Labor Relations & Wages Hours Update
July 2014
Hot Topics in LABOR LAW:
Been there, done that at the Labor Board
By Pamela Wolf, J.D.
As the NLRB has begun to set aside its own rulings in the wake of the Supreme Court’s
holding that President Obama’s recess appointments to the Board were unconstitutional,
it’s “déjà vu all over again,” according to W.B. Bernie Siebert, Sherman and Howard
partner and Employment Law Daily Advisory Board Member. “The recent ruling of the
Supreme Court in Noel Canning is reminiscent of the Court’s ruling in New Process
Steel,” he said. “The result in both cases requires the Board to go back and deal with
those cases decided by the unlawfully constituted Board panel.”
On Thursday, June 26, the Justices determined that President Obama’s January 2012
recess appointments to the NLRB were unconstitutional — a ruling that has left much
uncertainty for employers and employees alike. The Court found that because the Board
appointments were invalid, the Board itself lacked a quorum and so could not lawfully
act. As a result, the many decisions made by the NLRB during the non-quorum period are
now called into question.
Board setting aside earlier rulings. A June 27 order in 800 River Road Operating
Company is typical of the slew of rulings the Board has begun issuing in the wake of
Noel Canning: “In view of the Court’s decision in Noel Canning, pursuant to Section
10(d) of the National Labor Relations Act, the Board hereby sets aside the abovereferenced Decision and Order.[] The Board will retain this case on its docket and take
further action as appropriate.” A footnote to the order cites this authority in Section
10(d): “[u]ntil the record in a case shall have been filed in a court, as hereinafter
provided, the Board may at any time, upon reasonable notice and in such manner as it
shall deem proper, modify or set aside, in whole or in part, any finding or order made or
issued by it.”
What else can we expect from the Board? “In most cases following the Noel Canning
ruling, the Board will merely uphold the earlier ruling, Siebert predicts. “There is hope,
however, that the Board might take another look at a few cases that have been
controversial.” The labor law expert pointed, for example, to WKYC, where “the Board
overruled 50 years of law when it held that an employer could not discontinue a union
dues check off provision in a collective bargaining agreement after the agreement
expired.”
Siebert also cited Piedmont Gardens, where the NLRB “overruled more than 30 years of
precedent when it required an employer to turn over to the union witness statements used
by the employer in disciplinary actions.” The Board substituted a test for keeping
statements confidential in that case, which, according to Siebert, is “nearly impossible to
meet.”
There may be similar hope for a fresh look atBanner Health, Siebert said. There the
Board “struck down an employer rule that employees maintain the confidentiality of
investigations into misconduct,” he noted.
While Siebert also mentioned the “numerous rulings on issues of social media that the
Board will have to review,” he thought it doubtful that changes would be made. “The
Board seems on a mission in social media and handbook cases to regain relevance using a
20th century statute in the 21st century to favor unions and expand the concept of
protected concerted activity,” observed.
Consolidation of Regions 3 and 6 under consideration
In the wake of Region 6 Regional Director Robert Chester’s recent retirement, the NLRB
is considering a proposal to restructure its regional offices in Buffalo, New York (Region
3), and Pittsburgh, Pennsylvania (Region 6). Although prompted by Chester’s retirement,
the restructuring proposal is part of an ongoing effort by the Board to explore ways to
streamline its operations in light of new technologies and changing patterns in case
intake.
NLRB General Counsel Richard F. Griffin, Jr., announced the proposal on July 1, under
which Regions 3 and 6 would be consolidated into one Region. One office would be
designated as the Regional Office and one office designated as a Sub-Regional Office to
be managed by one Regional Director. The Resident Office in Albany, New York,
presently assigned to Region 3, would also be part of the consolidated Region. Griffin
said that no offices will be closed under the proposed reorganization.
It is the practice of the NLRB to consider regional restructuring when a Regional Director
retires. In this instance, the decision to consider the consolidation of Regions 3 and 6
resulted from the recent retirement of Region 6’s Regional Director, Robert Chester. The
General Counsel will thoroughly consider input from agency staff and external
stakeholders, including practitioners, members of the management-labor relations
community, and Members of Congress, before reaching a final decision about whether to
present a formal proposal to the Board. Any permanent structural change must be
approved by the Board and announced in the Federal Register.
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Comments. The General Counsel is soliciting comments on the proposed consolidation
and the related question of which Region should be designated as the Regional Office.
Comments should be sent to Associate General Counsel Anne Purcell in the Division of
Operations-Management at feedback@nlrb.gov, or mailed to her at the National Labor
Relations Board, Division of Operations-Management, 1099 14th Street, N.W., Suite
10206, Washington, D.C. 20570. Comments must be received by August 15, 2014. Those
who have previously communicated a view on the status of the two Regions do not need
to resubmit the same information as it will be considered along with other comments
received.
Republicans file amicus brief with NLRB in Northwestern University student
athlete case
By Lisa Milam-Perez, J.D.
Congressional Republicans last week formally urged the NLRB not to treat college
athletes as statutory employees under the NLRA — the latest development in the ongoing
dispute over whether Northwestern University football players should be allowed to
unionize.
In an amicus brief submitted to the Board on July 3 in Northwestern University v.
College Athletes Players Association, the case now pending before the agency,
Republican leaders of the Senate HELP Committee and House Workforce Committee
argued that college athletes are not “employees” and that to treat them as such is
unfeasible. “Congress never intended for college athletes to be considered employees
under the National Labor Relations Act, and doing so is incompatible with the studentuniversity relationship,” they contend. “The profound and inherent differences between
the student-university and employee-employer relationship makes employee status
unworkable both as a matter of law and in practice.”
The brief was signed by John Kline (R-Minn), House Education and the Workforce
Committee Chairman; Higher Education and Workforce Training Subcommittee
Chairwoman Virginia Foxx (R-NC); HELP Subcommittee Chairman Phil Roe (R-Tenn);
HELP Committee Ranking Member Lamar Alexander (R-Tenn); Employment and
Workplace Safety Subcommittee Ranking Member Johnny Isakson (R-Georgia); and
Primary Health and Aging Subcommittee Ranking Member Richard Burr (R-NC).
The Congressional Republicans weighed in on the Northwestern University case on the
heels of a letter to NCAA President Mark Emmert from Kline, House Workforce
Committee Chair, asking for information about the efforts taken by the organization to
address the problems facing student-athletes.
On March 26, a NLRB regional director held that Northwestern’s scholarship football
players are “employees” under the NLRA. The student-athletes voted on April 25 in a
Board-conducted election; the ballots were impounded pending review of the regional
director’s decision by the full Board. In May, the House Workforce Committee held a
hearing to examine the consequences of the pending NLRB determination. The
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challenges facing the student athletes (no doubt a factor in the players’ unionization
efforts) were also a topic of discussion at that hearing.
The Board also last week received, among numerous other amicus filings in the case, a
brief from the NCAA in support of the university’s position, as well as a joint brief from
the NFL, NHL, NBA and major league baseball and soccer players’ unions in support of
the football players.
Port truck drivers in LA, Long Beach launch strike
On Monday, July 7, port truck drivers from three of Los Angeles’ leading drayage firms
began what Teamsters-backed Justice for Port Truck Drivers (JFPTD) called
“widespread, indefinite Unfair Labor Practice strikes” at truck yards and marine terminals
at the ports of Los Angeles and Long Beach. Forty percent of U.S. imports are reportedly
moved through these ports. This fourth strike launched within the past year is “a dramatic
escalation from prior actions,” according to JFPTD, which noted that earlier efforts, like
many other low-wage worker strikes over the last year, were 24-48 hours in duration.
“These escalating actions come as the drayage industry is growing increasingly desperate
and retaliatory, doing everything it can — including unending retaliation in flagrant
violation of U.S. labor laws — to hold onto a business model that relies on independent
contractors,” JFPTD said in a press release. “Multiple determinations — by the California
Division of Labor Standards Enforcement and Employment Development Department,
along with Region 21 of the National Labor Relations Board — have rendered the
industry’s business model illegal.”
According to JFPTD, companies are desperately trying to hold onto the status quo by
firing, intimidating, and countersuing drivers; countersuing state agencies and filing
appeals on trial court decisions; and filing to compel arbitration to stay government
proceedings. Companies are also continuing to retaliate against employees for engaging
in union and protected concerted activities, the group said, adding that employers are
threatening and otherwise intimidating, restraining, and coercing employees in the
exercise of their NLRA rights.
Port truck drivers, who work long hours hauling nearly $4 billion worth of cargo every
day, often receive paychecks below the minimum wage, JFPTD said. “These professional
drivers, who transport imports from American seaports for companies like Walmart,
Home Depot, Skechers Shoes, and Polo/Ralph Lauren, are on the front lines of the fight
for a fair day’s pay for a hard day’s work.”
Career attorney appointed Regional Director of Newark office
NLRB career attorney David E. Leach III has been appointed Regional Director of the
agency’s Regional Office in Newark, New Jersey (Region 22). NLRB Chairman Mark
Gaston Pearce and General Counsel Richard F. Griffin, Jr., made the announcement on
Tuesday, July 8, noting that Leach succeeds J. Michael Lightner, who recently retired. In
his new job, Leach will be responsible for enforcement of the nation’s primary labor law
covering private sector employees in northern and central New Jersey.
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Leach is a graduate of Cathedral College, Douglaston, New York, where he majored in
History. He graduated from Brooklyn Law School and joined the NLRB in 1976 as a
Field Attorney in the New York Regional Office, and has worked there continuously ever
since. In 1984, Leach was promoted to Supervisory Attorney; in 1988 he was appointed
as a Deputy Regional Attorney; and in 2012 he was promoted to his most recent position
of Regional Attorney. Since 1985, Leach has also been a Senior Lecturer at the Mailman
School of Public Health at Columbia University. He has been an Adjunct Professor of
Law at Brooklyn Law School since 2001.
After Supreme Court ruling, fewer state workers to organize
The U.S. Supreme Court’s recent ruling in a case brought by home health care aides in
Illinois casts doubt on labor agreements between such workers and state governments in
nine other states.
It also closes off—or at least complicates—one of labor’s clearest paths to reversing a
decades-long trend of declining ranks and shrinking clout.
The petitioners in Harris v. Quinn were home health care aides who did not want to join a
union, though a majority of their co-workers had voted to join. Under state law, the nonunion workers still were required to contribute their “fair share” to help pay for collective
bargaining and other union activities that would benefit them.
The decision turned on the status of the workers. Though their work is directed by their
patients, most home health care workers are paid through Medicaid, a joint state-federal
program. Union backers saw the workers as jointly employed by both the state and their
patients. Capitalizing on that, public employees’ unions in 10 states have organized them
as state workers.
But the high court ruled that unionized in-home health workers aren’t “full-fledged public
employees,” and therefore can’t be required to contribute, as other public employees are
under a 1977 ruling. Forcing them to do so, the court ruled, is a violation of their First
Amendment rights.
California, Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Oregon,
Vermont and Washington all have arrangements similar to the one in Illinois. Wisconsin
and Michigan did as well until they were reversed recently. How the last week's decision
will affect each of those agreements remains to be seen, although a number of them
signed onto a brief backing Illinois before arguments earlier this year.
For the time being, most are studying the impact of the decision. It is expected that
workers in those states who oppose the union — or at least oppose paying their dues —
will file similar lawsuits against the arrangements.
But there may be some room for the states to act. In Illinois, for example, some of the
workers challenging the union agreement were relatives of their patients. If the state
revised its labor agreement to include only those home health aides working
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independently (not for a private firm) and paid entirely by Medicaid, it might be able to
meet the court’s new “full-fledged public employee” standard.
“Each state legislature is in a position, and the governors of all the states, to take a look at
the way this was set up under Illinois state law and change the way their own states
function,” said Esta R. Bigler, director of labor and employment law programs at Cornell
University.
In contrast, the impact of the ruling will be limited on the roughly 24 “right-to-work”
states that already bar “fair share” dues-paying arrangements.
A blow to efforts in other states
Unions have focused on organizing public workers, as opposed to those in the private
sector, because “government employers tend to not resist unionization the way private
employers do,” said Kenneth Dau-Schmidt, a labor law expert at the Indiana University
Maurer School of Law. “The state of Illinois is not going to resist the union the way the
private sector would.”
Because of last week’s decision, however, any efforts to unionize such workers in other
states could face an uphill climb, if they’re even mounted at all.
The decision on the “fair share” provision “makes unionization harder,” according to
Christine Owens of the worker-advocacy group National Employment Law Project. “It
then becomes harder for the members that are continuing to support and pay for the
functions that the union provides to carry all the freight.”
For their part, labor unions — mainly the SEIU and AFSCME, which together have
hundreds of thousands of members potentially affected by the ruling — have pledged to
continue their efforts at organizing home-care workers.
“No court case is going to stand in the way of home-care workers coming together to
have a strong voice for good jobs and quality home care,” SEIU President Mary Kay
Henry said in a statement after the ruling.
Opponents say they will have a hard time doing so. “This was certainly seen as a growth
area for public sector unions and the labor movement in general,” said Ilya Shapiro of the
libertarian Cato Institute, which filed a brief against the unions in the case. “That’s been
stopped in its tracks.”
The future of labor
More broadly, the case is significant for the future of organized labor, which has eagerly
tapped into the fast-growing field of personal care aides.
America’s population is aging, which will create more demand for health care. An
analysis from the U.S. Administration on Aging projected one in four Americans will be
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older than 60 by 2025. All but three states and the District of Columbia will have more
than 20 percent of their populations older than 60 by then, according to the report.
At the same time, the home health care field is booming.
The U.S. Census Bureau reported last week the number of Americans in nursing homes
fell by 20 percent from 2000 to 2010. According to an AARP report on long-term care
policies released last month, 24 states have increased the percentage of their Medicaid
dollars dedicated to home and community-based services – which 90 percent of seniors
say they prefer to institutional care.
As a result, the number of in-home personal care aide jobs is projected to increase by 70
percent between 2010 and 2020, according to the U.S. Department of Labor. State by
state, the numbers vary, but the broader trend holds: Indiana could see a 73 percent
increase, Virginia a 78 percent increase, and Oklahoma a 67 percent increase, according
to an analysis by the Paraprofessional Healthcare Institute (PHI), which is focused on
care for seniors and people with disabilities.
PHI’s projections don’t include the vast majority of so-called “consumer-directed”
workers that often work independently versus those employed by agencies, so the growth
could be even greater than projections based on existing surveys.
Nearly all health care workers are poorly compensated: Only recently, the workers
became eligible for overtime pay and began earning at least minimum wage, thanks to
new federal guidelines. Last week’s decision doesn’t bar them from organizing to
improve their conditions, but it will make it harder for organized labor to bring them into
the fold.
“Employees always have a first amendment right to organize,” said Cornell’s Bigler.
“These workers still have, even in this quasi-public arrangement, they have an absolute
right under the Constitution to organize and join unions.”
Opponents agree on that much, but say it will be that much harder for unions to make the
case to workers to join.
“They could have it on a voluntary basis,” Cato’s Shapiro said. “If the unions present
such a good deal, people could sign up voluntarily.”
Source: Jake Grovum, Staff Writer, Stateline (http://www.pewstates.org), July 4, 2014.
Stateline is a nonpartisan, nonprofit news service of the Pew Center on the States that
provides daily reporting and analysis on trends in state policy and analysis on trends in
state policy.
Union shows appreciation for EEOC, or at least its workers
Although she has in the past offered many criticisms of the EEOC, the president of the
union council that represents the agency’s employees is speaking out in the role of
agency advocate, pointing to the EEOC’s ever-expanding mission in the face of
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inadequate funding. The EEOC, of course, like many other federal, state, and local
organizations, is celebrating the 50th anniversary of the Civil Rights Act of 1964.
More to enforce, not enough budget. Gabrielle Martin, president of the American
Federation of Government Employees (AFGE) council representing EEOC employees,
noted that during the 50 years that has passed since the Civil Rights Act became law, the
EEOC’s mission to protect employees from job-related discrimination has expanded as
the United States became increasingly determined to enforce equal rights under the law
for all Americans. While the agency’s initial focus was on discrimination based on race,
color, religion, sex, and national origin, it has grown to cover age, disability, genetic
information, and more recently transgender status and gender identity, Martin said in a
statement on Wednesday, July 9.
However, the EEOC's budget has not kept pace, according to Martin: “We have been
woefully underfunded for most of our existence.” The budget cuts required under
sequestration hit the EEOC especially hard, resulting in unfilled vacancies that mean
longer wait times for employees facing discrimination to receive assistance from the
agency, she observed. It currently takes nine months on average for EEOC to investigate
a case once it's been filed.
“A pregnant woman who loses her job early in her pregnancy is really damaged by the
passage of time,” Martin explained. “There's the loss of the job, the benefits and really
the destruction of a family unit that may be occurring behind that loss of job.”
“There is nothing more insulting to an employee or job applicant than being treated
unfairly on the basis of factors that have nothing to do with their ability to do the job,”
AFGE National President J. David Cox Sr. said. “The women and men who work for the
EEOC are often the only advocates for these employees, and they are doing a remarkable
job with limited resources and attention.”
The EEOC relies on labor unions to help counsel employees who are facing
discrimination and walk them through the process for filing discrimination complaints,
according to Martin. Unions like AFGE file complaints on behalf of federal-sector
employees and represent them throughout the process.
AFGE awareness campaign. The AFGE has launched a year-long campaign to raise
public awareness and appreciation of federal employees. The campaign kicked off with a
video highlighting the important services federal employees deliver and explaining how
they have much in common with the citizens they are sworn to serve. Fifteen other shortform documentaries are being released throughout the year, one every three weeks. The
videos highlight individual federal employees who carry out important work across the
country.
In one of those videos, Martin recalls the stories she heard from her mother about her
grandfather meeting with coworkers late at night in an effort to form a union for black
employees at the U.S. Postal Service in Chicago. The stories resonated with Gabrielle's
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mother and with Gabrielle herself, who joined AFGE to advocate on behalf of
government workers.
“For 50 years, EEOC employees have served a vital role in ensuring our workplaces are
free of discrimination and open to everyone,” Cox said. “They and all other government
employees have dedicated their careers to serving the public. This campaign is our way
of thanking them for their service and reminding Americans of the valuable work they
do.”
The American Federation of Government Employees (AFGE) is the largest federal
employee union, representing 670,000 workers in the federal government and the
government of the District of Columbia. AFGE Council 216 represents all professional
and nonprofessional General Schedule employees at the EEOC, including investigators,
attorneys, paralegals, mediators, administrative judges, and support staff.
President determined to put Sharon Block on the Labor Board
By Pamela Wolf, J.D.
Echoing his earlier intentions, President Obama has re-nominated Sharon Block, one of
the controversial 2012 recess appointments recently determined to be unconstitutional in
the Supreme Court’s Noel Canning ruling, to serve on the Labor Board. Having renewed
her nomination during the regular session, Obama later withdrew it in a deal intended to
avert the so-called “nuclear option” aimed to change the Senate rules to eliminate the
filibuster. In the face of what Senate Democrats saw as relentless obstructionism, Senate
Leader Harry Reid (D-NV) later felt forced to later pull the trigger and executed the
procedural maneuver.
Sharon Block is currently Senior Counselor in the DOL’s Office of the Secretary, a job
she has held since August 2013. She previously served as a Member of the NLRB from
2012 to 2013, and was Deputy Assistant Secretary for Congressional and
Intergovernmental Affairs at DOL from 2009 to 2012. Block was also Senior Labor and
Employment Counsel for the Senate Health, Education, Labor, and Pensions Committee,
where she worked for Senator Edward M. Kennedy from 2007 to 2009. She was Special
Assistant in the EEOC’s Office of the General Counsel from 2006 to 2007. The nominee
previously served at the NLRB as senior attorney to Chairman Robert Battista from 2003
to 2006 and as an attorney in the NLRB’s appellate court branch from 1996 to 2003.
From 1994 to 1996, she was Assistant General Counsel at the National Endowment for
the Humanities.
Prior to her public-sector work, Block was an associate at Steptoe & Johnson from 1991
to 1993. She received a B.A. from Columbia University and a J.D. from Georgetown
University Law Center.
UAW finds a new role at Chattanooga VW plant
By Pamela Wolf, J.D.
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Despite its high-profile defeat in a bid to represent workers at the Volkswagen plant in
Chattanooga, Tennessee, the UAW continues to press for a role on behalf of workers at
the plant, which was billed as the place where German-style “work councils” would be
introduced to the United States. The union, it seems, is determined both to advance the
work-council experiment and represent Volkswagen employees — even if only on a
voluntary basis. On Thursday, July 10, the UAW announced the formation of the entity
that will accomplish exactly that goal — UAW Local 42.
In February, after a campaign fought fiercely by both sides of the representation question,
including purported third-party maneuvering by local and national politicians and outside
interests, the UAW lost by a vote of 712-626. Local 42, which the union says was
organized by VW workers, will give employees the chance to have a voice in the
workplace through the works council, the German automaker’s version of employee
engagement. The UAW has declared a new place in Volkswagen’s business model,
which is premised on employee representation: Local 42 will represent any interested
employees who join the local as members, but no employee will be required to join.
Old deal, new deal? Part of the problem in the union representation battle was the
apparent commitment in advance by Volkswagen and the UAW to work together to
address workplace issues — a deal under which the company not only did not oppose
unionization, but encouraged it. Those who opposed the unionization push saw that
arrangement as unlawful, or at the very least, as depriving workers of their voice on the
representation issue. Volkswagen was cleared of those charges, however. The purported
deal was also thwarted by the reality that the VW plant is located in an area of the United
States that has long been very adverse to unions — that obstacle was perhaps too great to
overcome.
This latest development may be a scaled-down, more acceptable version of the earlier
reported deal. While UAW Secretary-Treasurer Gary Casteel stressed that Local 42 will
be run by, and for, the employees, it also looks like the voluntary union, so long as it
manages to recruit a “meaningful” number of workers, will be recognized by
Volkswagen — but only as representing those who have joined the new local. “We’ve
had ongoing discussions with Volkswagen and have arrived at a consensus with the
company,” Casteel said. “Upon Local 42 signing up a meaningful portion of
Volkswagen’s Chattanooga workforce, we’re confident the company will recognize
Local 42 by dealing with it as a members’ union that represents those employees who
join the local. As part of this consensus, the UAW is committed to continuing its joint
efforts with Volkswagen to ensure the company’s expansion and growth in Chattanooga.”
Battle over economic incentives. During the earlier election campaign, state officials
indicated that if the Volkswagen plant were unionized, economic incentives extended to
the manufacturer would end. The union said that it has renewed requests for the State of
Tennessee to extend the economic incentives necessary for Volkswagen to add a new
product line at the Chattanooga plant and will continue advocating for increased
investment. “State officials have assured the public and the Volkswagen workforce that
the decision on incentives for Chattanooga is not related to whether workers exercise
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their right to join a union,” said UAW Region 8 Director Ray Curry. “We are gratified by
those assurances, and the state was right to give them.”
In the wake of the election defeat, the UAW filed objections with the NLRB over what it
saw as interference by politicians and outside interests that had tainted the election. Antiunion workers won the right to participate in the hearing on those objections, but the
union later withdrew its objections. Casteel reiterated that the UAW withdrew the
objections “to end the controversy and put the focus where it belongs: obtaining the
economic incentives necessary to ensure the growth of Volkswagen in Chattanooga and
the addition of a new product line.” As Volkswagen’s works council partner, the union’s
role “is to encourage job creation and promote job security so that Volkswagen
employees can achieve the American dream and Chattanooga’s economy can prosper,”
he said.
VW-employee-union partnership. While Local 42 is billed as an employee
organization, it clearly will rely on the UAW for support. “Having access to the UAW’s
expertise and support will keep the plant competitive and will keep our workforce on the
cutting edge of productivity and quality,” said Jonathan Walden, who works in the
Volkswagen plant’s paint department. “The members of Local 42 are ready to roll up our
sleeves and focus on the future.”
Local 42 members have declared workforce development to be a top priority. They said
they would work with Volkswagen and the UAW to organize job-training opportunities
so that employees can continually expand their skills as new technologies emerge and
manufacturing processes change. Local 42 members have also pledged to get involved in
the community to support charitable causes, youth programs, and other local needs.
According to Michael Cantrell, a VW paint technician, creating an “American-style
works council” is an opportunity to do something new and different. “This is about
securing good jobs for the future of the plant and Chattanooga, and building lasting
partnerships between management and team members.”
Union program settles claim over black apprentice dropped just before graduation
The apprenticeship school affiliated with a New Jersey construction trade union has
agreed to pay $34,500 and provide substantial remedial relief to resolve allegations
leveled by the EEOC after a black apprentice was discharged just prior to graduation. The
Joint Apprenticeship and Training Committee (JATC) of Sheet Metal Workers Local 25
discharged the apprentice because of his race just two weeks before he was to graduate
from the four-year apprenticeship program, according to the federal agency.
The EEOC reached that conclusion from its investigation of the apprentice's appeal of his
dismissal, which he filed with the court-appointed special master who monitors Local 25
and its JATC pursuant to past judicial findings of race and national origin discrimination,
the agency said in a July 14 statement. The JATC purportedly violated the court's
previous orders by summarily discharging the apprentice for alleged poor performance
just days before he was to complete the program and be promoted to journeyman status.
The JATC imposed this severe sanction on the apprentice even though he had
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satisfactorily completed virtually the entire eight-term program — and despite his
complaints about inadequate on-the-job training from biased contractors, according to the
EEOC.
The settlement of the apprentice's appeal has been approved by the court. In addition to
paying the apprentice $34,500, the consent decree requires the JATC to make significant
improvements regarding how apprentices are evaluated and kept appraised of their
educational progress and to appoint an ombudsperson to investigate complaints of bias
brought by apprentices regarding classroom instruction, access to on-the-job
opportunities, and any other aspect of the apprenticeship process. The EEOC will
continue to monitor Local 25 and the JATC's compliance with the court's orders on
recruiting, recordkeeping, and referral systems.
“The EEOC is committed to ensuring that all construction trade apprentices are able to
complete their education free from discrimination, and go on to fulfilling careers,”
remarked EEOC New York Regional Attorney Robert D. Rose. “The EEOC will
continue to enforce prior court orders to make sure that the covered unions, as well as
those contractors who work with them, do not limit the opportunities of apprentices and
workers of color.”
The lawsuit under which the claim was resolved was brought in the Southern District of
New York; the case number is 71 Civ. 2877.
President names appointees to National Council on Federal Labor-Management
Relations
President Obama has named four individuals to serve as Members of the National
Council on Federal Labor-Management Relations (Council): J. David Cox, Michael B.
Filler, David J. Holway, and H.T. Nguyen. Three of the appointees have previously
served on the Council, which was created in 2009 by Executive Order. The Council,
which advises the President on matters involving labor-management relations in the
executive branch, is co-chaired by the Director of the Office of Personnel Management,
Katherine Archuleta, and the Deputy Director for Management of the Office of
Management and Budget, Beth Cobert, the White House noted in a July 15 release.
J. David Cox. Since 2012, J. David Cox has served as President of the American
Federation of Government Employees (AFGE), an affiliate of the AFL-CIO. He has also
served on the Federal Salary Council since 2010. Cox was National Secretary-Treasurer
of AFGE from 2006 to 2012. Before his AFGE leadership stint, he worked for the
Department of Veterans Affairs from 1983 to 2006. Cox became a registered nurse in
1983.
Cox is also a member of the AFL-CIO Executive Council and has been Vice President of
the North Carolina State AFL-CIO since 1993. He is also Chairman of the Executive
Committee of the AFL-CIO’s Department for Professional Employees and Chairman of
the AFL-CIO’s Union Veterans Council. He received an A.S. in nursing from RowanCabarrus Community College.
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Michael B. Filler. A Council veteran, Michael B. Filler is the Director of the Public
Services Division of the International Brotherhood of Teamsters (IBT), with
responsibility for overseeing the representation of over 260,000 public and professional
employees throughout the United States, Canada, and Puerto Rico. He was first appointed
to the Council in 2010 and was appointed for a second term in 2012.
From 2003 to 2005, Filler was the Associate Director of the IBT’s Education
Department. He previously worked at the National Treasury Employees Union in various
positions from 1985 to 1999, including Director of Negotiations, Northeast Regional
Director, and National Field Representative. Filler worked at the Federal Election
Commission as a Branch Chief from 1981 to 1984 and as a Reports Analyst from 1976 to
1980. He was also a founding member of the Federal Workers Alliance, an active
participant in the United Department of Defense Workers Coalition, and the Teamsters’
Delegate to the Public Services International Convention in Vienna, Austria, in 2007.
Filler received a B.A. in Political Science from American University.
David J. Holway. Also a Council veteran, David J. Holway is the President of the
National Association of Government Employees (NAGE) and the International
Brotherhood of Police Officers (IBPO). He was first appointed to the Council in 2010
and was appointed for a second term in 2012. Prior to his current position, Holway served
in many capacities at NAGE, including Lead Negotiator and Legislative Director.
Holway has also held several government positions, including Deputy Commissioner in
the Massachusetts Department of Correction, Chief Financial Officer at the Norfolk
County Hospital, and Budget and Staff Director at the Massachusetts Legislative
Committee on Counties. He served on the Cambridge, Massachusetts, School Committee
from 1978 to 1979. In 2011, he began serving his second four-year term as a member of
the Employee Thrift Advisory Council. Holway received a B.S. from Boston State
College.
H.T. Nguyen. The fourth appointee, H.T. Nguyen, is also a Council veteran, having first
been appointed in 2010 and then appointed for a second term in 2012. He is the
Executive Director/General Counsel of the Federal Education Association (FEA), a state
affiliate of the National Education Association representing federally-employed
educators. Nguyen previously served as the Deputy General Counsel for the FEA from
1988 to 1998, where he was the FEA’s lead attorney in all major cases involving the
Association. From 1984 to 1988, he was a Staff Attorney with the Overseas Education
Association, another affiliate of the National Education Association. In 1983, Nguyen
was an associate at Berger & Miranda in San Jose, California. From 1978 to 1980, he was
a case worker for the International Rescue Committee in Washington, D.C.
Nguyen received a B.A. in American Government and an M.A. in International Relations
from The Catholic University of America. He received a J.D. from the Columbus School
of Law at The Catholic University of America.
Is NLRB’s silence good news on the class action waiver front?
By Pamela Wolf, J.D.
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The deadline has now come and gone for the NLRB to take the debate over the validity
of class action waivers in arbitration agreements to the Supreme Court for final
resolution. Tuesday, July 15, was the deadline for the Board to ask the Justices to
consider the issue. The Board’s refrain from action could be good news for employers,
according to Ogletree Deakins shareholder Ron Chapman, Jr., the lead attorney
representing D.R. Horton in the case that gave rise to the controversy.
In December 2013, the Fifth Circuit ruled that an employer did not violate the NLRA by
requiring its employees to sign an arbitration agreement that prohibited them from
pursuing claims in a collective or class action. The NLRB had held to the contrary, but
the appeals court found that the Board did not given proper weight to the Federal
Arbitration Act (FAA). The Fifth Circuit reversal of the Board’s decision was a big deal
because many employers were using similar class action waivers that the NLRB
continued to label invalid, even in the face of several contrary court opinions.
Board decision. The NLRB had concluded in its D.R. Horton decision that the employer
violated Secs. 7 and 8(a)(1) by requiring its employees to sign the arbitration agreement
that precluded class or collective claims addressing wages, hours and other conditions of
employment in any forum. According to the Board, the agreement interfered with the
exercise of employees’ right to act in concert. The Board deemed it well-settled that the
NLRA protects the right of employees to improve their working conditions through
administrative and judicial forums.
Fifth Circuit disagreed. The Fifth Circuit saw it differently, noting among other things,
that no court decision had held that the Sec. 7 right to engage in “concerted activities for
the purpose of . . . other mutual aid or protection” prohibited class action waivers in
arbitration agreements. The appeals court also pointed out that the use of class action
procedures is not a substantive right. While the NLRA’s fundamental precept is the right
for employees to act collectively, there are numerous court decisions holding that there is
no right to use class action procedures under various employment-related statutory
frameworks.
Moreover, the Board’s determination that invalidating restrictions on class or collective
actions would not conflict with the FAA was soundly rejected by the Fifth Circuit. The
Board argued that any employee-employer contract prohibiting collective action fails
sunder Sec. 7. In so finding, the Board determined that the policy behind the NLRA
trumped the different policy considerations in the FAA that supported enforcement of
arbitration agreements. The Board relied on an FAA exception to the requirement that
arbitration agreements must be enforced according to their terms.
But the Fifth Circuit was not persuaded by the Board’s contention that the arbitration
agreement violated the collective action provisions of the NLRA — thereby triggering
the exception that an arbitration agreement may be invalidated on any ground that would
invalidate a contract under the FAA’s “saving clause.” A detailed analysis of AT&T
Mobility LLC v Concepcion showed that the Board’s rule did not fit within the FAA’s
saving clause. The effect of the Board’s interpretation was to disfavor arbitration.
Requiring a class mechanism is an actual impediment to arbitration and violates the FAA.
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The appeals court also found no support under the second exception, under which
application of the FAA may be precluded by another statute’s contrary congressional
command.
What does the Board’s inaction mean? “The decision not to seek Supreme Court
review is an important piece to the still evolving puzzle, but it's just one piece,” Chapman
told Employment Law Daily. “We don't know why the NLRB chose not to pursue the
case further. Hopefully, it is a signal that the NLRB might reconsider the rationale from
the Horton decision, but it could simply be that the NLRB didn't like its chances and
didn't want to risk an adverse ruling from the Supreme Court.”
For employers, according to D.R. Horton’s lead counsel, “this development provides
even greater confidence that class action waivers in properly worded arbitration
agreements are perfectly valid.” Given the extreme importance of the issue, Chapman
suggested every employer should at least consider having such an arbitration agreement
in place.
Tentative deal reached in Long Island Rail Road dispute
By Pamela Wolf, J.D.
Amidst the threat of what could have been a crippling strike, a four-year long contract
dispute between New York’s Metropolitan Transportation Authority and a coalition of
eight Long Island Rail Road (LIRR) labor unions has been resolved by a tentative deal
that is subject to union member approval. The agreement provides a 17-percent wage
increase recommended by the Presidential Emergency Board (PAB) and includes the
first-ever healthcare contributions from the 5,400 workers that make up the eight unions,
while also protecting commuters and the MTA’s long-term financial stability, according
to a July 17 announcement by Governor Andrew M. Cuomo, MTA Chairman and CEO
Thomas F. Prendergast, and United Transportation Union President Anthony Simon.
In March, President Obama issued Executive Order (EO) 13663 establishing a second
PAB to investigate the ongoing dispute between the LIRR and employees represented by
the unions. A prior emergency board, established by EO in November 2013, terminated
upon issuance of its report, and its recommendations were not accepted by the parties.
The second federal intervention to settle the contentious matter has apparently netted a
much better result. Based on the second PAB’s recommendations, the proposed
agreement provides that existing LIRR employees will receive 17-percent raises over a
term of six-and-a-half years. To ensure the long-term affordability of these wage
increases, the deal requires that all employees will for the first time contribute to their
health insurance costs, and new employees will have different wage progressions and
pension plan contributions.
The contract will have no impact on MTA fares and will be accommodated with revisions
to the MTA financial plan.
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“The Long Island Rail Road is a critical artery in connecting the downstate region, and
the men and women who keep it running play a vital role in the lives of our commuters
and in the communities that the LIRR serves,” remarked Governor Cuomo. “Resolving
this contract dispute is the right thing to do, and the agreement we have reached today is
fair to all parties. It recognizes the many contributions of the LIRR’s hardworking
employees, while also maintaining the fiscal integrity of the MTA. I thank everyone
involved in these negotiations, especially UTU Chairman Anthony Simon and MTA
Chairman Tom Prendergast, whose collective dedication to the needs of LIRR commuters
made this agreement possible.”
New contracts approved, tentative deal reached
By Pamela Wolf, J.D.
In the labor world, several ongoing disputes have been resolved, including union
membership votes that approved new contracts at American Airlines, AT&T Park in San
Francisco, and the San Francisco Metropolitan Transit Authority (SFMTA). Full-time
cast members at Walt Disney World Resort in Orlando, Florida, have also reached a
tentative contract deal.
American Airlines. About 11,000 maintenance training specialist, fleet service, and
mechanic and related employees of the “new” American Airlines have approved new
contracts, with 96, 86 and 67 percent, respectively, of the union membership voting in
favor of the deal, according to a July 19 release by the International Association of
Machinists and Aerospace Workers (IAM). US Airways and American Airlines merged,
forming one company. IAM represents the pre-merger US Airways workers that
approved the new contract.
In May 2013, the IAM and the Transport Workers Union of America (TWU) announced
a partnership to jointly represent nearly 30,000 ground workers at the “new” American
Airlines following the merger.
The three-year accords approved by the IAM membership provide for significant wage
hikes and industry-best job security while retaining affordable health insurance and
preserving defined-benefit pension plans at the carrier, according to the union. The TWUIAM representation Alliance will now begin talks with American Airlines for agreements
that will bring the rest of the TWU-IAM Alliance members under joint contracts.
“I'd like to thank all IAM members and their negotiating committees at US Airways for
their patience, support and determination during this tenuous process,” said IAM General
Vice President Sito Pantoja. “We are now well situated to begin joint contract talks with
our TWU sisters and brothers to achieve the best contracts in the airline industry at the
world’s largest airline.”
Centerplate. UNITE HERE Local 2 and Centerplate, the company that provides
hospitality services for the San Francisco Giants, have reached a contract agreement that
ends labor negotiations on behalf of 800 food and beverage workers at AT&T Park. The
agreement, ratified by a 98-percent vote in favor, provides wage increases, health care
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and improved pension benefits. The agreement extends through the start of the 2019
baseball season, according to a July 15 union statement.
“We are proud to announce a great contract that secures our health care, wages, pensions,
and provides job security,” said Billie Feliciano, a Centerplate concession worker who
has been serving SF Giants’ fans since 1978. “We look forward to welcoming the
thousands of fans who make AT&T Park a great place to work, this season and in future
ones.”
“This agreement underscores Centerplate’s commitment to its employees, maintains
wages and benefits as some of the best in the league, and allows us to continue providing
the highest standard of service to fans of the San Francisco Giants,” said Des Hauge,
CEO, Centerplate.
SFMTA. San Francisco Muni operators and fare inspectors represented by the Transport
Workers Union (TWU) Local 250-A voted to ratify a new three-year contract with the
SFMTA. Some 634 TWU Local 250-A Muni operators voted in favor of the agreement
and 485 voted against it. Twenty-three Local 250-A transit fare inspectors voted in favor
of the agreement and none voted against it.
The new agreement includes raises totaling 14.25 percent for TWU Local 250-A
members, Local 250-A President Eric Williams pointed out in a July 15 release. He said
the raises will more than cover increased pension contributions of 7.5 percent. A previous
tentative agreement, he said, “was a pay cut, because the pension costs were more than
the raises we would have received. That’s why it was overwhelmingly rejected.”
Walt Disney World Resort. On Thursday, July 17, the Service Trades Council Union
and Walt Disney World Resort reached a tentative deal for a contract that would cover
21,000 full-time cast members. The proposal includes unprecedented wage increases,
limits employees’ healthcare costs, and protects cast members’ defined benefit pension
plan, according to the union. The union membership will vote on whether to ratify the
deal on August 1.
Negotiations had been ongoing since workers’ contract expired in March. The tentative
settlement came just minutes before the contract extension was set to expire.
The tentative agreement lifts starting hourly pay from the current minimum of $8.03 to
$9 in 2014; to $9.50 in 2015; and to $10 in 2016. Workers who are above those minimum
rates will receive $.50 per hour increases in each of the three years. Most significantly,
according to the union, the agreement calls for no increase in employees’ weekly health
insurance contributions in 2015. That freeze in employees’ healthcare costs is the first in
many years.
“We are extremely proud to have reached such an unprecedented milestone for thousands
of Disney workers,” said Jeremy Cruz-Haicken, president of UNITE HERE Local 737.
“The agreement includes the biggest wage increase workers have seen in recent
memory.”
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“We have set a new standard for workers in the Central Florida hospitality industry, and
it is because of the tremendous participation of cast members who wanted to make their
voices heard in the negotiating process. I feel inspired and proud,” said Eric Clinton,
president of UNITE HERE 362.
NY healthcare workers reach 'landmark' deal with hospitals, nursing homes
1199SEIU United Healthcare Workers East announced via Twitter what it called a
“Landmark agreement reached for 70,000+ nurses/caregivers at 109 NY hospitals &
nursing homes!” The deal, which averted a strike, followed months of negotiations that
culminated in marathon talks over this past weekend. In the early morning hours of
Monday, July 21, the union and the League of Voluntary Hospitals and Homes of New
York announced a tentative four-year collective bargaining agreement.
The proposed CBA would run from October 2, 2014, until September 30, 2018. It
includes total wage increases of 13 percent, according to a 1199SEIU release. The
tentative deal also provides for employer contributions to fully fund the National Benefit
Fund through the end of the contract and full funding for other 1199SEIU Funds,
including the Child Care, Job Security, and Training and Upgrading Funds. Contributions
to the National Pension Fund will remain at 11.25 percent through January 1, 2016, and
will then be reduced to 10 percent to cover wage increases over 3 percent. Contributions
will remain at 10 percent in case of any other Fund shortfalls.
“This is one of the best contracts we’ve ever gotten and one of the hardest contracts
we’ve ever negotiated because we had so much to lose,” remarked Rosemarie Curley, a
secretary II at Southside Hospital in Bay Shore, NY. “I’m so proud of our members. We
came in not wanting to lose anything and we got wages. We didn’t want to go on strike,
but we were willing to if we had to. And in the end we didn’t have to. This is a testament
to what we can do together.”
League President Bruce McIver said, “This agreement demonstrates the strength of our
commitment to work with 1199SEIU and tackle some of the most complex issues facing
the healthcare industry today …We are pleased to have reached an agreement that
preserves benefits and increases wages for our great workforce, while supporting the
health and sustainability of New York’s non-profit hospitals, health system and nursing
homes.”
McDonald’s could be liable as joint employer in complaints against franchisees
By Pamela Wolf, J.D.
In a move that will undoubtedly spawn much concern in the franchise world, the NLRB’s
General Counsel said that McDonald’s will be named as a joint employer respondent
should parties find it impossible to resolve allegations that McDonald’s franchisees and
the world-famous franchisor violated employees’ NLRA rights as a result of activities
related to worker protests.
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In ongoing protests in the United States and across the globe seeking to win a minimum
wage increase for fast-food workers, among other sectors, there has been a great deal of
focus on McDonald's, the fast-food giant with the farthest global reach.
The Office of the General Counsel has investigated the protest-related charges and found
merit in some, but not others. Accordingly, the GC has authorized complaints on the
alleged NLRA violations. The complaints will be issued and McDonald’s, USA, LLC
will be named as a joint employer respondent, the Board said in a July 29 statement.
Since November 2012, the General Counsel’s office has logged 181 cases involving the
giant franchisor. Of those cases, 68 were found to have no merit, 43 had merit, and 64
cases are currently pending investigation. In the 43 cases where the GC has authorized
complaints, McDonald’s franchisees and/or McDonald’s, USA, LLC will be named as a
respondent if parties are unable to reach settlement.
McDonald’s will contest the NLRB’s determination that it is a joint employer, according
to media reports.
Board’s GC takes on the big one: Is McDonald’s a joint employer?
By Pamela Wolf, J.D.
The NLRB stirred a hornet’s nest yesterday when its Office of the General Counsel
announced that McDonald’s will be named as a joint employer respondent with regard to
any unresolved charges against its franchisees stemming from worker protests. The
reactions were quick and pointed. It is important, however, to keep in mind the context of
the development — for purposes of issuing a complaint — that the General Counsel is
alleging a joint employer relationship. The Board has not issued a ruling that
McDonald’s is in fact a joint employer of any of its franchisees’ employees, or that the
global company bears any liability. But the move could signal one more shift in the
already changing labor landscape.
It’s also no secret that the Board is reconsidering its long-standing joint employer
standard. In May, NLRB extended an invitation to parties and interested amici to filed
briefs addressing the Board’s joint employer standard, as raised in Browning-Ferris
Industries (No 32-RC-109684). On April 30, 2014, the Board granted the employer’s
request for review of a Regional Director’s decision and direction of election, finding it
raised substantial issues warranting review.
Joint-employer relationship denied. McDonald’s denied any joint employer
relationship with its franchisees, stating that the global fast-food giant “serves its 3,000
independent franchisees’ interests by protecting and promoting the McDonald’s brand
and by providing access to resources related to food quality, customer service, and
restaurant management, among other things, that help them run successful businesses.”
This relationship, according to McDonald’s, does not establish a joint employer
relationship under labor law. “This decision to allow unfair labor practice complaints to
allege that McDonald’s is a joint employer with its franchisees is wrong,” Heather
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Smedstad, Senior Vice President Human Resources, McDonald’s USA, said in a
statement. She also made it clear that the corporation intends to contest the allegation.
“McDonald’s also believes that this decision changes the rules for thousands of small
businesses, and goes against decades of established law regarding the franchise model in
the United States. McDonald’s, as well as every other company involved in franchising,
relies on these existing rules to run successful businesses as part of a system that every
day creates significant employment, entrepreneurial and economic opportunities across
the country,” Smedstad continued. “McDonald’s does not direct or co-determine the
hiring, termination, wages, hours, or any other essential terms and conditions of
employment of our franchisees’ employees — which are the well-established criteria
governing the definition of a ‘joint employer,’” the executive explained.
Franchise community alarmed. Not surprisingly, the General Counsel’s decision to
allege McDonald’s is a joint employer with franchisees, should complaints issue, has
sparked much concern in the franchise industry. International Franchise Association
President & CEO Steve Caldeira, CFE, quickly released a statement regarding what he
described as a “the decision by the NLRB Division of Advice recommending franchisors
and franchisees can be designated as joint-employers,” calling it “both wrong and
unjustified.” He continued, “This legal opinion would upend years of federal and state
legal precedent and threaten the sanctity of hundreds of thousands of contracts between
franchisees and franchisors, a bedrock principle of the rule of law.”
At the time of press, the NLRB had not made public any Advice Memorandum related to
joint employers or to McDonald’s.
“Millions of jobs and the livelihoods of hundreds of thousands of independent franchise
small businesses are now at risk due to the radical and unprecedented nature of this
decision,’ Caldeira suggested. “Ruling that franchises are joint-employers will be a
devastating blow to franchise businesses and the franchise model. Franchise job growth
and new business formation have outpaced non-franchise growth for the last five years
but will undoubtedly come to a screeching halt if this decision is affirmed by the NLRB’s
New York Regional Office.”
Caldeira said that “[t]his recommendation is a drastic and overreaching solution,” and
that ample federal, state and local remedies are available and used regularly to enforce
current law. He pointed to the remedies of more limited NLRB action, state attorneys’
general action, and private rights of action to deal with labor violations. “Destroying the
fundamental tenets of the franchise model would eviscerate the most successful business
model in existence,” according to Caldeira.
Lawmakers react. On Capitol Hill, the development drew the ire of leading Republican
lawmakers. House Education and the Workforce Committee Chairman John Kline (RMinn.) issued a statement responding to the development, saying that the General
Counsel has “determined McDonald’s Corp. and its franchisees are ‘joint employers’ —
a decision he called “detached from reality.”
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“While the board is considering this very issue, the general counsel is trying to rewrite
the franchise model workers, employers, and consumers have known for decades,” Kline
charged. “This is yet another activist decision from the general counsel's office. Big
Labor has scored once again at the expense of workers and employers. Let’s hope wiser
heads prevail and this absurd decision is rejected.”
On the Senate side, Senator Lamar Alexander (R-Tenn.), the senior Republican on the
Health, Education, Labor and Pensions Committee, also reacted quickly. “Imagine being
an owner of a franchise business and being told that all the employees that you recruit,
hire, train, pay, promote, and work alongside day after day are actually another
company’s employees, too,” he said. “The NLRB General Counsel’s absurd
determination ignores decades of precedent and plain old common sense in what can only
be an effort to help labor unions add more members. It’s time to change the Board for
good and ensure it’s the umpire it’s intended to be, not the advocate it’s become.”
Employee side of the equation. To place the controversial development in broader
context and get a glimpse of the employee side of the equation, Employment Law Daily
reached out to Marquette University Law School professor Paul Secunda. The decision
by the NLRB General Counsel to treat McDonald’s, and presumably, other fast food
restaurants, as joint employers could potentially have a large impact on protecting
workers’ labor rights under Section 7 of the NLRA, he said.
“Of course, just because McDonald’s could be found liable, does not mean that they will,
and many of the cases (68) were already found by the General Counsel not to have
merit,” Secunda noted.
He also pointed to the significant challenges still facing workers who seek to organize
unions at such workplaces or who seek to file an unfair labor practice claim against the
company for unfair treatment. “On the election side, such fast food restaurants still have
very transient workforces and it might be hard to keep the momentum of an organization
campaign going as employees come and leave such jobs,” he suggested.
“On the unfair labor practice side, there are no compensatory or punitive damages for
such claims under the NLRA,” Secunda noted. “The normal remedy is reinstatement with
some form of backpay. Those types of damages may certainly help some workers. But
the remedies for failure to bargain with a recognized union are very weak and may make
it no more likely that a restaurant like McDonald’s will ever enter into a collective
bargaining agreement with its workers.”
Turning his attention beyond the traditional Wagner Act model of labor law where unions
are organized and then bargain with their employers for contracts, Secunda observed: “It
may be that this joint employer decision is more important because of the alternative
strategies that workers are increasingly using outside the traditional models of unionism,
like the protests and pickets involved in these McDonald’s cases.”
Those strategies, according to Secunda, may prove more effective — regardless of
whether a union is involved — if workers can involve a franchisor like McDonald’s in
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their allegations of unfair pay, benefits, and working conditions. “Not only does
McDonald’s have a proverbial deeper pocket, but from a public relations perspective, it
does not allow the corporate headquarters to deflect allegations down to the level of the
franchisee.”
If McDonald’s is in fact found liable for committing an unfair labor practice, the decision
finding it to be a joint employer will be undoubtedly be appealed to the D.C. Circuit or
another court, and its fate there remains to be seen, Secunda point out.
Executive Order will target federal contractor labor and safety violations
By Pamela Wolf, J.D.
In the aftermath of an investigation by the Senate Health, Education, Labor and Pensions
(HELP) Committee investigation, which found widespread labor violations by
government contractors that went unnoticed in the contracting process, the White House
announced on Wednesday, July 30, President Obama’s intent to sign an Executive Order
(EO) targeting the problem. The move is aimed to improve the federal contracting system
by taking new steps to ensure that companies paid by taxpayers provide safe and fair
workplaces. The EO will require prospective federal contractors to disclose labor law
violations and will give agencies more guidance on how to consider labor violations
when awarding federal contracts. It will also place restrictions on certain arbitration
agreements.
HELP Committee investigation. HELP Committee Chairman Tom Harkin (D-Iowa),
called the upcoming EO “a bold response” to the report he released less than a year ago.
The investigative report found that “in 2012 alone, taxpayers provided more than $80
billion in contracts to companies that had committed significant violations of our basic
labor laws, which are designed to ensure workers are paid fairly and are safe on the job,”
Harkin stressed in a statement. “The President’s action will be an important step forward
to give the government more tools to effectively confront and deter workplace wage and
safety violations. Companies that receive federal contracts employ 22 percent of the
workforce, so this action will raise working conditions for millions of Americans.”
The amount of federal service contracts increased by more than $200 billion since 2000,
with an increasing number of private-sector employees paid with taxpayer dollars,
according to the report. Almost 30 percent of companies receiving the highest penalties
for violations of federal labor law are also federal contractors. Between 2007 and 2012,
49 federal contractors were accountable for almost 1,800 separate enforcement actions
taken by the DOL and paid $196 million in back wages and initial penalties over that
period, the report revealed.
The HELP Committee’s investigation also found:

