Labor Relations & Wages Hours Update
August 2013
Hot Topics in LABOR LAW:
Officer in Charge of Milwaukee Subregion is named
NLRB Chairman Mark Gaston Pearce and Acting General Counsel Lafe Solomon
announced on August 1 the appointment of Ben Mandelman as Officer in Charge of the
NLRB’s newly-designated Subregional office in Milwaukee (Subregion 30).
Last week, the Board published a notice in the Federal Register advising that the agency
is changing its regional offices in Puerto Rico and Milwaukee to subregional offices
assigned to the supervision of the Tampa and Minneapolis Regional Offices respectively.
The changes were prompted by a decline in unfair labor practice and representation case
filings in each of the regional offices subject to restructuring and the Board’s desire to
equalize caseload and case management responsibilities in all affected offices.
In his new position, Mandelman will assist Marlin Osthus, Director of the NLRB Region
18 in Minneapolis, in enforcing the National Labor Relations Act in Wisconsin, the
western portion of the upper peninsula of Michigan, Minnesota, most of Iowa, North
Dakota and South Dakota. Mandelman is Subregion 30’s initial Officer in Charge upon
its formal restructuring with the Minneapolis office, which became effective August 1.
Mandelman is a native of Milwaukee. He received his B.A. degree in economics from the
University of Wisconsin, Milwaukee, and his J.D. degree from the University of
Wisconsin, Madison. He began his NLRB career as a field attorney in the Milwaukee
office in 1973. He was promoted to Deputy Regional Attorney in 1999 and to the position
of Deputy Director in 2006.
Expanding outreach efforts, NLRB to collaborate with Mexican embassy
The NLRB and Mexico’s Ministry of Foreign Affairs have signed a letter of agreement
under which the entities will collaborate to offer information and guidance to Mexican
workers, their employers, and Mexican business owners in the United States. The
partnership, announced by the Board on August 1, marks the agency’s latest effort to
broaden employees’ awareness of their protected rights under the Act—making inroads
in the immigrant community in particular. The agreement also will promote awareness of
the services that the NLRB provides, according to NLRB Acting General Counsel Lafe
Solomon.
“We recognize the need to improve employer and worker awareness of the rights and
obligations under the Act that are applicable to all Mexican workers in the United States
of America,” Solomon said.
Under the agreement, an outgrowth of negotiations between the NLRB’s Chicago office
and the Mexican consulate office there, the NLRB and the Mexican Embassy in
Washington, D.C. (and the Board’s regional offices and Mexican consulates nationwide)
will jointly provide outreach, education, and training. They will also partner to develop
best practices. The framework has been used by other federal agencies, including the
DOL and EEOC, which have similar agreements with the Mexican Embassy and its
consulates, according to the Board.
With the partnership, the Board will have “a greater opportunity to fulfill the goals of the
National Labor Relations Act, to guarantee the right of workers—including employees
just entering the work force—to engage or refrain from engaging in protected-concerted
or organizing activity to improve their working conditions without fear of discrimination,
harassment or retaliation,” Solomon said. He added that the agreement will increase the
NLRB’s ability to provide employers, including Mexican business owners in the U.S.,
with access to education and training about their rights and responsibilities under the Act.
“With coordination from the consulates, we expect to meet with Mexican workers around
the country to help forge innovative solutions to issues specific to their needs,” said
Solomon.
Ousted Board member Griffin nominated to serve as NLRB General Counsel
President Obama on Thursday, August 1, sent to the Senate the nomination of Richard F.
Griffin, Jr. to serve as General Counsel of the NLRB for a four-year term, replacing
Ronald Meisburg to fill a seat kept warm most recently by embattled Acting General
Counsel Lafe Solomon. Griffin, who served as Board member under a controversial
recess appointment in January 2012, saw his nomination to the NLRB withdrawn by the
President as part of an eleventh-hour deal with Senate Republicans in the face of their
staunch opposition.
Griffin, who earned a J.D. from Northeastern University School of Law, was previously
general counsel of the International Union of Operating Engineers.
Also on Thursday, the President formally withdrew Solomon’s name for the post; his
nomination was originally sent to the Senate in May.
President nominates former Assistant Secretary of Labor to serve as member of
FLRA
On August 1, President Barack Obama submitted to the Senate his nomination of Patrick
Pizzella, of Virginia, to be a Member of the Federal Labor Relations Authority for a term
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of five years expiring July 1, 2015. If approved, he would replace Thomas M. Beck, who
resigned.
Pizzella is Principal at Patrick Pizzella, LLC, a position he has held since 2009. He
previously served as Assistant Secretary of Labor for Administration and Management at
the DOL from 2001 to 2009. Before that, he worked at Preston Gates Ellis & Rouvelas
Meeds LLP as a Government Affairs Counselor from 1998 to 2001 and as Director of
Coalitions from 1996 to 1997. From 1990 to 1995, Pizzella was Director of the Office of
Administration at the Federal Housing Finance Board, and from 1988 to 1989, he was
Deputy Under Secretary for Management at the Department of Education. He has
previously held positions at the Office of Personnel Management, Small Business
Administration, and the General Services Administration. Pizzella received a B.S. in
Business Administration from the University of South Carolina.
Passenger service employees at US Airways reach tentative CBA
The Communication Workers of America and the International Brotherhood of Teamsters
have reached a tentative agreement that covers 6,500 passenger service employees at US
Airways, the CWA announced August 1. Together, the IBT and the CWA represent the
reservations and airport agents.
All passenger service employees will receive wage increases at every step, as well as
ratification bonuses, under the tentative agreement. The agreement also provides critical
job security protections, an issue that the CWA says is important for workers as the US
Airways-American Airlines merger goes forward.
Agents from the two airlines have launched a joint campaign to make sure they have a
strong union voice at the merged airline, according to the release. “Working together,
passenger service employees at US Airways have built a strong, united group that will
continue to make advances for all agents as the US Airways-American Airlines merger
proceeds,” said CWA Chief of Staff Ron Collins.
A ratification vote on the tentative agreement is being scheduled.
UFCW breaks with CTW, joins AFL-CIO
The United Food and Commercial Workers Union (UFCW) announced on August 8 that
it has moved its affiliation to the AFL-CIO — a move it says is aimed at a stronger, more
unified labor movement. UFCW President Joe Hansen, supported by a vote of the UFCW
Executive Board, made the decision to add the 1.3 million private sector members to the
AFL-CIO federation “in order to build a stronger, more unified voice for the rights of
workers,” according to a UFCW press release.
“This is not about which building in Washington D.C. we call home — it is about
fostering more opportunities for workers to have a true voice on the job,” Hansen said in
a statement. “It is about joining forces to build a more united labor movement that can
fight back against the corporate and political onslaught facing our members each and
every day.”
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Calling the UFCW’s former affiliation with the Change to Win Federation (CTW) a
rewarding one, Hansen said that his union will continue its relationships with the
Teamsters, SEIU, and the Farmworkers. The UFCW will also remain active with the
CTW’s Strategic Organizing Center and “bring its AFL-CIO partners into collaboration
with private-sector unions in an effort to build more power for workers,” according to
Hansen.
“The need for unity became paramount after the 2010 elections,” Hansen explained. “The
attacks on workers brought the UFCW into direct strategic partnership with the AFL-CIO
and the entire labor movement. Our shared campaign revealed a dynamic and revitalized
AFL-CIO and made it clear that it was time for the UFCW to redouble our efforts to
build a more robust and unified labor movement.”
Hansen also cited, as an impetus for the change, AFL-CIO President Richard Trumka’s
“bold leadership” and his “strategic advocacy on key issues,” such as the urgent need for
comprehensive immigration reform, changes to the Affordable Care Act that would
permit workers in multiemployer plans to keep the health care they currently have, and
ensuring that the NLRB can protect workers’ rights.
Foxwood/MGM grand casino dealers, EFE News Service Workers have tentative
contracts
United Auto Workers Local 2121 reached a tentative agreement August 6 on a new
contract covering casino dealers at the Foxwoods Resort Casino and MGM Grand on
tribal land in Mashantucket, Connecticut, according to a release by the local.
If the agreement is ratified, the dealers get a pay increase of $0.25 per hour (2.5 percent)
retroactive to March 1, 2012. They will also receive an increase of $0.30 per hour (3.0
percent) retroactive to March 1, 2013, followed by $0.30 per hour increases (3.0 percent)
each year in 2014 and 2015.
The deal would also delay increases in health insurance premiums, add a wellness
program, and preserve the 401k match, their weekend regular days off, full-time and dual
rate ratios, and caps on casual usage—which creates promotional opportunities for parttime members. Dealers alone will also determine any changes to their tip distribution
method.
A two-day ratification vote will be held on August 29 and 31.
EFE News Services. The News Media Guild announced on August 2 that after 20 months
of tough bargaining, its negotiators have reached a tentative agreement with EFE News
Services. EFE, based in Madrid, is state-supported but independent—it’s the world’s
largest Spanish-language news agency. The Guild represents the company’s U.S.
workers. If approved, the new pact would provide a two-year period of unpaid furloughs,
followed by the first wage increase for U.S. staff since 2008.
Specifically, the contract would require all workers to take 24 unpaid furlough days over
a two-year period, starting in 2014. Workers also would have to pay 5 percent of the cost
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of the current medical insurance plan. In 2015, however, wages would increase 2 percent
across the board. The agreement would extend 42 months, beginning on January 1, 2012,
and expiring June 30, 2016. Unlike the previous agreement, there are no re-opener
provisions.
Guild members, who work in Washington, New York, California, and Miami, stood
together during bargaining, donning red T-shirts and sharing images on social media, the
union said.
The tentative contract now goes to members for a ratification vote.
Board prepares to act under new MOU with OSC when charges allege
discrimination under INA against US citizens, other work-authorized persons
By Pamela Wolf, J.D.
The NLRB’s Office of the General Counsel, Division of Operations-Management, has
sent out an operations management memo (OM 13-59) regarding the Memorandum of
Agreement (MOU) entered into on July 8 by Acting General Counsel Lafe Solomon and
the DOJ’s Office of Special Counsel for Immigration Related Unfair Employment
Practices (OSC). The operations management memo also attaches the MOU and directs
that a Charge Referral Checklist and Referral Transmittal Information Sheet be
distributed to NLRB field attorneys and field examiners for use in the new collaborative
process and that discussions on the MOU be held.
The MOU formalizes a collaborative relationship that permits the two agencies to share
case-handling information and coordinate investigations as appropriate. With the
charging party’s express authority, charges may be referred by one agency to the other
during the charge intake or case-handling process when a matter suggests a possible
violation of the other agency’s law.
The OSC, which is an agency within the DOJ’s Civil Rights Division, enforces the
antidiscrimination provision of the Immigration and Nationality Act (INA). That
provision bars certain employment-related discrimination against US citizens and other
work-authorized individuals. Employers that unlawfully discriminate may be required to
pay back wages and civil penalties and to hire or rehire workers.
The MOU also provides for cross-training and technical assistance to ensure that staff
within each agency can identify appropriate referrals. To that end, the management
operations memo attached an overview of the OSC’s jurisdiction, as well as charge
referral instructions and a referral checklist. It also directed that these documents be
distributed to all field attorneys and field examiners, and that the MOU and the
jurisdiction of the OSC be discussed at upcoming training or staff meetings.
IAM defeats IBT in representation battle at US Airways
On Monday, August 12, the International Association of Machinists and Aerospace
Workers (IAM) won an election overseen by the Nation Mediation Board (NMB),
defeating the International Brotherhood of Teamsters (IBT) by a vote of 1,903 to 1,418 in
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a battle over representation of worker at US Airways. The outcome of the five-week
election means that IAM will represent nearly 4,600 Mechanic and Related employees at
the airline.
Contract negotiations had been effectively suspended during the year-long representation
battle with the IBT, according to IAM, which has represented Mechanic and Related
employees at US Airways since 1949.
“This victory marks an important milestone for the Mechanic and Related group at US
Airways,” IAM Transportation Vice President Sito Pantoja said in a statement. “By
voting for the Machinists Union our members safeguarded their pensions and seniority
heading into the merger with American Airlines while rejecting the empty promises of an
organization with a history of corruption.”
“The election results will allow contract negotiations between the IAM and US Airways
to resume without any further delay,” said IAM District 142 President Tom
Higginbotham. “We remain convinced that the IBT never had support among mechanics
at US Airways to get this election in the first place. We fully expect the NMB to
thoroughly investigate the matter.”
IAM suggested that in a separate IBT battle over more than 11,000 Mechanic and Related
workers at American Airlines, IBT staff forged hundreds of election authorization cards,
pointing to testimony of former Teamster organizers that was presented by the Transport
Workers Union (TWU). The NMB is currently investigating to determine if the IBT
submitted enough valid cards to warrant an election at American Airlines, according to
IAM.
USW members approve Bridgestone-Firestone contract, reject BF Goodrich deal
The United Steelworkers Union announced on August 12 that members have voted to
ratify a new four-year contract with Bridgestone-Firestone. However, in a separate
development, union members rejected a proposed deal with BF Goodrich.
Bridgestone-Firestone. The new Bridgestone-Firestone CBA covers 4,500 workers at
six facilities. The agreement was reached in late July after several months of negotiations.
Union members voted by a 2-to-1 margin to accept the new contract. The new agreement
provides a signing bonus and general wage increases for all employees, as well as
improvements to the wage tier and benefit systems for new hires, increased pension
contributions, and protection of retiree health care benefits. “We made sacrifices in the
past when the company needed us to make them,” said Randy Boulton, BridgestoneFirestone coordinator for the USW. “Now, with significant investments being made in the
workers and in the plants, we’re looking forward to a prosperous future.” The new
Bridgestone-Firestone CBA covers workers at plants in Akron, Ohio; Des Moines, Iowa;
Russellville, Arkansas; Warren County and LaVergne, Tennessee; and Bloomington,
Illinois. BF Goodrich. On the other hand, the proposed three-year deal for some 2,400
USW workers at BF Goodrich facilities in Tuscaloosa, Alabama, and Fort Wayne,
Indiana, was rejected by union members. Negotiations will resume on August 14th in
Knoxville, Tennessee, in an effort to reach agreement, the union said.
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Latino union members take the battle to Cretex headquarters after alleged refusal
to negotiate over nondiscrimination contract language
In a continuing battle over the treatment of Latino employees at Elk River, Minnesota-based
Cretex, a delegation of Latino employees stormed the company’s headquarters on August 13 to
demand a meeting with execs after their union’s request to negotiate nondiscrimination contract
language was purportedly rejected, according to a release.
Members of Local 563, who work at Cretex’ Shakopee, Minnesota, concrete plant, have been
picketing since June 19, when they went on strike to protest company plans to slash retirement
benefits. The union said that 15 of their members have filed EEOC charges against the company,
alleging they have been subjected to ongoing harassment, intimidation, and unequal treatment,
such as the following:

Use of insulting and offensive language—statements to the effect that “Mexicans have no
brains” and “Mexicans are too stupid to use computers”—and harassment of Latino
immigrants for speaking to each other in Spanish during breaks.

Unequal treatment of Latino and immigrant workers, who are assigned more difficult and
dangerous work, and disciplined more frequently and more harshly than their peers.

Attempted intimidation through threats of firing and, in some cases, threats to the person
and property of Latinos.
Negotiations broke down in June, when Cretex failed to budge from what the union characterized
as “its unreasonable demand to eliminate pension contributions and slash workers’ retirement
package by roughly 80 percent.” Under the company’s proposal, employees would see hourly
compensation (wage plus retirement contribution) drop by anywhere from $2.91 and $4.07 in
2013, depending on an employee’s age and the amount he or she puts into the company’s 401(k)
plan, according to the release.
Until there is a meeting, the Latino workers plan to keep up their peaceful vigil. “We want nothing
more than to go back to work and to be treated as equals,” said Cretex employee Julio Ocampo
Sanchez. “Sometimes you have to fight and sacrifice to make things happen.”
“We are very disturbed by what our Latino brothers have told us about what is going on at
Cretex,” said Tim Mackey, business manager for Local 563. “No union member, no worker, no
human being should have to put up with this. We have asked the company to come back to the
table two weeks ago to discuss new contract language to protect our members from
discrimination, harassment and intimidation.”
Cretex, according to Mackey, has refused to negotiate on the discrimination issue.
New CBA at AK Steel; Patriot Coal workers ratify settlement; EMS professionals
unionize; US Airways contract vote on hold; California state healthcare workers
reach tentative agreement; Minnesota state workers ratify contracts
In the world of collective bargaining, AK Steel has a confirmed CBA with steelworkers,
Patriot Coal workers have ratified a labor-management agreement, emergency services
professionals in two Western states have organized, and the vote on a tentative US
Airways contract has been delayed. In addition, two states have reached agreements with
public employee unions.
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Steel workers. AK Steel announced on August 16 that members of United Steelworkers
(USW) Local 1865 have ratified an 18-month labor agreement covering more than 800
hourly production and maintenance steel operations employees at the company's Ashland,
Kentucky, Works. The current agreement expires on September 1, 2013. The new
contract takes effect September 1, 2013 and expires on March 1, 2015.
We are pleased to have reached a new labor agreement at our Ashland Works ahead of
the expiration date,” said James L. Wainscott, Chairman, President and CEO of AK Steel.
“The agreement continues to serve the interests of both the company and Local 1865
members in an increasingly competitive, global steel industry.”
Mine workers. The United Mine Workers of America (UMWA) said that members who
work at Patriot Coal operations in West Virginia and Kentucky on Friday, August 16,
ratified a settlement the union reached with the company late last week. The settlement
makes significant improvements in terms and conditions of employment over a federal
Bankruptcy Judge’s order from last May.
Members from 13 local unions participated in the vote, which was overseen by UMWA
local union tellers and conducted at worksites. The final vote was 85 percent in favor to
15 percent opposed. The UMWA International Auditor/Tellers have certified the vote.
“The membership has made it clear that they are willing to do their part to keep Patriot
operating, keep their jobs and ensure that thousands of retirees continue getting the health
care they depend on and deserve,” UMWA International President Cecil E. Roberts said.
“This has been a difficult and uncertain year for our members. But I believe that in the
end, they understood that we had done a lot to improve what the judge had ordered. They
also understood all that was at stake and resolved to move forward in a positive way.
“But as we work to keep Patriot a viable company into the future, we have not forgotten
how we got here and who is responsible,” Roberts said. “With this agreement, we have
foiled the schemes of Peabody Energy and Arch Coal by continuing to both provide
health care for retirees and maintain union jobs at these mines.”
Roberts said the settlement with Patriot does not provide enough resources to fulfill the
promise of lifetime health care benefits that Peabody and Arch had agreed to provide to
thousands of retirees from those companies.
“Ratification of these agreements provides labor stability and ensures cost savings
essential to Patriot's plan of reorganization,” said Patriot President and Chief Executive
Officer Bennett K. Hatfield. “These agreements should set Patriot on a path to emerge
from bankruptcy by the end of 2013.”
A motion seeking authorization to enter into these agreements has been filed with the
Bankruptcy Court in St. Louis and will be heard on August 20, 2013.
EMS workers. Emergency medical services professionals in California and Arizona
voted this week to unionize with United EMS Workers-AFSCME. Employees of First
Responders EMS in Sacramento, California, won their election on Monday, August 12,
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with 76 percent of the vote, according to AFSCME. Employees at River Medical
Ambulance-AMR in Lake Havasu, Arizona, held their election the following day and
chose to unionize with AFSCME — this time with 90 percent of the vote.
According to AFSCME, the victories are part of a movement of EMS workers uniting
across the country with unions to have a voice in their profession. More than 3,000
workers in Northern California and New England joined United EMS Workers last year.
US Airways merger. On August 15, the Communications Workers of America (CWA)
said that the planned ratification vote for a tentative contract covering 6,500 passenger
service employees at US Airways has been put on hold now that DOJ has announced it
will try to block the merger of US Airways and American Airlines. Agents are
represented by CWA and the International Brotherhood of Teamsters.
The tentative agreement was an interim settlement while the merger moved forward.
Although US Airways contends that the merger will be completed, the time frame will be
longer, and the unions have concluded that it would be better to evaluate all options
before proceeding with the vote.
California state health care and social services workers represented by AFSCME
Local 2620 reached a tentative agreement with the state of California August 7th. The
negotiation team will formally submit the Tentative Agreement to the Local 2620
Executive Board, which will be followed by a full vote of the union’s membership. The
agreement would cover three fiscal years ending in July 2016. AFSCME represents
approximately 4,900 state employees in the health and social services fields.
Most employees would see a two-step 3-percent general salary adjustment over the life of
the contract (1.5 percent in July 2014 and again in July 2015), but two job classifications
would receive equity adjustments totaling 8 percent (4 percent in July 2014 and again in
July 2015). According to published reports, the timing of the proposed pay hikes depends
on the state's assessment of state government finances next year — if revenues are not on
target, the raises would not be implemented until 2015.
The Minnesota Association of Professional Employees (MAPE) announced August 12
that its membership overwhelmingly approved the 2013-2015 state contract agreement,
which was passed by over 97 percent of the members who voted.
Approximately 13,000 state employees represented by MAPE will receive across-theboard raises of 3 percent for each year of the contract, but will pay more for their health
care premiums.
“We hope that once the Subcommittee on Employee Relations reviews the contract, they
will vote to accept it,” said Sandy Dunn, Co-Chair of MAPE’s Negotiations Team. “As
legislators from both sides of the aisle have often remarked how they support the hard
work state employees do, one of the best ways to show their support for us would be to
vote to accept this contract.”
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The state contract agreement now goes to the Legislative Coordinating Commission
Subcommittee on Employee Relations (SER) for action, which must act within 30 days or
the contract goes into effect. After the contract has gone to the SER, regardless of the
result of the committee’s actions, it will be taken up by the full legislature in 2014 for a
final vote.
AFSCME Council 5 Minnesota state employees also ratified their two-year contract for
2013-2015. Their deal covers more than 18,000 executive branch workers and includes 3percent pay raises in 2013 and 2014, and requires employees to pay more for their health
insurance beginning in 2015.
The 2013 pay raise is retroactive to July 1, 2013. The new contract also maintains step
progressions in both years, increases allowances for safety shoes and out-of-town meals,
and raises the dental maximum by $500 to a new yearly total of $1,500. Beginning in
2015, all employees will pay 5 percent of the individual health insurance premium.
Negotiation, renegotiation of CBAs in Detroit bankruptcy filing will be mediated by
chief judge
By Pamela Wolf, J.D.
The federal judge presiding over Detroit’s municipal bankruptcy has ordered that the
parties appear for mediation and assigned the job of mediating to Gerald Rosen, Chief
Judge of the Eastern District of Michigan. The facilitative mediation will include the
negotiation and renegotiation of collective bargaining agreements. Judge Rosen has
ordered that the parties appear for their first mediation session on September 17.
The case has drawn much controversy focusing on the public worker pensions that are at
stake in the city’s Chapter 9 bankruptcy filing. A state court earlier determined that city’s
bankruptcy filing violated Michigan’s constitution because it threatened accrued pension
benefits and ordered that it be withdrawn. The federal bankruptcy judge later held,
however, that the federal bankruptcy court has exclusive jurisdiction over the case, that
state court litigation challenging the Detroit’s Chapter 9 filing should be consolidated into
the bankruptcy case, and that further litigation against the city should be suspended
during the bankruptcy process.
Aiming to protect public worker pensions, Michigan Attorney General Bill Schuette
announced that he would join the bankruptcy case in the role of “Peoples Attorney” on
behalf of the pensioners who stand to lose pension benefits during the proceedings. The
AG’s move pits him against Michigan Governor Rick Snyder, who on July 18 authorized
Detroit Emergency Manager Kevyn Orr to file the bankruptcy petition. The AG agrees
with the state court: “Michigan's constitution, Article 9, section 24, is crystal clear in
stating that pension obligations may not be ‘diminished or impaired,’” he said.
The question on everyone’s mind is whether the Michigan constitution will afford any
protection at all for the public pensions at stake in the federal bankruptcy proceeding.
Chicago funeral directors locked out despite offer to return to work
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The Teamsters Union reported on August 20 that funeral industry giant Service
Corporation International (SCI) has locked out 59 Chicago-area funeral directors despite
a purported unconditional offer to return to work that was made by the union’s Local 727.
A state court judge in Chicago last month denied an emergency motion filed by SCI,
which uses the brand name Dignity Memorial, in an effort to silence picketers. SCI
operates 16 funeral homes in the Chicagoland area. Workers began an unfair labor
practice strike there in July. Strikers have been picketing at Dignity locations since July
2.
As of July 22, the Teamsters reported filing more than 10 Unfair Labor Practice (ULP)
charges against SCI since negotiations began on June 14. The charges included worker
intimidation, threats of job loss, and worker surveillance, and are pending before the
National Labor Relations Board.
The union now reports that through 40 hours of negotiations and 50 days on the strike
line, SCI “has offered only unlawful regressive proposals to the bargaining committee,
including the elimination of worker pensions and higher premiums for health care
coverage.”
The Teamsters resumed contract negotiations for two meetings on August 6 and 8, during
which, according to the union, SCI resubmitted its original demands “to eviscerate
workers’ seniority rights and to eliminate authority of the arbitrator in arbitration
decisions.” In addition to its unconditional offer to return to work on August 19, Local
727 had made some movement on issues critical to SCI, including allowing the company
to withdraw from the Teamsters’ Pension Fund for an economically equivalent 401(k)
plan, the union said.
“SCI has chosen to lock out its employees rather than see them return to serving grieving
families in their communities,” said John T. Coli, Secretary-Treasurer of Local 727. “SCI
has forced this lockout to get rid of its longtime employees and boost its bottom line. But
the Teamsters will continue to fight on behalf of our members for justice, and for a fair
and equitable contract.”
Teamsters Local 727 has represented Chicago’s funeral directors and embalmers since
1946; it represents more than 6,800 men and women in the greater Chicagoland area.
Agency has new Division of Legal Counsel
The NLRB has created a new Division of Legal Counsel at its agency headquarters in
Washington, D.C., headed by Associate General Counsel Margery E. Lieber. The new
division will include three branches created by the consolidation of several headquarters’
offices. The consolidation eliminates duplication of functions, improves services
delivery, streamlines operations, and integrates services, according to the NLRB.
The move follows the agency’s announcement in the Federal Register on July 25 that it
was restructuring and realigning the location and lines of authority of certain agency
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headquarters offices to create an independent Division of Legal Counsel that reports to
the Office of the General Counsel.
The three Branches of the new Division of Legal Counsel are:

The Ethics, Employment and Administrative Law Branch, which provides the
NLRB with legal counsel and advice in the areas of ethics, labor relations,
employment and personnel law, government contracting, and Federal Tort Claims
Act matters.

The Contempt, Compliance and Special Litigation Branch, which provides
compliance and contempt advice and conducts litigation when external statutes,
programs, or outside proceedings threaten the NLRB’s ability to carry out its
mission. This branch also gives advice and engages in litigation to attain
compliance with outstanding court judgments and initiates ancillary collection
proceedings; protects the Board’s remedial orders in bankruptcy courts or against
attachments, garnishments, and liens; assists with defending agency employees
when they have been sued in their individual capacity for actions taken in their
official capacity; and assists Regions regarding compliance work related to
potential derivative liability.

