess of the annual contribution and
benefit base for a given year, which could result in the employer and employee not
paying Social Security taxes on the excess. That, in turn, reduces the employee’s eventual
monthly benefit, since participants receive a higher benefit when they have paid more
into the system. Finally, even if social security taxes were paid on the entire amount,
because of the progressive formula used to calculate benefits, retiring employees might
receive a smaller monthly benefit when a multiyear award is posted to one year rather
than being allocated to the appropriate periods. Thus, absent the SSA reporting
requirement, an employee would continue to suffer the effects of the employer’s unfair
labor practice — and would not have been whole by a backpay award, the Board
reasoned.
Tax payments. As for the requirement that employers pay the additional state and federal
taxes incurred by employees as a result of a backpay award, employees who receive a
lump-sum backpay award covering more than one calendar year could end up in a higher
tax bracket for that year, incurring greater tax liability — which would result in that
employee’s not being made whole. The Board also pointed out that courts and other
agencies have required respondents to pay this tax burden, for the same reason, and it
decided to follow suit.
The General Counsel will have the responsibility, in a compliance proceeding, of proving
and quantifying the extent of the adverse tax consequences that arise as a result of a
backpay award. The burden will then shift to the respondent to rebut the General
Counsel’s evidence or calculations, the Board said.
Routine remedy. “In providing for social security reporting and tax compensation as
remedies for unfair labor practices, then, we follow a well-marked path,” the Board
wrote. Accordingly, in the case at hand, and in all pending and future cases in which a
43
violation of the Act results in make-whole relief, the Board said it would continue
routinely to require the employer to submit the appropriate documentation to the SSA so
that when backpay is paid, it will be allocated to the appropriate calendar quarters, and to
reimburse the employee for any additional federal and state income taxes he or she may
owe as a consequence of receiving a lump-sum backpay award in a calendar year other
than the year in which the income would have been earned had the employer not
committed the unfair labor practice.
The slip opinion is: 361 NLRB No. 10.
Attorneys: John Munger (Munger Chadwick) for Don Chavas, LLC dba Tortillas Don
Chavas.
NLRB: Emails questioning inclement weather policy protected concerted activity
By Ronald Miller, J.D.
An employer unlawfully discharged an employee for engaging in protected concerted
activity when she sent several emails to supervisors questioning the employer’s new
inclement weather day (IWD) policy, ruled a divided three-member panel of the NLRB.
Here, the record amply demonstrated that the employer knew she was acting not only on
her own behalf, but also in concert with and in support of her coworkers to resolve a
common concern, concluded the Board. The majority further concluded that the employer
failed to show, under Wright Line, that it would have discharged the employee even
absent her protected concerted activity. Member Miscimarra dissented (Hitachi Capital
America Corp, August 8, 2014).
IWD policy. The employer’s recently implemented IWD policy triggered numerous
questions among employees and managers. In a series of emails sent to management, the
employee raised a group complaint about the employer’s application of the employment
policy that adversely affected her and her coworkers, and sought a resolution that would
have benefitted them. Confused by the policy, even a supervisor contacted the human
resources department with questions about the policy’s application to four employees in
her department.
In her first email, the employee stated that she thought the IWD policy should have been
explained to employees earlier than after the fact — indicating that her complaint was a
group complaint. Further, in two separate meetings, the employee specifically mentioned
two coworkers by name in attempting to explain why she sent the emails. Under such
circumstances, the Board concluded that the employer knew or suspected that the
employee’s activity was concerted, and that it demonstrated animus towards her protected
activity by issuing her a warning concerning her emails.
Inappropriate behavior. Moreover, the Board agreed with an administrative law judge’s
determination that a work rule prohibiting “inappropriate behavior” while on company
property was unlawful as written because employees would reasonably construe the rule
to prohibit Sec. 7 activity. In determining whether an employer’s maintenance of a work
rule reasonably tends to chill employees in the exercise of their Sec. 7 rights, the Board
44
gives the rule a reasonable reading and refrains from reading particular phrases in
isolation. Where, as here, a rule does not explicitly restrict activities protected by Sec. 7,
the rule is not unlawful unless (1) employees would reasonably construe the language to
prohibit Sec. 7 activity; (2) the rule was promulgated in response to union activity; or (3)
the rule has been applied to restrict the exercise of Sec. 7 rights.
Here, the Board found it unnecessary to decide whether the rule was facially overbroad,
but determined that the employer applied it to restrict an employee’s exercise of her Sec.
7 rights. The employee engaged in protected concerted activity when she emailed
supervisors. Based on those emails, the employer issued her a final written warning.
Although the warning did not expressly cite the “inappropriate behavior” rule, it
characterized the employee’s emails as “disrespectful” and “rude,” and reminded her that
this was not her first warning for using “inappropriate/profane” language. Subsequently,
the employee was discharged. Those circumstances plainly supported a finding that the
employer’s condemnation of the employee’s protected conduct was grounded in the rule
barring “inappropriate behavior.”
Dissent. In a dissenting opinion, Member Miscimarra would have dismissed the
complaint allegation that the employer acted unlawfully by discharging the employee and
by applying a handbook rule prohibiting “inappropriate behavior on Company property”
to restrict her protected concerted activities. As an initial matter, Miscimarra agreed with
the majority that the employee was engaged in protected concerted activity when she sent
several email messages about the employer’s failure to clearly explain its IWD policy.
However, the dissent argued that the evidence failed to establish that the employer
applied its “inappropriate behavior” rule when it disciplined the employee. Rather, he
contended that contemporaneous documentation indicated that the employer actually
applied a different handbook rule.
The slip opinion is: 361 NLRB No. 19.
Attorneys: Lawrence Peikes (Wiggin and Dana) for Hitachi Capital America Corp..
Margaret Sheahan (Mitchell & Sheahan) for Virginia Kish.
NLRB: Board splits over concerted nature of individual harassment complaints,
overrules precedent
By Lisa Milam-Perez, J.D.
In a ruling of keen interest to employers vexed by the challenge of conducting sexual
harassment investigations in the face of the Board’s preoccupation with confidentiality
rules and its rearing of Section 7 concerns outside the traditional labor context, a divided
NLRB found an employee was engaged in “concerted activity” for the purpose of
“mutual aid or protection” within the meaning of the NLRA when she sought help from
coworkers in raising a sexual harassment complaint to her employer. And, to the extent
this holding would conflict with the Board’s decision in Holling Press, Inc which,
according to the majority, “lies far outside the mainstream of Board precedent,” that 2004
ruling was overturned (Fresh & Easy Neighborhood Market, Inc, August 11, 2014).
45
Offering the promise of some wiggle room, however, the Board’s five members
unanimously held the employer had a legitimate business reason for prohibiting the
employee from seeking additional witness statements while it investigated her underlying
complaint — at least based on the narrowly tailored directive issued here. Yet Member
Miscimarra, dissenting in part, lamented that in explicitly limiting its holding to “the
particular circumstances” and facts of this case, the majority left employers with no real
roadmap as to what other conduct, during the course of different investigations, will
constitute unlawful interference in the Board’s eyes.
The whiteboard incident. After a message that she had left for her supervisor on the
breakroom whiteboard was defaced (the word “tips” was changed to “tits,” and it now
bore a picture of a peanut or worm urinating over her name), a female grocery store
employee asked her team leader about filing a sexual harassment complaint. The team
leader asked why the employee would want to make a complaint, and the employee left
angry. The team leader did call the employee’s supervisor to tell him of the employee’s
intention to file a complaint, and the supervisor told the team leader to take a photo of the
altered whiteboard and then erase it.
Meanwhile, the employee had made a handwritten copy of the defaced whiteboard
picture and its altered message (cell phones and cameras were not allowed, under the
employer’s policy), and asked two coworkers and one supervisor to sign her document,
noting that she wanted to depict what was on the whiteboard and that she wanted to file a
complaint — although the dissent characterized her actions as haranguing the individuals
to sign the paper; the credited evidence was that she was “loud and angry” during the
conversations. As she later explained, “I was offended and I believe that the other girls
were offended too. And it just seemed that if we were to file a harassment charge that it
wouldn’t happen again.”
The supervisor later reviewed the break room video footage, identified the culprit, and
reported it to human resources. He also spoke to the individuals who had been asked to
sign the employee’s reproduction of the defaced whiteboard message. They all said that
they didn’t think they were aiding the employee in bringing a sexual harassment
complaint; they were merely attesting to the veracity of her drawing. (On the other hand,
one employee admitted that she wouldn’t have liked it if that had happened to her, and
thought management should have been notified and disciplinary action taken. In fact, this
employee went to the supervisor the next day and told him the whiteboard incident was
inappropriate and that she hoped the employer would “take care of it.”) Yet another
signator made a formal complaint against the employee for “bullying” her into signing,
and accused her of altering the document after she did so. Also, the perpetrator of the
whiteboard incident complained that the employee cursed at him.
The employer launched an investigation into the whiteboard incident and the subsequent
complaints against the employee. A human resources manager asked the employee why
she felt the need to obtain her coworkers’ signatures, and also instructed her not to get
any further statements so that HR could conduct the investigation. The HR manager did
tell the employee, though, that she could talk to coworkers and ask them to serve as
witnesses on her behalf. Also, she was never threatened with or subjected to disciplinary
46
action. Following the investigation, the individual who altered the whiteboard was
disciplined and the employee was so informed in writing, with assurances that she would
be protected from any potential retaliation. The investigation also found the complaints
against the employee lacked merit.
Concerted activity. The threshold issue was what divided the five-member panel — with
a four-member majority finding that the employee had engaged in concerted activity.
Noting that an employee’s subjective motive for taking action is not relevant to whether
that action was “concerted,” or “for mutual aid or protection,” the majority stated that the
proper focus is “whether there is a link between the activity and matters concerning the
workplace or employees’ interests as employees.” Here, the employee sought assistance
from her coworkers in raising a sexual harassment complaint. Even though she did not
intend to pursue a joint complaint, she wanted her workers to be witnesses to the incident,
and two of those coworkers stated they were aware of her intent to report it to
management. This initial call to group action was enough to establish concerted activity;
the employee need not have engaged in any further activity, they held.
Dissenting, Member Miscimarra saw no concerted activity in the employee’s repeated
insistence that her coworkers sign her statement, which merely served to document what
appeared on a whiteboard. Hers was a personal complaint, Miscimarra argued, one that
was not shared by coworkers. And his conclusion was consistent with Section 7 and with
the Board’s decision in Meyers Industries, he argued. Although the NLRA’s provisions
should be liberally construed, “we must still interpret the Act in a manner consistent with
its terms,” he stressed. And, under the plain language of Section 7 (as well as its
legislative history), employee conduct is protected only if “concerted,” and only if
motivated by the “purpose” specified in the statutory language — i.e., the purpose of
“collective bargaining or other mutual aid or protection.”
However, the majority broadly construed the language of Section 7, rejecting the notion
that the disputed provision applied solely to the narrow purposes of “self-organization”
and collective bargaining. Moreover, even if her coworkers had only signed her
document to stop her “annoying” conduct, the majority said that under Board precedent,
“concertedness is not dependent on a shared objective or on the agreement of one’s
coworkers with what is proposed.” Their purported irritation was irrelevant; the concerted
nature of the employee’s request would not be diminished if her coworkers didn’t want to
sign the document. And, the majority noted, it’s “well established” that an employee who
is acting in part on selfish motivations is still engaged in concerted activity, “even if she
is the only immediate beneficiary of the solicitation.”
Mutual aid or protection. A three-member majority concluded that the employee’s
conduct was undertaken for the purpose of “mutual aid or protection” as well. It reasoned
that the activity in question would undoubtedly have been seen as undertaken “for mutual
aid or protection” had the employee tried to join forces with another victim of alleged
sexual harassment; the question here, as framed by the majority, was whether the
employee’s solicitation of support from coworkers should be resolved any differently
because the complained-of harassment was directed at her alone. The majority said “no,”
47
backing up its answer with a line of supporting Board precedents which, while arising
under varying circumstances, are uniformly grounded in the “solidarity” principle.
Miscimarra took issue with the majority’s overarching proposition that whenever an
individual employee invokes (non-NLRA) statutory employment protections, that
employee’s efforts are for the purpose of mutual aid or protection. By holding that such
activity on the part of a single employee inherently involves “mutual aid and protection”
if it implicates a non-NLRA statutory right, the majority reinstate a principle rejected by
the NLRB in Holling Press, Inc and dispense with any inquiry into whether a complaint
involving sexual harassment or any other statutory right involves the “purpose” set forth
in Section 7 as a prerequisite to protection under the NLRA.
“We have nearly 80 years of precedent establishing that, in cases that turn on a particular
type of intent, motivation must be proven,” Miscimarra argued, and the facts here offer
no evidence that the interaction between the employee and her coworkers had the purpose
or intent of mutual aid or protection. In fact, nobody here acted for the “purpose” of
extending “mutual aid or protection” to anyone else, he said. One coworker in fact
submitted her own complaint about the employee for “bullying” her into signing.
Member Johnson joined Miscimarra in dissenting from the majority’s holding
(“overbroad,” in his view) that an employee seeking the assistance or support of his or
her coworkers in raising a sexual harassment complaint is always acting for the purpose
of mutual aid or protection. In Johnson’s view, the holding could not be reconciled with
the principles of Meyers Industries. However, contrary to his other dissenting colleague,
Johnson believed that, at least in certain instances, “the purpose of aiding or protecting
other employees may be proved by an individual’s claim of sexual harassment conditions
to which others are exposed, even if no other employee joins in pressing that claim.”
Overturning precedent. Acknowledging that its holding was in conflict with Holling
Press, the majority’s solution was to overturn the Board’s divided decision in that 2004
case, which “lies far outside the mainstream of Board precedent,” in its view. “‘An injury
to one is an injury to all’ is one of the oldest maxims in the American labor lexicon,” the
majority pointed out, and its prior decision had nullified that principle in the context of
sexual harassment directed at only one employee, seemingly creating “a special exception
for sexual harassment claims” (despite that under similar circumstances, concerns over
discipline, safety, or many other matters similarly affecting working conditions would
have enjoyed the protection of the Act.) Concluding this “outlier” ruling itself could not
be reconciled with the body of established Board law (and Supreme Court precedent) that
came before it, the Board overruled Holling Press to the extent it was inconsistent with
its holding here.
Johnson concurred in overruling Holling Press, but only to the limited extent that it held
the “mutual aid or protection” element of protected concerted activity was not proved
under the facts in that case and this, where other employees have been exposed to the
same conduct that is the basis for an individual’s sexual harassment complaint. In his
view, Holling Press “unfortunately overlooked the fact that some kinds of alleged
violations of other statutes affect employees as a group. The quintessential example of
48
that is posed by this case: an employee essentially created a derogatory, demeaning and
gender-specific offensive display on a whiteboard. Even though the display directly
targeted a single female employee, it existed for all female (and male) employees to see.”
On the other hand, Johnson said, the majority went too far: “it so broadly construes the
circumstances in which an individual sexual harassment complaint will be found to be for
the purpose of ‘mutual aid and protection’ as to vitiate the requirement of proof for this
independent element of the statutory test.” In effect, the majority created a n irrebuttable
presumption that an employee seeking the assistance or support of his or her coworkers in
raising a sexual harassment complaint is always acting for the purpose of mutual aid or
protection. To demonstrate the folly of this presumption, Johnson cited the example of a
sexual harassment complaint asserted on the heels of a failed workplace romance; in that
scenario, it was unlikely there would be additional victims, and the complainant would
not likely be engaged in mutual aid or protection. (Miscimarra, for his part, dissented
outright from the decision to overturn Holling Press.)
Other statutes undermined? While the majority’s expansive reading of the Act was
“well-intended,” Miscimarra contended, it would have adverse consequences —
including “undermining the interests of employees in regard to sex harassment
complaints and other non-NLRA protection that is available to employees.” He staunchly
rejected the majority’s contrary assertion that the holding “furthers the important federal
policy of preventing sexual harassment in the workplace.”
“Rather than advancing the policies associated with statutory requirements like the
prohibition against sex harassment, expanding Section 7’s coverage will predictably
undermine the many important non-NLRA statutes and regulations that afford individual
protection to employees,” Miscimarra warned. The NLRA focuses primarily on the
process “by which employees can decide whether to have union representation and
engage in collective bargaining,” he reasoned; “by comparison, other employment
statutes primarily require a desired outcome.” By making Section 7 applicable to every
situation where a lone employee appeals to a coworker about a complaint of sexual
harassment or some other statutory right, numerous of the NLRA’s “process” restrictions
thereby apply, such as proscriptions on unlawful surveillance and interrogation. But
while these “process” restrictions have served employees well in the Section 7 context,
they work decidedly less well elsewhere, and “will clearly detract from the legal
protection afforded to employees under such statutes,” he cautioned. Citing, for example,
the employee’s right under the NLRA to refrain from protected activity, Miscimarra
pondered a scenario in which an employee’s individual complaint involves “protected”
conduct, and the complaining employee or a witness invokes an NLRA-protected “right”
to “refrain from” answering questions or providing relevant information, even if the
claim involves a sexual assault associated with a sex harassment complaint, for example,
or a work-related injury or fatality implicated in an OSHA complaint. In this way,
applying the Section 7 template “undermines the policies and purposes of other important
federal, state and local statutes.”
“Employers will need to focus on limiting and narrowly tailoring their investigations and
discussions with employees, rather than focusing on the substantive legal issues relating
49
to individual complaints,” Miscimarra predicted. “Employers will need to anticipate —
consistent with the Respondent’s experience — that one or two questions may result in
years of Board litigation, separate from the complex non-NLRA laws and procedures that
actually govern the employee complaint. Extensive research is not needed to conclude
that these problems will delay or obstruct investigations and inhibit the vigor with which
they can be carried out. Necessarily, these problems will operate to the detriment of
employees.” Indeed, he speculated, the majority’s holding “may be the source of an
unprecedented expansion in Section 7 coverage that nobody can presently anticipate.”
The majority dismissed these fears, stating that “what our colleague deems unprecedented
protection is, in fact, consistent with decades of Board precedent” and suggesting that
their dissenting colleague’s real beef was, in fact, “with existing Board jurisprudence.” It
explained that employees have protections under the NLRA as well as other statutes
governing the workplace; that an employee’s protected activity might also implicate
those other statutes doesn’t mean that it loses the protection of the Act. Moreover, the
majority noted, “employees are not required to choose between engaging in Section 7
activity and pursuing other remedies.”
While that may be true, Johnson, in his dissent, countered that “there is no sign, and
certainly no justification provided by the majority, that Congress intended to impose the
majority’s new universe of restrictions on an employer trying to investigate and/or
remedy violations under Title VII or any other statute.” Section 7 does not authorize the
Board to serve as an “überagency,” he argued, “without due regard for and proper
accommodation of the enforcement processes established by these other laws and
agencies.” As he concluded, “if searching for some logical policy presumption in this
case, it would be best to begin and end with the presumption that Congress and the
various states, having populated the field with these laws in spite of the Act’s existence,
perceived Section 7’s substantive rights and the Board’s processes as inapplicable to, or
at least ill-suited to, effectuating the protections intended by their enactment.”
Admonition was not interference. Having waged that heated NLRB policy battle, the
Board members nonetheless reached accord on the ultimate holdings in the case at hand,
with the full five-member panel agreeing that the employer did not violate Section 8(a)(1)
when it questioned the employee about why she obtained witness statements from her
coworkers and also when it instructed her not to obtain additional statements.
As for the latter, while the employer bears the burden of showing that such restrictions
have a legitimate business justification that outweighs employees’ Section 7 rights, the
employer here met that hurdle. “The Board has recognized that employers have a
legitimate business interest in investigating facially valid complaints of employee
misconduct, including complaints of harassment,” it wrote. And in this case, the
employer’s directive was narrowly tailored to its need to undertake a thorough
investigation. The HR manager told the employee to let her obtain any other statements
in the course of her investigation. But she did not prohibit the employee from discussing
the pending investigation with coworkers, or asking them to be witnesses for her, or from
bringing subsequent complaints (or obtaining coworker statements related to those future
complaints). As such, the case at hand was distinguished from cases in which an
50
employer imposed a blanket prohibition on discussing ongoing investigations of
employee misconduct.
Furthermore, given the particular circumstances (specifically, her coworkers’ concerns
that the employee had made additions to her document after her coworkers signed it), the
human resources manager reasonably issued that directive in an effort “to safeguard the
integrity of the investigation,” not in an attempt to restrict her Section 7 rights. Thus,
while “instructions limiting employees from discussing or seeking assistance with sexual
harassment complaints and investigations may in other contexts violate the Act,” on these
facts, the narrowly tailored instruction was not unlawful.
OK to ask why. Nor did the employer violate Section 8(a)(1) when the HR manager
questioned the employee as to why she felt the need to obtain her coworkers’ signatures
on the document showing the reproduced whiteboard message. Although the NLRA
generally prohibits such inquiries into employees’ reasons for their protected concerted
activity, including why they chose to engage in that activity, the Board has recognized at
the same time that, “as part of a full and fair investigation, it may be appropriate for the
employer to question employees about facially valid claims of harassment and threats,
even if that conduct took place during the employees’ exercise of Section 7 rights.” Such
was the case here. The questioning was narrowly tailored to enabling the employer to
investigate both the employee’s complaint, and her coworkers’ complaints against her,
and the HR manager legitimately believed the line of inquiry was important to the
investigation. Moreover, there was no evidence the questioning delved any further than
this narrowly tailored purpose, so a reasonable employee would perceive the questioning
as part of a legitimate attempt “to gain a full picture of the events as part of her
investigation.” The Board also noted that the employer assured her, upon the
investigation’s conclusion, that it was committed to protecting her against retaliation of
any kind and told her to report any future incidents of harassment or retaliation.
The slip opinion is: 361 NLRB No. 12.
Attorneys: Joshua Ditelberg (Seyfarth Shaw) for Fresh & Easy Neighborhood Market,
Inc..
NLRB: Confidentiality rule prohibiting employees from discussing discipline with
coworkers unlawful
By Ronald Miller, J.D.
An employer unlawfully maintained an unwritten rule that discipline was confidential
and prohibited employees from sharing or discussing their discipline with coworkers,
ruled a three-member panel of the NLRB. Although the alleged rule was unwritten, the
Board found evidence of its existence in a summary of the employee’s discipline record
that referenced the fact that employees were aware that disciplinary action forms were
confidential and should not be shared. Moreover, the Board pointed to a discharge notice
referring to the employee sharing his confidential warning as one of the reasons for his
discharge. Member Miscimarra agreed with the majority that the employee’s discharge
did not violate the NLRA, but dissented from that portion of the Board decision finding
51
that the employer maintained an unlawful confidentiality rule (Philips Electronics North
America Corp, August 14, 2014).
Offensive behavior. The General Counsel alleged that the employer had a rule that
discipline was confidential and prohibited employees from sharing or discussing their
discipline with coworkers; and that the employer discharged an employee for sharing or
discussing his discipline with coworkers. During his tenure, the employee received
numerous oral and written warnings for performance deficiencies and acts of misconduct,
including harassing a coworker. In January 2012, the employer decided to discharge the
employee for his disruptive, intimidating, and offensive behavior. However, after looking
into the matter further, the employer determined that, for administrative reasons, it had to
give the employee a final written warning instead of discharging him.
The final warning cited inappropriate behavior by the employee, and unsatisfactory
performance. In addition to the warning, the employee was transferred to another
department and instructed to stay away from a harassment victim’s work area. Four days
later, the employee violated the stay-away instruction and engaged in acts of harassment.
The employee also showed his disciplinary warning to other workers and loudly stated
that he had received warning because of a coworker’s harassment allegations.
Maintenance of confidentiality rule. An administrative law judge dismissed both
allegations that the employer maintained an unlawful confidentiality rule, and that it
unlawfully discharged the employee for discussing his discipline with coworkers. Based
on language in a file summary detailing the employee’s discipline, the General Counsel
argued that the rule did in fact exist and therefore was being unlawfully maintained, even
though the employer never formally promulgated such a rule. Unlike the ALJ, the Board
agreed with the General Counsel that the employer maintained an unlawful
confidentiality rule, and reversed that portion of the ALJ’s decision. However, the Board
declined to find that the employee was unlawfully discharged because he discussed his
discipline with coworkers.
Discussing discipline. An employer violates Sec. 8(a)(1) when it prohibits employees
from speaking with coworkers about discipline and other terms and conditions of
employment absent a legitimate and substantial business justification for the prohibition.
While the employer did not have a written rule about discussing discipline, language in
the file summary and discharge notice established that it unlawfully maintained a rule
prohibiting employees from discussing their discipline. First, the file summary asserted
that employees were aware that disciplinary action forms were confidential and should
not be shared. In addition, the discharge notice referred to the employee sharing his
confidential warning as one of the reasons for his discharge.
Dissent. While Member Miscimarra agreed with the majority that the employee’s
discharge did not violate the NLRA, he would affirm the ALJ’s dismissal of the
allegation that the employer unlawfully maintained an rule prohibiting employees from
discussing their discipline with coworkers. He argued that the Board could not reasonably
infer the existence of such a rule from the language in the file summary, and the
discharge notice mentioning the sharing of “confidential documentation” with others.
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Finding that neither document was prepared for distribution to employees generally,
Miscimarra argued that the “confidential” references in the documents had nothing to do
with any rule prohibiting the disclosure of discipline.
The slip opinion is: 361 NLRB No. 16.
Attorneys: No attorney listed for Lee Craft. Mason C. Miller (Philips Electronics North
America Corp.) for Philips Electronics North America Corporation.
NLRB: Regional director did not error in failing to change voter eligibility date
after election postponed
By Lisa Milam-Perez, J.D.
An NLRB acting regional director did not abuse his discretion in failing to sua sponte
change the voter eligibility date in a pending union election after unfair labor practice
charges pushed the election date back, a divided NLRB panel held — even though there
were more excluded voters, hired after the eligibility date, than votes cast for either party.
Like the dissent, the majority acknowledged concerns about voter disenfranchisement
and the optimal goal of an election with “broad employee participation.” But the
employer made no effort to ensure that its substantially reconstituted workforce would be
eligible to vote. And “countervailing factors, which protect the overall process, will
sometimes outweigh the value of enfranchising each and every employee,” the majority
wrote. The countervailing factor that controlled here: a settled voting eligibility date,
which “minimizes the possibility that hiring decisions will be made with an eye toward
affecting the election’s outcome,” it noted (Tekweld Solutions, Inc, August 15, 2014).
Stipulated election delayed. The union filed a representation petition on March 5, 2013,
and on March 21, the parties reached a stipulated election agreement providing for a
March 8 voting eligibility date and an April 16 election. Because the union filed several
unfair labor practice charges, the election was not held as scheduled, consistent with the
Board’s “blocking charge” doctrine (which is currently under review in the Board’s
pending rulemaking process regarding representation election procedures, but for now,
extant procedures continue to apply.)