Eighteen federal contractors were recipients of one of the largest 100 penalties
issued by the OSHA between 2007 and 2012. Almost half of the total initial
penalty dollars assessed for OSHA violations were against companies holding
federal contracts in 2012.
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
Forty-two American workers died during this period as a result of OSHA
violations by companies holding federal contracts in 2012. Notably, in 2010,
seven workers were killed at a Tesoro-owned refinery in Anacortes, Washington,
when a heat exchanger ruptured and spewed vapor and liquid that exploded. The
workers who died were standing near the area of the rupture specifically to
attempt to stop leaks of the volatile, flammable gases in the facility, which had not
been inspected for 12 years prior to the rupture. Tesoro nonetheless was the
recipient of $463 million in federal contracts in fiscal year 2012.

Among the largest 100 back wage assessments issued by the DOL’s Wage and
Hour Division between 2007 and 2012, 32 were federal contractors.

Overall, the 49 federal contractors responsible for large violations of federal labor
laws were cited for 1,776 separate violations of these laws and paid $196 million
in penalties and assessments. In fiscal year 2012, these same companies were
awarded $81 billion in taxpayer dollars.

Thirty-five of these 49 federal contractors responsible for large violations of
federal labor laws violated both wage and safety laws.
Executive order provisions. On Thursday, July 31, the White House released a fact
sheet explaining the soon-to-be issued EO on fair pay and safe workplaces. “Although
many contractors already play by the rules, and federal contracting officers already must
assess a contractor’s record of integrity, these officers still may not necessarily know
about companies’ workplace violations,” the document points out. The new process will
be structured to encourage companies to settle existing disputes, like paying back wages.
The EO will also ensure that workers are given the necessary information each pay period
to verify the accuracy of their paycheck. Additionally, the EO will target certain
arbitration agreements. “[W]orkers who may have been sexually assaulted or had their
civil rights violated get their day in court by putting an end to mandatory arbitration
agreements at corporations with large federal contracts,” according to the fact sheet.
The Fair Pay and Safe Workplaces Executive Order will govern new federal procurement
contracts valued at more than $500,000, providing information on companies’
compliance with federal labor laws for agencies, the fact sheet explains. The EO is
expected to be implemented on new contracts in stages, on a prioritized basis, during
2016. According to DOL estimates, there are about 24,000 businesses with federal
contracts, employing about 28 million workers.
The fact sheet provides further detail on the following key provisions of the anticipated
EO:

Hold Corporations Accountable: Agencies will require prospective contractors
to disclose labor law violations from the past three years before they can get a
contract.

Crack Down on Repeat Violators: Contracting officers will take into account
only the most egregious violations, and each agency will designate a senior
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official as a Labor Compliance Advisor to provide consistent guidance on
whether contractors’ actions rise to the level of a lack of integrity or business
ethics.

Promote Efficient Federal Contracting: Federal agencies risk poor performance
by awarding contracts to companies with a history of labor law violations.
Because the companies with workplace violations are more likely to encounter
performance problems, the EO will also improve the efficiency of federal
contracting and result in greater returns on federal tax dollars.

Protect Responsible Contractors: The vast majority of federal contractors have
clean records. The DOL estimates that the overwhelming majority of companies
with federal contracts have no federal workplace violations in the past three years.

Focus on Helping Companies Improve: The goal of the process created by the
EO is to help more contractors come into compliance with workplace protections,
not to deny contracts to contractors. Companies with labor law violations will be
offered the opportunity to receive early guidance on whether those violations are
potentially problematic and remedy any problems. Contracting officers will take
these steps into account before awarding a contract and ensure the contractor is
living up to the terms of its agreement.

Give Employees a Day in Court: The EO directs companies with federal
contracts of $1 million or more not to require their employees to enter into predispute arbitration agreements for disputes arising out of Title VII or from torts
related to sexual assault or harassment (except when valid contracts already exist).

Give Employees Information About their Paychecks: The EO requires
contractors to give their employees information concerning their hours worked,
overtime hours, pay, and any additions to or deductions made from their pay, so
workers can be sure they’re getting paid what they’re owed.