The Freedom of Information Act (FOIA) Branch, which coordinates the
processing of all FOIA requests in the Regional Offices and directly handles all
FOIA requests in NLRB Headquarters, as well as all FOIA appeals. The agency
anticipates that all FOIA work will soon be centralized at NLRB Headquarters; at
that time, the FOIA Branch will be responsible for processing all FOIA requests
nationwide.
The NLRB also noted that the new division’s Lead Technology Counsel renders advice
and assistance regarding e-litigation and e-discovery matters.
Unions push back against DOJ airlines merger suit
By Pamela Wolf, J.D.
Unions that collectively represent 70,000 American Airlines and US Airways employees,
including pilots, flight attendants, mechanics, technicians, aircraft dispatchers, call center
representatives, and others, are pushing for a November 12 trial date in the DOJ’s civil
antitrust lawsuit challenging the proposed $11 billion merger between US Airways Group
Inc. and American Airlines’ parent corporation, AMR Corp. The suit has stirred a
firestorm of passion in the union world.
On August 22, the Allied Pilots Association (ALPA), the US Airline Pilots Association
(USAPA), the Association of Professional Flight Attendants (APFA), Association of
Flight Attendants-CWA (AFA), the Transport Workers Union (TWU) and the
Communications Workers of America (CWA) stressed their desire to quickly dispose of
the government’s lawsuit: “We urge the U.S. District Court and the Department of Justice
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to begin the trial on November 12, 2013 in order to get to a speedy resolution to this
exciting merger,” the unions said in a statement.
“Our members want a fair shot at competing in the marketplace,” the unions explained.
“The airlines we work for, US Airways and American Airlines, can together succeed in a
way that neither airline can alone, bringing new competition to the domestic and
international airlines that serve Americans. The improved network and higher quality
product will attract new customers, allowing the airlines to compete with the
megacarriers in a way neither airline can do alone, creating greater job security for our
members as a result.
“Delaying a trial puts our families and our customers at further risk. For American and its
employees, the uncertainty of the last two years in bankruptcy has already exacted a
heavy toll. Employees at US Airways have had similar hardships with two bankruptcies
since 9-11. In order to make new American competitive, that uncertainty should be ended
as soon as possible.”
Protecting consumers. The DOJ, in announcing the antitrust suit against the airlines,
pointed to the more than $70 billion on airfare spent last year by business and leisure
travelers. In recent years, according to the DOJ, “major airlines have, in tandem, raised
fares, imposed new and higher fees and reduced service.”
“The department sued to block this merger because it would eliminate competition
between US Airways and American and put consumers at risk of higher prices and
reduced service,” said Bill Baer, Assistant Attorney General in charge of the DOJ’s
Antitrust Division. “If this merger goes forward, even a small increase in the price of
airline tickets, checked bags or flight change fees would result in hundreds of millions of
dollars of harm to American consumers. Both airlines have stated they can succeed on a
standalone basis and consumers deserve the benefit of that continuing competitive
dynamic.”
Economic realities. The unions, meanwhile have strongly protested against the DOJ suit,
quickly issuing statements questioning the wisdom of the move as soon as it was
announced.
“The Justice Department’s move isn’t rooted in the economic reality facing the aviation
industry and its workers, one of the most fiercely competitive industries in the global
economy,” ALPA said. “Moreover, the DOJ appears to have completely overlooked the
need for U.S. carriers, such as American and U.S. Airways, to position themselves to
compete in the international marketplace against powerful—often governmentsupported—foreign airlines.”
Action plan. TWU air transport director Garry Drummond has stated that the union’s
leaders and attorneys believe the merger will ultimately be approved. TWU nonetheless
has outlined an action plan; other unions will likely follow a similar path:

Filing an amicus brief with the court in opposition to the DOJ antitrust lawsuit.
13

Using social media to mobilize union members to tell Attorney General Holder to
drop the lawsuit and allow the merger to proceed, and communicating with
elected officials, urging them to speak out against the suit.

Circulating petitions to Holder that will be hand-delivered to DOJ headquarters in
Washington D.C.

Political action, working with the AFL-CIO and its Transportation Trades
Department (TTD) to mobilize elected leaders to oppose the DOJ lawsuit.

Offering assistance to local unions with organizing press conferences in their
communities to educate the public about how the merger is good for workers,
consumers, and the community.

Working with the AFL-CIO, TTD, and leaders of the nation’s labor unions to
send the Attorney General a strong message that all of organized labor is united in
support of the merger.
The unions are clearly aligned in their goal to halt the suit and push the airline merger
through: “We’re going to continue to fight for this merger and we’re prepared to bring
the fight to federal court, the halls of Congress, and the White House, if necessary,” said
APFA President Laura Glading. “Everyone needs this merger—airline investors,
workers, and the flying public especially.”
Teamsters drop representation battle. Moreover, the fallout has fanned out. In the
wake the DOJ’s suit, the International Brotherhood of Teamsters called it quits on a yearlong campaign to represent aircraft mechanics and related personnel at American
Airlines. “The Teamsters Union has determined that the recent announcement that the
federal government will fight the proposed merger between US Airways and American
Airlines places the workers at American Airlines in significant turmoil,” said Teamsters
spokesman Bret Caldwell. “American Airlines’ emergence from bankruptcy has been
cast into doubt and the union has determined that the continued conflict between labor
organizations is not in the best interest of the workers. This is not a time for workers to
fight among themselves.”
In this somewhat rare convergence of union and employer interests, all eyes will be
watching to see if the government will continue down a trajectory that has already
spawned so much labor strife.
UPS Teamsters, Goodyear steel workers, NBCU writers, Texas-Pacifico train
employees make labor advances
By Pamela Wolf, J.D.
On the labor scene, UPS Teamsters are making strides in ratifying supplements and riders
to the UPS National Master Agreement, Goodyear steel workers ratify a new CBA,
Comcast/NBCU writers call for the release of impounded election ballots, and train and
14
engine employees have a new collective bargaining agent at Texas-Pacifico
Transportation Ltd.
UPS Teamsters. Last week, UPS Teamsters in New York ratified the Upstate New York
supplement to the UPS national agreement with 65 percent voting in favor. This is the
first of 17 supplements and riders that were rejected by members in June to be
renegotiated and re-voted, according to the union. Members ratified the national
agreement in June, but the contract does not take effect until all supplements and riders
have been approved.
The UPS National Master Agreement achieves many contract enhancements that
members identified as extremely important, including wage and benefit increases,
additional full-time jobs, and language improvements on issues such as harassment, 9.5,
SurePost and military leave. Those provisions, including a 70-cent per hour wage
increase, were negotiated to take effect August 1. However, there have been no changes
reflected in paychecks yet because the national agreement does not take effect until all
regional supplements and riders have been approved. Seventeen supplements and riders
had yet to be approved as of August 22.
The current Agreement has been extended on a month-to-month basis to give the
supplemental negotiating committees time to address issues.
The union said that many supplements and riders have failed because of confusion and
misinformation about a change in some of its members’ health care benefits in the
national agreement. Members currently in a UPS health insurance plan are being moved
to alternative plans in order to ensure that they continue to receive excellent health
insurance benefits without having to pay a monthly premium, according to the union.
Moreover, because health care is contained in the national agreement, the union informed
its membership that votes against the 17 supplements and riders will not impact health
care. The supplements deal strictly with local area issues, and not the broader, national
economic and language issues that are covered by the national agreement, which was
approved.
Goodyear steel workers. The United Steelworkers (USW) announced on August 22 that
union members have ratified a new four-year CBA with Goodyear Tire and Rubber
Company that covers about 8,500 workers at six of the company’s U.S. facilities. The
contract was passed by an overwhelming 3-to-1 margin by steelworkers at plants in
Buffalo, New York; Topeka, Kansas; Fayetteville, North Carolina; Danville, Virginia;
Gadsden, Alabama; and Akron, Ohio.
According to USW International President Leo W. Gerard, the ratified contract improves
income, retirement, and job security, as well as other benefits.
The new CBA also protects plants against closure throughout its term, noted Tom
Conway, USW International Vice President, who chairs the union’s Goodyear
negotiations. “We also negotiated a commitment from Goodyear to invest in our North
15
American facilities so that future generations can look forward to continuing the tradition
of manufacturing in these communities.”
Comcast/NBCU writers. Writers from more than 20 of the most popular shows on the
NBC and USA networks say they have sent a letter to Comcast/NBCU CEO Stephen
Burke urging him to respect the results of a recent representation election at NBCUowned Peacock Productions. That election was ordered by the NLRB and NBCU has
impounded the ballets, according to the writers. NBC Universal employees at Peacock
have been working to organize a union for more than a year, but their efforts have been
purportedly stalled by NBCU's “legal maneuvering to prevent the writer-producers from
exercising their rights under the National Labor Relations Act,” the writers said in a press
release.
Peacock produces nonfiction programming for basic cable networks, such as shows like
Caught on Camera or Skywire Live with Nik Wallenda. The Writers Guild of America,
East (WGAE) has been actively organizing writer-producers in this part of the television
industry for several years.
The letter to Burke was signed by writers from Saturday Night Live, Late Night with
Jimmy Fallon, 30 Rock, Community, Law & Order, Law & Order Special Victims Unit,
Law & Order Criminal Intent, Parks and Recreation, Smash, Do No Harm, 1600 Penn,
Royal Pains, Passions, The Cosby Show, Homicide: Life on the Streets, The Tonight
Show, Late Night with Conan O’Brien, The Philanthropist, The West Wing, New Year’s
Eve with Carson Daly, Studio 60 on the Sunset Strip, and Monk.
According to the writers, NBCU attorneys claim that half the employees in the proposed
bargaining unit at Peacock are “supervisors” who are not entitled to any protection under
the NLRA. However, following a lengthy hearing and extensive briefing, the NLRB
Regional Director disagreed and directed a secret-ballot election. The election took place
in June, but BCU has successfully had those ballots impounded pending an appeal.
The WGAE wants the company to drop its appeal in order to allow the ballots to be
counted and, if a majority has voted in favor of union representation, to commence
negotiations for a collective bargaining agreement.
“We are mystified by NBCU’s refusal to honor the results of the NLRB election,” said
WGAE Executive Director Lowell Peterson. “The company employs a lot of Guild
members and, as the letter we delivered to the CEO makes clear, those members don’t
think their colleagues should have fewer rights and lesser conditions.”
Train and engine service employees. The Brotherhood of Locomotive Engineers and
Trainmen (BLET) counted a victory when the National Mediation Board on August 22
certified the results of an election at Texas-Pacifico Transportation Ltd. Workers there
voted to make the BLET their designated collective bargaining representative by a vote
of 15-2.
As a result of the victory, about 25 new train and engine service employees will be
brought into the ranks of the BLET. The union will begin contract negotiations with rail
16
management as quickly as possible, according to BLET National President Dennis R.
Pierce.
“The best way to respond to the confidence shown by our new Texas-Pacifico members
is to help them realize the goals they identified in their first-ever collective bargaining
agreement,” President Pierce said, “and that job begins today.”
Texas-Pacifico operates freight service over approximately 380 miles in West Texas,
from San Angelo Junction to Alpine Junction. It also operates from Paisano Junction to
International Bridge near Presidio, Texas, and it interchanges with the BNSF Railway,
Union Pacific, Ferromex and the Fort Worth & Western Railroad.
Demonstrators at D.C. Wal-Mart offices arrested as they protest low wages during
historic March on Washington celebrations
By Pamela Wolf, J.D.
Washington, D.C., last week was at the epicenter in the battle against low wages, not only
with regard to the many events that began and continue in planned celebrations
commemorating the 50th anniversary of the historic March on Washington, but also
because of planned protests against giant retailer Wal-Mart that were orchestrated by
Organization United for Respect at Walmart (OUR Walmart).
The group claimed the support of hundreds of DC-area residents in a planned rally
outside Wal-Mart’s D.C. offices with the aim of a public commitment from Wal-Mart to
increase wages paid by the company, which have been under debate and stirring great
controversy since the D.C. City Council last month passed a bill requiring large,
profitable retailers to pay a minimum hourly wage of $12.50 an hour.
If approved by D.C. Mayor Vincent C. Gray, the legislation (B 20-62), would require
large retailers to pay workers at least $12.50 per hour. However, new hires could be paid
$2.00 an hour less for the first 90 days of employment. The prorated hourly cost of any
benefits could be credited toward the minimum hourly compensation.
The D.C. Council cited three general reasons for establishing the minimum wage:

To save the District government money on costs associated with social services;

To expand the District's economy by augmenting spending by District residents
who would earn a living wage; and

To provide a higher income to District residents so they can better afford to live in
the District.
On Thursday, August 22, 10 former and current Wal-Mart workers, who were also OUR
Walmart members, were reportedly arrested for peaceful civil disobedience near the retail
giant’s downtown office.
17
TRO issued in headquarters demonstration. This latest action is another in a series
after a strike was launched on May 28 over Wal-Mart wages, working conditions, and
purported retaliation against workers who have spoken out in public about their
disagreement with the retailer’s policies. OUR Walmart launched a petition campaign —
backed by the United Food and Commercial Workers International Union (UFCW) —
with a plan for workers to descend on Wal-Mart’s corporate headquarters in Bentonville,
Arkansas, on June 7 to voice their concerns at the company's annual shareholders’
meeting. OUR Walmart held demonstrations outside the retailer’s headquarters on June
3.
But a Benton County, Arkansas, Circuit Court Judge struck a blow to the group that same
day when he issued a temporary restraining order against the UFCW, OUR Walmart, and
other individuals. The order prohibited the defendants, their officers, employees, agents,
affiliates, and all other persons or entities who act in concert with them (except for
current Wal-Mart employees) from entering Wal-Mart’s private property in Arkansas
without the retail giant’s permission for any reason other than shopping or purchasing
merchandise. The order expressly prohibited the defendants from entering Wal-Mart’s
private property to engage in picketing, patrolling, parading, demonstrating, “flash
mobs,” handbilling, solicitation, manager confrontations, and other similar activities.
The workers’ group is demanding a raise in wages and increased access to full-time hours
so that no Wal-Mart worker will make less than $25,000 per year. “Walmart is among the
most profitable companies in the US and is owned by the Walton Family, the richest
family in America, yet workers at Walmart must rely on food stamps and even go hungry
because of lack of hours and low wages,” according to Our Walmart.
House Committee report. On May 30, Democrats on the House Committee on
Education & the Workforce released a report that credits Wal-Mart with a “leading role”
in the nation’s current narrative on rising income inequality and wage stagnation
threatening the future of the middle class. The report, The Low-Wage Drag on Our
Economy: Wal-Mart’s Low Wages and Their Effect on Taxpayers and Economic Growth,
points to Wal-Mart’s business model, which “has long relied upon strictly controlled
labor costs: low wages, inconsiderable benefits and aggressive avoidance of collective
bargaining with its employees.”
The retail giant’s low wages and benefits at just one 300-person Wal-Mart Supercenter
store in Wisconsin, however, likely cost taxpayers at least $904,542 and up to $1,744,590
per year — about $5,815 per employee. Why? Wal-Mart employees and their dependents
have a higher usage of public-assistance programs.
“Wal-Mart is the nation’s largest private-sector employer, yet they pay such low wages
that many of its workers are unable to provide their families with the necessities of life,”
said Representative George Miller (D-Cal), the senior Democrat on the committee. “The
labor policies of Wal-Mart, and those of companies that emulate its low-road approach,
end up leaving taxpayers holding the bag.”
18
Call center’s policies improperly stifled off-site workers’ Sec. 7 rights; region urged
to take on Register Guard
By Lisa Milam-Perez, J.D.
A call center employer violated the NLRA by maintaining usage policies for its computer
and email systems that restrained off-site workers’ Section 7 activity, according to a June
2012 NLRB advice memo released Friday, August 23. The Division of Advice urged the
regional director to issue a complaint, in hopes of using this “virtual workplace” case to
test the NLRB’s Register Guard decision holding employers need not open their
computer systems to protected employee communications — a ruling that the acting
general counsel continues to maintain was incorrectly decided.
The employer’s nondisclosure agreement and overbroad confidentiality and media
relations policies were also improper, according to the memo. Moreover, the employer
unlawfully promulgated a discriminatory work rule and disabled the employees’ private
chat capabilities in response to an employee’s union activities. The employer also
engaged in improper surveillance and created the impression of surveillance by
instructing employees to report any communications from their union-adherent coworker.
However, the employer did not unlawfully alter its internal email capabilities to prohibit
employees from sending email to outside accounts; the employer had a legitimate
business reason for doing so after it received word that an employee had improperly
shared a client’s confidential information.
Alpine Access, a Denver-based company, provides virtual call-center services around the
clock to businesses in several different industries. It employs 4,000 “customer care
professionals” in 40 states. The CCPs work from home and have no face-to-face
interaction with each other. So when one of the employees set out to organize this virtual
workplace, he did so by communicating with his coworkers through the employer’s email
and chat system, the means by which he regularly interacted with fellow employees. His
supervisor responded by urging employees not to open his emails and to notify him if
they received communications from the employee. While the employer tried to correct
this clear violation by reversing the supervisor’s directive, HR told the employee he could
only engage in such communications when both he and the intended recipients of his
message were on down time. The employer also cut off access to the internal chat room,
contending the “Xbox” group in which the employee worked had productivity lapses.
The employees had a Section 7 right to use the employer’s electronic communications
system even under current Board law as set forth under Register Guard, the advice memo
concluded. These employees were unable to communicate with each other by traditional
means and so would be deprived of their protected rights were they not allowed to
communicate through the employer’s systems. As such, the case offers precisely the
scenario that the NLRB described and distinguished from the facts before it in Register
Guard. (In that case, employees still communicated largely face to face, and email had
not so “changed the pattern of industrial life” that traditional modes of interaction were
rendered useless.) Moreover, here the employer violated the Act, even under Register
Guard standards, because its restriction on employee use of its electronic
communications was motivated by antiunion bias, coming on the heels of an employee’s
19
union activity and specifically calling out his union-related communications. Still, the
Division of Advice urged the regional director also to use this case as a vehicle to argue
for the reversal of Register Guard.
According to the memo, the employer’s email rule also was problematic because it
required both the sender and recipient of the email to be off-duty when the
communication was sent. This requirement unreasonably infringed upon protected
activities. The call-center workers’ “down time” (the time in which they were on duty but
not actually responding to calls) varied greatly during the day — as did their work
schedules, given the 24-hour work cycle — and employees had no way of knowing when
their fellow employers were on down time. “Unlike a face-to-face communication, an
email does not need to be reviewed or responded to until the recipient is between calls or
on official break time,” the memo noted. So there was no valid reason for the employer to
insist that both sender and recipient be on break before exchanging emails. This was
especially true given that employees were regularly allowed to surf the internet or
communicate with each other about personal matters during their down time, the memo
noted.
In its correspondence with the employee setting out its restriction that email can only be
sent and received while on down time, the employer stated that it would not enforce its
work rules in a manner that would infringe upon “certain rights” provided under the
NLRA. This “savings clause” did not protect the employer from Board scrutiny when
such a statement was made alongside an unlawful directive that restricts Section 7 rights.
It was settled law, the memo observed, that such a provision does “not render an
otherwise unlawful rule lawful.”
The Division of Advice also concluded the employer improperly disabled the private chat
function in its software for only those employees working on the X-Box account
(including the union proponent). While the employer cited productivity concerns, there
were numerous factors establishing that this justification was pretextual, including the
fact that there was no evidence of a productivity lapse. Also, the employer initially
disabled only the union proponent’s chat feature (and although it intentionally did so, it
told him that his inability to use the function must be due to a connectivity problem on
his end). Finally, the service was disabled just two or three days after the employee used
the chat system to communicate with coworkers about unionizing.
The employer also promulgated an unlawful nondisclosure agreement and threatened to
take legal action against current and former workers for violating the provision after they
discussed terms and conditions of employment on a Facebook page called “Alpine
Access Sucks.” A media relations policy barring any discussions of company-related
matters with anyone outside the company, and requiring employees to refer all media
questions to the marketing department, was unlawfully overbroad, as it could easily be
construed as restricting employees’ right to talk to reporters about terms and conditions
of employment. A confidentiality rule was unlawful for similar reasons.
New Board Members name their Chief Counsel
20
On Monday, August 26, the NLRB introduced each of the individuals named by newly
confirmed Board Members to serve as their respective Chief Counsel:
Chairman Mark Gaston Pearce selected Ellen Dichner, who has been a partner with
the law firm Gladstein, Reif & Meginniss LLP in New York City since 1990; she was an
associate in the firm from 1986 to 1989. Prior to her law firm stint, Dichner served as an
assistant attorney general in the New York State Department of Law’s Labor Bureau
from 1985 to 1986. She also worked as a field attorney in Region 2 of the NLRB from
1982 to 1985. Dichner received a B.A. from Oberlin College and a J.D. from
Northeastern University School of Law.
Peter D. Winkler was named by Board Member Kent Y. Hirozawa. Winkler has
worked at the NLRB since 1977 and served as Chief Counsel to former Members Craig
Becker, Dennis Walsh, Ronald Meisburg, R. Alexander Acosta, and most recently,
Richard Griffin. He also was managing supervisor in the Appellate Court Branch,
Division of Enforcement. Winkler received his B.A. from Amherst College in 1973, his
M.A. from the University of Chicago in 1974, and his J.D. from the University of
Michigan Law School in 1977.
Board Member Harry I. Johnson, III, tapped James R. Murphy, who most recently
served as Chief Counsel to Member Brian Hayes; he filled the same job before that for
Member Peter Schaumber. Murphy began his Board career as a student law clerk in 1974.
He has served as a staff counsel or supervisor on the staffs of dozens of Board members.
Murphy earned his A.B. degree from Princeton University in 1972 and a J.D. from the
American University Washington College of Law in 1976.
Peter J. Carlton was chosen by Board Member Philip A. Miscimarra. Carlton came
to the Board from the Washington, D.C., office of Jones Day in 2001. Most recently, he
served as Chief Counsel in the office of Member Terry Flynn; prior to that he served in
the same role for Member Peter Kirsanow and as Senior Counsel to Member Brian
Hayes. Carlton also has been on the staffs of several other Board Members. He graduated
with high distinction from the University of Michigan in 1975 with a B.A. degree in
English literature. Carlton earned a Ph.D. in English from the University of Virginia in
1986, and for several years was an assistant professor at St. John’s University in
Minnesota. He received his J.D. from the University of Minnesota in 1996, and served as
judicial clerk to the Hon. George G. Fagg of the United States Court of Appeals for the
Eighth Circuit.
Board Member Nancy J. Schiffer chose John F. Colwell, who has been with the
NLRB since 2001, most recently serving as Chief Counsel to Member Sharon Block and
before that filling the same slot for former Chairman Wilma B. Liebman from 2001 to
2011. Before coming to the Board, Colwell held positions in the Office of the Solicitor in
the DOL, as well as having served as an advisor to the Assistant Secretary of Labor for
Mine Safety and Health. He began his legal career with the Washington, D.C., labor and
employment law firm of Yablonski, Both & Edelman. Colwell received his B.A. from the
University of Texas at Austin in 1981 and his J.D. from Yale Law School in 1985.
21
Wal-Mart lawfully bumped demonstration from parking lot, according justreleased advice memo
By Lisa Milam-Perez, J.D.
Wal-Mart did not violate the NLRA by ousting a demonstration by worker advocacy
group “OUR Walmart” from the parking lot of one of its Illinois stores, according to an
NLRB advice memorandum released Friday. The fact that a Wal-Mart employee was
among the organizers of the demonstration did not matter, the Division of Advice
concluded, because the presence of a van emblazoned with the “OUR Walmart” logo
reasonably led the retailer to believe the protest was staged by non-employee organizers,
who may lawfully be excluded from employer property.
On a day off from work, a Wal-Mart employee drove to the store in a minivan owned by
“OUR Walmart” (Organization United for Respect at Walmart), a labor advocacy group
that has been protesting wage and work conditions at the retail chain since 2012. The
employee was accompanied by an organizer for the group (along with a small crowd of
members), and the van was emblazoned with OUR Walmart logos and other graphic
images across the entire vehicle. It also was equipped with a video projection system and
stadium-style speakers. The employee began to play very loud music, including the song
“We’re Not Gonna Take It” and various old union songs, and projected video clips onto
the store’s façade from an earlier protest at Wal-Mart headquarters in Bentonville,
Arkansas.
Two police officers showed up and informed the demonstrators that the music violated a
noise ordinance. After consulting with store management, the officers told the
demonstrators to pack up and leave because they were on private property and the store
wanted them to leave. The officer also said the demonstrators could move to the (public)
shoulder of the road that runs adjacent to the parking lot. Concluding they had already
made their point, though, the demonstrators dispersed. However, the store employee was
allowed to remain on the premises, and did so for a short time, continuing to try to
engage other employees. He was never issued a citation by the police and was never
disciplined by Wal-Mart for his involvement in the demonstration.
Wal-Mart did not violate Sec. 8(a)(1) of the Act by requesting that the police remove
non-employee organizers from its parking lot. It was reasonable for the employer to
conclude that this was a non-employee demonstration, according to the memo, and by
advising the police that it did not permit outside groups to solicit on its property without
prior approval, Wal-Mart was merely enforcing its lawful solicitation and distribution
policy. Also, the employee had been allowed to remain in the parking lot. While the
action of the police deprived the employee of the use of the van, Wal-Mart reasonably
concluded that the van was owned by OUR Walmart and was an instrument of nonemployee solicitation.
“In the circumstances, where the van was covered with the OUR Walmart logo and other
graphic images, and where the participants in the demonstration — save the one
identified employee allowed to stay on the property — were non-employee organizers,
22
we cannot conclude that the Employer’s conduct interfered with employees’ section 7
rights,” the memo stated, advising that the charge against Wal-Mart should be dismissed.
Amid historic anniversary celebration, agency reaching out during National Labor
Rights Week with special focus on Mexican workers
By Pamela Wolf, J.D.
During National Labor Rights Week (August 25 through August 31), NLRB staff
members in its regional offices across the country are meeting with immigrant workers,
community groups, employees, and employers to discuss the rights guaranteed by the
National Labor Relations Act.
Indeed, this is a very busy week in the world of labor and employment. President Barack
Obama declared August 28 the official 50th anniversary of the historic March on
Washington demanding jobs and freedom. “Today, we remember that the March on
Washington was a demonstration for jobs as well as freedom,” the president said in his
proclamation. “The coalition that brought about civil rights understood that racial
equality and fairness for workers are bound together; when one American gets a raw deal,
it jeopardizes justice for everyone. These are lessons we carry forward -- that we cannot
march alone, that America flourishes best when we acknowledge our common humanity,
that our future is linked to the destiny of every soul on earth.
Many groups have brought the battle for better wages to the nation’s capital during the
ongoing anniversary commemorations. Elsewhere, fast food workers and other low-wage
workers are holding a one-day strike today in three dozen-plus cities across the nation,
calling for a $15 minimum wage and the right organize free from retaliation.
President Obama also designated August 26 as Women Equality Day, commemorating
the struggle that on that same day in 1926 finally gave women the right to vote. “As we
reflect with pride on decades of progress toward gender equality, we must also resolve to
make progress in our time,” the president remarked. “Today, we honor the pioneers of
women's equality by doing our part to realize that great American dream — the dream of
a Nation where all things are possible for all people.”
About National Labor Relations Week, NLRB Chairman Mark Gaston Pearce said. “We
are placing a particular emphasis on educating Mexican workers employed in the United
States by partnering with Mexican consulates in many communities.” The NLRB, along
with other federal agencies including the DOL and the EEOC, is participating in events
aimed at ensuring that Mexican employers and workers in the United States understand
their rights and obligations under American law, according to Pearce.
Among the events slated for the week-long agency commemoration are the following:

In California, NLRB Regional Directors attend the Los Angeles and San
Francisco Mexican Consulates’ opening celebration for Labor Rights Week,
representatives hold briefings on the NLRB for the Los Angeles consulate’s
professional staff, and attorneys participate in a telethon designed to provide
23
callers with information on their rights and the agencies best suited for assisting
them; in San Francisco, staff participate in outreach programs hosted by the
consulate.