The parties settled the charges on August 30 and agreed the election would be held as
soon as practicable after the conclusion of a notice-posting period specified in the
settlement. The election was finally held on November 19. The union prevailed by a vote
of 21-20, with 30 challenged ballots — 24 of which were challenged by the Board’s
agent, because the voters’ names did not appear on the eligibility list. The employer
acknowledged that 23 of those 24 voters were hired after the eligibility date set forth in
the election agreement. However, it argued that the acting regional director should have
revised the voting eligibility date sua sponte in light of the revised election date. And
having failed to do so, he should have overruled the challenges to those ballots.
Casehandling manual. Consistent with the Board’s casehandling manual, the March 8
voting eligibility date here was the end of the employer’s last payroll period before the
acting regional director approved the stipulated election agreement. The manual also
53
provides that in rescheduled elections, an employer “will not be required to furnish a
second list of names and addresses” absent unusual circumstances. The casehandling
manual contains no indication that the region should change a stipulated eligibility date,
of its own accord, in instances where the scheduled election has been delayed due to
blocking charges. The regional director did not abuse his discretion by following these
guidelines, particularly absent any request by the employer that he do so, the majority
held.
Unusual circumstances? Member Miscimarra, dissenting, was troubled that the ballots
of the 23 voters hired after the eligibility date, while “unquestionably” in the bargaining
unit and bound by the results of the election, would not be counted, even though they
outnumbered both the employees who voted in favor of the union and those who rejected
representation. While acknowledging that an established eligibility date is important to
the Board’s ability to conduct orderly elections, he argued the case at hand presented
“extremely unusual” circumstances. As such, he dissented from the decision not to count
the ballots, but would go even further — he would have directed the regional director to
set a new eligibility date and direct a new election.
The majority was not persuaded that a seven-month delay in a scheduled election
pursuant to the blocking charge doctrine constituted “unusual circumstances.” At any
rate, it said, the employer failed to raise its concerns in a timely fashion, and Board
practice and precedent did not support Miscimarra’s proposed resolution. “The Board has
never set aside an election, as our colleague would, based only on challenged ballots and
in the absence of a party’s objections to the election.”
Stipulated agreement enforceable? Miscimarra further argued to no avail that the
stipulated election agreement could not be fairly enforced under the circumstances. The
agreement that specified the March 8 eligibility date also specified an April 16 election,
he noted, and “[i]t is a black-letter principle of contract law that a party cannot selectively
enforce one material term in an agreement while freely disregarding the other material
terms.” Consequently, in his view, the parties cannot be bound to the eligibility date.
But a stipulated election agreement “is not normally subject to change,” the majority
countered. Had the acting regional director changed the eligibility date of his own accord,
it would have been a material breach of the agreement, warranting a new election.
Moreover, the notion that a stipulated election agreement becomes wholly unenforceable
with a change to one material term was contrary to longstanding Board practice “and
damaging to the representation process,” the majority said. “The dissent’s approach
would essentially require regional directors to monitor election agreements and sua
sponte open them to renegotiation under a wide variety of circumstances. We decline to
place those additional burdens on our regional directors.”
Employer dropped the ball. The majority stressed that the employer failed to file
objections, particularly in conjunction with its failure to question the eligibility list’s
adequacy, until eight days after the election (limiting the scope of Board review here). It
had a number of opportunities to challenge the eligibility date earlier, or to provide a new
Excelsor list, but it did not. And it made no effort to ensure that its newly hired
54
employees were enfranchised prior to the election — or even to file objections to their
disenfranchisement thereafter. Only after voting closed, ballots were tallied, and the
deadline for objections passed did the employer first contend that an updated list should
have been used. “Given the employer’s knowledge of changes to its employee
complement but persistent lack of effort to prevent the voter disenfranchisement that it
now protests, its belated dismay rings somewhat hollow.”
Miscimarra thought it unfair to make the employer responsible for the problem caused by
a failure to update the eligibility date, noting there was some precedent where the Board
has revised and made current the eligibility date on its own initiative. Moreover, he said,
the underlying problem resulted mainly from the Board’s blocking charge doctrine,
“which has spawned criticism and commentary to a degree that prompted the Board to
solicit public input regarding potential modifications” to it. However, “even assuming
that the [e]mployer did not understand all the ramifications of the election agreement
when it later agreed to the rescheduling of the election, we cannot excuse its failure to
raise this issue prior to the election itself or in postelection objections,” the majority
insisted.
The slip opinion is: 361 NLRB No 18.
Attorneys: Morris Tuchman (Law Office of Morris Tuchman) for Tekweld Solutions,
Inc..
UNFAIR LABOR PRACTICES—NLRB: Employer’s anti-harassment policy did
not support discharge of returning striker
By Ronald Miller, J.D.
An employer acted unlawfully by discharging an employee for participating in a lawful
strike under the pretext that he violated its anti-harassment policy, ruled a divided threemember panel of the NLRB. The Board majority was not persuaded that the employer’s
anti-harassment policy supported the employee’s immediate discharge for allegedly
making a “cut-throat” gesture toward a nonstriking employee. There was no evidence that
the employee made any threatening comments or other gestures. Rather, the evidence
indicated that the gesture was commonly used at the facility to indicate to a forklift driver
that an engine should be shut off. Member Johnson dissented (Nichols Aluminum, LLC,
August 18, 2014).
The employer had a long-term bargaining relationship with the union. After the parties’
existing contract expired, and during bargaining over a successor agreement, the union
initiated a strike in which the employee participated. In response, the employer hired
replacement workers. When the strikers returned, the employer’s manager told them they
could not work unless they promised not to strike again. The employee and other strikers
were presented with a form containing a no-strike pledge. It is undisputed that the
employee agreed to the pledge not to strike again and that managers were aware of his
pledge.
55
Anti-harassment policy. Two weeks after his return, the employee was discharged under
the employer’s zero-tolerance policy concerning threats and harassment. Two days
earlier, he had brought his hand across his neck with his thumb pointing up in what a
nonstriker construed as a “cut-throat” gesture. The coworker reported the gesture and his
interpretation of it as a threat to human resources. On the other hand, a replacement
worker interpreted the gesture as the employee signaling the coworker to stop blaring the
horn on his forklift. The employee denied even making the gesture.
The parties’ expired CBA contained a provision listing certain offenses that could result
in termination without a prior warning, including workplace violence and threats.
Moreover, during post-strike meetings, the employer emphasized certain policies,
including its violence in the workplace policy. A week after the employee’s discharge a
striker replacement engaged in harassing conduct directed at a returning worker. When
that employee reported the incident to a supervisor he was told to “grow up,” and told
that if he wanted something done the supervisor would fire both employees. The incident
was reported to HR, but there was no discipline arising from the incident.
Disparate treatment. Here, it was undisputed that the employee engaged in protected
activity by participating in the strike and that the employer was aware of that activity. At
issue was whether the General Counsel demonstrated that the employer harbored
antiunion animus. Contrary to the finding of an administrative law judge, the Board
majority found that the record included both direct evidence of animus and a sound basis
for inferring it. The employer required returning strikers to promise not to go back on
strike over the same dispute, and told them that breaking the promise could subject them
to discipline. The pledge conditioned the strikers’ return to work on their promise to
refrain from lawful protected activity, and was strong evidence of animus toward the
protected conduct of striking.
In addition, the timing of the employee’s discharge, less than a month after the strike
ended, supported an inference that the strike motivated the employer to discharge him,
even though he played no particularly prominent role in it. Moreover, the record showed
that the discharge was not consistent with the employer’s previous application of its
disciplinary policy, but instead demonstrated disparate treatment of the employee’s
conduct. Thus, the Board found that the employer’s animus toward the recently ended
strike motivated the discharge.
Zero-tolerance policy. Contrary to the ALJ’s finding, the Board concluded that the
employer failed to show that it would have discharged the employee under its zerotolerance policy even in the absence of protected conduct. It was undisputed that the
employer maintained some form of zero-tolerance policy towards workplace violence and
harassment. However, the employer failed to show that its discharge of the employee was
in keeping with its enforcement of that policy. The employer declined to discipline two
employees for threatening and aggressive behavior, one of whom was a striker
replacement. In both instances, supervisors did little more than instruct the individuals
involved in the conflict to stop. Thus, the evidence demonstrated that the employer did
not consistently discharge employees, even for relatively severe misconduct immediately
following the strike, at a time when it was emphasizing its anti-harassment policy.
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Dissent. Noting that there were no allegations of independent Sec. 8(a)(1) violations, as
well as the employee’s undistinguished participation in the strike, Member Johnson
would find that the employer’s requirement of a no-strike pledge did not fill the void of
animus. As a result, the dissent concluded that the majority relied on scant evidence and
unsupported inferences to find that the General Counsel met his burden of proving
unlawful motivation for the employee’s discharge. Johnson would affirm the ALJ’s
finding that the employer lawfully discharged the employee for making a threatening
gesture to another employee in violation of the zero tolerance policy.
The slip opinion is: 361 NLRB No. 22.
Attorneys: No attorney listed for Teamsters Local Union No. 371. Michael A. Snapper
(Barnes & Thornburg) for Nichols Aluminum, LLC.
NLRB: Supervisor’s recording of names of attendees at union meeting unlawful
By Ronald Miller, J.D.
An employer unlawfully surveilled its employees’ union activities, and unlawfully
created the impression of surveillance, when a supervisor attended a bargaining session
that employees were observing and informed an employee that he was recording the
names of employees in attendance, ruled a divided three-member panel of the NLRB.
The employer also acted unlawfully by terminating an employee and then denying her
access to its facility in her capacity as an agent for the union. Member Johnson dissented
from that portion of the ruling finding unlawful surveillance by the supervisor and
unlawful discharge (Modern Management Services, LLC dba The Modern Honolulu,
August 18, 2014).
A predecessor employer owned the hotel property where this dispute arose. It voluntarily
recognized the union as bargaining representative of its bargaining unit employees, but
sold the property before it reached a collective bargaining agreement. The successor hired
most of the workers and granted recognition to the union in the existing unit. Following
recognition, the new employer voluntarily granted the union access to its property to
observe working conditions. After the parties agreed to meet for the first bargaining
session, the union distributed flyers announcing the start of negotiations. The flyer
pictured a number of housekeeping employees. (This case primarily concerns workers in
the housekeeping department.)
Surveillance activity. An employee alleged that the director of housekeeping, with no
known assignment from hotel management related to bargaining, directed a supervisor to
take notes at the bargaining session about who attended and what occurred. For its part,
the employer contended that the supervisor had a legitimate purpose for attending the
bargaining session. Specifically, it asserted that he attended the meeting to determine
whether additional employees were needed to cover for on-duty employees who were
observing the bargaining session. However, the Board observed that this assertion was
discredited by an administrative law judge. Further, it was concluded that the coercive
nature of the employer’s activity was not diminished by the fact that the meeting was
“open.” By its own admission, noted the Board, the supervisor did not merely attend the
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“open” bargaining session, but actively observed and recorded the names of the
employees who chose to attend.
Moreover, the majority adopted the ALJ’s finding that, prior to this bargaining session,
the employer created the impression of surveillance when, in the presence of an
employee, the director of housekeeping instructed the supervisor to attend the session,
take notes of who attended, and report what happened.
Unlawful discharge. Additionally, the Board found that the employer unlawfully
terminated an employee because of her protected concerted activity at a mandatory
meeting. The employee engaged in protected activity by raising the question of gossip
and the meaning of the “cutting tongues” metaphor used several times by the director of
housekeeping at daily briefings. After the director failed to respond to the employee, she
later attempted to address the issue in private. In addition to discussing the matter with
coworkers after the meeting, the evidence also showed that coworkers had encouraged
her to take it up at the meeting. The employer had argued that the employee had lost the
protection of the NLRA by engaging in insubordinate, disruptive conduct during the
meeting. However, the employer failed to meet its burden of showing that it held an
honest belief that the employee engaged in serious misconduct.
The Board also determined that the discharged employee’s prior employment with the
employer did not provide a basis for its unilateral denial of access to her as a union agent.
As a result, the employer acted unlawfully when it barred her from its property after the
union designated her as an agent to service bargaining unit employees.
Dissent. Member Johnson filed a partial dissent. Johnson would not find either the
surveillance or the impression of surveillance violations. According to the dissent, the
complaint allegations did not actually alleged this violation, and the General Counsel
never sought to amend the complaint to address this issue or contend in a post-hearing
brief that it was unlawful. Thus, Johnson argued that the employer did not have fair
notice that the ALJ would find the unalleged violation.
Additionally, the dissent argued that the supervisor’s brief, open presence at the joint
bargaining session was not reasonably characterized as surveillance or creating the
impression of surveillance. Finally, he agreed with the majority that the employer acted
unlawfully by denying the discharged employee access to its property after she was
designated as a union agent; however, he would not adopt a finding that her discharge
was unlawful, but remand the matter to the ALJ for further explanation.
The slip opinion is: 361 NLRB No. 24.
Attorneys: Robert S. Katz (Torkildson, Katz, Moore, Hetherington & Harris) for Modern
Management Services, LLC, d/b/a The Modern Honolulu. Jennifer Cynn (UNITE HERE!
Local 5) for Unite Here! Local 5.
NLRB: Posters implying lack of sick leave for Jimmy John’s workers meant
contaminated sandwiches protected
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By Lisa Milam-Perez, J.D.
A Minnesota Jimmy John’s franchise unlawfully fired employees who participated in a
union “paid sick leave” campaign by plastering posters around town inferring that sick
workers were making the restaurant’s sandwiches and, consequently, customers were at
risk, a divided NLRB panel held. Dissenting, Member Johnson argued the posters were
so inflammatory, reckless, and disloyal that the employees who posted them lost the
protection of the NLRA (MikLin Enterprises, Inc dba Jimmy John’s, August 21, 2014).
A union campaign issue. The employer, a franchisee of nationwide chain Jimmy John’s
operates 10 sandwich shops in the greater Minneapolis-St. Paul area. After the Industrial
Workers of the World union narrowly lost a representation election, but was continuing
its organizing efforts, it launched a “paid sick leave” campaign among the franchisee’s
workers. The lack of paid sick leave was one of the key issues raised with the union
during the organizing campaign. Not only were employees not provided paid sick leave;
if they were too sick to work, they had to find their own replacements for their shift or
risk discipline. In a union phone survey, employees reported that they worked while sick
nearly 80 percent of the time, and overwhelmingly implicated the company’s attendance
policies as the reason why. Forty percent of respondents said they worked while they
were sick because they were unable to find a replacement, 30 percent reported that they
couldn’t afford to take unpaid time off (and 30 percent cited both factors).
The poster. As part of its campaign, the union created a poster that featured two identical
sandwiches and noted that one sandwich was made by a healthy Jimmy John’s worker
and the other by a sick worker. “Can’t Tell the Difference?” it asked. “That’s too bad
because Jimmy John’s workers don’t get paid sick days. Shoot, we can’t even call in sick.
We hope your immune system is ready because you are about to take the sandwich test
…” The poster also included the message: “Help Jimmy John’s workers win sick days,”
and listed contact information for the union.
Initially, the union placed the posters on community bulletin boards inside the
franchisee’s stores, and management would remove them whenever they were spotted.
But then, the union appealed to the company’s co-owner. Four employees approached the
co-owner asking to speak to him about the sick leave policy and delivering a letter from
the union. It requested paid sick leave for the employees, cited the risk to public safety in
the absence of such a benefit, and seeking a meeting as well. And, if the employer was
unwilling to meet, it would put the posters up in public locations citywide. When the
employer refused to meet, the union launched a press release the same day (which
included the poster art) and a group of employees set out to plaster the poster around
town. (The poster now urged readers to call the company president to voice support,
rather than the union.) Two days later, the employer fired six employees and issued
written warnings to three other employees for their participation.
Dispute-related. The Board majority held the discharge and discipline was unlawful,
finding the posting was protected activity. Applying the MasTecAdvanced Technologies
(2011) framework, it concluded that neither the posters nor the union press release were
so disloyal, reckless, or maliciously untrue as to lose the NLRA’s protection. The
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communications were clearly related to the ongoing labor dispute over paid sick leave,
for one, and their primary message (and intent) was to seek support for the workers in
that dispute. Anyone viewing the poster would construe it as such, the majority reasoned,
and not as an attempt to disparage the company or its product.
Truthful enough. Also, the posters were not reckless or “maliciously untrue,” the
majority found. It was factually accurate that the workers don’t get paid sick leave, as the
poster attested. The closer question was the assertion, “shoot, we can’t even call in sick.”
But while the statement didn’t flesh out the entirety of the employer’s sick-day policy, it
accurately characterized its impact to the workers. And it was nearly a verbatim repetition
of the company rule that “We do not allow people to simply call in sick! NO
EXCEPTIONS!” Because the attendance policy penalized sick employees who were
unable to find a replacement, employees generally did have to work to avoid discipline.
As such, the statement fell far short of being maliciously false, the majority reasoned;
moreover, a “reasonable reader” would see it as standard, labor-dispute hyperbole.
Contrary to the majority, Member Johnson contended the statement “we can’t even call in
sick” (written out in capital letters, incidentally) was empirically false. Employees were
entitled to call in sick at any time, he noted, on condition that he or she find someone to
cover the shift. The union and employees knew the policy well, and so knew that the
statement was false, but published it anyway. However, the majority responded that the
statement was in fact “well within the permissible bounds set by our case law.”
Not recklessly disparaging. Nor were the communications so disloyal or “recklessly
disparaging” as to remove the employees’ conduct from the Act’s protection. They
certainly shed “unwelcome light” on issues that might affect public safety, but the safety
issue raised was directly related to the ongoing labor dispute and the message didn’t stray
from that context.
Rejecting the majority’s reasoning on this point, Member Johnson would find the union’s
“contaminated sandwich” posters were deliberately disparaging and thus unprotected.
Moreover, he argued, the disparagement was completely disproportionate to the discrete
labor dispute at issue. The “use of the tainted food product ‘nuclear bomb’ was so
incommensurate with the sick leave grievance as to show that the purpose was to harm
the employer in a manner unrelated to the labor dispute,” he argued. And the fact that the
reputational attack was related to a labor dispute didn’t immunize such conduct.
No intent to harm. Also, there was no evidence the employees’ purpose was to inflict
harm on the company or that they put up the posters without regard for the potential
economic detriment to its business. Rather, by urging the public to “Help Jimmy John’s
Workers Win Sick Days,” they evidenced “a sincere desire to improve their terms and
conditions of employment by obtaining a more flexible attendance policy that included
paid sick leave.”
Disagreeing once again, Johnson found “malicious intent” on the employees’ part.
Specifically, in his view, their primary purpose was to injure their employer’s business
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reputation and income, not to redress their sick leave dispute, and such disloyalty left
them unprotected by the Act.
Empirical proof required? Johnson further lamented that the employees’ “devastating
direct attack” on the employer’s product quality here “would fail even the most basic
notions of statistical proof or empirical analysis” and cited the “infinitesimal risk” to
public health. The majority and dissent sharply disputed the factual underpinnings of the
poster’s claims, with the majority citing a CDC study on the danger to public health
caused by the handling of food by sick workers, and Johnson countering with the lack of
evidence that the employer’s attendance policy here “caused any customer to become ill
— ever.” More troubling to Johnson than the factual discrepancy itself, though, was that
the majority allowed a “post hoc justification” based on these unconnected facts, creating,
in effect, “a ‘safe harbor’ for disparaging an employer’s products or services, no matter
how far afield from the reality of the employer at issue, as long as the employees at some
point afterwards come up with some tenuous connection to the employer or its general
industry.”
In response, the majority countered that Johnson’s objections to a perceived absence of
“statistical proof or empirical analysis” misconstrued the applicable standard in play here.
In none of the relevant caselaw did the Board or the courts require empirical evidence to
support employees’ claims, and the majority declined to adopt such a standard.
Untrue = disloyal? “The majority’s approach gets the relationship between empirical
facts and disloyalty precisely backwards,” Johnson accused. Insisting that the overblown
nature of the alleged threat as described in the poster was clearly indicative of malice, he
rejected the majority’s position that evidence of the truth or untruth of employees’
allegations was irrelevant to a determination of disloyalty, saying this notion “disavows
human experience.” In his view, “[a]n employee who is willing to make up allegations
out of whole cloth against his or her employer is obviously far more disloyal, in any
meaningful sense of that word, than one who acts upon a reasonable but mistaken belief.”
Coca Cola overruled? The majority also rejected the employer’s contention that there
was a higher standard for disloyalty in the food industry. While there was certainly a
likelihood of customer alarm due to potential food safety threats, it was no greater cause
for concern than in the case of transportation, aviation, or health care settings, the Board
concluded, citing cases where similar concerns were raised in those other safety-sensitive
industries.
Also, the employer’s reliance on Coca Cola Bottling Works in support of this notion was
misplaced, the majority said. In that 1970 NLRB ruling, the Board found statements were
unprotected because they disparaged the quality of the product with the purpose of
instilling fear in customers. However, since that time, “Board law has developed
considerably in its approach to the question of employee disloyalty,” and to the extent the
holding in Coca Cola was inconsistent with these subsequent rulings, the case has been
implicitly overruled, the majority explained.
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Here, too, Member Johnson disagreed, finding the holding in Coca Cola to be in keeping
with subsequent Board decisions, and fitting squarely within “the consistent line of Board
precedent holding that there is a point when product disparagement in connection with a
labor dispute is so disloyal as to warrant removal of statutory protection.” Also, he urged,
adherence to the precedent was mandated by Section 10(c) of the Act, as interpreted by
the Supreme Court in Jefferson Standard.
Franchise relationship. Johnson also cited concerns that the posters “intentionally
enmeshed the franchisor in the dispute.” By identifying Jimmy John’s, rather than the
franchisee, the employees inaccurately implied that the national chain was responsible for
their woes — potentially placing the employer’s relationship with the franchisor at risk,
he asserted. But the majority was unswayed by their colleague. For one, it was irrelevant,
the majority said; it is well settled that the Act protects concerted activities on behalf of
employees of other employers, it reasoned, and the union campaign in this case was
clearly intended to benefit employees of other Jimmy John’s franchises as well, “by
bringing to the public’s attention a ‘marked increase in workers unable to take sick
leave.”
Moreover, the majority failed to see any evidence of malice in the fact that the poster did
not distinguish between franchisor and franchisee, pointed out that while the sandwich
shops are operated by the franchisee, “they are held out and known as Jimmy John’s.”
And at any rate, there was no evidence that the posters (or the related union press release)
undermined its standing with the franchisor in any way. And why would it?, the majority
reasoned; the franchisee and franchisor’s interests were clearly aligned here.
Haranguing of union supporter. The Board also found the employer violated the Act by
an assistant manager’s conduct in encouraging employees, supervisors, and managers to
publicly disparage a strong union supporter via posts on an antiunion Facebook page set
up by the company’s employees. The assistant manager posted the union adherent’s
phone number there and urged employees to call him. And antiunion employees
(including managers) posted crude, disparaging, and profane comments about the
employees’ organizing activities. While most of this banter, although distasteful, was fair
game given the “vituperative speech” tolerated in the heat of labor conflict, the assistant
manager crossed the line by encouraging harassment that “went beyond the bounds of
mere opinion or exuberance during the heat of a labor campaign.”
Postings by two supervisors were unlawful as well. One employee, who was actually
fired for putting excrement in the union supporter’s coat pocket several months earlier,
posted a picture of the union supporter on the Facebook page, altered significantly with
overtones of the excrement theme, and the supervisors replied “Bahahaha [sic] omg [sic]
this is great [sic] can we please post these everywhere [sic].” Encouraging employees to
disseminate the degrading picture would reasonably dissuade other employees from
supporting the union lest they fall victim to similar humiliation and ridicule, the Board
held.
The slip opinion is: 361 NLRB No 27.
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Attorneys: Michael A. Landrum (Landrum Dobbins) for MikLin Enterprises, Inc., dba
Jimmy John’s. Timothy Louris (Miller O'Brien Cummins) for Industrial Workers of the
World.
NLRB: Internet/blogging policy violated NLRA; so did Facebook-related firings
By Lisa Milam-Perez, J.D.
A restaurant/bar unlawfully discharged employees caught venting on Facebook because
they had to pay extra state income taxes due to the employer’s withholding mistakes, a
three-member NLRB panel held. The Board rejected the notion that the Facebook
conversation, in which the manager who performs the restaurant’s accounting duties was
called “an asshole,” was so disparaging or defamatory that the conduct lost the protection
of the Act. (In so ruling, it also rejected the use of the Atlantic Steel framework, generally
speaking, in cases involving the off-site use of social media.) Among other additional
findings, a majority found that the restaurant’s internet/blogging policy was unlawful;
Member Miscimarra dissented on this point (Three D, LLC dba Triple Play Sports Bar
and Grille, August 22, 2014).
Facebook griping. It all started when several restaurant employees (not represented by a
labor union, in this case) discovered that they owed more in state income taxes than they
anticipated. The employees discussed the problem with coworkers at the restaurant, and
some complained about it to the employer, who planned a staff meeting with its payroll
provider to discuss the employees’ concerns. Meanwhile, a former employee took to
Facebook to air her grievance: “Maybe someone should do the owners of Triple Play a
favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I
OWE money...Wtf!!!!” She added, in another comment: “It’s all Ralph’s fault. He didn’t
do the paperwork right. I’m calling the labor board to look into it bc he still owes me
about 2000 in paychecks.” At this point, one of the restaurant’s current employees
“liked” his former colleague’s initial status update.
Then another employee chimed in: “I owe too. [He’s] Such an asshole.” The employee’s
Facebook privacy settings permit only her Facebook friends to view her posts. But the
restaurant owner’s sister, also an employee, was a Facebook-friend of-a-friend, and she
told her brother about the social media conversation. She was fired when she came into
work. When asked why, the boss said she was “not loyal enough” to work for the
restaurant given her Facebook comment.
The employee who hit “like” in response to the initial comment met a similar fate. He
was brought into the office, asked whether he “had a problem with them, or the
company,” was interrogated about the Facebook discussion, the identity of other people
who took part in the conversation, whether he had written anything negative about
management, and the meaning of his “like.” He was also told that because he “’liked’ the
disparaging and defamatory comments,” he obviously wanted to work elsewhere. After
showing the employee the door, the restaurant owner told him that his attorney instructed
the restaurant to fire anyone involved in the Facebook conversation — and that “you’ll be
hearing from our lawyers.” He never did hear from the restaurant’s attorneys, although
they contacted the other discharged employee raising the threat of legal action against
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her; they also contacted the former employee, who deleted the entire conversation and
posted a retraction.
Unfair labor practice findings. The law judge found the Facebook discussion was
concerted activity under the standard set forth in Meyers Industries because it involved
four current employees and was “part of an ongoing sequence” of discussions that began
in the workplace about the restaurant’s calculation of employees’ tax withholding. She
also found the employee who hit the “like” button was expressing his support for the
others, and thus was a participant in the protected, concerted activity. Also, the activity
did not lose the protection of the Act under Atlantic Steel Co or Jefferson Standard, she
concluded, so their discharge on this basis was unlawful. The Board panel agreed, but
under a slightly different analysis.