Streamline Implementation and Overall Contractor Reporting: The EO
directs the General Services Administration to develop a single website for
contractors to meet their reporting requirements — for this order and for other
contractor reporting.
“Part of the basic American bargain is that if you take responsibility, work hard and play
by the rules, workers can count on fair wages, freedom from discrimination on the job,
and safe and equitable workplaces,” the fact sheet states. “Taxpayer dollars shouldn’t be
used by unscrupulous employers to drive down living standards for our families,
neighbors, and communities. By creating incentives for better compliance and a process
for helping contractors come into compliance with basic workplace protection laws, the
Executive Order is basic good government that will increase efficiency in federal
contracting and will help strengthen our workforce and our economy.”
24
LEADING CASE NEWS:
3d Cir.: Union member denied motion to disqualify defense counsel from joint
representation of union and officers
By Ronald Miller, J.D.
A union member’s appeal of a district court order denying his motion to disqualify
defense counsel from the joint representation of unions and individual union officers, and
to prohibit the payment of the union officials’ legal fees with union funds was dismissed
by the Third Circuit in an unpublished opinion. Finding that the unions’ payment of legal
fees for the officers was not related to any requested relief sought by the member, the
appeals court determined that it lacked appellate jurisdiction of his appeal (Averhart v
CWA Union Local 1033, July 3, 2014, per curiam).
The union member was unsuccessful in running for president of a local union on three
separate occasions. After the latest election in 2011, he filed suit against a parent union
and the local union along with certain union officers for mismanagement and misconduct.
The parent union and its officers were represented by the same counsel. Similarly, the
local union’s separate counsel represented its officers as well. Here, the member sought
an order (1) disqualifying counsel from jointly representing the union entities and their
officers, and (2) enjoining the unions from paying the officers’ legal fees in this litigation.
The district court denied both requests, holding that joint representation was permissible
under the applicable Rules of Professional Conduct because the member’s claims likely
did not present a conflict of interest between the union entities and their officers. The
member appealed. Here, the Third Circuit sua sponte raised the issue of appellate
jurisdiction.
Payment of legal fees. As an initial matter, the member conceded that the appeals court
lacked jurisdiction to review the district court’s denial of his request to disqualify defense
counsel, and expressly withdrew his appeal on that issue. As a result the appeals court
was left with the district court’s denial of the member’s request to prohibit the union
entities from paying their officers’ legal fees. Here, the Third Circuit agreed with the
defendants’ argument that the district court’s refusal to grant an injunction under 28
U.S.C. Sec. 1292(a)(1), was not immediately appealable.
Although the member framed his request as one for injunctive relief and the district court
treated it as such, “the label used by the district court is not dispositive,” noted the Third
Circuit. Rather, according to the appeals court, the district court’s order did not constitute
an injunction or refusal of an injunction under Sec. 1292(a)(1) unless it granted or denied
a request to “accord or protect some or all of the substantive relief sought by the
complaint.” Orders do not constitute injunctions or refusals of injunctions if they merely
“concern[] the conduct of the parties or their counsel, unrelated to the substantive relief
sought.”
25
No relation to relief sought. The union member’s complaint did not mention the union
entities’ payment of legal fees, let alone seek any relief on that basis. To the contrary, the
member’s complaint asserted that the defendants breached contracts and their fiduciary
duties and otherwise violated the law in ways relating primarily to management of the
union entities and the 2011 election. Those claims were not based on and did not seek
relief from the union entities’ payment of legal fees.
Further, the appeals court rejected the member’s contention that the district court’s ruling
“touches the merits of part of the complaint” because his complaint alleged breaches of
contract and fiduciary duty and the union entities’ payment of legal fees constituted an
additional breach. However, the member conceded that if the officers were unsuccessful
in defending this matter, the union entities or the member would be required to bring a
separate action to recover unauthorized expenditure of union funds. Thus, the union
entities’ payment of legal fees was not related to any of the relief that he requested in his
complaint.
Moreover, the district court’s denial of the member’s request did not otherwise relate to
the merits of his claims. The district court declined to prohibit the union entities from
paying their officers’ legal fees on the sole ground that joint representation was
permissible under the applicable Rules of Professional Conduct. That ruling had no
bearing on the merits of the member’s claims and was instead inextricably intertwined
with the district court’s denial of his request for the disqualification of counsel, which
was not presently appealable.
Finally, the member argued that the union entities’ payment of legal fees was related to
his complaint because he sought to enjoin such payment in order “to protect the remedies
sought in the complaint.” The appeals court rejected this argument because “[s]uch a
broad reading of section 1292(a)(1) would undermine the limited exception to the final
judgment rule that section 1292(a)(1) carves out.” Thus, the Third Circuit dismissed the
appeal for lack of appellate jurisdiction.
The case number is: 13-4352.
Attorneys: Walter R. Bliss Jr. (Law Offices of Walter R. Bliss, Jr.) for CWA Union Local
1033. Jesse J. Averhart, pro se.
3d Cir.: New Jersey’s Prevailing Wage Act not preempted by ERISA or LMRA
By Ronald Miller, J.D.
Because New Jersey’s Prevailing Wage Act (PWA) was not completely preempted by
either ERISA or the LMRA, the Third Circuit vacated a district court order dismissing
claims by union benefit plans alleging that a casino project that received financial
assistance in the form of tax incentives, tax exemptions, and tax reimbursements was a
“public work” within the meaning of the PWA. Here, the appeals court determined that
the employer’s duty to pay prevailing wages derived from the PWA, not any ERISA plan.
As a result, no interpretation of any ERISA plan was necessary in order to determine
whether the employees were paid prevailing wages. Similarly, proving a PWA violation
26
did not require any reference to or analysis of any collective bargaining agreement (New
Jersey Carpenters v Tishman Construction Corporation of New Jersey, July 28, 2014,
Chagares, M).
Prevailing wage claim. The PWA provides that laborers on certain public works projects
are to be paid the prevailing wage. A “public work” falls within the PWA if it is “paid for
in whole or in part out of the funds of a public body,” or if at the time of entering into the
contract, the property where the labor is performed is owned or substantially leased by a
public body. If a worker believes that he or she has been paid less than the prevailing
wage, that worker may file a complaint with the Labor Commissioner.
The workers at issue in this case were carpenters hired to work on a casino project in
Atlantic City. They contend that the Revel Casino Project is a “public work” within the
meaning of the PWA because it received financial assistance in the form of incentives,
tax exemptions, and tax reimbursements from the New Jersey Economic Development
Authority (EDA). According to the employees, their employer, Simon/Watt, did not pay
them fringe benefits as required by the PWA. Tishman Construction was the general
contractor and/or construction manager on the casino project and subcontracted certain
carpentry work to Simon/Watt.
The employees assigned their claims for unpaid prevailing wages to union employee
benefit plans. Thereafter, the benefit plans brought suit in state court alleging violations
of the EDA Act and PWA. However, the employer removed the case to federal court,
asserting subject matter jurisdiction pursuant to the “complete preemption” doctrine.
Specifically, the employer contended that the complaint was completely preempted
pursuant to ERISA Sec. 502(a) because the benefit plans’ cause of action was actually
one to collect benefits due. The employer also claimed that the benefit plans’ claims were
preempted by Sec. 301 of the LMRA, because resolution of the dispute involved
interpretation of a collective bargaining agreement.
After removal, the employer moved to dismiss the action. The district court agreed with
the employer’s characterization of the action and held that the benefit plans’ claims were
completely preempted under ERISA, and that the complaint “seeks interpretation of the
collective bargaining agreement.” Additionally, the district court concluded that the
action was expressly preempted by ERISA, Sec. 514. The benefit plans timely appealed.
Subject matter jurisdiction. Before reaching the preemption issue, the Third Circuit
first determined whether there was subject matter jurisdiction over the benefit plans’
PWA claims in federal court. Complete preemption under Sec. 502(a) is a “jurisdictional
concept,” whereas express preemption under Sec. 514 is a “substantive concept
governing the applicable law.” Because subject matter jurisdiction involves “a court’s
power to hear a case,” the court had an “independent obligation to determine whether
subject-matter jurisdiction exists.”
A cause of action does not typically “arise under” federal law unless a federal question
appears on the face of a well-pleaded complaint. Complete preemption “operates to
confer original federal subject matter jurisdiction notwithstanding the absence of a
27
federal cause of action on the face of the complaint.” Beginning with Sec. 502, the court
observed that ERISA’s civil enforcement mechanism had extraordinary preemptive
power that converts an ordinary state common law complaint to one stating a federal
claim for purposes of the well-pleaded complaint rule and permits removal. A claim is
completely preempted, and thus removable, under ERISA Sec. 502(a) only if: (1) the
plaintiff could have brought the claim under Sec. 502(a); and (2) no other independent
legal duty supports the plaintiff’s claim. Because the test is conjunctive, a state-law cause
of action is completely preempted only if both of its prongs are satisfied.
ERISA preemption. In this instance, the employer contended that the suit was
preempted because the benefit plans sought to collect “delinquent fund contributions”
and overlapped two portions of ERISA’s comprehensive enforcement scheme. However,
the Third Circuit disagreed. Turning to the second prong of the test, the appeals court
observed that if the state law claim is not “derived from, or conditioned upon” the terms
of an ERISA plan, and “[n]obody needs to interpret the plan to determine whether that
duty exists,” then the duty is independent.
Independent legal duty. The PWA created just such an independent legal duty,
concluded the appeals court. Here, the employer’s duty to pay prevailing wages derived
from the PWA, not any ERISA plan. No interpretation of any ERISA plan was necessary
in order to determine whether the carpenters were paid prevailing wages. Rather, the
employer would be required to pay prevailing wages regardless of whether any ERISA
plan existed. To determine whether the defendant is liable, a court must simply compare
the amount that the carpenters were paid to the amount that they were owed under the
PWA. As such, the PWA is a law that regulates wages. “States have traditionally
regulated the payment of wages,” not the federal government. State actions to recover
unpaid wages generally are not expressly preempted by ERISA, much less completely
preempted.
As the obligation to pay prevailing wages was an independent legal duty, the second
prong of the test was not met. Therefore, the benefit plans’ claims were not completely
preempted by ERISA Sec. 502(a), and that section could not provide the basis for federal
court jurisdiction.
LMRA preemption. Although the district court did not decide whether removal was
proper under LMRA Sec. 301 or whether the LMRA completely preempted the plaintiffs’
claims, the Third Circuit nevertheless addressed this issue on appeal. LMRA Sec. 301
provides exclusive federal jurisdiction for suits concerning “violation of contracts
between an employer and a labor organization.” It converts state causes of action into
federal ones and allows removal “when the heart of the state-law complaint is a clause in
the collective bargaining agreement.” LMRA Sec. 301 completely preempts a state cause
of action only when the resolution of said action is “substantially dependent upon
analysis of the terms of an agreement made between the parties in a labor contract.”
According to the benefit plans, their claim under the PWA was not preempted by the
LMRA because it existed independent of any CBA. Proving a PWA violation did not
require any reference to or analysis of any CBA. The carpenters’ right to prevailing
28
wages is grounded in the PWA and would exist even in the absence of any CBA.
Although the amount owed to the employees under the PWA may be the same amount
owed by virtue of their CBA, such “parallelism” did “not render the state-law analysis
dependent upon the [CBA] analysis.” Further, “Section 301 cannot be read broadly to
pre-empt nonnegotiable rights conferred on individual employees as a matter of state
law.” Because the benefit plans asserted a substantive right under the PWA to be paid
prevailing wages, that right was not preempted by the LMRA.
The case number is: 13-3005.
Attorneys: Gregory R. Begg (Peckar & Abramson) for Tishman Construction Corp. of
New Jersery. Michael G. McNally (Kroll Heineman) for New Jersey Carpenters.
5th Cir.: Discharged employees unable to show union breached duty of fair
representation
By Ronald Miller, J.D.
Two employees who alleged that they were discharged without just cause in violation of
the governing collective bargaining agreement and that their union refused to process
their grievances failed on their hybrid Sec. 301 claim because they were unable to show
that the union violated its duty of fair representation, ruled the Fifth Circuit in an
unpublished opinion. Here, the appeals court pointed out that a union’s investigation need
not be perfect to be adequate. As a result, while the union’s conduct may not have been a
model of representation, neither could it be labelled arbitrary, discriminatory, or bad
faith. Accordingly, the appeals court affirmed the district court’s grant of summary
judgment to an employer and union (Jaubert v Ohmstede, Ltd, July 3, 2014, per curiam).
The employees worked as welders at a fabrication plant and were members of a union;
their work was governed by a CBA, including a three-part grievance procedure. In
October 2011, one of the employees filed a grievance regarding a weld repair he had been
instructed to perform, which he believed negatively impacted the integrity of a vessel.
The second employee, in his position as a union steward, hand delivered copies of all
outstanding grievances to the company’s president. The president reacted poorly to the
grievances and made negative comments and gestures showing contempt for the
grievances. When the two employees ran into the president later that same day, he stated
that the employees were ruining the company, do not want to work, and only “whine and
cry.”
Termination policy. In addition to the negative remarks about grievances, the president
stated that he spoke with the customer about the weld in question and it had no problem
with it. Later that day, the employees called the customer’s quality control inspector and
asked him if the customer was aware of the weld. The inspector thereafter called the
company president, who in turn called the union’s district manager and advised him that
the employees would be fired. The employees admitted to union officials that they had
contacted the inspector. Thereafter, the officials met with the company president and
plant manager. At that time, the employer told the unions officials that an internal
investigation uncovered no problem with the weld, and that it regarded the employee’s
29
grievance as meritless. The employer again advised the union that the employees would
be terminated. In response, the union district manager requested a copy of the policy cited
by the employer so that he could review it.
The employees were terminated the same day. Thereafter they filed grievances
concerning their termination. After the union reviewed the employer’s termination policy
it decided that the employer had just cause for the terminations. Specifically, it found that
the contact with the inspector constituted an unauthorized transmission of confidential
information in violation of company policy. Accordingly, the union denied the
employees’ termination grievance. Having already discussed the terminations at the
meeting with company management, the union viewed arbitration as the only remaining
step, which it declined to pursue.
Duty of fair representation. The employees filed suit claiming breach of contract by the
employer for discharge without just cause in violation of CBA and breach of the duty of
fair representation by the union for refusing to process the grievances. The district court
granted summary judgment to the company and union. The employees timely appealed.
A plaintiff in a “hybrid” breach of contract and fair representation suit must prove both
that the employer violated the CBA and that the union breached its duty. In order to
succeed on a claim for breach of the duty of fair representation against a union, an
employee must show that the union’s conduct “was arbitrary, discriminatory, or in bad
faith, so that it undermined the fairness or integrity of the grievance process.” “Thus, the
duty of fair representation imposes an obligation for a union to investigate a grievance in
good faith” and “prosecute a grievance with reasonable diligence unless it decided in
good faith that the grievance lacked merit or for some other reason should not be
pursued.” A union’s actions can be deemed arbitrary, discriminatory, or in bad faith if,
“in light of the factual and legal landscape at the time of the union’s actions, the union’s
behavior is so far outside a wide range of reasonableness as to be irrational.”
Union investigation. The employees argued that, given the timeline of events, it was
impossible that union conducted any investigation at all into their termination grievance.
In their view, whether the union investigated was a question of fact that remained
disputed. The Fifth Circuit found this argument unavailing. The uncontested evidence
indicated that the union learned that unauthorized calls had been made to a customer and
that whoever placed those calls would be terminated. The employees admitted that they
placed the calls. Union officials thereafter met with company management. During that
meeting, they requested a copy of the employer’s termination policy for independent
review, and asked if the employees’ jobs could be saved.
Here, the court concluded that the union’s actions did not rise to the level of arbitrary,
discriminatory, or bad faith representation. By the time the employees’ formal grievance
reached the union, it had reasonably determined that it had already gathered the
information it needed to consider whether there was just cause for termination. The union
declined to take the claim to arbitration. Taking into account the entire factual landscape
and the actions the union did take, this imperfection in representation did not amount to
arbitrary, discriminatory, or bad faith conduct, concluded the appeals court.
30
The employees further contended that the union acted unreasonably by believing that the
employer terminated them for placing the call to the inspector given the anti-grievance
rant engaged in by the company’s president, and that the union should have suspected an
ulterior motive for the terminations. However, even accepting that the employer fired the
employees in retaliation for filing grievances, the union’s determination that their
unauthorized contact with a customer constituted just cause for termination remained
reasonable, concluded the court. Whether the union was correct in its determination that
the employees were fired for just cause was not dispositive. The union may come to an
incorrect conclusion without breaching its duty.
The case number is: 13-30969.
Attorneys: Gregory W. Homer (Drinker, Biddle & Reath) for Ohmstede, Limited. Louis
L. Robein Jr. (Robein, Urann, Spencer, Picard & Cangemi) for Local 37, International
Boilermakers. Edward J. Fonti (Jones, Tete, Fonti & Belfour) for Henry Jaubert.
5th Cir.: Within arbitrator’s authority to fashion alternative to discharge as
discipline for employee
By Ronald Miller, J.D.
An arbitrator acted within his authority, as set forth by an arguable construction of a
collective bargaining agreement, when he found cause for an employer to suspend, but
not discharge, an oil refinery worker, ruled a divided Fifth Circuit in an unpublished
decision. Despite the employer’s prior warning to the employee regarding mishandling
products, the CBA did not establish criteria for determining cause to discharge. With
suspension and discharge available as sanctions under the CBA, the majority declined to
find that the arbitrator exceeded his authority in finding suspension appropriate. Judge
Clement dissented (United Steelworkers v Delek Refining, Ltd, July14, 2014, per curiam).
Disciplinary history. During his 19 years of employment at an oil refinery, the employee
was disciplined four times for mishandling products. He was warned that additional
performance or safety issues would result in separation from employment. Nearly two
years after the final incident, the employee violated a work order and was terminated for
“unacceptable performance and insubordination.” Pursuant to a collective bargaining
agreement, the employee’s union submitted the dispute over the employee’s discharge to
arbitration. The CBA provided the arbitrator jurisdiction and authority to interpret and
apply the provisions of the CBA, but did not have authority to add to or alter the contract.
Arbitration award. The employer contended that it had just cause to discharge the
employee because he acted contrary to the orders on its daily report. On the other hand,
the employee contested the authenticity of the daily report and produced a conflicting
version that directed him to perform the disputed operation. Finding that the employer
failed to establish the authenticity of its proffered version, the arbitrator concluded that
the employer lacked just cause to discharge the employee, but found that it had sufficient
and reasonable cause to discipline the employee for not contacting his supervisor before
performing the operation. The arbitrator determined that a suspension of two months
without pay was sufficient discipline.
31
Thereafter, the employer notified the union that it did not intend to abide by the award.
The union brought suit to enforce the arbitration award, and the employer responded by
filing its own suit to vacate the arbitration award. After the district court consolidated the
cases, both parties moved for summary judgment. The district court found that the
arbitrator “implicitly found just cause for discharge” and therefore “any remedial
authority to determine a ‘proper remedy,’ pursuant to the issues submitted to him by the
parties for arbitration, was not triggered.” Finding that the arbitrator exceeded authority
in fashioning a remedy, the district court granted summary judgment in favor of the
employer and vacated the arbitration award. The union appealed.
Alternative sanctions. Relying on the Fifth Circuit’s ruling in E.I. DuPont de Nemours
& Co. v. Local 900 of Int’l Chem. Workers Union, the district court reasoned that the
arbitrator’s language resulted in an implicit finding of just cause to discharge such that he
was not authorized to fashion a less drastic remedy. However, the Fifth Circuit held that,
on the facts of this case, DuPont does not support vacatur of the award here. Instead, the
majority concluded that Albemarle Corp v United Steelworkers, decided after the district
court rendered judgment, compels the appeals court to affirm the arbitration award.
Like Albemarle, the appeals court found that the CBA in this case contemplated
situations in which a finding of cause could support lesser sanctions than termination and
that it was within the arbitrator’s authority to fashion this alternative remedy despite
having found that the employee violated a work rule. Accordingly, the majority rejected
the employer’s argument that the arbitrator exceeded his authority by fashioning an
alternative remedy to discharge. The CBA here contemplated both discipline and
discharge as available sanctions upon a finding of cause. Providing for the right to “fire
and discipline for just cause,” the CBA between the employer and the union did not
clearly mandate that any performance or safety issues required discharge.
Fashioning a remedy. In fashioning a remedy, the arbitrator made no implicit or explicit
finding that the employer had cause enough to discharge the employer; rather, he
explicitly concluded the opposite, that discharge was not appropriate, and that there was
instead cause for the employer to issue discipline. As a result, the provision for sanctions
less than termination and the arbitrator’s explicit conclusion that discharge was not
appropriate compelled the appeals court to affirm the arbitral award. The employer’s
prior warning to the employee — that “[a]ny future performance or safety issues of any
nature or severity w[ould] result in immediate separation of employment” — did not
suggest otherwise, concluded the court.
The CBA in this instance did not define “cause” to discharge. Here, the court observed
that if the employer wished to remove doubt as to whether performance issues met the
criteria for cause to terminate, it had only to bargain for a specific list of violations that
will be considered sufficient grounds for discharge in the CBA. At this juncture, the
employer argued that its warning constituted a binding last chance agreement. However,
because the employer did not raise that argument before the arbitrator, the appeals court
declined to consider the argument on appeal. The district court’s award of summary
judgment in favor of the employer was reversed.
32
Dissent. In dissent, Judge Clement would affirm the district court’s decision to vacate the
arbitration award. He argued that for decades the Fifth Circuit had recognized district
courts’ ability to find just cause even when the arbitrator did not expressly state that it
existed. In this instance, he argued that the majority’s analysis unnecessarily extended the
decision in Albemarle to effectively abrogate prior holdings on implicit findings of just
cause. The dissent would have found that the arbitrator’s decision contained an implicit
finding of just cause for discharge.
The case number is: 12-41119.
Attorneys: Ronald Wayne Chapman Jr. (Ogletree Deakins) for Delek Refining, Ltd.
Patrick M. Flynn (United Steelworkers of America) for United Steel, Paper and Forestry,
Rubber Manufacturing, Energy, Allied.
7th Cir.: Hardball tactics by union in hotel dispute crossed line into secondary
boycott
By Ronald Miller, J.D.
A union’s strategy of targeting organizations that had made arrangements to reserve large
blocks of rooms or spaces with a hotel in the hopes that they would cancel their plans
may have crossed the line into unlawful secondary boycott activity, ruled the Seventh
Circuit. While a number of the incidents complained of by the hotel were insufficient to
support allegations that the union coerced neutral targets or that it used coercion with the
intent of forcing the neutral entities not to do business with the hotel, the appeals court
found that in three instances, the union engaged in conduct that crossed the line from
intent to persuade, to simply interfering with the businesses of the neutrals (520 South
Michigan Avenue Associates, Ltd dba The Congress Plaza Hotel & Convention Center v
UNITE Here Local 1, July 29, 2014, Tinder, J).
Hotel strike. UNITE was engaged in a long-running strike with the Congress Hotel
dating back to 2003. In 2008, the union escalated the strike by pursuing a more
aggressive strategy. Specifically, the union began targeting organizations that had made
arrangements to reserve large blocks of rooms or space at the hotel in the hopes that they
would cancel their plans. The union would send delegations to the offices of potential
hotel patrons and express the union’s disapproval of their plans to use the hotel.
According to the hotel, instead of just using persuasion, the union coerced hotel
customers into cancelling their agreements.
Claiming that this conduct crossed the line into unlawful secondary labor activity, the
hotel filed suit, seeking damages. The district court granted the union’s motion for
summary judgment, reasoning its conduct was not coercive and that barring it would raise
important free speech concerns. The hotel appealed. Finding that certain of the union’s
actions were coercive, the Seventh Circuit reversed.
Secondary targets. The hotel alleged that the union engaged in unfair labor practices by
targeting secondary targets with the object of forcing them to cease doing business with
the hotel. The central question, therefore, was whether the union’s conduct in this case
33
was coercive, as in the sense of a boycott or picket, or persuasive, as in the case of
handbilling outside of an establishment.
Courts have observed that a defining characteristic of picketing is that it creates a
physical barrier between a business and potential customers, thereby “keeping employees
away from work or keeping customers away from the employer’s business.” By contrast,
peaceable activity that does not create a barrier between customers and the business is
typically permitted. The conduct alleged in this case was not satisfactorily described as
either picketing or handbilling. On the one hand, the delegates often took written
materials with them, including handbills and leaflets. Then again, some of the conduct the
described by the hotel was similar to picketing. Moreover, the Seventh Circuit observed,
many of the union’s activities were disturbingly similar to trespass and harassment.
Trespass and harassment. The court first examined whether trespassing and harassment
could count as coercive behavior under federal labor law. A union is permitted some
initial entry onto private property so it may convey its views to the decision-makers of a
secondary organization. But, even in the context of primary picketing, at some point the
trespass becomes unprotected. The Supreme Court has made clear that federal labor law
“does not require that [an] employer permit the use of its facilities for organization when
other means are readily available.”
The same is true of harassment, which relies on the interfering manner of
communication, not its content, to accomplish its aims. Here, the union was alleged to
have continued contacting targets even after they had made clear that they were not
willing to receive delegations. Some of these contacts were physical invasions of private
property. Moreover, allegedly frequent and repetitive phone calls and the threats to
disrupt events also supported an inference that the union did not intend to persuade but to
force neutrals to take sides in its dispute with the hotel. Harassment, if severe enough,
could rise to the level of coercive behavior under Sec. 8(b) of the NLRA.
As a consequence, the Seventh Circuit concluded that a union may be liable under Sec.
8(b)(4)(ii)(B) for unlawfully coercing a secondary to cease doing business with the struck
employer if the union’s conduct amounts to harassment or involves repeated trespass, or
both. While trespass and harassment of a secondary organization do not create a symbolic
barrier between a business and its customers in the way a picket line does, such conduct
may nevertheless significantly disrupt a business and pose a substantial threat to an
organization’s finances.
Another important point is that the conduct alleged by the hotel was generally targeted at
employees, not customers passing by, as in handbilling. Here, the appeals court
determined that the union’s decision to repeatedly target secondary employees indicated
an intention not to persuade, but simply to interfere. Because the conduct here was
concededly directed at secondary actors, it may potentially fall under the ambit of Sec.
8(b) if it is substantially similar to picketing and sufficiently coercive.
Free speech concerns. The Supreme Court has cautioned the courts to be careful not to
label expressive union conduct as coercive if such an interpretation could interfere or
34
limit free speech. In this instance, it was undisputed that the union delegations all
attempted to communicate a message on a topic of public concern. According to the
hotel, some of the union’s conduct went too far, and rendered its activities unprotected
and illegal. Agreeing, the Seventh Circuit concluded that prohibiting some of the union’s
conduct under the federal labor laws would pose no greater obstacle to free speech than
that posed by ordinary trespass and harassment laws.
Even aside from the ban on secondary picketing, the appeal court found that some of the
union’s alleged conduct, such as trespass and harassment, was not protected speech. The
union’s harassing conduct could also not reasonably be deemed protected under the First
Amendment. Important First Amendment interests were not threatened in this case
because the hotel’s complaint was narrowly tailored to address the union’s conduct
without reference to the content of its message. Another reason why some of the union’s
alleged harassment merited less First Amendment protection was because the union
transmitted its messages to an unwilling, captive audience.
Finally, the Seventh Circuit concluded that Servette gave the union ample breathing room
to express its views by permitting delegates to approach and talk to decision-makers of
neutral businesses, even if they are initially uninvited. But once that decision-maker says
that she is not interested, and that the union delegates are no longer welcome, the union’s
free speech interests start to wane, and the property and privacy rights of the neutral
target become dispositive. Thus, if the hotel could provide evidence permitting a
reasonable inference that the union essentially committed trespass or harassed secondary
organizations, or threatened to do the same, and thereby coerced them to cease their
business with the hotel, summary judgment for the union was inappropriate in this case.
Crossing the line. With respect to a number of incidents complained of by the hotel, the
appeals court concluded that there was no evidence in the record that the union did
anything other than attempt to peacefully persuade the neutrals. However, the court
reversed summary judgment with respect to the union’s behavior toward three neutrals.
In those instances, the hotel demonstrated that the union coerced the neutrals into
abandoning their business with it by trespassing in offices and businesses, threatening to
disrupt the neutrals’ businesses, and stalking a neutral. Such conduct crossed the line
between communication intended to persuade, and was simply intended to interfere with
the inner workings of three neutral entities. Accordingly, the Seventh Circuit reversed the
district court’s decision in part, remanding for a trial on whether the union’s actions were
coercive and, if so, whether and to what extent the hotel was damaged by this coercive
conduct.
The case number is: 13-1938.
Attorneys: Elizabeth N. Reynolds (Allison, Slutsky & Kennedy) for Unite Here Local 1.
Peter Andjelkovich (Peter Andjelkovich & Associates) for 520 South Michigan Avenue
Associates, Limited dba The Congress Plaza Hotel & Convention Center, and Congress
Plaza Hotel LLC.
35
8th Cir.: Employer could modify retiree benefit premium contributions without
violating CBA or ERISA
By Ronald Miller, J.D.
An employer had the authority to modify retiree benefit premium contributions without
violating either a collective bargaining agreement (CBA) or ERISA, ruled the Eighth
Circuit. Here, the appeals court concluded that the negotiating history of a 2005
memoranda of agreement (MOA) on retiree health benefits was not “reasonably
susceptible of the meaning” that retiree health benefits were permanently vested. Judge
Loken filed a separate concurring opinion (Windstream Corp v Gragnano, July 8, 2014,
Murphy, D).
The Communications Workers of America (CWA) negotiated a series of three year CBAs
with Windstream’s predecessor. Separate MOAs on retiree health benefits were attached
to each bargaining agreement. The plan description stated that it was maintained pursuant
to the CBA, and reserved to the company “the right to terminate, amend, or replace” the
plan, in whole, or in part, any time for any reason. The retiree challenging the employer’s
action was enrolled in the predecessor’s retiree health plan under the terms of a 2005
MOA. Even after the 2005 MOA expired, the predecessor continued the retiree’s benefits
and subsidies beyond that date. The predecessor also continued the retiree health benefits
of other employees beyond the expiration dates of the MOAs under which they retired.
In 2006, the predecessor was acquired by Windstream Corp. The employer maintained a
comprehensive plan of group insurance and reserved the right to “amend this Plan in
whole or in part at any time and for any reason” and to “terminate this Plan at any time.”
In 2008, Windstream informed the union of its interest in changing its premium
contribution to a flat rate. The employer abandoned the modification when the CWA
indicated it would not agree to it, and the parties instead agreed to carry over the
graduated contribution schedule from the 2005 MOA to the 2008 MOA. However, the
2008 MOA included a provision that permitted the employer to modify or rescind retiree
medical benefits at the employer’s discretion.
Modification of contributions. In 2009 Windstream notified the CWA that changed
economic circumstances required modification of its premium contributions. The parties
held negotiations but failed to agree on a modification. Thereafter, the employer decided
to reduce retiree benefit contributions to the flat rates proposed and rejected in 2008 and
to discontinue subsidies for retiree spouses and dependents. Retirees objected to the
change, disputing Windstream’s right to modify retiree health and welfare benefits
without their consent. Thereafter, the employer sought a declaratory judgment that it had
the authority to modify retiree benefit premium contributions without violating either the
CBA or ERISA.
The CWA intervened, suing Windstream for breach of contract under LMRA Sec. 301.
The employer moved for summary judgment on all claims, asking the district court to
declare that (1) the modifications it made to the contribution schedule were legally
effective and enforceable; (2) the modifications did not violate ERISA, the Windstream
Plan, or the CBA; and (3) that it had the right to amend, modify, or terminate the plan or
36
any of its provisions unilaterally. The district court concluded that plan documents
contained reservation of rights clauses securing the company’s right to modify the retiree
health benefits plan. Accordingly, it granted the employer’s motion and dismissed the
union’s suit. The retirees and the union appealed.
Vesting of retiree health benefits. On appeal, the retirees and union asserted that the
text and negotiating history of the 2005 MOA created a factual question that company
retiree benefit contributions were promised for the lifetime of the retirees and could not
be unilaterally modified by the company. Under ERISA, an employer may unilaterally
modify or terminate retiree health and other welfare benefits unless they have been
vested. Retiree health and welfare benefits are not vested unless the employer has
“contracted an agreement to the contrary.”
As an initial matter, the Eighth Circuit concluded that the district court correctly
determined that the Windstream comprehensive plan, the predecessor’s plan description,
and the 2005 and 2008 MOAs comprised the ERISA plan documents. To obtain a
reversal of the district court judgment, the retiree had to demonstrate that the plan
language was “reasonably susceptible” to his claim that the company agreed to vest
retiree benefits permanently.
Although Windstream’s conduct indicated it understood the 2005 MOA not to allow it to
modify its contribution amounts without the CWA’s consent, there is no evidence
indicating it was required to obtain retiree consent, as well. If under the 2005 MOA the
company and union could bilaterally agree to modify the company contribution amount
without the retiree’s consent, then his right to it could not have been permanently vested.
Next, the court rejected the retiree’s and union’s contention that the employer’s decision
to continue benefits beyond the terms of the 2005 agreement was evidence that they were
vested. It is well settled that a “clause expressly limiting the duration of the retirement
health benefits . . . to the duration of the Master Agreement . . . [is] inconsistent with an
intent to vest health benefits for life.” While the continuation of retiree benefits beyond
the term of a durational clause in a contract may be evidence that the company implicitly
intended to provide lifetime benefits to retirees, in this case there was no evidence that
the employer gave its employees the assurance that they would receive lifetime benefits.
Accordingly, the district court’s judgment was affirmed.
The case number is: 13-1723.
Attorneys: Lindsy Nicole Alleman (Fulbright & Jaworski) for Windstream Corporation.
8th Cir.: Inconsistent conduct undermined employer’s claim it unequivocally
terminated participation in CBA
By Kathleen Kapusta, J.D.
Declining to formally recognize termination as a valid defense in a fringe benefits
collection action because the circumstances of the case would not support such a defense,
the Eighth Circuit found that two letters sent by an employer to a union purporting to
37
terminate its participation in the parties’ collective bargaining agreement did not
unequivocally express such an intent when viewed alongside the company’s inconsistent
conduct in continuing to make fringe benefit payments. Accordingly, the court reversed a
district court’s finding that the employer unequivocally terminated its participation in the
CBA and thus was not required to contribute fringe benefits for work performed by its
employees (Twin City Pipe Trade Service Association, Inc v Frank O’Laughlin Plumbing
& Heating Co, July 17, 2014, Bye, K).
The agreement. The plumbing company was a signatory contractor to a CBA with the
union that was in effect between December 1, 2009, and April 30, 2011, and which
required the company to contribute to employee benefit funds for all pipe work
performed by its employees. The CBA further provided that it would remain in effect
from year to year thereafter unless 90 days advance written notice of the intent to
terminate was provided.
The first letter. On January 27, 2011, the company sent a letter to the union stating that
it would be terminating the agreement effective January 31, 2011. For the next three
months, however, the employer complied with the terms of the CBA by making fringe
benefit contributions on behalf of its employees. When the union later began negotiations
for a new CBA with other signatory contractors, one of the company’s owners attended
several negotiation meetings. The principal owner also met with union management
several times after the new CBA was in place in an attempt to negotiate specific terms of
concern to it. The company also continued to make fringe benefit contributions on behalf
of its employees after the new agreement was in place and throughout the rest of 2011.
The second letter. On December 27, 2011, the company sent the union a second letter
stating that it would be terminating “all existing work agreement” with the union
effective January 1, 2011. Beginning January 1, 2012, the union stopped submitting
fringe benefit contributions on behalf of its employees. Contending that the employer
never effectively terminated its participation in the 2009-2011 CBA, and therefore
remained obligated to contribute fringe benefits on behalf of its employees, Twin City,
the company designated to receive the fringe benefits made by the signatory contractors
to the CBA, sued to collect such benefits allegedly owed by the employer. The district
court granted summary judgment in favor of the employer.
No unequivocal intent. On appeal, the employer urged the court to recognize
termination as a valid defense in a fringe benefits collection action brought pursuant to 29
U.S.C. Sec. 1145. It also asked the court to affirm the district court’s determination that it
unequivocally expressed its intent to terminate its participation in the CBA. The appeals
court, however, found that it did not unequivocally express intent to do so for two
reasons. First, the court found that it manifested an intention to abide and be bound by the
terms of the CBA by continuing to make fringe benefit contributions on behalf of its
employees throughout 2011.
Although the district court discounted the company’s conduct based on its owner’s
explanation that he made the fringe benefit contributions voluntarily as a gesture of good
will, the Eighth Circuit panel explained that a benefit fund is entitled to assume that all
38
participating employers in a plan are following the stated terms as no other approach
permits accurate actuarial computations and proper decisions about which claims to pay.
Pointing out that the stated terms of the CBA did not contemplate employers making
voluntary payments, the court noted that when “an employer's objective conduct indicates
a continued acceptance of the CBA, while at the same time the employer inconsistently
states it intends to terminate the CBA, we are hard pressed to conclude the intent to
terminate is clear, explicit, and unequivocal.” If it were to conclude otherwise, it
explained, the administrator of a benefit plan would have no concrete manner by which to
determine whether an employer is bound or not bound by the CBA’s terms.
Letters again. As to the second reason, the court found the employer’s letters to the
union were ineffective to express an unequivocal intent to terminate participation in the
CBA. The first letter clearly stated that the company intended to terminate its
participation in the CBA “effective January 31, 2011.” This was ineffective because the
company was obligated to participate in the CBA through April 30, 2011, and could not
unilaterally terminate it on a different date. Further, the first letter did not explicitly refer
to the CBA's 90-day notice provision or reference the correct termination date of April
30, 2011. Thus, it was not the type of "clear and explicit” notice required to express an
unequivocal intent to terminate.
Nor did the second letter refer to the correct termination date of April 30, 2011. Instead, it
purported to terminate participation in the CBA at the beginning of January 2011. Even
crediting the employer’s explanation of the second letter as containing a typographical
error, the court found that the two letters were still inconsistent: the first purported to
terminate participation in the CBA at the end of January 2011, while the second
purported to terminate participation in the CBA eleven months later. Neither of those
dates was a permissible date upon which to terminate the CBA pursuant to its provisions,
the court noted, finding that the two letters did not, therefore, unequivocally express the
clear and explicit intent necessary to terminate participation in a CBA.
The case number is: 13-2521.
Attorneys: Wilbur W. Fluegel (Fluegel Law Office) for Frank O'Laughlin Plumbing &
Heating Co. William Allan Cumming (Hessian & McKasy) for Twin City Pipe Trades
Service Association, Inc.
11th Cir.: First Amendment did not immunize union’s “call for reprisal”
By Kathleen Kapusta, J.D.
A memo sent by a union to its bargaining unit members, which named two firefighters
who had sued the union and the county for retaliation and stated that union members
would likely have to pay more in dues to defend against these “frivolous” claims, was not
speech on a matter of public concern, an Eleventh Circuit panel ruled in rejecting the
union’s claim that the First Amendment immunized its speech. Accordingly, the appeals
court affirmed a district court’s denial of the union’s motion for judgment as a matter of
law or, in the alternative, a new trial or reduction of the damages awarded against it on