In Illinois, the Regional Director signs a Local Agreement with the Consul
General of Mexico in Chicago as part of the opening ceremonies for Labor Rights
Week, while Regional staff participate in numerous events throughout the week at
the consulate and throughout the community;

In New Jersey, the Regional office participates in the Mexican Consulate’s New
Brunswick Labor Week events, scheduled for August 27 and 29;

In Raleigh, North Carolina, attorneys from the Regional office participate in a
presentation at the Mexican Consulate, including an overview of employer and
employee rights under the NLRA;

In Oregon, NLRB staff pass out literature and meet with the public at booths in
The Dalles, Portland, and Woodburn;

In Philadelphia, Pennsylvania, attorneys from the Regional office participate in a
briefing sponsored by the Mexican Consulate, highlighting the work of the NLRB
and responding to questions;

In Texas, Regional staff participate in events planned in Dallas, Houston, and San
Antonio;

In Washington State, representatives from the NLRB Seattle office discuss
employee and employer rights and obligations at a booth located in Centro de la
Raza.
“These activities around the country build on the letter of agreement I signed last month
with Mexican Ambassador Eduardo Medina-Mora Icaza,” said Acting NLRB General
Counsel Lafe Solomon.
“Since its passage in 1935, the National Labor Relations Act has promised generations of
workers the right to join together, with or without a union, to seek improvements and a
voice in their working lives,” Solomon noted. “But that promise can only be fulfilled if
individuals understand and are able to exercise their rights under the law.”
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4th Cir.: Pension fund was not “labor organization” but claim against union
proceeds based on alleged “sham litigation”
By Ronald Miller, J.D.
24
A pension fund was properly dismissed from a suit by real estate developers alleging that
a union and the fund orchestrated 14 separate legal challenges against their real estate
projects in order to force them to terminate their relationship with a non-unionized
supermarket, ruled the Fourth Circuit (Waugh Chapel South, LLC v United Food and
Commercial Workers Union Local 27, August 26, 2013, Diaz, A). In affirming the
dismissal of the complaint against the pension fund, the appeals court agreed the fund
was not a “labor organization” under the NLRA. However, it vacated the dismissal of the
developers’ complaint as to the union defendants, reasoning that the Noerr-Pennington
doctrine did not insulate their litigation activity from liability based on their First
Amendment right to petition the courts. The case was remanded for a determination of
whether the unions waged a secondary boycott through the alleged “sham litigation.”
Legal challenges. The real estate developers were building shopping centers and planned
to lease storefront units to Wegmans Food Markets. Because the Wegmans supermarket
chain does not employ organized labor, the unions opposed both projects. The campaign
opposing Wegmans included a union executive’s threat to the developers that if the
supermarket did not unionize, “we will fight every project you develop where Wegmans
is a tenant.” Thereafter, the unions directed and funded a barrage of legal challenges at
every stage of the projects’ development. After 14 challenges, the developers sued the
unions under the LMRA, alleging unlawful secondary boycott activity. Specifically, the
developers alleged that the unions directed a series of adverse lawsuits in order to wage a
secondary boycott. A district court dismissed the action. The developers appealed.
Dismissal of fund. The court first considered the district court’s decision to dismiss the
claim against the fund on the basis that it was not a “labor organization” under the NLRA
subject to the secondary boycott prohibitions of the LMRA. An employee entity may be a
“labor organization” if its purpose or activity involves “dealing with” employers. The
fund satisfied neither of these criteria. In fact, the developers’ own complaint alleged that
the fund was prohibited from “participating directly or indirectly in union collective
activities.” Moreover, the only fact suggesting any interactions between the fund and an
employer concerned the alleged secondary boycott. Plainly, there was no “bilateral
mechanism” when the only alleged contact between an employee entity and management
was an unfair labor practice directed against an employer.
Further, the fact that the fund had designated itself as a “labor organization” for purposes
of tax liability, this was not sufficient to render it a “labor organization” for purposes of
labor law. Here, the Fourth Circuit agreed with the First Circuit that the Internal Revenue
Code and the NLRA have very different objectives. Thus, the Fourth Circuit declined “to
import definitions from statutes with unrelated or cross-purposes.” Consequently,
because the developers failed to allege that the fund had engaged in a pattern or practice
of “dealing with” employers, it was not a “labor organization” under the NLRA and was
not subject to the conditions of the LMRA.
Secondary boycott. The court next considered whether the district court correctly
dismissed the developers’ claim that the unions’ various legal challenges to the projects
violated the secondary boycott provision of the NLRA. According to the developers, the
union lawsuits were an effort to “exert pressure on an unrelated, secondary or neutral
25
employer in order to coerce the secondary employer to cease doing business with the
primary employer, thereby advancing the union’s goals indirectly.” However, the unions
countered that their litigation activity was protected by the Noerr-Pennington doctrine,
which safeguards the First Amendment right to “petition the government for a redress of
grievances,” by immunizing citizens from the liability that may attend the exercise of that
right.
However, the First Amendment offers no protection when “petitioning activity ostensibly
directed toward influencing governmental action, is a mere sham to cover an attempt” to
violate federal law. When the purported sham litigation encompasses a series of legal
proceedings rather than a single legal action, the appeals court concluded that the sham
litigation standard of California Motor Transp Co v Trucking Unlimited should govern.
Thus, the district court should conduct a holistic evaluation of whether “the
administrative and judicial processes have been abused.”
Although the courts are a medium by which citizens may exercise their First Amendment
right to petition their government, the act of petitioning those courts may not serve as the
means to achieve illegal ends. Under this “sham litigation” exception to the NoerrPennington doctrine, the Fourth Circuit held that the developers’ pleadings were
sufficient to show that the unions have abused their right to petition the courts beyond the
point of constitutional protection.
In this instance, the Fourth Circuit concluded that the record presented a genuine issue of
material fact as to whether the unions indiscriminately filed (or directed) a series of legal
proceedings without regard to the merits and for the purpose of waging a secondary
boycott. As a consequence, the appeals court vacated the district court ruling on this point
and remanded the matter for a determination of whether the unions waged a secondary
boycott in the manner alleged in the complaint.
The case number is 12-1429.
Attorneys: Ira Lee Oring (Fedder & Garten) for Waugh Chapel South, LLC. Michael
Timothy Anderson (Murphy Anderson) for United Food and Commercial Workers Union
Local 27. Sharon McNeilly Goodman (Slevin & Hart) for Mid-Atlantic Retail Food
Industry Joint Labor Management Fund.
5th Cir.: Two facilities were single site under WARN Act due to “truly unusual”
circumstances, including a hurricane
By Lorene D. Park, J.D.
Affirming judgment in favor of two employees who were laid off without notice in
violation of the WARN Act, the Fifth Circuit found no error in the lower court’s finding
that two Texas facilities were a single site of employment for purposes of determining
that there had been a “mass layoff” (Davis v Signal International Texas GP, LLC, August
28, 2013, Reavley, T). While the general rule is that two locations are considered separate
sites, this case fell under an exception for “truly unusual” circumstances because
employees had been moved around after Hurricane Ike, though many regularly worked at
26
both locations. The appeals court also found no error in the lower court’s selection of a
“snapshot” date for purposes of determining employment levels.
From July to September 2009, Signal International, a marine services and shipbuilding
company, terminated 159 full-time workers at two facilities in Texas. Two employees
filed suit, alleging the terminations constituted a mass layoff under the WARN Act and
that Signal violated the Act by failing to provide 60 days advance written notice as
required.
The central issue before the district court was whether there had been a mass layoff.
Concluding that Signal’s two facilities in Orange, Texas constituted a single site of
employment under a regulatory exception for “truly unusual organizational situations,”
the court measured workforce levels across the two facilities. It also found that a proper
“snapshot” for measuring the workforce levels was July 24, the date of the first layoff
included in the employee’s allegations. With that in mind, the court ruled that there had
been a mass layoff during the 90-day period following July 24, 2009. It entered judgment
against Signal and the company appealed. The Fifth Circuit affirmed.
Single site. Noting that the WARN Act does not define what constitutes a single site of
employment, the Fifth Circuit looked to Department of Labor regulations for guidance.
The general rule, stated the court, is that separate facilities are separate sites. However,
there are exceptions. Under 20 CFR 639.3(i)(8), the term “single site of employment”
may also apply to certain “truly unusual organizational situations.” Finding little
authority on what constitutes such a “truly unusual” situation, the court nonetheless found
that this case qualified.
Signal’s two facilities consisted of a fabrication facility covering 77 acres, called “the
yard,” and an administrative office that was originally 35 miles away but was moved to
Orange to consolidate support and have personnel closer to the shipyard. Administrative
workers were housed in mobile office units at the periphery of the yard. The parties
disputed whether the units were permanent but the administrative staff had been there for
“longer than a few months.” Three months after the move, Hurricane Ike struck the Gulf
Coast, causing severe damage to the yard.
Due to the hurricane damage, Signal moved most of its administrative employees a mile
away to a two-story office complex called “the annex.” Many administrative workers
stayed at the yard, however. At the time the employees were laid off, employees housed
in the annex regularly carried out business in the yard and vice versa. Some had offices in
both locations and it was undisputed that the general manager oversaw the day-to-day
operations at both facilities.
Based upon these facts, and in particular on the regular sharing of staff between the annex
and the yard, the appeals court found that the two facilities constituted a single operation
that served the same operational purpose: the production and supply of platforms, rigs,
and vessels. The court also pointed to the importance of geographic proximity, noting
that while the facilities were noncontiguous, they were close enough to be essentially one
27
site. For these reasons, the Signal facilities constituted a “truly unusual organizational
situation” and were a single site of employment for purposes of the WARN Act.
“Snapshot” date. Under 20 CFR 639.5(a)(2), for purposes of determining whether there
has been a mass layoff, the number of employees is to be measured on the date the first
notice was required to be given. Signal argued that here the proper snapshot date would
be May 25, 2009, 60 days before the first alleged layoff, and the district court erred by
using July 24, 2009 instead.
Finding no error in the lower court’s snapshot date, the appeals court noted that the
district court relied on an example in the WARN Act preamble that was identical to the
case at hand (involving rolling layoffs over a 90-day period) and applied deference to the
agency’s interpretation of its own regulations. Further, the CFR section at issue expressly
permits divergence from the “date the first notice is required” in “unusual circumstances”
such as the date being “clearly unrepresentative” of ordinary employment levels. Here,
there was no evidence on staffing levels for May 25 so that date was unrepresentative. In
the appellate court’s view, the district court had “plenty of reasons” for using July 24 as
the snapshot date, including that it was the “Day 1” date embraced in the WARN Act
preamble and that the parties and the court had been relying on for over two years.
For these reasons, the district court did not err in concluding there was a mass layoff
under the WARN Act.
The case number is 12-41262.
Attorneys: Bryan A. Terrell (Weller, Green, Toups & Terrell) for Philip A. Davis. David
S. Bland (LeBlanc Bland) for Signal International Texas GP, LLC.
6th Cir.: NLRB did not abuse discretion in finding CNA-only bargaining unit to be
appropriate
By Ronald Miller, J.D.
A nursing home operator was denied its petition to review the NLRB’s order that a
bargaining unit composed of certified nursing assistants (CNAs) constituted an
appropriate unit, ruled the Sixth Circuit (Kindred Nursing Centers East, LP dba Kindred
Transitional Care and Rehabilitation - Mobile v NLRB, August 15, 2013, Martin, B).
Where the Board explained why it adopted the approach that it did, it acted within its
discretion in adopting a community-of-interest test based on some of its prior precedents.
Consequently, the Board did not abuse its discretion in applying a version of its
traditional community-of-interest test to find a CNA-only bargaining unit to be
appropriate.
The employer operated a nursing facility with no history of collective bargaining.
Employees at the facility were placed in one of eight separate departments: nursing,
nutrition services, resident activity, maintenance, administration, medical records, central
supply, and social services. The nursing department consisted of 53 CNAs, along with
licensed practical nurses (LPNs) and Registered Nurses (RNs). LPNs supervised the
28
CNAs and were in turn supervised by the RNs. The CNAs worked one of three eighthour shifts and worked directly with up to 17 residents. Typically three to five CNAs
were assigned to work on each nursing floor.
Functions of CNAs. With respect to their job duties, the CNAs helped residents with
daily functions, serviced their meals, assisted them to get around the facility,
accompanied them to outside appointments, and took vital signs, and monitored their
daily food and fluid intake. CNAs were required to complete an activity flow sheet to
record residents’ vital signs and daily functions and activities. The employer preferred its
CNAs to have a high-school diploma, and they were required to be certified by the state.
The bargaining unit dispute. Here, the employer sought to include in the bargaining
unit about 33 other employees it considered service and maintenance employees. None of
the other employees were in the nursing department, and so none reported to the RNs.
Most of the classifications the employer sought to add to the bargaining unit had similar
educational requirements. All employees were eligible for the same benefits and were
subject to the same personnel policies.
The union petitioned to represent a unit of 53 full-time and regular part-time CNAs. At
proceedings before a hearing officer, the employer argued that the bargaining unit should
be expanded to include the additional service and maintenance employees. Ultimately, an
NLRB regional director found that the petitioned-for unit of CNAs constituted an
appropriate unit in which to conduct an election. The union won the election, but the
employer filed a timely request to review the regional director’s decision and the Board
granted review.
Community-of-interest standard. In Specialty Healthcare I, the Board invited parties to
address some or all of eight questions related to bargaining units in non-acute healthcare
facilities. The NLRB then decided the current case, Specialty Healthcare II, which
purported to: (1) overrule Park Manor Care Center, a test the Board applied to determine
the appropriateness of a bargaining unit in a nursing home; (2) return to applying the
“traditional community-of-interest approach” to nursing homes; and (3) place the burden
on the party contending that a readily identifiable group of employees who shared a
community of interest was nevertheless inappropriate and that excluded employees
shared an overwhelming community of interest with the included employees.
When the employer refused to bargain, the union filed an unfair labor practice charge.
The employer was found to have violated the NLRA. It petitioned for review of the
Board’s determination that the bargaining unit of CNAs in this case was appropriate.
The Sixth Circuit first noted that it must uphold the Board’s bargaining unit
determination “unless the employer establishes that it is arbitrary, unreasonable, or an
abuse of discretion.” Further, it had to uphold the Board’s interpretation of the NLRA if it
is reasonably defensible. On appeal, the employer did not argue that the Board abused its
discretion in overruling Park Manor, rather it argued that the Board abused its discretion
in the approach it adopted in Specialty Healthcare II for determining the appropriateness
of bargaining units.
29
First, the appeals court addressed the employer’s argument that Specialty Healthcare II
adopted a new approach and does not return to applying the traditional community-ofinterest approach. Because of the wide discretion given to the Board under Sec. 9(b),
judicial review of bargaining unit determinations is limited. In making a unit
determination, the Board must select an appropriate bargaining unit, and it is not required
to select the most appropriate unit. However, the Board does not exercise its authority
aimlessly in defining a bargaining unit, but focuses on whether the employees share a
community of interest. The community-of-interest test requires simply that groups of
employees in the same bargaining unit share a community of interests sufficient to justify
their mutual inclusion in a single bargaining unit.
No abuse of discretion. It is within the NLRB’s purview to develop standards for
ascertaining whether one unit is more appropriate than another. Moreover, it is within the
Board’s purview to choose to follow one of its precedents, provided the departure from
precedent is explained. Here, the Board explained why it adopted the approach it did in
Specialty Healthcare II. If the Board believes that it can best fulfill its statutory duty by
adopting a test from one of its precedents over another, then it does not abuse its
discretion. In Specialty Healthcare I, the Board observed that the long-term care industry
has “long been criticized as a source of unnecessary litigation.” Because Specialty
Healthcare II adopted a community-of-interest test based on some of the Board’s prior
precedents, and because it did explain its reasons for doing so, it did not abuse its
discretion in applying a version of its traditional community-of-interest test to find a
CNA-only bargaining unit to be appropriate.
Overwhelming-community-of-interest standard. Next, the Sixth Circuit concluded that
the NLRB did not abuse its discretion in Specialty Healthcare II’s adoption of the
overwhelming-community-of-interest test. Here, the employer argued that the
overwhelming-community-of-interest standard represented a “material change in the law”
and was not a mere reiteration nor a clarification. Citing Jewish Hosp Ass’n of Cincinnati,
the appeals court pointed out that the Board has used the overwhelming-community-ofinterest standard before, so its adoption was not new. Moreover, the D.C. Circuit
approved the Board’s use of it in Blue Man Vegas, LLC v NLRB. The Board quoted Blue
Man in Specialty Healthcare II in adopting this standard. If the Board overruled some of
its precedents and chose to follow a precedent approved in Blue Man, it may do so
provided it explains why. Thus, the court denied the employer’s petition for review.
The case numbers are 12-1027 and 12-1174.
Attorneys: Charles P. Roberts, III (Constangy, Brooks & Smith) for Kindred Nursing
Centers East, LP. Robert J. Englehart for NLRB. Matthew J. Ginsburg, AFL-CIO Legal
Department, for Intevenor.
7th Cir.: Non-union company bound to arbitration provisions of collective
bargaining agreement under “single employer” doctrine
By Ronald Miller, J.D.
30
A district court did not err in finding that two tile installation companies, one union and
one non-union, were a “single employer,” ruled the Seventh Circuit (Lippert Tile Co, Inc
v International Union of Bricklayers and Allied Craftsmen, District Council of
Wisconsin, August 1, 2013, Williams, A). The appeals court agreed that, for all practical
purposes, the companies functioned as a single entity. While the distinction between the
“union” and “non-union” companies was useful, the bottom line reason the new
companies were created was to increase the employer’s share of the tile installation
market by providing the same service at lower prices.
Single employer doctrine. Lippert Tile owned a tile installation company that employed
union workers. In 2004, in order to meet the demand by customers for cheaper non-union
labor, the company created a new tile company, DeanAlan, solely to serve this market. In
2010, after the union discovered that DeanAlan had been created to perform non-union
tile work in the same region, it filed a grievance under the collective bargaining
agreement with a joint arbitration committee (JAC), seeking union benefits for the nonunion tile installers working at the new company. After the JAC granted this relief, the
employers petitioned to vacate the arbitration award, arguing that the new company
should not be bound because it was not a party to the CBA. However, the district court
granted enforcement of the arbitration award, finding that the new company could be
treated one and the same with the old company for purposes of the CBA under the “single
employer” doctrine. The companies appealed.
The Seventh Circuit agreed with the district court that Lippert Tile and DeanAlan
constituted a single employer, noting that they were centrally operated by the same entity
and so were one and the same for purposes of arbitrability under the CBA. DeanAlan
rented trucks from and ordered its supplies through Lippert Tile, the Lippert Group
provided administrative services for the two companies, maintained business records,
processed payroll, handled billing and managed bank accounts for both companies.
Additionally, the Lippert Group provided both companies with office and warehouse
staff. But the companies had separate employees and customers, different corporate
officers, separate bank accounts and separate lines of credit and insurance programs.
Review of arbitration award. The governing contract between Lippert Tile and the
union provided for certain benefits and wages and prohibited it from subletting or
transferring covered work, except to an employer bound by the terms of the agreement. It
also provided for creation of the JAC, consisting of three employers and three union
representatives. According to the union, the employer’s set-up violated the CBA’s
assignment provision. However, the employer argued that DeanAlan and the Lippert
Group were not parties to the CBA.
As an initial matter, the Seventh Circuit noted that it had limited jurisdiction in an appeal
to challenge the district court’s enforcement of the JAC award under LMRA Sec. 301.
Section 301 essentially limits the federal court’s jurisdiction to applying the terms of a
CBA, so when a CBA provides for submission of contractual disputes to an arbitrator, the
court is confined to ascertaining whether the party seeking arbitration is making a claim
which on its fact is governed by the contract. Thus, the court was responsible only for the
question of arbitrability.
31
Single employer status. The companies challenged the district court’s finding that the
dispute was arbitrable because all three companies should be considered a “single
employer,” and were thereby bound by the CBA even though DeanAlan and the Lippert
Group were not signatories. The single employer doctrine holds that when two entities
are sufficiently integrated, they will be treated as a single entity for certain purposes. To
determine whether two nominally separate entities are a single employer, one must
examine four factors: (1) interrelation of operations, (2) common management, (3)
centralized control of labor relations, and (4) common ownership.
For essentially the same reasons set forth by the district court, the Seventh Circuit
concluded that the three companies were a “single employer” for purposes of enforcing
the arbitration provisions of the CBA. With respect to day-to-day operations, the same
entity, the Lippert Group, maintained business records, processed payroll, handled billing
and managed bank accounts of both companies. Moreover, the Lippert Group made the
critical decision of which company should bid on a particular project. While the
companies did not share the same space, they were both housed in the same warehouse.
Although they employed different installers and served different markets, they served the
same geographic area and performed the exact same work. Thus, the appeals court found
operations extensively interrelated.
Although Lippert Tile and DeanAlan technically had different corporate officers, because
the same entity controlled the bidding process and administrative tasks for both
companies, the “common management” factor weighed in favor of a single employer
finding. Finally, the appeals court found that there was centralized control of labor
relations because it was the owners’ decision in the first place to create a new company
that would give room to a new, non-union labor system solely to serve the non-union
market. Thus, under the “single employer” doctrine, the JAC had the power to decide
whether the companies’ double-breasting practice violated the CBA and to issue a
binding arbitral award. The judgment of the district court was affirmed.
The case number is 12-2658.
Attorneys: Thomas W. Scrivner (Michael Best & Friedrich) for Lippert Tile Co, Inc.
Matthew Ruehl Robbins (Previant, Goldberg, Uelmen, Gratz, Miller & Brueggerman) for
International Union of Bricklayers and Allied Craftsmen, District Council of Wisconsin.
7th Cir.: Employee’s state law retaliatory discharge claim not subject to complete
preemption under LMRA Sec. 301
By Ronald Miller, J.D.
An employee’s state tort claim of retaliatory discharge for filing a workers’ compensation
claim was not subject to complete preemption under LMRA Sec. 301, and so was
remanded to state court, ruled the Seventh Circuit (Crosby v Cooper B-Line, Inc, August
7, 2013, Wood, D). The appeals court rejected the employer’s contention that the
employee’s retaliatory discharge suit was a disguised Sec. 301 action that arose under
federal law. Here, the court observed that none of the elements of the employee’s
retaliatory discharge claim required an interpretation of the collective bargaining
32
agreement governing the terms of his employment. Thus, removal of his claim from state
court was improper.
The employer is a manufacturer of electrical components and tools, and the employee
worked in one of its seven divisions. On July 28, 2010, he severed a portion of his middle
finger as he was attempting to remove a piece of metal from a bundle. He had asked a
coworker to kick the bundle in order to dislodge the pieces as he removed them. The
company frowned on this procedure. Thereafter, the employee sought medical attention,
and filed a medical and disability claim under the Illinois Workers’ Compensation Act.
New safety rules. The employee returned to work approximately six weeks later. During
a conversation with management, the employee stubbornly maintained that he did not
intend to stop using the “kicking method” to remove metal from the bundles. As a
consequence, he was suspended for three days for using an unsafe work practice. The
corrective action also stated that further violation of safety policies would result in
immediate termination. A grievance was filed on his behalf by his union to protest the
suspension. After returning from suspension, the employee was given additional safety
training and was advised about numerous new safety rules. Within hours of resuming
work, he was accused of violating one of the new safety rules. Thereafter, the employee
was terminated.
The employee alleged that his firing had nothing to do with safety violations, but
occurred as a result of his filing a workers’ compensation claim. In support of this theory,
he pointed to the timing of his firing, the sudden appearance of new safety rules, emails
exchanged between company personnel expressing a desire to fire him, and emails from
the company’s HR manager stating that transferring him to a different part of the plant
would result in a more costly workers’ compensation award. Thus, he filed suit in state
court alleging that he was fired in retaliation for asserting a workers’ compensation claim.
However, the employer removed the case to federal court on the basis that his retaliatory
discharge claim was really a claim under a collective bargaining agreement and was
necessarily covered by Sec. 301.
The district court granted the employer’s motion for summary judgment, finding that the
employee’s retaliatory discharge claim failed on the merits. On appeal, the Seventh
Circuit remanded the matter to the state court.
State law claim. The appeals court determined that this case turned on a single question:
did Sec. 301 completely preempt the employee’s state-law claim? Although not raised by
the employee before the district court, the appeals court first examined whether the lower
court had subject matter jurisdiction of this dispute. To determine whether a purportedly
state law claim “really” arises under Sec. 301, a federal court must look beyond the face
of a plaintiff’s allegations and labels and evaluate the substance of the plaintiff’s claims.
In Lingle v Norge Div of Magic Chef, Inc, the Supreme Court made clear that preemption
does not extend to every state law that touches upon rights governed by Sec. 301. Only
those state law claims that require “interpretation” of a CBA are inevitably federal.
33
The state law claim at issue in this case was for retaliatory discharge in violation of the
Illinois Workers’ Compensation Act. Although the Act itself does not recognize a cause
of action for employees fired in retaliation for exercising rights under the statute, Illinois
courts recognize an implied private action. A claim of retaliatory discharge requires a
plaintiff to show that “(1) he was discharged or threatened with discharge and (2) the
employer’s motive in discharging or threatening to discharge him was to deter him from
exercising his rights under the Act or to interfere with his exercise of those rights.” None
of these elements called to mind a labor contract. Thus, the court concluded that the
employee’s case was not within the territory that Congress carved out to be governed
exclusively by federal rules under Sec. 301.
The case number is 13-1054.
Attorneys: Thomas F. Crosby, III (Winters, Brewster, Crosby & Schafer) for Philip
Crosby. Bryan D. LeMoine (McMahon Berger) for Cooper B-Line, Inc.
8th Cir.: Sidestepping recess appointment issue, Eighth Circuit upholds NLRB
findings that series of discharges violated the Act
By Lisa Milam-Perez, J.D.
Substantial evidence supported the NLRB’s findings that an employer unlawfully
discharged eight employees for supporting a union organizing campaign, providing
adverse testimony during a Board hearing, or engaging in other protected, concerted
activity, the Eighth Circuit held, enforcing Board orders in two separate decisions (NLRB
v RELCO Locomotives, Inc, August 20, 2013, Murphy, D). Judge Smith dissented; he
would deny enforcement because the NLRB lacked a valid quorum when it issued the
decisions below—an issue the majority declined to take up, deeming it both
nonjurisdictional and waived by the employer because it was not first raised below.
“Sit down and shut up.” Two discharged employees were the acknowledged leaders of
a nascent union organizing campaign, and there was ample circumstantial evidence that
senior management knew of their union activities. The company CEO indicated that he
knew there was a union drive afoot, and evidence suggested that another employee—an
“openly and avowedly anti-union” coworker who bore a grudge against the pair—kept
management apprised of ongoing campaign developments. In fact, the informer enjoyed
“a meteoric progression to a coveted position” at the company for his efforts.
Moreover, there was substantial evidence that the company harbored animus towards the
union campaign. Upon learning of the organizing drive, the CEO called a meeting with
all employees (except for union contractors, who were told to leave the room) and
delivered an hour-long speech on the negative influence of unions. When one of the
union leaders rose and spoke out in favor of unions, the CEO told him to “shut up and sit
down,” a clear indicator of hostility, the appeals court found. It also agreed with an ALJ’s
finding that the CEO’s comment that inviting a union on-site was akin to “erasing the
chalkboard” was an unlawful “bargain from scratch” threat.
34
Citing Sec. 8(c)’s protections for employer speech, the employer contended that the
CEO’s comments could not be used as evidence of antiunion animus because they did not
contain threats of reprisal or force or a promise of benefits. However, the appeals court
concluded the “chalkboard” comment qualified as a threat of reprisal. The CEO’s
demand that the union supporter “shut up and sit down” also could be considered as a
threat of reprisal against the employee if he were to continue to advocate for the union,
particularly since the company indicated that it fires employees for “insubordination.”
Further, the NLRB has consistently held that an employer's antiunion comments, while
themselves lawful, could be considered as background evidence of animus. “Section 8(c)
is designed to shield employers from claims that rest solely on an employer's
communication that it disfavors unionization,” the appeals court wrote. “That does not
mean that these remarks be excised when considering whether the employer has evinced
a hostility to unions. Otherwise, Section 8(c) would effectively prevent an employer's
statement of hostility to unions from being used as proof of such an attitude.”
The appeals court also rejected the employer’s reliance on a Title VII race bias case in
support of its contention that these statements should not have been considered because
the CEO was not the decisionmaker in the discharge of the union adherent. “While it may