The Board also held the restaurant separately violated the NLRA by threatening the
employees with discharge, interrogating them about their Facebook activity, informing
them that they were being discharged because of their Facebook posts, and threatening
them with legal action.
Atlantic Steel does not apply. Unlike the law judge, the Board did not apply the Atlantic
Steel framework in deciding whether the Facebook comments at issue here lost the
protection of the Act, explaining that this precedent was “not well suited to address issues
that arise in cases like this one involving employees’ off-duty, offsite use of social media
to communicate with other employees or with third parties.” Atlantic Steel factors work
well when analyzing whether direct, face-to-face workplace confrontations between
employees and management are “so opprobrious” as to lose the Act’s protection, the
Board noted, but it hasn’t typically been applied as to third-party or public
communications. (Atlantic Steel’s “place of discussion” factor, in particular, is
problematic to apply outside the physical workplace.) In those cases, the Board has
applied the standards set forth in Jefferson Standard and Linn. Doing the same here, the
Board found the comments at issue were statutorily protected.
The Board was careful to note, though, that it did not hold “employees’ off-duty, offsite
use of social media can never implicate an employer’s interest in maintaining workplace
discipline and order in the same manner that a face-to- face workplace confrontation with
a manager or supervisor does.” However, the facts here did not support such a finding.
Specifically, the employee’s use of “asshole” to describe the manager, during the course
of a protected discussion on social media, didn’t sufficiently implicate the restaurant’s
interest in maintaining discipline in the workplace to the extent that an Atlantic Steel
analysis was called for.
Comments not unduly disparaging. It was undisputed the Facebook conversation was a
concerted activity under the NLRA; the question was whether the conversation lost the
protection of the Act. As the restaurant saw it, the Facebook posts were made in a
“public” forum accessible to other workers and to customers — adversely affecting
management’s authority in the workplace as well as its public image. However, the Board
disagreed that the communication here was “so disloyal, reckless, or maliciously untrue”
as to be unprotected under Jefferson Standard and its progeny. The comments made no
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mention of the restaurant’s products or services, let alone disparage them, the Board
observed. “Where, as here, the purpose of employee communications is to seek and
provide mutual support looking toward group action to encourage the employer to
address problems in terms or conditions of employment, not to disparage its product or
services or undermine its reputation, the communications are protected.”
Distinguishing the comments at issue with those deemed unprotected in Jefferson
Standard, the Board said the Facebook discussion here clearly revealed the existence of
an ongoing dispute (over the restaurant’s tax withholding practices). Also, the discussion
was not directed to the general public; the comments were posted on an individual’s
personal Facebook page, not on a company page providing information about its products
or services. Although the record was unclear as to the privacy settings used by the former
employee (whose initial status update launched the whole affair) or other “friends” who
made comments, “we find that such discussions are clearly more comparable to a
conversation that could potentially be overheard by a patron or other third party than the
communications at issue in Jefferson Standard, which were clearly directed at the
public.”
Grappling with Facebook-specific discourse. What did the employee’s Facebook “like”
mean in this instance? While it was ambiguous, the Board concluded the employee was
merely endorsing the original status update by the former employee, not the “entire topic
as it existed at the time,” as the law judge had found (including the subsequent contention
that it was “all Ralph’s fault.”) Had the employee intended to express his approval or
agreement with the additional comments that followed the initial status update, he would
have “liked” them each individually, the Board reasoned.
The Board also rejected the employer’s effort to pin the blame on the two employees for
other comments made during the ongoing Facebook conversation, including comments
by the former employee accusing the restaurant of pocketing employees’ money.
Assuming that accusation would have been unprotected, it didn’t follow that the
employees would have lost the protection of the Act by simply participating in an
otherwise-protected Facebook discussion where unprotected statements were made by
other participants.
Comments not defamatory. Nor were the employees’ Facebook comments defamatory
under the standard set forth in Linn and its progeny. The Board saw no basis to find the
employees’ claims that their withholding was insufficient to cover their state tax liability,
or that the shortfall resulted from an error on the employer’s part, were maliciously
untrue. As for the “asshole” comment about the restaurant manager, made in connection
with the complaints about the withholding errors, the Board said the employee was
merely voicing a negative personal opinion that could not reasonably be read as a
statement of fact. This, too, did not lose the Act’s protection.
Discharges unlawful. Because it was undisputed that the employees’ discharges were
motivated by the Facebook comments, it also followed that the finding that such
comments were protected meant the discharges violated the Act. Of note here: the law
judge applied Burnup & Sims in finding the discharges violated Sec. 8(a)(1),
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notwithstanding that the restaurant may have mistakenly believed, in good faith, that the
Facebook posts were unprotected. But Burnup & Sims applies in cases involving
mistakes of fact, not mistakes of law. This was clearly not a “mistake of fact” case, so
this precedent did not apply. “Otherwise,” as the Supreme Court explained, “the
protected activity would lose some of its immunity, since the example of employees who
are discharged on false charges would or might have a deterrent effect on other
employees.”
Internet policy unlawful. Here’s where the Board parted ways with the law judge, and
Member Miscimarra, with the majority. The judge had dismissed the allegation that the
restaurant unlawfully maintained an overly broad internet/blogging policy, but the Board
majority reversed, finding that employees would reasonably construe the restaurant’s
policy to prohibit the type of protected Facebook posts that led to the unlawful
discharges. Specifically, employees could reasonably interpret the policy barring
“inappropriate discussions” as prohibiting any discussions about terms and conditions of
employment deemed “inappropriate” by the employer. Problematic to the majority was
that the rule contained only one other prohibition — against revealing confidential
information — and offered no illustrative examples as to what would be deemed
inappropriate in the employer’s eyes. As such, the term “inappropriate” was “sufficiently
imprecise” to implicate Section 7 concerns. (On this holding, the majority was guided by
its precedent in First Transit, Inc, noting that the Board’s approach in this area “has
received judicial approval.”)
(Miscimarra disagreed with the notion that the term “inappropriate” was too imprecise to
pass muster without also providing illustrative examples. As he observed, most
individuals would appreciate that “inappropriate” behavior could have consequences
sufficiently serious as to violate the law and result in discipline. “It does not per se violate
Federal labor law to use a general phrase to describe the type of conduct that may do so.”
If such were the case, he reasoned, then “just cause” provisions found in most bargaining
agreements over the last eight decades would be deemed invalid, he argued.)
And while the General Counsel did not contend that the restaurant expressly relied on its
internet policy in discharging the employees in this case, by firing them unlawfully for
their Facebook discussion, the restaurant conveyed a strong message to its workforce
about “the scope of its prohibition against inappropriate discussions and that they should
construe its rule against inappropriate discussions to include such protected activity.”
True, the policy contained a general savings clause noting that it had no force or effect if
state or federal law precluded it, but the unlawful discharges sent a contrary message.
Miscimarra rejects Lutheran Heritage. Finding nothing in the language of the internet
policy that employees could reasonably construe to prohibit Section 7 activity,
Miscimarra would find the policy was “legitimately aimed to prevent the revelation of
proprietary information and statements about the company, its management, and its
employees that may be unlawful.” Miscimarra noted too that he disfavored the current
Board standard regarding overly broad work rules and policies, set forth as the first prong
of Lutheran Heritage (work rules are unlawful even where they do not explicitly restrict
protected activity, and are not applied against or promulgated in response to such activity,
66
if “employees would reasonably construe the language to prohibit Section 7 activity”).
He urged the Board to reconsider the standard when an appropriate case permits (but,
even under Lutheran Heritage, he would find the policy here lawful — phrased “in
general commonsense terms that preclude it from reasonably being considered unlawful
under any standard.”)
Miscimarra also decried the majority’s “cobbling together” here of prongs one and three
of the Lutheran Heritage standard as “contrary to the careful separation of those two
theories of violation established in that case.” Under prong one, the question is whether
the language of a work rule would, on its fact, reasonably be interpreted to prohibit
Section 7 activity; prong three asks whether a rule, regardless of its wording, has been
applied to restrict Section 7 rights. “The majority continues down the path of this hybrid
category of violation, under which a rule that is not unlawful on its face and has not been
applied to restrict the exercise of Section 7 rights nevertheless is found unlawful based on
a mixture of the rule’s language and the employer’s conduct,” he asserted. “In so doing,
the majority contributes to the uncertainty employers confront in seeking to square their
rules with our Lutheran Heritage prong-one precedent, which, at this point, consists of so
many distinctions, qualifications, and factual variations as to preclude any reasonable
‘certainty beforehand’ for most parties ‘as to when [they] may proceed to reach decisions
without fear of later evaluations labeling [their] conduct an unfair labor practice.’”
The majority rejected the “cobbling together” accusation, and the notion that its holding
would spark greater uncertainty on the part of employers by applying the first prong of
Lutheran Heritage to the facts at hand. Rather, its finding that the policy in question here
was unlawful was in keeping with “the many Board decisions that have found a rule
unlawful if employees would reasonably interpret it to prohibit protected activities,” the
majority countered.
Threatening litigation: an unresolved issue. Also worth noting: in adopting the law
judge’s finding that the restaurant also violated the Act by unlawfully threatening legal
action against the employees, the Board relied on the restaurant’s post-discharge
statement to one employee that he would “be hearing from [its] lawyers.” This threat was
not incidental to a lawsuit: the lawyers never contacted him, and the restaurant took no
legal action against him. By its threat alone, though, the restaurant violated Sec. 8(a)(1),
regardless of whether a lawsuit against the employee would have been unlawful had one
been filed.
On this point, the law judge erred in stating that the NLRB had “explicitly declined to
apply” the principles of BE & K Construction Co. (2007) to threats to initiate litigation
where the threat is incidental to the actual filing of a lawsuit itself. That issue remains
undecided, the Board noted, adding that its resolution was unnecessary here.
The slip opinion is: 361 NLRB No 31.
Attorneys: Joseph Yamin (Yamin & Grant) for Three D, LLC.
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NLRB: Interim earnings off the table when calculating backpay in non-termination
cases
By Lisa Milam-Perez, J.D.
“Important statutory policies strongly support a practice of declining to deduct interim
earnings” when applying the backpay formula set forth in Ogle Protection Service in
cases where employees have suffered economic loss stemming from an employer’s unfair
labor practice, but not termination of employment, held a three-member panel of the
NLRB. Justifying its policy choice in a supplemental decision on remand from the D.C.
Circuit, the Board reaffirmed its backpay order in a case where employees had sought
alternative work to offset an unlawful reduction in their hours (Community Health
Services, Inc dba Mimbres Memorial Hospital and Nursing Home, August 25, 2014).
Backpay due. In the underlying unfair labor practice case, a hospital violated the NLRA
by unilaterally reducing the work hours of respiratory department employees from 40
hours per week to 32-36 hours per week. The Board ordered the employer to make the
employees whole for lost earnings that resulted from the violation, computing the relief in
accordance with Ogle Protection Service. Two of the affected employees had taken on
additional work in order to make up for the lost hours at the hospital, generating interim
earnings. In compliance proceedings, the employer contended these earnings should have
been deducted from their backpay awards. But the law judge (and later, the Board)
disagreed, explaining that under Ogle Protection, interim earnings are not considered in
cases that don’t involve job loss. The employer petitioned for review, arguing that the
Board erred in refusing to consider the interim earnings in its backpay calculation.
The D.C. Circuit remanded, granting the employer’s petition for review in part and
directing the NLRB to undertake a more extensive analysis of the issue. The Board had
failed to properly explain why it wouldn’t consider the interim earnings of employees
who took second jobs to compensate for earnings lost when their employer unilaterally
cut their hours. As the appeals court saw it, Ogle Protection did not address the situation
here; in that case, employees had not taken on extra work. While the court didn’t say the
NLRB had to consider the interim earnings when calculating backpay in such
circumstances, the Board did have to explain why it didn’t.
Historical underpinnings. In Phelps Dodge Corp., the Supreme Court imposed a
mitigation requirement on employees who were wronged by violations of the NLRA, not
so much to minimize their damages but pursuant to “the healthy policy of promoting
production and employment.” In the end, the Board urged, Phelps Dodge stood as an
affirmation of the Board’s remedial authority, rather than a restriction on that authority.
Also, in F.W. Woolworth (1950), the Board adopted its quarterly computation method in
cases involving unlawful termination and orders of reinstatement; the Supreme Court
expressly approved this formula as a legitimate exercise of the agency’s “broad
discretionary” authority to grant relief under Section 10(c).
Subsequently, the Board held in Ogle Protection that in cases that don’t involve
termination (or interim earnings that would reduce a backpay award), the quarterly
computation was unnecessary. This holding recognized that “in most cases involving
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unlawful adverse economic consequences, but no cessation of employment, affected
employees will not even have the opportunity to generate any interim earnings.” So it
made sense that the NLRB generally doesn’t mention deducting interim earnings in cases
applying this standard, the Board wrote. While occasional Board rulings have provided
for deduction of interim rulings where affected employees had not been terminated —
even while nominally applying Ogle Protection — these represent a mere fraction of
cases in which the ruling had been correctly applied — and they were mistaken. Aside
from these outliers, standard Board policy has been to preclude deducting interim
earnings from other jobs when applying Ogle Protection to remedy losses incurred in the
absence of termination and a corresponding duty to mitigate damages.
Effectuating NLRA policy. And that policy is sound, the Board reaffirmed here. Noting
the issue at hand was a policy matter implicating the Board’s “undisputedly broad
discretionary authority to fashion remedies under Section 10(c) of the Act,” it explained
that it “would not best effectuate statutory policy” to deduct interim outside earnings in
cases where employees have no duty to mitigate damages by seeking such earnings.
Holding that interim earnings should not be deducted when Ogle Protection’s backpay
formula is applied is well within the Board’s remedial discretion, it stated.
While the D.C. Circuit had proposed that the Board could deduct interim earnings
without imposing a duty to mitigate (it could, for example, reduce backpay for nonterminated employees who had sought out interim earnings while leaving backpay intact
for those employees who had not done so), doing so “would contravene the policy of
promoting production and employment,” as employees would have less incentive to
voluntarily find interim work, the Board reasoned.
Why should the employer benefit? The Board cited prior Board rulings for the
proposition that, “When a diligent backpay claimant chooses to work additional overtime
during interim employment, it should operate to his [or her] advantage, not that of the
employer required to make him [or her] whole for a discriminatory discharge.” That
reasoning applies with equal force in cases where a claimant who is under no obligation
to work additional interim hours on another job chooses to do so. That’s especially true
because an employee who is forced to take a second job because his work hours have
been trimmed has to nonetheless adjust any outside work hours to accommodate his
regular employer’s demands. The claimant faces other hardships, like resolving
scheduling conflicts and travelling to the moonlighting job. “In fashioning make-whole
relief, we acknowledge these practical considerations and encourage employees to
address their financial situations contemporaneously.”
Any additional interim earnings received by a diligent claimant in this case through his
own extra effort does not, in the end, make the claimant “more than whole.” And even if
it did, such would be “a permissible remedial outcome,” since it would bear an
appropriate relation to the policies of the NLRA. On the other hand, to allow the
employer to deduct interim earnings from backpay owed rather than let the employee
accrue the benefit of his efforts would give “an unwarranted windfall” to the employer,
discouraging compliance with the Act, the Board reasoned. Cognizant that the longer an
employee worked a second job, the lower its ultimate backpay liability, a wrongdoing
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employer would be unfairly rewarded by delaying compliance with a Board rescission
order. In this situation, the employee would essentially be “subsidizing” the violation, to
the employer’s benefit. Such an outcome would not effectuate the purposes of the Act,
the Board found.
The slip opinion is: 361 NLRB No 25.
Attorneys: Bryan Tyler Carmody (Law Office of Bryan T. Carmody) for Community
Health Services, Inc. d/b/a Mimbres Memorial Hospital and Nursing Home.
NLRB: Union unlawfully maintained agreement giving hiring preferences based on
union membership
By Ronald Miller, J.D.
Union acted unlawfully by enforcing agreements that gave preferential treatment in
hiring, transfers and buyouts to employees who were union members and/or worked for
signatory employers over employees who were not members or did not work for
signatory employers, ruled a three-member panel of the NLRB. Moreover, the union
violated the NLRA by failing to give employees of a signatory employer notice of their
rights under NLRB v. General Motors, to refrain from becoming union members, and
Communications Workers v Beck, to object to paying union dues for union activities not
germane to the union’s duties as bargaining agent (Newspaper and Mail Deliverers’
Union of New York and Vicinity (NYP Holdings, Inc dba New York Post), August 21,
2014).
Hierarchical structure. For many years, the union represented the employees of
publishers and wholesalers that were represented in collective bargaining by two
multiemployer associations. The union and the employers agreed to a hierarchical
structure for hiring extra employees. Each union-signatory employer would have a group
of steady employees called “regular situation holders” or “RSHs,” plus a roster of extra
employees to draw from to perform any remaining work that day. After the RSHs
received their assignments, the extras would bid for the remaining work according to
their placement in one of four groups and their seniority within that group.
Group 1 employees were assigned an industry-wide priority number that determined
seniority among the employees of all union-signatory employers. Group 2 consisted of
individuals currently employed by any union-signatory employer within the union’s
jurisdiction. Group 3 included individuals who obtained regular work at a particular
employer over a period of time. Group 3 extras were not eligible to become union
members, but their wages and conditions of employment were set by the contract that the
union had with their employer. They were also required to pay agency fees to the union.
Group 4 extras were true casual employees, and individuals on this list were given work
as a last resort. Like Group 3 extras, they could not become union members, but their
wages and conditions of employment were set by the union contract of their employer,
and they were required to pay the union an agency fee.
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Altered bargaining landscape. When this structure was first established, it was in the
setting of multiemployer bargaining. In such a context, the use of union-based seniority
to establish employment preferences was not unlawful. The multiemployer bargaining
unit being unionwide, union and unit seniority were coextensive, so there could be no
discrimination based on union seniority rather than unit seniority. Over time, publishers
withdrew from the association and bargained with the union individually, and employees
were represented in separate bargaining units. Similarly, the wholesalers association
ceased to exist. This altered the landscape to individual employer bargaining and separate
bargaining units.
The contract between the union and New York Post included provisions permitting
employees of other signatory employers to transfer to the Post under certain
circumstances. There was also a side agreement that, if one of several designated
signatories, including City & Suburban Delivery Systems (C&S), a New York Times
subsidiary, ceases operations, the Post would add to its own Group 1 list a certain number
of that employer’s RSHs and Group 1 extras. In 2008, the Post needed to fill a number of
vacancies. However, the union responded that there was an industry-wide “freeze” on all
Group 1 lists due to economic uncertainty. After C&S went out of business in 2009, the
Post agreed to employ a number of employees who lost their jobs at C&S.
Thereafter, the Post filed a complaint alleging that the union acted unlawfully by
maintaining and applying contractual provisions giving hiring preferences under the side
agreement. Specifically, the Post alleged that the union attempted to cause it to
discriminate against certain unit employees by giving hiring preferences to nonunit
individuals based on membership in the union. The complaint also alleged that the union
acted unlawfully by refusing the Post’s request to elevate employees from Group 3 to fill
vacancies on the Group 1 list because it wanted to preserve work opportunities for
nonunit members employed by other signatory employers. Finally, the complaint alleged
that the union acted unlawfully by failing to give the Post’s unit employees appropriate
notice of their General Motors and Beck rights.
Hiring preference. The key issue here was whether the union violated Section
8(b)(1)(A) and (2) of the NLRA by entering into and enforcing agreements that gave
preferences (in hiring, transfers, and buyouts) to one group of employees over another,
based on the preferred group’s membership in the union and/or their employment with an
employer that had a collective-bargaining relationship with the union. Here, the Board
agreed with an administrative law judge that the union’s use of industry-wide priority
numbers, and the fact that almost all employees became union members when they
received these priority numbers, created a union-based preference that favored employees
who had worked for union-signatory employers and/or were union members over
employees who had not worked for union-signatory employers and/or were not union
members.
“The basic rule of law” applicable here is that discrimination in hiring and promotion
based solely on union considerations (i.e., union membership and/or prior employment
with union-signatory employers) is unlawful. Thus, the Board adopted the ALJ’s findings
that the union violated Sec. 8(b)(1)(A) and (2) by causing and attempting to cause the
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Post, and other signatory employers to give employment preferences to union-represented
employees based on union membership and/or industry-wide priority numbers. By virtue
of this preference based on union membership, and/or their RSH or Group1 status at
other union-signatory employers, non-unit employees had priority over in hiring over the
Post’s own Group 3 and 4 extras who had greater unit seniority.
Therefore, the union’s maintenance and application of its industry-wide priority number
system, operating in tandem with union security requirements, unlawfully favored
individuals who were union members and/or had greater length of employment with
union-signatory employers as RSHs or Group 1 extras; and this arrangement disfavored
individuals who were not union members and/or had not worked for union-signatory
employers. Thus, the union caused the Post and the Times to discriminate against
employees because of their prior lack of representation by the union.
Notice of rights. The Board also agreed with the law judge that the union violated
Section 8(b)(1)(A) by failing to inform Post employees whom it sought to obligate to pay
dues or agency fees under a union-security clause of their right under General Motors, to
be and remain nonmembers, and of the rights of nonmembers under Beck, to object to
paying for union activities not germane to the union’s duties as bargaining agent, and to
obtain a reduction in dues and fees for such activities. Although the General Counsel
subpoenaed the union to provide any notices it had furnished to employees in this regard,
it failed to do so. The Board therefore drew an adverse inference that the union never
informed employees of their General Motors and Beck rights.
The slip opinion is: 361 NLRB No. 26.
Attorneys: Elliot S. Azoff (Baker & Hostetler) for NYP Holdings, Inc, d/b/a New York
Post. Daniel Silverman (Silverman & Silverman) for Newspaper and Mail Deliverers’
Union of New York and Vicinity. Michael J. Lebowich (Proskauer Rose) for New York
Times.
Hot Topics in WAGES HOURS & FMLA:
Veterans services provider faces $600K-plus prevailing wage complaint
The DOL’s Wage and Hour Division (WHD) has determined that Topeka, Kansas-based
Assisted Transportation Inc. violated the Service Contract Act (SCA) and the Contract
Work Hours and Safety Standards Act (CWHSSA) when it failed to pay $616,187 in
prevailing wages, fringe benefits, and overtime to 52 employees. The employees
provided wheelchair van services to veterans, transporting them between their homes and
the Marion and Evansville, Indiana, VA Medical Centers, according to a July 31 agency
announcement.
As a result, the DOL has filed an administrative complaint with the Office of
Administrative Law Judges seeking the back wages due.
Specifically, WHD investigators found that 51 shuttle bus drivers were misclassified as
taxi cab drivers and were generally due an additional $3 to $5 per hour. The company
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purportedly only paid drivers the prevailing wage when a veteran was in the vehicle. All
other time, such as wait time and time spent completing maintenance and paperwork, was
considered noncontract time and paid at a lower hourly rate. These practices created
fringe benefit violations, the WHD said. The investigation also revealed that Assisted
Transportation failed to include health and welfare benefits with driver’s holiday pay.
Additionally, one employee was misclassified as a travel clerk when he performed the
work of a motor vehicle dispatcher.
The WHD said that the company violated the overtime provisions of the CWHSSA by
failing to classify the drivers properly under the SCA and pay legally required overtime at
time and one-half the employees’ correct rates for all hours worked over 40 in a
workweek.
“Assisted Transportation received government funding to provide services for our
nation’s veterans,” commented WHD’s St. Louis Director Norma Cervi. “It has a legal
and moral obligation to abide by the rules of the signed contract that requires proper pay
to employees for work performed. Government contracts include specific requirements
regarding pay and benefits. Contractors are aware of these obligations when they bid for
jobs and when contracts are awarded. Taxpayers have a right to expect that federal
contractors, who are paid with tax dollars, will comply with the law.”
Assisted Transportation is a subcontractor of Logistic Services LLC, based in Topeka,
Kansas.
President signs another Executive Order after House votes to sue him
By Pamela Wolf, J.D.
As promised, the President has signed the Executive Order (EO) on Fair Pay and Safe
Workplaces, also taking the opportunity to tick through several recent EO’s he felt
compelled to issue in the face of what he described as a Congress that is “doing so little
or nothing at all to help working families.” At the signing on July 31, the Chief Executive
also pointed to the solely Republican House vote the night before to sue him for such
actions — calling it a move that “wastes America’s time” — and noting the absence of a
vote on the minimum wage, immigration reform, strengthening the borders, or family
leave.
Fair pay and safe workplaces. This latest EO is aimed at protecting both workers and
taxpayers alike, by ensuring government contracts are not going to companies that violate
federal labor laws. The President pointed to several aspects of the executive directive,
including these:

It will hold corporations accountable by requiring potential contractors to disclose
labor law violations from the past three years before they can receive a contract.
It’s going to crack down on the worst violators by giving agencies better tools to
evaluate egregious or repeated offenses.
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
It will give workers better and clearer information on their paychecks, so they can
be sure they’re getting paid what they’re owed.

It will give more workers who may have been sexually assaulted or had their civil
rights violated their day in court.

It will ease compliance burdens for business owners around the country by
streamlining all types of reporting requirements across the federal government,
the first step in a series of actions to make it easier for companies, including small
businesses, to do business with the government. The goal is to make it easier for
good corporate citizens to do business with the federal government.

For companies that have violations, the emphasis will not be on punishments, but
rather on giving them a chance to follow good workplace practices and come into
compliance with the law.

The Administration will spend time talking to and listening to businesses owners
so the EO can be implemented thoughtfully and in a manner that is manageable.
The President said that the goal “is to make sure that the EO raises standards across the
economy; encourages contractors to adopt better practices for all their employees, not just
those working on federal contracts; give responsible businesses that play by the rules a
fairer shot to compete for business; streamline the process; and improve wages and
working conditions for folks who work hard every single day to provide for their families
and contribute to our country.”
Prior executive action. This most recent executive action is part of a pattern of similar
moves to implement to the extent possible the President’s policies aimed at helping
working families in the face of a Congress that has chosen not to act. Underscoring his
efforts to provide relief otherwise not made available, Obama said, “so far this year,
we’ve made sure that more women have the protection they need to fight for fair pay in
the workplace — because I believe when women succeed, America succeeds.” He also
noted executive action to “give millions of Americans the chance to cap their student loan
payments at 10 percent of their income.”
“We’ve acted on our own to make sure federal contractors can’t discriminate based on
sexual orientation or gender identity — because you shouldn’t be fired because of who
you love,” the President continued. “If you’re doing the job, you should be treated fairly
and judged on your own merits.” Finally, he pointed to the EO under which federal
contractors are required to pay what he called “a fair wage of $10.10 an hour.”
“I'm ready to work with [Congress] any time that they want to pursue policies that help
working families,” Obama declared. “But where they’re doing so little or nothing at all to
help working families, then we've got to find ways, as an administration, to take action
that's going to help.”