the firefighters’ retaliation claim. However, the appeals court reversed the lower court’s
39
entry of judgment in favor of the county based on its finding that there was insufficient
evidence to prove that the county had engaged in unlawful retaliation when it required the
firefighters to take a fitness-for-duty (FFD) exam after they filed discrimination charges
against it (Booth v Pasco County, Florida, July 3, 2014, Anderson, R).
The firefighters alleged that the county retaliated against them after they filed various
charges of discrimination against it. When the union refused to assist them in prosecuting
their charges against the county, they filed discrimination charges against it as well. A
short time later, the union distributed the disparaging memo to county employees.
Alleging that the memo was distributed in retaliation for their EEOC complaints, the
firefighters sued both the county and the union for retaliation. Shortly thereafter, someone
posted a newspaper article about the lawsuit on fire station bulletin boards; the
firefighters filed additional EEOC charges.
Fitness-for-duty exams. The firefighters subsequently filed affidavits, in which they
expressed concern that they could no longer trust their coworkers and feared that they
would subject them to, or fail to protect them from, dangerous or even life-threatening
situations. Concerned that this fear would render them unable to perform their duties, the
department chief and county personnel chief required the firefighters to take FFD exams.
Prior proceedings. After a trial on their retaliation claims, a jury found for the
firefighters against both the county and the union; both defendants filed motions for
judgment notwithstanding the verdict. Although the district court denied the union’s
motion, it granted the county’s motion, finding that there was insufficient evidence to
support the finding that it ordered the FFDs for a retaliatory purpose.
County’s actions. Disagreeing with the district court’s insufficient evidence
determination, the appeals court found that while the firefighters’ affidavits may have
raised serious concerns about their fitness for duty, there was evidence showing that the
department and personnel chiefs believed their statements to have a possible basis in
reality. Despite this possibility, the county ordered the exams without speaking to the
firefighters or their supervisors and without investigating the potential factual basis for
their statements.
In addition, there was evidence that the professional counselor stated that they did not
meet the criteria for the exam as well as a fact dispute over whether he or the department
chief ordered six follow-up visits. Under these circumstances, the jury was permitted to
find that the desire to retaliate was a “but-for” cause of the county’s decision.
Union’s memo. As to the jury’s finding that the union retaliated against the firefighters
by naming them in the memo and “editorializing about possible ramifications to Union
members,” the union argued that the imposition of liability on this basis violated its First
Amendment right to freedom of speech. At the outset, the court assumed arguendo that
the entry of judgment on the verdict against the union was a content-based burden on its
speech. Alternatively, the court found that the memo could be viewed as part and parcel
of a course of retaliation that included conduct as well as speech.
40
The appeals court agreed with the district court’s determination that the union’s speech
was a “call for reprisal.” The memo did not specify that the contemplated retaliation
would take the form of speech rather than conduct, the court observed, noting that the
retaliation that actually resulted from the union’s call for reprisal took the form of both
speech and conduct. Because of a lack of clarity in case law, however, the court declined
to hold that a lesser scrutiny should apply merely because the call for retaliation initiated
and was inextricably intertwined with the actual retaliation (both speech and conduct)
that predictably resulted.
Compelling government interest. Even assuming that the restriction on the union’s
speech, as embodied in the judgment against it, was content-based, the court nevertheless
rejected the union’s argument that the First Amendment immunized it for three reasons.
First, the court explained, it is absolutely clear that preventing discrimination in the
workplace is a compelling government interest.
Threat for further retaliation. Second, the court found that the memo contained both an
implicit “call for reprisal” and also a threat of further retaliation. Observing that the union
intentionally invited its members to retaliate against the firefighters because they filed
EEOC charges, the court found that a crucial part of this call for reprisal was a threat that
the cost of the union’s defense would result in additional dues assessments to the
individual members. Because no such assessment was ever levied, however, the court
found that this statement was reasonably perceived as a baseless threat of further
retaliation, rather than a reasonable prediction.
No public concern. Finally, and to the court most significantly, the union’s speech
involved little or no public concern. The jury focused on a narrow aspect of the union’s
speech, the court explained, pointing out that liability was not based on the mere fact that
the union reported the existence of an EEOC charge or on its expression of its opinion
that the firefighters’ claims were “frivolous;” rather it was based on the fact that the
union identified the firefighters, invited union members to retaliate against them for
having filed EEOC charges, and threatened to impose assessments in order to fund its
defense.
Based on its review of precedent and the record, the court found that the firefighters’
filing of their EEOC charges was not a matter of public concern; nor was the union’s
response speech on a matter of public concern. Even considering the union’s response as
a whole, rather than the particular aspects which formed the basis of the union’s liability,
the court still found it was merely a response to the firefighters’ personal grievances. In
focusing on the narrow basis upon which the union was held liable, the court found it was
even clearer that there was little or nothing of public interest or concern in its statements
or the threat that the members might have to pay additional assessments.
Neither the EEOC charges nor the memo attempted to involve the public in any manner,
nor were they disseminated to the public. Rather, the memo was “‘speech solely in the
individual interest of the speaker and its specific … audience.” Thus, the court concluded,
“the content (the naming of Plaintiffs, the implicit “call for reprisal,” and the threat to
make assessments), the form (dissemination to a limited membership rather than the
41
public at large), and the context (a mere personal response to Plaintiffs’ personal
grievances) all indicate that the speech at issue was not on a matter of public concern.”
The case numbers are: 12-13389 and 12-14194.
Attorneys: Tracey K. Jaensch (Ford & Harrison) for Pasco County, Florida. Paul A.
Donnelly (Donnelly & Gross) for International Association of Firefighters Local 4420.
Cynthia N. Sass (Law Offices of Cynthia N. Sass) for Anthony Booth.
NLRB: In non-union case, Board finds nurse improperly terminated for protected
activity
By Lisa Milam-Perez, J.D.
A long-tenured nurse at a nonunion hospital was not discharged as a result of her bawdy
comments and coworker complaints about them, but rather because of her protected,
concerted activity, a three-member NLRB panel held, affirming an ALJ’s finding that the
hospital violated the NLRA. The Board also found the employer unlawfully refused to
promote another well-qualified nurse because she had admonished a coworker for
volunteering to work an evening surgery, and wrongly issued a warning to another
coworker who was part of a group of nurses that showed up in HR to come to their
discharged colleague’s defense (Inova Health System, June 30, 2014).
Friction in the OR. The unrepresented nurses worked in the hospital employer’s
ambulatory surgical center (ASC), assisting surgeons in the performance of outpatient
surgeries. Friction escalated on the unit after the director of clinical services began to
schedule surgeries in the ASC after 6 p.m., a departure from the hospital’s previous
practice, which was to schedule late surgeries in its main operating room. This displeased
the ASC nurses, who were accustomed to a regular, daytime schedule. The nurse at issue
here confronted management about the switch, and was issued a “decision-making”
disciplinary notice for insubordination, and admonished for having discussed “these
incidents . . . openly with other staff, which leads to distrust of management and low staff
morale.”
Hotline complaints. Profanity and off-color jokes and stories were commonplace in the
unit, and both nurses and surgeons engaged in such behavior. In early 2009, though, the
hospital’s “compliance hotline” received three phone calls complaining about the nurse
— who had been recently promoted and deemed by management to be “an excellent
clinician” and “fabulous nurse.” The complaints alleged she used profanity in the ER,
used sexual innuendo when talking with coworkers, and shared graphic details about her
sexual encounters with her husband, also a staff nurse in the unit. (Other allegations
included that she “bullied” and “intimidated” coworkers and “threw her weight around,”
“vindictively” changed the schedules of employees she did not like, and retaliated if they
raised concerns. The complainants also claimed she didn’t follow certain procedures
(such as counting surgical instruments after surgeries) and took excessively long breaks.)
An investigation ensued.
42
Protected activity. While the investigation was pending, the nurse (in concert with four
coworkers in the unit, who had agreed that she would serve as their spokesperson) drafted
a group email to their supervisor, signed by each of them, expressing concerns over the
hospital’s procedure for evaluating nursing fellows. They urged the hospital to impose a
one-week hiatus between assignments of fellows to the various surgical specialties — a
recommendation that, in the Board’s view, was relevant to their terms and conditions of
employment, and “clearly” protected activity.
Disciplined. Management discussed the email, which enraged the supervisor of the nurse
fellows, who acknowledged that she was “quite furious” by the nurse’s conduct in
making herself the “self-appointed” spokesperson. The nurse was suspended the
following day, suggesting that animus toward the protected conduct motivated the
adverse action. Also that day, the Board noted, the chief of surgery said he supported the
discharge after learning about the email. This, coupled with the nurse’s earlier protected
conduct in confronting management about the transferred surgeries to the ASC unit,
unlawfully motivated the nurse’s eventual discharge as well. Here, the General Counsel
“amply met his initial burden under Wright Line,” the Board found.
Rebuttal burden not met. Further, the hospital failed to show it would have suspended
and then terminated the nurse absent her protected activity. Despite the complaints
received about the nurse’s “disruptive, rude” conduct, the Board noted that inappropriate
language was part of the culture of the operating rooms, and was tolerated by other
employees. In fact, such behavior on the nurse’s part had been tolerated for years, and she
received glowing reviews and a promotion despite such conduct. The Board also noted
that the nurse’s termination was far more severe than the discipline imposed on another
employee who had showed sexually explicit photographs of herself to colleagues, and
who merely received a final warning (despite having received two such warnings in the
preceding three months).
Corrections Corp defense fails. Although the hospital argued the timing of the hotline
complaints offered a legitimate explanation for why the nurse had not been disciplined
earlier, the Board found no merit to its reliance on Corrections Corp. of America to
suggest that the timing of the complaints provided a legitimate explanation. Because the
hospital hadn’t taken any measures to address similar behavior by the doctors in its
operating rooms, the evidence here did not show that the hospital could no longer tolerate
the use of inappropriate language or that her behavior interfered with patient care.
Gag order. The employer also violated the Act by directing the nurse not to discuss her
suspension with anyone except her (coworker) husband. While the hospital contended
that the directive was merely a “recommendation,” and such an “oblique” statement that
it did not impinge on Section 7 rights, the Board noted it was well-established that
employees have the right to discuss discipline, or disciplinary investigations, with
coworkers. And the employer failed to establish a legitimate business justification for its
confidentiality rule. (Although not a “rule” per se, the Board added, such instructions
directed at a lone employee call for “the same balancing of employer business
justification against employee rights” when analyzing whether the employer violated the
Act in imposing the requirement.)
43
Protected show of support. The Board also affirmed the law judge’s finding that the
hospital improperly disciplined a coworker who went to HR to support her discharged
superior, along with a group of other nurses. It rejected the employer’s contention that the
coworker lost the protection of the Act when, during the encounter, she placed her hand
on an HR administrator’s shoulder in an “aggressive” manner, finding no merit to this
assertion and holding that, even if she had done so, it would not have been so opprobrious
an act as to strip her of the NLRA’s protection.
Failure to promote. Finally, the hospital unlawfully refused to promote another nurse,
with 29 years of experience and superior performance evaluations, to a new “clinical
nurse leader” position in the ASC due to her protected, concerted activity. Specifically,
the nurse had scolded a colleague for volunteering to stay late the previous evening to
assist with a surgery, stating that in doing so, she had encouraged the hospital to shift
more operations to the unit (thereby altering all the nurses’ schedules and increasing their
work hours).
The hospital did not dispute that these comments were a factor in its decision not to select
her for the position. Citing Audubon Health Care Center, though, it argued that the
comments were unprotected because they advocated a partial strike. But this contention
lacked merit, as the nurses who stayed late to work on new surgeries volunteered to do
so. “It is not unprotected conduct for one employee to discourage another from accepting
voluntary work, particularly where, as here, the first employee has a reasonable belief
that acceptance of voluntary work will affect the terms and conditions of other
employees,” the Board said.
Not a union. The nurses in this case were not represented by a union; however, they were
part of the “Nurses Association for Patient Safety (NAPS),” a group of nurses working in
the ASC unit of the hospital. The law judge found NAPS was not a labor organization as
defined by the Act, as it did not formally “deal with” the employer on terms and
conditions of work or other statutory subjects. Rather, the nurses here were merely
individuals acting in concert. There was no objection to this finding.
The slip opinion is: 360 NLRB No. 135.
Attorneys: Paul M. Tyler (Gromfine, Taylor and Tyler) for Nurses Association for Patient
Safety. H. Tor Christensen (Littler Mendelson) for Inova Health System.
NLRB: Enforcement of fare-shortage policy not unilateral change in policies; but
suspension of first-time offenders unlawful
By Ronald Miller, J.D.
In view of an employer’s audit of drivers’ fare manifests and a finding that certain drivers
had failed to turn in all fares collected from passengers, the evidence failed to establish
the employer unilaterally changed is fare-shortage policies, ruled a three-member panel
of the NLRB. However, the panel divided on a finding that the employer unlawfully
suspended two employees for a first offense of allegedly failing to deposit all of their
44
collected fares. Member Miscimarra dissented in part (Allied Medical Transport, Inc,
July 2, 2014).
In 2010, the employer contracted with Broward County, Florida, to provide
nonemergency transportation services to Americans with Disabilities Act (ADA)qualified residents. The employer provided each of its drivers with a manifest from the
county listing the driver’s assigned route, the pick-up and drop-off times for each
scheduled passenger, and the names of those passengers who were required to pay a
$3.50 fare. The drivers were to account for the collected fares by marking on the manifest
the amount paid by each passenger and depositing the fares in a validating machine. The
employer kept the collected fares and received a “trip fee” from the county for each
transport.
Fare discrepancies. In June 2011, the county amended its contract with the employer to
deduct the collected passenger fares from the trip fees it paid. The employer noticed
discrepancies between the fares collected and the amounts remitted by it drivers and, in
response, it initiated an audit comparing the daily manifests and fare-validating machine
receipts of its drivers. As a result, the employer concluded that several drivers had failed
to turn in all of their fares. It issued warnings to these drivers and required them to repay
the amounts allegedly owed. However, the employer agreed to investigate the claims of
two employees who asserted that they had turned in all of their collected fares.
In October 2011, a union petitioned to represent the employer’s drivers, dispatchers, and
mechanics. The employer conducted a vigorous antiunion campaign during which it
committed multiple violations of the NLRA. The union won the representation election.
Several days later, the employer concluded its second audit for the employee who
asserted all their fares were turned in. One employee was advised that there was no
record of his remitting $2,000 from his fare box; the employer would include police to
conclude the investigation, but the employee would not have to repay the money because
of his continued insistence that it was given to his supervisor. With respect to a second
employee, the employer concluded that he failed to follow procedures for depositing
some of his collected fares and had to repay $1,000. To keep his job, the employee
agreed to repay the money.
Employee suspensions. A third employee was told he had a fare delinquency for the
previous week. He responded that the fare machine sometimes failed to work and that on
those instances, he deposited the money in an envelope and dropped it into the machine
without obtaining a receipt. Yet another driver was told he owed $433 in delinquent
fares; he also explained that the fare machine did not always work, and he too deposited
the money in the machine without obtaining a receipt. He also noted that some fare
shortages resulted from passengers’ refusal to pay the fare in full or at all. While
admitting that he might have made an occasional mistake, the employee denied owing the
entire $433. However, he did pay a fare shortage of $7 based on a daily manifest. The
employee was suspended while the employer conducted an investigation of this shortage.
Ultimately, the driver who first asserted that fare machines did not always work was
informed he had a delinquency of $226 and was instructed to pay that amount. When the
45
employee continued to insist that he did not owe the money, he was suspended pending
further investigation. The matter was turned over to the police, who did not file charges.
The employee was eventually discharged. The two suspended drivers were the only ones
suspended and ultimately terminated for a first offense of allegedly failing to deposit all
of their collected fares.
Unilateral change in fare shortage policies. An administrative law judge found that the
employer acted unlawfully by significantly tightening enforcement of its pre-existing fare
shortage policies and procedures when it abruptly went from a loose system to one where
all fare submissions were scrutinized and drivers subjected to discipline. However, the
employer excepted to that finding. The Board agreed and reversed the ALJ’s finding,
observing that the employer initiated a comprehensive audit of all its drivers in response
to its revised contract with the county. Accordingly, the employer had no duty to bargain
over the decision to conduct the audits, irrespective of whether those audits would have
constituted a material, substantial, and significant change to the bargaining unit’s terms
and conditions of employment.
Moreover, the employer’s treatment of two employees failed to demonstrate that it had an
established past practice of not suspending employees pending investigation or that it
departed from that practice when disciplining two employees. Two of the first drivers
audited and approached about repaying delinquent fares were not suspended; however,
the fact that those two employees were not suspended was insufficient to demonstrate a
settled practice. Accordingly, the General Counsel failed to establish that the later
suspension of two other employees pending investigation was an unlawful unilateral
change.
Disciplinary suspensions. Nonetheless, the Board concluded that while the suspensions
did not constitute a unilateral change in work conditions, they did constitute unlawful
discrimination against the two employees. Using the burden-shifting analysis of Wright
Line, the Board noted that the two suspended employees solicited union authorization
cards, distributed union flyers, attended union meetings, wore a union T-shirt, and spoke
to coworkers regarding their support for the union. One of the employees served as a
union election observer. There was evidence of extensive union animus demonstrated by
the employer, including numerous threats and actions directed at employees. Against this
backdrop, the employer claimed that it suspended and terminated the two employees for
fare delinquencies, not union activities.
Despite employees’ insistence that they had properly remitted their collected fares, the
employer refused to verify the accuracy of its audit summaries or to grant the employees’
requests to review their manifests and any receipts and envelopes. Rather, the employer
promised to investigate further, but it never did. As a result, in light of the employees’
repeated insistence that they deposited their collected fares and the employer’s failure to
conduct promised investigations, the Board found that such conduct undermined
employer’s position that it acted on a reasonable belief in suspending and discharging the
employees and instead supported the conclusion that its actions were unlawfully
motivated.
46
Partial dissent. Member Miscimarra dissented from that portion of the Board’s ruling
that found that the employer acted unlawfully by discharging the two union activists. The
dissent argued that the employer reasonably believed that the employees were stealing
fares along with more than 70 other drivers. Thus, the dissent argued that the record did
not support a finding of unlawful motivation because of the employer’s failure to
investigate further when the employees demanded to see their daily manifests. Rather, the
employer had already investigated and clearly had a serious, bona fide problem that
warranted action; it treated the two employees just like other employees who were
considered to have engaged in similar offenses.
The slip opinion is: 360 NLRB No. 142.
Attorneys: Osnat Rind (Phillips, Richard & Rind) for Transport Workers Union. Lydia
Cannizzo (Cannizzo & Chamberlin) for Allied Medical Transport, Inc.
NLRB: Employer’s threats implying harm from supporting union and promising
wage increase to dissuade support unlawful
By Ronald Miller, J.D.
When a company executive threatened employees that it would be futile for them to
select a union as bargaining representative, implicitly promised wage increases to
employees to discourage them from supporting the union, and threatened demotions
suggesting that under union representation, employees would be demoted to apprentices
unless they met the requirements to become journeymen, the company acted unlawfully,
ruled a three member panel of the NLRB. It also unlawfully discharged an employee
because of his union activities. However, the employer’s suspension of an employee from
his driver position after his driver license was suspended was lawful. Member
Miscimarra filed a partial dissent (Auto Nation, Inc, July 9, 2014).
Threat of futility. Service technicians for an automobile dealership contacted a union
regarding representation. During a meeting with employees, the executive commented
“[W]hen you enter these negotiations, if you ever get there, employees tend to lose
things.” To drive his point home, he cited the employees of its Orlando dealership who
had voted for union representation in 2008: “I can bring those people up here that have
been living that nightmare for almost 3 years now without one bargaining session, not
one contract negotiation.” The NLRB agreed with an administrative law judge’s ruling
that the executive’s statements alone conveyed the message to employees that selecting
the union was futile. The Board agreed with the ALJ’s rationale that comments
effectively communicated that the selection of the union would inevitably lead to years of
delay and years of frozen benefits while negotiations were proceeding.
Implied promise of wage increases. The Board also agreed with the law judge’s
conclusion that the employer unlawfully made an implied promise of wage increases to
employees in order to discourage them from supporting the union. When an employee
asked whether it would be possible for the employer’s pay plan to be “updated” for
currently low-paid technicians without voting the Union into the dealership, an HR
director responded that it was “absolutely possible.” He explained that the employer had
47
to pay competitive wages in order to attract and retain skilled technicians, and in any
event wanted to pay employees a “fair wage” based on their contributions to the
company. These statements invited confidence as to the employer’s future actions, and
contrasted pointedly with the employer’s earlier statements that wages and other
employment terms would remain “frozen,” potentially for “years,” if the employees
selected union representation.
Further, an executive’s closing remarks that the employer wanted a chance to address
employee issues “before you pay someone else” to address them, while not expressly
promising an increase in wages, directly linked the remedying of employees’ grievances
with the employees’ rejection of union representation.
Threat of demotions. The ALJ next found that the employer unlawfully threatened to
demote employees because of their union activities. Again the Board agreed, pointing to
statements by the company executive that any contract would be negotiated so that
employees would be demoted to apprentices unless they met the requirements to become
journeymen. Under the circumstances, employees would reasonably interpret the
executive’s statements as indicating that at least some employees would face demotion if
the employees selected union representation. Throughout the meeting, in response to any
suggestion that the union might be able to negotiate improved terms and conditions of
employment, company officials repeatedly emphasized that the union could not force the
employer to take any particular actions or agree to any particular proposals that were not
in the best interests of employees and/or the employer.
However, the employer’s stance changed when the discussing employee reclassification,
which might adversely affect some employees. At that point, the executive suggested that
the employer would have no power to resist a union demand for a journeyman/apprentice
structure and that a reclassification of employees, and the subsequent demotion of at least
some employees, was inevitable. Accordingly, the Board found that, taken as a whole, the
employer’s comments about reclassification and demotion of employees were unlawful.
Discrimination claims. The NLRB then examined the circumstances surrounding the
suspension and later termination of an automotive painter after his driver’s license was
suspended. The employee’s job entailed some driving responsibilities to retrieve and
return vehicles to car lots. He was active in the union organizing campaign, obtaining
signatures on authorization cards. The employer maintained a vehicle usage and motor
vehicle report (MVR) screening policy that applied to all employees in driving positions,
which required that employees possess a valid driver’s license and notify their supervisor
immediately of any suspension of their driving privileges. The employee was classified
as a driving employee under the policy.
In August 2011, the employer received an anonymous voice mail alleging that a worker
was being coerced into joining the union, that the employee was pushing the union, and
that the employee did not have a valid driver’s license. An MVR inquiry revealed that the
employee’s driver’s license had been suspended. The employee was suspended and given
a deadline to have his license reinstated. In the meantime, the employee’s license
suspension triggered the employer’s “adverse action” process. A letter was generated
48
indicating that the employer would not continue his employment and documented the
suspension of his driver’s license. Several days later, the employee received a second
letter reiterating the first.
The employee’s reaction to both letters was that his employment had been terminated. He
never contacted the employer about the letters but instead applied for unemployment. The
employee never reported to the employer regarding his progress towards having his
license reinstated. The employer terminated the employee for “job abandonment.”
Suspension and discharge. The ALJ dismissed allegations that the employer acted
unlawfully by suspending and later discharging the employee. Although the law judge
found that employer animus toward the employee’s union activity was a motivating
factor in his suspension, he credited employer testimony that it always suspended
employees who had license problems but gave them time to correct the matter. The Board
agreed that the employer’s suspension of the employee after his driver license was
suspended was lawful. The record showed that the employer in the past suspended
employees who lost their licenses. In fact, the employer accommodated the employee by
merely suspending him for his violation of the MVR policy and by giving him more time,
as he requested, to attempt to have his license reinstated. Accordingly, the Board affirmed
the law judge’s decision that the suspension was lawful.
On the other hand, the Board reversed the law judge’s dismissal of allegations that the
employer acted unlawfully by discharging the employee. The ALJ found that the
employer lawfully discharged the employee for job abandonment because he did not
return to the dealership after the deadline for reinstating his license and made no attempt
to contact his supervisors after a suspension meeting. However, the Board found that the
employer used “job abandonment” as a pretext for discharging the employee because of
his union activities.
By the date the employee was supposed to contact the employer regarding his license
reinstatement, the employer was aware that he had filed for unemployment benefits. The
employer also knew that he reported to the state unemployment agency that he had been
discharged. Further, a company official participated in a call with unemployment
officials in which he explained to them that the employee had only been suspended and
not fired. Yet, the employer made no attempt to explain to the employee how matters
actually stood, and allowed him to go on thinking that he had been fired. Under such
circumstances, the Board found that the employer’s claim of “job abandonment” was
pretext for ridding itself of a prominent union supporter. Accordingly, the Board
concluded that the employer unlawfully discharged the employee because of his union
activity.
Partial dissent. Member Miscimarra dissented from that part of the Board’s decision that
finding that the employer made an implied promise of wage increases. According to
Miscimarra, although the executive came close to crossing the line, he avoided stepping
over it because he phrased his statement in terms of the employer’s wanting a chance to
address the wage issue. Moreover, he also disagreed with the majority that the
employer’s stated reason for discharging the employee was pretexual. Member
49
Miscimarra argued that the law judge correctly determined that the employer would have
discharged the employee for job abandonment regardless of his prior union activity.
The slip opinion is: 360 NLRB No. 141.
Attorneys: Douglas R. Sullenberger (Fisher & Phillips) for Village Motors, LLC. Brian
A. Davis (Auto Nation, Inc.) for Auto Nation, Inc.
NLRB: Direction of second decert election premature despite merit to union’s
objections
By Lisa Milam-Perez, J.D.
Agreeing with an NLRB hearing officer that an employer improperly promised its
unionized employees 401(k) and profit-sharing plans if they voted to decertify their
union, a Board majority nonetheless held the officer jumped the gun in recommending
that the employer’s decertification win be set aside and a second election held before a
discharge grievance could be resolved that would determine whether a challenged ballot
should be counted. The correct approach was to first determine the status of that ballot,
the panel ruled. Member Johnson dissented; he would have overruled the union’s
objections altogether (UniFirst Corp, July 15, 2014).
Decertification election. After a decertification election garnered 69 votes in the union’s
favor and 70 opposed, with three challenged ballots, the union filed election objections
contending the employer had unlawfully made a promise of retirement benefits if the
employees chose to decertify the union. The panel majority adopted the hearing officer’s
recommendation sustaining the objections that the employer engaged in objectionable
conduct. However, as yet unresolved was the challenged ballot of an employee who was
terminated just three days prior to the election. A grievance was still pending over his
discharge. (The union dropped a grievance brought on behalf of another employee, whose
election ballot was also in limbo, and an objection to the third challenged ballot was
overruled without exceptions.)
The hearing officer had recommended setting aside the election results anyhow and
directing a second election once the status of the challenged ballots was determined in the
grievance procedure. But a direction of a second election was premature, the Board said.
“The proper procedure is to resolve the status of the challenged ballots before
determining whether the election should be set aside.” The Board therefore remanded the
case to the Regional Director to await resolution in the pending grievance proceeding. If
the grieved employee’s vote, along with the other ballot, proved determinative, the Board
directed the Regional Director to open and count the ballots and issue a revised tally (and
issue a certification of representative if the union emerges victorious). On the other hand,
if the revised tally shows that the union did not prevail, the election was to be set aside
and a second election directed at that time.
Dissent on merits of objection. Dissenting, Member Johnson would simply have
overruled the objections regarding the employer’s alleged improper promise of benefits.
In his view, the employer “did no more than truthfully describe to employees the benefits
50
it currently made available to its unrepresented employees.” According to the dissent, the
employer had merely informed the unionized employees, during “the give and take of
voluntary employee meetings,” about the benefit plans that non-union employees
received. And the hearing officer had credited the testimony of the employer’s witnesses,
who asserted that employees were expressly told that these benefits “could not be
guaranteed.” At any rate, the employer handbook “unequivocally shows” that the
employees would automatically be eligible for these benefits by the terms of the
employer’s retirement plan, and the fact that the employer (as is commonly the case)
retained the right to modify or terminate those benefits — for all covered employees —
was beside the point. “What matters is that the Respondent accurately described the
benefits presently provided to all nonunit employees,” Johnson said.
“Ultimately, under the general principles behind Section 8(c) and the First Amendment,
an employer should be free to describe the wages, benefits, and working conditions
offered at its unionized facilities and its nonunionized facilities,” Johnson argued.
“Employees should be armed with the facts when they vote.” Here, the employer did just
that: it told the bargaining unit members what their nonunion counterparts received in the
way of retirement benefits. But it advised them, too, that there was no such guarantee. As
such, Johnson “would not find any objectionable promise of benefits.”
Majority: beyond a mere statement of fact. Contrary to Johnson’s characterization, the
majority found the employer’s pre-election benefits discussion as going beyond the kinds
of “statements of historical fact” that the Board would typically find not objectionable. In
this case, in contrast to Board precedent cited by the dissent, there was no evidence that
the employer was obligated to automatically cover the employees if they decertified the
union. And the evidence as viewed by the majority suggested that the employer had
“specifically linked the receipt of the 401(k) and profit-sharing plans to voting against the
Union in the upcoming decertification election.” Specifically, the employer’s senior VP
told the unionized employees to “trust him, vote no, and take their union dues and put
them into the Employer’s 401(k) plan,” And the general manager told them they could
get in on the profit-sharing plan by “voting no basically.” And, like the hearing officer,
the majority found the employer’s disclaimers that the benefits were not guaranteed were
inadequate. Accordingly, the majority agreed with the hearing officer that the employer’s
statements were objectionable “because they would lead employees to reasonably believe
that the Employer was promising these benefits if they decertified the Union.”
The slip opinion is: 361 NLRB No 1.
Attorneys: Peter Kraft (Peter R. Kraft Law Offices) for UniFirst Corporation.
NLRB: Small petitioned-for departmental unit of cosmetic employees upheld
By Ronald Miller, J.D.
In a five-member NLRB decision, a divided Board affirmed an acting regional director’s
decision that a petitioned-for departmental unit of cosmetics and fragrances employees
was appropriate and upheld, in a 4-1 decision, the small bargaining unit under Specialty
Healthcare.
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The Board majority concluded that the employees in the petitioned-for unit were a readily
identifiable group who shared a community of interest and that the employer had not met
its burden of demonstrating that the other selling and nonselling employees it sought to
include in the unit shared an overwhelming community of interest with the petitioned-for
employees so as to require their inclusion in the unit. Member Hirozawa filed a separate
concurring opinion, while Member Miscimarra dissented (Macy’s, Inc, July 22, 2014).
Cosmetics and fragrances. In November 2012, the acting regional director of Region 1
issued a decision finding that a petitioned-for departmental unit of cosmetics and
fragrances employees, including counter managers, at a Massachusetts store was
appropriate. Of 150 total employees at the store, 120 are selling employees, and of these,
41 work in cosmetics and fragrances. The sales manager for cosmetics and fragrances had
no regular responsibilities for the other sales departments, nor did other sales managers
have any regular responsibilities for the cosmetics and fragrances department.
Selling employees. Macys argued that the only appropriate unit must include all other
employees of the store, or at least all of the selling employees at the store. However, the
evidence in the record concerning selling employees of other departments was less
specific than that for the cosmetics and fragrances employees. Thus, the record revealed
only that the other selling employees had their own sales manager and that some of them
were divided into subdepartments. There was no indication that the other sales
departments had the equivalent of counter managers, and the record was unclear as to
whether the other departments utilized the equivalent of on-call employees. Not all
selling employees were paid on the base-plus commission formula used in cosmetics and
fragrances.
There was some incidental contact between cosmetics and fragrances employees and
other selling employees. Moreover, all employees participated in daily morning rallies
that reviewed the previous day’s sales figures and any in-store events. The record
indicated that selling employees were expected to help each other out and to assist
customers, and that this could lead to contact between the petitioned-for and other selling
employees. Otherwise, there was little evidence of temporary interchange between the
petitioned-for employees and other selling employees. The petitioned-for employees as
well as the other selling employees worked shifts during the same time periods, used the
same entrance, had the same clocking system, and used the same break room. There was
no bargaining history at the store.
Specialty Healthcare framework. Applying Specialty Healthcare, the acting regional
director first found that the employees in the petitioned-for unit were readily identifiable
as a group and that they shared a community of interest because the petitioned-for
employees worked in one of two distinct areas of the store, and they worked in one of
two job classifications. He further found that the unit tracked a departmental line drawn
by the employer, and this departmental line reflected differences between the petitionedfor unit and other selling employees. Although the petitioned-for employees shared some
common interests with other selling employees, the acting regional director determined
that the employer had not established that they shared an overwhelming community of
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interest because there were “meaningful differences” between the petitioned-for
employees and other selling employees.
Specialty Healthcare sets forth the principles that apply in cases in which a party
contends that the smallest appropriate bargaining unit must include additional employees
beyond those in the petitioned-for unit. When a union seeks to represent a unit of
employees “who are readily identifiable as a group (based on job classifications,
departments, functions, work locations, skills, or similar factors), and the Board finds that
the employees in the group share a community of interest after considering the traditional
criteria, the Board will find the petitioned-for unit to be an appropriate unit … .” If the
petitioned-for unit satisfies that standard, the burden is on theproponent of a larger unit to
demonstrate that the additional employees it seeks to include share an “overwhelming”
community of interest with the petitioned-for employees, such that there “is no legitimate
basis upon which to exclude certain employees from” the larger unit because the
traditional community of interest factors “overlap almost completely.”
Community of interest factors. Applying this framework to the particular facts of this
case, the Board majority found that the petitioned-for unit was appropriate. First, the
majority found that the cosmetics and fragrances employees were “readily identifiable as
a group” and shared a community of interest. The cosmetic employees were all in three
nonsupervisory classifications and performed the same selling function. Further, although
there were some differences among the petitioned-for employees, they worked in the
same selling department and performed their functions in two connected, defined work
areas. They had common supervision, and their work also had a shared purpose and
functional integration. Employees in the petitioned-for unit were the only store
employees selling cosmetics and fragrances, and they had only limited contact with other
employees.
In Specialty Healthcare, the Board held that two groups share an overwhelming
community of interest when their community-of-interest factors “overlap almost
completely.” In this instance, the majority concluded that the employer failed to establish
that the petitioned-for employees and nonselling employees shared an overwhelming
community of interest. Additionally, the employer failed to meet its burden that the
petitioned-for employees share an overwhelming community of interest with the other
selling employees. Here, there was no dispute that the petitioned-for employees worked
in a separate department from all other selling employees. The majority found that the
fact that the petitioned-for unit tracked a dividing line drawn by the employer particularly
significant.
The Board also found it significant that the cosmetics and fragrances department was
structured differently than other primary sales departments. There was no dispute that the
petitioned-for employees were separately supervised. Similarly, there was no dispute that
the petitioned-for employees worked in their own distinct selling areas. Likewise, the
record did not show significant interchange between the petitioned-for employees and
other selling employees. Moreover, the majority concluded that the significance of
functional integration was reduced where, as here, there was limited interaction between
the petitioned-for employees and those that the employer sought to add. Taken together,
53
the Board found that these facts supported its finding that the petitioned-for employees
did not share an overwhelming community of interest with other selling employees.
Dissent. In his dissent, Member Miscimarra would have found that the petitioned-for unit
was not appropriate and that the smallest potential appropriate unit would consist of all
salespeople storewide. He argued that the result in this case was contrary to the Board’s
traditional standards governing retail operations. According to Miscimarra, the record
revealed that all salespeople storewide had the same or similar working conditions,
employment policies, job responsibilities, performance criteria, benefit plans, and
commission and compensation arrangements. As a result, he argued that the Specialty
Healthcare standard, as applied in this case, highlighted important shortcomings that
rendered that decision inappropriate and contrary to the NLRA.
The slip opinion is: 01–RC–091163.
Attorneys: William Joy (Morgan, Brown & Joy) for Macy’s, Inc. Warren Pyle (Pyle
Rome Ehrenberg) for Local 1445, United Food and Commercial Workers Union.
NLRB: Union had no duty to inform expelled member of right to “refrain” from
paying dues
By Ronald Miller, J.D.
A union did not violate the NLRA by threatening to sue a former member for the fees he
accrued
while the union continued to represent him after his expulsion; by not giving him notice
that he had no further obligation to pay dues; or by refusing to disgorge the fees it
collected from the employee after his expulsion but before he registered an objection,
ruled a three-member panel of the NLRB. The Board declined to give an expansive
reading to Proviso B of Sec. 8(a)(3), so as to preclude the union from threatening a
lawsuit to collect dues from a lawfully expelled union member who continued to receive
representation by the union. Moreover, the Board concluded that the union had no
obligation to inform the employee of his right to “refrain” from paying any dues or
equivalent fees charged to nonmembers at the time of his expulsion (International
Brotherhood of Teamsters, Local Union 89 (United Parcel Service, Inc), July 23, 2014).
Expulsion from union. The charging party in this case is a current employee of United
Parcel Service (UPS), and former member of the Teamsters. The union continues to
represent him as a member of the bargaining unit at UPS. UPS and the Teamsters were
parties to a collective bargaining agreement that contained union-security and dues
checkoff provisions, whereby the employer deducted monthly union dues from the
paychecks of unit members and forwarded them to the union. The employee was a union
member and a shop steward until October 27, 2007, when he was expelled for
campaigning for a rival union. Following the employee’s expulsion until April 30, 2008,
UPS continued to make monthly dues deductions from his paycheck in the amount of an
objecting nonmember’s Beck fee.
54
On April 6, 2008, the employee sent a letter to the union demanding that it “not charge or