be unreasonable to assume that an employee is speaking on behalf of the company when
he or she expresses racist sentiments, the same is not true in the labor context,” the court
noted. “To the contrary, ‘it is eminently reasonable to assume that high-level corporate
managers speak on behalf of the company when they express anti-union animus.’” When
the CEO openly and overtly expressed his hostility towards unions, it was reasonable to
assume that he was announcing the company’s policy. This viewpoint may then
reasonably be imputed to other senior managers, including the decision-makers, the court
explained.
Manufactured insubordination. The other discharged leader had taken up the
organizing mantle after the first activist was fired. He was terminated shortly thereafter,
ostensibly for dangling his feet off the side of a railcar (a safety violation) despite being
directed not to do so. However, there was ample evidence that this reason was pretextual.
The employee insisted that his feet were never dangling—either before or after he was
reprimanded; in fact, he placed the ladder on which he worked precisely where
instructed. His version of events was corroborated by another employee (who himself got
the axe after testifying as such).
The employer argued it was irrelevant whether the feet were dangling—it was enough
that the employer thought his feet were dangling, and that he had insubordinately
disregarded instructions. But the ALJ discredited as “either implausible or an outright
fabrication” the company official’s assertion that he believed the employee was
insubordinate. The ALJ’s conclusion was further supported by the fact that, immediately
after he was fired, the employee offered to bring the official over to his workspace to
show that the safety ladder had been properly placed, but the official refused. This
supported the inference that “was looking for an excuse to terminate a known union
sympathizer.”
35
Uniform cleaning costs. The company had recently begun docking employees $36 per
month for uniform cleaning costs, and considerable discord arose when employees began
to suspect that they were being charged more than the company was actually paying to
have the uniforms cleaned. The CEO was visibly upset by the accusation when he called
a meeting to discuss the issue. That same night, one employee contacted the cleaning
vendor to inquire directly, and was told it charged $6.20 per week, per uniform. After he
shared this information with his coworkers, he was fired for “inappropriate interaction
with a vendor.”
The employer argued to no avail that the employee’s action was not “concerted” but
rather, a solitary pursuit, and thus not protected by the Act. Even action that “involves
only a speaker and a listener” can qualify as concerted action if it bears a relation to
group action on behalf of employees’ interests, the court noted. Given the employees’
vocal expression of concern about the uniform cleaning charges at a meeting earlier that
same day, there was substantial evidence to support the Board’s conclusion to the
contrary.
Next, the employer contended it did not fire the employee for calling the vendor, but
because it mistakenly believed that he had harassed the vendor (though it turned out to be
another employee). As such, the discharge was permitted, even if the harassment
occurred while engaging in protected, concerted activity. This argument might have held
sway if the stated (but mistaken) motive for termination was neutral, but the Supreme
Court has refused to extend the “honest belief” safe harbor to circumstances where the
stated motivation was “an alleged act of misconduct in the course of [protected] activity.”
Another vocal opponent of the uniform cleaning fees was let go for accruing too many
attendance “points,” although there was an ongoing dispute about how many points were
properly assessed. Management had been working with the employee to resolve the issue,
but its cooperation ceased soon after he publicly challenged the uniform policy. The
Board has ample evidence to find that the company may not have been planning to
terminate him, or at least had been planning to investigate his claim that his attendance
points should have been expunged—and that the discharge in fact was motivated at least
in part by his protected activity.
The company also reacted to the uniform dispute by modifying its nondisclosure
agreement to forbid any employee from contacting its vendors. The revised agreement
also eliminated employees’ right to recover litigation costs if the employee prevailed in
an action brought by the company. Although the employer demanded that employees sign
the agreement, it never took disciplinary action against employees who refused.
Nonetheless, the Board’s order directing the employer to rescind the nondisclosure
agreement and disavow it publicly, in light of its chilling effect on employees, was
upheld.
Adverse testimony. Two other employees were fired soon after they gave adverse
testimony during a Board hearing into unfair labor practice allegations arising from the
first four terminations. Given that the CEO was present at the hearing, the employer made
little traction with its argument that it could not be proven that it was aware of their
36
protected activity. Nor was the court swayed by the employer’s claim that there was no
evidence the company harbored any animus toward their testimony. While five nonparty
employees testified at the hearing, only the two who provided testimony adverse to the
employer (and signed a statement on behalf of the union in that proceeding) were
discharged.
Moreover, there was substantial evidence that the stated reasons for their terminations
were pretextual. In one case, the employer cited offenses that could warrant discipline
(such as failing to wear a hard hat), management embellished these incidents after the
Board hearing, and added new allegations in order to justify his suspension, probation,
and eventual firing. “The decision to add after the fact justifications to prior misconduct
is itself a recognized ground for inferring animus.”
The ALJ also discredited the employer’s claim that it terminated one of the witnesses
because he lacked a welding certificate, where four other employees who lacked welding
certificates had not been discharged or placed on probation. Also, the employee had
never been given an ultimatum to obtain a certificate or be terminated, and there was no
evidence that his performance was substandard. Further, the delay in reprimanding the
employee for these alleged violations (until after his Board testimony) further
undermined the employer’s credibility. While it claimed that it held off on imposing
employee discipline on advice of counsel because of the pending union election, the
appeals court observed that the company reprimanded other employees during that time.
The other witness was ostensibly let go for being unproductive. Like the other witness, he
was given a performance review for the first time in years. Yet the only evidence of a
lack of productivity was when he was admonished by his supervisor for “walking around
the shop” (while he was en route to assist a coworker with a job). Again, the employer
argued that what mattered was not whether he was actually unproductive, but whether
management believed that he was. Again, the ALJ had ample reasons to doubt the
authenticity of this belief.
Rumor about coworker’s firing. The final two discharges came on the heels of fears
that a particularly hard-working employee had been fired. He had been off work the day
before and was nowhere to be seen, and the news spread rapidly throughout the plant that
a well-regarded employee had fallen victim to the employer’s wrath. In fact, the
employee had just been assigned to another jobsite that day, and he was quite shaken by
the numerous calls from coworkers throughout the day asking if he had been discharged.
Two employees responsible for disseminating the misinformation were fired for
spreading a rumor that “potentially destroyed [the coworker’s] life.”
Neither party disputed that this was the actual reason for their terminations. The critical
question, then, was whether their (unfounded) statements about their coworker’s
discharge were concerted activity. The ALJ's determination, adopted by the Board, that
their activity was concerted was reasonable. “Repeated conversations about the effect of
a company decision on other workers qualifies as concerted activity, and an employee
cannot be terminated for engaging in such conversations,” wrote the court. The talk
among employees had provoked worries that mass layoffs were imminent, or that even
37
popular and productive employees could be eliminated by overly strict interpretations of
company policies, the court reasoned.
The employer insisted it could fire the loose-lipped employees because their statements
were not true. However, the court noted, false and inaccurate employee statements are
protected under the Act so long as they are not malicious. Contrary to the employer’s
assertion, there was no evidence to support a finding that the employees’ statements were
malicious; they were not made with either actual knowledge of their falsehood or with
reckless disregard for their veracity. In fact, there was substantial evidence that many
workers in the plant honestly believed that their coworkers had been fired. And the
employees stopped spreading the rumor once they found out it was untrue. One of the
employees even actively tried to stop the rumor’s spread at that point. “Even assuming
that [the employer] honestly believed that [the employees] had behaved maliciously, that
subjective belief is irrelevant unless the two workers were actually guilty of the alleged
misconduct during their protected concerted activities,” the appeals court reiterated.
Recess appointments issue waived. Finally, the Eighth Circuit declined to add to the
growing body of jurisprudence regarding the validity of President Obama’s recess
appointments to the NLRB. The appeals court had not previously considered head-on
whether a challenge to the NLRB’s quorum is jurisdictional in nature. However, noting
that the Supreme Court, the D.C. Circuit, and the Sixth Circuit have all so held, the
appeals court concluded the same. Further, no “extraordinary circumstances" warranted
consideration of the employer’s belated challenge to the NLRB's recess appointments, as
“all of the facts and legal arguments necessary to make an appointments clause challenge
were available to [the employer] when its case was heard by the Board.” Therefore,
having failed to raise the issue previously, the employer could not now assert that the
Board lacked a lawful quorum when it issued the decisions below.
The case numbers are 12-2111, 12-2447, 12-2203, and 12-2503.
Attorneys: Beth S. Brinkmann, U.S. Department of Justice, Linda Dreeben, National
Labor Relations Board, for NLRB. Michael Klupchak (Laner & Muchin), Gene R. La
Suer (Davis & Brown), and Paul E. Starkman (Pederson & Houpt) for RELCO
Locomotives.
8th Cir.: Despite employer’s rejection of CBA in bankruptcy, former parent
company still obligated to pay benefits to “assumed retirees”
By Ronald Miller, J.D.
The Eighth Circuit reversed the denial of declaratory relief to Patriot Coal and Heritage
Coal that Peabody Holding’s obligation with respect to health care benefits owed to
assumed retirees would not be affected by modification of the benefits of retirees of
Heritage or Eastern Coal under Section 1114 of the Bankruptcy Code (In re Patriot Coal
Co aka Eastern Coal Holding Co aka Patriot Coal Corp Midwest, August 21, 2013,
Kressel, R). Although Heritage Coal was granted permission to reject its “me too” CBA
with a union, it specifically did not seek to modify the assumed retirees’ benefits. As a
consequence, Heritage was still statutorily obligated under Sec. 1114 to provide benefits
38
under the terms of an individual employer plan, and Peabody Holding was obligated to
fund those benefits as it agreed to under a liabilities assumption agreement it entered with
the union.
The players in this case were all previously subsidiaries of Peabody Energy. After a
strategic spin-off, only Peabody Holding remains with the parent Peabody Energy, while
Heritage and Eastern operate under the Patriot Coal umbrella. While neither Heritage nor
Eastern were members of a multiemployer bargaining association of coal operators, they
entered into a “me too” agreement with the mine workers union. The agreement provided
for health and other benefits for retirees. While Peabody Energy was contemplating the
spin-off, Peabody Holding entered into an assent agreement with the union stating that it
was “primarily obligated” to pay for the benefits of approximately 3,100 of Heritage’s
retirees, known as the assumed retirees under the terms of an individual employer plan
maintained by Heritage.
Liabilities assumption agreement. The agreement dictated that Peabody Holding would
enter into a liabilities assumption agreement with Heritage to consummate and define
their relationship post-separation. Additionally, the agreement stated that Peabody
Holding would not be a party to a collective bargaining agreement with the union, and the
assent agreement did not create any right of action by the union or its retirees against
Peabody Holding with respect to benefits provided by Heritage’s individual employer
plan. However, the union and its members were allowed to file suit for any benefits
Peabody Holding had agreed to pay under the liabilities assumption agreement or
otherwise provided under the Heritage individual employer plan.
At a time when Patriot and Heritage and Peabody Holding all were subsidiaries of
Peabody Energy, the companies entered into the liabilities assumption agreement. The
liabilities assumption agreement reiterated that Heritage had an obligation to provide
retiree healthcare pursuant to its “me too” labor contract. It further stated that the parties
desired that Heritage continue to provide the retiree healthcare. Peabody Holding
assumed some of the liabilities for providing retiree healthcare “to the extent expressly
set forth in this agreement.”
On October 31, 2007, Peabody Energy parted ways with Patriot Coal and several
subsidiaries. The spun-off companies comprised the coal operations with unionrepresented labor. Patriot became a parent company, and Heritage and Eastern were
among its subsidiaries. In 2012, Heritage and Eastern filed for bankruptcy. Patriot and
Heritage then filed this adversary proceeding to gain bankruptcy court approval to reject
a CBA. Section 1114 requires a debtor to timely pay retiree benefits unless the
bankruptcy court determines that modification of those benefits is necessary. Ultimately,
Patriot was allowed to reject the CBA and modify retiree benefits for certain current
retirees. The Sec. 1114 proposal called for modifying the retiree health care benefits of all
Heritage retirees, except assumed retirees, by transferring the obligation to provide
benefits from Heritage to a voluntary employee beneficiary association (VEBA).
Primary obligator. Thereafter, Patriot and Heritage sought a declaratory judgment that
Peabody Holding’s obligations with respect to the healthcare benefits owed to the
39
assumed retirees would not be affected by modification of the benefits of retirees of
Heritage or Eastern under Sec. 1114. Finding that all liabilities remained with Heritage
and Peabody was simply obligated to fund those liabilities, the bankruptcy court denied
the request for declaratory relief, and granted summary judgment to Peabody Holding.
According to the bankruptcy court, because the “me too” agreement had been rejected,
Heritage was no longer obligated to provide the assumed retirees’ benefits, and Peabody
was not required to fund them. Patriot and Heritage appealed.
On appeal, Patriot and Heritage argued that Peabody was the primary obligator of the
assumed liabilities, that the Sec. 1114 proposal did not propose modifying the assumed
retirees benefits, and that the bankruptcy court’s Secs. 1113 and 1114 order was not a
successor labor contract. Under the bankruptcy court’s theory, only Heritage or Peabody
could be liable to the union, and it held that only Heritage was liable.
Effect of rejection of collective bargaining agreement. The Eighth Circuit was faced
with three legal issues. First, did the assumed retirees’ benefits emanating from the “me
too” collective bargaining agreement survive rejection of the collective bargaining
agreement? Second, if those benefits did survive, were they modified? Third, was
Peabody Holding relieved from its liability under the liabilities assumption agreement?
The assumed retirees’ benefits survived rejection of the CBA under Sec. 1113, ruled the
appeals court. The plain anguage of Sec. 1114(e)(1) indicates that a CBA can be rejected
under Sec. 1113 and the debtor would still be required to timely pay for, and refrain from
modifying, retiree benefits provided for in that labor agreement unless authorization to
modify is granted under Sec. 1114. While Heritage’s rejection of its CBA relieved it of
its contractual obligation to pay benefits, it still had a statutory obligation to pay those
benefits. Thus, upon rejection of the “me too” agreement under Sec. 1113, absent
modification under Sec. 1114, Heritage was still required to comply with the terms of the
individual employer plan and provide its retirees benefits under the plan.
In this instance, the appeals court observed that neither Heritage nor the union requested
modification of the assumed retirees’ benefits. Before the bankruptcy court, Heritage was
adamant that its motion to reject the CBA did not seek to modify the assumed retirees’
benefits. The legal effect of this carve-out language was that Heritage specifically
requested that the court not grant it such approval. With such a request in the motion,
those benefits remained undisturbed by the court’s order granting Heritage permission to
modify the rest of its retirees’ benefits.
Consequently, the appeals court disagreed with the bankruptcy court’s conclusion that
only Heritage was liable for the benefits. Heritage was made liable to the union through
the “me too” agreement that required it to provide non-pension benefits to its employees
and retirees at the levels in the individual employer plan. Peabody Holding was made
liable through the assent agreement. This provision made clear that Peabody Holding was
liable. While Heritage rejected its “me too” agreement with the union, the liabilities
assumption agreement remained in effect. Heritage was still statutorily obligated under
Sec. 1114 to provide benefits under the terms of the individual employer plan, and this is
40
precisely what Peabody Holding agreed to assume and pay. Thus, the decision of the
bankruptcy court was reversed.
The case number is 13-6031.
Attorneys: Andrew S. Gehring (Davis & Polk) for Patriot Coal Co. Carl E. Black (Jones
& Day) and Steven N. Cousins (Armstrong & Teasdale) for Peabody Holding Co., LLC.
8th Cir.: Union did not act arbitrarily in declining to take rest break claim to
arbitration
By Ronald Miller, J.D.
After certifying a class action against an employer for breaching its collective bargaining
agreement and against a union for breaching its fair representation duty, a federal district
court then correctly granted summary judgment in favor of the defendants, ruled the
Eighth Circuit (Inechien v Nichols Aluminum, LLC, August 28, 2013, Kelly, J). In view
of the parties’ history on the issue of rest breaks for employees working on continuously
operating lines, the union did not have a duty to pursue to arbitration a grievance that it
believed did not warrant such action. Thus, under the facts and circumstances of this
case, an employee failed to raise a genuine issue of material fact on whether the union
failed in its duty of fair representation. Because summary judgment in favor of the union
was properly granted, summary judgment in favor of the employer was also proper.
The employer operated two facilities, with three of its production lines operating
continuously. Employees at the facilities were represented by a union and their working
conditions governed by a CBA. In January 2010, the employee first complained to his
supervisor and the union president that employees on the coil coating line were not
receiving breaks. Ultimately, he filed a grievance on this issue. The employer responded
that the employees, in fact, did get to take their rest breaks “as time permits.” Dissatisfied
with this response, the employee pursued the grievance. Eventually, the grievance was
denied and the union did not request arbitration. The employee said he did not receive
notice that his grievance was denied.
The employee filed a second grievance stating he thought employees would be notified
regarding breaks and lunch periods. The employer refused to accept the grievance
because it considered the matter closed. In response, the employee filed this class action
class action, alleging that the employer breached the CBA by failing to establish rest
periods for workers on the continuously operating lines and against the union for breach
of the duty of fair representation. The district court certified the class pursuant to Rule 23
as to those employees who worked on continuously operating lines at any time during the
ten-year period preceding the lawsuit but then granted summary judgment to both
defendants.
Union investigation. To prevail on this “hybrid” action pursuant to Sec. 301 of the
LMRA, the employee had to prove both that the employer violated the CBA and that the
union breached its duty of fair representation. “A union breaches its duty of fair
representation when its conduct is ‘arbitrary, discriminatory, or in bad faith,’” the court
41
began. In this instance, the employee asserted that the union acted arbitrarily and
breached its duty of fair representation when it failed to conduct an investigation into the
merits of his grievance and failed to process his grievance properly. He presented
evidence that the union did not, in fact, conduct interviews of employees on continuously
operating lines regarding whether they were taking breaks. Thus, the appeals court agreed
with the district court that there remained a disputed issue of fact regarding whether the
union acted arbitrarily or in bad faith when it failed to arbitrate the grievance that coil
coating line employees were not actually receiving their rest periods.
However, whether or not employees on a continuously operating line were receiving rest
periods was not the basis for certifying the class. Instead, the claim in the class action was
that the employer failed to establish scheduled rest breaks on the continuously operating
lines, as required by the CBA, and that the union, in turn, failed in its duty of fair
representation when it refused to take this claim to arbitration. Any purported failure of
the union to investigate individual claims by individual class members was not relevant
to the analysis of the appeals court.
Past history of ad hoc breaks. With regard to that portion of the grievance alleging that
the employer had breached the CBA by failing to establish scheduled rest periods for
workers on continuously operating lines, the union had several reasons to believe that
arbitration of this issue would not prove successful. Because the union had represented
the bargaining unit since the 1940s, it understood what the rest period practice was for
workers on continuously operating lines. That practice was for these workers to take their
breaks as time permitted. The employee presented no evidence to dispute this
longstanding method for taking ad hoc beaks on continuously operating lines.
Further, the union had previously addressed a grievance on the issue of a lack of
scheduled breaks on the continuously operating lines in 1990. At that time, the employer
responded that, for most workers on continuously operating lines, breaks are not
scheduled. Instead, workers are “allowed break time without disrupting production.” The
employer explained that the continuously operating line simply could not be shut down
for a “scheduled” break, and the union did not take the matter to arbitration.
A year later, the union negotiated a possible change to the CBA’s rest period provision.
At that time, the employer and union discussed the impracticality of designating specific
times for scheduled rest periods on the continuously operating lines, and the proposal was
ultimately abandoned. Thus, when the union was faced this issue in the past, it proposed
changing the language of the rest period provision, rather than asserting a violation of the
CBA as it is currently written. Consequently, given the longstanding practice at the
employer and the previous experience with the issue of scheduled rest breaks for
employees on continuously operating lines, the union’s decision not to take this particular
issue to arbitration was not arbitrary.
No union bad faith. Finally, the appeals court concluded that the employee failed to
show that the union engaged in conduct sufficient to establish a breach of the duty of fair
representation. The employee asserted that the union acted in bad faith by failing to
communicate openly and honestly with him about the investigation and the grievance
42
process. However, he failed to show that the union acted in bad faith as to the issue
certified for the class action. The question of whether the employer breached the CBA on
the issue of scheduled rest breaks did not require the same type of investigation in order
to assess its validity and viability for arbitration. Mere negligence, poor judgment or
ineptitude on the part of the union was insufficient to establish a breach of the duty of fair
representation. Accordingly, the appeals court affirmed the judgment of the district court.
The case number is 12-3734.
Attorneys: Brad J. Brady (Brady & Preston) for Charles Inechien. Kathleen Marie
Anderson (Barnes & Thornberg) and Martha L. Shaff (Betty & Neuman) for Nichols
Aluminum, LLC. John S. Callas (McCarthy & Callas) for International Brotherhood of
Teamsters Union, Local No 371.
9th Cir: Employees’ labor code claims could not be aggregated under PAGA to
satisfy amount-in-controversy requirement; federal court lacked jurisdiction
By Lisa Milam-Perez, J.D.
Individual employees’ California Labor Code claims could not be aggregated under the
state’s Private Attorney Generals Act (PAGA) in order to satisfy the amount-incontroversy requirement for establishing federal court jurisdiction, a divided Ninth
Circuit panel held (Urbino v Orkin Services of California, Inc, August 13, 2013,
Hawkins, M). As a result, the appeals court refused to resolve the “quintessential
California dispute” over whether an employer’s arbitration agreement that contained a
PAGA arbitration waiver was unenforceable under state law. Instead, the majority
vacated the district court’s order denying an employee’s motion to remand his labor code
claims. Judge Thomas dissented.
PAGA action filed. An Orkin employee filed a representative PAGA action alleging that
the company deprived him (and his fellow nonexempt, hourly workers) of meal periods,
overtime, and vacation pay, and failed to furnish accurate itemized wage statements. The
employer removed the case to federal court on the basis of diversity—presenting
evidence that the aggregated claims of some 811 individual employees, who were issued
at least 17,182 possibly faulty paychecks, could result in liability that satisfied the
minimum federal jurisdictional requirements.
The employee moved to remand the case to state court, leaving the district court to
ponder whether the potential penalties could be combined or aggregated to satisfy the
amount in controversy requirement. If they could, federal diversity jurisdiction would lie
because statutory penalties for initial violations of California’s Labor Code would total
$405,500 and penalties for subsequent violations would aggregate to more than $9
million. If not, the $75,000 threshold would not be met because penalties arising from the
plaintiff’s sole claims would be limited to $11,602. Noting the split opinions among other
district courts on the issue, the court below, addressing the question for the first time,
found PAGA claims to be common and undivided and therefore capable of aggregation.
The Ninth Circuit reversed, concluding the penalties recoverable on behalf of all
43
aggrieved employees could not be considered in their totality to clear the jurisdictional
hurdle.
Applicable law. With passage of the PAGA in 2004, the California legislature
“fundamentally altered the state’s approach to collecting civil penalties for labor code
violations,” the appellate majority observed. Though the state’s Labor and Workforce
Development Agency (LWDA) retained primacy over private enforcement efforts, under
PAGA, if the LWDA declines to investigate or initiate an enforcement action, an
aggrieved employee may commence a civil action against his employer “on behalf of
himself or herself and other current or former employees.” If he prevails in the
representative action, the aggrieved employees are statutorily entitled to 25 percent of the
civil penalties recovered, while the LWDA is entitled to 75 percent.
The traditional rule is that multiple plaintiffs who assert separate and distinct claims are
precluded from aggregating them to satisfy the amount in controversy requirement unless
the individual plaintiffs “unite to enforce a single title or right in which they have a
common and undivided interest,” the appeals court wrote, quoting the Supreme Court in
Snyder v Harris. To determine whether such a common interest exists, courts look to the
source of plaintiffs’ claims. “If the claims are derived from rights that they hold in group
status, then the claims are common and undivided. If not, the claims are separate and
distinct.” However, just because claims arise from questions of fact and law “common to
the group” does not mean they have a “common and undivided interest,” the court
explained. Such an interest exists only when the claims can be asserted “by pluralistic
entities as such,” or, put another way, if the defendant “owes an obligation to the group of
plaintiffs as a group and not to the individuals severally.”
Rights held individually. Here, the aggrieved employees sought to vindicate breaches of
their individual rights under the labor code. Each employee suffers a unique injury, the
Ninth Circuit reasoned, “an injury that can be redressed without the involvement of other
employees.” And the employer’s obligation to them is not “as a group,” but as
“individuals severally.”
The employer argued to no avail that the interest asserted by the employee is not his
individual interest, but rather “the state’s collective interest in enforcing its labor laws
through PAGA.” To the extent that the employee asserted anything but his individual
interest, the majority could not be persuaded that such a suit—“the primary benefit of
which will inure to the state”—satisfies the requirements of federal diversity jurisdiction,
noting that the state, as the real party in interest, is not a “citizen” for diversity purposes.
Because the employees’ individual claims could not be aggregated, the amount in
controversy requirement was not satisfied, and federal subject matter jurisdiction did not
lie. The district court was directed to return the matter to state court for resolution.
Dissent. Arguing that PAGA claims can be aggregated for purposes of diversity
jurisdiction, Judge Thomas dissented. The dissent noted that PAGA is fundamentally a
law enforcement tool to protect the public, not to benefit private parties. “The Act neither
creates nor vindicates substantive rights of individual aggrieved employees. Rather, it
44
deputizes aggrieved employees to vindicate the State’s interest in labor code
enforcement.” As such, a PAGA plaintiff is not entitled to “damages,” but only a share of
recovery as an incentive payment. Consequently, Thomas argued, PAGA plaintiffs do not
represent “separate and distinct” claims subject to the anti-aggregation rule.
A PAGA plaintiff is comparable to a plaintiff in a shareholder derivative suit, who
likewise lacks a direct proprietary interest in the subject of the litigation and sues as a
proxy for the injured corporation, in the dissent’s view. “Notwithstanding the individual
recovery secured by successful shareholder derivative plaintiffs, we have long held their
claims subject to aggregation, relying on the rationale that derivative suits vindicate
corporate interests and benefit the shareholders only indirectly.” The dissent also noted,
in support of the notion that PAGA does not vindicate “separate and distinct” claims, that
PAGA claims are not assignable; they may only be pursued individually if the state
chooses not to take enforcement action; and the judgment binds nonparty aggrieved
employees (as would a judgment in a suit brought by the government). “If aggrieved
employees possessed individual substantive rights under the Act, this broad rule of
preclusion would raise serious due process concerns,” Thomas argued. This is why a
PAGA judgment does not bar aggrieved employees from later pursuing individual claims
based on the same labor code violations.
The case number is 11-56944.
Attorneys: Kenneth H. Yoon (Law Offices of Kenneth H. Yoon) and Peter M. Hart (Law
Offices of Peter M. Hart) for John Urbino. Christopher Charles Hoffman (Fisher &
Phillips) and Theodore Robert Scarborough (Sidley Austin) for Orkin Services.
11th Cir.: Lower court improperly aggregated layoffs for WARN Act purposes;
employer could not invoke “unforeseen business circumstances” defense without
having given any layoff notice
By Lisa Milam-Perez, J.D.
Reversing in part a district court’s grant of summary judgment to employees who brought
a WARN Act suit after their casino employer fell victim to a gambling crackdown, the
Eleventh Circuit concluded the court below incorrectly aggregated a layoff and a plant
closing that took place a month apart (Weekes-Walker v Macon County Greyhound Park,
Inc aka Victoryland, August 5, 2013, Wilson, C). The appeals court reversed and
remanded the case for the district court to determine whether employees who were laid
off in January 2010 were “affected employees” as a result of the February plant closing,
and thus entitled to notice under the statute.
However, the lower court correctly classified February 2010 and August 2010 layoffs as
plant closings, the appeals court held, finding the employer liable for violations of the
WARN Act notice provisions. The appeals court also affirmed that the employer could
not avail itself of the statute’s unforeseeable business circumstances defense because the
company failed to at least provide its employees with notice of the layoffs as soon as
practicable. And it rejected the notion that the employer’s PR counter-offensive to the
gambling crackdown was enough to satisfy WARN’s employee notice requirements.
45
Right here in Macon County… The plaintiffs were former employees of MCGP, a
greyhound track turned casino—and Macon County’s largest employer. The electronic
gaming machines on the premises made the park the target of a well-publicized
crackdown by the Alabama governor’s gambling task force, resulting in a series of
shutdowns and reopenings.
In the first layoff, in January 2010, 68 workers were let go as the result of scheduled
renovations. That layoff was portrayed as temporary, and the employer conceded that it
did not provide WARN Act notice to the employees who were terminated. One month