Vote to sue the President. The House on Wednesday, July 30, approved a resolution
providing the authority to initiate litigation for actions taken by the President or other
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executive branch officials that are inconsistent with their duties under the Constitution.
The 225-201 vote approving the measure (H.R. 676) was supported only by Republicans.
“One of the main objections that’s the basis of this suit is us making a temporary
modification to the health care law that they said needed to be modified,” the President
said. “So they criticized a provision; we modify it to make it easier for business to
transition; and that’s the basis for their suit. Now, you could say that, all right, this is a
harmless political stunt — except it wastes America’s time.”
But House Speaker John Boehner (R-Ohio) sees it quite differently. “Over the past five
years, President Obama has circumvented the American people and their elected
representatives through executive action, changing and creating his own laws, and
excusing himself from enforcing statutes he is sworn to uphold,” he wrote in a July 12
column.
He too, referred to the Affordable Care Act: “In the case of the health care law’s
employer mandate — which is arguably the best known example of his executive
overreach — the president changed the law without a vote of Congress, effectively
creating his own law by literally waiving the mandate and the penalties for failing to
comply with it. Simply put, he legislated without the Legislative Branch — and the
Constitution doesn’t give presidents the power to do that.”
LinkedIn will pay $5.85M to resolve FLSA overtime violations
LinkedIn Corp. has agreed to pay $5.85 million to resolve FLSA overtime and records
violations identified by agency investigators as to 359 former and current employees
working at company branches in California, Illinois, Nebraska, and New York.
Specifically, LinkedIn will pay $3,346,195 in overtime back wages and $2,509,646 in
liquidated damages. When notified of the violations that were found by the DOL’s Wage
and Hour Division (WHD), LinkedIn agreed to pay all the overtime back wages due and
take proactive steps to prevent repeat violations, the DOJ said in an August 4 agency
release.
WHD investigators found that LinkedIn failed to record, account, and pay for all hours
worked in a workweek. In addition to paying back wages and liquidated damages,
LinkedIn has entered into an enhanced compliance agreement with the DOL under which
the company agreed to: provide compliance training and distribute its policy prohibiting
off-the-clock work to all nonexempt employees and their managers; meet with managers
of current affected employees to remind them that overtime work must be recorded and
paid for; and remind employees of LinkedIn’s policy prohibiting retaliation against any
employee who raises concerns about workplace issues.
“This company has shown a great deal of integrity by fully cooperating with investigators
and stepping up to the plate without hesitation to help make workers whole,” remarked
Dr. David Weil, administrator of the Wage and Hour Division. “We are particularly
pleased that LinkedIn also has committed to take positive and practical steps towards
securing future compliance.”
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“Off the clock’ hours are all too common for the American worker,” added WHD District
Director Susana Blanco. “This practice harms workers, denies them the wages they have
rightfully earned and takes away time with families.”
Super Maids loses misclassification battle over “independent contractors” who
signed noncompetes
In the wake of an investigation conducted the DOL’s Wage and Hour Division (WHD),
Romeoville, Illinois-based Super Maid LLC, and owner-operator Paul Krawczyk will pay
55 misclassified workers a total of $184,505 in back wages and liquidated damages under
an order entered in the Northern District of Illinois. The employer treated employees as
independent contractors, even though they were required to sign noncompete agreements.
Both defendants are also enjoined from violating the FLSA in the future.
The WHD investigation found that employees of Super Maid, which provides cleaning
services throughout Chicago and northwest Indiana, were misclassified as independent
contractors rather than employees entitled to minimum wage, overtime, and other
protections of the FLSA, according to an August 5 DOL release. Investigators found that
maids were paid a flat rate per house cleaned, regardless of the amount of time it took,
and were not compensated for all hours worked, including travel time between cleaning
assignments. These practices resulted in maids earning less than the federal minimum
wage of $7.25 per hour, the DOL said. Employees did not receive additional
compensation for overtime hours, and the company failed to maintain accurate payroll
records.
According to the investigation, 55 workers were due $92,252.50 in unpaid overtime and
minimum wages. The court ordered an equal amount payable to the maids in liquidated
damages.
Independent contractors are supposed to compete. The owner’s claims that the maids
were independent contractors were proven false by actions the company took, the DOL
said, including requiring maids to sign noncompete agreements and not allowing them to
clean homes other than those assigned by Super Maid. The company also provided
training, vehicles, and cleaning equipment, and set all work hours and assignments. Super
Maid purportedly intimidated and threatened workers with disciplinary actions and loss
of pay for exceeding time limits for cleaning. The also company threatened to sue maids
who violated the noncompete agreement, according to the DOL.
“Super Maid and its owner demonstrated a reluctance to cooperate with investigators by
failing to produce reliable records and to comply with wage laws,” remarked WHD
Regional Administrator Karen Chaikin. “It is unfortunate that there are employers who
believe they can exploit vulnerable workers through intimidation and harassment. This
judgment sends a clear message that denying employees their rightfully earned wages
will not be tolerated.”
The DOL’s regional solicitor in Chicago litigated the case.
Detroit affordable housing construction workers get $415,000-plus in back wages
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More than 90 construction workers on the federally funded Palmer Park Square
affordable housing project in Detroit have received $415,000-plus in back wages, thanks
to investigations conducted by the DOL’s Wage and Hours Division (WHD). The
investigations were part of a multiyear strategic enforcement initiative aimed at
combating widespread labor violations on federally funded construction projects in the
Detroit area, such as affordable housing construction projects funded by HUD.
The investigations found that Malino Construction and several project subcontractors
violated the Davis-Bacon and Related Acts (DBA), the Contract Work Hours and Safety
Standards Act, and the FLSA, according to an August 5 WHD release. The companies
failed to pay prevailing wages, fringe benefits, and overtime to construction workers on
the project, failed to keep accurate time and payroll records for employees, and provided
falsified, certified payroll records to the government, the Division said.
Detroit-based Malino Construction, the prime contractor on the project, also has been
debarred from bidding on federal contracts for up to three years because of the extent and
willful nature of the violations.
Strategic enforcement initiative. Malino Construction contracted with several other
companies for general construction work on the Palmer Park Square multifamily housing
units in Detroit that were constructed in 2012 and 2013. On a DBA project, the prime
contractor is responsible for the compliance of subcontractors and lower-tier
subcontractors. Under the strategic enforcement initiative, 19 investigations focused on
the companies working on the project. All contractors found in violation have agreed to
comply with applicable wage laws in the future.
“These are tough economic times for the people of Detroit, and the last thing we need is
for the workers who are helping to rehabilitate this city to be denied their rightful wages
and benefits,” remarked WHD District Director Timolin Mitchell. “With our ongoing
initiative, we are working with the Michigan State Housing Development Authority and
the Detroit Housing Commission to ensure federal labor law compliance on taxpayerfunded projects.”
The WHD’s Detroit office is continuing its strategic enforcement initiative this year to
ensure compliance with the wage and fringe benefit requirements that apply to federal
and federally assisted contracts.
Morgan Stanley willing to pay $4.2M to resolve class OT claims
By Pamela Wolf, J.D.
Under a proposed deal, Morgan Stanley & Company, LLC, would pay up to $4.2 million
to bring to a close class claims that the wealth management giant failed to pay overtime
that was due its client service associates. Brought in 2011, the complaint alleges claims
under both the FLSA and New York state law.
After the court conditionally certified a FLSA collective class earlier in the litigation, 850
putative class members opted into the action — this number does not include current and
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former workers associated with the putative state law claim raised in the case. The
estimated size of the Rule 23 class for those asserting state law claims is about 1,500.
Terms of the deal. Under settlement agreement described in the plaintiffs’ brief in
support of its motion for preliminary approval, Morgan Stanley would pay not more than
$4,200,000 into a settlement fund to satisfy the claims of two classes of client services
associates. The first would be a federal class of those who filed timely consents to join
the action. The second, a state-law class, would include those employed in New York
State at any time from July 29, 2005, until the date of preliminary approval or October
17, 2014, whichever is sooner.
Out of the settlement funds would be deducted up to one-third of the maximum fund
amount in unopposed attorneys’ fees, as well as “reasonable costs.” A reserve fund of
$100,000 for disputed claims would also be carved out from the gross amount. Three
representative plaintiffs would each receive from the gross settlement amount an
enhanced payment of $10,000 in addition to their regular settlement amounts. Also
deducted from the gross settlement would be enhanced payments of $7,500 for each of
five opt-in class members who were deposed (in addition to their portion of the
settlement). All of the usual payroll taxes would be deducted from settlements amounts
before disbursement to class members.
In the final analysis, the plaintiffs estimate that the individual class members will receive
about $1,100, net of attorneys’ fees and other items.
California landscaper pays for mowing down employee wages
Sacramento, California-based Frank Carson Landscape & Maintenance Inc. will pay
$185,270 in back wages and liquidated damages to 164 employees to resolve FSLA
overtime and recordkeeping violations uncovered in a DOL Wage and Hour Division
(WHD) investigation. The company does business as Carson Landscape Industries, The
Grove, and TurfPro.
WHD investigators found the company had failed to pay time and one- half for hours
worked beyond 40 hours in a workweek, as required by FLSA, according to a WHD
release. The company also purportedly failed to maintain accurate records of the hours
employees worked before and after their scheduled shifts, and paid employees only for
scheduled hours rather than actual hours worked.
“This investigation puts money back into the hands of workers denied their rightfully
earned wages,” remarked WHD District Director Richard Newton. “This practice hurts
not only workers and their families, but it gives companies that violate the law an unfair
competitive advantage.”
Prison subcontractor pays $8M in back wages and fringe benefits
A DOL Wage and Hour Division investigation has prompted federal prison subcontractor
Corrections Corp. of America to pay more than $8 million in back wages and fringe
benefits to 362 current and former prison guards, maintenance workers, and
administrative personnel. The workers were employed at California City Correctional
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Center, a federal correctional facility in California City. Many of the workers will be paid
more than $30,000 in back wages, according to an August 19 WHD release.
The WHD investigation established that Corrections Corp. of America violated the
Service Contract Act (SCA) and the Contract Work Hours and Safety Standards Actco
(CWHSSA) by failing to pay proper prevailing wages, health and welfare benefits,
overtime, and holiday pay, the WHD said. The investigation also unearthed FLSA
recordkeeping violations.
The SCA applies to contracts entered into by the United States that have as their principal
purpose services furnished by contractors. The SCA requires contractors and
subcontractors performing services on covered federal contracts in excess of $2,500 to
pay their service workers no less than the wages and fringe benefits prevailing in the
locality.
Under the CWHSSA, contractors and subcontractors with federal service contracts and
federal and federally assisted construction contracts over $100,000 must pay laborers and
mechanics one and one-half times their basic rate of pay for all hours worked over 40 in a
workweek. The Act also prohibits unsanitary, hazardous, or dangerous working
conditions on federal and federally financed and assisted construction projects.
“Many of the workers, some of whom commuted up to two to three hours to keep our
communities safe, will receive more than $30,000 in back pay,” said WHD Regional
Administrator Ruben Rosalez. “This recovery sends a message to the prison industry and
others that we are watching for workplace violations.”
Employer’s purported harassment, intimidation, false affidavits net injunction in
FLSA case
In a rare move, the DOL has gone to court for a preliminary injunction against Kevin
Corriveau Painting Inc. and its officers and agents after they purportedly harassed and
intimidated workers into signing false affidavits in an investigation and related litigation
prosecuting FLSA violations. The injunction obtained by the DOL bars the a Nashua,
New Hampshire, employer and its officials and agents from intimidating, retaliating, or
discriminating against current or former employees involved in the matter, according to
an August 20 agency release. It also precludes use of the false affidavits.
An investigation by the DOL’s WHD found the defendants had violated FLSA minimum
wage, overtime, and record-keeping provisions and also required employees to falsify
time cards. The DOL originally filed suit in the in the District of New Hampshire against
the company owner and president Kevin Corriveau, vice president Brian Corriveau, and
treasurer Sharon Mercuri in October 2012.
In July 2014, former employees of Kevin Corriveau Painting informed the WHD that
Kevin Corriveau and Jeffrey Levinson, who represented himself as Corriveau’s legal
counsel, harassed and intimidated workers into signing affidavits that contained false
statements, the DOL said. The defendants allegedly provided the affidavits to the DOL
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during the discovery phase of the litigation to convince the DOL and the court that no
violations had been committed.
The defendants agreed to the preliminary injunction after the DOL filed its request with
the court, according to DOL. The injunction prohibits the defendants and their agents
from discriminating against workers or witnesses in the legal proceedings; prevents them
from communicating directly or indirectly with employees or former employees about
issues in the case; precludes their use of the submitted affidavits; and requires the reading
of a statement to all employees, in English and Spanish, informing them of their right to
speak with the DOL’s representatives of without retaliation or threats.
“Seeking and obtaining an injunction of this type is a rare and extraordinary step, but one
that was warranted under the circumstances,” said Michael Felsen, the DOL’s regional
solicitor of labor for New England. “If the defendants violate the terms of the injunction,
they will be held accountable to the court including, if justified, the imposition of
contempt sanctions.”
$9.5M bargain would end HR manager misclassification suit against Lowes
By Pamela Wolf, J.D.
Lowes Home Centers has agreed to a $9.5-million settlement of a FLSA collective action
alleging that HR managers for Lowe’s home improvement stores were misclassified as
exempt from overtime compensation. In January, the court conditionally certified a
nationwide opt-in class of all HR managers (or other human resources store employees
with other titles) employed by Lowe’s in the past three years who worked more than 40
hours a week and were not paid overtime. The deal would put an end to the litigation that
began in 2012.
The plaintiffs alleged that they had identical job duties, hours worked, lack of authority,
lack of supervision of others, and nearly identical employment history working as HR in
Lowe’s stores across the country. They claimed the common practice or scheme was
misclassifying them as salaried exempt employees and requiring overtime work.
Declarations from former Lowe’s Area HR Managers indicated that all stores were mirror
images of each other in “policies, hours, job duties, merchandise, and layout.” The
declarations also stated that HR managers were all scheduled for 11-hour-per-day
workdays, worked every other Saturday, and that the corporate office set the number of
hours that HR managers were scheduled to work uniformly.
In January, the court conditionally certified a nationwide opt-in class. More than 880
class members filed consents to participate, according to the joint motion for approval of
the deal. The parties then engaged in discovery that included the exchange of over a
million documents, emails, payroll records, and other materials. They also selected class
representatives for discovery purposes, and deposed class members and corporate
representatives in an effort to prepare for trial. After two attempts at mediation, the
parties reached a settlement agreement.
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What’s in the bargain? Under the deal, Lowes agreed to shell out $9,000,000 to put the
litigation to bed without admitting any wrongdoing or liability. The fund will be used to
compensate HR managers who worked at any of the defendants’ stores in the United
States from January 10, 2011, until the date the court approves the deal. Those who have
not already opted in will receive a notice informing them of their right to do so and will
be permitted to opt-in within 30 days of their receipt of the notice. Lowe’s will also
provide up to an additional $75,000 to pay the costs of a third-party claims administrator.
Up to $3,166,667 (1/3) would be carved out from the settlement fund for class counsels’
attorneys’ fees. In addition, $1,000 would be deducted from the net settlement for each of
a group of opt-in class members who agreed to provide representative testimony and
were deposed. Class counsel would also receive up to $100,000 in costs from the net
distribution amount. The remaining funds would be distributed to class members under a
pro rata allocation formula, with enough allotted for each to receive an average of about
$3,166.67.
Separately, the lead plaintiff would receive an incentive award of $7,000 and an
additional $50,000 from Lowe’s in return for executing a release of claims.
According to the parties, the agreement is a fair, adequate and reasonable compromise
given the existence of disputed issues of fact and law with respect to liability; uncertainty
as to whether the opt-in plaintiffs would be deemed similarly situated; questions as to
whether the plaintiffs were actually exempt from the overtime under the FLSA; the risks
of whether the plaintiffs could obtain a judgment in their favor; the high expenses of
continued collective action litigation; and the risks of possible appeals.
LEADING CASE NEWS:
3d Cir.: FMLA claims reinstated because employer couldn’t prove employee
received FMLA notice
By Marjorie Johnson, J.D.
Reviving an employee’s FMLA interference claim that she was unfairly discharged for
exhausting her FMLA leave – since she did not know that her extended absence had been
deemed FMLA leave – the Third Circuit held that her insistence she had never received
the employer’s letter designating her leave as FMLA rebutted the presumption of receipt
under the “mailbox rule.” Her FMLA reprisal claim was also reinstated since she
presented sufficient evidence of pretext. The district court’s dismissal of her claims on
summary judgment was reversed and remanded (Lupyan v Corinthian Colleges Inc,
August 5, 2014, McKee, T).
The employee was an instructor for an institution that provided college-level classes. In
December 2007, her supervisor suggested that she take a personal leave of absence since
she seemed depressed. She filled out a form requesting “personal leave” from December
4 through December 31. After her supervisor suggested that she apply for short-term
disability instead, she scheduled an appointment with her doctor and received a DOL
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form certifying her mental health condition. Based on the form, human resources
determined that she qualified for FMLA leave.
Letter received? On December 19, a manager instructed the employee to initial the box
marked “Family Medical Leave” on her leave request form and changed her projected
date of return to April 1, 2008. However, the manager did not discuss the employee’s
FMLA rights. The employer claimed that on that same day, it mailed the employee a
letter advising her that she was placed on FMLA leave and explaining her rights.
However, she claimed that she never received the letter and denied knowing that she was
on FMLA leave until she attempted to return to work.
On March 13, 2008 (two weeks after her FMLA leave expired), the employee advised
management that she had been released by her doctor to return to her teaching position
with certain restrictions. Two weeks later, her supervisor told her that she could not
return with restrictions. Although she subsequently provided a full release from her
psychiatrist, ultimately she was discharged on April 9, ostensibly due to low student
enrollment and because she had not returned to work within the 12 weeks allotted for
FMLA leave.
Lower court proceedings. The district court dismissed the employee’s FMLA claims on
summary judgment. After initially claiming that a factual dispute existed as to whether
she was informed of her FMLA rights, the employer produced affidavits from employees
who testified that the FMLA letter was properly mailed to her. Based on the affidavits,
the district court relied on the “mailbox rule” to hold that she had received the letter.
Mailbox rule. Because the employee claimed interference by her employer not informing
her that her leave was under the FMLA — which resulted in her being unaware that she
had to return to work within 12 weeks or be subject to termination — at issue was
whether the district court properly afforded the employer the benefit of the presumption
of receipt of properly mailed letters that arises under the “mailbox rule.” Under this rule,
if a letter “properly directed” is proved to have been either put into the post-office or
delivered to the letter carrier, it is presumed that it reached its destination at the regular
time and was received by the person to whom it was addressed.
Rebuttable. However, this presumption is a rebuttable. A “strong presumption” of
receipt applies when notice is sent by certified mail, but a “weaker presumption” arises
where delivery is sent via regular mail. Without actual proof of delivery, receipt can be
proven though evidence of business practices pertaining to mail, such as through a sworn
statement. Because the presumption is weak where proof of receipt is attempted solely by
circumstantial evidence, the affiant must have “personal knowledge” of the applicable
procedures at the time of the mailing.
Letter received? The employer submitted the affidavits of its mailroom supervisor and
the HR coordinator, both of whom had personal knowledge of the business’s customary
mailing practices and one of whom swore that she prepared the letter and placed it in the
outgoing mail bin. It did not, however, present any evidence that the employee received
the letter since it was not sent by registered or certified mail and it did not request a return
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receipt or use any of the now common ways of tracking a letter. Its only evidence
consisted of self-serving affidavits signed nearly four years after the alleged mailing date.
Given the employee’s denial, and the ease with which a letter can be certified, tracked, or
proof of receipt obtained, the weak rebuttable presumption was insufficient to establish
receipt as a matter of law.
Verifiable receipt. The Third Circuit went on to note that, in this age of computerized
communications and handheld devices, “it is certainly not expecting too much to require
businesses that wish to avoid a material dispute about the receipt of a letter to use some
form of mailing that includes verifiable receipt when mailing something as important as a
legally mandated notice.” Finding that her denial of the receipt of the letter was enough to
create a genuine issue of material fact, it reversed summary judgment on her FMLA
interference claim and remanded for determination of whether she received notice that
her leave fell under the FMLA.
Prejudice by lack of notice. The employee also sufficiently demonstrated that, had she
been properly informed of her FMLA rights, she could have structured her leave
differently. It was undisputed that she received all of the FMLA leave to which she was
entitled and that she did not provide a release to return to work without restrictions until
about 18 weeks after she began her leave. However, she claimed that had she known her
leave fell under the FMLA, she would have expedited her return and returned to week
before she exhausted her 12 weeks of leave.
She also pointed out that her first doctor’s release was issued only two weeks after her
FMLA leave expired and did not indicate that she was unable to return to her job. Instead,
it stated that she “would benefit from a position with minimal student contact if at all
possible.” Thus, while her leave request form contained a projected return date of April 1,
the record did not establish that she was not able to return before February 26, when her
FMLA leave expired.
Pretext shown. Summary judgment was also improper as to her FMLA reprisal claim
since the employee presented sufficient evidence that her discharge was pretextual. After
submitting her full release, she was advised that she was fired not only because she failed
to return within 12 weeks, but also because of low student numbers. However, the
employer’s own witness testified that, as a matter of school policy, the employer did not
“lay off” instructors because of downturns in enrollment. Thus, even if enrollment had
declined, it was highly unusual for the employer to respond by terminating the employee.
Given the unusual nature of her termination and its proximity to her leave, a jury could
reasonably conclude that her request for FMLA leave motivated this differential
treatment.
The case number is: 13-1843.
Attorneys: Jeffrey B. Balicki (Feldstein, Grinberg, Lang & McKee) for Corinthian
Colleges, Inc. Adam R. Gorzelsky (Williams Law Offices) for Lisa Lupyan.
3d Cir.: Jury could find employee attempted to invoke right to return to work
83
By Kathleen Kapusta, J.D.
An employee who spent 60 percent of her job typing, and who was prevented from
returning to work with three fingers taped together after she broke a bone in her hand —
even though she presented a note from her treating physician stating she had “no
restrictions” — sufficiently established that she attempted to invoke her right to return to
work, a Third Circuit panel ruled in reviving her FMLA interference claim. Because a
reasonable jury could also find that the employer significantly altered the terms of her
employment when it permanently replaced her and told her to turn in her badge and keys
upon the expiration of her FMLA leave, the appeals court revived her FMLA retaliation
claim as well. However, the court affirmed the denial of her motion for leave to amend
her complaint to add an ADA “perceived as” claim (Budhun v Reading Hospital and
Medical Center, August 27, 2014, Chagares, M).
When the hospital credentialing assistant came to work on August 2 with a metal splint
on her hand, an HR employee provided her with FMLA leave forms. The employee then
left work to see a doctor, who taped her pinky, ring, and middle fingers of her right hand
together. On August 12, the employee emailed the HR rep some of the FMLA paperwork
she’d been given, together with a note from her doctor stating that she could return to
work on August 16 with no restrictions.
Attempt to return. Upon arriving for work on the 16th, the employee advised the HR rep
that while she still had a splint, she could type slowly. The rep, however, told her “It
seems that your physician was incorrect in stating that you could work unrestricted. If
you were truly unrestricted in your abilities, you would have full use of all your digits.”
The employee then left work and returned to her doctor. That same day, he faxed the
completed FMLA certification to her employer stating that she would be out of work
until August 16. On the last page, however, he asked that the employee be excused until
September 8. At that point, the employee’s FMLA leave request was approved from
August 2 through September 8.
Leave extension. Reevaluated on September 8, the employee was prescribed
occupational therapy for her hand and scheduled for a follow-up appointment on
November 9. Her FMLA leave was then extended until September 23, the date at which
her 12 weeks of leave would be exhausted. She was also approved for non-FMLA leave
through November 9. When she did not return to work at the end of her FMLA leave, her
position was offered to another employee.
Because she had received prior written discipline, the employee was not eligible for a
transfer. She was told that if her doctor released her to work before she found another
position, she would be terminated. On October 6, she was told to pick up her belongings
and turn in her identification badge and keys. She remained on leave through November
9. When she did not contact her employer at the end of her leave, she was considered to
have voluntarily resigned.
Lower court proceedings. She subsequently sued, asserting claims for FMLA
interference and retaliation. Granting summary judgment on her interference claim, the
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district court found that she was never entitled to the protections of the FMLA because
she claimed that she was fully capable of working at the time that she attempted to return
to work on August 16. It also granted summary judgment on her retaliation claim after
concluding that she suffered no adverse employment action because she was medically
unable to return to work at the conclusion of her FMLA leave.
Right to be restored. Observing that “we have never had occasion to address specifically
what constitutes invocation of one’s right to return to work,” the appeals court panel
found that the employee adduced enough evidence that a reasonable jury could find she
did so here. Pointing out that her fitness-for-duty certification clearly stated that she could
return to work with “no restrictions,” the court found it undisputed that her employer did
not provide her with a list of essential job functions to present to her doctor. Accordingly,
the fitness-for-duty certification was based only on the job description the employee
would have supplied. When the employee was asked by the doctor if she felt she could
type, she responded that she thought she could.
Although the doctor’s communications were admittedly inconsistent, his second note
excusing the employee from work until September 8 was provided only after the HR rep
questioned the doctor’s assessment and told the employee she could not return until she
had full use of all 10 fingers. While the regulations provide that if an employer requires
clarification of the fitness-for-duty certification, it can contact the employee’s health care
provider (as long as the employee gives the employer permission to do so, which the
employee did here), an employer cannot delay an employee’s return to work while
contact with the health care provider is being made. Here, the court found that a
reasonable jury could conclude that the employee attempted to invoke her right to return
to work and that her employer interfered with that right when it told her that she could
not return.
Essential job function. Even if she actually attempted to return to work, the employer
argued that it was still entitled to summary judgment because it would have sent her
home as she could not perform an essential function of her job. Noting that whether a
particular function is essential is a factual determination that must be made on a case-bycase basis, the court observed that the FMLA regulations place the onus on an
employee’s health care provider — not her employer — to certify whether the employee
is unable to perform any essential job function. Although the employer could have
provided the doctor with a list of specific essential job functions, it did not. Instead, the
court observed, the HR rep unilaterally determined, over email, that the employee could
not perform an essential function because she had use of only seven fingers.
Hunt and peck. And while the employee admitted that she could not type as quickly
with only seven fingers, the court noted that there was no evidence of a minimum wordsper-minute requirement in her written job description. Moreover, the court pointed out,
both another employee who held an equivalent position and the employee’s supervisor
admitted to using a “hunt and peck” method to type. That was sufficient evidence to show
she could, in fact, perform this essential function.
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Not yet on leave. Rejecting the employer’s argument that it could not have interfered
with her right to restoration on August 16 because she was not yet on FMLA leave at that
time, and thus she was not eligible for FMLA benefits including restoration, the court
stated that a “reading of the statute that denies all rights that the FMLA guarantees until
the time that an employer designates the employee’s leave as FMLA would be illogical
and unfair.” Rather, the court wrote, “it is the time that an employee invokes rights under
the FMLA that matters, not when his or her employer determines whether the employee’s
leave is covered by the FMLA.” Accordingly, having invoked the protections of the
FMLA on August 2, the employee was eligible to avail herself of the right to return to her
job at the end of her leave. Therefore, the district court erred in granting summary
judgment on her FMLA interference claim.