attempt to collect any dues or fees from me,” and that it refund “all of the dues that have
been collected from my paychecks” since the date of his expulsion. The union refunded
the employee’s April dues, and agreed to no longer bill the employer for monthly dues.
However, it stated that it was considering its legal options. In a second letter, the union
contended that non-members must still pay a “financial core” fee to cover their share of
the costs of representation. The letter stated that if the employee refused to pay, it would
institute court action. Pending the outcome of this case, the union had not attempted to
collect additional fees.
The NLRB General Counsel filed a complaint alleging that the union violated Sec.
8(b)(1)(A) by failing to inform the union member that he had a right to refrain from
paying any union dues, nonmember financial core fees, or reduced Beck fees because of
his recent expulsion from the union; (2) refusing to reimburse the member for the reduced
Beck fees that were deducted from his pay from the time of his expulsion; and (3)
threatening to sue him in civil court to recover the amount of reduced Beck fees that he
failed to pay subsequent to April 6, 2008.
Johnson Controls II standard. In Johnson Controls II, the NLRB observed that the
expulsion of a member for disloyalty was necessarily a termination of membership “for
reasons other than the failure of the employee to tender periodic dues.” Accordingly, in
that case, the Board concluded that the enforcement of a union-security clause against an
expelled employee, for the purpose of collecting membership dues or the equivalent fee
paid by nonmembers, by threatened or attempted discharge, was barred by Proviso B of
Sec. 8(a)(3). In this instance, the General Counsel contended that Johnson Controls II
similarly extinguished the union’s right to seek dues from the employee by means other
than threat of discharge, while continuing to represent him. However, the Board found
that the stipulated record in this case did not establish the violations alleged in the
complaint, concluding that the General Counsel had misapplied Johnson Controls II to
the fact of this case, and there was no statutory basis for finding the union’s actions
unlawful.
Johnson Controls II goes no farther than to bar the threatened or actual enforcement of a
union security clause by threat of discharge. It does not state that a union has no
entitlement to fees from an ex-member who has been lawfully expelled but continues to
receive representation. Nor does Johnson Controls II suggest that the union is barred
from seeking ongoing payment in some form from a lawfully expelled employee by
lawful means other than by threatening or seeking the employee’s discharge. In this case,
the union never threatened the employee with discharge or attempted to procure his
discharge for nonpayment of dues after his expulsion from membership. Further, there
was no allegation that the union failed to comply with its duty to represent the employee
fairly after his expulsion. Because the union’s threat of a collection lawsuit did not target
any of the employee’s protected activity, none of the union’s action fell within the
prohibition imposed by Johnson Controls II.
Collection of dues.Johnson Controls II applies Proviso B of Sec. 8(a)(3) and Sec. 8(b)(2)
to bar a union and an employer from using a threat of discharge to enforce a union-
55
security clause against an employee expelled from membership for disloyal misconduct.
However, Sec. 8(a)(3) does not prohibit a union from attempting to collect dues or
equivalent fees by any other lawful means from such an employee whom the union is
required to represent. Similarly, Sec. 8(b)(2) echoed Proviso B in barring a union from
causing an employer to discharge an employee for any reason “other than his failure to
tender” dues. However, neither Sec. 8(b) nor any other provision in the Act bars a union
from seeking dues or core fees by other lawful means from an employee who remains in
the represented bargaining unit.
Here, the NLRB compared an employee who has been lawfully expelled or disciplined by
a union to a Beck dues objector who voluntarily resigns from or refuses to join the union.
Thus, the Board observed that there is no question that such an employee can reduce his
or her monetary obligation to the amount chargeable for representational expenses.
However, the NLRA does not bar a union from seeking payment of core fees from such
an employee, as the union did here by threat of a collection lawsuit. Thus, the Board
concluded that the union did not violate the Act by threatening to sue the employee for
unpaid fees.
The slip opinion is: 361 NLRB No. 5.
Attorneys: Gerry Miller (Previant, Goldberg, Uelmen, Gratz, Miller & Brueggeman) for
International Brotherhood of Teamsters, Local Union No. 89. Darrell R. Hall, pro se.
NLRB: Bargaining unit of shoe department associates rejected, not distinct from
other department store employees
By Ronald Miller, J.D.
In a follow-up to last week’s ruling in Macy’s, Inc, a five-member NLRB panel reached a
contrary result with respect to a regional director’s decision that a petitioned-for
bargaining unit of all women’s shoe sales associates at a retail store was appropriate
under Specialty Healthcare. As in Macy’s, the employer argued that the petitioned-for
unit was not appropriate under established law and that the petitioned-for employees
shared an overwhelming community of interest with other selling employees. Here,
however, a unanimous Board concluded that while some factors suggested there was a
sufficient community of interest among associates within the petitioned-for bargaining
unit, these factors were outweighed by the fact that the proposed unit, as structured, bore
no relationship to any of the administrative or operational lines drawn by the employer
(The Neiman Marcus Group, Inc dba Bergdorf Goodman, July 28, 2014).
The employer, a luxury retailer, operated Manhattan locations consisting of adjacent
women’s and men’s stores. It employed approximately 354 sales associates at these
stores. The stores are organized into various departments. The petitioned-for women’s
shoe sales associates were located in two separate departments, totaling 46 employees,
and fell under the auspices of two different sales directors. Nevertheless, the sales
associates in the two shoe departments shared the same terms and conditions of
employment: they were paid on a “draw versus commission basis,” while other sales
associates in the store were paid on a “salary plus commission” basis.
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The employer encouraged all sales associates to make sales outside of the department
where they worked. Sales associates from other departments have made sales in both
shoe departments, and associates from both shoe departments have sold products from
different departments. The employer held morning meetings each day to enhance product
knowledge. All employees were invited to attend, but some of the meetings were
department-specific. There were also monthly meetings for all employees, as well as
monthly meetings for sales associates only.
Specialty Healthcare standard. Specialty Healthcare sets forth the principles that apply
in cases in which a party contends that the smallest appropriate bargaining unit must
include additional employees (or job classifications) beyond those in the petitioned-for
unit. The “employees in the petitioned-for unit must be readily identifiable as a group and
the Board must find that they share a community of interest using the traditional
criteria[.]” If the petitioned-for unit satisfies this standard, the burden is on the proponent
of a larger unit to demonstrate that the additional employees it seeks to include share an
“overwhelming community of interest” with the petitioned-for employees.
In determining whether a petitioned-for unit is appropriate, the Board weighs various
community-of-interest factors, including whether the employees are organized into a
separate department; have distinct skills and training; have distinct job functions and
perform distinct work; are functionally integrated with the employer’s other employees;
have frequent contact with other employees; interchange with other employees; have
distinct terms and conditions of employment; and are separately supervised.
Community of interest. While the Board found the shoe associates in the petitioned-for
unit were readily identifiable as a group, it nevertheless held the unit was not appropriate
because they lacked a community of interest. Employees in the petitioned-for unit shared
some community of interest factors: (1) their work had a common purpose; (2) they were
the only employees in the store to specialize in selling women’s shoes; (3) they were the
only store employees paid on a “draw against commission” basis; and (4) they received
the highest commission rates of any sales associates. On the other hand, along with all
other employees, employees in the petitioned-for unit shared the same hiring criteria,
received the same employee handbook, and had the same appraisal process.
Importantly, the Board observed that the boundaries of the petitioned-for unit did not
resemble any administrative or operational lines drawn by the employer. As a result, the
balance of the community-of-interest factors weighed against finding that the petitionedfor unit was appropriate. One shoe department constituted the whole of the department,
while the second department would be carved out of a separate department. Further, the
two shoe departments were located on separate, non-adjacent floors. Moreover, it was
only at the highest level of store management that the petitioned-for unit employees could
be said to share supervision.
Significant interchange between employees of the two shoe departments could support a
finding of community of interest, but that was not the case in this instance. The sales
associates in the two departments did not interchange with each other on either a
temporary or a permanent basis, and contact among the petitioned-for employees was
57
limited to attendance at storewide meetings and daily incidental contact related to sharing
the same locker room, cafeteria, and the like.
Having concluded that the petitioned-for bargaining unit was not appropriate, the Board
found it unnecessary to examine whether any of the other employees whom the employer
proposed including in the unit shared an overwhelming community of interest with the
petitioned-for employees, as required by Specialty Healthcare.
The slip opinion is: 361 NLRB No. 11.
Attorneys: Richard M. Greenspan (Law Office of Richard M. Greenspan) for Local 1102
Retail, Wholesale Department Store Union, UFCW. Michael Cooper (Jackson Lewis) for
The Neiman Marcus Group, Inc dba Bergdorf Goodman.
NLRB: Board signs off on private settlement resolving bargaining dispute despite
GC’s reluctance
By Lisa Milam-Perez, J.D.
Sanctioning a private settlement agreement, the NLRB allowed a union to withdraw
unfair labor practice charges contending that an employer refused to provide the union
with information related to a grievance and to changes to employee health benefits.
Despite the General Counsel’s reluctance to sanction the non-Board settlement and the
law judge’s denial of their joint motion, the Board cited its longstanding policy of
“encouraging the peaceful, nonlitigious resolution of labor disputes,” approved the
private agreement, and dismissed the complaint. Member Hirozawa was part of the threemember panel, having denied a motion for recusal brought by the employer’s counsel
(McKenzie-Willamette Regional Medical Center Associates, LLC, July 29, 2014).
Sec. 8(a)(5) allegations. The union alleged that the employer delayed turning over
relevant information that it had requested in connection with a grievance; the employer
also refused to furnish information about changes to employees’ health insurance
benefits. Two months after the Sec. 8(a)(5) charges went to a Board hearing, the parties
filed a joint motion asking the law judge to approve withdrawal of the charges and
dismiss the complaint because they had privately settled their dispute.
Settlement. In exchange for the union’s withdrawal of charges, the employer agreed to
respond to future information requests from the union in a “timely fashion.” It also
vowed not to propose any changes to employees’ current health benefits until the parties
began negotiations for a successor contract, or to implement any such changes until it
reached an agreement with the union (or an impasse). The agreement did not, however,
require the employer to turn over the previously requested health benefits information, or
to post any remedial notice about its alleged Sec. 8(a)(5) violations.
GC objections. The General Counsel opposed the motion, arguing that approval was
unwarranted at this late stage of the litigation. He was also troubled by the absence of a
Board-approved remedy or an enforcement mechanism in the agreement itself. A law
judge denied the motion, finding that the non-Board settlement did not meet the
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requirements of Independent Stave Co. However, the Board disagreed, and dismissed the
complaint.
While the General Counsel’s opposition to a proposed settlement “is an important
consideration weighing against approval,” and the settlement certainly came late in the
litigation process (and thus offered no meaningful conservation of agency resources),
countervailing factors outweighed these concerns.
Factors favored settlement. The union had not opposed the employer’s request to
approve the settlement, and there were no individual discriminates bound by its terms.
Nor were there any allegations of fraud, coercion, or duress in reaching the settlement
and — contrary to the General Counsel’s assertion—no record evidence that the
employer had a history of violating the Act or had ever breached previous settlement
agreements. Also, contrary to the law judge and the General Counsel, the Board found
the settlement itself was reasonable. The union’s request for health benefits information
had been made in response to the employer’s apparent intent to make such changes; the
employer’s commitment not to do so “appears to be of substantial value to the Union and
would appear to obviate the Union’s immediate need for that information.” Also, the
employer affirmatively agreed to timely respond to future requests.
And, although the settlement didn’t offer everything that a Board order might have
provided (i.e, a cease and desist order and a required notice posting), the lack of a full
remedy did not warrant rejecting the settlement here, the Board said. “It is well
established that approval of settlements under Independent Stave does not require that the
remedies provided by the settlement be coextensive with the remedies that the Board
would provide if the General Counsel were to prevail on all of the complaint allegations.”
Lack of remedial notice. The absence of a remedial notice was a tough issue, the Board
noted, acknowledging that “[a]s a general matter, we do not endorse the settlement of
alleged unfair labor practices without a notice to employees of the alleged violations and
the actions taken to settle them.” But in this case, there were no alleged violations that
resulted in employee discipline or discharges, or involving threats or coercion; the
alleged violations had a limited impact on individual employees. As such, the Board saw
no need to reject the settlement for lack of a notice-posting requirement.
No enforcement mechanism. Finally, while the settlement lacked an express
enforcement mechanism, neither did it purport to waive the union’s access to the Board.
The union was free to file an unfair labor practice charge over any subsequent
unreasonable delays or outright refusals to provide requested relevant information, the
Board observed. Moreover, the agreement could be revoked — and the underlying
proceedings resumed — upon future noncompliance, or in the face of new unfair labor
practices. “With these safeguards in place, the lack of a separate enforcement mechanism
does not preclude us from approving this particular settlement.”
Recusal motion denied. Member Hirozawa rejected a recusal motion brought by counsel
for the employer based on previous “acrimonious” litigation between the attorney and the
Communications Workers of America (CWA), whom Hirozawa represented (and had
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filed counterclaims against counsel on the CWA’s behalf). Hirozawa rejected the
contention that his role in that earlier case — some 17 years ago — would cause a
reasonable person to question his impartiality here. Nor would a reasonable person
conclude that his participation in the case would violate ethical guidelines.
The slip opinion is: 361 NLRB No. 7.
Attorneys: Bryan T. Carmody (Bryan T. Carmody, Esq) for McKenzie-Willamette
Regional Medical Center Associates, LLC.
Cal. Sup. Ct.: State’s truck driver misclassification lawsuit not preempted by
federal law
By Lisa Milam-Perez, J.D.
The FAA Authorization Act does not preempt California’s UCL claims against a trucking
company that allegedly misclassified its drivers as independent contractors, a unanimous
California Supreme Court has ruled. The UCL action was not related to the company’s
price, route, or service “with respect to the transportation” of property, and the underlying
state statutes were laws of general application, not specific to motor carriers. Affirming a
state appellate court’s decision overturning the trial court’s grant of judgment on the
pleadings to the trucking company, the state high court left it to the trial court to
determine whether the company in fact misclassified its drivers (People ex rel Harris v
Pan Anchor Transportation, Inc, July 28, 2014, Chin, M).
Independent contractors? The defendant trucking company and its owner recruit
drivers to operate the company’s 75 trucks. The drivers invest no capital, do not own the
trucks they drive, do not use their own tools or equipment, and have no operational
control or any other customers. The drivers take all instruction from the trucking
company and often work for extended time periods for the company, but they can be
discharged without cause. They have no independent operating authority from the
Department of Transportation and hold no permits to engage independently in cargo
transport. Performing the core activity of delivering cargo, the drivers are fully integrated
into the defendants’ trucking business. Nonetheless, the company classifies them as
independent contractors rather than employees.
Contending that the company misclassified its drivers, the State of California filed suit
under the Unfair Competition Law (UCL), asserting several violations of the state’s labor
and unemployment insurance laws. As a result of these violations, the state asserted, the
company obtained an unfair advantage over its competitors. It also harmed the drivers,
depriving them of employee benefits and protections to which they are entitled under
California law, and deprived the state (and the general public) of payments for state
payroll taxes.
Rulings below. A state trial court granted judgment on the pleadings. It held that a UCL
claim based on a trucking company’s alleged violation of state labor and insurance laws
was “related to a price, route or service” of the company and, therefore, is preempted by
the FAAAA, which provides that a state “may not enact or enforce a law, regulation, or
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other provision having the force and effect of law related to a price, route, or service of
any motor carrier . . . with respect to the transportation of property.” According to the
trial court’s reasoning, requiring the company to treat truck drivers as employees would
increase the company’s operational costs; as such, the state’s action “related to a price,
route, or service.” The court also found the action “threatened to interfere with the forces
of competition by discouraging independent contractors from competing in the trucking
market.” A California appeals court reversed, rejecting the finding that the UCL action
was related to the company’s price, route, or service as a motor carrier and thus
concluding the action was not FAAAA-preempted.
Preemption test. To support its contention that the state’s lawsuit against it was
preempted by the FAAAA, the trucking company would have to show that the UCL
claim: (1) derives from the enactment or enforcement of state law; and (2) relates to the
company’s prices, routes, or services with respect to the transportation of property. The
state conceded the first point; the lone issue before the high court, then, was whether the
claim related to the company’s price, route, or service “with respect to the transportation”
of property.
Not facially preempted. The trucking company first argued to no avail that the FAAAA
facially preempts all claims against motor carriers brought under California’s UCL
because such claims seek to regulate the effect that unfair business practices have on the
quality and price of goods and services. The appeals court had rightly rejected this
argument, the California Supreme Court found. When a cause of action is based on
allegations of unlawful violations of the state’s labor and employment laws, there is no
reason to find preemption simply because the pleading raises these issues under the UCL
as opposed to separate causes of action.
Moreover, the UCL is broad in scope; a law of general application, it does not expressly
mention motor carriers — “or any other industry for that matter,” the high court noted.
And the FAAAA preempts only state regulations that are specifically “related to” the
“price, route, or service” of motor carriers for violations involving the transportation of
property. It does not preempt generally applicable employment laws that may have an
effect on prices, routes, and services. “[T]he FAAAA embodies Congress’s concerns
about regulation of motor carriers with respect to the transportation of property; a UCL
action that is based on an alleged general violation of labor and employment laws does
not implicate those concerns,” the high court explained.
Properly applied here. Nor was the UCL claim specifically preempted as applied to this
particular case. The state asserted a single cause of action under the UCL, premised on
violations of the state’s unemployment insurance code, Labor Code, and IWC Wage
Order No. 9. By coupling the UCL with these various provisions, the company argued,
the state was actually seeking to regulate motor carrier competition (i.e., prices, routes, or
services) directly. However, the Labor Code and unemployment insurance provisions
anchoring the state’s UCL claim make no reference to motor carriers or the transport of
property; they regulate employer practices across the board, and require all employers —
not only motor carriers—to comply with labor laws related to the classification of their
workers.
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The trucking company pressed the matter with respect to IWC Wage Order No. 9,
though, which regulates wages, hours, and working conditions “in the transportation
industry.” But the sections of this provision relied on by the state did not refer to prices,
routes, or services; rather, they referred to minimum wage requirements (Section 4) and
employer recordkeeping (Section 7). Any effect that these sections have on the
company’s prices, routes, or services is indirect, at best. As such, the high court disposed
of the company’s related contention that these particular provisions are facially
preempted as well.
Effect on prices, routes and services. According to the trucking company, the UCL
claim brought by the state will “significantly affect motor carrier prices, routes, and
services” by preventing its use of independent contractors. If the state prevails, the
company would have to reclassify its drivers as employees, “driving up their cost of
doing business and thereby affecting market forces.” But the high court rejected this
theory. “Nothing in the People’s UCL action would prevent defendants from using
independent contractors,” it wrote. “The People merely contend that if defendants pay
individuals to drive their trucks, they must classify these drivers appropriately and
comply with generally applicable labor and employment laws.”
And again, the court stressed: The laws invoked here apply to all employers, not just
trucking companies. As such, even though the UCL action may have some indirect effect
on the company’s prices or services, that effect is “too tenuous, remote, [and] peripheral”
to have a preemptive effect.
Deregulatory purpose. Finally, the supreme court was unswayed by the defendants’
contention that, even if the effect on motor carrier transportation is too remote, the state’s
UCL claim should be preempted anyway because it threatens Congress’s deregulatory
purpose. While Congress passed the FAAAA “in order to end a patchwork of state
regulations,” the court observed, “nothing in the congressional record establishes that
Congress intended to preempt states’ ability to tax motor carriers, to enforce labor and
wage standards, or to exempt motor carriers from generally applicable insurance laws.”
The court rejected the trucking company’s related argument that the UCL claim conflicts
with the deregulatory purpose “because it erects the very entry control that Congress
intended to dismantle.” To this, the high court noted: “The congressional record does
show that Congress disapproved of a California law that denied advantageous regulatory
exemptions to motor carriers who used a large proportion of independent contractors.”
In this regard, the trucking company’s characterization of the state’s claim against it was
“factually inaccurate” at any rate, the high court said, noting again that “The People’s
UCL action does not encourage employers to use employee drivers rather than
independent contractors. Defendants are free to use independent contractors as long as
they are properly classified. The People’s sole premise for invoking the UCL is to ensure
that employers properly classify their employees or independent contractors in order to
conform to state law.
The case number is: S194388.
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Attorneys: Satoshi Yanai (California Attorney General's Office) for Kamala D. Harris.
Neil S. Lerner (Cox Wootton Lerner Griffin Hansen Poulos) for Pac Anchor
Transportation, Inc.
Wis. Sup. Ct.: Wisconsin’s Act 10 restrictions on public employee bargaining passes
constitutional muster
By Ronald Miller, J.D.
A divided Wisconsin Supreme Court upheld the constitutionality of Wisconsin’s Act 10,
which significantly altered the labor relations landscape for public employee unions, in
its entirety. As an initial matter, the majority concluded that the associational rights of
general employees were in no way implicated by Act 10’s modifications to Wisconsin’s
collective bargaining framework. Moreover, the court determined that the unions’ equal
protection claims also failed because public employees are not a protected class. Justice
Crooks filed a separate concurring opinion, while Justice Bradley, joined by Chief Justice
Abrahamson, filed a separate dissenting opinion (Madison Teachers, Inc v Walker, July
31, 2014, Gableman, M).
Restrictions on public employee bargaining. In March 2011, the Wisconsin legislature
passed Act 10, a measure that made significant changes to Wisconsin’s public-sector
labor law: It prohibited government employers from collectively bargaining with their
general employees over anything except base wages; prohibited municipal employers
from deducting labor organization dues from paychecks of general employees; imposed
annual recertification requirements for general employee unions, and prohibited fair share
agreements requiring non-represented general employees to make contributions to labor
organizations.
Unions representing general employees sued the Wisconsin governor and three labor
commissioners, challenging several provisions of Act 10. Specifically, the plaintiffs
alleged, among other things, that the collective bargaining limitations, the prohibition on
payroll deductions of labor organization dues, the prohibition of fair share agreements,
and the annual recertification requirements violated the constitutional associational and
equal protection rights of the employees they represent. They also challenged a provision
of Act 10 that prohibited the City of Milwaukee from paying the employee share of
contributions to the City of Milwaukee Employes’ Retirement System, alleging it
violated the home rule amendment to the Wisconsin Constitution.
A trial court invalidated the provisions of Act 10 relating to collective bargaining
limitations, union recertifications, and the prohibitions on fair share agreements and
payroll deductions of labor organization dues. Thereafter, the court of appeals certified
the case to the state supreme court, which accepted the certification.
Constitutional challenges. Before the Wisconsin high court was whether certain
provisions of Act 10 violated the U.S. and Wisconsin Constitutions. Four issues were
presented on appeal: (1) whether Act 10 impermissibly infringes on the associational
rights of general employees; (2) whether Act 10 impermissibly infringes on the equal
protection rights of represented general employees when compared to non-represented
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general employees; (3) whether Act 10 violates the home rule amendment to the
Wisconsin Constitution by prohibiting the City of Milwaukee from paying the employee
share of pension contributions to the Milwaukee ERS; and (4) whether Act 10 violates
the Contract Clause of the Wisconsin Constitution by significantly impairing the
contractual rights of City of Milwaukee employees.
Associational rights. The Wisconsin high court first examined whether the disputed
provisions of Act 10 violated the general employees’ associational rights guaranteed by
the U.S. and Wisconsin Constitutions. It had to determine whether there was a cognizable
First Amendment interest, which establishes the attendant level of scrutiny applied to the
legislative judgment behind the requirement. If Act 10 does not infringe on the
employees’ First Amendment rights, it will be upheld if any rational basis can be found
for the contested provisions. The freedom of association doctrine has two analytically
distinct categories: “intrinsic” freedom of association, which protects certain intimate
human relationships under the Substantive Due Process component of the Fourteenth
Amendment, and “instrumental” freedom of association, which protects associations
necessary to effectuate First Amendment rights.
Here, the unions asserted the second category of freedom of association right had been
infringed. Specifically, the unions argued that Act 10 violated the constitutional right of
general employees and their certified representatives to freely associate. Although
conceding that the state may statutorily restrict the obligation to collectively bargain in
good faith, they asserted that the state could not constitutionality withhold benefits or
penalize public employees for exercising their associational rights to self-organization or
to select a certified representative for collective bargaining purposes.
Before the enactment of Act 10, general employees were permitted under Municipal
Employee Relations Act (MERA) to collectively bargain over a broad array of subjects,
including wages, working conditions, work hours, and grievance procedures. The unions
argued the Act 10 limitation penalizes general employees who choose to be represented
by a certified representative. Consequently, they contended that Act 10 unconstitutionally
burdens the associational rights of general employees because they must surrender their
association with a certified representative in order to negotiate anything beyond base
wages. In support of their argument, the unions relied on the unconstitutional conditions
doctrine cited in Lawson v Housing Authority of Milwaukee.
However, the Wisconsin high court concluded that the unions’ argument did not
withstand scrutiny. The court noted that it did not dispute the existence of the
unconstitutional conditions doctrine, only its applicability to this case. Without question,
in Lawson, the right being relinquished for a benefit — the right to associate with
organizations that engage in constitutionally protected speech — is fundamental in nature
and protected under the First Amendment. Here, however, the “right” the unions refer to
— the right to associate with a certified representative in order to collectively bargain on
any subject — is categorically not a constitutional right. General employees have no
constitutional right to negotiate with their municipal employer on the lone issue of base
wages, let alone on any other subject.
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Fair share agreements, certification elections and payroll deductions. The unions also
argued that Act 10’s provisions related to: (1) the prohibition of fair share agreements; (2)
the requirement of mandatory annual certification elections; and (3) the prohibition on
payroll deductions of labor organization dues from the wages of general employees,
taken together, imposed a constitutionally impermissible burden on general employees.
The court first examined each contested provision in isolation and then examined their
operation as a whole.
Fair share fees. Fair share agreements require all general employees to pay the
proportional share of the cost of collective bargaining and contract administration. The
unions argued that permitting non-union bargaining unit employees to enjoy a “free ride”
would dissuade unions from becoming certified representatives and general employees
from becoming represented. However, the majority was unpersuaded, pointing out that
labor organizations “have no constitutional entitlement to the fees of nonmemberemployees.” The United States Supreme Court recently reaffirmed in Harris v. Quinn
that fair share agreements “unquestionably impose a heavy burden on the First
Amendment interests” of municipal employees who do not wish to participate in the
collective bargaining process. Thus, the prohibition of fair share agreements did not
infringe on the associational rights of general employees or certified representatives in
any respect.
Certification elections. Prior to Act 10, once a labor organization was certified, it would
remain the general employees’ certified representative until 30 percent of the employees
requested a decertification election. Act 10 requires the certified representative of a
collective bargaining unit to undergo an annual certification election. The unions argued
that this election requirement imposed “organizational penalties” that will eventually
dissuade participation in collective bargaining. However, the state high court concluded
that the certification election provisions merely specified the statutory requirements a
certified representative must satisfy in order to exclusively negotiate on behalf of the
general employees in its bargaining unit. As a result, it determined that the “burdens”
they imposed on certified representatives did not infringe on the rights of general
employees to freely associate.
Payroll deductions. Similarly, prior to Act 10, municipal employers could deduct labor
organization dues from the paychecks of general employees at the employee’s request.
Act 10 prohibits this practice. While not bound by the Seventh Circuit’s analysis of Act
10 in Wis Educ Ass’n Council v Walker, the Wisconsin Supreme Court agreed with its
reasoning that the prohibition on an employer’s authorization to deduct labor
organization dues from the paychecks of general employees did not infringe on an
employee’s constitutional right to associate. Thus, the Wisconsin court found that the
prohibition on payroll deductions did not infringe on the unions’ constitutional rights.
Moreover, the Wisconsin court concluded that viewing the provisions as a whole did not
change its analysis. Even viewed together, the contested Act 10 provisions were not
constitutionally infirm. The court pointed out that each provision the unions alleged
infringed upon associational rights did not, in fact, do so, because there was no
constitutional association right implicated.
65
Equal protection. The court next turned to whether Act 10 offended the equal protection
provisions of the Wisconsin or United States Constitutions. Here, the unions argued that
Act 10 violated the equal protection rights of general employees and certified
representatives through the disparate treatment of general employees who choose to
associate with a certified representative and general employees who do not. Noting that
public employees are not a protected class, the Wisconsin court had no trouble find that
this challenge implicated no fundamental rights. Accordingly, rational basis review
governed the court’s examination of the equal protection claims. Having rejected the
premise that Act 10 implicates a fundamental right, the unions’ equal protection claim
necessarily failed under rational basis review.
Dissent. Justice Bradley, in dissent, would have found that Act 10 unconstitutionally
infringed on protected rights. According to the dissent, the majority failed to discuss the
actual arguments and issues presented by the parties. While the union questioned whether
Act 10 infringed on the associational rights of public employees to organize, the dissent
argued that the majority reframed the issue to determine whether there is a constitutional
right to collective bargaining and whether the state had an obligation to promote First
Amendment rights. The dissent argued that the majority shifted the focus to the purpose
behind Act 10 as a whole. According, Justice argued that the majority’s failure to address
the actual issues presented allowed it to reach results that countenanced the needless
diminution of multiple constitutional rights.
The case number is: 2012AP2067.
Attorneys: Lester A. Pines (Cullen Weston Pines & Bach) for Madison Teachers, Inc.
J.B. Van Hollen (Attorney General’s Office) for Scott Walker.
Hot Topics in WAGES HOURS & FMLA:
Comment period extended on proposed minimum wage rule for federal contracts
In a Federal Register issuance slated for publication on Tuesday, July 8, the Department
of Labor will extend the comment period on its proposed regulation to raise the minimum
wage for workers on federal service and construction contracts. The comment period,
originally set to expire on July 17, will be extended to July 28. The agency noted that it
had received numerous requests from government and business organizations to extend
the period for filing public comments.
Labor Secretary Thomas E. Perez on June 12 announced a proposed regulation to raise
the minimum hourly wage to $10.10 for workers on federal service and construction
contracts pursuant to EO 13658, an executive order issued by President Obama on
February 12. The proposed rule provides guidance and sets standards for employers
regarding coverage, including for tipped employees and workers with disabilities, as well
as an enforcement process familiar to most government contractors, the DOL said.
EO 13658 applies to new contracts and replacements for expiring contracts with the
federal government that result from solicitations issued on or after January 1, 2015, as
well as to contracts awarded outside the solicitation process on or after the same date.
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The order applies to four major categories of contractual agreements: contracts for
construction; service contracts under the Service Contract Act; concessions contracts; and
contracts entered into by the federal government in connection with federal property or
lands and related to offering services for federal employees, their dependents, or the
general public.
Limo service to pay drivers $500K in back OT wages
S.D. Transportation Services LLC, dba Premier Limousine, will pay a total of $500,000
in back wages and liquidated damages to 183 drivers who were denied overtime wages
under a judgment entered in federal court in Connecticut. The payment, in addition to
other relief, puts an end to a DOL suit filed against the Berlin, Connecticut, company in
March 2012, according to a July 9 agency announcement.
The DOL filed suit in the wake of a Wage and Hour Division (WHD) investigation that
revealed the company violated the FLSA by underpaying drivers who regularly operated
sedans, limousines and sport utility vehicles — they were paid straight time rather than
overtime of time and one-half their regular rates of pay when they worked more than 40
hours in a workweek. Premier Limousine’s payroll records also failed to reflect drivers’
total daily and weekly hours, as required by the FLSA, the WHD said.
“We found many employees working long hours without any overtime compensation,”
said WHD District Director Michelle Garvey. “Unfortunately, these types of labor
violations are all too common in the limousine industry. That is why our investigators
continue to make unannounced visits to limousine services throughout Connecticut and
Rhode Island to identify and remedy such violations and to help ensure a level playing
field for law-abiding employers.”
In addition to the payment of back wages, liquidated damages and interest, the judgment
enjoins and restrains Premier Limousine from future violations of FLSA overtime and
recordkeeping requirements.
The DOL filed its lawsuit in the District of Connecticut; the case number is 12-cv-00490
(JBA).
Gulf coast staffing agency to pay $1.6M for per diem OT violations
Labor recruiting and staffing agency B & D Contracting Inc. has agreed to pay
$1,660,438 in back wages to 1,543 current and former employees following a DOL
investigation finding the company engaged in improper pay and recordkeeping practices
that resulted in employees being denied overtime compensation in violation of the FLSA.
The employees were assigned to client work sites throughout Louisiana, Mississippi, and
Alabama to work as welders, pipe fitters and shipfitters — B & D Contracting caters to
oil field services and maritime fabrication facilities along the Gulf Coast.
Wage and Hour Division (WHD) investigators found the company mischaracterized
certain wages as per diem payments and impermissibly excluded these wages when
calculating overtime premiums, denying employees earned overtime compensation.
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In the wake of the investigation, B & D Contracting agreed to pay back wages owed to
employees, according to a July 10 WHD announcement. The company entered into a
settlement agreement with the DOL under which it will implement specific measures to
prevent future FLSA violations, including: setting standards to accurately identify and
compensate workers who qualify for bona fide per diem payments; paying accurate
overtime and ensuring per diem payments are not automatically excluded from overtime
calculations; informing employees about their pay and employment conditions; and
obtaining written acknowledgment from employees that they understand the criteria for
receipt of per diem payments.
The company also agreed to maintain accurate records demonstrating that employees
received bona fide per diem payments and that such payments are based either on
applicable IRS guidelines or upon a reasonable approximation of the expenses incurred.
Pursuant to the DOL's partnerships with the IRS and the Louisiana Workforce
Commission, the case has also been referred to those agencies for review under their
respective laws.
The investigation of the case was conducted under the WHD’s ongoing initiative focused
on strengthening labor compliance among temporary labor providers, such as staffing and
support services companies in the Gulf Coast region. Between fiscal years 2011 and
2013, the WHD’s New Orleans District Office conducted 24 investigations in the
temporary help industry, securing more than $2.5 million in back wages for more than
3,000 workers, the DOL reported.
“The labor violations we found in this case are not unique to B & D Contracting Inc.,”
said Cynthia Watson, regional administrator for the division in the Southwest. “We are
increasingly finding the use of per diem schemes as a means of decreasing overtime pay
and tax obligations in the staffing and support services industry in this region. The
resolution of this case demonstrates our continued focus on combating such labor
violations in order to improve compliance in this industry.”
Republican lawmakers press to end David-Bacon reach to survey technicians
By Pamela Wolf, J.D.
Republican lawmakers are pressing Labor Secretary Thomas E. Perez to back-peddle on
a DOL Wage and Hour Division memorandum that put survey technicians under the
reach of the Davis-Bacon Act. All Agency Memorandum 212 (AAM 212) clarifies the
application of Davis-Bacon labor standards to survey crew members who may be
working as laborers or mechanics on projects that are subject to Davis-Bacon prevailing
wage provisions.
House Education and the Workforce Committee Chairman John Kline (R-MN), Small
Business Committee Chairman Sam Graves (R-MO) and Subcommittee on Workforce
Protections Chairman Tim Walberg (R-MI) called AAM 212 a “decision to unilaterally
extend the Davis-Bacon Act requirements to survey technicians due to inadequate
analysis and outreach to industry stakeholders.” In a July 11 letter to Perez, the three
representatives called on the secretary to reverse AAM 212.
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Under AAM 212, issued on March 22, 2013, survey crew members performing primarily
physical and/or manual duties while employed by a contractor or subcontractor in work
performed immediately prior to or during actual construction in direct support of
construction crew(s) on the worksite are considered laborers or mechanics covered by the
Davis-Bacon requirements.
According to the letter, at the time AAM 212 was issued, “survey technicians were
included under Davis-Bacon for the first time in the act’s history. For over 50 years, both
Republican and Democrat administrations have consistently excluded survey technicians
from Davis-Bacon requirements.”
The three lawmakers complained that the DOL made the “unprecedented policy change”
based solely on unsolicited input from the International Union of Operating Engineers
(IUOE) and without consulting any other stakeholders. “To make matters worse, the
department made this change through an agency memorandum, rather than the public
rulemaking process,” the lawmakers said. “The department’s action in this case has
resulted in confusion as to what work is covered by the memorandum and when the
change in policy officially began.”
In 2013, Graves, Kline and Walberg requested documents and communications regarding
the DOL’s decision to apply Davis-Bacon wage requirements to survey technicians. The
DOL’s response, although significantly delayed and falling short of providing all
documents and communications requested, showed that only the IUOE was consulted
during the nearly two years that the department considered the change, according to
Kline, Graves, and Walberg.
“Based on the most recent documents provided to the committee, it is clear the
department worked exclusively with the IUOE to make this significant policy change,”
the lawmakers wrote in the letter. “The entire process appears to have started on May 4,
2011, when an assistant for William Waggoner, Business Manager, IUOE Local 12,
contacted the department stating that Mr. Waggoner had discussed this issue with thenSecretary Solis at a luncheon and would like to meet in Washington, D.C. to discuss the
matter.”
Proposal gives employers tax incentives to provide paid family leave
By Pamela Wolf, J.D.
Senators Deb Fischer (R-Neb.) and Angus King (I-Maine) on Wednesday, July 16,
introduced The Strong Families Act, a “bipartisan plan” that would incentivize employers
to voluntarily provide employees with paid parental or medical leave. The proposal is
aimed to provide paid leave in circumstances similar to those protected under the FMLA,
but for which current law does not provide paid leave. The bill, S. 2618, was read twice
and referred to the Senate Committee on Finance.
The FMLA requires employers with 50 or more employees to provide up to 12 weeks of
unpaid leave, which can be used for events like the birth or adoption of children, serious
medical issues, or providing care to close family members. The challenge for many
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working families, particularly hourly workers living paycheck-to-paycheck, is that
current law does not involve paid time off, Fischer and King pointed out in a joint
announcement.
The Strong Families Act would let working families have continued access to pay while
meeting necessary family obligations, according to its sponsors. “The Fischer-King plan
would create a tax credit to encourage employers of any size to voluntarily offer paid
leave for workers; the legislation includes no new mandates,” the lawmakers assured.
According to a summary provided by its two Senate sponsors, the proposed measure
would:

Create a tax credit for employers that voluntarily offer at least four weeks of paid
leave, which would be counted in addition to any state-based FMLA paid leave.

Permit employers to receive a 25-percent nonrefundable tax credit for each hour
of paid leave offered to qualified employees.

Consistent with the FMLA, allow employees to take FMLA leave after one year
on the job to ensure that the employer knows the employee won’t take FMLA
immediately after hiring.

Let employees take the leave on an hourly basis that would be separate from other
vacation or sick leave.

Permit part-time employees to be eligible for a pro-rata portion of FMLA leave,
so that for example, where someone works 20 hours a week, the employer could
offer two weeks of paid leave to qualify for the tax credit.

Prohibit employers from interfering or restraining an employee in taking the paid
leave offered by the employer, or from discharging or discriminating against the
individual for taking the leave.
“With more than half of women working as primary breadwinners, workplace flexibility
has become a necessity for 21st century families,” Fischer said. “It’s not just children
who require personal care and attention, it’s also elderly parents. This hourly paid leave
proposal provides families with the flexibility to take paid time to meet family medical
and caregiving obligations. Importantly, our bipartisan plan is also a balanced measure
that respects employers’ costs of doing business with employee needs.”
“America’s family leave policies are antiquated and shortsighted,” King explained. “How
can we expect to create a world-class workforce that can compete in a global economy if
we don’t give our workforce a chance to succeed? … It’s time that our family leave
policies caught up with the realities of a changing world and the demands of a global
economy. Our bill is one way we can encourage employers to make it easier for working
mothers and fathers to make a living and take the time needed to deal with life’s major
events. By supporting employees, America will be better poised to compete on a global
scale for generations to come.”
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Republican lawmakers move to repeal Davis-Bacon Act
By Pamela Wolf, J.D.
In the continuing battle over the Davis-Bacon Act, Republican lawmakers on Thursday,
July 17, introduced a bill that would repeal the legislation, which requires that local
prevailing wages be paid to workers on federal construction projects. To determine local
prevailing wage rates, among other things, the DOL’s Wage and Hour Division conducts
surveys to collect wage and benefit information for various job classifications in a given
geographic location. This latest effort is just the most recent of many aimed to get rid of
the Act, or at least to blunt its application to individual federal projects. The 2012
Republican Platform, in fact, called for a repeal of the Davis-Bacon Act.
The Davis-Bacon Repeal Act would repeal the federal legislation that applies to all
contractors and subcontractors working on federally funded or assisted contracts worth
more than $2,000 for the construction, alteration, and repair of public buildings or public
works, according to a release by Sen. Lamar Alexander (R-Tenn.), the senior Republican
on the Senate Health, Education, Labor, and Pensions Committee.
Senator Mike Lee (R-Utah) introduced the measure that would roll back what its
sponsors called “a law mandating a wage subsidy on nearly all federally funded
construction projects.” Senator Alexander cosponsored the bill, along with Sens. Ted
Cruz (R-Texas), Tim Scott (R-S.C.), Jeff Sessions (R-Ala.), Tom Coburn (R-Okla.), Ron
Johnson (R-Wis.), John Cornyn (R-Texas), Marco Rubio (R-Fla.) and David Vitter (RLa.).
“Enough is enough: For 83 years, this handout to labor unions has meant that, rather than
getting the job done for the lowest cost, taxpayers get charged extra on everything from
building roads to painting buildings,” Alexander said.
According to the repeal bill’s sponsors, the Congressional Budget Office has reported
that Davis-Bacon requirements increase construction costs by raising wages on federal
projects, by requiring labor to be used in a costly fashion, and by imposing reporting and
paperwork requirement on contractors — repeal, the agency said would save $12.7
billion over 10 years. The Republican lawmakers also pointed to a 2008 Suffolk
University study, which they said had found that Davis-Bacon requirements cost U.S.
taxpayers an additional $8.6 billion annually and add 9.9 percent to construction costs.
A year ago, in June, the House Education and the Workforce Subcommittee on
Workplace Protections held a hearing on the Davis-Bacon Act. At the hearing, Chairman
Tim Walberg (R-Mich.) pointed out that of the surveys reviewed by the Government
Accountability Office for a 2011 report, about 25 percent of the final rates were based on
the wages of fewer than seven workers. Moreover, 46 percent of the prevailing wages for
non-union workers were based on wages reported more than a decade ago. Walberg
underscored the GAO’s conclusion: “If the resultant prevailing wage rates are too high,
they potentially cost the federal government and taxpayers more for publicly funded
construction projects or, if too low, they cost workers in compensation.”
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Other side of the aisle. It’s probably safe to assume that the response from the other side
of the political aisle will be very similar to what it was a year ago. At the House
subcommittee hearing in June 2013, Democrats vigorously defended the benefits of the
Davis-Bacon Act to workers and characterized the hearing as “designed by the GOP to
undermine the nation’s historic wage protection law.”
“For the last eight decades, the Davis-Bacon Act has provided millions of hard working
Americans fair wages for their hard work,” remarked Ranking Democratic subcommittee
member Joe Courtney (D-Conn.). “During all these years, the Davis-Bacon Act has done
exactly what it was intended to do — prevent federal projects from driving down local
wage rates. To be sitting here today debating bureaucratic churning about Davis-Bacon
misses the point. The problem is more work. For people who are in the construction
trades today, this law is not the issue.”
Davis-Bacon ensures that workers are paid local prevailing wages on federal construction
projects so that government projects do not drive down local wages. A witness called by
the Republican majority advocated repeal of the Davis-Bacon law and also agreed that
workers’ wages would fall under repeal, the Democrats pointed out. House Republicans
have tried to repeal the Davis-Bacon protections nine times over the last two years in a
number of federal agency contracts, they noted. Nonetheless, the House has repeatedly
voted to retain these protections on a bipartisan basis.
“By protecting the wages of higher-skilled workers from low-wage, less-skilled
competition, Davis-Bacon raises employee productivity and offsets the cost of paying
higher hourly rates,” said Ross Eisenbrey, vice president of the Economic Policy
Institute. “Better-managed firms and more skilled employees also tend to work more
safely, reducing the number of accidents, lowering workers compensation costs, and
preventing damage to materials and equipment.”
“I can’t think of anything more fundamental to protecting our workforce than seeing to it
that they are paid a fair wage,” said Representative Tim Bishop (D-N.Y.). “I don’t think
you need to be a Nobel laureate in economics to figure out that if you pay people less,
they are going to spend less. If 70 percent of our economy is rooted in what people spend,
if we pay them less, that’s going to hurt our economy. What I want this committee to
look at is how we can protect wages.”
Justices asked to clarify donning and doffing compensation for nonunion workers
By Pamela Wolf, J.D. and Ronald Miller, J.D.
Waupaca Foundry, Inc. has asked the Supreme Court to take up a series of questions to
resolve the unsettled issue of exactly when donning and doffing activities in the nonunion
work environment are compensable as “principal activities” under the FLSA “because of
the nature of the work.” If the petition for certiorari is granted, the case will give the
Justices an opportunity to illuminate donning and doffing compensation requirements for
the nonunion sector, much as they did for the union environment in the Court’s January
2014 decision in Sandifer v. U.S. Steel Corp.
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Donning and doffing at the foundry. For safety, the Waupaca Foundry provided its
employees with personal protective equipment (PPE), including hardhats, safety glasses,
ear protection, steel-toed footwear and fire-retardant uniforms. Employees were required
to wear the PPE while working, and were subject to discipline for failing to comply with
the employer’s safety standards. Locker rooms equipped with showers were also
provided to the employees. When employees finished their shifts, they first clocked out
and preceded to the locker rooms, where they removed their uniforms and PPE, then
showered and changed into street clothes. Some employees did leave the foundry wearing
their uniforms, however.
FLSA violation alleged. The foundry employees sued their employer alleging that it
violated the FLSA by failing to pay them overtime compensation for the time they spent
showering and changing clothes. Citing DOL regulations and authority from sister
circuits, the district court held that an employee’s activity constituted compensable
“work” under the FLSA if such activities are required by law, by the employer, or by the
“nature of the work.” It thereafter granted summary judgment in favor of the employer,
ruling that showering and changing clothes at the plant was not compensable because
OSHA had responsibility for promulgating and enforcing occupational safety and health
standards, and had not mandated that workers in foundries shower and change clothes onsite.
“Nature of the work.” Particularly important to the case, the district court found the
third element of the test — the “nature of the work” — was “not a question that either a
court or a jury was well-equipped to answer.” Therefore, a determination of what
practices and procedures should be mandated to protect worker health and safety in the
workplace should be made on an industry-wide basis. Accordingly, the district
concluded, “the fact that OSHA has promulgated a standard for [hazardous material]
exposure that does not mandate changing clothes and showering after work requires the
conclusion that such activities are not required by the nature of the work.”
Seventh Circuit disagrees. The Seventh Circuit, however, saw it differently. OSHA’s
failure to promulgate a rule requiring that foundry employees shower and changes clothes
on-site did not bar the employees from presenting evidence as to the compensability of
such activities under the FLSA, ruled a divided appeals court in DeKeyser v
Thyssenkrupp Waupaca, Inc dba Waupaca Foundry, Inc., an October 30, 2013 decision.
Here, the appeals court majority determined that the district court erred when it ignored
the “sharp dispute” in the evidence as to the health effects of chemical exposure at the
foundry and the impact, if any, that showering and changing clothes would have on the
workers.
Unlike the district court, the Seventh Circuit concluded that it could not draw any
negative inferences from the absence of an OSHA standard requiring foundry workers to
shower and change clothes on-site. The majority also determined that it could not ignore
factual evidence and expert testimony offered by the parties to establish the
compensability of an activity under the FLSA. Moreover, the court concluded that
although cases such as this may implicate difficult and complex scientific issues, courts
cannot avoid discovery or expert testimony simply because it may be costly, time
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consuming, or difficult to understand. Thus, the district court erred in ignoring evidence
as to the health effects of chemical exposure, and the impact that showering and changing
clothes would have on the workers. Consequently, the case was remanded to the district
court.
Questions presented. Filed on July 1 (Dkt No 14-30), Waupaca Foundry’s petition for
certiorari presents three questions to the Court:
(1) In light of the OSH Act’s enactment and the creation of OSHA, does the “required
by the nature of the work” prong of the tripartite test still exist when matters of
workplace health and safety are in issue, or are such issues subsumed by the
“required by law” prong of the test, and decided by OSHA?
(2) What legal standard should be applied to determine if the “required by the nature of
the work” prong of the tripartite test has been met?
(3) If an employee is not required to perform donning, doffing and showering activities
at his/her place of employment, and the employee has the option and ability to
change clothes and shower at home (or elsewhere), does that fact alone render these
activities noncompensable under the FLSA?
As the petition for certiorari underscores, the High Court’s Sandifer ruling did not
address any important donning and doffing questions for the 90 percent of the U.S.
workforce that is nonunion. Perhaps the Justices will take the opportunity to do so now.
Bill demands more scheduling certainty for low-wage workers
By Pamela Wolf, J.D.
Democratic lawmakers on Tuesday, July 22, introduced a bill that would give more
predictability to the too-often uncertain world of low-wage workers. The legislation is
aimed at what its sponsors called “abusive scheduling practices directed primarily at
hourly workers.” The move comes in response to a growing workplace trend of uncertain,
shifting work schedules and research suggesting that these schedules can have broad
negative consequences for working families.
The lawmakers pointed to some of the economy’s fastest-growing and lowest-paying
industries — including the retail, food service, and janitorial sectors — in which workers
face erratic and irregular work schedules. Constantly changing, on-call schedules, the
bill’s sponsors observed, hinder hourly wage earners in their quest to earn a decent living
while still balancing responsibilities at work and at home.
“Despite being employed, too many hardworking people don’t have a stable schedule and
consistent wages, Senator Harkin (Iowa), Chairman of the Senate Health, Education,
Labor, and Pensions Committee remarked a release. “Instead, schedules change
constantly, so workers can’t predict their income or plan their lives. This wreaks havoc
on working families and jeopardizes their economic security. The Schedules That Work
Act would help workers better manage this balance while still respecting the needs of
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businesses. By giving workers greater input into and certainty in their schedules, workers,
families, and businesses can all benefit.”
What are the numbers driving legislative action? “Only 27 percent of employers allow
all or most of their employees to periodically change their starting and quitting times,”
according to the legislative findings that underpin the proposal. Low-wage workers are
most likely to be raising children by themselves — as half of mothers of young children
in low-wage jobs are doing — yet they have the least control over their schedules and the
most unpredictable ones.
“Retail sales, food preparation and service, and building cleaning occupations are among
those most likely to have unpredictable and unstable schedules,” the legislative findings
state. “According to data from the Bureau of Labor Statistics, 66 percent of food service
workers, 52 percent of retail workers, and 40 percent of janitors and housekeepers know
their schedules only a week or less in advance. The average variation in work hours in a
single month is 70 percent for food service workers, 50 percent for retail workers, and 40
percent for janitors and housekeepers.”
Those occupations are also among the lowest-paid and fastest-growing, making up 18
percent of workers in the economy, according to the legislative findings, which set their
number at about 23,500,000 workers. Their median pay is between $9.15 and $10.44 per
hour. More than half of workers in those occupations are women.
Worker protections. The Schedules That Work Act (HR 5159) would empower hourly
employees with greater scheduling flexibility and certainty, according to a bill summary.
The proposal would provide relief to workers facing irregular and unpredictable
schedules by:

Protecting employees against retaliation when they request a more flexible,
predictable, or stable schedule.

Creating a process for employers to consider requests that is responsive to the
needs of both employees and employers. Employees who make requests because
they have caregiving duties, are dealing with a health condition, are pursuing
education or training courses, or need to meet the demands of a second job must
be granted the schedule change, unless the employer has a bona fide business
reason for denying it.

Compensating retail, food service, and cleaning workers for at least four hours of
work when they report to work as scheduled for at least four hours but are sent
home early.

Providing that retail, food service, and cleaning employees must receive their
work schedules at least two weeks in advance. Although employers may later
change the schedules, they must pay employees one hour’s worth of extra pay for
schedules that are changed with less than 24 hours’ notice.
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
Providing workers an extra hour of pay when scheduled to work split shifts, or
nonconsecutive shifts within a single day.
The proposed legislation would give employees a voice at work — a benefit to both
business and families, the lawmakers point out. Businesses can incur significant costs due
to unpredictable employee scheduling, such as high worker turnover and absenteeism.
Empowering workers with schedule flexibility and certainty can minimize those effects.
Businesses would also benefit from the increased company loyalty that workers feel
when their voices are heard.
The bill’s sponsors further observed that when “work schedules are more stable and
predictable, families experience greater economic security, are better able to plan for
caregiving and childcare, face fewer strains on marriage and family, and have more
quality time to spend with loved ones.”
The Schedules That Work Act was introduced in the House by Representatives by George
Miller (D-Cal) and Rosa DeLauro (D-Conn), along with 27 cosponsors. Senators Tom
Harkin (D-Iowa) and Elizabeth Warren (D-Mass) are the sponsors of the Senate’s
companion legislation. The bill is already supported by a long list of unions, workers
advocates, and legal and social justice organizations.
GAO examines uptick in FLSA suits, recommends more DOL guidance
By Pamela Wolf, J.D.
More FLSA guidance from the DOL’s Wage and Hour Division would be helpful,
according to plaintiffs’ and defense attorneys who were interviewed by the Government
Accountability Office, including guidance on how to determine whether certain types of
workers are exempt from FLSA overtime pay and other requirements. The GAO study
was driven by questions about the effect of FLSA lawsuits on employers and workers, as
well as the WHD’s enforcement and compliance assistance efforts as the number of
lawsuits has risen.
Why did the GAO undertake the study? The GAO explained that questions have been
raised regarding the effect of FLSA lawsuits on employers and workers, as well as about
the WHD's enforcement and compliance assistance efforts as the number of lawsuits has
increased. As a result, the GAO examined what is known about the number of FLSA
lawsuits filed and how the WHD plans its FLSA enforcement and compliance assistance
efforts — an effort rooted in the results of a December 2013 report. In conducting the
earlier work, the GAO analyzed federal district court data from fiscal years 1991 to 2012
and reviewed selected documents from a representative sample of lawsuits filed in federal
district court in fiscal year 2012. The GAO also reviewed DOL's planning and
performance documents, and interviewed DOL officials and stakeholders, including
federal judges, plaintiffs’ and defense attorneys specializing in FLSA cases, officials
from organizations representing workers and employers, and academics.
FLSA actions on the rise – by 500 percent. The GAO noted in a report released on July
23 that there have been substantial increases over the last decade in the number of civil
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lawsuits filed in federal district courts alleging FLSA violations. According to statistics
mapped out in the report, 1,397 FLSA suits were filed in 1991. By 2012, the number of
such suits increased over 500 percent to 8,148. Some 42 percent of the FLSA suits filed
in 2012 were individual actions; 40 percent were collective actions; 16 percent were
individual actions arising from a decertified collective action; and 2 percent were initiated
by the DOL. The GOA found that in fiscal year 2012, an estimated 97 percent of FLSA
lawsuits were filed against private sector employers, often from the accommodations and
food services industry, and 95 percent of the lawsuits included alleged overtime
violations.
Federal courts in most states experienced increases in the number of FLSA lawsuits filed,
but large increases were concentrated in a few states, including Florida and New York,
the GAO reported. Many factors may contribute to the general trend of increasing FLSA
suits, but the one cited most by stakeholders interviewed — including attorneys and
judges — was attorneys’ increased willingness to take on such cases. Stakeholders cited
these potential contributing factors, according to the report:

Increased awareness and activity by plaintiffs’ attorneys. Stakeholders most
frequently cited increased awareness about FLSA cases and activity on the part of
plaintiffs’ attorneys as a significant contributing factor. Many stakeholders,
including two plaintiffs’ attorneys, told the GAO that financial incentives,
combined with the fairly straightforward nature of many FLSA cases, made
attorneys receptive to taking these cases. In Florida, for example, where nearly 30
percent of all FLSA lawsuits were filed from 1991 to 2012, several stakeholders
advised the GAO that plaintiffs’ attorneys advertise for wage and hour cases using
billboards, radio, foreign language press, and other methods.

Evolving case law. Several stakeholders suggested that evolving case law may
have contributed to the increased awareness and activity by plaintiffs’ attorneys,
pointing for example, to the 1989 Supreme Court decision Hoffmann–La Roche,
Inc. v. Sperling, which made it easier for plaintiffs’ attorneys to identify potential
plaintiffs and reduced the work necessary to form collectives. Historically,
stakeholders explained, the requirement that plaintiffs must “opt in” to a
collective action had created some challenges to forming collectives because the
plaintiffs’ attorneys had to identify potential plaintiffs and contact them to get
them to join the collective. In Hoffmann–La Roche, the Supreme Court held that
federal courts have discretion to facilitate notice to potential plaintiffs of ongoing
collective actions

Economic conditions. Some stakeholders said that economic conditions, such as
the recent recession, may have played a role in the increase in FLSA litigation.
Workers who have been laid off face less risk when filing FLSA lawsuits against
former employers than do workers still employed, who may fear retaliation for
filing lawsuits. Some stakeholders also said that during difficult economic times,
employers may be more likely to violate FLSA requirements in an effort to reduce
costs, possibly spawning more FLSA litigation.
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
State wage and hour laws. Many stakeholders told the GAO that the prevalence of
FLSA litigation by state is influenced by the variety of state wage and hour laws.
For example, while the federal statute of limitations for filing an FLSA claim is
two years (three years if the violation is willful), New York state law has a sixyear statute of limitations for filing state wage and hour lawsuits. A longer statute
of limitations may increase potential financial damages in such cases because
more pay periods are involved and more workers may be involved. Moreover,
adding a New York state wage and hour claim to an FLSA lawsuit in federal court
could expand the potential damages, which, several stakeholders said, may
influence decisions about where and whether to file suit. Moreover, many
stakeholders noted that because Florida lacks a state overtime law, those who
wish to file a lawsuit seeking overtime compensation generally must do so under
the FLSA.

Ambiguity in applying the law and regulations. A number of stakeholders cited as
a factor the existing ambiguity in applying the FLSA statute or regulations —
particularly the exemption for executive, administrative, and professional
workers. In 2004, DOL issued a final rule updating and revising its regulations in
an attempt to clarify this exemption and provided guidance about the changes, but
a few stakeholders told the GAO that there is still significant confusion among
employers about which workers should be classified as exempt under these
categories.