later, the task force showed up and seized the employer’s gaming machines after the state
supreme court vacated a temporary restraining order against the task force. That
prompted the disheartened employer, in February, to lay off its remaining 249 workers—
again, without WARN notice.
In March, county officials filed suit challenging the authority of the gambling task force,
and the county court entered a second restraining order (then a preliminary injunction)
against the task force. The casino reopened for business almost immediately. But in July,
the state supreme court vacated this injunction too. Bracing for another raid, the casino
ceased its electronic gaming operations and, in August, laid off its workforce for good.
Without notice.
In the class action WARN Act suit that followed, the district court granted summary
judgment to the laid-off workers. It found the WARN Act applied to all three layoff
events. It aggregated the first two layoffs as a “mass layoff” and found the final closure
was a “plant closing” within the meaning of the statute. On appeal, the employer argued
that the January layoff was not covered by the WARN Act and, as such, the lower court
erred in aggregating the January and February layoffs. The employer also contended, as
to the February and August layoffs/plant closings, that it was subject to the WARN Act’s
unforeseeable business circumstances defense.
Aggregation was improper. The January 2010 layoff was not, by itself, covered under
the WARN Act, the appeals court found, agreeing with the lower court. However, the
February plant closing was a covered event. The district court concluded that the January
layoff must be aggregated with the February plant closing as a “mass layoff” or it was not
covered under WARN at all. Here, the appeals court disagreed. “The WARN Act does
not permit the January layoff to be aggregated with the February plant closing to qualify
as either a plant closing or mass layoff,” the appeals court said.
The district court erred by using the definition of “plant closing” from WARN Sec.
2101(a)(2) as an aggregation source or method. It reasoned that as long as the January
layoff occurred within 30 days of the February plant closing, then the two events can be
aggregated together to reach the threshold for a “plant closing.” But the language of the
“plant closing” definition itself does not allow for that sort of aggregation. “Plant
closing” is defined as “the permanent or temporary shutdown of a single site of
employment . . . if the shutdown results in an employment loss at the single site of
employment during any 30-day period for 50 or more employees.”
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The phrase “during any 30-day period,” the appeals court explained, is “merely the
timeframe for determining whether enough employees were laid off in ‘the shutdown’ —
singular, not plural — in order for that shutdown to qualify as a plant closing under the
WARN Act. This language does not allow us to count an earlier and unrelated layoff as
part of the same ‘plant closing’ just because the two events happened within 30 days of
one another.”
Nor could the January layoff and February plant closing be aggregated to constitute a
“mass layoff,” defined as “a reduction in force which . . . is not the result of a plant
closing…” It would be contrary to the plain language of the statute to aggregate the
February plant closing with an unrelated layoff to create a “mass layoff,” the appeals
court said.
Nonetheless, it reasoned, the employees laid off in January could potentially be “affected
employees” who were entitled to notice of the February plant closing under Sec.
2101(a)(5) of the Act. Whether they were entitled to notice depends on how long the
January layoff was expected to last — whether it was always intended to exceed six
months or whether the February plant closing turned what was an otherwise “short-term
layoff” into an “employment loss.” In that case, the employees would be entitled to
notice. That was a fact issue for the district court to decide on remand.
Unforeseen business circumstances defense foreclosed. The Eleventh Circuit also
affirmed that the employer could not avail itself of the WARN Act’s unforeseeable
business circumstances defense because it provided no notice at all to its workforce.
Under Sec. 2102(b)(3), an employer averring this defense “shall give as much notice as is
practicable and at that time shall give a brief statement of the basis for reducing the
notification period.” That is, the statute imposes a condition precedent such that an
employer seeking to leverage the unforeseeable business circumstances defense must first
give notice to affected employees. “It is manifest that a WARN Act employer attempting
to circumvent the 60-day notice requirement must still give some notice in accord with
Sec. 2102(b)(3),” wrote the court. “The unforeseeable business circumstances defense
does not jettison this absolute requirement under the WARN Act; even where the defense
is properly invoked, some notice must be given.”
In support of this conclusion, the appeals court noted that the title of the provision itself
reads, “Reduction of notification period.” Had Congress intended to allow the
notification period to be eliminated completely, “it would have indicated such by way of
delineation between that and a reduction; it did not.” Rather, the defense allows employer
to obtain a reduction of the notification period due to unforeseeable business
circumstances, but not an elimination of the notice requirement. Moreover, the DOL
regulations separately list circumstances under which no WARN Act notice is required,
and none of those circumstances were present here.
Formal notice required. The appeals court also rejected the employer’s contention that
even if notice is required in order to invoke the unforeseeable business circumstances
defense, it need not be formal notice. The gambling crackdown that prompted the layoffs
was “entirely obvious” to the affected employees, the employer said, and the employer
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had launched a counter-offensive of billboard ads, third-party newspaper articles, and
internet postings blaming the governor for the raids. That was enough to constitute
“notice” for WARN purposes, the employer urged. But the Eleventh Circuit found it
“inconceivable” that these PR efforts would satisfy the type of “brief statement of the
basis for reducing the notification period” that Congress envisioned in drafting the
WARN Act.
First, the WARN regulations require that notice must be specific, outlining specific
methods of notice that are acceptable under the Act, such as payroll inserts. Moreover,
while the task force raid was highly publicized, the employer could not show that each
affected employee actually received notice. Thus, the employer’s putative methods of
“notice” did not satisfy the fundamental statutory requirement that an employer “give or
serve a form of notice that will ensure delivery and receipt.”
The case number is 12-14673.
Attorneys: John M. Segrest (The Segrest Law Firm), Charles A. Hardin (Hardin &
Hughes), James B. Perrine (Bailey & Glasser), and Robert Simms Thompson, Attorney at
Law, for Judy Weekes-Walker. Patrick L.W. Sefton (Sasser Sefton Brown Tipton &
Davis), Fred D. Gray, Sr. (Gray Langford Sapp McGowan Gray Gray & Nathan) for
Macon County Greyhound Park, Inc.
Hot Topics in WAGES HOURS & FMLA:
Industrial services company and its president sued for failure to compensate
employee donning and travel activities
The DOL on July 31 announced that it has filed a federal lawsuit against MPW Industrial
Services Inc. and its president after an investigation by the DOL’s Wage and Hour
Division (WHD) disclosed evidence of FLSA minimum wage, overtime and
recordkeeping violations. MPW Industrial Services provides industrial support services,
including cleaning services, to area steel mills. The DOL’s suit seeks to recover unpaid
minimum wage and overtime compensation for 63 current and former employees, and
also requests that the defendants be permanently enjoined from committing future FLSA
violations.
The WHD’s investigation of the company’s Lorain establishment found that employees
reported to the facility at the beginning of their shift to perform necessary tasks, such as
loading trucks with personal protective gear and industrial cleaning equipment to use at
steel mills. The employees then traveled in company vehicles to job sites throughout
Ohio. However, the WHD found that the defendants failed to record and compensate
employees for time spent traveling between the company’s office and job sites; nor did
they compensate employees for shop time and wait time at the company and job sites.
The defendants’ failure to pay the employees for all hours worked resulted in minimum
wage and overtime violations.
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Investigators also found evidence that the company altered timekeeping records to show
fewer work hours than actually performed by employees and omitted other required
employee information, in violation of FLSA recordkeeping requirements.
The company has refused to pay the back wages owed to the affected employees,
according to the WHD, which prompted the agency to file suit. The WHD also noted that
a 2009 investigation at the company’s Canton location found similar violations.
“MPW Industrial has been found in violation of the FLSA previously for failing to
compensate employees for all hours worked, such as travel time and shop time,” said
WHD District Director George Victory. “Since its previous investigation, the company
has still not taken steps to ensure employees are paid proper minimum wage and overtime
compensation in compliance with the FLSA.”
Child labor violations result in fines, settlement for grocery stores; fireworks
company settles wage and child labor violations
Fareway Stores Inc. and Hy-Vee. A multiyear enforcement initiative conducted by the
DOL’s Wage and Hour Division focused on grocery stores in Iowa and Nebraska found
widespread violations of the FLSA’s child labor provisions. Since fiscal year 2011, WHD
investigations have disclosed child labor violations among 28 grocery stores throughout
the two states. Civil money penalties total more than $128,500.
Significant child labor violations were found in grocery stores operating under the names
of Fareway Stores Inc. and Hy-Vee, two of the largest grocery store chains in the area.
These violations included allowing minors to perform prohibited hazardous occupations,
such as loading and/or operating power-driving paper balers, meat slicers, and bakery
machines, and operating a motor vehicle.
Fareway Stores Inc. has signed a settlement agreement with the department, committing
to ensure future compliance with the FLSA at all of its present and future establishments.
The agreement includes training managers about prohibited hazardous occupations for
minors, posting FLSA information for employee awareness, establishing an email contact
for reporting potential violations, and implementing a new policy to ensure its
employment of minors is in compliance with the child labor provisions of the law.
Big Fireworks. American Eagle Superstore Inc., and its subsidiary Big Primo LLC, both
doing business as Big Fireworks, agreed to pay 119 employees $55,891 after an
investigation by WHD found overtime and minimum wage violations under the FLSA for
employees working in Michigan, South Carolina, and Indiana. American Eagle also paid
a civil money penalty for violations of the child labor provisions of the Act.
Lansing-based American Eagle Superstore and its subsidiary operate five fireworks
outlets and 20 seasonal firework tents as Big Fireworks in Michigan and Indiana. The
company also operates two additional warehouses located in Lansing and Fort Mill, S.C.
Two additional subsidiaries, Rt 83 Investments LLC, which operates as Odyssey
Fireworks, were also included in the investigation.
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The investigation found that the company violated hazardous orders regulating child
labor when it allowed minors to operate forklifts and work in warehouses where
fireworks were stored. The company and its subsidiary also failed to pay warehouse,
retail store, and tent employees at time and one-half their hourly rates of pay for hours
worked beyond 40 per week, instead paying straight time or a salary for all hours worked.
The fireworks retailer improperly classified some employees as exempt from overtime
and paid them fixed salaries without regard to the number of hours they worked.
American Eagle also failed to record and pay for all hours of work.
American Eagle Superstore has agreed to pay back wages found due for employees in
Michigan, South Caroline, and Indiana.
Company will improve compliance, train workers, pay back wages for FMLA
violations
Hawker Beechcraft Inc. signed a compliance agreement with the DOL as a result of an
investigation by the WHD found the Wichita company interfered with employees’ rights
under the FMLA.
A 20-year employee terminated in violation of the Act will be reinstated and receive a
total of $45,000 in back wages and 15 months of accrued vacation and sick leave hours.
The company offered to write a letter of explanation to the employee’s creditors, who had
threatened foreclosure on his home. Two other employees, who also were wrongfully
terminated, will receive a total of $3,800 in back wages.
The investigation found that Hawker Beechcraft required employees to submit complete
medical records to the company physician prior to scheduling an appointment for a
second opinion. The company allegedly terminated those employees who failed to
provide these private medical records in a timely manner, a practice that discouraged
employees from applying for FMLA leave. Under the FMLA, an employer only has the
right to request medical certification containing sufficient medical facts to establish that a
serious health condition exists.
The company also failed to provide employees the required notification of their
eligibility, rights and responsibilities under the Act.
Hawker Beechcraft has agreed to provide FMLA information to its 6,000-member
workforce, to provide proper notification of eligibility, rights and responsibilities to
employees within the time frames required by the Act, to revise its administrative
procedures for requesting FMLA leave, and to provide additional FMLA training to its
human resources staff.
Flooring contractor pays over $103,000 in OT back wages, liquidated damages
Flooring Demolition Specialists LLC has paid $103,554 in back wages and liquidated
damages to 24 employees after an investigation by the WHD found that the Tempe floor
removal contractor willfully violated the FLSA’s overtime and recordkeeping provisions.
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The investigation by the division’s Phoenix district office disclosed that a certain group
of employees was paid straight time for all hours worked and did not receive an overtime
premium for hours worked beyond 40 per week. Flooring Demolition Specialists also
failed to pay employees for hours worked while loading company trucks and for travel
time to job sites. Investigators found that other employees of the firm who performed the
same type of work did receive proper overtime pay.
The company has paid $51,777 in overtime back wages and an equal amount in
liquidated damages to the affected workers. It has also paid $6,000 in civil money
penalties because of the willful nature of the violations found. A settlement agreement
with the department requires the employer to post notices of FLSA’s rights in prominent
locations accessible to all workers, in English and Spanish, along with the WHD’s
contact information. Every employee will be given a copy of the notice. The employer
has also agreed to make and provide, upon request, periodic audits of its payroll to ensure
proper payment of wages to all employees.
South Carolina restaurants agree to pay $74,619 in back wages for FLSA violations
The DOL’s Wage and Hour Division (WHD) announced on August 5 that two El Jimador
Mexican Restaurants, located in Clemson and Westminster, South Carolina, have agreed
to pay $74,619 in back wages to 13 employees following an agency investigation. The
establishments, owned and operated by several members of the same family, were in
violation of FLSA overtime, minimum wage and recordkeeping provisions at both
locations, according to the WHD.
The FLSA violations found at both restaurants resulted from the employers’ failure to
compensate employees properly for all work hours. By reviewing payroll records and
conducting employee interviews, investigators determined that tipped employees, such as
servers, were made to rely primarily on tips for pay, the WHD said. Their wages
amounted to less than the federal minimum wage of $7.25 per hour. Additional minimum
wage violations occurred when the employers purportedly made illegal deductions from
workers’ pay for the cost of their uniforms. The employer also allegedly failed to pay
workers overtime compensation as required by the FLSA, and failed to maintain records
of employees’ work hours and wages, in violation of statutory recordkeeping
requirements.
“We found several low-wage, at-risk employees working off the books at both El Jimador
Mexican Restaurants,” said Michelle Garvey, director of the division’s Columbia office.
“Many of them worked long hours, often averaging 60 hours a week, but earned far
below the minimum wage and no overtime compensation.”
In addition to paying the back wages owed, the restaurants have also agreed to maintain
future compliance with the FLSA by signing a Stipulation of Compliance with the DOL.
The WHD’s investigations were conducted under a multiyear enforcement initiative
focused on the restaurant industry in South Carolina, where widespread noncompliance
with the FLSA’s minimum wage, overtime and recordkeeping provisions has been found.
Since fiscal year 2012, the WHD’s Columbia District Office has concluded more than
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130 restaurant investigations, resulting in the recovery of more than $1,580,000 in back
wages for more than 1,630 workers, the agency said.
Albuquerque health care provider agrees to change FMLA policies after WHD
investigation finds violations
Presbyterian Healthcare Services in Albuquerque, one of the largest health care providers
in New Mexico, has agreed to make corrections to its Family and Medical Leave Act
policies and practices following an investigation by the DOL’s Wage and Hour Division
(WHD) that found several FMLA violations affecting more than 9,600 employees. The
violations included wrongful denial of leave to nearly a dozen eligible employees and
improperly requesting more information than permitted under law, according to a WHD
statement.
The terms of the settlement agreement resolving the alleged violations include
requirements that Presbyterian make corrections to the wrongful denials and provide
FMLA leave benefits to future eligible employees; supply FMLA training to managers;
update its policy regarding normal call-in procedures when employees need FMLA leave;
give proper advance notice of fitness-for-duty medical certification requests for
employees to return to work; and eliminate the annual automatic renewal of medical
certification without a leave request from the employee.
“The FMLA gives eligible employees the ability to help balance the demands from work
and family that we all face without the worry of being fired or disciplined for taking
FMLA leave,” said Cynthia Watson, WHD regional administrator in the Southwest.
“This agreement will impact thousands of families in New Mexico by ensuring
employers will comply with the protections and benefits afforded to them under the
FMLA.”
T.G.I. Fridays makes compliance adjustment to FMLA leave policy following WHD
investigation
T.G.I. Fridays, a subsidiary of Minnesota-based Carlson, has agreed to change its leave
policy in order to achieve FMLA compliance, according to an announcement on August 7
by the DOL’s Wage and Hour Division (WHD). The move affects employees at 272
company-owned locations. Fridays will also correct FMLA violations found during an
investigation of one of its restaurants in Shreveport, Louisiana, and pay an employee
$1,455 in back wages.
A WHD investigation found the company had violated the FMLA by failing to reinstate
the employee to the same or an equivalent position, including pay, benefits and other
terms of employment, and that the worker was not allowed to return to work immediately
following FMLA-covered leave. The employee lost three weeks’ pay due to the delay.
The company’s FMLA policy and worker rights notification practices were also
inconsistent with federal law, according to the WHD. The policy did not include
information on the FMLA’s military family leave provisions, information on the right to
take FMLA-covered leave on an intermittent or reduced-schedule basis, and it misstated
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the 12-month employment requirement for FMLA eligibility as being 12 continuous
months, the agency said.
“Workers should not have to choose between their job and the family members who need
their care,” said Laura Fortman, principal deputy administrator for the WHD. “Ensuring a
work-life balance is the cornerstone of the Family and Medical Leave Act, which has
been the law of the land for 20 years. It gives America’s workers the right to take unpaid,
job-protected leave to care for themselves or a loved one. As we move into its third
decade, we are more dedicated than ever to enforcing the law when necessary to protect
workers, yet continue to offer assistance to those employers who need help to come into
compliance.”
$124,239 in back wages paid to workers for FLSA overtime violations at military
and protective gear manufacturer
The DOL’s Wage and Hour Division (WHD) has recovered $124,239 in back wages for
79 current and former workers at Tyr Tactical LLC, a military and protective gear
manufacturer, after an agency investigation found the company in violation of FLSA
overtime provisions.
Investigators from the WHD’s Phoenix District Office found that the employer paid
hourly workers straight time wages for all hours worked without any overtime premium
for hours worked beyond 40 per week, as required by the FLSA, according to an agency
release on August 8.
The company has agreed to comply with all provisions of the FLSA and has paid the
back wages to the workers.
“These low-wage employees often worked an average of 60 hours per week, and this
violation made a significant dent in their paychecks,” said Eric Murray, director of the
WHD’s Phoenix District Office. “Protecting and securing employees’ basic workplace
rights under the FLSA are central to what we do at the department. It is always a good
outcome when an employer takes immediate action to come into compliance and pay
back wages.”
The violation in this case could have been avoided had the employer had done its
homework, according to Murray. He recommended that employers either check with the
WHD website or call its local office when they are contemplating major wage and hour
policy decisions.
Secretary takes action to implement Supreme Court’s DOMA decision
By Pamela Wolf, J.D.
Secretary of Labor Thomas Perez has moved to implement the Supreme Court’s ruling in
United States v. Windsor that struck down as unconstitutional Section 3 of the Defense of
Marriage Act, which had denied federal benefits to legally married, same-sex couples. As
a result of that ruling, federal laws will now apply equally to legally married, same-sex
couples in addition to opposite-sex couples.
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However, a DOL spokesperson clarified to Employment Law Daily that at this point no
regulatory guidance has been issued; rather, internal direction has been given to DOL
staff regarding the impact of the Windsor decision. The DOL’s Wage and Hour Division
has also updated the language of some of its sub-regulatory guidance interpreting the
Family and Medical Leave Act’s application to covered private-sector employers.
On Friday, August 9, Perez sent an email to DOL staff outlining action being taken “to
implement this ruling as swiftly and smoothly as possible.” The Secretary wrote, “I have
directed Agency Heads within the Department to look for every opportunity to ensure
that we are implementing this decision in a way that provides the maximum protection
for workers and their families.”
Perez also noted that the DOL has updated several guidance documents to remove
references to DOMA and “to affirm the availability of spousal leave based on same-sex
marriages under the Family and Medical Leave Act (FMLA).”
The Wage and Hour Division’s FMLA regulations define “spouse” as a husband or wife
as defined or recognized under state law for purposes of marriage in the state where the
employee resides. Indeed, this definition is now reflected in a fact sheet issued by the
DOL this month, Qualifying Reasons for Leave under the Family and Medical Leave Act
(#28F).
Perez also pointed out that the Office of Personnel Management has announced the
extension of benefits to federal employees and annuitants who have legally married a
spouse of the same sex. “By extending unemployment compensation, health insurance
and other important benefits to federal employees and their families, regardless of
whether they are in same-sex or opposite-sex marriages, the Obama Administration is
making real the promise of this important decision,” Perez wrote.
Michigan heavy equipment company liable for unpaid wages in violation of Davis
Bacon Act and CWHSSA
Beaverton, Michigan, heavy equipment company William J. Lang Land Clearing has
been found liable for $106,897 in back wages to 23 employees as the result of a DOL
Wage and Hour Division (WHD) investigation. The company performed work on six
federally funded road projects in Michigan. A DOL administrative law judge issued a
decision and ordered the company to pay the back wages that a federal district court and
the Sixth Circuit Court of Appeals had previously determined were owed to employees,
according to an August 13 Wage and Hour statement.
The WHD’s investigation found that William J. Lang Land Clearing misclassified powerequipment operators so that they were paid less than the required prevailing wages and
fringe benefits for work on a federally funded project for the Michigan Department of
Transportation (MDOT) — a violation of the Davis-Bacon and Related Acts and the
Contract Work Hours and Safety Standards Act (CWHSSA). Because the company failed
to pay the correct prevailing wage rate, overtime compensation was also calculated
inaccurately in violation of the CWHSSA.
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The WHD said the company also improperly took credit toward its fringe benefits
requirement by averaging its employee health insurance costs on an annual basis. The
DOL filed an order of reference against the company after the case failed to settle
administratively.
The MDOT, the contracting agency, has released $84,095 for payment of back wages due
that it withheld from payments to the employer during the course of the litigation,
according to the WHD. William J. Lang Land Clearing has paid the additional wages
owed of $22,802.
Under the Davis-Bacon Act, all contractors and subcontractors performing work on
federal and certain federally funded projects must pay their laborers and mechanics the
proper prevailing wage rates and fringe benefits as determined by the Secretary of Labor.
On a Davis-Bacon Act covered project, the prime contractor is responsible for the
compliance of all subcontractors.
The CWHSSA applies to federal service contracts and federal and federally assisted
construction contracts of more than $100,000. It requires contractors and subcontractors
on covered contracts to pay laborers and mechanics employed in the performance of the
contracts one and one-half times their basic rate of pay for all hours worked over 40 in a
workweek.
Company pays back wages to agricultural workers, civil money penalties after
WHD finds H-2A program violations
The DOL’s Wage and Hour Division (WHD) announced on August 14 that Adams Land
and Cattle Co., a major cattle research and development facility and feeding operation,
has paid $127,615 for back wages owed to 68 agricultural workers employed at the
company’s Broken Bow cattle feed lot after an investigation disclosed violations of H-2A
temporary agricultural program standards. The company has also paid $101,600 in civil
money penalties for violations.
Adams Land and Cattle employed Mexican nationals under the H-2A program. The
investigation found multiple program violations, including unlawful rejection of U.S.
applicant workers, preferential treatment of H-2A workers, failing to reimburse
transportation costs, and not paying the required wage rate. The company also did not
properly record hours worked, took illegal deductions from wages, and failed to provide
all workers a copy of their work contracts, according to the WHD. Nor did the company
notify the DOL in writing of employment separation of H-2A workers as required.
At this time, the company has ceased using H-2A workers at its facilities, the agency
said. As a result of the investigation, 29 U.S. workers were paid H-2A back wages of
$31,758.17 after it was determined they were paid less than the H-2A workers for
corresponding job assignments.
“Employers who choose to participate in the voluntary H-2A program must realize they
are required to follow all of the labor standards of the program,” said Michael Staebell,
district director of the Wage and Hour Division in Des Moines. “When that same
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employer certifies that he cannot find enough U.S. workers to work in his business, he
must also assume the responsibility of learning the specifics of this program.”
Agency files suit against company it claims is repeat offender for FLSA violations
The DOL announced earlier this week that it filed a lawsuit in the Northern District of
Texas against NB Wholesale Inc., dba Silver Star Imports, and five individuals, in an
effort to recover unpaid minimum wages and overtime pay, liquidated damages and civil
money penalties for FLSA violations. The DOL is also seeking injunctive relief.
The lawsuit was filed after a Wage and Hour Division (WHD) investigation found that
the company failed to pay current and former cashiers, stockers, and delivery workers in
compliance with the FLSA. The majority of grocery staff and delivery drivers, who
worked up to six days a week and averaged more than 53 hours a week, were paid a fixed
salary for all hours worked, according to investigators. These employees were not paid
time and one-half their regular rate, as required by the FLSA, for hours over 40 in a
workweek. In some cases, employees’ earnings purportedly fell below the minimum
wage rate of $7.25 per hour.
The WHD said that investigations conducted 2012 and 2013 found that the company paid
workers on a weekly salary that was often insufficient to cover the minimum wage for all
their hours of work. The company did not pay overtime for hours worked over 40 in a
workweek and did not maintain records of employees’ hours and pay, according to those
investigations.
“Silver Star Imports has been investigated before, and the employers have continued to
deliberately disregard the most basic requirements of the FLSA,” said Cynthia Watson,
the WHD’s regional administrator in the Southwest. “Despite the company’s agreement
in 2012 to pay back wages and comply with the overtime, minimum wage and
recordkeeping requirements, no payments have been made to employees. We have seen
no changes in its unlawful pay practices.”
Compliance effort targeting hotel and motel industry nets two more settlements
By Pamela Wolf, J.D.
The DOL’s Wage and Hour Division (WHD) this week announced separate settlements
with hotels in Denver and Ohio after investigations found FLSA minimum wage and
overtime violations, in one case as a result of worker misclassification as independent
contractors.
The hotel and motel industry employs many low-wage workers who, due to a lack of
knowledge of the law or an unwillingness to exercise their rights, are vulnerable to
disparate treatment and labor violations, according to the WHD. The agency has
expressed concern over the severity of noncompliance in this industry and is
concentrating its resources on identifying and remedying violations, informing workers
of their rights and providing compliance assistance to employers.
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The WHD also has found that staffing agencies frequently provide workers for a variety
of jobs in the hotel and motel industry, including housekeeping, food service, and
janitorial services, and sometimes misclassify these employees as independent
contractors. The agency is documenting the structure and complexity of these
employment relationships to determine which of these structures is most likely to enable
violations so that it can target enforcement efforts accordingly.
Grand Hyatt Denver. In a release on August 13, the WHD said that 1750 Welton Street
Investors LLC, dba Grand Hyatt Denver, and Xclusive Staffing of Denver, have paid a
combined total of $55,691 in minimum wage and overtime back wages to 52 employees
after an investigation found FLSA minimum wage, overtime, and recordkeeping
violations. Xclusive Staffing provided temporary employees to work as room attendants
at the Grand Hyatt Denver. In addition to the back wages due, the WHD also assessed
civil money penalties totaling $7,920 for the Grand Hyatt and $3,520 for Xclusive
Staffing.
Investigators found that the employers failed to pay employees for time spent working
prior to and after their scheduled shifts. Housekeeping staff arrived early to prepare their
carts and stayed late to finish cleaning a required number of rooms, without the extra time
recorded or paid, the WHD said. These unpaid work hours resulted in both minimum
wage and overtime violations. The employers also failed to pay employees for working
through meal breaks and automatically deducted break time, regardless of whether breaks
were taken, according to the agency. Recordkeeping violations were also cited for the
employers’ failure to keep accurate records of hours worked by employees.
1750 Welton Street Investors LLC is a subsidiary of UBS Realty Investors LLC; their
Grand Hyatt Denver property is managed by Chicago-based Hyatt Corp., which manages,
owns, franchises and develops Hyatt-brand hotels and vacation properties worldwide.
Xclusive Staffing Inc. was also recently found in violation of the FLSA during an
investigation of the Gaylord Texan Resort and Convention Center in Grapevine, Texas,
the WHD said.
In this case, both companies have agreed to comply with the FLSA in the future. The
back wages and penalties have been paid in full, according to the WHD.
Midwest Lodging LLC. In a separate development, Midwest Lodging LLC will pay 67
workers a total of $47,654 in back wages following a WHD investigation that found the
company used temporary staffing agencies to obtain workers for its hotel facilities, who
were then misclassified as independent contractors. The workers were thus denied proper
compensation for all hours worked in violation of FLSA minimum wage, overtime, and
recordkeeping provisions.