FMLA retaliation. Turning to her FMLA retaliation claim, the court rejected the
argument that the employee suffered no adverse employment action when she voluntarily
resigned at the end of her non-FMLA leave. To the contrary, a reasonable jury could
conclude that she suffered an adverse employment action when her employer installed
another worker permanently in her position, as she was no longer free to return to her
previous job. In addition, the court noted, she was expressly told to turn in her badge and
keys and to pick up her personal belongings, and she was not offered another position at
the hospital. This certainly altered her privileges of employment, the court stated, as she
could no longer even enter her place of work. Moreover, she was also told that if her
doctor cleared her to return to work, she would be formally terminated. “Such a complete
elimination of responsibility ‘significantly altered [her] duties and status,” the court
explained.
Timing. Finally, the court rejected the employer’s contention that she failed to establish a
causal link between her FMLA leave and the adverse employment action. While the
employer argued that because her separation did not occur until November, there was
nothing unusually suggestive about its timing, the court pointed out that the decision to
replace her in September was an adverse employment action. Moreover, there was
evidence demonstrating that the employer decided to replace her before her FMLA leave
ended. Further, the replacement worker was offered and accepted the position two days
after the employee’s FMLA leave ended. This close temporal proximity “qualifies as
unusually suggestive timing,” the court stated in finding that the district court erred in
concluding that the employee could not establish a prima facie case of FMLA retaliation
as a matter of law.
The case number is: 11-4625.
Attorneys: Justin L. Swidler (Swartz Swidler) for Vanessa Budhun. Vincent Candiello
(Post & Schell) for Reading Hospital and Medical Center.
3d Cir.: Overtime claim must allege employee worked more than 40 hours in
workweek and time uncompensated
By Ronald Miller, J.D.
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The Third Circuit affirmed the dismissal of putative collective and class actions in five
cases in which employees alleged that healthcare systems violated the FLSA and
Pennsylvania law by implementing timekeeping and pay policies that failed to
compensate them for all hours worked. Taking the middle-ground approach taken by the
Second Circuit in Lundy v. Catholic Health System of Long Island Inc, the Third Circuit
concluded that “in order to state a plausible FLSA overtime claim, a plaintiff must
sufficiently allege [forty] hours of work in a given workweek as well as some
uncompensated time in excess of the [forty] hours.” Here, the plaintiffs failed to allege
that they were uncompensated during one or more of the weeks in which they worked
more than 40 hours (Davis v Abington Memorial Hospital, August 26, 2014, Chagares,
M).
Complaints in five cases alleged that healthcare systems implemented timekeeping and
pay policies that failed to compensate employees for all hours worked in violation of the
FLSA and Pennsylvania law. The five cases are among several similar actions brought by
a single law firm alleging systemic underpayment in the healthcare industry. The
plaintiffs are nurses and other patient-care providers. According to the plaintiffs, the
healthcare systems maintained three unlawful timekeeping and pay policies. First, the
defendants automatically deducted 30 minutes of pay daily for meal breaks without
ensuring that employees actually received a break. Second, the employers prohibited
employees from recording time worked outside their scheduled shifts. Third, the
employers did not pay employees for time spent at “compensable” training. Because of
these policies, the employees alleged that they were not paid for all hours worked.
The district court granted the employers’ joint motions to dismiss the consolidated
actions, finding that the complaints did not plausibly allege that the defendants were the
plaintiffs’ employers, and so failed to state claims under the FLSA or ERISA. RICO
claims were also dismissed on the ground that the complaints did not adequately allege
the predicate act of mail fraud. The court granted the plaintiffs leave to amend, but
cautioned them to “remedy the gaping deficiencies,” in particular, the plaintiffs were
instructed to “clari[fy]” whether they were also seeking gap time wages. Subsequent
complaints were filed in which the plaintiffs abandoned their ERISA and RICO claims
and sought relief solely under the FLSA and Pennsylvania law. Still, the district court
granted the defendants’ motions to dismiss. This appeal followed.
Overtime claims. The plaintiffs first alleged that the defendants did not compensate
them for hours worked in excess of 40 per week during meal breaks, at training
programs, and outside of their scheduled shifts. However, the district court found that the
plaintiffs’ overtime claim was factually inadequate, on the ground that they “failed to
allege a single specific instance in which a named Plaintiff worked overtime and was not
compensated for this time.” On appeal, the plaintiffs argued that “[n]othing in Twombly
or Iqbal” requires them to plead the exact dates and times that they worked overtime.
To recover overtime compensation under the FLSA, “an employee must prove that he
worked overtime hours without compensation, and he must show the amount and extent
of his overtime work as a matter of just and reasonable inference.” The level of detail
necessary to plead a FLSA overtime claim poses a more difficult question. Some courts
87
have required plaintiffs to allege approximately the number of hours worked for which
wages were not received. Other courts have adopted a more lenient approach, holding
that, a FLSA complaint will survive dismissal so long as it alleges that the employee
worked more than 40 hours in a week and did not receive overtime compensation.
Plausible claim. The Third Circuit agreed with the middle-ground approach taken by the
Second Circuit in Lundy v. Catholic Health System of Long Island Inc. That is, to state a
plausible FLSA overtime claim, a plaintiff must sufficiently allege [forty] hours of work
in a given workweek as well as some uncompensated time in excess of the [forty] hours.”
Under FRCP 8(a)(2), a “plausible” claim contains “factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
In the present case, each named plaintiff alleged that he or she “typically” worked shifts
totaling between 32 and 40 hours per week and further alleged that he or she “frequently”
worked extra time. Because they “typically worked full time, or very close to it” and
“also worked several hours of unpaid work each week,” the plaintiffs surmise that “[i]t
[is] certainly plausible that at least some of the uncompensated work was performed
during weeks when the plaintiffs[’] total work time was more than forty hours.” The
appeals court disagreed.
None of the named plaintiffs alleged a single workweek in which he or she worked at
least 40 hours and also worked uncompensated time in excess of 40 hours. Thus, their
allegations were insufficient. In reaching this conclusion, the Third Circuit disclaimed
that it was requiring that a plaintiff identify the exact dates and times that she worked
overtime. It would suffice if a plaintiff alleged that she “typically” worked 40 hours per
week, worked extra hours during such a 40-hour week, and was not compensated for
extra hours beyond 40 hours she worked during one or more of those 40-hour weeks.
Thus, the District Court did not err in dismissing the plaintiffs’ claims for overtime under
the FLSA.
Gap time claims. The plaintiffs also challenged the district court’s determination that
their claims for gap time are not within the FLSA’s purview. The plaintiffs typically
worked 37.5 hours per week. “Gap time” is non-overtime hours worked for which an
employee is not compensated. Because the employees had a sufficiently high hourly rate,
when all compensated and non-compensated hours are divided into the weekly pay, their
average hourly pay still exceeded the FLSA minimum. Here, the employees sought to
recover for those uncompensated hours. However, the Third Circuit pointed out that
courts widely agree that there is no cause of action under the FLSA for “pure” gap time
wages. Accordingly, the appeals court agreed with the clear weight of authority and held
that pure gap time claims are not cognizable under the FLSA. Thus, the district court’s
dismissal of this claim was affirmed.
The case number is: 12-3512.
Attorneys: Kristen E. DiMaria (Ogletree Deakins) for Abington Memorial Hospital. Jared
K. Cook (Thomas & Solomon) for Collette Davis.
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6th Cir.: Unlawful discharge claim under FMLA self-help provision untimely
By Cynthia L. Hackerott, J.D.
The doctrine of Ex parte Young did not save the untimely claim of a state employee
seeking prospective injunctive relief against a state official under the FMLA’s self-care
provision, a Sixth Circuit panel ruled in a 2-1 decision. Thus, the panel affirmed a district
court’s decision to dismiss as untimely the action of a Michigan Department of
Corrections (MDOC) employee who sought reinstatement to his job at a state corrections
facility. The appeals court also found that the employee’s request to amend his complaint
to allege willfulness and thus, to take advantage of an extended three-year limitations
period, would be futile (Crugher v Prelesnik, August 1, 2014, Cohn, A).
Alleged reprisals for taking leave. Five years into his employment, a corrections officer
with the MDOC developed a chronic medical condition, identified as generalized anxiety
disorder and irritable bowel syndrome that caused periodic flare-ups and prevented him
from performing his usual job responsibilities. He first took leave in March 2007 under
the FMLA’s self-care provision. Two years later, he transferred to the facility where the
defendant was the warden. The corrections officer continued to take periodic FMLA
leave due to his medical condition. However, he asserted that the facility’s warden
retaliated against him for taking this leave, via harassment, intimidation, and ultimately
termination.
Claim untimely under FMLA provisions. Although he admitted that the “last event
constituting the alleged violation for which the action is brought” was his termination
from employment that occurred on January 11, 2011, the corrections officer did not file
his court action until April 16, 2013, over three months past the FMLA’s two-year
limitations period. Nevertheless, he argued that the FMLA’s statute-of-limitations period
did not apply because his claim was brought under the Ex parte Young exception to the
Eleventh Amendment, and accordingly, the analogous state statute or the general federal
statute of limitations for civil actions contained in 28 U.S.C. Sec. 1658(a) should be
applied to his claim.
Ex parte Young doctrine. The Eleventh Amendment bars a plaintiff from seeking
retrospective relief against a state official in his or her official capacity, but, under Ex
parte Young, it does not bar a district court from examining the allegations to determine
whether there is an ongoing violation of federal law. In other words, under Ex parte
Young and Sixth Circuit precedent, the Eleventh Amendment does not bar suits for
equitable, prospective relief, such as reinstatement, against state officials in their official
capacity as long as the employee sufficiently alleges an ongoing violation of federal law
to maintain his equitable claim.
But the doctrine of Ex parte Young did not make the employee’s claim here timely. That
doctrine simply allowed the employee’s claim for reinstatement, which would otherwise
be barred by sovereign immunity, to be brought against the warden, the Sixth Circuit
majority explained. In Ex parte Young, a state official was sued not for violating a statute
but for violating the Constitution, the majority noted. In contrast, here, Sec.
2617(a)(1)(B) of the FMLA expressly permits the employee to seek prospective
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injunctive relief for violations of the FMLA’s self-care provision. Therefore, the
corrections officer’s attempt to apply an implied right of action directly under Ex parte
Young was without merit because his suit was pursuant to an express right of action —i.e.
the FMLA.
Moreover, allowing the employee’s argument to prevail would allow a reinstatement
action by a state employee against a state official a longer statute-of-limitations period
than an action brought by a private employee against a private employer, the majority
pointed out. “The [state] official who is now treated as an individual based on Ex parte
Young should be subjected to the same statute-of-limitations period as any other private
employer,” the majority wrote. Thus, because the FMLA expressly provides a cause of
action for equitable relief, it is appropriate to apply the statute of limitations in the FMLA
instead of looking to an analogous state statute or the general federal statute of limitations
for civil actions contained in Sec. 1658(a).
Willfulness lacking. The majority also found the employee’s arguments that the warden
engaged in a willful violation, which would allow the employee to take advantage of an
extended three-year limitations period, meritless. First, the complaint was devoid of any
allegations supporting a finding of willfulness; the allegations merely established a causal
connection between the officer’s termination and his FMLA leave. It contained no facts
showing that the warden or any other MDOC employee acted intentionally or recklessly
to violate the employee’s FMLA rights.
Further, even if the employee were allowed to amend his complaint to add facts relevant
to an email sent by the warden in 2007 (about four years prior to the employee’s
termination), he would still not be able to establish a plausible claim of willfulness. The
email merely showed that the warden was attempting to limit abuses of FMLA leave, the
majority determined, and the email did not relate to anything done at the facility
regarding the plaintiff.
Dissent. In Judge Clay’s view, however, the officer did plead a willful violation of the
FMLA, and thus, the three-year limitations period applied. In his dissent, Clay asserted
that even if the majority found the officer had not pleaded a willful violation, the court
should have held that the default four-year statute of limitations of Sec. 1658(a) applied
to Ex parte Young claims asserting violations of the FMLA, regardless of the limitation
period provided in the statute itself. “[T]his is an Ex parte Young cause of action, not an
FMLA cause of action,” Clay wrote, reasoning that Ex parte Young does not simply
provide a jurisdictional exception with regard to the Eleventh Amendment, but rather, it
also recognizes that a cause of action to ensure compliance with a federal statute is
implied under the Supremacy Clause.
The case number is: 13-2425.
Attorneys: Collin Harold Nyeholt (Fixel Law Offices) for Corey S. Crugher. Jeanmarie
Miller (Office of the Michigan Attorney General) for John Prelesnik.
6th Cir.: Medical clinic owner personally liable for INA, wage-hour violations
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By Marjorie Johnson, J.D.
The Sixth Circuit upheld the DOL Administrative Review Board’s determination that a
doctor who ran several medical clinics violated numerous provisions of the Immigration
and Nationality Act (INA) and was personally liable for back wages — including
expenses his physician-employees incurred in obtaining their J-1 waivers and H-1B visas
— and civil penalties. Affirming the district court’s dismissal of the doctor’s petition for
review, the appeals court rejected his assertion that the physicians’ fees relating to their
visas were not reimbursable “business expenses” under the relevant regulations.
Moreover, because nearly all of the factors for piercing the corporate veil were present
and the entities were used to commit a “wrong,” the ALJ did not err in deciding to pierce
the corporate veil and hold the doctor personally liable (Kutty v U.S. Department of
Labor, August 20, 2014, White, H).
J-1 waivers. Seventeen physicians employed by the doctor in his clinics entered the
United States on J-1 nonimmigrant foreign-medical-graduate visas. These visas allowed
them to remain in the U.S. for their graduate and medical training, but required them to
return to their home country for an aggregate of two years following their J-1 visa’s
expiration. However, at the doctor’s direction, each of the physicians obtained a J-1
waiver based on a contract of employment with him to provide medical services in an
underserved area and applied for H-1B visas.
Pursuant to federal regulations, the doctor completed and filed Labor Condition
Applications (LCAs) for the physicians with the DOL. The LCA certified that the H-1B
worker would be paid the greater of either the actual wage level the employer paid to
other individuals with similar experience or the prevailing wage level. The applicable
wage rates specified on the LCAs ranged from $52,291 to $115,357. The doctor also filed
the physicians’ H-1B nonimmigrant-worker petitions, in which he agreed to the terms of
the LCAs. The Immigration and Naturalization Service (INS) approved the petitions and
changed the physicians’ visa status from J-1 to H-1B.
Meanwhile, the physicians signed individual employment agreements that were
contingent upon their obtaining a J-1 visa waiver of residency requirement and H-1B
visa, their state certification, and the necessary HMO, Medicare, and Medicaid approvals.
They were also were required to devote 40 hours per week to the practice of medicine for
the doctor for an annual salary of $80,000. However, in 2000, the doctor’s new
administrator reported that the physicians were either absent or arriving late. In January
2001, the doctor began withholding the physicians’ salaries, which he released when they
began seeing more patients.
An attorney representing eight of the physicians demanded immediate payment of the
difference between the amounts previously paid and the rate of $115,000 per year as set
forth in the LCA. The letter warned that if the doctor did not pay the requested amounts
within one week, the physicians would contact the DOL, and warned him against
retaliation. After receiving the letter, the doctor stopped paying the eight physicians’
salaries. The physicians subsequently filed a DOL complaint, and the DOL conducted an
on-site record inspection at one of the doctor’s facilities. That day, two additional
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physicians faxed him a letter demanding back wages, and those physicians were added to
the DOL complaint the following day. The doctor fired seven of the ten physicians
included in the DOL complaint.
The Wage and Hour Administrator determined that the doctor and the medical clinics
violated numerous INA provisions, including willfully failing to pay required wages to
the physicians and retaliating against nine of them. A law judge affirmed, finding the
clinics liable for backpay and the costs of obtaining J-1 waivers and H-1B visas
($1,044,294), holding the doctor personally liable, and assessing $108,800 in civil
penalties. The ALJ reasoned that the expense of obtaining the waivers was an
unauthorized business deduction that reduced the wages below the required LCA rates.
The ALJ’s also concluded that personal liability was warranted since the doctor’s
violation of the INA was willful and he acted as the alter ego of the corporations. The
DOL’s Administrative Review Board (ARB) and district court affirmed.
H-1B visa fees. The Sixth Circuit agreed that the physicians were entitled to
reimbursement for fees, including attorney’s fees expended in obtaining H-1B visas. It
rejected the doctor’s contention that the costs of the H-1B visas were not business
expenses because the physicians were not required to obtain H-1B visas to work lawfully
in the United States, since they were already in the country and eligible to have their
nonimmigrant status changed from J-1 to H-1B. The doctor misstated the law, since a
nonimmigrant foreign medical graduate on a J-1 visa, who seeks a waiver on the ground
that he will work in an underserved area for three years, may only fulfill the requisite
three-year employment contract as an H-1B nonimmigrant.
Moreover, the business expense regulation plainly prohibits employers from passing on
the costs of business expenses such as H-1B fees to their employees where those costs
would reduce wages below the required rates. Indeed, in promulgating the interim final
rule that became the current version of the regulations, the DOL specifically clarified that
the costs of filing LCAs and H-1B petitions “are the responsibility of the employer
regardless of whether the INS filing is to bring an H-1B nonimmigrant into the United
States, or to amend, change, or extend an H-1B nonimmigrant’s status.” Thus, the ARB’s
finding that the costs (including attorneys’ fees) of obtaining H-1B visas were business
expenses was neither arbitrary nor an abuse of discretion.
Limiting its ruling to the facts of this case, the Sixth Circuit also ruled that the Wage and
Hour Administrator did not err by treating the costs associated with obtaining J-1 waivers
as business expenses that were improperly passed on to the physicians. It was not
coincidence that all but one of the doctors, who happened to have a green card, were
nonimmigrant physicians hired under contracts that made their employment contingent
on their receipt of both an H-1B visa and a J-1 waiver. In addition, in most cases, either
the doctor or his attorney pressured the physicians to hire a firm that apparently had some
relationship to him to process their applications for the J-1 waivers. Under these facts, the
ARB’s conclusion that the Administrator did not err in including the physicians’ J-1
waiver application costs as a business expense was adequately supported.
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Personal liability. The Sixth Circuit also rejected the doctor’s assertion that he should
not be personally liable because the INA does not provide authority to pierce the
corporate veil and impose personal liability. The doctor had argued that the statute
addresses only violations by an “employer” and is silent with respect to personal liability.
Although no case directly applies veil-piercing liability under the INA, the Supreme
Court has held that a parent corporation may be held responsible for its subsidiary’s
actions under the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), which is silent on the question of personal liability for an employer’s
violation. The Sixth Circuit has similarly imposed individual shareholder liability for
corporate violations of federal law where the statute did not explicitly mention personal
liability, also finding that a shareholder could be personally liable under CERCLA.
Although no single factor is conclusive, Tennessee courts rely on 11 factors when
determining whether to pierce the corporate veil. The ALJ, ARB, and district court did
not err in concluding that a majority of these factors were present here. The doctor set up
a web of corporate entities, with the help of his attorney, in order to hire the
nonimmigrant physicians. He was the sole owner and investor in these entities. He made
all the companies’ major decisions regarding salaries and staffing from a single office
and he and his wife were the only officers and directors. He treated the corporations as an
extension of himself. The corporations appear to have been undercapitalized, as he could
not state how much money was used to start the clinics or whether money was
contributed as capital or loans. In addition, the corporations appeared to be
interchangeable.
Moreover, several of the ALJ’s findings sufficiently qualified as “wrongs” that
demonstrated the doctor’s fraud. He and his medical clinics failed to pay the H-1B
physicians their promised wages that were required under the INA. When the physicians
complained, the doctor retaliated against them. The ALJ further found that he admitted
that he knew he was not going to pay the physicians the amounts listed in the LCAs
despite having signed an agreement to abide by the terms of the LCAs when he signed
the H-1B petitions. Accordingly, because it appeared that nearly all of the Tennessee
factors for piercing the corporate veil were present and the entities were used to commit a
“wrong,” the ALJ did not err in deciding to pierce the corporate veil and hold the doctor
personally liable.
No due process violation. Finally, the appeals court rejected the doctor’s assertion that
the ALJ violated his right to due process by (a) allowing two non-lawyers to represent
him and the corporate entities; (b) failing to postpone the hearing after he was
hospitalized and required surgery; (c) relying instead on his prior deposition and other
testimony; and (d) finding him personally liable in his absence.
The case number is: 11-6120.
Attorneys: William Tyler Chastain (Bernstein, Stair & McAdams) for Mohan Kutty,
M.D.. Geoffrey Forney (U.S. Department Of Justice, Civil Division) for U.S. Department
of Labor.
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6th Cir.: FedEx didn’t provide employee written notice of consequences of no
FMLA form; jury award upheld
By Cynthia L. Hackerott, J.D.
Finding that FedEx was at fault for failing to provide an employee with written notice of
the consequences of not returning a completed medical certification form, the Sixth
Circuit has affirmed a jury’s verdict in favor of the employee on her FMLA interference
claim. In addition, the appeals court found the magistrate impermissibly re-weighed the
evidence when she reduced to $90,788 the jury’s award of $173,000 in compensatory
damages; thus, the appeals court reinstated the full amount of the award (Wallace v
FedEx Corp, August 22, 2014, Moore, K).
The long-time FedEx employee had worked in a variety of positions over the years. By
the summer of 2007, she was a senior paralegal. She also had a variety of health
problems, including temporomandibular joint disorder (TMJ) and various mental health
issues, which required her to take leave. FedEx offered FMLA leave and its management
verbally asked her to complete a medical-certification form. Yet, the company never
explained the consequences of not returning a completed form. The employee failed to
provide FedEx with the medical certification, and following her absence for two
consecutive days after the form was due, FedEx discharged her.
Jury award. She filed an FMLA interference action, and a jury found in her favor on the
issues of liability and back pay, awarding damages in the amount of $173,000. Both
parties filed post-judgment motions, and the magistrate judge handling the case denied all
of them, except for FedEx’s request for a remittance of the compensatory damages award
under Fed. R. Civ. P. 59. On that issue the magistrate determined that a reasonable jury
could not find that the employee was able to work more than 16 months between her
termination and the trial. Accordingly, she reduced the employee’s compensatory
damages award to $90,788.
The employee appealed the magistrate judge’s decisions denying her requests for
liquidated damages and front pay, and the magistrate’s ruling on remittitur of the
compensatory damages. FedEx cross-appealed, challenging the magistrate judge’s denial
of its motion for judgment as a matter of law on liability. In December 2011, a motions
panel of the Sixth Circuit dismissed the appeal of the liquidated damages and front pay
decisions, which were issued in December 2010, as untimely. Although in the present
ruling the Sixth Circuit found that decision clearly erroneous, the Sixth Circuit
determined it could not revisit it three years later. Therefore, it limited its review to the
parties’ arguments related to the magistrate judge’s ruling on remittitur and judgment as a
matter of law on liability which was issued in March 2011.
FMLA liability. The Sixth Circuit affirmed the magistrate’s ruling as to the employer’s
cross-appeal of the magistrate’s decision denying judgment as a matter of law on liability.
The company first argued that the employee failed to present any evidence showing that
she provided FedEx notice of an intention to take FMLA leave because she failed to
return the medical certification form or to indicate that she desired FMLA leave. But the
appellate court found that the jury’s ruling in favor of the employee was reasonable
94
because she provided her manager with a note from her physician indicating she had a
serious medical condition that required her to take leave from work. Moreover, her
manager understood that the employee needed FMLA leave as evidenced by the fact that
he discussed the FMLA with in-house counsel and then provided the employee with
FMLA paperwork. Plus, the employee provided the employer with a note from her
psychiatrist which indicated that medical professionals would need to clear her to return
to work before her leave would end.
FedEx also asserted that no reasonable jury could find that its termination of the
employee interfered with her rights under the FMLA because her failure to return the
certification form meant she was not eligible for leave under the Act. Yet, the Sixth
Circuit disagreed. First, it found that FedEx failed to comply with the applicable
regulation at 29 C.F.R. Sec. 825.305 which requires employers to provide with sufficient
notice as to the consequences of failing to return a medical certification form. Both sides
agreed that management verbally told the employee she needed to return a medical
certification form within 15 days. However, the regulation requires written notice. Also,
neither the forms, nor the memorandum the manager gave the employee along with the
forms, mentioned the need for medical certification or the consequences of failing to
produce it.
Second, the Sixth Circuit rejected the employer’s argument that the applicable regulation
was arbitrary or capricious, finding that the regulation was reasonable and did not conflict
with the Act. Third, the appeals court was not convinced by the employer’s assertion that
the employee’s failure to report for work was somehow independent from the FMLA
leave at issue in this case. Rather, the employee’s failure to report for work — and her
subsequent termination — was a direct result of the failure to perfect her FMLA leave,
which was a consequence of FedEx failing to meet its responsibilities under the
applicable regulation.
Finally, the court rejected the employer’s arguments that the jury’s findings were
unreasonable because (1) there was no evidence that FedEx fired the employee for failing
to return her medical certification form; and (2) the employee admitted that her emotional
state, rather than lack of notice, caused her not to turn in the form. As to the first
argument, the court found FedEx’s failure to provide notice was the proximate cause of
the employee’s termination, meaning that its failure to comply with the regulations
prejudiced the employee. Regarding the second assertion, the court found that the
employer disregarded the regulation’s equitable-tolling provision, thus, elevating its
attendance policy over the protections of the FMLA. In addition, the employer
oversimplified mental illness, the court stated, pointing out that if the employee had
known that returning the certification was necessary to keep her job, she may have
rearranged her priorities in dealing with her mental illness to comply with FedEx’s
request.
Compensatory damages. The Sixth Circuit reversed as to the employee’s damages
award for two reasons. First, it found that the magistrate committed a procedural error by
granting remittitur and not offering the employee the option of a new trial on the issue of
back pay damages. Second, the magistrate judge abused her discretion by
95
impermissibility re-weighing the evidence when she reduced the damages award based
on her determination that the employee was able to work as a paralegal during the period
of over sixteen months between her termination and the trial. The appeals court found
that the magistrate failed to credit testimony which showed that the employee was
capable of working during the period at issue, and that it a reasonable jury would have
done so. Thus, the Sixth Circuit ordered the magistrate to enter judgment in favor of the
employee in the amount of $173,000.
The case number is: 11-5500/5577.
Attorneys: Alistair Elizabeth Newbern (Vanderbilt Law School) for Tina Wallace. David
Andrew Billions (Federal Express Corp.) for FedEx Corporation.
7th Cir.: Failure to meet expectations as assistant manager dooms FMLA, Title VII
claims
By Lorene D. Park, J.D.