Industry trends. About one-quarter of the FLSA lawsuits filed in fiscal year 2012
were filed by workers in the accommodations and food service industry.
Nationally, service jobs, including those in the leisure and hospitality industry,
increased from 2000 to 2010, while most other industries lost jobs during that
period. Federal judges in New York and Florida attributed some of the
concentration of such litigation in their districts to the large number of restaurants
and other service industry jobs in which wage and hour violations are more
common than other industries. An academic who focuses on labor and
employment relations told the GAO that changes in the management structure in
the retail and restaurant industry may have contributed to the rise in FLSA
lawsuits, pointing to frontline managers, for example, who were once exempt but
have become nonexempt as their nonmanagerial duties have increased relative to
their overall duties.
Compliance and enforcement. The WHD has an annual process for planning how it will
target its enforcement and compliance assistance resources to help prevent and identify
potential FLSA violations. The WHD targets industries that according to its recent
enforcement data have a higher likelihood of FLSA violations. However, the division
does not have a systematic approach that includes analyzing relevant data, such as the
number of requests for assistance it receives from employers and workers, to develop its
guidance — a best practice previously recommended by the GAO.
The division also lacks a routine, data-based process for assessing the adequacy of its
guidance, according to the GAO. For example, the WHD does not analyze trends in the
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types of FLSA-related questions it receives from employers or workers. But according to
the plaintiffs’ and defense attorneys interviewed by the GAO, more FLSA guidance from
WHD would be helpful, for example, on how to determine whether certain types of
workers are exempt from the overtime pay and other requirements of the FLSA.
Recommendations. In its December 2013 report, GAO recommended that the Secretary
of Labor direct the WHD Administrator to develop a systematic approach for identifying
and considering areas of confusion that contribute to possible FLSA violations to help
inform the development and assessment of its guidance. WHD agreed with the
recommendation and described its plans to address it.
The report suggested that the WHD’s approach “could include compiling and analyzing
data on requests for guidance on issues related to the FLSA, and gathering and using
input from FLSA stakeholders or other users of existing guidance through an advisory
panel or other means.”
“While improved DOL guidance on the FLSA might not affect the number of lawsuits
filed, it could increase the efficiency and effectiveness of its efforts to help employers
voluntarily comply with the FLSA,” according to the report. “A clearer picture of the
needs of employers and workers would allow WHD to more efficiently design and target
its compliance assistance efforts, which may, in turn, result in fewer FLSA violations.”
FLSA hearing: Compliance challenges vs vital wage-theft protection
By Pamela Wolf, J.D.
The House Education and the Workforce Subcommittee on Workforce Protections on
Wednesday, July 23, held a hearing on the federal wage and hour regulatory structure
built around the FLSA, which according to DOL estimates, impacts more than 130
million workers. The subcommittee expressed concern about what it called a “patchwork
of conflicting interpretations and a complex regulatory structure” that has created legal
uncertainty among employers and employees. On the other hand, testimony also revealed
the chilling scope of wage theft in the low-wage workforce and the vital need for worker
protections.
The subcommittee pointed to a Government Accountability Office report, issued in
December 2013, which found a significant increase in FLSA-related litigation and
recommended that the DOL develop a systematic approach to identifying areas of
confusion and improve administrative guidance. A subsequent GAO report, released on
the day of the hearing, also examined the uptick in FLSA litigation and made the same
recommendations. This later report relied on the December 2013 report and served as the
testimony of the GAO’s Dr. Andrew Sherrill.
Need for regulatory change. In his opening remarks, Subcommittee Chair Rep. Tim
Walberg (R-Mich.) noted the crucial wage and hour protections enjoyed by the U.S.
workforce for more than 75 years, saying that “the vast majority of employers do their
part to ensure workers enjoy these vital protections.” However, Walberg, lamented, this
has become an increasingly difficult challenge.
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“The current rules and regulations surrounding the law are exceptionally complex and
outdated,” Walberg said. “Too often a maze of confusing regulatory requirements
promotes the interests of trial lawyers, rather than working families. A report issued by
the nonpartisan Government Accountability Office reveals a broken regulatory structure
that fosters unnecessary and costly litigation.”
Referring to the more than 500-percent increase in FLSA litigation during the last 20
years, Walberg remarked: “You would think employers are engaged in some coordinated
national conspiracy to deny workers their rights. The truth is the vast majority of
employers want to do the right thing and follow the law, but too often they unknowingly
step into a regulatory trap. Even the Department of Labor has run afoul of wage and hour
regulations and they are responsible for writing the rules and enforcing the law.”
Moreover, even as litigation has increased, DOL guidance on the FLSA has sharply
declined, from about 37 per year between 2001 and 2009, to only seven during the last
three years.
Slamming the Obama Administration, Walberg said, “We’ve heard a lot in recent months
and years about executive authority. We are told this is supposed to be a so-called year of
action. Too often these actions stretch the limits of the law and even our Constitution. Yet
when it comes to using a pen and phone to help employers understand a complex and
confusing regulatory scheme, the Department of Labor can’t be bothered.”
Turning to President Obama’s earlier Executive Memorandum directing the secretary of
labor to revise federal wage and hour regulations, Walberg noted there is some agreement
that the rules are outdated and need to be improved. He also said that if the President was
“beginning a sincere attempt to modernize current regulations,” the House Education and
the Workforce Committee would support that effort — the Subcommittee hearing should
inform that work.
Compliance challenges. The FLSA needs to meet the needs of today’s workplace and
ensure workplace flexibility, according to Nancy McKeague, Senior Vice President of
Employer and Community Strategies and Chief Human Resources Officer, Michigan
Health and Hospital Association (MHA). McKeague testified at the hearing on behalf of
the Society for Human Resource Management (SHRM). She told representatives that
most employers face challenges in ensuring that they are compliant with the FLSA.
“Additional guidance would certainly be helpful for HR professionals given the practical
challenges most employers face with FLSA compliance,” she said.
Classifying employees as exempt or nonexempt is challenging for employers because it is
partly based on subjective criteria and because employees often perform a mix of
functions in one position, McKeague told the Subcommittee. “Even some of the best
employers, like the MHA, face practical challenges with the FLSA.” She added,
“Complying with the statute can create high legal costs for employers.”
The FLSA also makes it difficult for employers to offer flexible hours and prohibits
offering comp time to private-sector nonexempt employees, said McKeague. Regarding
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the DOL’s anticipated proposed changes to FLSA regulations this fall, SHRM has
cautioned that changes could make compliance even more complicated for employers,
particularly small businesses and nonprofit organizations, and could reduce flexibility for
employers and employees.
“Any changes to the FLSA regulations should be carefully constructed to prevent a new
wave of litigation and additional confusion,” according to McKeague.
Employee protections vital. The FLSA and its vigorous enforcement is “vitally
important” to today’s workforce, “particularly for low-wage workers,” according to
Judith M. Conti, Federal Advocacy Coordinator for the National Employment Law
Project (NELP). NELP, she explained, is a nonprofit organization that for over 45 years
has fought for the rights and needs of low-income and unemployed workers.
Conti made it clear that it was not her position that a majority or even a substantial
minority of employers do not follow the FLSA. “Indeed, given the clarity of the law, by
and large, most employers quite willingly comply, and where there are judgment calls to
be made, they do their best to make the right judgment.” She pointed to the “thriving
management-side bar that ably advises employers and human resources professionals
across the country as to compliance with the FLSA” and said that “by and large they do a
very good job.”
“But we cannot ignore the fact that there are low-road employers, both large and small,
who to varying degrees push the boundaries of the FLSA beyond reason, who misclassify
workers as independent contractors in order to avoid their legal responsibilities under the
FLSA, who wrongfully classify workers as exempt from coverage of the FLSA, and who
flat-out do not pay their workers minimum wage and/or overtime,” Conti urged. “It is
these employers, and their employees, for whom the vigorous enforcement of the FLSA
is most important, for not only do they cheat workers out of their wages, but they gain an
unfair competitive edge over honest employers. Neither outcome should be tolerated.”
How can that bad behavior be eradicated? The answer lies in finding “ways to increase
vigorous enforcement of the wage and hour laws that are already on the books, and to
craft better solutions to the common schemes of wage theft that are so rampant in this
country,” according to Conti. “If we do those things, we not only make conditions better
for workers in this country, but we simultaneously level the playing field for high-road
employers who strive to do the right thing by their workforces.”
Low-wage workers hit hard by wage theft. Conti underscored the scope of the problem
for hourly workers, citing a 2009 report, Broken Laws: Unprotected Workers, which
discussed the results of a 2008 survey of low-wage workers in Chicago, Los Angeles, and
New York City. Among its key findings:

68 percent of those surveyed experienced at least one pay-related violation in the
work week preceding the survey.
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
More than one-fourth (26 percent) of workers were paid less than the legally
required minimum wage in the previous work week, and 60 percent of these
workers were underpaid by more than $1 per hour.

Among those working overtime (more than 40 hours in the previous work week),
76 percent were not paid the legally required overtime rate by their employers.

Nearly a quarter of workers came in early or stayed late on the job; 70 percent of
these workers received no compensation for this “off the clock” work.

Three-in-ten tipped workers surveyed were not paid the tipped worker minimum
wage, and 12 percent of tipped workers experienced tip stealing by their employer
or supervisor.

The majority of workers never complained about any of these violations for fear
that they would experience retaliation, and of those who did complain, 43 percent
did experience illegal employer retaliation.

As to the cost of wage theft, the typical worker experiencing wage theft lost $51
per week out of average weekly earnings of $339. On a full-time year-round
basis, this translates into lost annual earnings of $2,634 (15 percent of total
earnings of $17,616).
The researchers, extrapolating from these findings, estimated that in these three cities
alone, low-wage workers lose more than $56.4 million per week as a result of
employment and labor law violations.
DOL compliance assistance. Conti also rounded out the record on the compliance
assistance efforts of the DOL’s Wage and Hour Division, observing that “while the GAO
identifies the WHD’s decision to stop doing Opinion Letters as a decline in compliance
assistance, they do not detail all the other methods of compliance assistance that the
WHD uses.” She ticked off a list of those efforts:

numerous fact sheets that are in English and nine other languages,

conference calls with stakeholders about compliance with numerous laws and
regulations,

webinars,

various Interactive “E-tools” that help employers calculate what wages they owe
their workers,