Midwest Lodging used Luxor Services Inc., Bahor Inc., and BA Cobalt Cleaning Inc., to
obtain temporary workers. The WHD analyzed the employment relationship between the
companies and determined that the affected employees, who worked as housekeepers,
laundry workers, and front desk clerks at various Midwest Lodging-operated area hotels
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under the supervision of its managers, were jointly employed by Midwest Lodging and
the temporary staffing agencies. The employers are therefore considered jointly
responsible for FLSA compliance. The WHD also found that Midwest Lodging LLC
failed to pay overtime to workers directly employed by the company at its hotels.
Specifically, the agency’s investigation found that the employees of the staffing agencies
were misclassified as independent contractors and were denied proper compensation
under the FLSA. Many of these employees were not paid overtime premiums at time and
one-half their regular rates of pay for hours worked beyond 40 in a workweek; they were
also not paid for short breaks as required by the FLSA. Additionally, some hourly
staffing agency workers who were employed in housekeeping and guest services did not
receive minimum wage and were paid as little as $7 per hour, the WHD said. The staffing
company also failed to keep accurate records of hours worked, employees’ names, and
contact information.
Midwest Lodging LLC operates the following Ohio hotels: Holiday Inn Express and
Suites, Mason; Holiday Inn Express, Sharonville; Holiday Inn and Suites, Blue Ash; and
Holiday Inn Hotel and Suites in Lima. The hotels are franchise establishments of
InterContinental Hotels Group.
According to the WHD, the hotel operator has signed an enhanced compliance agreement
that includes paying back wages to the employees of the staffing agencies that have
ceased operation, creating an employee handbook that details wage-specific information,
maintaining accurate payroll records, issuing payroll checks with detailed wage
statements, and ensuring that any workers supplied by a contracting agency are paid in
accordance with the FLSA.
Companies: 1750 Welton Street Investors LLC; Grand Hyatt Denver; Xclusive Staffing
of Denver; Midwest Lodging LLC; Luxor Services Inc.; Bahor Inc.; BA Cobalt Cleaning
Inc.
DOL used FLSA “hot goods objection” to coerce berry growers into consent to
judgments before harvests spoiled, suit alleges
By Pamela Wolf, J.D.
Two Oregon blueberry growers have filed a lawsuit against the U.S. Department of Labor
asserting that the federal agency, via a “hot goods objection” for purported FLSA
violations, coerced them into consent judgments so that hundreds of thousands of pounds
of highly perishable picked blueberries would not rot in storage while the dispute with the
agency was being resolved.
Coercive demands to enter consent judgments. At Pan-American Berry Growers,
LLC, the DOL conducted an investigation and reportedly found that two piece rate
pickers were using the same ticket, according to a complaint filed on August 15. Without
providing more detail of the alleged violation or a summary of its investigation, the DOL
District Director allegedly notified both the grower and the purchaser that it was lodging
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an FLSA “hot goods objection” that would prevent shipment of the berries until the cited
violation was resolved.
At the time, Pan-American allegedly had 400,000 pounds of picked blueberries in storage
and under contract for sale. To avoid the risk that further harvest would rot, the grower
suspended picking operations that would have harvested 30,000 to 50,000 pounds of
berries per day, according to the complaint.
The DOL allegedly refused to permit shipment of the berries until Pan-American agreed
to sign a consent to judgment under which it would pay nearly $50,000 in damages and
penalties, despite the grower’s assurances regarding the corrective measures it was
implementing. The DOL also purportedly refused to negotiate the substantive terms of
the judgment other than as to two minor modifications.
Ultimately, because the harvested berries were already in storage and in the chain of
distribution, Pan-American signed the consent to judgment that, in addition to requiring
that it pay the monetary amount, also included injunctive relief, and waived service of
process, an answer and any defense to the complaint, further findings of fact and
conclusions of law, and the grower’s right to a hearing before an administrative law judge
on the assessed civil money penalties.
B&G Ditchen, LLC, suffered a similar scenario, according to the complaint, when
investigators arrived unannounced for an FLSA compliance check. Without telling the
B&G Ditchen’s owners what violations were found, the DOL District Director placed a
verbal “hot goods objection” and even in his written notice only cited “apparent
violations,” the complaint said. The grower’s customers were contacted, and the growers
were barred from shipping harvested blueberries until they signed a consent to judgment.
At the time, B&G Ditchen had a million pounds of picked berries in storage that could
perish. The estimated value of berries in storage and halted in the distribution chain was
$1.5 million, the complaint asserts. The DOL purportedly told the grower’s attorney that
there were suspected violations of multiple pickers using the same ticket. Although a
spreadsheet was provided with a brief description of penalties assessed, the DOL
allegedly declined to provide a written explanation regarding the calculation of penalties.
Even though B&G Ditchen tendered a check for the assessed penalties, which amounted
to almost $170,000, the DOL refused to lift the “hot goods objection” despite purported
prior assurances to the contrary. Like Pan-American, B&G Ditchen was required to enter
into a consent to judgment under which it admitted to FLSA violations, consented to
penalties, and waived all rights to contest the DOL’s findings or pursue an appeal, all
before the “hot goods objection” was removed. They did so because it was the only way
to save their highly perishable harvest before it rotted, the complaint asserts.
Relief sought. Both growers are seeking rescission of the consents to judgment and
reimbursement of the amounts paid under them, declaratory judgment that the DOL’s
application of the FLSA “hot goods objection” provision to growers of perishable goods
is unconstitutional, a declaratory judgment that the consent to judgment provided to the
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growers was unconstitutional because it deprived them of due process, and reasonable
attorneys’ fees.
Companies: Pan-American Berry Growers, LLC; B&G Ditchen, LLC
Attorneys: Timothy J. Bernasek (Dunn Carney Allen Higgins & Tongue LLP) for PanAmerican Berry Growers, LLC and B&G Ditchen, LLC.
Florida electrical contractor to pay back wages to 59 workers for FLSA overtime
violations
The DOL’s Wage and Hour Division (WHD) announced on August 20 that C&B
Electrical Contractors of Florida Inc. has agreed to pay $124,638 in back wages to 59
workers after an agency investigation found FLSA overtime and record-keeping
provisions.
Investigators from the Jacksonville District Office determined that the company failed to
pay overtime to employees working more than 40 hours in a workweek. The firm paid
employees on a piece rate, which the WHD said is permissible under the FLSA, but one
and one-half times their regular rate of pay for all hours worked over 40 is nonetheless
still required. The employer also failed to maintain accurate records of hours worked and
payments made to its employees, according to the investigation.
In addition to paying the back wages, C&B Electrical Contractors, which provides
residential, new construction, warranty and service electrical work throughout Central
Florida, also agreed to comply with FLSA overtime requirements, and to keep accurate
time and payroll records. The employer also decided to simplify its pay practices by
setting an hourly rate for all employees.
Michigan farming operation, owners sued for agricultural housing, FLSA minimum
wage violations
The DOL announced on August 21 that it has filed a lawsuit against Grossnickle Farms
in Manistee County, Michigan and its two owners, following an investigation by
agency’s Wage and Hour Division (WHD). The complaint asserts violations of the
Migrant and Seasonal Agricultural Worker Protection Act (MSPA) and the FLSA’s
minimum wage and recordkeeping provisions.
WHD investigators concluded that since at least May 1, 2012, Grossnickle Farms has
failed to maintain its migrant agricultural housing facilities in accordance with the
MSPA. Inspections of the housing facilities revealed evidence of several safety and
health standards violations, including failing to maintain toilets in a sanitary condition
and to clean them daily, not providing an adequate supply of hot water for bathing and
laundry, and failing to ensure all camp shelters provided protection from the elements and
that all exterior openings were effectively screened with mesh material. Additionally,
floors in the laundry and shower facilities were purportedly not constructed of nonslip
material, and leaking water caused rotting wood and a slipping hazard.
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The farming operator also violated the FLSA by paying many employees’ wages at rates
less than $7.25 per hour, the DOL asserts. The violations were the result, in part, of
defendants misclassifying employees as independent contractors and paying employees
on a piece rate basis which, in some workweeks, was less than the minimum wage per
hour. Investigators also found that the employers failed to maintain required records of
employees’ names, wages and work hours, as required by the FLSA.
Grossnickle Farms, which grows strawberries, asparagus and cucumbers, utilized 49
migrant and seasonal farm workers during the 2012 cucumber harvest, according to the
DOL. The migrant agricultural workers were mainly from Texas and Florida. The
agency’s lawsuit seeks to recover unpaid minimum wages owed to the affected
employees and requests the court to permanently enjoin the defendants from violating the
FLSA and MSPA in the future.
“Allowing migrant workers to live in unsanitary facilities without sufficient hot water for
bathing and laundry signals a lack of regard for the workers and puts their health and
safety at risk,” said WHD District Director Mary O’Rourke. “The department will use
every enforcement tool available to ensure compliance with safety and health standards.”
Dunkin Donuts franchise operator made deductions from store managers’ pay;
because they no longer were paid on salary basis, became entitled to overtime
Edison, New Jersey-based QSR Management LLC, the operator of 55 Dunkin Donuts
franchise locations throughout New Jersey and Staten Island, New York, will pay
$197,787 in back wages owed to 64 employees after a DOL Wage and Hour Division
(WHD) investigation found FLSA minimum wage and overtime violation.
Investigators from the WHD’s Southern New Jersey district office found the company
did not pay overtime to store managers as required by the FLSA. QSR incorrectly
claimed that their managers at all 55 locations were exempt from overtime; as a result of
these violations, 56 non-exempt store managers will be paid a total of $197,550 in back
wages, according to the WHD. Management at two locations also took tips from
customer service workers to cover register shortages, which resulted in minimum wage
violations of $237 for eight employees.
Specifically, WHD investigators found that QSR treated store managers as exempt from
the overtime requirements and argued that these managers were salaried. But the
company actually treated them as hourly employees, reducing their pay when they
worked less than 60 hours in a week. Although the FLSA allows an overtime exemption
for management employees who perform certain job duties, the exemption only applies if
they receive a guaranteed weekly salary of at least $455. Though these managers
performed the duties required for the exemption, the company did not pay them a
guaranteed weekly salary in all workweeks; thus, store managers were entitled to
overtime pay for hours worked in excess of 40 in a workweek.
QSR has assured compliance with the FLSA and has agreed to pay all back wages,
according to the WHD. As part of its commitment to future compliance, the company has
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changed its employee handbook to reflect its intent to properly apply any valid
exemptions, and to no longer allow management to take tips from employees.
Suit asserts mechanics, parts department staff were improperly classified as
overtime exempt
The DOL filed a lawsuit in federal court against Phil’s Sales and Service LLC and two
shareholders after an investigation by its Wage and Hour Division (WHD) found
evidence of FLSA overtime violations. The federal agency is looking to recover unpaid
overtime compensation and an equal amount in liquidated damages for nine employees,
as well as a permanent injunction against future FLSA violations.
Investigators from WHD’s Columbus district office determined that the defendants failed
to compensate nine employees working as mechanics and/or parts department staff at
time and one-half their regular rates for hours worked more than 40 in a work week as
required by the FLSA. To date, the company has paid one employee, an administrative
assistant, the back wages due.
Phil’s Sales and Service, which sells and services lawn and yard equipment such as
mowers, tractors and chain saws, contends that the employees are exempt from overtime
under a FLSA exemption for sales and servicing of farm implements. This exemption,
however, does not apply when the establishment is primarily engaged in the sales of lawn
and garden equipment used by homeowners and similar consumers, the WHD said.
The DOL filed its lawsuit in the Northern District of Ohio; the case number is 4:13-cv01876-BYP.
S.D. Ohio judge finds cable installers misclassified as independent contractors,
awards $1,474,266 in back wages, damages
According to a Department of Labor news release August 29, 2013, a federal district
court in Ohio has found approximately 250 cable installers who worked for Cascom Inc.
to be employees covered by the FLSA, rather than independent contractors. Accordingly,
the Fairfield, Ohio, company was found liable for $737,133 in back wages and an equal
amount in liquidated damages, which can be collected both from the company and its
owner. The company has ceased operations, said the DOL, so the department will seek to
collect from the owner as well.
The findings of fact were issued following a damages hearing in a lawsuit filed by the
agency in 2009, after an investigation conducted by the department’s Wage and Hour
Division. The court had ruled in September 2011 that Cascom Inc. and its owner violated
the FLSA by failing to compensate employees for hours worked in excess of 40 per work
week because they were misclassified as independent contractors.
“The findings in this case bring justice to workers and their families by providing them
with their rightfully earned wages,” said Secretary of Labor Thomas E. Perez. “Cascom’s
business model also hurt law-abiding employers, who were undercut by this illegal
practice. The Labor Department is committed to ensuring compliance to protect middleclass workers and to level the playing field for responsible employers.”
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The agency’s suit (Solis v. Cascom Inc.) was heard in the U.S. District Court, Southern
District of Ohio; the case number is 3:09-cv-00257.
San Francisco Giants pay $544,715 in back wages, liquidated damages for FLSA
violations
The DOL announced on Thursday, August 29, that the San Francisco Giants baseball
team has paid $544,715 in back wages and liquidated damages to 74 employees
following an agency investigation that determined the Major League Baseball club had
failed to properly pay the workers over a three-year period. The DOL and MLB are now
working to ensure that all teams are aware of and adhere to FLSA requirements.
Investigators from the DOL’s Wage and Hour Division (WHD) found FLSA minimum
wage, overtime pay, and recordkeeping violations that affected a range of employees in
the organization at the major and minor league levels, including clubhouse assistants and
managers, the DOL said. San Francisco Baseball Associates LLC, the club’s ownership
group, has entered into an agreement with the Labor Department to ensure continued and
future FLSA compliance.
During the investigation, WHD determined that clubhouse employees were working
more hours than were recorded under an employment agreement required by the club,
which established a flat rate of pay of $55 for working 5.5 hours per day. However, the
employees actually worked an average of 12 to 15 hours daily and received less than the
hourly federal minimum wage of $7.25, the WHD found; they were also not paid
overtime for hours exceeding 40 in a workweek.
Moreover, the club had improperly classified a number of employees as exempt from
overtime pay, including clubhouse managers at the major and minor league levels, and
video operators at the team’s major and minor league affiliates, the WHD said. The nonexempt employees were paid a straight salary and no overtime premium, as required
based on their job duties. The investigation also revealed that the club had failed to pay
overtime or incorrectly calculated overtime pay for administrative staff participating in
the Giants’ bonus program.
“We are pleased that the Giants addressed this matter, and it is our hope that other Major
League Baseball teams will take a close look at their pay practices to ensure they are in
compliance with the law,” said Laura Fortman, principal deputy administrator of the
Wage and Hour Division. “MLB has agreed to work collaboratively with the department
to ensure all MLB teams are in compliance with the FLSA.”
According to Susana Blanco, director of the San Francisco WHD’s District Office, the
case underscores the importance of wage protections: “I am encouraged that the Giants
acted to resolve this issue, but it was disappointing to learn that clubhouse workers
providing services to high-paid sports stars weren’t making enough to meet the basic
requirements of minimum-wage law.”
Effective date of 2011 H-2B Wage Rule indefinitely delayed
By Pamela Wolf, J.D.
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The DOL’s Employment and Training Administration (ETA) has issued a final rule
indefinitely delaying the effective date of the embattled Wage Methodology for the
Temporary Non-agricultural Employment H-2B Program final rule (2011 Wage Rule),
according to a notice slated for publication in the Federal Register on August 30.
The for the indefinite delay is to comply with recurrent legislation barring the DOL from
using any funds to implement it and to allow the agency to consider further comments
sought in conjunction with an interim final rule published April 24, 2013 (78 FR 24047).
The 2011 Wage Rule revised the methodology by which the DOL calculates the
prevailing wages to be paid to H-2B workers and U.S. workers recruited in connection
with a temporary labor certification for use in petitioning the Department of Homeland
Security to employ a nonimmigrant worker in H-2B status. The 2011 Wage Rule was
originally scheduled to become effective on January 1, 2012, and the effective date has
been extended a number of times, most recently to October 1, 2013. If the 2011 Wage
Rule is later implemented, the DOL will publish a document in the Federal Register
establishing a new date.
The April 24 interim final rule was issued in response to a March 21 order by a federal
district court in Pennsylvania in Comité de Apoyo a los Trabajadores Agricolas v Soli,
which vacated portions of DOL’s current prevailing wage rate regulation, and to ensure
there is no question that the rule is effective nationwide in light of other outstanding
litigation. The rule also contains revisions to DHS’ H-2B rule to clarify that DHS is the
Executive Branch agency charged with making determinations regarding eligibility for
H-2B classification after consulting with DOL for its advice about matters with which
DOL has expertise, particularly, in this case, questions about the methodology for setting
the prevailing wage in the H-2B program.
LEADING CASE NEWS:
1st Cir.: Dismissal of “hospital compensation” case vacated on appeal; complaint
allegations found sufficient
By Ronald Miller, J.D.
The First Circuit vacated a district court dismissal of a “hospital compensation” case after
finding that the complaint allegations were sufficient to survive a hospital’s motion to
dismiss (Manning v Boston Medical Center Corp, August 1, 2013, Lipez, K). In a suit
seeking class and collective certification for claims that a hospital system failed to
compensate employees by making automatic deductions for meal breaks and for work
performed during pre- and post-shift periods, as well as mandatory training sessions, the
appeals court found that the essence of the plaintiffs’ complaint contained sufficient
factual allegations to make their entitlement to relief plausible.
Employees of Boston Medical Center alleged that the hospital deprived them of their
wages through the use of timekeeping policies and employment practices that required
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them to work through their meal and rest periods, put in extra work time before and after
regularly scheduled shifts, and attend mandatory training sessions. The employees sought
recovery under the FLSA and Massachusetts common law. They also sought certification
of their wage claims as an FLSA collective action and a Rule 23 class action. In response,
the hospital moved to dismiss both the federal and state claims and to strike the
employees’ class and collective action allegations. The district court granted the
hospital’s motion in its entirety. The employees appealed.
Insufficient complaints. The district court held that the employees’ amended complaint
failed to remedy problems identified by the court in their original complaints.
Specifically, it contained no factual matter indicating that the employer had a concrete
policy in place that required employees to work through their meal and rest breaks,
before and after hours, or during their training periods. Moreover, even assuming that
such a policy existed, the complaint failed to demonstrate that any of the employer’s
managers or supervisors had knowledge of the employees’ unpaid work. For related
reasons, the court granted the defendants’ motion to strike the class and collective action
allegations. Finally, the district court denied the employees leave to file a second
amended complaint, noting that plaintiffs’ counsel had filed other hospital compensation
cases using “substantially identical” complaints to the one at issue in this case, and other
district courts had routinely dismissed such complaints as insufficiently pled.
However, the First Circuit vacated the dismissal of the FLSA claims against Boston
Medical, as well as the Massachusetts common law claims. It also vacated the striking of
the employee’s class and collective action allegations. This action was filed against a
health care system that operated related organizations in the Boston area. The plaintiffs
worked in various capacities at several locations and sought to represent 4,000 hourly
workers of Boston Medical, including a broad range of positions. The crux of the
employees’ complaint was that Boston Medical did not properly compensate employees
for the time spent working during their regular scheduled breaks, as well as time spent
before and after scheduled shifts. The employees alleged that they were not allowed to
record all their work performed. Additionally, employees were not paid for time spent in
required training sessions.
FLSA allegations. The First Circuit assesses the sufficiency of a complaint’s factual
allegations in two steps. First, conclusory allegations that merely parrot the relevant legal
standard are disregarded, as they are not entitled to the presumption of truth. Second, the
court accepts the remaining factual allegations as true and decides if, drawing all
reasonable inferences in plaintiffs’ favor, they are sufficient to show entitlement to relief.
The basic elements of a FLSA claim are that (1) plaintiffs must be employed by the
defendants; (2) the work involved interstate activity; and, (3) plaintiffs “performed work
for which they were under-compensated.”
Actual or constructive knowledge. In this case, the defendants assailed the employees’
pleading as vague about a number of points, such as the identities and roles of managers
with whom the employees spoke and the frequency of those interactions. However, the
appeals court noted that Rule 8 does not demand this degree of particularity. Boiled down
to its essence, plaintiffs' claim is that the intersection of several employment practices
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frequently required them to work through their scheduled breaks, before and after work
hours, and during training sessions. Here, the defendants suffered and permitted this work
to take place, knew that their automatic timekeeping would deduct certain categories of
noncompensable time from employees’ paychecks, yet did nothing to account for this
extra time actually worked. These facts were sufficient to establish a plausible inference
of the defendants’ knowledge.
Compensable work. Next, the appeals court concluded that while some of the complaint
allegations straddled the line between the conclusory and factual, the pleading contained
enough substantive content to elevate the FLSA claims above the mere possibility of
defendants’ liability. Because of short staffing, employees must frequently complete their
regular working activities during their meal breaks and before and after their scheduled
shifts. The work they performed during these times was indistinguishable from the work
performed during the employees’ regularly scheduled hours. The fact that this assertion
was not accompanied by a detailed list of each and every activity performed by the
plaintiffs did not mandate dismissal.
Overtime worked. The parties also debated whether the complaint properly alleged that
each individually named plaintiff worked more than 40 hours in a given workweek. Here,
the First Circuit rejected the defendants’ contention that the complaint was “strikingly
similar” to the complaint dismissed by the Second Circuit in Lundy v Catholic Health Sys
of Long Island Inc. In this case, the named plaintiffs actually presented evidence that they
worked 40-hour weeks within the limitations period. Thus, the appeals court concluded
that the named plaintiffs have alleged enough to survive dismissal.
The case numbers are 12-1573 and 12-1653.
Attorneys: Guy A. Talia (Thomas & Soloman) for Elizabeth Manning. C.J. Eaton
(Seyfarth Shaw) for Boston Medical Center.
1st Cir.: Failure to offer medical records to support FMLA claim not “excusable;”
no fraud in defense argument hemorrhoids not “serious health condition”
By Lorene D. Park, J.D.
Finding that an employee “conspicuously failed” to proffer readily available medical
records to support her claim that her hemorrhoids were a “serious health condition” under
the FMLA, and that she could not blame defense counsel when the evidence was not
taken into account by a district court that granted summary judgment to her employer, the
First Circuit affirmed the lower court’s denial of her Rule 60(b) motion for relief from
judgment (Nansamba v North Shore Medical Center, Inc, August 12, 2013, Selya, B).
The technical nursing assistant developed hemorrhoids. She told her manager she needed
time off to have a colonoscopy and the manager agreed. Three days later, she was fired
for performance-related reasons, including patient complaints. The employee filed suit,
alleging that her termination was in retaliation for her hemorrhoids-induced absences and
violated the FMLA and state law. Finding that the employee failed to show she suffered a
66
“serious health condition,” the court granted summary judgment for the employer on the
FMLA claims and declined to exercise jurisdiction over the state law claims.
“New” evidence. The employee moved for reconsideration, alleging her medical records
constituted newly discovered evidence that her hemorrhoids satisfied the definition of a
“serious health condition.” Specifically, in pre-trial discovery, the defendants repeatedly
requested her complete medical records. They first received only records responsive to
her release of a “medical record abstract.” A second release signed by the employee was
broader but excluded photographs, radiation and x-ray reports, and “personal information
not related to treatment.” The records were sent to defense counsel, who forwarded the
records as an attachment to an email to the employee’s attorney, along with a note that
once again the records were not complete.
The employee’s attorney did not look at the attached records but did have the employee
execute a third release. With this release, the defendants obtained more records in, but the
records were not substantially different from what was sent to the employee’s attorney in
the email. Not realizing the records were basically the same, her attorney argued that the
later records were newly discovered evidence. Rejecting this claim, the district court
observed that virtually all the records upon which the employee’s motion for
reconsideration relied had languished in her attorney’s possession.
Rule 60(b) motion. The employee did not timely appeal summary judgment or the denial
of her motion for reconsideration, but later moved for relief from the judgment. She
characterized her attorney’s failure to introduce the earlier records as the product of
excusable neglect or fraud under Rule 60(b). The district court denied the motion. On
appeal, the First Circuit noted that relief under Rule 60(b) is “extraordinary,” and “setting
aside a final judgment requires more than the frenzied brandishing of a cardboard sword.”
Here, the issue was whether the employee established that exceptional circumstances
warranted the extraordinary relief. The appeals court concluded that she did not.
No excusable neglect. The employee argued that relief from judgment was warranted
due to her lawyers’ “excusable neglect.” She admitted they did not open the earlier email
attachment containing her medical records and failed to introduce any of those records to
oppose summary judgment. She claimed, however, that the neglect was excusable
because the wording of defense counsel’s email lulled her legal team into inaction. In the
appellate court’s view, “[t]hat suggestion exalts hope over reason.”
The email at issue complained that the defense had “received part of [the plaintiff’s]
medical record — but, once again, only part of it.” To the court, the argument that her
lawyers believed, based on this, that the records were the same ones first produced (and
thus not worth reviewing) was unpersuasive. The text of the email was silent on the issue.
Thus, the employee relied on her lawyers’ subjective belief that the two productions were
identical. Such unilateral assumptions, without more, were not enough to excuse neglect.
Also cutting against the employee’s position was the fact that her attorneys never sought
clarification of the email she now argued was ambiguous. Moreover, she never offered a
plausible rationale for bringing an FMLA claim but failing to obtain her full medical
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record in order to prosecute it. For these reasons, the district court acted within its
discretion in denying her motion under Rule 60(b)(1).
No fraud. Likewise, the appeals court found no error in the rejection of the employee’s
argument that relief from judgment was appropriate due to fraud, misrepresentation, or
misconduct under Rule 60(b)(3). She pointed to the defendants’ summary judgment
argument that her hemorrhoids were not a “serious health condition,” and claimed this
was “fraudulent” because the defense must have read the earlier medical records (though
her attorneys did not) and thus knowingly made an untrue argument.
Finding the employee’s thesis to be a “house of cards,” the appellate court pointed out
that it is the burden of the nonmoving party (here, the employee) to proffer sufficient
facts to defeat a motion for summary judgment. She was free to counter the defendants’
assertion but she failed to do so, even though her medical records were readily available
to her. That the defense did not scour discovery for facts supporting her position was “not
a badge of fraud,” it was a “prudent refusal to make their adversary’s case for her.”
The same reasoning undermined the employee’s reliance on statements made by defense
counsel at the summary judgment hearing that the employee had “received no medical
treatment” or medication for hemorrhoids since her colonoscopy. Such statements were
properly viewed as counsel’s characterization of the record, particularly since the
employee testified in deposition that she had received neither.
Moreover, the employee failed to show that any misconduct by defense counsel inhibited
her from fully and fairly preparing her case. “The short of it is that the plaintiff, through
her attorneys, had in her possession prior to crafting her opposition to the summary
judgment motion all the medical records that she now claims should have been submitted
to the district court.” Their failure to proffer those records was no one’s fault but their
own. Consequently, the lower court did not abuse its discretion in denying their motion.
The case number is 13-1266.
Attorneys: Godfrey K. Zziwa (Law Office of Godfrey K. Zziwa) and Alanna G. Cline
(Law Office of Alanna G. Cline) for Janat Nansamba. Eugene J. Sullivan, III (Holtz &
Reed) for North Shore Medical Center, Inc.
2ndCir: Second Circuit schools plaintiffs on FLSA pleading requirements;
healthcare employee comes up short
By Lisa Milam-Perez, J.D.
Noting that the adequacy of FLSA complaints against healthcare employers was before it
for a third time in recent months, the Second Circuit rearticulated its pleading standards
in light of Twombly and Iqbal and the spate of similar litigation within the circuit
(DeJesus v HF Management Services, LLC, August 5, 2013, Sack, R). By simply hewing
to the language of the FLSA, the plaintiff in the case at hand came up short, the appeals
court said, affirming dismissal of her federal and state law overtime claims. “Whatever
the precise level of specificity that was required of the complaint,” the court said, the
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plaintiff “at least was required to do more than repeat the language of the statute.”
Contrary to the district court, however, the Second Circuit found the employee
sufficiently alleged that she was an “employee” within the meaning of the Act, a hollow
victory, however, in light of its other holding.
Overtime suit. The plaintiff worked as a promoter for a company that provides support
and administrative services to nonprofit healthcare organizations. Her job involved
promoting the insurance programs offered by the employer and recruiting individuals to
sign up. As a part of her wage agreement, the employee received a commission for each