Affirming the dismissal of a Wal-Mart employee’s claims that the retail giant retaliated
against her for exercising her FMLA rights, a Seventh Circuit panel explained that her
performance problems predated her medical leave and any conclusion that her
termination was causally related to her FMLA leave five months earlier involved
unbridled speculation. Her sex discrimination claim, which was based on the failure to
timely promote her, also failed because she did not point to similarly situated male
comparators who were promoted more quickly (Langenbach v Wal-Mart Stores, Inc,
August 4, 2014, Kanne, M).
The employee was hired by Wal-Mart in 1998 to stock shelves and did well enough over
the years to receive promotions. In 2006 or 2007, she began seeking an assistant manager
(AM) position, applying to the retailer’s management-in-training program several times
without success. She was finally admitted to the program in February 2008 and, upon
completion of the program, began work as an assistant manager at a store in Wisconsin.
In 2009, she received her first performance evaluation as an AM. She was given an
overall “Solid Performer” rating but there were a number of deficiencies noted, including
time management skills.
First PIP. Later in 2009, the employee was put on a performance improvement plan
(PIP), which noted a lack of leadership, a tendency to push decisions off on associates,
spending too much time in the office rather than the sales floor, not following proper
overnight shift procedures, and professionalism issues. The PIP was never completed
because her managers did not hold the anticipated follow-up meetings. In January 2010,
the employee moved to the day shift and soon thereafter was issued a written discipline
or “Coaching” for not following management routines and failing to timely complete her
duties. In her April 2010 annual review, she was given a competency score of 2.63 out of
five and a rating of “Development Needed.” The review noted that Wal-Mart wanted to
see a “complete turn around” from the employee and a renewed sense of “urgency and
time management.” It described specific issues concerning stocking, attendance, and
holding underperforming associates accountable.
96
Medical leave. In July 2010, the employee took FMLA leave for surgery to remove
fibroid tumors from her uterus. She was granted an extension when complications arose
and eventually returned in September. Upon her return, she was again assigned to the
overnight shift. That shift could be more physically demanding, but as AM, she could
delegate heavy lifting to associates. Meanwhile, she also expressed concerns about her
medical condition to her supervisor, who told her to go back on leave or request ADA
accommodations if she was concerned about her condition’s effect on her job
performance. The employee did not follow up on the discussion.
2010 PIP. Although the employee’s next performance evaluation had been prepared
before her FMLA leave, Wal-Mart delivered it after she returned. She was assessed a
2.26 competency rating and again assigned an overall rating of “Development Needed.”
The comments again reflected poor leadership skills as well as insufficient organization
and planning. Thereafter, she was put on a second PIP which identified a number of
issues with her performance, including time management problems, failure to
consistently implement policies, and more. The PIP also identified actions she could take
to improve her performance and her supervisors held follow-up sessions. Because the
supervisors concluded that the employee had not made the specified improvements, they
decided to terminate her.
The employee filed suit alleging that Wal-Mart retaliated against her for exercising her
FMLA rights and discriminated against her based on her sex by delaying her promotion
to AM and paying her less than her male counterparts, and refusing to promote her
further. The district court granted summary judgment for Wal-Mart and the employee
appealed.
FMLA retaliation claim. Affirming, the Seventh Circuit panel first addressed whether
the employee made out a prima facie case under the direct method. At issue was whether
Wal-Mart’s actions were “materially adverse” and whether there was a causal connection
between the employee’s FMLA leave and those actions. The four post-leave actions to
which the employee pointed included her poor performance rating, placement on a PIP,
being assigned to the overnight shift, and termination. The appeals court explained that
the performance review and 2010 PIP were not materially adverse. Nor was the
assignment to night shift: “Where there is no evidence the defendant sought to exploit a
‘known vulnerability’ by altering a plaintiff’s work schedule upon return from FMLA
leave, a schedule change is not a materially adverse action.”
Furthermore, while termination is an adverse action, the employee could not lead the
appellate court to conclude that she was fired for retaliatory reasons without relying on
“unbridled speculation.” She claimed that the timing of her discharge five months after
her return from leave was suspicious and her supervisors’ reasons pretextual, but she
could not deny that her history of performance issues preceded her 2010 FMLA leave,
the appeals court averred. Moreover, the comments her supervisors made about her
shortcomings as an AM were consistent both before and after her leave.
The employee’s FMLA retaliation claim also failed under the indirect method of proof
because she did not present evidence that she was meeting Wal-Mart’s legitimate
97
expectations. Although one of the decisionmakers commented that she was “doing fine,”
that was consistent with the same supervisor’s comment in PIP follow-up meetings that
she had “made strides to improve” but they were ultimately not enough to meet company
expectations. In any event, there was voluminous evidence that the employee did not
meet Wal-Mart’s expectations, including notes from the 2010 PIP, her evaluations, and
deposition testimony by coworkers.
Sex discrimination. Summary judgment was also affirmed on the employee’s claim that
Wal-Mart failed to promote her because of her sex, which was based on the 10-year delay
in promoting her to the AM position and Wal-Mart’s failure to promote her beyond the
AM position. As to the latter, the appeals court noted that she was fired from the AM
position for not meeting Wal-Mart’s performance expectations and she admitted in
deposition that she was not qualified for promotion past the AM position and never
applied for a higher position.
With respect to the delay in promoting her to the AM position, the employee failed to
point to sufficient evidence that similarly-situated male employees were promoted faster
than she was. She relied on two males who were promoted to AM positions less than two
years after being hired and upon their first application (in contrast to her many
applications, which were denied for several years); however, those two individuals were
different in significant ways. One had skill in the “lost art” of meat cutting, and was
uniquely qualified to be AM in the meat department and he had three years of
management experience. Likewise, the other had two years of community college, which
by itself allowed him to meet the minimum qualifications for the AM position, while the
employee had no education beyond high school. Given that Wal-Mart’s minimum
requirements for the AM position relied heavily on schooling and experience, a
reasonable factfinder would not find either male employee to be an adequate comparator
for the employee.
Moreover, the claim that the employee was paid less than her male counterparts because
she was not promoted when she should have been was inextricably intertwined with her
delayed promotion argument because Wal-Mart’s pay structure is linked to job title and
seniority. Thus, because summary judgment was appropriate on her delayed promotion
claim, the appeals court did not address her disparate pay claim.
The case number is: 14-1022.
Attorneys: James H. Kaster (Nichols Kaster) for Erika M. Langenbach. Erik K.
Eisenmann (Whyte, Hirschboeck, Dudek) for Wal-Mart Stores, Inc.
7th Cir.: No expert testimony needed to establish incapacity while out on FMLA
leave
By Lisa Milam-Perez, J.D.
Reversing summary judgment in an employer’s favor on an employee’s FMLA claims,
the Seventh Circuit rejected the district court’s holding that an employee had to present
expert testimony at trial to establish that he was incapacitated on the specific days in
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which he took intermittent leave, concluding that no such showing in required under the
Act or its enabling regulations. Although the employee, who suffered from depression,
exceeded the amount of intermittent leave periods estimated by his physician on his
medical certification, “an estimate is just that,” the appeals court noted, and the employer
had other options at its disposal, other than discharge, if it required validation that he was
in fact incapacitated on the days in question (Hansen v Fincantieri Marine Group, LLC,
August 18, 2014, Tinder, J).
Intermittent leave. The employee was granted intermittent FMLA leave based upon his
physician’s certification that he would have periodic flare-ups of depression four times
every six months, with a duration of incapacity from two to five days with each episode.
When the employee requested leave for the eighth time within six months, the employer’s
third-party FMLA administrator sent a fax to his physician noting that the latest leave
request “is out of his frequency and duration,” and asking the physician to “Please
confirm item #7.” (Item #7 asks about the employee’s need to attend follow-up
appointments or work part-time or on a reduced schedule; presumably, though, the
administrator was actually seeking confirmation as to Item #8, which asks about the
estimated frequency and duration of episodic flare-ups and the duration of the related
incapacity.) At any rate, the physician faxed back a response asserting that “Item #7” is
“confirmed.”
Thereafter, the employee’s subsequent leave requests were rejected because the
physician-certified frequency was exceeded. As such, he began to accumulate attendance
points (his previous FMLA-approved absences had not been counted against him), and
when he accumulated a sufficient number of attendance marks under the employer’s
attendance policy, he was terminated, and he filed an FMLA suit.
Summary judgment to employer. Granting summary judgment to the employer, the
district court concluded that expert medical testimony was required to prove that the
employee’s serious health condition rendered him unable to perform the functions of his
position on each day for which he sought FMLA leave. The employee had no such
testimony at trial; his own certifying physician was identified as only a fact witness. As
such, he could not establish entitlement to FMLA leave, the lower court reasoned.
On appeal, the Seventh Circuit addressed two issues: (1) whether an employer is allowed
to deny intermittent FMLA leave when an eligible employee exceeds the estimated length
or duration provided in his medical certification form; and (2) whether an employee is
required to present expert testimony at trial to prove that he was incapacitated for each
day for which he requested FMLA leave.
Proving incapacity. The district court erred in holding that an employee needs expert
testimony to prove that he was incapacitated each day for which he requested FMLA
leave due to his serious health condition, the appeals court found, noting that the law does
not require such a showing. The cases cited by the employer do not support the notion
that an expert witness is necessary; rather, they stand merely for the “the unsurprising
proposition” that some medical evidence is required to establish a serious health
condition.
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The employer cited no controlling authority directly on point as to whether an
employee’s initial medical certification was sufficient to make out a prima face case, or
whether expert testimony is required to establish incapacity where the employee suffers
from a chronic condition like depression. The Third and Eighth Circuits have held that
lay testimony combined with medical testimony raises a genuine issue of material fact as
to incapacity, and the Fifth and Ninth Circuits have gone still further, holding that lay
testimony alone is sufficient, the Seventh Circuit observed.
Here, the physician’s medical certification established that the employee had a serious
health condition, and the employer did not contest that certification. Although the
certification did not expressly cover the absences in excess of the estimated number of
episodes, the certified need for intermittent leave could be enough from which a jury
could find his chronic serious health condition rendered him unable to work on the days
in question. That might not be abundant evidence to establish his leaves were medically
necessary, the appeals court noted, but it was enough to raise a material issue of fact.
Regulations lend support. The appeals court buttressed its reasoning by citing the
FMLA regulations addressing continuing treatment and “intermittent leave. The
regulations anticipate that the determination whether an employee is unable to work due
to a serious health condition would not necessarily be made by a medical professional.
The “continuing treatment” regulation at 29 CFR Sec. 825.115(f), for example, provides
that absences attributable to incapacity may qualify even though the employee does not
receive treatment from a health care provider during the absence. Thus, an employee with
asthma may not be able to report for work due to an attack, or a pregnant employee may
be home in bed with morning sickness — and in neither case would the employee need to
seek treatment from a physician for his or her leave to be FMLA-covered. The
intermittent leave regulations at Sec. 825.202(B)(2) similarly provide.
“If the employee does not visit a health care provider during the flare-up of the chronic
condition such as depression, the health care provider would not have any personal
knowledge about the employee’s claimed incapacity that day,” the appeals court
reasoned. “There would be no medical testimony about the incapacity on that particular
day and the only available evidence to prove incapacity would be lay testimony. Thus,
the regulations support the conclusion that incapacity can be established by lay testimony
and expert medical testimony is not required to prove the incapacity.”
“An estimate is just that.” In completing the FMLA certification form, the physician
certified that it was medically necessary for the employee to be absent during flare-ups of
his condition. The form asked for the physician’s “best estimates” as to frequency or
flare-ups over the next six months, based upon the patient’s medical history and the
physician’s knowledge of the medical condition. That is, the certification form asked for
an estimate and the physician gave one. This was sufficient to certify the employee’s
need for intermittent leave.
And, while the employer now suggested that the certification constituted hearsay, the
appeals court said a health care provider’s medical certification “could be considered a
record of a regularly conducted activity,” and thus was admissible under the business
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records exception (assuming proper foundation was laid). “We have routinely relied on
the medical certifications of health care providers submitted by employees to their
employers to establish the employees’ entitlement to FMLA leave,” the appeals court
added.
Also rejected was the employer’s argument that the employee’s right to intermittent leave
was “limited to the precise frequency and duration stated in the certification.” The
certification did not explicitly certify that the employee would not need leave beyond the
estimated number of episodes, and the authorities cited by the employer “did not stand
for such a sweeping proposition.” Also, other courts have rejected similar arguments. “If
the certified frequency and duration were limits on the employee’s entitlement to leave,
there would be no need to request recertification when the employee’s requested leave
exceeded the frequency or duration stated in the certification,” the Seventh Circuit
pointed out.
Employer’s missteps. The employer erred in failing to give the employee a chance to
cure the arguably deficient certification before firing him once his absences exceeded the
expected frequency the certification predicted. It was not entitled to deny him FMLA
leave based on the perceived insufficiency. Another misstep: the third-party administrator
made a half-hearted attempt to recertify with its fax to the physician, but the attempt was
improper. Under the regulations, an employer is required to give notice of a requirement
for certification every time a certification is required; there is no evidence that the
employee was notified when his physician was faxed. Moreover, the regulations prevent
an employer from communicating directly with the employee’s health care provider, so
the administrator erred in contacting the physician directly. Finally, it sought to confirm
the prior certification; it did not request certification for the absences that exceeded the
estimated frequency and duration. (Not to mention, the court observed, that “the fax itself
was horribly confused and confusing.”)
What should the employer have done? Were it uncertain of the employee’s incapacity
on those days in excess of the predicted number of episodic flare-ups, the employer could
have challenged the certification or required that the employee obtain a second opinion. It
could have sought recertification under the circumstances and could have asked the
physician whether the employee’s condition and the need for leave were consistent with
the frequency and duration of his absences. In fact, the regulations contemplate this very
situation, the court noted. But the employer didn’t do that either. Rather, it simply denied
him FMLA-approved leave. Whether it did so in violation of the Act was for a jury to
decide.
The case number is: 13-3391.
Attorneys: Joel S. Aziere (Buelow Vetter Buikema Olson & Vliet) for Fincantieri Marine
Group, LLC. Erica N. Reib (Heins Law Office) for James G. Hansen.
8th Cir.: Tyson again loses bid to overturn damage award on employees’ donning
and doffing claims
By Ronald Miller, J.D.
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Tyson Foods lost its bid challenging that a district court erred in granting certification of
an FLSA collective action and Rule 23 class action to production employees who alleged
that the employer failed to provide overtime compensation for donning and doffing
personal protective equipment (PPE). A divided Eighth Circuit panel rejected Tyson’s
contention that class certification was improper, noting that since class members were all
subject to the same policy, worked in the same plant, and used similar equipment, the
complaint was not dominated by individual issues. Also rejected was Tyson’s contention
that the plaintiffs improperly relied on a formula to prove liability. Judge Arlen Beam
dissented (Bouaphakeo v Tyson Foods, Inc, August 25, 2014, Benton, W).
“K-code” time. To calculate the employees’ compensable working time, Tyson
measured “gang time” — when the employees were at their working stations and the
production line was moving. In addition to “gang time,” Tyson added “K-code” time to
each employee’s paycheck. Before 2007, Tyson paid four minutes of K-code time per
day to each employee in order to compensate for the donning and doffing of unique
items. From February 2007 to June 2010, Tyson added several minutes per day for preand post-shift walking time required of the employees. The employer did not record the
actual time that employees perform any of these tasks. The employees claimed that
Tyson’s K-code time was insufficient to cover compensable pre- and post-production line
activities, violating the FLSA and the Iowa Wage Payment Collection Law (IWPCL).
Employees at Tyson’s Storm Lake, Iowa facility claimed that the employer failed to
provide overtime compensation for donning personal protective equipment (PPE) and
clothing before production and again after lunch, and for doffing PPE and clothing before
lunch and again after production. A jury returned a verdict in favor of employees at the
meat-processing facility. On appeal, Tyson argued that the district court erred in
certifying the FLSA collective action and the IWPCL class under Rule 23.
A district court may certify a class under Rule 23(b) if “questions of law or fact common
to class members predominate over any questions affecting only individual members,”
and “a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.” The FLSA allows named plaintiffs to sue “for and in
behalf of . . . themselves and other employees similarly situated.” Plaintiffs may be
similarly situated when “they suffer from a single, FLSA-violating policy, and when
proof of that policy or of conduct in conformity with that policy proves a violation as to
all the plaintiffs.”
Factual differences. According to Tyson, factual differences between the plaintiffs —
differences in PPE and clothing between positions, the individual routines of employees,
and variation in duties and management among departments — made class certification
improper. In Tyson’s view, these differences did not allow the class action to “generate
common answers apt to drive the resolution of the litigation.” Here, the appeals court
observed that Tyson had a specific company policy — the payment of K-code time for
donning, doffing, and walking — that applied to all class members. The court also noted
that class members worked at the same plant and used similar equipment. Further, a time
study showed that donning and doffing all equipment, plus walking took an average of 18
minutes in the fabrication department and 21 minutes in the kill department.
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While applying Tyson’s K-code and expert testimony to general answers for individual
overtime claims did require inference, the Eighth Circuit found that this inference was
allowable under Anderson v. Mt. Clemens Pottery Co. Although the employees’ varied in
their donning and doffing routines, the majority concluded that the complaint was not
“dominated by individual issues” such that varied circumstances prevent “one stroke”
determination. Thus, it was concluded that the district court did not abuse its discretion in
certifying the class.
Jury instruction. Tyson also contended that the class should be decertified because
evidence at trial showed that some class members did not work overtime and would
receive no FLSA damages even if Tyson under-compensated their donning, doffing, and
walking. As an initial matter, the appeals court found that Tyson exaggerated the
authority for its contention. At any rate, at Tyson’s request, the jury was instructed, “Any
employee who has already received full compensation for all activities you may find to
be compensable is not entitled to recover any damages.” Tyson’s instruction directed the
jury to treat plaintiffs with no damages as class members. As a result, the court concluded
that where Tyson “invited error” there could be no reversible error.
Proof of liability. Next, Tyson argued that the plaintiffs improperly relied on a formula
to prove liability. In Wal-Mart Stores, Inc. v Dukes, the Supreme Court disapproved of
“Trial by Formula” — that is a sample set of the class members would be selected, as to
whom liability would be determined and back pay owing would be determined by
depositions supervised by a master. However, in this instance, the plaintiffs did not prove
liability only for a sample set of class members. They proved liability for the class as a
whole, using employee time records to establish individual damages. The plaintiffs did
not rely on inference from average donning, doffing, and walking times, but applied this
analysis to each class member individually.
Contrary to Tyson’s contention, the evidence presented by the plaintiffs was not
insufficient to prove damages classwide. Tyson had no evidence of the specific time each
class member spent donning, doffing, and walking. “[W]hen an employer has failed to
keep proper records, courts should not hesitate to award damages based on the ‘just and
reasonable inference’ from the evidence presented,” explained the majority. To prove
damages, the plaintiffs used individual timesheets, along with average times calculated
from a sample of 744 observations of employee donning, doffing, and walking. Pay data
— which came directly from Tyson — showed the amount of K-code time each
individual received. Thus, sufficient evidence existed to support a “reasonable inference”
of classwide liability.
Dissent. In a dissenting opinion, Judge Arlen Beam argued that the case should be
reversed and remanded. According to the dissent, neither the FLSA collective action, nor
the IWPCL class action were eligible for certification as a matter of fact or law.
Moreover, the dissent argued that Rule 23 state-law-based class actions are
fundamentally different than collective actions authorized under the FLSA and may not
be procedurally homogenized for trial as done in this case. With respect to the FLSA
collective action, the dissent observed that the six named lead plaintiffs bore the burden
of showing that opt-in plaintiffs were similarly situated. Conditional certification was
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granted for three Tyson departments. According to the dissent, the record reveals that this
“conditional” designation was never withdrawn or modified at any time during or after
trial.
Turning to the state class, the dissent argued that the requirements of Rule 23 were not
met. With respect to Rule 23(a)(2) — which contemplated that “there are questions of
law or fact common to the class,” the dissent pointed out that commonality requires the
plaintiff to demonstrate that the class members have suffered the same injury. According
to the dissent, the plaintiffs failed to demonstrate the capacity of a classwide proceeding
generating common answers apt to drive the resolution of the litigation.
Separate donning, doffing ruling. Tyson fared better in another ruling by the Eighth
Circuit, on an appeal by employees at a separate Iowa plant who also alleged the
employer failed to pay wages due under the FLSA and IWPCL. Having convinced a
district court that the donning and doffing cases must be litigated on a plant-by-plant
basis, the employees found themselves unable to use prior precedent to prevent the
employer from “re-litigating” the compensability of donning and doffing “unique” items
(Guyton v Tyson Foods, Inc dba Tyson Fresh Meats, Inc, August 25, 2014, Benton, W).
As in Bouaphakeo, employees at Tyson’s Columbus Junction plant claimed that the
employer failed to provide overtime compensation for donning PPE and clothing before
production and again after lunch, and for doffing PPE and clothing before lunch and
again after production. The employees sued claiming that the K-code time paid by Tyson
was insufficient to cover compensable pre- and post-production line activities. The
district court certified an FLSA collective action and a Rule 23 class claim under the
IWPCL. The district court granted Tyson summary judgment, finding that pre- and postproduction activities during a 35-minute meal period are not compensable. On other
donning and doffing claims, the jury returned a verdict in favor of Tyson.
In response to questions on a verdict form, the jury agreed that the donning and doffing
of items was work. However, it responded “NO” to the question whether such activity
was integral and indispensable to a principal activity, such that it starts and ends the
“continuous workday.” On appeal, the plaintiffs allege that the district court erred in
submitting the case to the jury, in denying them judgment as a matter of law, and in
granting Tyson summary judgment on the meal-period claim.
Re-litigating compensability. As an initial matter, the employees argued that Tyson was
estopped by the Supreme Court decision in IBP, Inc v Alvarez, and the Tenth Circuit
decision in Reich v IBP, Inc, from re-litigating the compensability of donning and doffing
“unique” items related to knife use. In Alvarez, the Supreme Court held that walking time
to and from the production floor after donning “special safety gear” was compensable.
The appeals court in Reich ruled that time spent donning and doffing unique PPE
associated with knife use was compensable, and also that time spent donning and doffing
non-unique gear was not compensable
Here, the class included all gang-time employees — those who used knives and
associated unique gear, and those who did not. Testimony showed that employees rotated
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through knife and non-knife positions. At any time, 35 to 40 percent of employees did not
use knives. In their proposed verdict form and their expert’s damages model, the
plaintiffs did not distinguish between those using knives and those who did not. PostReich and Alvarez, the Eighth Circuit has held that employees “bore the burden of
proving they performed uncompensated work” when “donning and doffing non-unique
items.” Since plaintiffs must prove their case on a classwide basis, the district court did
not err in failing to give Reich and Alvarez preclusive effect.
Integral and indispensable to principal activity. The employees next argued that the
district court erred in letting the jury decide that donning, doffing, and walking were not
“integral and indispensable to a principal activity.” Here, the Eighth Circuit noted that the
employees did not object to letting the jury decide the “integral and indispensable” claim.
When a party fails to object to a jury instruction, the court reviews for sufficiency of the
evidence. In this instance, testimony showed that for some positions all equipment could
be worn to and from home. Some equipment was optional, and could be worn for the
employee’s comfort at work. Many positions did not require protective gear associated
with knife use. As a result, sufficient evidence existed that the disputed activities were
not integral and indispensable classwide.
Plant-specific litigation. On appeal, the employees contended that questions of law must
be decided by the court so that the coverage of the statute applies equally across all Tyson
plants through the principle of stare decisis. However, the appeals court noted that the
employees previously opposed consolidated proceedings, stating that each case must be
litigated on a plant-by-plant basis. They pointed to “types of personal protective
equipment and clothing worn at the specific plant . . . and local policies, practices, and
procedure concerning unpaid time.” The employees also noted that time studies “at each
specific plant location” would “take into account the processing line configuration, locker
room locations [and] walking distances.” Thus, based on the employees’ claims, the
plants were not so similar as to prevent plant-specific litigation.
Jury response not inconsistent. The employees also attacked the jury response on the
jury verdict form as being inconsistent — that any activity found to be “work” must be
“integral and indispensable.” However, the plaintiffs had not objected to the separation of
“work” and “integral and indispensable” on the verdict form, nor did they object to
separate definitions of “hours worked” and “integral and indispensable” in the jury
instruction. The employees’ argument also ignored the Portal-to-Portal Act, which allows
some “work” to be noncompensable. Thus, the district court properly ruled that the
verdict was not inconsistent.
Meal period claim. Finally, the employees challenged the district court’s grant of
summary judgment in favor of Tyson on whether pre- and post-production activities
during a 35-minute meal period were not compensable. The Eighth Circuit uses a
“predominantly-for-the-benefit-of-the-employer” standard for mealtime claims under the
FLSA. Here, it was undisputed that the entire meal period, other than a brief time spent
donning and doffing, was uninterrupted. Employees could wear much protective clothing
in the cafeteria. Thus, the meal period as a whole was for the benefit of the employees.
105
The case number is: 12-3753.
Attorneys: Roger K. Doolittle (Doolittle Law Firm) for Peg Bouaphakeo. Allison Balus
(Baird & Holm) for Tyson Foods, Inc..
9th Cir.: Even minor acts of retaliation support First Amendment claims
By Lorene D. Park, J.D.
Reversing in part a district court’s grant of summary judgment in a First Amendment
retaliation suit by a county employee and her union, a Ninth Circuit panel found that at
least some of the 30 adverse employment actions identified by the employee were
“reasonably likely to deter” protected speech, including “minor” actions like being
removed from a committee; being prohibited from using break time to travel between
worksites and required to use unpaid time; and having approved vacation rescinded.
Involuntary transfers and an internal investigation also supported her claim (Thomas v
County of Riverside, August 18, 2014, per curiam).
Granting summary judgment for a county and for individual defendants on the First
Amendment retaliation claims of an employee who allegedly suffered adverse actions
after union activities and protected speech, a federal district court in California concluded
that the 30 adverse actions she identified were not materially adverse. Only nine of the
actions were analyzed in some detail. The others, which were collectively dismissed as
“petty workplace gripes,” included the removal of the employee from a community
college teaching assignment (costing her $9,000 a year); prohibiting her from using break
time to travel between work sites, thereby requiring her to use unpaid time to travel;
rescinding a previously approved vacation; and removing her from an unpaid position on
the uniform committee.
Minor acts can infringe. Reversing, the appeals court concluded that a “reasonable juror
might well find that these actions even if viewed in isolation, could deter protected
speech.” Indeed, even the removal of the employee from an unpaid committee, “which
might at first blush appear trivial, might in context be more egregious.” The court noted
that the Supreme Court has recognized that excluding an employee from a weekly
training lunch that “contributes significantly to the employee’s professional advancement
might well deter a reasonable employee from complaining about discrimination.”
Moreover, “even minor acts of retaliation can infringe on an employee’s First
Amendment rights,” particularly where, as here, there is evidence suggestion that some of
those actions were part of a more general campaign.