person she recruited to join the company's programs, in addition to her regular wage. She
filed suit alleging that she was denied overtime pay for those weeks that she worked more
than 40 hours. She also asserted that, during the few weeks where she did receive
overtime pay, the employer failed to include her commission payments in calculating her
overtime rate.
The district court held the employee did not sufficiently allege that she was an
“employee” within the meaning of the FLSA; also, through her “sole allegation” that she
worked more than 40 hours “in some or all weeks,” she failed to make an approximation
of her overtime hours that “would render her claim plausible rather than merely
conceivable.” While the court below dismissed her complaint without prejudice, the
employee chose not to replead. In fact, she disclaimed any intent to amend her complaint,
rendering the non-final order “final” so that she could immediately appeal. (The Second
Circuit looked upon the tactic with disfavor. “We would like to believe that the decision
not to amend was made for some reason that benefitted [the client], rather than as an
effort on counsel's part to obtain a judicial blessing for plaintiffs' counsel in these cases to
employ this sort of bare-bones complaint.”) At any rate, the misstep proved fatal to her
claim. On review, the appeals court agreed that the employee did not plausibly allege that
she worked overtime without being properly paid.
Pleading standards. In those cases in which FLSA pleading standards have been at
issue, the appeals court said, tensions arise between: (1) the difficulty that plaintiffs have
in determining the particulars of their work hours and pay without benefit of access to the
employer’s records; (2) the use by plaintiffs’ lawyers of “standardized, bare bones
complaints against any number of possible defendants about whom they have little or no
evidence of FLSA violations” while engaged in “fishing expeditions” to find a suitable
defendant; and (3) the modern rules of pleading established by the Supreme Court in
Iqbal and Twombly. Specifically, the Second Circuit referenced its March ruling in Lundy
v Catholic Health System of Long Island, Inc and its July opinion in Nakahata v New
York-Presbyterian Healthcare System, Inc.
Federal courts have “diverged somewhat” as to the specificity required to state a
plausible FLSA overtime claim, the court noted. Some courts require an approximation of
the total number of uncompensated hours in a given week, others require no such
estimate but simply an allegation that the plaintiff worked some amount over 40 hours in
a workweek. In Lundy, the Second Circuit formulated its own standard: in order to state a
plausible overtime claim, “a plaintiff must sufficiently allege 40 hours of work in a given
workweek as well as some uncompensated time in excess of the 40 hours.” The appeals
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court did not make an approximation of overtime hours a necessity in all cases; however,
it did advise that an approximation “may help draw a plaintiff's claim closer to
plausibility.” The appeals court revisited the issue in Nakahata, where it found, again,
that the employees did not adequately plead their claims.
In the case at hand, the employee provided even less factual specificity in her pleadings,
the appeals court observed. She did not estimate her hours in any or all weeks or provide
any other factual content. “Indeed, her complaint was devoid of any numbers to consider
beyond those plucked from the statute.” She merely tracked the statutory language of the
FLSA, “lifting its numbers and rehashing its formulation,” but asserting no specific facts
sufficient to raise a plausible inference of an FLSA overtime violation. As such, her
overtime claims were inadequate, held the court.
The Second Circuit in Lundy instructed that plaintiffs must allege they worked unpaid
overtime in a “given” workweek; this was not “an invitation to provide an all-purpose
pleading template alleging overtime in ‘some or all workweeks,’” the court explained.
Rather, the standard was intended for employees to provide “some factual context that
will ‘nudge’ their claim `from conceivable to plausible.’” While the circuit does not
demand that employees keep careful records and plead their overtime hours “with
mathematical precisions,” employees are expected to draw on their own memory and
experience in preparing complaints with sufficiently developed factual allegations.
Employee status. The appeals court disagreed with the court’s finding below, however,
that the plaintiff did not sufficiently allege that she was an “employee” within the
meaning of the FLSA. In her complaint, she stated that she worked for the defendant and
was “employed” by the defendant for about three years as “an hourly employee.” She
also asserted that she was “employed by defendant within the meaning of the FLSA” and
stated the duties she performed in that capacity. She also explained her wage structure.
As such, the plaintiff alleged facts both about her employment status and duties in order
to support the inference that she was an employee within the meaning of the FLSA, the
appeals court found.
Paying heed to the broad interpretation of “employee” set forth in the FLSA, the appeals
court noted that it was a “flexible concept” under the Act. Accordingly, district courts
within the circuit have found that complaints sufficiently allege “employee” status when
they state where the employee worked, outlined his or position, and provided dates of
employment. Here, the plaintiff adequately pled that she was an employee and that the
defendant was her employer under the FLSA, “especially in light of the expansive scope
of the definition employed in the statute.”
The case number is 12-4565.
Attorneys: Abdul Karim Hassan (Law Office of Abdul K. Hassan) for Ramona DeJesus.
Seth Laurence Levine (Levine Lee LLP) and Andrew Marks (Littler Mendelson) for HF
Management Services, LLC.
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2nd Cir.: Removal of economic incentive to pursue wage claims individually in
arbitration not basis for invaliding class action waiver
By Ronald Miller, J.D.
In light of the Supreme Court’s ruling in American Express Co v Italian Colors
Restaurant, the Second Circuit concluded that an employee cannot invalidate a class
action waiver provision in an arbitration agreement when the waiver removed the
financial incentive for an employee to pursue her FLSA claim in arbitration (Sutherland v
Ernst & Young LLP, August 9, 2013, per curiam). Because Italian Colors abrogated the
district court’s basis for invaliding the class action waiver provision in this case, the
appeals court concluded that it erred in denying Ernst & Young’s motion to compel
arbitration based on the fact that individual arbitration may be prohibitively expensive.
The plaintiff, an audit employee, brought a putative class action on behalf of herself and
other similarly situated employees to recover “overtime” wages pursuant to the FLSA
and the New York Department of Labor’s Minimum Wage Order. Ernst & Young
compensated the employee on a “salary only” basis, which meant she was paid a fixed
salary, regardless of how many hours she worked—she did not receive any additional
compensation for working overtime. However, the employee alleged that she “regularly
worked in excess of 40 hours in a work week. When the employee accepted her offer of
employment with Ernst & Young, she signed an offer letter which stated that “if an
employment related dispute arises between you and the firm, it will be subject to
mandatory mediation/arbitration under the terms of the firm’s alternative dispute
resolution program.”
Effective vindication. Despite the arbitration agreement’s bar against both civil lawsuits
and “any class or collective proceedings in arbitration,” the employee filed this putative
class action to recover unpaid overtime wages. According to the employee, Ernst &
Young wrongfully classified her as “exempt” from the overtime requirements of the
FLSA and New York Labor Law (NYLL). After she filed her putative class action, Ernst
& Young filed a motion to dismiss or stay the proceedings, and to compel arbitration of
her claims on an individual basis in accordance with the arbitration agreement. In
response, the employee argued that the entire provision requiring individual arbitration
was unenforceable because the costs of prosecuting her claim on an individual basis
prevented her from “effectively vindicating her rights under the FLSA and the NYLL.
The district court was persuaded, relying in large part on the Second Circuit’s analysis in
Amex I. The district court denied the motion to compel because it found that the
underlying class action waiver provision in the arbitration agreement was unenforceable
pursuant to the Second Circuit’s decision in In re American Express Merchants’
Litigation (Amex I), which invalidated a class action waiver provision in an arbitration
agreement.
Reconsideration. Ernst & Young first moved for reconsideration of the district court’s
order following the Supreme Court’s decision in AT&T Mobility LLC v Concepcion, but
that motion was denied. The employer again sought reconsideration of the district court’s
decision following the Supreme Court’s ruling in Italian Colors.
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On reconsideration, the Second Circuit was faced with the question of whether an
employee may invalidate a class action waiver provision in an arbitration agreement
when the waiver removes the financial incentive for her to pursue her FLSA claim. As an
initial matter, the appeals court concluded that the Amex I decision and the decisions that
followed are no longer good law in light of the Supreme Court’s decision in American
Express Co v Italian Colors Restaurant. Italian Colors held that plaintiffs could not
invalidate a waiver of class arbitration under the so-called “effective vindication
doctrine” by showing that “they had no economic incentive to pursue their antitrust
claims individually in arbitration.”
Class arbitration waiver. In Italian Colors, the Supreme Court reminded lower courts to
“rigorously enforce arbitration agreements according to their terms, including the terms
that specify with whom the parties choose to arbitrate their disputes, and the rules under
which that arbitration will be conducted.” Here, the Second Circuit first considered
whether the FLSA contains a “contrary congressional command” barring waivers of class
arbitration. Finding that the FLSA does not preclude the waiver of collective action
claims, the appeals court next analyzed the employee’s argument that she could not
“effectively vindicate” her rights in an individual arbitration, because it would be
“prohibitively expensive.”
Despite the obstacles facing the vindication of the employee’s claims, the Supreme
Court’s decision in Italian Colors compels the conclusion that her class action waiver is
not rendered invalid by virtue of the fact that her claim is not economically worth
pursuing individually. The fact that it is not worth the expense involved in proving a
statutory remedy does not constitute the elimination of the right to pursue that remedy.
Accordingly, the employee’s “effective vindication doctrine” argument was insufficient
to invalidate the class action waiver provision.
The case number is 12-304-cv.
Attorneys: Max Folkenflik (Folkenflik & McGerity) for Stephanie Sutherland. Rex S.
Heinke (Akin Gump Strauss Hauer & Feld) for Ernst & Young.
2nd Cir.: District court acted within discretion in retaining jurisdiction over state
law claims after dismissing RICO claim
By Ronald Miller, J.D.
After dismissing the civil RICO claims brought in several wage and hour class actions
against health care systems, a federal district court did not err by exercising supplemental
jurisdiction over the employees’ remaining state law claims, ruled the Second Circuit
(Gordon v Kaleida Health, August 21, 2013, per curiam). The employees had argued that
the appropriate course of action for the district court was to remand their state law claims
to state court. However, the appeals court concluded that the district court’s decision to
exercise supplemental jurisdiction over the employees’ state law claims in this instance
was a wise exercise of judicial economy, not an abuse of discretion.
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Civil RICO claims. The employees alleged that their employers used a scheme to cheat
them out of their lawful earnings in violation of RICO. In order to state a claim under
civil RICO, a plaintiff must “allege the existence of seven constituent elements: (1) that
the defendant (2) through the commission of two or more acts (3) constituting a ‘pattern’
(4) of ‘racketeering activity’ (5) directly or indirectly invests in, or maintains an interest
in, or participates in (6) an ‘enterprise’ (7) the activities of which affect interstate or
foreign commerce.” The district court dismissed the RICO claim with prejudice.
The Second Circuit noted that it has recently rejected identical RICO claims brought by
the same class action law firm against other health systems. As in those cases, the appeals
again concluded that “the mailing of pay stubs cannot further the fraudulent scheme
because the pay stubs would have revealed (not concealed) that Plaintiffs were not being
paid for all of their alleged compensable overtime.” Thus, the RICO cause of action was
properly dismissed for failure to state a claim.
State law claims. The appeals court also affirmed dismissal of the employees’ state law
claims. Although the court observed that all of the employees’ state law claims might be
preempted under the LMRA, it concluded that the case did not call for a Jacobson remand
for further fact-finding because it affirmed dismissal of the state law claims on other
grounds. Here, the court disagreed with the employees’ contention that once the district
court dismissed their RICO claim, it should have declined to exercise supplemental
jurisdiction over their remaining claims. Rather, the Supreme Court has made it
abundantly clear — in a case that also involved a dismissed RICO claim — that “a
district court’s decision whether to exercise supplement jurisdiction over state-law claims
after dismissing every claim over which it had original jurisdiction is purely
discretionary.”
The employees’ first state law claim was for breach of contract; however, the only clear
allegation in the complaint was that the health systems breached an express and implied
promise to “fulfill all of their obligations pursuant to state and federal law.” However, “a
promise to perform a pre-existing legal obligation does not amount to consideration,”
explained the appeals court. Further, the employees’ claims for breach of implied
covenant of good faith and fair dealing, unjust enrichment, and quantum meruit were
dismissed because they were sufficiently distinct from the breach of contract claim. The
court also rejected the employees’ assertion that their quasi-contract claims may not be
duplicative because there was a credible dispute over whether or not an underlying
employment contract actually existed. Their remaining bald allegations supported no
contractual duty extending beyond the statutory requirements already binding the health
systems. Accordingly, the judgments of the district court were affirmed.
The case numbers are 12-0918 and 12-0654.
Attorneys: Guy A. Talia (Thomas & Solomon) for Catherine Gordon and Gail
Hinterberger. Mark A. Molloy (Nixon Peabody) for Catholic Health Systems, Inc and
Kaleida Health.
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3rd Cir.: FLSA wage claims of bus operators didn’t require interpretation of
collective bargaining agreements; lower court dismissal vacated
By Ronald Miller, J.D.
The Third Circuit has vacated the dismissal of an FLSA collective action filed by
employees of the Southeastern Pennsylvania Transportation Authority (SEPTA), which
the district court dismissed believing it would require the interpretation of collective
bargaining agreements between SEPTA and the unions representing the employees (Bell
v Southeastern Pennsylvania Transportation Authority, August 19, 2013, Barry, M). The
minimum protections of the FLSA provided to individual workers “take precedence over
conflicting provisions in a collectively bargained compensation arrangement,” concluded
the appeals court.
Pre-trip inspections. Bus drivers and trolley operators (operators) employed by SEPTA
sued to recover unpaid wages and overtime pay for work performed during morning “pretrip” inspections required before the start of each operator’s daily run. At the start of each
workday, operators must fulfill two sets of responsibilities: (1) reporting tasks, including
checking with the dispatcher, collecting passenger transfers, checking daily detours and
operating conditions, and determining the location of their vehicles; and (2) pre-trip
vehicle safety inspections. Reporting tasks take approximately ten minutes to complete,
while pre-trip inspections can be completed in about 15 minutes. Although operators
were compensated for performing reporting tasks, that time was not included in the
calculation of overtime. Moreover, the operators contended that inspections were
performed “off the clock.”
In response to the operator’s collective action, and relying on the Third Circuit’s ruling in
Vadino v A Valley Engineers, SEPTA filed a motion for summary judgment on the
ground that the operators’ FLSA claim was dependent on the disputed interpretations of
the CBAs regarding reporting time. SEPTA asserted that the parties were first required to
submit the disputed issues to arbitration. The district court granted the motion,
concluding that the resolution of the FLSA claim depended upon the interpretation of the
CBAs.
The operators contended that the time spent — approximately 25 minutes — conducting
the reporting tasks and inspections was compensable “time worked” for purposes of the
FLSA and that SEPTA unlawfully failed to include this time in the computation of
overtime. Because many operators worked 40 hours a week exclusive of the time
performing inspections, they contended that SEPTA’s failure to compensate them for this
time resulted in unpaid overtime wages, constituting a willful violation of the FLSA.
FLSA protections take precedence. The Third Circuit disagreed with SEPTA’s
contention that the FLSA claim depended upon the interpretation of the CBAs and had to
be decided in the first instance by an arbitrator. Under Barrentine v Arkansas-Best
Freight System, Inc, the minimum protections the FLSA provides to individual workers
“take precedence over conflicting provisions in a collectively bargained compensation
arrangement,” concluded the appeals court. Therefore, an employee’s right to relief under
the FLSA is distinct from an employee’s contractual rights as provided in a CBA.
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In some instances, however, an employee’s FLSA claim is intertwined with the
interpretation or application of the CBA. That was the case in Vadino, where the
employee acknowledged that the employer paid him one and one-half times his “normal”
hourly rate for overtime hours. But he argued that his overtime rate should have been one
and one-half times the “journeyman” rate provided for in the CBA. There, the
employee’s FLSA claim was entirely derivative of his breach of contract claim and
dependent on an interpretation of that CBA. As a consequence, the Third Circuit held that
FLSA claims that rest on interpretations of the underlying CBA must be resolved
pursuant to procedures contemplated under the LMRA.
However, unlike the employee in Vadino, the operators in this case did not contend they
were entitled to additional under the CBA, nor did they contend that SEPTA failed to
compensate them in the amounts set forth in the CBAs for time spent performing their
duties prior to the scheduled starting time. Rather, they argued that their FLSA claim
existed independently of any rights they had under their CBAs. Resolution of the FLSA
claim required a factual determination of the amount of time operators were required to
work prior to their scheduled start and a legal determination regarding whether this time
was compensable and subject to the overtime provisions of the FLSA. Accordingly, the
order of the district court was vacated.
The case number is 12-4031.
Attorneys: Bruce Bodner (Kaufman, Coren & Ress) for David Bell. Jo Bennett (Stevens
& Lee) and Zachary R. Davis (Hangley, Aronchick, Segal, Pudlin & Schiller) for
Southeastern Pennsylvania Transportation Authority.
5th Cir.: Supervisor lacked qualified immunity; prior ruling that public employees
could be individually liable under FMLA was “fair warning” his conduct was
objectively unreasonable
By Joy P. Waltemath, J.D.
On interlocutory appeal, the Fifth Circuit agreed in an unpublished opinion that a state
university board member was not entitled to qualified immunity from a discharged
employee’s suit alleging that her clearly established statutory right to FMLA leave was
violated by his objectively unreasonable termination of her (Bellow v LeBlanc, July 30,
2013, per curiam).
During her employment at the LSU Health Sciences Center, the employee was diagnosed
with a facial tumor that, if left untreated, would eventually have been fatal. She sought
and was approved for eight weeks of FMLA leave by her supervisor. When she attempted
to return to work, however, her parking card and ID pass did not work, and she received
written notification of her termination three days later, signed by the supervisor who
granted her FMLA leave. She alleged her termination violated both her employer’s
policies and was in retaliation for taking FMLA leave and sued her supervisor in his
individual capacity. He invoked qualified immunity and moved to dismiss, but the district
court disagreed.
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On appeal, the Fifth Circuit considered two issues: (1) did the employee have a clearlyestablished statutory right not to be terminated for taking leave under the FMLA, and (2)
if so, was terminating her for taking FMLA leave objectively unreasonable in the light of
that clearly established law? To abrogate a public official’s right to qualified immunity,
the official’s conduct must have violated a constitutional or statutory right, and the
official’s actions must be objectively unreasonable in light of clearly established law at
the time of the conduct, the court emphasized.
Don’t confuse qualified immunity with sovereign immunity. Here the supervisor
suggested the employee, as a state employee, had no statutory rights under the relevant
FMLA subsection because states enjoy sovereign immunity from such claims, citing the
Supreme Court’s 2012 Coleman v. Court of Appeals of Maryland opinion. That reliance
was misplaced, said the court, because Coleman addressed state sovereign immunity, not
the qualified immunity at issue here. Nor did the Fifth Circuit concede that the state of
Louisiana was the real party in interest, thereby extending sovereign immunity to the
supervisor, relying on both Supreme Court and circuit precedent that state sovereign
immunity is no bar to suit against a public official in his individual capacity.
Additionally, the appeals court would not adopt a position contrary to its own circuit,
which held that the FMLA’s plain language “permits public employees to be held
individually liable,” meaning that officials such as the supervisor could be considered
“employers” under the FMLA and be sued in their individual capacities, regardless of
what other circuits had done. Because the employee had the statutory right to take
medical leave and alleged that her supervisor in his individual capacity terminated her in
retaliation for properly exercising that statutory right, she satisfied the first qualifiedimmunity prong.
Objectively unreasonable. Although the supervisor argued that his conduct was not
objectively unreasonable because the law was not clearly established at the time he
terminated the employee, the Fifth Circuit again disagreed. Its earlier holding that public
employees could be individually liable for FMLA violations provided the “fair warning.”
that terminating his employee for availing herself of FMLA leave — that he personally
approved — would violate her clearly established right to take leave. Since both prongs
necessary to abrogate the supervisor’s qualified-immunity defense were satisfied, the
court affirmed the district court.
The case number is 13-30075.
Attorneys: Dale Edward Williams (Law Office of Dale Edward Williams) for Kristie
Bellow. Lance Sterling Guest, Louisiana Department of Justice, for Kim Edward
LeBlanc.
5th Cir.: Lower court erred in disregarding fluctuating workweek (FWW) method
to calculate overtime for store managers
By Ronald Miller, J.D.
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Following a jury’s finding that executive managers at certain Party City retail stores were
misclassified as exempt from overtime, a district court erred when it adopted a magistrate
judge’s unorthodox methodology for calculating overtime damages and disregarded the
fluctuating workweek method (FWW), ruled the Fifth Circuit (Ramson v M. Patel
Enterprises, Inc dba Party City, August 16, 2013, Jolly, E). The evidence demonstrated
that the employees’ salary was intended to compensate for all hours worked, and that
those hours would fluctuate. However, there was no support in the record for the
magistrate’s conclusion that the parties had an understanding that the employees’ salary
was only intended to compensate for a set 55-hour workweek.
Executive managers (EMs) at Party City retail stores alleged that the employer
misclassified them as exempt from the overtime provisions of the FLSA and paid them
only a weekly salary that did not vary even though they often worked weeks of irregular
and long hours. According to the employees, they were owed overtime for such
workweeks. The matter proceeded to a jury trial presided over by a magistrate judge.
After a jury found that the plaintiff and other executive managers were misclassified as
exempt, they became eligible for an award of overtime wages. In computing damages, the
district court disregarded the fluctuating workweek (FWW) method and instead used the
magistrate judge’s unorthodox methodology.
Calculation of damages. On appeal, neither party contested the employer’s liability as
found by the jury. Rather, the employer contended the trial court erred in calculating the
overtime damages. Before the magistrate judge, the employees had argued for the
“EZPawn” method, derived from In re EZPawn LP Fair Labor Standards Act Litig.
Generally speaking, this method computes an employee’s regular rate of pay by dividing
his weekly salary by 40, the number of hours in a standard workweek. An overtime
payment of 150 percent of the regular rate for all hours worked over 40 during the
workweek is then awarded. The employer, on the other hand, argued for application of
the FWW method.
In this case, the magistrate divided the employees’ weekly salary by 55, the number of
hours he found their weekly salary was intended to compensate. According to the
magistrate, the employees had been paid for all they were entitled to for the hours zero to
40; for hours over 40 and up to 55, they had been paid their regular rate; and for hours
over 55, they had not been paid at all. The magistrate awarded one-half the regular rate
for each hour over 40 and up to 55, and for all hours over 55, the employees received one
and one-half times their regular rate.
Length of workweek. However, the overwhelming evidence showed that the employees’
salary was intended to compensate for all hours worked, and that those hours would
fluctuate, the appeals court concluded. Consequently, the magistrate’s calculation —
which rejected the FWW method — was based on a misunderstanding of the law and was
clearly erroneous. Here, the understood arrangement was not a written agreement that
clearly laid out the employees’ terms of employment, observed the appeals court. The
magistrate, however, interpreted the parties’ mutual understanding to mean that the
employees’ salary compensated specifically for 55 hours per week. Yet the magistrate’s
expressed findings did not support such a view. While there were numerous statements in
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the record indicating that employees were expected to work a minimum of 50 to 55 hours
per week, none of those statements established that the EM salary was intended to
compensate for a set 55-hour workweek.
On the other hand, testimony that the magistrate did not consider clearly showed that the
employees knew their hours would fluctuate and that their salary would not increase or
decrease with those fluctuations. Moreover, the employer’s job application explicitly
stated that stores had extended hours for certain occasions, and applicants were asked:
“Can you work flexible schedules where days and number of hours scheduled is different
each week?” Further, a review of the weekly data revealed only a handful of times that
any of the employees worked a precise 55-hour week, but more often 58 or 59 hours.
Thus, the magistrate erred in finding that the mutual understanding was for a workweek
specifically of only 55 hours.
Fluctuating workweek method. With respect to calculating damages based on the FWW
method, the magistrate concluded that because the parties did not have a written
agreement, the Supreme Court’s decision in Overnight Motor Transp Co v Missel, did not
require the use of the FWW. This assumption was wrong, concluded the Fifth Circuit,
noting there is no authority that requires the agreement to be in writing. Moreover, the
job application clearly indicated, in writing, that the employees understood their job
included “flexible schedules” and “different hours each week.”
The appeals court observed that Blackmon v Brookshire Grocery Co was the controlling
authority in the circuit for resolving this case. Blackmon and Missel reflect the same
instruction: FWW is the proper method of calculating overtime when an employee is paid
a weekly wage and is expected to work fluctuating hours. Consequently, the ruling of the
district court was reversed and the amount of damages vacated and remanded for
recalculation.
The case number is 12-50534.
Attorneys: Edmond S. Moreland, Jr. (Floreani & Moreland) and David Weiser (Kator,
Parks & Weiser) for Abigail F. Ramson. Justin Michael Welch (Blazier Christensen
Bigelow & Virr) for M. Patel Enterprises, Inc.
6th Cir.: Because six-month limitation period in FedEx employment agreement
effectively waived rights under FLSA and EPA, provision was invalid
By Sheryl C. Allenson, J.D.
A six-month limitations provision in an employment agreement operated as a waiver of
rights under the FLSA and Equal Pay Act; because such waivers are barred, the provision
was invalid, ruled the Sixth Circuit, reversing a district court’s decision granting FedEx’
motion for summary judgment (Boaz v FedEx Customer Information Services, Inc,
August, 6, 2013, Kethledge, R). Moreover, FedEx’ alternate arguments did not
resuscitate its motion for summary judgment; the appeals court rejected each one in turn.
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Employment agreement. When the employee joined FedEx in 1997, she executed an
employment agreement that included a provision that stated: “To the extent the law
allows an employee to bring legal action against Federal Express Corporation, I agree to
bring that complaint within the time prescribed by law or 6 months from the date of the
event forming the basis of my lawsuit, whichever comes first.”
Employee’s positions. FedEx categorized its employees by grade levels, which
corresponded to compensation rates. In late 2003 and early 2004, the employer decided to
eliminate a number of positions, including a grade-27 position held by a male coworker.
At the time, the employee held a grade-7 position, but when her male coworker left in
January 2004, she assumed some of his responsibilities. Although the employee
performed those duties through June 2008, her compensation did not immediately reflect
that change. Instead, she remained a grade-7 employee until December 1, 2004, when she
accepted a new position that was classified as grade-25. Just six months later, FedEx
downgraded the employee’s position two levels. About three years later, she accepted yet
another new position where she would not be responsible for performing her former
coworker’s duties, and was downgraded one more grade.
The employee received her last paycheck as a grade-23 employee on June 30, 2008. Ten
months later, she filed suit against FedEx asserting claims under the FLSA and the Equal
Pay Act. According to the employee, FedEx violated the FLSA by failing to pay her
overtime compensation, and the EPA by paying her less than it paid her male coworker
for performing the same duties. FedEx filed a motion for summary judgment, asserting
that under the employment agreement, the employee’s claims were untimely.
Limitations period. An employee seeking to assert claims under the FLSA must do so
within two years for non-willful violations or three years for willful violations. After the
FLSA was enacted, the U.S. Supreme Court ruled that employees could not, either
prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime or
liquidated damages. According to the Sixth Circuit, the rationale behind the Court’s
decision was based on its concern that if employers required employees to waive their
rights under the FLSA, they could circumvent the Act’s requirements and thus gain an
advantage over competitors.
Reviewing the employee’s claim, the Sixth Circuit considered whether her employment
agreement operated as a waiver of her rights under the FLSA. Clearly, she filed suit more
than six months after her last allegedly illegal paycheck; thus, if the agreement served as
a valid waiver, her claims would be time-barred. If not, her claims were timely, as they
were filed within the FLSA’s statute of limitations.
Agreement invalid as to FLSA. Citing the U.S. Supreme Court’s decision in Jewell
Ridge Coal Corp v Local No. 6167, United Mine Workers of Am, the appeals court
decided that the six-month limitations period in the employment agreement was invalid.
Employment agreements may not be used to deprive an employee of her statutory FLSA
rights, and that was the exact effect of the agreement here, the appeals court explained.
FedEx argued that because an employee could agree to shorten her Title VII limitations
period, she should be able to similarly shorten her FLSA limitations period. Rejecting
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FedEx’s arguments, the appeals court explained that there were several factors
differentiating the two.
In an effort to support its position, FedEx improperly extrapolated from another Sixth
Circuit decision that employees could waive their procedural rights under the FLSA even
if they could not waive their substantive rights, the court explained. Case law does not
recognize that distinction. The case the employer cited said only that an employee “can
waive his right to a judicial forum only if the alternative forum ‘allow[s] for the effective
vindication of [the employee’s claim,’” wrote the court, citing to Floss v Ryan’s Family
Steak Houses, Inc. Having rejected each of the employer’s arguments, the Sixth Circuit
concluded that the limitations period in the employee’s agreement served as a waiver of
her FLSA claims; accordingly, that provision was invalid as to that claim.
Agreement invalid as to EPA. Moreover, the provision was also invalid as to the
employee’s Equal Pay Act claim. The Sixth Circuit said that in drawing its conclusion, it
presumed that Congress was aware of law relevant to the legislation it was enacting. By
the time Congress enacted the EPA as an amendment to the FLSA, the Supreme Court
had already decided that employees could not waive their FLSA claims for unpaid wages
and liquidated damages. By definition, Congress also meant for claims under the EPA to
be unwaivable, the appeals court reasoned. Additionally, and relatedly, the Supreme
Court’s rationale for barring FLSA claims was also applicable to claims under the EPA.
Specifically, if an employer pays a woman less than a lawful wage, that employer could
gain a competitive advantage. Thus, like the employee’s claims under the FLSA, her
claims under the EPA could not be waived. Drawing on its prior analysis, the appeals
court concluded that the limitations period in the employee’s agreement served as a
waiver of her claims under the EPA; therefore, that provision was invalid.
Alternative arguments. Alternatively, FedEx argued that the appeals court should affirm
the lower court’s decision because the employee could not prevail on either her FLSA or
Equal Pay Act claims. Though the court acknowledged that it could affirm on any
grounds supported by the record, in this instance there was no evidence to support
affirmance. FedEx relied on the employee’s subjective belief that her position was
exempt from the FLSA to support its position. This subjective belief did not mean the
position was exempt as a matter of law. “Were it otherwise, an employer could obtain
waivers of FLSA claims merely by having its employees sign a form stating that they are
exempt,” wrote the court. Thus, the employer was not entitled to summary judgment on
this basis.
FedEx advanced two more arguments to counter the EPA claim, which the Sixth Circuit
rejected. First, the employer argued that the employee did not have evidence that the
company “paid different wages to an employee of the opposite sex for substantially equal
work.” To the contrary, the employer did not dispute that it paid the employee’s male
coworker more than it paid her; moreover, there was evidence demonstrating that they
performed jobs that were substantially similar. Second, FedEx did not establish an
affirmative defense to the employee’s EPA claim. FedEx agreed that it paid the employee
less than her male coworker, but claimed that when the male coworker left, it reclassified
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his position to a lower pay grade. However, there were genuine issues of material fact as
to this issue; the employee presented evidence to the contrary.
Having decided that the limitations provision in the employment agreement acted as a
waiver, that it was therefore invalid, and that FedEx’ other arguments fell short, the Sixth
Circuit reversed the district court’s decision and remanded the case.
The case number is 12-5319.
Attorneys: Adam W. Hansen (Nichols Kaster), Stephen H. Biller (The Biller Law Firm)
for Margaret Boaz. M. Kimberly Hodges, Federal Express Corporation, for FedEx
Customer Information Services, Inc., and Federal Express Corp
6th Cir.: Revised FMLA regs support employer requirement that employee comply
with stringent attendance policy
By Sheryl C. Allenson, J.D.
Relying on revised FMLA regulations, the Sixth Circuit ruled that an employer could
enforce its usual and customary notice and procedural requirements against an employee
seeking FMLA-protected leave, absent unusual circumstances that would justify the
employee's failure to comply (White v Dana Light Axle Manufacturing, LLC, August 7,
2013, Batchelder, A). The employee, who filed suit alleging FMLA interference after he
was terminated for failing to follow his employer’s call-in requirements, did not present
any evidence demonstrating the type of “unusual circumstances” that would justify his
conduct, ruled the appeals court, affirming the district court’s decision granting summary
judgment in favor of the employer.
As an assembly worker for Dana Light Axle Manufacturing, the employee had to lift
parts that weighed between 20 and 75 pounds for at least half of each shift. Although he
performed well when he was at work, the employee had consistent attendance problems.
Between January 26, 2009 and September 24, 2009 the employee called in about 19
times. The days off included emergency vacation, vacation, unpaid leave and FMLA
leave. During that time, he took FMLA leave multiple times due to gout and “perhaps
other unrelated back and foot pain as well.”
Abdominal injuries. However, in September 2009, the employee started to have
complications related to multiple abdominal surgeries he had more than a decade earlier.
Specifically, the employee was in a car accident, punctured his intestines and had surgery
to remove three feet of his intestines. Thereafter, he suffered hernias that required three
more surgeries. Though he had not had a hernia in about ten years, the employee started
to have stomach pain and sought medical attention in September 2009; he called in to
take FMLA leave on September 22, 23 and 24. The following day, his surgeon scheduled
him for surgery on October 7; he also went into work that day. However, the plant’s HR
manager sent him home, because his medical certification for the previous FMLA leave
was incomplete. The employee had already been told once that the certification was
incomplete, and was given an extension until September 23 to provide proper
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documentation. Notwithstanding, the employee did not meet that deadline, and when he
did produce documentation, it was still incomplete.
Hold off on termination. When the HR manager sent the employee home on Friday, she
told him to come back Monday morning at 9 am to meet with her. He did not arrive on
time, but did make it at some point during the day. Nonetheless, the HR manager
rescheduled the meeting for September 30, again at 9 am. There was some dispute over
the events that occurred at that meeting. According to the employer, the HR manager, the
production manager and the first shift union steward were at the meeting; the employee
claimed his supervisor was also there. In any event, the HR manager stated in an affidavit
that before the meeting she had prepared a termination letter, but decided not the
terminate the employee once she heard his explanation for failing to submit his
certification on September 23.
In her affidavit, the HR manager acknowledged that the employee did submit a new
medical certification dated September 28, covering his late September absences and
restricting him from lifting more than 20 pounds. However, the HR manager said that the
employee never used the word “hernia” during the September 30 meeting. Instead, she
claimed that he said he had a “hole in his stomach and “might be having surgery soon.”
In contrast, the employee claimed that he told the group that he was having surgery the
following week and that on October 2, he had to go to the anesthesiologist for surgery
prep. He stated that he explained to the group about his hernia, the danger it presented at
work, and asserted that he specifically used the word “hernia” during the meeting. His
medical certification stated that his condition “may be hernia” and that he was referred to
a surgeon “for evaluation of possible hernia.”
During the meeting, the HR manager told the employee that he could not return to the
plant due to his weight-lifting restriction. According to the HR manager’s own affidavit,
she understood at the end of the meeting that the employee planned to have his doctor
remove that restriction and that he would return to work the next day. The employee
testified that he believed that his paperwork was fine at that point, but that he could not
return to work because no light duty was available. Thus, he said he would try to get the
restriction lifted, so that he could return to work for a few days before his surgery.
However, that did not work out, because his doctor would not agree to the modification.
As a result, the employee contacted another HR rep, who claimed that she did not recall
that communication. She did, however, remember providing the employee with a shortterm disability application, just as the employee claimed.
Off work. Because the employee was not released from the lifting restriction, the
employee did not report to work on October 1, 2, 5 or 6; it was also undisputed that he
failed to call in as required by the employer’s attendance policy. Under that policy, every
absence had to be called in to a number provided on a daily basis. If an individual fails to
report for work for two days and has not called in, he is deemed to have voluntarily quit.
The company’s FMLA policy required an employee to provide both advance leave notice
and medical certification.
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Termination letter. Although the employee thought the medical certification he
submitted on September 30 was in order, the employer disagreed. On October 1 the HR
manager sent the employee a memo identifying several deficiencies in that certification
relating to his late September absences; she gave him until October 7 to rectify the
documentation. However, in the interim, the employee had not returned to work; thus,
pursuant to the attendance policy the HR manager sent him a termination letter dated
October 6. As the reason for termination, the employer cited the employee’s failure to
notify his supervisor, noted that the company’s records would indicate that he voluntarily
resigned, and stated that he should contact his supervisor with any extenuating
circumstances that should be considered.
Apparently after he received the October 1 memo but before he received the termination
letter, the employee obtained a revised medical certification from one of his doctors. On
October 7, he dropped it off on the HR manager’s desk before he went to have his
surgery. Though he received the termination notice the following day, he apparently
disregarded it, and started calling in absent on October 9, and did so until October 15,
stating that he taking FMLA leave. The employee claimed that his union steward advised
him to do this after he received his termination notice.
Procedural requirements understood. There was no dispute that the employee
understood employees had to report their absences through the call-in line. However, he
claimed that after the September 30 meeting, he thought he was absolved from that
responsibility based on the HR manager’s comments and his assertion that he would be
having surgery. Rather, the employee asserted that the employer knew he would not be
coming to work, because they told him there was no light duty work for him and they
knew he was having surgery.
After he was terminated, the employee filed suit alleging that his employer interfered
with his FMLA rights. The lower court granted the employer’s motion for summary
judgment. Although an employee asserting an FMLA interference claim has the burden
of establishing five elements, only one was at issue on appeal. An employee has to
demonstrate that he gave the employer notice of his intention to take leave. Here, the
employer’s notice requirements were more burdensome than those sufficient under the
FMLA; thus, the question before the Sixth Circuit was whether an employer could
impose and enforce its own internal notice requirements.
In 2003, the Sixth Circuit ruled in Cavin v Honda of America Manufacturing, Inc, that the
FMLA did not allow employers to limit an employee’s FMLA rights if an employee
failed to comply with internal procedural requirements that were more stringent than the
statute. That decision drew on 29 CFR Sec. 825.302, which limited an employer’s rights
in that regard. Subsequently, there were material revisions to the regulations. Effective
January, 16, 2009, Sec. 825.302(d) provides in part that “an employer many require an
employee to comply with the employer’s usual and customary notice and procedural
requirements for requesting leave, absent unusual circumstances. . . .Where an employee
does not comply with the employer’s usual notice and procedural requirements, and no
unusual circumstances justify the failure to comply, FMLA-protected leave may be
delayed or denied. . . .”
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Thus, the revised regulation expressly allows an employer to condition FMLA-protected
leave upon that employee’s compliance with the employer’s usual notice and procedural
requirements, absent unusual circumstances. Finding that Cavin decision was abrogated,
the Sixth Circuit applied the revised regulation here and determined that the employer
was entitled to enforce its usual and customary notice and procedural requirements
against the employee. Moreover, the employee failed to produce any evidence
demonstrating the type of “unusual circumstances” contemplated by the regulation, such
that would justify his failure to follow the call-in requirements under the attendance
policy. Therefore, regardless of whether the employee provided sufficient FMLA notice
on September 30, the employer was entitled to terminate him for his failure to follow the
attendance policy. Thus, the district court properly granted the employer’s motion for
summary judgment.
The case number is 12-5835.
Attorneys: James Y. Moore (Eric C. Deters & Partners) for Matt White. Marjorie A.
Farris (Stites & Harbison) for Dana Light Axle Manufacturing, LLC
6th Cir.: Employee transferred to more “clerical” position after return from FMLA
leave advances on FMLA interference and retaliation claims
By Marjorie Johnson, J.D.
An employee who was transferred to a different position four weeks after she returned
from medical leave presented sufficient evidence to defeat summary judgment on her
FMLA interference and reprisal claims, ruled a divided Sixth Circuit in an unpublished
decision, reversing the district court’s dismissal of her claims (Crawford v JP Morgan
Chase & Co, August 6, 2013, Donald, B). The position arguably involved more clerical
duties and required less legal expertise, and therefore may have been non-equivalent even
if her salary, grade level, work hours and work location did not change. Moreover, a
chain of emails between upper-level supervisors provided evidence suggesting pretext.
Judge Clay dissented.
The employee, who worked for JP Morgan Chase & Co, was diagnosed with posttraumatic stress disorder (PTSD), anxiety, and depression in the spring of 2005,
following an incident in which she was held hostage at gunpoint. Later that year, she was
promoted to a project manager position and she remained stationed at a Chase office in
Columbus, Ohio. This position allowed her to apply legal knowledge that she acquired
during her studies in law school.
E-mails regarding transfer. From January to March 2007, the employee took FMLA
leave for her continued anxiety and depression. When she returned, she was assigned to a
different supervisor. A few months later, a series of conversations took place via email
among high-level managers regarding the transfer of her position to Phoenix, Arizona.
On September 27, 2007, her supervisor sent an email to the Phoenix supervisor regarding
the possible transfer. She suggested that the functions being performed in Columbus
would be transferred to the Phoenix office at no additional head count. The Phoenix
supervisor responded that a business case was needed to justify the change of the
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employee’s position. A month later, the employee’s supervisor sent an email to a highlevel manager asking if a decision had been made about eliminating the employee’s
position since she did not have enough work to justify a full-time employee.
Another high-level manager responded that the company could not justify eliminating the
employee’s position, but rather needed to “realign her to change her responsibilities.” The
manager further stated that if the employee refused to accept the responsibilities, such
would be considered a resignation, “which we will accept.” From December 10, 2007
through February 19, 2008, the employee took another approved FMLA leave. A few
weeks after her return, she was informed that her project manager position was
transferred to Arizona and that she would be assigned to a quality analysis position based
in Columbus, reporting to a former peer.
Her salary, grade level, work hours, work location, and bonus potential did not change.
However, she believed the new position included more clerical duties and did not require
the same level of legal expertise. She also felt that her opportunities for career
advancement were diminished. She brought the instant action asserting, among other
things, that Chase interfered with her FMLA rights and retaliated against her for using
FMLA leave. The district court dismissed these claims on summary judgment, ruling that
she had been reassigned to an equivalent position following her leave and did not suffer
an adverse action.
FMLA interference. A triable fact issue existed as to whether the employee was
transferred to an equivalent position after she returned from FMLA leave, and thus
summary judgment was not warranted as to her FMLA interference claim, the Sixth
Circuit ruled. Although the record did not include a great deal of evidence on this issue,
viewing the facts in the light most favorable to the employee, the quality analyst position
involved more clerical duties and did not require the same level of legal expertise as her
prior program manager position. Moreover, she testified that her opportunities for career
advancement were diminished in her new position. The appeals court concluded that if
the quality analyst position did not require a similar level of training and education, then
it was not equivalent in terms of status, and thus the positions would not be equivalent
under the FMLA.
FMLA retaliation. The district court also erroneously granted summary judgment
against the employee on her FMLA retaliation claim. As an initial matter, the Sixth
Circuit ruled that the employee suffered an adverse action if a reasonable employee
would have been dissuaded from exercising her FMLA rights, thus adopting the same
standard set forth by the US Supreme Court for Title VII cases in Burlington Northern
and Santa Fe Railway Co v White. Applying this standard, the appeals court held that the
employee presented sufficient evidence that, upon returning from FMLA leave, she was
transferred to a lesser position. She argued that her new position constituted a demotion
because the position included more clerical duties, did not require the same level of
expertise, and she was required to report to a former peer.
Even if she was transferred to a seemingly lateral position, the change in job
responsibilities supported an inference of an adverse employment action. The email
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exchange among high-level supervisors demonstrated that there was a change in her
responsibilities in the new role and that those changes might cause her to decline the new
position and resign. Under these circumstances, the change in positions shortly after her
return from FMLA leave could deter a reasonable employee from exercising her FMLA
rights. Also, the close temporal proximity satisfied the causation element of her prima
facie case at the summary judgment stage.
Pretext shown. The employee also cast sufficient doubt on Chase’s assertion that it
eliminated the her project manager position based solely on “business reasons,” in that it
wanted to transfer the position to Phoenix without adding any additional personnel. The
employee raised a triable fact issue as to whether this proffered explanation was
pretextual through the emails from high-level supervisors in her former department. For
instance, one manager stated that Chase could not justify eliminating her position, but the
position could be moved to the Phoenix office so long as it did not require hiring a new
person. These emails also suggested that the transfer of her position involved at least
some ulterior motive to push her out of the company by offering her a lesser position with
the hope that she would resign.
Dissent. Judge Clay argued in dissent that the employee did not present sufficient
evidence showing that she was transferred to a non-equivalent position. Her assertion that
her new position required less legal work, and more clerical duties, was “specifically the
kind of intangible or de minimis distinction” that did not give rise to a claim under the
FMLA given there was no difference in pay, benefits, or working conditions. “By the
logic that the majority embraces, almost any change in job would give rise to a claim
under the FMLA, so long as a plaintiff could claim that a skill learned in their past was
devalued in some way.” The dissent further argued that the employee failed to show an
adverse employment action for purposes of her FMLA retaliation claim. Nor did she
establish pretext, as the emails by management showed only that they made a decision
based on the business needs of the unit.
The case number is 12-3698.
Attorneys: Gary A. Reeve (Law Offices of Gary A. Reeve) for Paula Crawford.
Angelique Paul Newcomb (Ice Miller) and Brooke Elizabeth Niedecken (Littler
Mendelson) for JP Morgan Chase & Co.
6th Cir.: Volunteer firefighters received substantial compensation, so regarded as
employees; enable police dispatcher to advance FMLA claims
By Sheryl C. Allenson, J.D.
In a 2-1 decision, the Sixth Circuit found that volunteer firefighters were employees
within the meaning of the FMLA and FLSA, and therefore reversed a lower court’s
decision granting a city’s motion for summary judgment (Mendel v City of Gibralter,
August 15, 2013, Batchelder, A). Looking at the economic realities, the appeals court
determined that the firefighters were paid compensation under the FLSA, and not a
nominal fee for their work. As a consequence the city employed a sufficient number of
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employees so that a city police dispatcher could maintain a FMLA claim. Judge
Kethledge wrote in dissent.
After a city police dispatcher was terminated, he filed suit alleging that the city violated
his FMLA rights. In response, the city filed a motion for summary judgment; specifically,
the city claimed that because volunteer firefighters were not employees for purposes of
the FMLA it did not employ enough workers to invoke the FMLA. The district court
agreed, and granted the city’s motion for summary judgment.
On appeal, the underlying facts of the employee’s claim were not at issue. Instead, the
Sixth Circuit only had to consider whether the volunteer firefighters were employees for
purposes of the FMLA, to decide whether the police dispatcher was an eligible employee
under the Act. When the police dispatcher was terminated, the city had 41 employees,
less its volunteer firefighters. At that time, the city had between 25 and 30 volunteer
firefighters. The volunteer firefighters are not required to respond to any emergency calls,
do not have set shifts, consistent scheduling, or do not staff a fire house. However, when
they do respond to emergency calls, they are paid $15 per for the time they spend
responding to the call and maintaining equipment. They do not receive health insurance,
sick or vacation time, social security benefits or premium pay; however, the city does
require the firefighters to complete an employment application and keeps a personnel file
on each one. They typically receive a 1099 form from the city.
FMLA eligible. Here, if the volunteer firefighters are employees of the city, then the city
would employ 50 or more employees and the police dispatch would be an eligible
employee under the FMLA. If they were not, then the employee would not be an FMLA
eligible employee. To decide whether the volunteers fell within the FMLA’s definition of
an employee, the Sixth Circuit turned to the FLSA.
Applying Supreme Court precedent, the Sixth Circuit indicated that an economic reality
test should be used to determine whether an individual is an employee under the FLSA.
According to the appeals court, the volunteer firefighters fell within the FLSA’s “broad
definition of employee.” The firefighters are suffered or permitted to work, and they
receive substantial wages for their work. Specifically, the firefighters received $15 per
hour for their service, which was commensurate with the hourly wage other firefighters
received, the appeals court noted. ‘These substantial hourly wages simply do not qualify
as nominal fees,” wrote the appeals court. Accordingly, the firefighters were employees
and not volunteers within the meaning of the FLSA, and therefore, the FMLA. Thus, the
police dispatcher could advance his FMLA claim, because the city had a sufficient
number of employees to maintain that claim.
Dissent. Although Judge Kethledge thought the compensation was a close call, he wrote
that it nonetheless amounted to nominal pay. In this instance, the dissent wrote that the
city neither controls nor requires the firefighters’ efforts. The first firefighter to respond
to a fire typically controls the scene; the city does not send anyone to supervise them.
And the city does not require a firefighter to respond to any fires in the first place. Indeed
a firefighter could go for years without responding to a single fire — and the city would
not discipline him, pointed out the dissent. Persons who need the FLMA are presumably
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persons who need leave not to show up for work. That description does not apply to the
City of Gibraltar’s firefighters.
The case number is12-1231.
Attorneys: L, Rodger Webb (L. Rodger Webb, PC) for Paul Mendel. Cassandra L.
Booms (Logan, Huchla & Wycoff) City of Gibraltar.
9th Cir.: Employee must arbitrate wage claims; she was not prejudiced by
employer’s failure to pursue arbitration until Supreme Court issued AT&T v
Concepcion
By Lisa Milam-Perez, J.D.
An Ernst & Young employee had to arbitrate her state law wage claims, the Ninth Circuit
ruled, reversing a lower court’s holding that the employer waived its right to arbitrate by
failing to assert the right as a defense (Richards v Ernst & Young, LLP, August 21, 2013,
per curiam).
The employee’s putative class action wage suit was consolidated with another case
against Ernst & Young brought by two other employees. The litigation had been moving
along for several years and determinative rulings had been issued. However, after the
Supreme Court issued its Concepcion decision holding that the FAA preempted state-law
bars on class action arbitration waivers, Ernst & Young filed a motion to compel
arbitration.
The district court determined that the employer waived its right to arbitration by failing to
assert that right as a defense to the other (now-consolidated) wage action. The Ninth
Circuit reversed, concluding that the employee could not show she was prejudiced by the
employer’s delay in asserting it right to arbitrate.
No showing of prejudice. The employee argued to no avail that she was prejudiced
because there already had been litigation on the merits, resulting in the dismissal of some
of her claims. Once such claim, a meal and rest break cause of action, was dismissed
without prejudice, which is not a decision on the merits, the appeals court noted. The
other dismissed claim, for injunctive relief, was disposed of on standing grounds. (As a
former employee, she was not entitled to pursue prospective relief.)
Next, the employee argued she was prejudiced by Ernst & Young’s late move to arbitrate
because the employer already conducted discovery, causing her to incur expenses during
litigation prior to the motion to compel. However, she did not allege that the employer
had used discovery as a means of gaining information about her case that could not have
been obtained in arbitration. Moreover, the appeals court noted, “self-inflicted” expenses
are not evidence of prejudice. Here, the employee was a party to an agreement that
mandated arbitration of any disputes. Any extra expense she may have incurred from her
“deliberate choice of an improper forum, in contravention of their contract,” could not be
attributed to her employer, the court wrote.
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D.R. Horton no help. The Ninth Circuit also rejected the employee’s suggestion that it
apply the NLRB’s D.R. Horton ruling as a basis for affirming the lower court’s refusal to
compel arbitration. First, the employee did not assert that her arbitration agreement with
Ernst & Young was unenforceable under the NLRA until after the parties had briefed,
and the district court had denied, the motion to compel. Regardless, the appeals court
noted, the “overwhelming majority” of courts to have considered the issue have declined
to defer to the NLRB decision “because it conflicts with the explicit pronouncements of
the Supreme Court concerning the policies undergirding the Federal Arbitration Act.”
More recently, the court noted, the Supreme Court reiterated in Am Express v Italian
Colors Rest that “courts must rigorously enforce arbitration agreements according to their
terms,” and that this directive holds true for claims that allege a violation of a federal law,
“unless the FAA’s mandate has been overridden by a contrary congressional command.”
However, Congress did not expressly override any provision in the FAA when it enacted
the NLRA or Norris-LaGuardia Act. Thus, D.R. Horton could not salvage her court case.
Class arbitration precluded. Finally, because the district court should have compelled
arbitration, and because the applicable arbitration agreement between the parties
precluded class arbitration, the Ninth Circuit also vacated the district court’s order
certifying the employee’s claims as a class action.
The case number is 11-17530.
Attorneys: Max Folkenflik (Folkenflik & McGerity), Leon Greenberg and H. Tim
Hoffman (Hoffman Libenson Saunders & Barba) and Mark Russell Thierman (Thierman
Law Firm) for Michelle Richards. Rex S. Heinke (Akin Gump) for Ernst & Young, LLP.
9th Cir.: High Court overruled Lowdermilk’s “legal certainty” standard to establish
amount in controversy for federal CAFA jurisdiction
By Lisa Milam-Perez, J.D.
The Supreme Court has spoken: A lead plaintiff may not waive claims over $5 million in
hopes of evading federal jurisdiction under the Class Action Fairness Act, and that
holding has effectively overruled the Ninth Circuit’s Lowdermilk standard requiring
employers seeking a federal forum to show with “legal certainty” that the amount in
controversy satisfies the jurisdictional minimum (Rodriguez v AT&T Mobility Services
LLC, August 27, 2013, Clifton, R). Concluding that the High Court’s 2013 decision in
Standard Fire Insurance Co v Knowles “has so undermined the reasoning of our decision
in Lowdermilk” that it has no legal effect, the appeals court vacated a district court order
remanding a California class-action wage suit based largely on that circuit precedent.
Removed, remanded. An AT&T Mobility Services employee brought a putative class
action wage claim under California law on behalf of himself and all other similarly
situated retail sales managers of AT&T wireless stores in Los Angeles and Ventura
counties. He filed his original complaint in Los Angeles County Superior Court, but
AT&T removed the case to federal court. The employee moved to remand the case to
state court, arguing that AT&T could not establish federal subject-matter jurisdiction
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because the total amount in controversy did not exceed $5 million, the minimum amount
for federal jurisdiction as required by the CAFA. To be certain, he waived any claims in
excess of that amount.
In its attempt to show that the amount in controversy did in fact exceed $5 million,
AT&T submitted sworn declarations from AT&T representatives regarding the potential
number of class members and the size of their claims. The company argued that the lead
plaintiff’s allegations, coupled with the sworn declarations, established that the amount in
controversy could not be less than roughly $5.5 million and was likely double that
amount. Citing the Ninth Circuit’s 2007 decision in Lowdermilk v U.S. Bank Nat’l Ass’n,
the lower court required AT&T to demonstrate “to a legal certainty” that more than $5
million was at stake here. But the lead plaintiff’s waiver foreclosed such a showing, the
court reasoned. And because the waiver was controlling, the court paid no heed to the
employer’s calculations or declarations.
High Court weighs in. After the district court entered its order, the Supreme Court ruled
in Standard Fire Ins Co v Knowles that such waivers are ineffective. The Ninth Circuit’s
Lowdermilk decision was based on the principle that the plaintiff, as the “master of his
complaint,” should be entitled to plead to avoid federal jurisdiction, even foregoing a
higher potential recovery if he so chose. Lowdermilk adopted the “legal certainty” test, in
part, to preserve that prerogative. However, that principle is directly contradicted by
Standard Fire. Also, Lowdermilk held that district courts need not look beyond the four
corners of the complaint to determine whether the CAFA jurisdictional amount is met so
long as a plaintiff avers damages below $5 million. Under Standard Fire, though, courts
are instructed to look beyond the complaint to the potential claims of absent class
members, concluding that this is what CAFA requires.
“Legal certainty” standard falls. The High Court ruled a lead plaintiff of a putative
class could not foreclose a defendant’s ability to establish the $5 million amount in
controversy by stipulating prior to class certification that the amount in controversy is
less than $5 million. Because a lead plaintiff cannot reduce the amount in controversy on
behalf of absent class members, there is no justification for assigning the “legal certainty”
standard, the appeals court concluded. In fact, the rationale for applying such a standard
is “clearly irreconcilable with intervening Supreme Court authority.”
Accordingly, “employers seeking removal of a putative class action need show only by a
preponderance of evidence that the aggregate amount in controversy satisfies the federal
minimum,” the Ninth Circuit wrote. This standard conforms to the employer’s burden of
proof when a plaintiff does not plead a specific amount in controversy.
In the case at hand, because the lead plaintiff’s waiver was not binding on the class, it
could not resolve the amount-in-controversy question. And, since the district court had
relied solely on that waiver in remanding to state court, the appeals court reversed the
order of remand for further reconsideration. On remand, the preponderance standard was
to be applied to the amount-in-controversy evidence.
The case number is 13-56149.
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Attorneys: Michael S. Morrison (Alexander Krakow & Glick), Thomas Falvey (Law
Offices of Thomas W. Falvey), and Dimitrios Vasiliou Korovilas (Wucetich &
Korovilas) for Robert Rodriguez. George W. Abele (Paul Hastings) and Laurie Erin
Barnes, AT&T Services Legal Department, for AT&T Mobility Services.
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