Transfers. Of the nine incidents discussed in detail, the appeals court found that four
should have survived summary judgment. Of these, three were involuntary transfers to
different positions or a different shift. Although the defendants offered various
nonretaliatory business reasons for the transfers, the employee produced evidence that
each happened shortly after her acts of speech, that the employer had opposed that
speech, and that the business justifications were pretextual. Any one of these showings,
let alone all three, was enough to survive summary judgment if it presented a genuine
factual dispute, explained the court.
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Internal investigations. As to three internal investigations, only one supported the
retaliation claim. One was initiated based on grave, detailed accusations that the
employee and others fabricated a departing employee’s negative performance reviews,
causing panic attacks and a miscarriage. Although the charges against the employee
proved unfounded, not all of the claims were baseless. The second investigation was
initiated in response to the employee’s having improperly accessed and removed files,
which was an undisputed violation of department policy. The district court correctly
found no plausible inference of retaliation raised by this investigation.
However, the third investigation raised a genuine factual dispute. The employee’s
supervisor started the investigation for “rude and discourteous” emails but conceded that
no word or phrase violated department policy. Rather, the “tone” was considered
objectionable. In the appellate court’s view, this supposed justification was sufficiently
thin and subjective that a reasonable juror might find it pretextual. Summary judgment
was therefore inappropriate on this basis. However, summary judgment was affirmed as
to two individual defendants who did not supervise or have authority over the employee
and could not have committed an adverse action.
Liability. The court declined to address the individual defendants’ qualified immunity
argument in the first instance on appeal. However, it did find that the district court erred
in determining that the county was not subject to Monell liability. Although it recited the
correct standard, it erroneously found that the employee presented “no evidence
whatsoever” to support her claim that there was a delegation of final policy making
authority to the sheriff’s department employees who allegedly retaliated against her. To
the contrary, the appeals court noted that she attached an exhibit to a declaration that was
a copy of the county disciplinary process policy, which stated that the department was
exempt from the county-wide policy except that the sheriff’s disciplinary policies could
not be less strict. Remand was therefore proper to determine whether the policy
constituted a delegation of authority resulting in Monell liability.
The case numbers are: 12-55470 and 12-55812.
Attorneys: Alan G. Crowley (Weinberg, Roger & Rosenfeld) for Wendy Thomas.
Edward P. Zappia (The Zappia Law Firm) for County of Riverside.
9th Cir.: MDL court got it wrong: FedEx drivers employees, not independent
contractors
By Lisa Milam-Perez, J.D.
In a decision that “substantially unravels FedEx’s business model,” according to a
concurring judge, the Ninth Circuit has ruled in two companion decisions that FedEx
delivery drivers are employees, not independent contractors, as a matter of both
California and Oregon law. The appeals court thus reversed a MDL court’s holding to the
contrary. Looking to the “right to control” test and, as to the Oregon drivers, the
economic realities test as well, the appeals court reversed a grant of summary judgment
to FedEx and a corresponding denial of summary judgment to the drivers, in several class
action wage suits (among other claims) against the courier brought under state law
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(Alexander v FedEx Ground Package System, Inc dba FedEx Home Delivery and
Slayman v FedEx Ground Package System, Inc dba FedEx Home Delivery, Inc, August
27, 2014, Fletcher, W).
“As a central part of its business,” Judge Fletcher began in both opinions — signaling
where the appeals court would likely end — FedEx contracts with drivers to deliver
packages to customers. In each case, the drivers are identified as independent contractors
under the company’s operating agreement (OA), which governs the parties’ relationship.
When a wave of lawsuits challenged FedEx’s independent contractor model (with cases
filed in 40 states), the Judicial Panel on Multidistrict Litigation consolidated the cases for
multidistrict litigation (MDL) proceedings in a federal district court in Indiana. The MDL
court held that nearly all of the plaintiffs were independent contractors as a matter of law,
in those states where such status is guided by common law agency principles. That
holding applied to the California plaintiffs here, who represented some 2,300 individuals
who worked as full-time delivery drivers in the state between 2000 and 2007, either for
FedEx Ground or FedEx Home Delivery, and also to the Oregon plaintiffs (363 drivers,
in two classes, who worked full-time for FedEx between 1999 and 2009 in one of the two
operating divisions). Reversing the MDL court, the Ninth Circuit in both cases remanded
to the respective district courts with instructions to enter summary judgment in the
drivers’ favor on the question of their employment status.
Scope of OA, right-to-control test. The relevant facts were largely undisputed here; the
parties sparred only over the reach of the FedEx operating agreement, and the extent to
which, under the contract’s terms, FedEx exerted the kind of control over the drivers that
was indicative of employee status. While the operating agreements were fairly clear, the
Ninth Circuit found, to the extent they were ambiguous, extrinsic evidence supported a
finding that FedEx exercised substantial enough control over the drivers to suggest that
“independent contractor” was a misnomer.
In addition to the OA, various company policies and procedures also guided FedEx’s
relationship with its drivers. Both the OA and these additional policies and procedures
“unambiguously allow FedEx to exercise a great deal of control over the manner in which
its drivers do their jobs,” the appeals court concluded. Given this broad right of control
(the most important factor) coupled with the finding that other, lesser factors favored
neither employee nor independent contractor status, the drivers were deemed employees
as a matter of law under California and Oregon law.
Appearance and vehicle standards. The drivers operate FedEx-approved vehicles and
wear mandated FedEx uniforms in accordance with FedEx’s required grooming
standards. In fact, the court observed, “FedEx controls its drivers’ clothing from their hats
down to their shoes and socks.” The company’s extensively detailed grooming and
appearance standards clearly constitute control over the drivers, within the meaning of
the right-to-control factors, the appeals court found. FedEx is equally meticulous about
the vehicles the drivers are to use in delivering the company’s packages. They have to be
painted a specific shade of white, marked with the FedEx logo, and maintained in a
presentable fashion, free of body damage or other markings. The specific dimensions of
the vehicles, even the van’s “package shelves,” and the materials to be used in
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constructing the shelves, are also company-dictated. “These requirements go well beyond
those imposed by federal regulations,” the appeals court observed. And, under the OA,
drivers that failed to conform to the grooming requirements or vehicle specifications can
be barred from working.
When to work. Although FedEx doesn’t dictate drivers’ working hours to the very
minute, the OA clearly reflects that the company has considerable control over the
specific hours they work. Drivers’ workloads are structured so that they have 9.5 to 11
hours of work every working day. While FedEx argued that the drivers are free to hire
helpers to spread their labor, thus freeing them up to work less than 9.5 hours, managers
nonetheless maintain the right to adjust drivers’ workloads to ensure they never have
more or less work than can be done in 9.5 to 11 hours. Moreover, drivers cannot leave
their terminals in the morning until all of their packages are available; they also have to
report back to the terminals before a specified time. “The combined effect of these
requirements is substantially to define and constrain the hours that FedEx’s drivers can
work,” the court wrote.
How to work. FedEx also tells the drivers what packages to deliver, and when. Each
driver is assigned a specific service area that can only be altered at the company’s sole
discretion. The company negotiates package delivery windows directly with its
customers. Under the OA, drivers must comply with FedEx “standards of service,” such
as maintaining a professional image and using “proper decorum at all times” in order to
protect the company’s reputation.
The drivers exercise a bit of discretion here and there: they can choose the order in which
to deliver their assigned packages, and they are free to ignore the guidance of managers
who had evaluated their performance on ride-alongs. But, as the Ninth Circuit noted, “the
right-to-control test does not require absolute control.” And the narrow freedom afforded
the drivers in this regard “does not counteract the extensive control it does exercise.”
Rebuffing the company’s contention that it controlled only the results obtained, not the
manner in which the results are achieved, the appeals court pointed out that “no
reasonable jury could find that the ‘results’ FedEx seeks include having all of its vehicles
containing shelves built to exactly the same specifications,” as one example.
Entrepreneurial opportunities. According to FedEx, its OA gives the drivers
“flexibility and entrepreneurial opportunities that no ‘employee’ has.” It cites, for
example, their ability to take on multiple routes and vehicles, and to hire third-party
helpers, suggesting this was inconsistent with employee status. To support this
contention, though, it relied not on California or Oregon law, but on the D.C. Circuit’s
2009 decision in FedEx Home Delivery v. National Labor Relations Board. Even if
correct, though, that appellate ruling has no bearing on the cases here, as there is no
indication that either state replaced their longstanding right-to-control tests with the
“entrepreneurial opportunities” test developed by the D.C. Circuit. The relevant case law
indicates that entrepreneurial opportunities of the sort afforded the drivers here do not
undermine a finding of employee status. While the drivers could operate more than one
vehicle or route, the right was contingent on FedEx’s approval, and only if it was
consistent with the company’s business needs and the specific terminal capacity. To hire
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on additional help, a driver had to be “in good standing” with the company, and FedEx
had the right to determine whether replacement drivers were “acceptable.” Whether the
company actually exercised that right was irrelevant, the appeals court said; “what
matters is that the right exists.”
Other factors can’t tip scales. Given the “powerful evidence” of FedEx’s right to
control the manner in which its drivers complete their duties, none of the remaining
variables in the respective right-to-control tests (nine additional factors under California
law; four more, in Oregon) sufficiently favored FedEx to permit a finding of independent
contractor status.
Favoring the drivers, as noted above: their work is performed under FedEx’s direction.
While they are free to determine some aspects of the day-to-day work, FedEx closely
supervises them through various means. So too, the relative level of skill required. The
drivers required no experience to land the job, except for the ability to drive. The duration
of the relationship counted in the drivers’ favor too: they entered into one to three-year
contracts, which are automatically renewed for one-year terms unless either party wishes
not to.
Also, importantly, the drivers’ work is “wholly integrated” into the company’s
operations. “The drivers look like FedEx employees, act like FedEx employees, [and] are
paid like FedEx employees,” the appeals court noted, citing as persuasive the holding in
Estrada v. FedEx Ground Package System, Inc., in which a California appeals court
found employee status where plaintiffs worked under the identical OA. Also significant:
the work they perform, picking up and delivering packages, is part of the principal’s
regular business. Indeed, it is “essential to FedEx’s core business.”
Slightly in FedEx favor: the “right to terminate at will” factor (an arbitration clause in the
OA restricts FedEx’s unqualified right to discharge the drivers, suggesting the
relationship is more a business partnership than a standard employment-at-will
arrangement). Also, the drivers provide their own vehicles and are not required to procure
their tools and equipment through the company. This factor, too, weighed only slightly in
favor of independent contractor status, though, since FedEx is involved in the purchasing
process, provides funds, and recommends vendors. In fact, the required scanners which
the drivers must use on the job are unavailable elsewhere; the vast majority of drivers
thus purchase their equipment through FedEx. On balance, neither of these factors
favored FedEx enough to tip the scales in the company’s favor on the independent
contractor question.
Parties’ intentions or belief. California also takes into consideration the parties’ beliefs
as to the nature of their relationship. The edge here went to FedEx — again, though, only
slightly. The OA expressly identifies the relationship as one of an independent contractor,
and disclaims any authority on FedEx’s part to direct drivers as to the manner or means
of their work. However, the disclaimer is belied by other contract provisions, as well as
other policies and procedures in effect, which allow the company in fact to exert
considerable control over the drivers’ day-to-day work. As such, the OA “provides only
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limited insight into the drivers’ state of mind.” And, in the end, neither FedEx’s belief nor
the drivers’ own perceptions is dispositive.
On this point, Judge Trott wrote separately to emphasize that simply calling the drivers
independent contractors didn’t make it so — even if the drivers originally believed and
intended, as FedEx insisted, that this was the arrangement that he or she was signing
onto.
Economic realities test. The appeals court also had to evaluate the drivers’ status, as for
the Oregon plaintiffs, under that state’s economic realities test. It’s a broader inquiry than
the right-to-control test; one that turns more on the worker’s dependence on the employer
than on the employer’s direct control over the worker. Looking to the same operative
facts, the appeals court found employee status under this analysis as well.
Split decision on class certification. The Ninth Circuit also rejected, for the most part,
FedEx’s cross-appeal of the MDL court’s decision to certify the classes in the cases at
hand. FedEx argued that the appeals court should reverse class certification if, in
reversing summary judgment in the company’s favor, it relied on individualized evidence
in doing so. However, the appeals court did not rely on any individualized evidence, so
this contention was unavailing. However, the appeals court did hold that former drivers in
the Oregon case lacked standing to seek prospective relief, seeing as they were not in a
position to benefit from such a remedy. Thus, the court reversed the MDL court’s
decision to certify their class claims for injunctive and declaratory relief.
The case numbers are: 12-17458, 12-35525 and 12-35559.
Attorneys: Ellen Lake (Law Offices of Ellen Lake) and Beth A. Ross (Leonard Cardner)
for Dean Alexander. Jonathan Hacker (O'Melveny & Myers) for FedEx Ground Package
System, Inc, dba FedEx Home Delivery. Scott Alden Shorr (Stoll Berne) for Edward
Slayman.
10th Cir.: Oil-field workers forced to arbitrate wage claims under narrow
employment contract
By Ronald Miller, J.D.
Although employment contract did not contain any language dealing with wages, hours,
overtime compensation, or other rights regarding wages generally, the Tenth Circuit
reversed a district court’s denial of an employer’s motion to compel arbitration of
employee wage claims. The appeals court rejected the trial court’s rationale that the wage
disputes fell outside the scope of the arbitration clause because it was nestled in a narrow
contract pertaining only to the workers’ promises regarding confidentiality and
competition. Rather, because the arbitration clause was broad, the appeals court
determined that the employees’ FLSA wage disputes fell within the scope of the clause
(Sanchez v Nitro-Lift Technologies, LLC, August 8, 2014, Seymour, S).
Arbitration agreement. Three former employees filed suit against the employer
claiming that it failed to pay overtime wages in violation of the FLSA and Oklahoma
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Protection of Labor Act (OPLA). The employees were oil field workers. At the beginning
of their employment each signed a confidentiality/non-compete agreement which
contained an arbitration clause. Other than a clause acknowledging that the employee’s
compensation was consideration for the agreement, the agreement contained no language
dealing with wages, hours, overtime compensation or other rights regarding wages
generally. The contract also provided that only the employer could seek remedies in
court. However, the agreement included an arbitration clause that allegedly bound the
employees to resort to arbitration to resolve any disputes regarding their employment.
According to the workers, the contract was presented to them as an agreement
specifically about confidentiality and competition. They contended that the employer did
not explain the arbitration provision or allow them to read the document, and did not
allow them to ask questions or consult an attorney before signing the document. Further,
the employees alleged that they were never told that, by signing the agreement, they
would be waiving their right to a jury trial for claims for unpaid wages or that they would
have to arbitrate wage disputes.
Overtime claims. With respect to their overtime claims, the employees alleged that they
worked more than 40 hours per week almost every week and that the employer refused to
pay them overtime compensation. When one of the employees raised the issue with a
supervisor, he was told if he had trouble with the money, he should quit. The employees
filed suit seeking to recover unpaid wages and seeking a declaration that the employer’s
“wage policy was unlawful” and an injunction against its use and enforcement. In
response, the employer filed a motion to dismiss and compel arbitration, arguing that the
arbitration clause contained in the agreement contractually obligated plaintiffs to submit
their FLSA claims to arbitration.
The district court denied the employer’s motion to compel arbitration. Addressing only
the FLSA claims and the scope of the arbitration clause, the court reasoned that despite
the provision’s broad language, the employees did not agree to arbitrate wage disputes
because the contract was limited to confidentiality and competition. This appeal ensued.
Scope of an arbitration clause. The central issue raised on appeal was whether the
employees’ statutory wage disputes fell within the scope of an arbitration clause
contained in a contract labeled “Confidentiality/Non-Compete Agreement.” The
employer asserted that the language of the arbitration clause was broad and covered any
disputes between it and the employees. However, the employees countered that the
contract related solely to issues of confidentiality and competition.
The Tenth Circuit applies a three-part test to determine whether an issue falls within the
scope of an arbitration clause. First, the court agreed with the lower court that the
arbitration clause at issue was broad. The clause contained no limiting language, either
restricting arbitration to any specific disputes or to the agreement itself. Further, the
appeals court was not convinced that the narrow context of the contract rebutted the
presumption of arbitrability because “the strong presumption in favor of arbitrability
applies with even greater force when such a broad arbitration clause is at issue.” Here,
there was no manifestation of an intent to limit the arbitration agreement. Thus, the
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appeals court held that the employees’ FLSA wage disputes fell within the scope of the
arbitration clause.
Substantive rights. Next, the employees contended that the arbitration provision denied
them substantive rights afforded by the FLSA because it specifically provides that costs,
reasonable attorney fees and expenses would be borne by the losing party. The FLSA,
however, provides that, in addition to any judgment awarded to plaintiffs, they are
allowed reasonable attorney fees and costs. Here, the appeals court pointed out that the
FLSA fee-shifting provision refers only to a prevailing party and says nothing about a
prevailing defendant. Because the district court did not address the employer’s waiver of
the fee-shifting provision, the matter was remanded to permit the lower court to address
those issues in the first instance.
The case numbers are: 12-7046 and 12-7057.
Attorneys: Kelli M. Masters (Fellers, Snider, Blankenship, Bailey & Tippens) for NitroLift Technologies, LLC. Mark Hammons (Hammons, Gowens & Hurst) for Miguel
Sanchez.
10th Cir.: Tyson loses bid to overturn damage award on employees’ donning and
doffing claims
By Ronald Miller, J.D.
Meat packing giant Tyson Foods lost its bid before the Tenth Circuit to overturn the
sizeable verdict and attorneys’ fee award won by its employees on their claims that the
company failed to properly compensate them for the time they spent donning and doffing
protective gear necessary to carry out their work activities. The appeals court found that
the evidence supported a finding of undercompensation for every class member.
Moreover, although Tyson pointed out that the fee award far exceeded the damages
award, the appeals court observed that the fee award need not be proportionate to the
damages award, and the district court acted within its discretion in setting the amount of
attorneys’ fees (Garcia v Tyson Foods, Inc, August 19, 2014, Bacharach, R).
Employees filed class and collective actions against Tyson Foods, seeking unpaid wages
for time spent on pre- and post-shift activities. The jobs required the employees to wear
certain protective clothing and equipment. Thus, before each shift, the employees would
put on the clothing and equipment, and remove them when the shift was over. The
employees were paid through two systems: (1) “gang time,” which was intended to
compensate for time spent working on the production line, and (2) “K-Code” time, which
was intended to compensate for time spent on pre- and post-shift activities, such as
putting on protective clothing and equipment, taking them off, and walking to and from
the work stations.
Jury award. The employees sued Tyson under both the FLSA and Kansas Wage
Protection Act (KWPA) alleging insufficient compensation for pre- and post-shift
activities. The district court certified the matter as a collective action under the FLSA and
a class action under the KWPA. A jury found for the employees, fixing damages at
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$166,345 for the FLSA claim and $366,666 under state law. After the district court
entered judgment for the plaintiffs, Tyson moved for judgment as a matter of law,
arguing that the evidence did not support the verdict and that the court should have
decertified the class and collective actions. The district court denied the motion,
reasoning that: (1) the employees had presented sufficient evidence to support the verdict,
and (2) the employees had satisfied the legal requirements for continued certification as
class and collective actions. The employees filed a motion for attorneys’ fees and costs,
which the court awarded in an amount totaling $3,389,207. Tyson appealed.
Sufficiency of evidence. On appeal, Tyson first argued that the evidence was insufficient
to support the verdict because the employees did not prove unpaid time on a class-wide
basis. However, the Tenth Circuit found that the jury could have reasonably inferred
class-wide liability. For both federal and state claims, the overarching question was
whether the K-Code system had resulted in underpayments. The jury answered yes. Here,
the appeals court determined that this answer was reasonable based on the evidence.
The jury could have relied on Tyson’s own internal study which showed that on average,
employees were not paid for more than 29 minutes per shift. The resulting question was
how many of those minutes were spent getting in and out of protective clothing and
equipment and walking to and from the work stations. Tyson acknowledged that the KCode was intended to compensate employees for activities before and after their shifts.
Since Tyson increased the K-Code three times in seven years, the jury could have
inferred recognition by Tyson that it had underestimated the time required to get in and
out of protective clothing and equipment, and to walk to and from the work stations.
Thus, the evidence was sufficient for class-wide liability.
Liability to class members. Tyson also challenged the proof of undercompensation for
each class member. However, the court found its argument unpersuasive because: (1)
such proof was unnecessary; (2) the jury could rely on representative evidence; and (3)
Tyson relied on cases that are inapplicable. First, the employees did not need to
individualize the proof of undercompensation once the district court ordered certification
as a class action and collective action. Second, the jury could reasonably rely on
representative evidence to determine class-wide liability because Tyson failed to record
the time actually spent by its employees on pre- and post-shift activities. Finally, cases
relied on by Tyson, such as Wal-Mart Stores, Inc v Dukes, Thiessen v Gen Elec Corp,
Espenscheid v. DirectSat USA, LLC, and Lugo v. Farmer’s Pride Inc., involved class
certification, not the sufficiency of the evidence. Thus, the jury could have reasonably
inferred that each class member was undercompensated, concluded the appeals court.
Tyson next contended that because the jury awarded less to the employees than was
requested, the lower damage award meant that even more class members would have
fallen out of liability. The court rejected this contention, noting that (1) the evidence
supported a finding of undercompensation for every class member, and (2) Tyson’s
argument rested on speculation about how the jury calculated damages.
Attorneys’ fees. Tyson also challenged the district court’s award of attorneys’ fees,
raising three arguments: (1) it was entitled to production of itemized time records for
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plaintiffs’ counsel; (2) the employees were not entitled to recover for time spent on
unsuccessful federal theories or any of the state claims; and (3) the fee award was too
high given that the jury awarded only 8 percent of the damages that the employees had
sought in their closing argument.
Rather than compelling the production of itemized time records for plaintiffs’ counsel,
the district court opted for in-camera review, allowed each side to depose someone
familiar with the adversary’s billing, and ordered disclosure of the adversary billing rates
and time incurred. On appeal, Tyson argued that it could not respond meaningfully to the
employees’ fee application without production of itemized time records. Finding that the
Tyson failed to make a “clear showing that the denial of discovery resulted in actual and
substantial prejudice,” the Tenth Circuit held that the district court did not abuse its
discretion in denying Tyson’s motion.
Unsuccessful claims. Tyson also argued that the employees were not entitled to recover
fees for time spent on any of the claims under the KWPA or the unsuccessful claims
under the FLSA. The employees had pursued three distinct theories of underpayment: (1)
failure to pay for pre- and post-shift activities; (2) failure to pay for meal times; and (3)
failure to pay for time in rest breaks. They prevailed only on the claim of failure to pay
for pre- and post-shift activities. As a result, Tyson argued that they should not have
recovered fees for time spent on the state claims or the unsuccessful federal claims
involving underpayment for meal times and rest breaks.
Reviewing the district court’s determination of attorneys’ fees under an abuse-ofdiscretion standard, the Tenth Circuit rejected Tyson’s argument. Rather, the appeals
court observed that “where a lawsuit consists of related claims, a plaintiff who has won
substantial relief should not have his attorney’s fee reduced simply because the district
court did not adopt each contention raised.” Here, the district court reasonably inferred a
relation between the successful federal claims, and the state claims and the unsuccessful
federal claims. All were factually related and arose under a common legal theory —
failure to pay for some of the compensable time involving the donning and doffing of
protective gear.
Lack of proportion. Finally, Tyson argued that the district court should have reduced the
fee award because: (1) the jury awarded only 8 percent of the damages sought by the
employees in closing argument, and (2) the fee award far exceeded the damages award.
Disagreeing, the appeals court observed that the district court concluded that plaintiffs’
counsel obtained excellent results for their clients. This conclusion fell within the district
court’s discretion. Moreover, it noted that the fee award need not be proportionate to the
damages award, so the district court acted within its discretion in setting the amount of
attorneys’ fees.
The case number is: 12-3346.
Attorneys: Michael J. Mueller (Hunton & Williams) and Craig S. O’Dear (Bryan Cave)
for Tyson Foods, Inc.. George Allan Hanson (Stueve & Siegel) for Adelina Garcia.
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11th Cir.: Books-A-Million bookkeeper forced to work after childbirth prejudiced
under FMLA
By Ronald Miller, J.D.
A federal district court correctly awarded summary judgment in favor of an employer
against an employee’s claims that the employer discriminated against her on the basis of
gender, retaliated against her for complaining about gender and race discrimination, and
paid her less than male employees performing the same work, ruled the Eleventh Circuit.
With respect to her Title VII claims, the employee failed to identify any male employees
who rejected a reassignment and who were treated differently than she was. On the other
hand, the district court erred by dismissing the employee’s FMLA claim. The appeals
court observed that an employer that coerces an employee to work during her intended
FMLA leave period and, subsequently, reassigns her based on her allegedly poor
performance during that period, the employee may well have been harmed by the
employer’s FMLA violation (Evans v Books-a-Million, August 8, 2014, Berman, R).
The employee worked for national book retailer Books-A-Million in various financial
positions for ten years. In January 2006, she advised the employer she was pregnant. At
that time the employee was involved in the implementation of a new payroll system,
which was scheduled to “go live” by August 2006. In June 2006, she approached her
supervisor to discuss necessary paperwork for her FMLA maternity leave, to become
effective on her due date, September 1, 2006. The employee was advised that
management had decided that she “would not go on leave but would work while on
maternity leave.” She was given a laptop computer that would enable her to work from
home after her delivery.
Work from home. Despite the employee’s protestations that she did not intend to work
after the birth of her child, her supervisor repeatedly told her that she was “really
needed,” because the “go live” date had been delayed until November 2006. Moreover,
the employee was advised that successful implementation of the new system would
account for 50 percent of her annual bonus. Given her supervisor’s insistence, the
employee felt she had “no choice” but to continue to work from home after the birth of
her child. The employee gave birth on August 30, and upon arriving home from the
hospital with her newborn on September 1, she immediately began answering workrelated calls. For the next two months, the employee was required to work nearly fulltime from home. She also had to attend meetings on the new system. However, she was
paid her full salary while she worked from home.
According to the employee, she returned to the office a week and a half earlier than she
originally planned. Upon her return, her supervisor’s attitude toward her was cold and
hostile. In the meanwhile, the employee was transferred to a newly created risk manager
position, and the company advertised for a payroll position that included all of the
employee’s former role. The employee protested and declined to accept the risk manager
position. Thereafter, she was terminated and denied a bonus.
Dismissal of claims. The employee’s complaint alleged that Books-A-Million (1)
interfered with her right to take parental leave by forcing her to work from home
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immediately after she gave birth; (2) discriminated against her on the basis of gender by
altering her job title and responsibilities, withholding her annual bonus, and ultimately
firing her; (3) retaliated against her for complaining about gender and race discrimination
in the workplace; (4) paid her less than male employees doing the same work; and (5)
failed to provide her with notice of her right to continuation of her dental insurance
following her termination. The district court granted the employer’s motion for summary
judgment on all claims except the COBRA claim. This appeal followed.
FMLA interference. On appeal, the employee alleged that the district court erred in
dismissing her FMLA, equal pay, and Title VII discrimination and retaliation claims. To
prove FMLA interference, the employee had to demonstrate “that [she] was denied a
benefit to which [she] was entitled under the FMLA,” and that she had been prejudiced
by the violation in some way. Here, the district court concluded that the employee
suffered no “legal damages” because she was paid for her work. However, the Eleventh
Circuit found this conclusion was error. The FMLA provides explicitly for two (distinct)
categories of remedies: (1) “damages,” including compensation, benefits, and other
monetary losses sustained by reason of the violation; and (2) “such equitable relief as
may be appropriate, including employment, reinstatement, and promotion.”
The appeals court observed that it was clear that, in order to prove that she was
“prejudiced” by an FMLA violation, the employee need only demonstrate some harm
remediable by either “damages” or “equitable relief.” In addition to the question of
whether the employer interfered with the employee’s FMLA rights, there were other
unresolved issues of material fact requiring a trial, such as whether she was “prejudiced”
by any FMLA interference. A reasonable fact finder could conclude that her supervisor
emphasized job performance while the employee was home with her newborn. Moreover,
any prejudice or harm suffered by the employee may be remediable by reinstatement or
“front pay” if reinstatement is not viable.
Title VII claim. However, the district court correctly concluded that the employee failed
to demonstrate a prima facie case of gender discrimination with respect to her termination
and reassignment because she failed to identify any male employees who rejected a
reassignment and who were treated differently than she was. Similarly, her Title VII
retaliation claim was properly dismissed where she failed to demonstrate that she
engaged in any “protected activity” prior to her termination.
Equal pay claim. To establish a prima facie violation of the Equal Pay Act, the
employee must have shown that she “performed substantially similar work for less pay”
than her male colleagues. With respect to three male division heads the employee failed
to establish a prima facie case of unequal pay. Here, the employee failed to show that
their positions involved “equal work” or required “equal skill, effort and responsibility.”
Thus, the district court’s award of summary judgment with respect to the employee’s
Title VII and Equal Pay Act claims was affirmed, but the grant of summary judgment on
her FMLA claim was vacated.
The case number is: 13-10054.
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Attorneys: Sybil Vogtle Newton (Starnes Davis Florie) for Books-A-Million. Alicia Kay
Haynes (Haynes & Haynes) for Tondalaya Evans.
11th Cir.: Reduction in attorney fees awarded to employee not unreasonable
By Ronald Miller, J.D.
A federal district court did not err in denying an employee’s motion to alter or amend a
judgment of attorneys’ fees after reducing the requested amount of fees based on the
employee’s “limited recovery,” ruled the Eleventh Circuit in an unpublished decision.
Although the appeals court found that the hourly rate assigned to plaintiff’s counsel was
slightly lower than attorneys of comparable experience, it determined that the district
court’s hourly rate was not clearly erroneous. Further, the appeals court found that the
district court acted within its discretion in reducing travel hours and the lodestar
(Martinez v Hernando County Sheriff’s Office, August 21, 2014, per curiam).
The employee worked as a handler of police dogs for the sheriff department’s K-9 unit.
Initally, he was assigned one dog and was paid for 45 minutes each day at the minimum
wage to care for its care. In March 2008, the employee acquired a second dog, and at his
suggestion, it was taken into the K-9 unit and assigned to the employee. The employee
cared for both dogs until he was removed from the K-9 unit. In a subsequent action, the
employee alleged that the sheriff failed to pay him an additional 45 minutes each day for
after-hours care of the second dog. Following trial, the district court awarded the
employee 10 minutes per day of compensation for the second dog’s care.
The employee moved for an award of attorneys’ fees as prevailing party. He submitted
declarations attesting to the experience and rates of plaintiff’s counsel, and the amount
customarily charged in the market. The district court awarded the employee $10,500 in
attorney’s fees after first reducing counsel’s rate to $300 per hour and deducted 38 hours
of travel time and reduced the number of reasonable hours expended, and reduced the
lodestar based on the employee’s “limited recovery.” After, the trial court denied the
employee’s motion to amend the attorney’s fees, he brought this appeal.
Reasonable attorney’s fee. Under 29 U.S.C. Sec. 216(b), when an employee prevails in
an FLSA action, the district court “shall, in addition to any judgment awarded to the
plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and
costs of the action.” A district court has “wide discretion” in calculating an attorney’s fee
award, but “the district court must articulate the decisions it made, give principled
reasons for those decisions, and show its calculation” to allow for meaningful review.
The first step in calculating a reasonable fee award is to determine the “lodestar” — the
product of multiplying reasonable hours expended times a reasonable hourly rate.
“A reasonable hourly rate is the prevailing market rate in the relevant legal community
for similar services by lawyers of reasonably comparable skills, experience, and
reputation.” The applicant bears the burden of producing satisfactory evidence that his
requested rate is reasonable. Here, the district court did not clearly err in determining that
$300 per hour was a reasonable rate for plaintiff’s counsel. The court correctly stated and
applied the law, focusing on the market rate for FLSA cases in the district for attorneys of
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comparable experience, and it properly placed the burden on the plaintiff. The district
court adequately explained why it did not find the employee’s evidence persuasive.
Moreover, the district court is entitled to rely on its own experience and judgment in
coming to a reasonable hourly rate. Although the district court’s rate of $300 per hour
may have been slightly lower than awards made to attorneys of comparable or somewhat
less experience in other cases from the district referenced in its order, the rate was not
clearly erroneous.
Travel hours reduction. The employee next contended that the district court erred in
deducting 38 hours of travel time. Here, the employee emphasized that the travel time
was the result of limited availability of lawyers handling police dog compensation cases.
However, the appeals court observed that the employee presented no evidence showing a
lack of local counsel willing and able to handle his police canine compensation claim.
Thus, it agreed with the district court that it was unreasonable to pass the costs of travel
to the sheriff’s office without a showing of a lack of local counsel. The district court did
not clearly err in excluding travel hours of plaintiff’s counsel.
Lodestar reduction. The appeals court also rejected the employee’s contention that the
district court’s reduction of the lodestar by 75 percent was “confiscatory,” and that the
court placed undue emphasis on the results obtained. However, the appeals court pointed
out that a district court may adjust the lodestar for the “results obtained.” Here, where the
employee achieved only limited success, the product of hours reasonably expended on
the litigation as a whole times a reasonable hourly rate may be an excessive amount.
Accordingly, the district court had discretion to reduce an award for situations where
lodestar figure is unreasonable in light of the limited success obtained.
The district court did not abuse its discretion in reducing the lodestar figure by 75 percent
and awarding $10,900 in attorney’s fees. The employee was only partially successful in
his claims, so the court was permitted to adjust the lodestar downward. Because the court
found that it was unable to determine the number of hours spent on the unsuccessful
claims, it had discretion to “simply reduce the award to account for the limited success.”
The district court’s reduction of the lodestar was reasonably proportionate to the
employee’s success in the lawsuit.
The case number is: 14-10427.
Attorneys: Richard Michael Pierro Jr. (Allen Norton & Blue) for Hernando County
Sheriff's Office. G. Ware Cornell (Cornell & Associates) for William C. Martinez.
Fed. Cl.: Federal workers state viable wage claims over government shutdown
By Lisa Milam-Perez, J.D.
Nonexempt federal employees who were required to work without pay during the
government shutdown of October 2013 have raised viable FLSA minimum wage and
overtime claims, a federal district court judge has ruled. Paying employees two weeks
later than their scheduled paydays for work performed during the budget impasse
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amounted to a violation of the FLSA’s minimum wage violations, the employees
plausibly alleged; and the failure to pay for overtime worked during that time period
could also be actionable. However, claims that exempt employees lost their exempt status
during that time period, and so were entitled to overtime compensation too, lacked merit.
The court thus granted in part the government’s motion to dismiss (Martin v The United
States, July 31, 2014, Campbell-Smith, P).
Government shutdown. The plaintiffs were federal government employees who were
required to work during the two-week government shutdown but were not timely paid
minimum wages and overtime for that work. As “excepted employees,” they continued to
work and perform their normal duties but were not paid on their regularly scheduled
paydays for the entire pay period; their paychecks reflected payment for work performed
only through September 30, leaving them short five days’ worth of pay. They were
eventually paid for all work performed during the shutdown, but the pay came two weeks
later than their scheduled paydays — on the next scheduled payday following the end of
the shutdown, when Congress finally allocated funds to pay the wage debts. The
employees also alleged they were not paid overtime during the partial shutdown. Some of
the prospective class members were classified as exempt employees but, they argued,
because the government did not pay them on time, they did not satisfy the FLSA’s salary
basis test for that time period. Consequently, they claimed that at least for the duration of
the shutdown, they lost their exempt status and were thus entitled to overtime too.
The question before the federal court of claims was whether the employees were entitled
to recover under the FLSA for the delay in the payment of their wages — an issue of first
impression before the court.
Totality of circumstances? Urging the court to adopt a “totality of circumstances”
approach, the government argued that the late payment of wages was excusable, all
things considered, and thus did not violate the FLSA. It urged the court to take into
account the legal constraints imposed by the Anti-Deficiency Act, which prohibited the
government from paying employees when appropriated funds are not available. It also
noted the brevity of the delay in finally paying the workers and the fact that the
government paid them as quickly as possible; the employees’ knowledge that they would
eventually receive payment (even if they did not know exactly when); and the absence of
willfulness on the government’s part.
However, this “totality of the circumstances” test was expressly rejected by the Ninth
Circuit, which nonetheless observed that “when late payment becomes nonpayment
creates ‘a moving target’ that has the grave potential to subvert the intended purpose of
the FLSA.” At any rate, “the weight of the most analogous authority militates in favor of
applying the standard known as the ‘usual rule,’” endorsed by the Federal Circuit.
Therefore, the court rejected the use of the government’s proposed test.
Usual rule applies. Under the “usual rule,” which numerous courts apply in this context,
an FLSA claim accrues at the time of a missed regular payday and a violation occurs at
that same time. While there is no explicit timeline for the payment of wages set forth
either in the FLSA or its enabling regulations, the court paid heed to the Supreme Court’s
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emphatic pronouncement on this point in Brooklyn Savings Bank v. O’Neil, a 1945
decision. Observing that the FLSA’s minimum wage provision requires “on-time”
payment, the High Court said the statute “constitutes a Congressional recognition that
[the] failure to pay the statutory minimum on time may be so detrimental to maintenance
of the minimum standard of living ‘necessary for health, efficiency, and general wellbeing of workers’ and to the free flow of commerce, that double payment must be made
in the event of delay in order to insure restoration of the worker to that minimum standard
of well being.” Applying this mandate, lower courts have almost universally held that an
FLSA violation occurs on the date that an employer fails to pay workers on their regular
paydays.
The government argued that the bright-line rule advocated here by the employees would
mean that “any delay in payment would constitute an FLSA violation.” But this
contention reflected “a misapprehension of how the timeliness rule applies and
improperly conflates a finding of an FLSA violation with an award of liquidated
damages,” the court said. All that mattered for now was whether an FLSA violation
occurred when the government failed to pay its excepted workers on their regularly
scheduled paydays. On this allegation, the plaintiffs stated a claim.
FLSA protected plaintiffs. The court found unpersuasive the government’s policy
argument that the FLSA was intended “to protect low wage workers” who are denied the
minimum wage — not to protect the plaintiffs here, whose pay was only briefly delayed.
As the employees pointed out, many of the opt-in plaintiffs in this case are not highly
compensated, but earn annual salaries in the $28,000 to $41,000 range. Further, by
extending the reach of the statute to cover federal workers, “Congress clearly intended to
protect such employees.” Contrary to the government’s contention, then, “a ruling for
plaintiffs in this instance is consistent with the purpose of the Act.”
Workweek the proper standard. The parties also disagreed about the appropriate
standard for measuring whether the employees were paid minimum wage on time: the
government argued the minimum wage should be calculated according to a bi-weekly
measurement — such that any potential plaintiff paid $580 or more during that pay
period (i.e. $7.25 per hour x 40 hours x 2 weeks) failed to state a claim for relief. But the
government offered no authority to support this approach. On the other hand, the
plaintiffs urged an hour-by-hour calculation, wherein any single hour that either went
unpaid or underpaid would be an FLSA violation. The correct approach lies in between,
the court found: the majority approach is a workweek basis.
The court rejected the employees’ plea that even though the workweek approach is the
norm, an hourly calculation is warranted given the unusual circumstances presented here.
The employees argued that a workweek approach might be well and good for employees
who simply missed a meal break (and were denied pay for the missed break) but were
otherwise paid their regular hours worked. Those employees still at least know their total
compensation, the employees noted. But here, the employees were not paid at all for
work performed during a five-day period, they urged, and did not know how long they
would have to wait to be paid.
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In the end, the OPM minimum wage regulations, a DOL interpretive bulletin, and “an
overwhelming majority” of other federal courts support the use of the workweek standard
to calculate minimum wages due. Concededly, the use of this measure may be something
of a “contrivance” where the employees were paid their regular wage for certain hours
but were paid nothing for others, the court said. “Nonetheless, the language of the Act
focuses on the aggregate pay for all work performed within a workweek.” Accordingly,
the court of claims adopted the majority approach and, based on this calculation method,
dismissed from the case any potential plaintiff who was paid more than $290 ($7.25
multiplied by 40 hours) for the week in question.
Split decision on overtime claims. The nonexempt employees also sufficiently alleged
overtime claims for the shutdown period, the court held, rejecting the government’s
defense that the late payment of overtime wages was acceptable under the circumstances
because it could not compute the proper amount due while human resource employees
and other federal workers were furloughed. The government also cited DOL regulations
for the notion that employers are granted some leeway in paying overtime “when the
correct amount of overtime compensation cannot be determined.” But whether the
government was able to compute overtime during the shutdown was a factual question to
be considered at a later stage, not a motion to dismiss.
On the other hand, exempt employees could proceed no further. Rejecting the plaintiffs’
argument that the exempt employees were not paid on a salary basis and thus lost their
exempt status during the period in question, the court noted that OPM regulations —
particularly, their definition of “executive,” govern federal-sector workers’ exempt status,
not the DOL’s salary-basis test.
Liquidated damages? The government argued that liquidated damages were
inappropriate at any rate, contending that it acted reasonably by paying the employees’
wages as quickly as possible after the budget impasse ended, and in light of the
constraints that it was under due to the Anti-Deficiency Act. But that wasn’t the measure;
what mattered was whether the government had a good-faith reason to believe its conduct
was in compliance with the FLSA. And that, the employees argued, the government
would never be able to show, and certainly not on a motion to dismiss. The court was not
quite so fatalistic.
As for the Anti-Deficiency Act defense, the employees were on the job during the
shutdown pursuant to an exception to this statute “for emergencies involving the safety of
human life or the protection of property.” (Employees who were required to work during
the impasse included prison guards, air marshals, border patrol agents, and the like.)
Whether the Anti-Deficiency Act was enough to establish subjective good-faith on the
government’s part sufficient to relieve it of responsibility for potential FLSA violations
here was an open question — one that would be inappropriate to determine on a motion
to dismiss. “Even if the court were to decide that a liquidated damages award is
warranted, additional factual determinations remain to be made as to which employees, if
any, are entitled to recover, and damages, if any, to which those employees would be
entitled.”
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The case number is: 13-834C.
Attorneys: Heidi Rhodes Burakiewicz (Mehri & Skalet) for Donald Martin. Sharon Ann
Snyder (U.S. Department of Justice) for The United States.
Mo. Sup. Ct.: Hotel could be liable as joint employer even if staffing agency illegally
reduced wages
By Dan Selcke, J.D.
A hotel chain that paid a fair wage to a staffing agency, which then illegally reduced that
wage before passing it on to a hotel employee, was liable under the Missouri Minimum
Wage Law (MMWL) so long it was found to be a joint employer along with the staffing
agency, the Missouri Supreme Court ruled. The court reversed and remanded a district
court ruling granting summary judgment to the hotel chain (Tolentino v Starwood Hotels
& Resorts Worldwide, Inc, August 19, 2014, Teitelman, R).
Staffing agency. The hotel contracted with a staffing agency to obtain housekeepers on
an as-needed basis. It paid the staffing agency $5 per room for each room cleaned; the
staffing agency then paid the employee $3.50 per room cleaned. However, the staffing
company came under investigation for crimes including human trafficking, fraud in
foreign labor contracting, money laundering, fraud, and extortion. During the employee’s
last pay period while working for the staffing agency at the hotel, after paying the
employee $3.50 per room and making proper deductions for taxes, the staffing agency
illegally deducted the remainder of the employee’s wages to pay for the employee’s visa
fees, leaving the employee with nothing. The staffing agency was subsequently indicted
on federal charges and its owners were convicted of labor racketeering.
Alleging that the hotel chain, as a joint employer with the staffing agency, had failed to
pay him a minimum wage in violation of the MMWL, the employee brought a class
action suit. Summary judgment in favor of the hotel chain was granted on the grounds
that it had adequately compensated the employee and could not be held responsible for
the staffing agency’s illegal wage deductions, and the employee appealed.
Joint employment. In order for the hotel chain to be held liable under the MMWL, it had
to qualify as an employer under the statute. The court began its joint employer analysis
by looking at whether the hotel chain had the power to hire or fire the employee. While
the hotel chain argued that it had no authority to hire workers, the employee claimed that
he was interviewed by the hotel chain prior to working there and was required to sign
documents containing the hotel chain’s standards for housekeepers. Similarly, the hotel
chain denied that it had the power to fire the employee, although at one point it did
request that the staffing agency stop sending the employee to a particular hotel,
prompting the staffing agency to reassign him. Because the parties gave differing
accounts, the question of whether the hotel chain could hire and fire the employee
represented a material question of fact.
Supervision and control. The court also held that there was a genuine factual dispute
concerning whether the hotel chain exercised supervision and control over the employee,
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another point in favor of passing the question along to a jury. Although the hotel chain
claimed that it did not supervise or exercise control over workers from the staffing
agency, the employee claimed that he received his daily assignments from the hotel chain
at a meeting every morning and that the rooms he cleaned were inspected to make sure
his work lived up to the hotel’s standards. The fact that the employee engaged in
relatively simple, repetitive work also weighed in favor of finding that the hotel chain
was a joint employer, since such work was subject to a greater degree of supervision and
control than were more highly skilled tasks.
Payment and maintenance of records. Looking at the final two factors, the court held
that they, like the others, presented genuine questions of material fact. While the hotel
chain claimed that it had no control over the rate or method of pay to any of the
housekeepers, there was evidence that it not only made the decision to pay housekeepers
on a per-room rather than an hourly basis, but also that it raised the per-room rate in
response to an increase in the minimum wage. The hotel chain also claimed that it
maintained no records relating to the employee’s performance, but the employee alleged
that the hotel chain kept time sheets and productivity records it utilized when it asked the
staffing agency to stop sending the employee to a particular hotel. All of the factors, in
short, presented questions that were inappropriate to resolve via summary judgment.
Criminal wage deductions. Next, the court rebuffed the hotel chain’s argument that,
even if it were a joint employer under the MMWL, it paid a fair wage to the staffing
agency and could not be held liable if that agency made unforeseen criminal wage
deductions before paying the employee less than his fair share. Should the hotel chain be
found to be a joint employer, it would have had an independent obligation under the
MMWL to pay the employee a minimum wage, regardless of what the staffing agency
did with the money after receiving it.
Purpose of the MMWL. The hotel chain argued that holding it liable under the MMWL
would violate the purpose of that statute, which operated in part to protect employers
from liability when those employers had exercised reasonable, good faith efforts to
comply with the law. Reasoning that, while that may have been one purpose of the
statute, the court found that purpose should not be honored when doing so would prevent
carrying out the statute’s primary purpose of paying employees a minimum wage. The
MMWL was a remedial statute protecting the rights of workers, and any doubts as to its
applicability should be resolved in favor of carrying out its primary purpose.
The hotel chain’s argument that the statute should be interpreted with reference to the
common law of agency and strict liability also failed. The threshold issue in the case was
whether the hotel chain was an “employer” under the MMWL. If so, there was nothing in
the statute insulating it from liability on common law agency or strict liability principles.
Accordingly, the judgment of circuit court was reversed and the case remanded.
The case number is: SC93379.
Attorneys: Matt J. O’Laughlin (Holman Schiavone) for Andro Tolentino. Elaine Drodge
Koch (Bryan Cave) for Starwood Hotels & Resorts Worldwide, Inc..
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Md. Spec. App.: Employee’s state-law wage claims not preempted by FLSA
By Ronald Miller, J.D.
A trial court erred in finding that Maryland’s Wage Payment and Collection Law
(WPCL) was preempted by the FLSA, ruled the Maryland Court of Appeals (the state’s
high court). Thus, a certified nursing assistant could recover overtime wages under state
law. In light of 2010 amendments to WPCL enacted specifically to clarify any doubt
about the intended scope of the statute, the court reiterated that both the Maryland Wage
and Hour Law (WHL) and the WPCL are vehicles for recovering overtime wages.
However, the trial court did not abuse its discretion in failing to award enhanced damages
to the employee or by failing to award treble damages (Peters v Early Healthcare Giver,
Inc, August 13, 2014, Adkins, S).
Overtime claim. The employee, a CNA, provided in-home care to elderly patients. She
consistently worked 119 hours every two weeks but was not paid at the overtime rate for
hours over 40 in a week. After leaving her employment, the employee filed suit against
the employer under the WPCL for wrongfully withheld overtime wages. Explaining that
the employee worked under a federal program, the employer argued that federal law
governed its payment of home healthcare workers. Specifically, the employer contended
that the employee’s work fell under the FLSA’s “companionship services” exemption.
The trial court denied the employee’s claim for overtime wages.
Maryland’s Court of Special Appeals, an intermediate appellate court, held that the trial
court erred in concluding that federal law preempted state wage laws, and held that the
FLSA exemption did not apply. The case was remanded to the trial court to consider
whether the employee was entitled to recover overtime wages under the WHL and the
WPCL. On remand, the employee requested that the trial court award her unpaid
overtime and treble damages under Labor and Employment Article (LE), Sec. 3-507.2(b).
The trial court awarded the employee $6,201 in unpaid overtime wages, but denied her
request for enhanced damages. The state high court granted the employee’s petition for
review.
Scope of coverage. Before the high court, the employee (and the Commissioner of Labor
and Industry, appearing as amicus curiae) argued that it had already been resolved that
overtime pay is recoverable under the WPCL. In Friolo v Frankel, the court explicitly
held that an employee “was entitled to sue under [the WHL and the WPCL] to recover
any overtime pay that remained due after termination of her employment.” The court
recently addressed the WPCL’s scope in Marshall v Safeway, Inc, where it rejected a
narrow reading of the statute that would exclude coverage for overtime claims. Without a
doubt, the employee had a right to bring a private cause of action under the WPCL to
recover unlawfully withheld overtime wages, concluded the Maryland high court.
Damages award. The court next examined the employee’s challenge to the trial court’s
refusal to grant enhanced damages. The employee presented three interrelated arguments.
First, she claimed that the trial court erred when it failed to make an explicit finding
regarding whether the employer withheld overtime wages as a result of a “bona fide
dispute.” Second, she urged that the court could not have reasonably concluded that the
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employer withheld the wages as a result of a bona fide dispute. Finally, she averred that
the trial court abused its discretion by declining to award her treble damages. Thus, the
employee sought remand of this case to the trial court with instructions that she be
awarded the full amount of treble damages under the WPCL.
Bona fide dispute. In granting the unpaid wages pursuant to the WHL and the WPCL,
the trial court was required to make a predicate finding as to whether the wages were
withheld pursuant to a bona fide dispute. Here, because the trial court did not make the
required predicate finding, it erred. A bona fide dispute is “a legitimate dispute over the
validity of the claim or the amount that is owing” where the employer has a good-faith
basis for refusing an employee’s claim for unpaid wages. It is well settled that a plaintiff
carries the initial burden of proving that he or she in fact performed the work that was
inadequately compensated. The WPCL is silent, though, on which party carries the
burden of production with respect to showing a bona fide dispute. The Maryland high
court noted that it has not considered this question directly.
Reviewing cases from other jurisdictions, the court observed that the burden is often
placed on the employer because of its knowledge of its own mental state. The rules of
evidence also support this burden-shifting rule. In this context, the employer is in the best
position to bring forward evidence concerning its own subjective belief as part of
establishing a bona fide dispute. Once the employer has done so, the burden of
production shifts back to the employee to rebut the employer’s reason. With this
guidance, and based on settled evidentiary principles, the court concluded that the
employer, as the party withholding wages, was uniquely qualified to offer evidence about
its reason for doing so.
The employer conceded that it employed the employee and that she worked more than 40
hours per week, thus supporting overtime status. The only disputed issue was why the
employer withheld the overtime wages and whether its reason could be considered a bona
fide dispute. Here, the employer presented nothing that could sufficiently justify that it
actually believed that federal law or other law exempted it from paying the employee
overtime. Thus, there was no evidence of a bona fide dispute and the employer did not
meet its burden of production. Without evidence of a bona fide dispute, there was no
reason for the trial court to make a factual determination on the issue.
However, because the record did not reveal whether the trial court considered the absence
of a good-faith reason for withholding overtime pay or gave appropriate consideration to
the statutory availability of an enhanced award up to treble damages, remand was still
necessary.
Enhanced damages. With respect to the employee’s contention that it was an abuse of
discretion for the trial court to deny her treble damages, the court was not persuaded that
there should be a presumption in favor of granting enhanced damages. To apply such a
presumption would ignore the legislature’s use of “may” in the clause granting the fact
finder discretion to make such an award. In Admiral Mort., Inc. v. Cooper, the court
indicated that the trier of fact has the discretion to decline any award of enhanced
damages, notwithstanding a finding that there was no bona fide dispute.
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The state high court observed that it has not previously attempted to set forth any guiding
principles that trial courts should follow when they exercise discretion as to whether, and
in what amount, to award an employee enhanced damages. The court did not depart from
that position and simply said that trial courts are encouraged to consider the remedial
purpose of the WPCL when deciding whether to award enhanced damages.
Calculation of enhanced damages. With respect to the calculation of enhanced
damages, the high court sided with the position taken by the commissioner, that the total
damages for a private cause of action are limited to three times the unpaid wage. Like the
commissioner, the court found the reasoning in Stevenson v Branch Banking & Trust
Corp persuasive because there was no language under the WPCL that would clearly
indicate an award of quadruple damages. Moreover, in passing the WPCL, the legislature
did not expressly include any language to suggest the enhanced damage award was meant
to be in addition to the unpaid wages. Thus, the matter was remanded for the trial court to
reconsider its decision whether to award any enhanced damages.
The case number is: 86.
Attorneys: Kevin M. Tabe (Law Offices of Kevin M. Tabe) for Early Healthcare Giver,
Inc.. Sally Dworak-Fisher (Public Justice Center) for Muriel Peters.
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