Q&A sheets,

field bulletins,

administrative interpretations, and
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
Powerpoint presentations in eight different languages that the DOL produces to
ensure that employers have every resource they need to comply with the FLSA.
Conti also noted that WHD employees “routinely take phone calls from employers and/or
their attorneys and provide individualized guidance over the phone as well.” While it’s
true that under the Obama Administration the WHD (and the DOL as a whole) “has
focused more on its enforcement responsibilities relative to compliance assistance than
the previous Administration’s DOL did, the return to enforcement, especially at a time
when the Recession was driving more and more employers to the low-road, was a
welcome and necessary change in the way of doing business.” According to Conti, “the
massive increase in recoveries and settlements, both from WHD and the private bar, is
proof that the added enforcement actions are necessary.”
Subcommittee hearing points to importance of paid family leave
By Pamela Wolf, J.D.
On Wednesday, July 30, the Senate Health, Education, Labor and Pensions
Subcommittee on Children and Families held a hearing on the benefits of paid family
leave for both businesses and working families that pointed to the difficult realities often
faced by working parents. Employer policies can be greatly divergent with regard to
family leave, and there is no universal paid family leave. The Subcommittee testimony
underscored both the hardships and the benefits that can result from employers’ family
leave policies.
In her opening remarks, Subcommittee Chair Kay R. Hagan (D-N.C.) pointed to the
scope of the challenge faced by so many employees. Only 12 percent of U.S. workers
have access to formal employer-provided paid family leave, which means they must try
to cobble together vacation, sick days, and short term disability leave in order to take paid
time off for the birth of a child, adoption, or to care for a seriously ill family member.
Moreover, Hagan said, nearly 25 percent of private-sector employees do not earn paid
vacation time, 40 percent do not earn paid sick days, and 40 percent do not have access to
employer-provided disability insurance.
Tale of two employers. In her testimony, Jeannine Sato, the director of Durham
Connects, a nurse home-visiting program for parents of newborns established by Duke
University and its community partners, said: “We must ensure that all moms and dads, all
workers no matter who they work for, have access to paid family leave, not only for new
parents, but also for families taking care of critically ill children, or other relatives, or
recovering from their own serious illnesses. This is a human issue.”
Sato, the married mother of two children, had very different experiences with employers
at the birth of each of her children. At the birth of her first child, her former employer
deemed she was “too essential” to take off 12 weeks and declined to “set a precedent”
that other employees would follow. The employer not only refused her request for leave,
but also denied Sato a flexible work environment after the birth — no working from
home, and no compressed workweek. As a result, she was required to return to work full-
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time after only six weeks of medical leave, after using all of her vacation and sick time,
or risk losing her job. As the family breadwinner, she needed her job.
The negative experience prompted Sato to find another job, her current position at Duke
University’s Center for Child & Family Policy, which made for an entirely different
experience at the birth of her second child. Her boss congratulated her about her my
pregnancy and told her to let him know what she needed. She was allowed 12 weeks
leave and the flexibility to work from home to ease her transition. Duke University’s HR
policy provided three weeks’ pay after her use of accrued vacation and sick time.
Because her leave was longer, Sato said she still took unpaid time and had to manage
finances carefully, but she didn’t risk losing her job. She said she was “recovered, rested
and ready to come back to work, and [] never missed a beat.”
“The stark difference between the family leave situations between my first and second
child crystalized for me how terrible my first experience was, and how much better things
can be in a supportive work environment,” Sato said. “Being able to take the appropriate
amount of time off allowed us to bond with our newborn, and establish good
breastfeeding routines and quality child care plans. It gave me time to rest and recuperate
from pregnancy and childbirth before jumping back into the workforce.”
Importance of flexibility and parental leave options. It’s also important for working
families to have paid leave and other viable options not just for childbirth, but for
adoption — and for both parents.
Ernst & Young LLP Flexibility Leader Maryella Gockel discussed her own experience
with the adoption of her son in 1988, when the firm did not offer paid leave for adoption,
and in 1991, with the adoption of her daughter, when no paid parental leave was
available. For the first adoption, Gockel was nonetheless able to arrange for six weeks off
and returned to work on a reduced work schedule. For the later adoption, she took four
months off and again returned to work on a reduced work schedule.
Gockel also traced the evolution of her firm’s flexible leave policy and its ultimate
adoption of a fully paid parental leave program. Ernst & Young LLP was the first of the
Big 4 professional services firms to adopt such a program.
“In 2002, we had no idea how it might work and if men would use the paid parental
leave,” she said. “But we knew we had to try because we were still losing women at a
faster rate than men, and exit interviews told us that ‘work-life balance’ was a big factor.”
Several years later Ernst & Young decided to enhance its parental leave policy, again
becoming the first Big 4 firm to do so, and increased time off for primary caregivers to
six fully-paid weeks off following the birth or adoption of a child, according to Gockel.
Birth mothers get 12 weeks of fully-paid time off following the birth, which includes six
weeks of disability plus six weeks of parental leave. If their doctor suggests it, they are
also eligible for (typically) two weeks off before the birth. For men and adoptive parents,
because they are not deemed “disabled” because of a pregnancy, they get six weeks of
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fully-paid parental leave, if they are the primary caregiver. Non-primary caregivers are
given two weeks of parental leave after the baby arrives.
Nearly all of the women at Ernst & Young who utilize this benefit take their 12 weeks off
consecutively, Gockel noted. Some also take additional vacation time and/or unpaid time
off afforded by the FMLA to expand the leave. The firm provides access to 16 weeks of
FMLA time — four more weeks than the 12 weeks required by the federal statute. In
addition, the firm runs FMLA and disability-related time off consecutively, not
concurrently. Thus, a new birth mother typically will have six weeks of disability leave
before the FMLA time off even begins. Accordingly, birth mothers working at Ernst &
Young have 22 weeks of job guaranteed time off after the birth (six weeks of paid
disability plus 16 weeks of FML, with six of the latter being paid under the firms parental
leave policy).
Gockel also pointed to a study conducted by the Boston College Center for Work and
Family, which found that millennials (aka Gen Y) “are particularly interested in utilizing
paid paternity leave benefits.” Millennial generation fathers felt most strongly that it’s
important for employers to provide paid paternity or paid parental leave. What she found
particularly significant was the fact that 93 percent said it was extremely, very or
somewhat important — and more than 60 percent of the Ernst & Young workforce is Gen
Y.
“It may seem counterintuitive for an organization to encourage its people to take more
time away from work and to spend business resources on family programming,” Gockel
explained. “Yet for [Ernst & Young], encouraging our men and women to take paid
parental leave, utilize day-to-day flexibility, or go on [flexible work arrangement] to help
manage their busy lives, has been smart business.”
National Partnership for Women & Families Vice President Victoria S. Shabo, MA, JD,
and Kevin Trapani, President and CEO, The Redwoods Group, also testified at the
hearing.
LEADING CASE NEWS:
2d Cir.: Entry-level accountants were learned professionals, exempt from overtime
By Ronald Miller, J.D.
Entry-level accountants at a major accounting firm were learned professionals exempt
from the FLSA’s overtime provisions, ruled the Second Circuit. Noting that the
employees received substantial, specialized education as accountants, were designated as
accountants by their employer, performed entry-level accounting tasks, and were
automatically promoted to a more senior accounting position after two years of
satisfactory employment, the appeals court concluded that they qualified for the
exemption. Further, they acted in a manner that reflected the knowledge and required
judgment characteristic of work in that profession (Pippins v KPMG LLP, July 22, 2014,
Lynch, G).
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The employees worked as “audit associates” at KPMG. They brought an FLSA collective
action alleging that they regularly worked more than 40 hours per week but did not
receive overtime compensation. KPMG countered that the employees worked as
accountants, one of the learned professions specifically identified in the regulations, 29
C.F.R. Secs. 541.301(c), (e)(5), as “a field of science or learning,” so they were exempt
from the FLSA’s overtime provisions. A district court concluded that because they were
employed as accountants, the employees were exempt from the FLSA overtime
provisions, and granted KPMG’s motion for summary judgment. The employees timely
appealed.
Professional exemption. To qualify for the FLSA’s “learned professional” exemption,
“an employee’s primary duty must be the performance of work requiring advanced
knowledge in a field of science or learning customarily acquired by a prolonged course of
specialized intellectual instruction.” The defining regulations impose a three-pronged test
to determine whether a primary duty qualifies for the exemption: the work must be (1)
“predominantly intellectual in character, and . . . require the consistent exercise of
discretion and judgment;” (2) in a “field of science or learning,” which includes
accounting; and (3) of a type where “specialized academic training is a standard
prerequisite for entrance into the profession.” All three prongs must be satisfied for the
learned professional exemption to apply.
Here, the employees did not dispute that they worked in the field of accounting, and that
the second requirement for application of the exemption was satisfied. However, they
contended that the other two requirements were not satisfied, arguing that their work does
not require specialized academic training or involve the consistent exercise of advanced
knowledge or professional judgment. Specifically, the employees contended that they
received all the training necessary to perform their function after their arrival at KMPG,
rather than through a prior course of intellectual instruction, and that they did not exercise
specialized knowledge or professional discretion in performing their duties because they
primarily performed low-level, routine work.
Learned professional. The parties agree that audit associates’ work is primarily
concerned with tasks that contribute to the production of work product characteristic of
the profession of accountancy. What the parties disputed was whether their work was so
“pre-determined,” and whether supervision and review of work product by more senior
employees was so pervasive that they never exercised the professional judgment
characteristic of accountancy. Further, the parties disputed the extent to which the
training, or the work actually performed by audit associates, was based on or required the
educational background possessed by those hired for the job.
The court noted the regulation explicitly identified “certified public accountants” and
those who perform similar jobs duties as learned professionals. Thus, if the employees
actually performed work in such capacity, there was little doubt that their work was
“predominantly intellectual” for purposes of the exemption.
Discretion and judgment. Comparing discretion and judgment in the context of the
administrative exemption as opposed to the professional exemption, the Second Circuit
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concluded that a worker’s application of broad discretion in the course of general
corporate decision-making is of a different character than the professional discretion
based on expertise in a particular field that is characteristic of the learned professions.
Learned professionals need not exercise management authority to operate as
professionals; what matters is whether they exercise intellectual judgment within the
domain of their particular expertise. The court further noted that while administrative
employees must show “independent judgment” to qualify for the exemption, the
definition of the learned profession exemption omits that requirement. More importantly,
the Secretary of Labor has recognized that the discretion and judgment standard for the
professional exemption is “less stringent” than the discretion and independent judgment
standard of the administrative exemption.
Advanced knowledge. Turning next to the substance of the professional exemption’s
“advanced knowledge” requirement, the Second Circuit observed as an initial matter that
it had not yet had an occasion to elaborate on the meaning of this prong of the learned
professional exemption. Central to the inquiry are “the importance of the duties, the
frequency with which they require the employee to exercise discretion, and the relative
freedom of the employee from supervision, as well as the percentage of time the
employee spends performing them.” Analogous cases suggest that employees apply
discretion in the application of advanced knowledge when they interpret and analyze
information central to the practice of the profession. Application of advanced knowledge
takes one of two forms: substantive interpretation of data; or meaningful decision-making
capacity characteristic of a member of the profession. Workers may be found to exercise
professional judgment even when their discretion in performing their core duties is
constrained by formal guidelines, or when ultimate judgment is deferred to higher
authorities. Thus, the appeals court concluded, the learned professional exemption applies
if employees rely on advanced knowledge of their specialty to exercise discretion and
judgment that is characteristic of their field of intellectual endeavor.
Qualities of work. Because the accounting profession was explicitly identified in the
FLSA regulations, the appeals court concluded that it was not necessary to inquire
whether accountancy had a sufficiently intellectual character to qualify as a learned
profession. Rather, it had only to identify what qualities are characteristic of the work of
an accountant. In order to qualify as professional accountants, employees’ “primary duty”
must be the deployment of “professional” skepticism” to ensure the integrity of the
financial accounting process, and their individual tasks must typically involve the
exercise of such skepticism. However, the occasional exercise of such judgment, which
does not constitute a primary duty, will not suffice. Nor will an employee who deals with
the tabulation of data demonstrate professional skepticism merely by noting and reporting
irregularities or errors in the process of tabulation.
The employees acknowledged that audit associates were expected to practice professional
skepticism in the discharge of their duties. Here, the facts demonstrated that they
practiced professional skepticism in the sense of the judgment characteristic of
accountants. Contrary to the employees’ contention that they never employed advanced
knowledge in their work, the agreed-upon facts indicated that judgment of the type
characteristic of trained accountants was at least sometimes a part of their work. Audit
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associates occasionally occupied leadership roles, and a review of their typical tasks
revealed that they regularly relied on advanced knowledge of accountancy and practiced
the judgment and discretion characteristic of their profession.
The case number is: 13-889-cv.
Attorneys: Carter Glasgow Phillips (Sidley Austin) for KPMG LLP. Deirdre Aaron
(Outten & Golden) for Kyle Pippins.
3d Cir.: Classwide arbitration a “ question of arbitrability” for court, not
arbitrator, to decide
By Lisa Milam-Perez, J.D.
Unless the parties “unmistakably provide otherwise,” whether an arbitration agreement
allows for classwide arbitration is a substantive “question of arbitrability” to be decided
by a district court, not an arbitrator, the Third Circuit held, remanding for the lower court
to decide in the first instance whether the parties contemplated classwide arbitration of a
putative overtime collective action. “Where we have an agreement to arbitrate individual
disputes and no mention of arbitration for a wider group, we believe the parties would
have expected a court, not an arbitrator, to determine the availability of class arbitration,”
the appeals court reasoned. “This is especially so given the critical differences between
individual and class arbitration and the significant consequences of that determination”
(Opalinski v Robert Half International Inc, July 30, 2014, Ambro, T).
In the underlying dispute, two employees filed a putative collective action contending
they were erroneously classified as exempt by their employer and improperly denied
overtime pay. However, both employees had signed employment agreements that
contained arbitration clauses, and those provisions did not mention classwide arbitration.
So the employer moved to compel individual arbitration. The district court granted the
motion in part but held that whether arbitration should proceed as a class or individually
would be determined by the arbitrator. Instead of appealing that order, the employer went
to arbitration. However, when the arbitrator concluded that the employment agreements
allowed for classwide arbitration and issued a partial award to that effect, the employer
once again sought recourse in the district court, asking the court to vacate the arbitrator’s
award. The district court denied the employer’s motion to vacate the award, prompting
this appeal.
After resolving a few procedural issues of its own, the Third Circuit addressed the issue
before it: not whether the applicable arbitration agreement allowed for classwide
arbitration, but rather, who should decide that question?
A question of arbitrability? A district court must determine, in the first instance,
whether the availability of classwide arbitration is a “question of arbitrability,” the
appeals court said. If so, the issue presumably is one for judicial resolution “unless the
parties clearly and unmistakably provide otherwise.” If the availability of classwide
arbitration is not a question of arbitrability, however, it is presumptively for the
arbitrator to resolve. Here, the appeals court determined it was a question of arbitrability.
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Questions of arbitrability “are limited to a narrow range of gateway issues,” the appeals
court explained, such as whether parties intended to be bound by an arbitration provision
or whether the provision was intended to apply to a particular dispute. In contrast, the
kinds of questions that parties might expect to be resolved in an arbitral forum include
“procedural” issues that arise out of the dispute, including allegations of waiver, delay, or
similar defenses to arbitrability.
The Supreme Court has not yet decided whether the availability of class arbitration is a
“question of arbitrability.” In Green Tree Financial Corp. v Bazzle, a High Court
plurality concluded that the availability of classwide arbitration was not a question of
arbitrability, but subsequent Supreme Court decisions (including Stolt-Nielsen S.A. v.
AnimalFeeds International Corp and Oxford Health Plans LLC v. Sutter) have cast doubt
on that plurality decision. Nor has the Third Circuit decided the question. The only other
circuit court to have squarely resolved the “who decides” issue is the Sixth, and it held
that “whether an arbitration agreement permits classwide arbitration is a gateway matter”
best addressed by the courts. The Third Circuit found the reasoning of its sister circuit
persuasive and resolved what had been an open question accordingly.
A question of arbitrability. The appeals court offered several bases for its holding. First,
the availability of class arbitration implicates whose claims the arbitrator may resolve,
and the Supreme Court has long recognized that a district court must determine whose
claims an arbitrator is authorized to decide. The Third Circuit, too, has “held repeatedly
that whose claims an arbitrator may decide is an issue for the courts,” it noted.
Whose claims? Also, the determination whether an arbitrator may resolve the claims of
additional individuals who are not currently parties to a dispute “affects whose claims
may be arbitrated and is thus a question of arbitrability to be decided by the court.” Citing
Justice Alito’s concurrence in Oxford Health, the appeals court heeded his caution that
courts “should be wary of concluding that the availability of classwide arbitration is for
the arbitrator to decide, as that decision implicates the rights of absent class members
without their consent.”
Yet another reason why the availability of classwide arbitration is a question of
arbitrability: it concerns “whether a concededly binding arbitration clause applies to a
certain type of controversy.” Contrary to the employees’ contentions here, the availability
of classwide arbitration is not simply a procedural question. The Supreme Court
expressly disclaimed such a notion in Stolt-Nielsen, explaining that “class action
arbitration changes the nature of arbitration to such a degree that it cannot be presumed
the parties consented to it by simply agreeing to submit their disputes to an arbitrator.”
The High Court then went on to articulate all the ways in which class and individual
arbitration were distinct.
Parties didn’t provide otherwise. Finally, the presumption is that courts must decide
questions of arbitrability “unless the parties clearly and unmistakably provide otherwise.”
The arbitration clauses at issue here were silent on that point, and silence won’t rebut the
presumption. Because nothing else in the agreement or in the record evidence suggests
that the parties agreed to submit questions of arbitrability to the arbitrator, the strong
89
presumption favoring judicial resolution was not undone, and the district court had to
decide whether the arbitration agreements permitted classwide arbitration.
The case number is: 12-4444.
Attorneys: Shannon Liss-Riordan (Licthen & Liss-Riordan) for David Opalinski. Richard
L. Alfred (Seyfarth Shaw) for Robert Half International, Inc.
5th Cir.: Owner’s mere advice to franchisee doesn’t support finding he was FLSA
employer
By Joy P. Waltemath, J.D.
Neither a franchise agreement nor the economic realities test supported a finding that an
owner/franchisor, by merely providing advice to a struggling franchisee, acted as the
employer of its cook, the Fifth Circuit ruled, overturning a jury verdict and finding the
owner/franchisor was entitled to judgment as a matter of law (Orozco v Plackis, July 3,
2014, Stewart, C).
Husband and wife franchisees initially hired the cook at a salary of $1200 biweekly in
2005; by 2007, his salary had been reduced to $1050 biweekly; in 2011, it was changed
to $10 per hour, at which time the cook quit and sued the franchisees for FLSA minimum
wage and overtime violations. Although he settled with the franchisees, the cook then
added the owner/founder of the franchise as a defendant. The owner/franchisor moved for
judgment as a matter of law, which was denied, and a jury found for the cook. On appeal,
the owner/franchisor challenged the first two findings by the jury: whether he was the
cook’s employer and whether the cook sufficiently established enterprise coverage.
Before the Fifth Circuit, the owner/franchisor argued that none of the factors in the
economic reality test were met and further, that the terms of the franchise agreement
showed the franchisee retained control over the cook’s franchise location. The appeals
court agreed, concluding the lower court should have granted the owner/franchisor’s
motion for judgment as a matter of law because there was legally insufficient evidence
for a reasonable jury to find that he was the cook’s employer under the FLSA.
Economic realities test. Even the cook conceded that he failed to provide any evidence
suggesting that the owner/franchisor maintained the cook’s employment records, which
was the fourth element of the economic reality test. However, this failure was not fatal, so
the court looked to the other three elements: whether the alleged employer: (1) possessed
the power to hire and fire the employees, (2) supervised and controlled employee work
schedules or conditions of employment, (3) determined the rate and method of payment.
Authority to hire or fire. Testimony that some employees worked at both the
owner/franchisor’s restaurant and the franchisee’s location did not show that the owner
possessed the power to hire or fire the cook. Disagreeing with the magistrate judge’s
conclusion, the court found the jury could not reasonably infer that the owner/franchisor
hired employees for his location and then directed them to work at another. Rather, the
mere fact that franchisee hired employees who worked at the owner’s restaurant did not
90
prove that the owner hired or fired employees; it suggested, however, that employees
who were already trained were more desirable candidates. Nor did the timing between
the owner’s meeting with the franchisee, which preceded personnel changes, suggest that
the owner had the power to hire or fire the cook. And the cook’s own testimony was that
the franchisee hired him and had the authority to fire him, not the owner.
Supervise or control. Nor was there legally sufficient evidence that the owner
supervised and controlled employee work schedules or conditions of employment at the
franchisee location. The franchisee made changes to the cook’s hours and salary shortly
after meeting with the owner. Moreover, the owner reviewed employee work schedules at
the franchisee location, trained the cook (and the franchisee), visited the location
frequently, emailed the franchisee with suggestions on how to improve the profitability of
the restaurants, implemented changes to the menus, contracted with vendors for supplies
for the franchise, and directed various advertising plans. Even coupled with evidence that
the cook was directed to remain at work until an employee who worked at the owner’s
restaurant arrived, none of the evidence was legally sufficient in the Fifth Circuit’s
opinion to show the owner supervised or controlled the cook’s working conditions.
Temporal proximity between the owner’s meeting with the franchisee and changes
implemented in the franchisee’s location alone did not establish that a jury could infer the
owner possessed the authority to supervise or control employee work schedules or
conditions of employment. Not only did the owner and the franchisee testify that the
owner merely provided advice, the cook also testified that the franchisee controlled his
schedule and the owner never discussed the cook’s responsibilities or position. The
appeals court found it reasonable that a franchisor would train new franchisees and their
employees and, via email, set out broad policies for the entire franchise and provide
assistance to franchisees. None of the evidence demonstrated that the owner supervised
or controlled the cook’s schedule or employment conditions.
Rate and method of pay. Awareness of the cook’s salary alone was not enough to justify
an inference that the owner determined the cook’s rate and method of payment. Meetings
between the owner and the franchisee, without more, did not demonstrate that the owner
decided the cook’s rate or method of pay. In fact, the cook testified that the owner did not
control his rate of pay; he similarly testified that the franchisee set his rate and method of
payment.
Franchise agreement. Finally, the franchise agreement itself did not support the jury’s
verdict Although it directed the franchisee to “comply with all lawful and reasonable
policies, regulations, and procedures promulgated or prescribed from time to time by
Franchisor,” it also stated that the franchisee exercised “ultimate authority and
responsibility with respect to the management and operation of Franchisee’s shop.” The
cook conceded that the franchise agreement was insufficient, by itself, to establish that
the owner was the cook’s employer, but the court also found that it did not lend support
to otherwise satisfy the economic reality test. The court thus entered judgment in favor of
the owner.
The case number is: 13-50632.
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Attorneys: Mark Alan Keene (Keene & Seibert) for Craig Plackis. Aaron Johnson (Equal
Justice Center) for Benjamin Orozco.
5th Cir.: Monday-through-Sunday workweek OK under FLSA, even for Thursdaythrough-Wednesday workers
By Lisa Milam-Perez, J.D.
An employer did not violate the FLSA by using a Monday through Sunday “workweek”
to calculate overtime pay for employees whose actual work schedules ran Thursdays
through Wednesdays, the Fifth Circuit held, affirming a district court’s grant of summary
judgment in the employer’s favor. Noting that an employer need not begin the workweek
on any given day, the appeals court wrote, “[t]he mere fact that an established workweek
does not maximize an employee’s overtime compensation does not, standing alone,
violate the FLSA.” It was enough to establish a fixed, regularly recurring workweek,
even if the actual work schedule spanned two workweeks and thus reduced employees’
potential overtime pay (Johnson v Heckmann Water Resources (CVR), Inc, July 14, 2014,
Prado, E).
Shifts, “workweeks” don’t jibe. Two nonexempt employees brought a putative overtime
collective action. They worked 12-hour shifts for seven consecutive days beginning every
other Thursday, and were paid bi-weekly, with overtime calculated on a Mondaythrough-Sunday workweek basis. One of the plaintiffs started at 6:00 am every other
Thursday; his standard two-week schedule amounted to 48 hours the first week and 36
hours the second week, and he was routinely paid 8 hours of overtime. The other plaintiff
started at 6:00 pm every other Thursday; he worked 42 hours a week, both weeks in the
pay period, and typically received 4 hours of overtime pay. They contended, though, that
their workweek should reflect their actual, seven-consecutive day, Thursday through
Wednesday schedule. In their view, their workweek for purposes of calculating overtime
should have started on Thursday and ended on Wednesday, in which case they would
have been entitled to 44 hours of overtime per pay period.
But the FLSA “does not impose such a requirement,” the appeals court held, affirming
the district court’s finding that the employer did not violate the Act by calculating
overtime hours in this fashion. The FLSA does not define the term “workweek,” and the
DOL regulation (29 C.F.R. Sec. 778.105) merely requires a “fixed and regularly
recurring period of 168 hours — seven consecutive 24-hour periods.” That period does
not have to coincide with the calendar week, the regulation provides, and it may start on
any day, and at any hour of that day.
The regulation also states that, for purposes of computing overtime pay, “a single
workweek may be established for a plant or other establishment as a whole or different
workweeks may be established for different employees or groups of employees.” The
employees latched on to this provision, contending that because they have “always”
worked Thursday through Wednesday, the employer should have established a different
workweek pursuant to this guidance. However, the DOL used the term “may,” meaning
this provision was “clearly permissive rather than mandatory.” It does not compel an
employer to establish a different workweek.
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Backed up by persuasive authority. The appeals court found persuasive support for its
holding in a 2009 DOL opinion letter, in which the agency advised an employer that its
nine-day, compressed workweek schedule complied with the FLSA, even though
employees’ actual work schedule spanned two workweeks, thereby reducing their
potential overtime compensation. So long as the workweek was fixed, consisted of 168hour periods, and employees were paid an overtime rate for any hours worked over 40 in
that specified pay period, the FLSA’s mandates were satisfied, the DOL advised.
Also on-point was the Eighth Circuit’s 2012 opinion in Abshire v Redland Energy
Services, LLC, which involved nearly identical facts. The employees in that case worked
12-hour shifts for seven consecutive days, followed by seven days off, a scheduled that
spanned two workweeks. They, too, were paid less overtime than if their workweek had
coincided with their actual work schedule. But the appeals court found no fault with the
“workweek” established by the employer, reasoning that “an employer’s right to establish
a workweek [is] ‘well-settled.’”
Agreeing with its sister circuit, citing the plain language of Sec. 778.105, and noting the
persuasive value of the DOL opinion letter, the Fifth Circuit held the employer’s
“workweek” did not run afoul of the FLSA, even if it did not square with the employees’
actual work schedule — and resulted in a lower overtime payout.
The case number is: 13-40824.
Attorneys: Charles Robert Dendy, (Charles R. Dendy, Attorney at Law) for Kevin
Johnson. Katherine Khristine Elrich (Hermes Sargent Bates) for Heckmann Water
Resources (CVR), Incorporated.
6th Cir.: Dismissal of overtime claims based on “outside sales employee” exemption
premature
By Ronald Miller, J.D.
A federal district court erred in granting a food distributor’s summary judgment motion
finding that its sales representatives were exempt from FLSA overtime under the outside
sales exemption issue; it further erred in excluding from a collective action those
employees who had signed the waivers contained in separation agreements, ruled the
Sixth Circuit. Specifically, the district court erred in concluding that the reps’ reordering
of merchandise constituted a “sale” for FLSA purposes as a matter of law and that
making sales was the primary duty of the reps (Killion v KeHE Distributors, LLC, July
30, 2014, Gilman, R).
Employer restructuring. In 2012, the food distributor discharged a number of its sales
representatives as part of a restructuring. Four of the discharged employees sued,
claiming that it failed to pay them overtime wages as required by the FLSA. The sales
representatives were paid entirely on commission. According to the reps, they regularly
worked in excess of 60 hours per week, but the employer did not pay overtime because it
classified them as exempt from overtime under the “outside sales employee” exemption.
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At the time of the restructuring, affected employees were mailed a separation agreement
that included a release of all claims arising out of their employment.
Collective action. The employees sought to certify a collective action. They also sought
to void the collective action waivers in the severance agreements for those who signed
them. In response, the employer argued that the employees waived their right to
participate in a collective action by agreeing to separation agreements, and that, in any
event, the employees were exempt from the overtime provisions of the FLSA because
they were properly classified as “outside sales employees.”
The district court upheld the validity of the waivers and certified a collective action
consisting only of employees who had not signed the agreements or who had modified
their agreements to preserve their right to participate in a collective action. After the
district court denied the employees’ motion for reconsideration, they sought an
interlocutory appeal. With that appeal pending, the district court granted summary
judgment for the employer, holding that all of the employees were outside sales
employees and therefore exempt from the overtime requirements of the FLSA. This
second appeal ensued.
Outside sales exemption. After first dismissing the employee’s interlocutory appeal, the
Sixth Circuit held that the district court erred in granting the employer summary
judgment on the outside sales exemption and excluding from the class action those
employees who had signed the waivers. The crux of the dispute was whether the sales
reps were exempt from overtime because they each qualified as an “outside salesman.”
The case turned on two questions: (1) do the plaintiffs make sales, and, (2) if so, is
making sales their primary duty? Here, the Sixth Circuit concluded that the district court
erroneously found that the employees’ reordering of merchandise constituted a “sale” for
FLSA purposes as a matter of law. Additionally, it incorrectly held that there was no
genuine dispute of material fact as to whether making sales was the primary duty of the
reps.
As an initial matter, the Sixth Circuit rejected the employer’s argument that the Supreme
Court’s ruling in Christopher v. SmithKline Beecham Corp. compelled the conclusion
that the reps made “sales” within the meaning of the FLSA. Because this case did not
involve the term “other disposition,” such as a “nonbinding commitment,” the appeals
court found Christopher of limited import to the questions that this case poses. Thus, the
court turned to the question of who actually sold the employer’s products for FLSA
purposes.
Who makes the sale? Four sets of employees were involved in selling the employer’s
products, including a customer-development team, a business-development team, account
managers, and the sales representatives, who provided store support. Although the reps
input orders for the employer’s products, they presented substantial evidence that the
account managers actually controlled the volume through “plan-o-grams” and restrictions
on reordering. Finding that a jury could conclude that the reps did not actually make the
employer’s sales, the Sixth Circuit concluded that the district court erred in determining
that the reps made sales as a matter of law.
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Primary duty. Further, the appeals court found that a question of fact remained as to
whether “sales” were the primary duty of the reps. It appeared that the majority of the
reps’ time was spent stocking and cleaning shelves. Further, based on a memo containing
the broad range of responsibilities assigned to the reps, a jury could conclude that making
sales was not their primary responsibility. In fact, the reps’ compensation was primarily
based on stocking shelves – 68 percent of the reps’ total compensation was for stocking
shelves. Additionally, the court found that the reps’ activities could be considered
“promotion work” within the meaning of the regulations in furtherance of the work of the
account managers.
The district court also erred in refusing to consider the “Drivers who sell” regulation, 29
C.F.R. Sec, 541.504, and evidence related to the factors identified there. A brief
evaluation of the factors in Sec. 541.504(b) yielded conflicting determinations with
respect to whether a driver would have a primary duty of making sales. On remand, the
district court should entertain evidence regarding as many of the nine factors identified in
Sec. 541.504(b) as it determined were relevant to this case.
Validity of waivers. The reps also appealed the district court’s refusal to reconsider its
ruling regarding conditional certification of the collective action, arguing that it
improperly excluded employees who signed unmodified separation agreements
purportedly giving up the any right to become a member of a class or collective action.
After disposing of the employer’s contention that the appeals court lacked jurisdiction to
review the district court’s decision, the Sixth Circuit concluded that because no
arbitration agreement was present in this case, the decision in Boaz v. FedEx Customer
Information Services, Inc was controlling. Boaz implied that a plaintiff’s right to
participate in a collective action cannot normally be waived.
The case numbers are: 13-3357 and 13-4340.
Attorneys: Cardelle B. Spangler (Winston & Strawn) for KeHE Distributors, LLC.
Robert A. Bunda (Bunda, Stutz & DeWitt) for Thomas E. Killion.
8th Cir.: Court reporter for state circuit judge not eligible employee under FMLA
By Joy P. Waltemath, J.D.
Fired from her “official court reporter” position allegedly because she asked for leave to
care for her children, whom she alleged had been abused by their nanny, and because she
criticized the local police and prosecutor for not pursuing criminal charges against the
nanny, a public employee was entitled to neither the protection of the FMLA nor the First
Amendment, the Eighth Circuit ruled. As a selected personal staff member for a judge
who was subject to merit retention elections, the court reporter was not an eligible
employee under the FMLA. Further, while her speech about child abuse generally could
be considered to be a matter of public concern, most of her online comments were about
her individual situation, and the potential and actual disruption in the judge’s office her
criticisms already had caused meant that her rights to engage in such speech were not
clearly established when the judge fired her, resulting in qualified immunity for him
(Hemminghaus v State of Missouri, July 1, 2014, Riley, W).
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Before she was fired, the court reported requested leave from the judge on many
occasions to care for her two preschool age children, who she claimed had been abused
by their nanny. The prosecutor declined to press charges and the judge told her not to
speak to the media about the case, or he would fire her. She did, however, anonymously
post blogs about her children’s case and the issue of child abuse generally. Also, the
judge did not always allow her requests for leave; even when he did, she had to find a
court reporter to replace her.
Tensions between the two escalated as the children’s behavioral issues demanded more
leave time. The judge told her to stop talking about her case at the courthouse, that no one
would believe her children or take her case. She mused about whether Dateline would
report on her case, and the judge allegedly responded by telling her to “get out of here
now and never come back in here again.” At a meeting the judge called the next day
where she feared she would be fired, the court reporter had her attorney attend via cell
phone; the judge instead ended the meeting and fired her by letter later that day. She sued
her state employer for FMLA retaliation and the judge for First Amendment retaliation
under Sec. 1983.
Did judge hold elective office? The initial hurdle for the Eighth Circuit was whether the
Missouri state circuit judge, who was first appointed by the governor and then subject to
a retention election (without any opposing candidate) held a “public elective office.”
FMLA excludes from its protection those employees who are “selected by the holder” of
a “public elective office of that State” “to be a member of his personal staff.” After
reviewing its history of refusing to decide that precise issue, the Eighth Circuit
specifically held the judge was a public elective office holder. “The plain language of the
statute makes no distinction between elective offices where another candidate’s name
appears on the ballot and offices where the holder is simply given an up or down
retention vote,” said the court; either way, it’s an election.
Was court reporter a personal staff member? The appeals court next found that the
court reporter was “selected by” the judge “to be a member of his personal staff” and was
not an employee under the FMLA. The court looked to six factors. First, the judge had
plenary power to hire and fire his court reporter as provided by Missouri statute. Second,
because state law permitted the judge to have this power, the state intended for the court
reporter to be personally accountable to only that one public official. That she
occasionally helped out with transcription for attorneys of filled in for other court
reporters did not change the result. Third, she appeared publicly as part of the judge’s
staff in an integral aspect of his judicial appointment: presiding in the courtroom, and was
a “sworn officer of the court,” even though it was clear she did not speak for the judge in
his absence.
Fourth, the judge exercised “a considerable amount of control” over the official court
reporter position; in addition to hiring and firing authority, he set her working hours, and
he was the only one who could authorize her leave. Although the court reporter argued
that the state, and not the judge, set and paid her salary, the court was not impressed,
pointing out that this argument “would effectively eradicate this entire category of
exemption, since few elected officials’ personal staff members are wholly administered
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and paid for personally.” Fifth, she reported directly to the judge. But the sixth factor,
“the actual intimacy of the working relationship between the elected official and the
person filling the position,” was harder to evaluate on summary judgment. Nonetheless,
said the court, the majority of the factors applied.
Not an employee. Plus, the appeals court agreed that the district court properly
disregarded a DOL opinion letter to the contrary. Opinion letters and other agency advice
that lack the force of law do not warrant Chevron-style deference, said the court, and
besides, this was a particularly fact-specific inquiry, which would not have lent itself well
to disposition by summary judgment “were it not that most of the necessary facts are
provided by statute or by [the employee’s] testimony.” Finding her to be a member of the
judge’s selected personal staff, the appeals court held she was not an eligible employee
under the FMLA.
Speech on a matter of public concern. As for the question of qualified immunity for the
judge on the court reporter’s First Amendment claim, the appeals court agreed with the
district court that at least some of the blog posts did express concern for the public at
large and not just the court reporter’s own children, so it concluded that at least in part,
her speech related to a matter of public concern.
Pickering balance. Thus, turning to the Pickering balancing test, the appeals court
looked to evidence of disruption or potential disruption in governmental operations,
citing the fact that a public employer does not need to wait until disruption actually
happens to take action. Here, the prosecutor was a frequent party in the judge’s
courtroom, and the court reporter’s repeated threats to speak with the media about the
prosecutor’s failure to prosecute could implicate the judge’s interest in avoiding the
appearance of impropriety.
Disruption. Even though her blog posts were anonymous, the court reporter’s feuds with
the prosecutor’s office and also with the police department were publicly known (the
employee had been escorted from the police department, which said she made harassing
calls to the nanny, who in turn filed for a protection order against the court reporter).
Even the court reporter’s own blogs described the disruption in the workplace, and her
strained and “out of control” relationship with the judge. There was additional evidence
of the court reporter making threatening comments, and the judge viewed other
comments as insubordinate.
Citing the heated exchanges alone, the court found the court reporter’s actions were
“sufficient evidence of disruption.” And regardless of whether all of her “abundant”
speech was protected, her right to engage in such speech was not clearly established at
the time she was fired. Rather, it was reasonable for the judge to be concerned about the
potential conflict of interest that the court reporter’s criticisms of the prosecutor may
have created. He did not have notice that his termination of “an insubordinate employee
who compromised the propriety and efficiency of his courtroom could violate her right to
free speech,” concluded the appeals court, upholding qualified immunity against the court
reporter’s Sec. 1983 claim.
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The case number is: 13-1566.
Attorneys: Jase Carter (Office of the Missouri State Attorney General) for State of
Missouri. Susan M. Andorfer (Susan M. Andorfer, Ltd.) for Nadine A. Hemminghaus.
8th Cir.: New supervisor’s comments on medical condition no help on FMLA claim
By Brandi O. Brown, J.D.
A sales representative with rheumatoid arthritis, who alleged that her termination for
falsifying physician call records was really in retaliation for FMLA leave she took seven
months earlier, was given no reprieve by the Eight Circuit, which affirmed the district
court’s decision granting summary judgment to her employer. Her supervisor’s
discussion of her medical condition and warning against taking additional vacation time
did not constitute direct evidence of discrimination and she failed to show pretext where
other employees, including a comparator who falsified calls, were also terminated
(Ebersole v Novo Nordisk, Inc, July 10, 2014, Smith, L).
In January 2009, while working under a supervisor who was terminated shortly
thereafter, the employee took FMLA leave for arthritis treatment. A new supervisor came
on board prior to the employee’s return from leave. Soon after she returned, he joined her
for a “field ride.” During their travels, he questioned her about her arthritis and
medication. He also told her the second-level supervisor was interested in her condition
and stated that he “wants to know if you’re the effective rep or [another rep] is, put
together this list and prove who—you know, is it the sick rep or is it the other rep, who is
it.”
Falsified calls. Around the same time, the supervisor learned that a physician who was in
the employee’s territory had moved his practice elsewhere. The supervisor determined
that another sales rep had falsified a visit to the relocated doctor and, when investigating
the call logs, learned the plaintiff also falsified three calls to the same physician.
According to the employee, her prior supervisor had allowed her to list calls to the nurse
practitioner as calls to the physician, even though it was against the employer’s policy to
record a call with someone in the office who was not the listed physician. According to
the employer’s policy, discipline for call falsification could include immediate
termination.
No vacation and termination. In July the employee was told by her supervisor not to
take any additional vacation leave that year. However, in August she requested three
vacation days for personal reasons. Her request was approved by her supervisor.
However, the day before it was to begin, she and the other employee who had recorded a
call with the relocated physician were terminated during a meeting with the direct and
second-level supervisors. That year the employer also fired six other representatives from
that district. Dozens of other reps who worked for the employer throughout the country
were also fired that year for the same reason. The employee sued the employer alleging
retaliation under the FMLA, along with other claims. The district court granted summary
judgment in favor of the employer and the employee appealed.
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Direct evidence. The employee argued that she had submitted evidence of direct
discrimination based on her supervisors’ discussion of her medical condition and
vacation leave prohibition. She claimed they terminated her when she tried to take a
vacation because they felt that she had taken too much leave. The district court rejected
that contention and the appeals court agreed. First, it explained that the supervisors’
conversations could not establish for a reasonable jury that the supervisors had acted on
the basis of discrimination. Characterizing her direct supervisor’s questions as “clumsy
but consistent with a new supervisor who was attempting to familiarize himself with a
new subordinate,” the appeals court explained that neither supervisor had made any direct
or indirect threats based on the employee’s use of FMLA leave. The warning not to take
additional vacation leave did not qualify and, moreover, such a warning was a
“reasonable, face-neutral employer request,” the court explained.
Pretext. With regard to indirect evidence, the appeals court agreed with the district
court’s determination that the employee could not show the employer’s stated reason for
firing her was pretextual. Temporal proximity of seven months was simply not enough.
Moreover, the employee’s preferred comparators, two employees who, according to her
prior supervisor, had engaged in call falsification but were not terminated, were not
appropriate comparators. First, the only evidence of their alleged behavior was from the
supervisor, whom the court noted “had an ax to grind with” them because they had
“given him poor reviews.” Second, although the prior supervisor suspected the
employees, the employer was never adequately alerted to actual evidence of their call
falsification, nor were they specifically identified by the prior supervisor.
A “closer comparator,” according to the appeals court, was the other sales rep who was
fired at the same time as the employee. His termination was based on call falsification
related to the same physician, he worked in the same district and answered to the same
supervisors, and his offense occurred at around the same time as the employee’s. The
court also noted that other representatives, in the district and around the country, were
fired that year for the same offense.
Supervisor’s okay not sufficient. The employee also contended that she should not have
been terminated because her prior supervisor had authorized the calls. However, the court
explained, the supervisor did not have “the power to unilaterally amend” the employer’s
policy. Because the court could not act as a “super-personnel department,” a
determination of “whether a prudent employer would have treated” her actions “more
leniently” because of the supervisor’s authorization was not its “call.” The appeals court
affirmed the district court’s judgment.
The case number is: 13-2160.
Attorneys: Thomas Frank Hurka (Morgan & Lewis) for Novo Nordisk, Inc. Alicia Anne
Campbell (Campbell Law) for Aubree Ebersole.
9th Cir.: Meal and rest break claims of California delivery drivers not preempted
by FAA Authorization Act
By Ronald Miller, J.D.
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The Federal Aviation Administration Authorization Act (FAAAA) did not preempt the
California meal and rest break claims of a class of drivers because those state laws
applied to motor carriers, ruled the Ninth Circuit. The state laws at issue here were not
“related to” prices, routes, or services, and so were not preempted by the FAAAA, the
court found. Further, applying California’s meal and rest break laws to motor carriers
would not contribute to an impermissible “patchwork” of state-specific laws, defeating
Congress’ deregulatory objectives. Judge Zouhary filed a separate concurring opinion
(Dilts v Penske Logistics, LLC, July 9, 2014, Graber, S).
Meal and rest break claims. A class of delivery and installers brought a class action
against Penske Logistics alleging that the employer routinely violated California’s meal
and rest break laws. The employees worked exclusively on routes within California,
typically worked more than 10 hours per day, and frequently worked in pairs, with one
driver and one installer in each truck. California law generally requires a 30-minute paid
meal break for every five hours worked, and a paid 10-minute rest break for every four
hours worked. According to the employees, Penske automatically deducted 30-minute
meal breaks for each shift, but failed to ensure that they actually took those breaks, and
created a working environment that discouraged employees from taking their meal and
rest breaks.
Penske asserted that the state meal and rest break laws as applied to motor carriers are
preempted under the FAAAA, which provides that “States may not enact or enforce a law
. . . related to a price, route, or service of any motor carrier . . . with respect to the
transportation of property.” The district court held that California’s meal and rest break
laws meet the FAAAA preemption standard and granted summary judgment for the
employer. The employees appealed.
“Related to” test. “Although Congress clearly intended FAAAA to preempt some state
regulations of motor carriers who transport property, the scope of the preemption must be
tempered by the presumption against the preemption of state police power regulations.”
Wage and hour laws constitute areas of traditional state regulation. However, that fact
alone does not “immunize” state employment laws from preemption if Congress in fact
contemplated their preemption.
Legislative history. Here, the Ninth Circuit determined that the FAAAA does not
preempt state laws that affect prices, routes, or services in “only a tenuous, remote, or
peripheral manner.” Rather, the court had to draw a line between laws that are
significantly “related to” rates, routes, or services, even indirectly, and thus are
preempted, and those that have “only a tenuous, remote, or peripheral” connection to
rates, routes, or services, and thus are not preempted. To discern congressional intent, the
appeals court turned to an examination of the legislative history and broader statutory
framework of the FAAAA.
The FAAAA was modeled on the Airline Deregulation Act. In 1978, Congress
deregulated the airline industry. To “ensure that the States would not undo federal
deregulation with regulation of their own,” it “included a preemption provision” that
barred the states from enacting any law relating to rates, routes, or services of any air
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carrier.” In 1980, Congress deregulated the trucking industry, and in 1994 similarly
sought to preempt state trucking regulation. In doing so, it borrowed language from the
Airline Deregulation Act. By using nearly identical text, Congress meant to create parity
between freight services provided by air carriers and those provided by motor carriers.
Here, the parties did not dispute that the transportation of property was involved, so the
Ninth Circuit’s analysis turned on the “related to price, route, or service” element of the
FAAAA preemption test. The principal purpose of the FAAAA was “to prevent States
from undermining federal deregulation of interstate trucking” through a “patchwork” of
state regulations. The FAAAA expressly does not regulate a state’s authority to: enact
safety regulations; impose certain insurance standards; or create certain uniform cargo or
antitrust immunity rules. Accordingly, Congress did not intend to preempt generally
applicable state transportation, safety, welfare, or business rules that do not otherwise
regulate prices, routes, or services.
Principles of FAAAA preemption. In Rowe v. N.H. Motor Transp. Ass’n, the Supreme
Court identified four principles of FAAAA preemption: (1) “‘state enforcement actions
having a connection with, or reference to,’ carrier ‘rates, routes or services’ are preempted”; (2) “such pre-emption may occur even if a state law’s effect on rates, routes or
services ‘is only indirect’”; (3) “it makes no difference whether a state law is ‘consistent’
or ‘inconsistent’ with federal regulation”; and (4) “pre-emption occurs at least where state
laws have a ‘significant impact’ related to Congress’ deregulatory and pre-emptionrelated objectives.”
Rowe instructed the Ninth Circuit to apply to its FAAAA cases the settled preemption
principles developed in Airline Deregulation Act cases, including the rule articulated in
Morales v. Trans World Airlines, Inc., that a state law may “relate to” prices, routes, or
services for preemption purposes even if its effect is only indirect, but that a state law
connected to prices, routes, or services in “too tenuous, remote, or peripheral a manner”
is not preempted.
Laws are more likely to be preempted when they operate at the point where carriers
provide services to customers at specific prices. On the other hand, generally applicable
background regulations that are several steps removed from prices, routes, or services,
are not preempted, even if employers must factor those provisions into their decisions
about the prices that they set, the routes that they use, or the services that they provide.
Meal and rest break laws not preempted. In light of these principles, California’s meal
and rest break laws plainly were not the sorts of laws “related to” prices, routes, or
services that Congress intended to preempt. They do not set prices, mandate or prohibit
certain routes, or tell motor carriers what services they may or may not provide, either
directly or indirectly. Rather, they are normal background rules for almost all employers
doing business in the state of California. While motor carriers may have to take into
account the meal and rest break requirements when allocating resources and scheduling
routes, the laws do not “bind” motor carriers to specific prices, routes, or services.
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Further, applying California’s meal and rest break laws to motor carriers would not
contribute to an impermissible “patchwork” of state-specific laws, defeating Congress’
deregulatory objectives. Congress was concerned only with those state laws that are
significantly “related to” prices, routes, or services. A state law governing hours is not
“related to” prices, routes, or services and therefore does not contribute to “a patchwork
of state service-determining laws, rules, and regulations.” Accordingly, the Ninth Circuit
reversed the district court’s decision granting summary judgment in favor of the
employer.
The case number is: 12-55705.
Attorneys: Deepak Gupta (Gupta Beck) for Mickey Lee Dilts. James H. Hanson
(Scopelitis, Garvin, Light, Hanson & Feary) for Penske Logistics, LLC.
9th Cir.: Jury finding that police officer was fired in retaliation for testifying in
coworker’s FLSA suit upheld
By Ronald Miller, J.D.
The City of Los Angeles failed in its attempt to overturn a jury verdict in favor of a police
officer who claimed that the Los Angeles Police department (LAPD) fired him in
retaliation for testifying in a FLSA lawsuit brought by a fellow officer, ruled a divided
Ninth Circuit. Because a LAPD review board did not address the issue of retaliation, its
determination that he was terminated for insubordination did not have preclusive effect.
Further, testimony at trial indicated that the officer would not have been brought up on
charges of insubordination had he not testified in the coworker’s action. Judge C. Roger
Vinson filed a lengthy dissenting opinion (Avila v Los Angeles Police Department, July
10, 2014, Hurwitz, A).
Internal investigation. The employee was a police officer who periodically worked
through his lunch break but did not claim overtime. According to his commanding
officer, the employee was a model officer. The employee testified under subpoena in an
FLSA suit filed by a fellow officer. He testified that he and many other LAPD officers,
including supervisors, operated under an unwritten policy of not claiming overtime for
working through lunch. After he testified, the department filed an internal investigation
complaint against him and other officer who testified at the trial, alleging that they had
been insubordinate by not submitting requests for overtime.
The employee resigned during a disciplinary review board hearing, but was found guilty
of insubordination in absentia. The LAPD deemed him insubordinate for not claiming
overtime and fired him. Thereafter, the employee sued the LAPD asserting claims under
the anti-retaliation provisions of the FLSA. He never sought judicial review of the review
board decision. The city moved for summary judgment asserting that his federal claims
were precluded. The district denied the motion, but precluded the employee from
challenging any factual findings made by the review board. A jury found in favor of the
officer on his anti-retaliation claim, and awarded damages and attorney fees. The city
appealed.
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Issue preclusion. The city first contended that the review board’s recommendation that
the employee’s employment be terminated precluded his FLSA retaliation claim. A state
agency determination is entitled to preclusive effect if three requirements are satisfied:
“(1) that the administrative agency act in a judicial capacity, (2) that the agency resolve
disputed issues of fact properly before it, and (3) that the parties have an adequate
opportunity to litigate.” Here, the dispositive question was whether the review board
actually decided whether the employee was fired in retaliation for testifying in the FLSA
action.
The Ninth Circuit observed that neither the review board’s decision, nor the termination
order addressed the issue of retaliation. The administrative proceedings simply found the
employee guilty of insubordination. As a result, there was no issue preclusion.
Jury instruction. On the other hand, the employee claimed that the real reason he was
fired was not because he worked through lunch without requesting overtime, but because
he testified in a fellow officer’s FLSA lawsuit. The city did not dispute whether the
employee’s claim was true nor did it contend that there was insufficient evidence to
support the jury verdict. Rather, the city only argued that the jury was not properly
instructed.
The city requested an instruction that the employee was required to prove that his
testifying at the trial was a “motivating factor” in his termination. Additionally, the city
requested an instruction that there was no liability under the FLSA anti-retaliation
provision if the “same decision” would have been made had the employee not testified. In
contrast, the employee requested an instruction that he was required to prove that his
testifying was the “but-for cause” of the termination. The district court gave the city’s
“motivating factor” instruction, which was consistent with Ninth Circuit law, but
declined to give the “same decision” instruction.
The appeals court observed that the city’s briefs did not assign as error the district court’s
refusal to give the “same decision” instruction. At any rate, the majority concluded that
“there must be a sufficient evidentiary foundation to support giving the instruction.”
However, the uncontested evidence was that the employee would not have been fired had
he not testified, concluded the court. At trial, an LAPD official confirmed that the only
officers disciplined for not claiming overtime were those who testified against the LAPD
in the FLSA suit, and that the employee would never have been disciplined had he not
testified. Thus, the appeals court concluded that there was simply no evidentiary
foundation for the “same decision” instruction.
Special instructions. The Ninth Circuit found that the only issue on the merits actually
raised by the city was whether the district court committed reversible error in declining to
give the jury two requested special instructions. The city requested the special
instructions that an employee who engaged in protected activity is not insulated from
adverse action for violating workplace rules, in support of its argument that it had not
fired the employee because he testified, but rather because he failed to request overtime.
It also argued that the FLSA only prohibits adverse action based on the fact that the
employee testified at the fellow officer’s trial, not the use of his testimony.
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The appeals court rejected the employer’s argument that the officer’s termination was not
in contravention of the FLSA anti-retaliation provision because it was based on the
content of his testimony, not on the mere fact that he “testified.” The court found no
evidence to support that contention because the city’s own witness testified that only
those who testified in the overtime suit were disciplined for not seeking overtime.
Moreover, the district court did not abuse its discretion in telling the jury, after it posed a
question on protected activity, to rely on its original instructions. The officer never
argued to the jury that his testimony insulated him from adverse action or that it could not
be used in a disciplinary proceeding. Nor did he claim that he could not be fired for
failing to request overtime. Rather, the officer’s claim was that the true reason he was
fired was because he testified against his employer in a FLSA action, not because he
violated the overtime rules. Indeed, the LAPD’s representative at the review board
hearing conceded that officer had been investigated only because he testified at the fellow
officer’s trial.
Thus, the issue for the jury was not whether the LAPD could fire the officer for not
claiming overtime or whether his trial testimony could be used in the administrative
hearing. Rather, the only issue was whether the reason given by the LAPD for the
termination was a pretext. That is precisely what the FLSA anti-retaliation provision
forbids. The district court did not abuse its discretion in declining to give the requested
supplemental instructions.
Dissent. Judge Vinson disagreed with the majority opinion to the extent that it immunizes
someone who testifies in an otherwise protected hearing from the consequences of selfincriminating admissions made during his testimony. He argued that there is a clear and
legally recognized distinction between the mere act of testifying on one hand and, on the
other hand, making admissions while testifying that provide independent grounds for
discipline. According to the dissent, the absence of the “same decision” defense
instruction and the inclusion of the “no role” instruction had the practical effect of
depriving the city of its entire defense.
The case numbers are: 12-55931 and 12-56554.
Attorneys: Mark K. Kitabayashi (Lozano Smith) for Los Angeles Police Dept. Matthew
S. McNicholas (McNicholas & McNicholas) for Leonard Avila.
10th Cir.: Half-hearted efforts to comply with employer’s FMLA-related requests
prompted discharge, not FMLA leave itself
By Lisa Milam-Perez, J.D.
A county employee who was suspected of abusing FMLA leave and took a lackadaisical
approach to complying with her employer’s requests for FMLA paperwork and an
independent medical exam was not discharged for taking FMLA leave, the Tenth Circuit
held, but for her obstinance in the face of the employer’s requests. “Like any other county
employee, Plaintiff was required to comply with legitimate directions given by her
supervisors, and her request for FMLA leave did not shelter her from this obligation,
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even when her supervisors’ instructions were related in some way to her use of FMLA
leave,” the appeals court wrote, affirming the district court’s grant of summary judgment
in the county’s favor (Dalpiaz v Carbon County, Utah, July 25, 2014, McKay, M).
FMLA leave. A benefits administrator for the county for nearly 15 years, the employee
was quite familiar with the FMLA and administering FMLA leave; her job duties
included scheduling doctors’ appointments for new county employees. She performed
this job well, and without incident (according to her performance reviews) until she was
injured in a car accident. At that point, she was referred by her physician to a spine
specialist and was sent to physical therapy. Difficulty securing an appointment with the
specialist, and her therapy regime, kept her out of work for several weeks. She obtained
work-release forms for all of the weeks she was off work, though, with most of the
releases coming from her personal physician.
Because of the employee’s extended absence, though, the county asked her to submit an
FMLA leave request. Seven weeks after her accident, her supervisor in HR sent her an
FMLA form and asked her to complete and return it “as soon as possible.” When she
hadn’t responded three weeks later, her supervisor sent her an email noting that her
FMLA time would run from the date that the (as-yet unreturned) form was mailed to her.
“Of course, I still need you to fill out the application in order for it to be finally and
officially considered for approval,” the supervisor wrote. Still no response. The county
attorney then sent a letter. “We have repeatedly requested that you provide the form to us
but you still have not done so,” he wrote, and set a deadline for her to return the FMLA
form. The employee finally did so, returning the FMLA form at 4:22 pm on the deadline
date — just under the wire.
Malingerer? The employee returned to work on a limited basis: two hours a day, two
times per week, in accordance with the work restrictions given to her by the spine
specialist, and continued on this limited schedule for more than a month. While she was
gone from work, though, her supervisor began hearing reports from other county
employees and from members of the community that she was engaged in activities that
seemed inconsistent with her reported injury. The reports became increasingly frequent as
time passed, prompting the supervisor to ask the observers to put them in writing. She
received eight written statements in all, from coworkers who reported seeing the
employee doing yard work, playing football with her children, and assisting them at
dance recitals. So the supervisor asked the employee to submit to an independent medical
examination (IME) to confirm that she was entitled to FMLA leave.
Obstinance. Again, the county attorney intervened, with a letter to the employee
instructing her to make an appointment with one of three listed doctors for an IME. But
the employee neither scheduled an exam nor contacted the attorney about the letter. A
second attorney letter instructed the employee to schedule an IME and confirm having
scheduled the exam by August 3, and cautioned that her failure to do so could subject her
to formal discipline. At that point, the employee tried to make an appointment but was
told she needed a doctor’s referral. Rather than obtain a referral through her personal
physician or the spine specialist, she sent an email to the county saying she couldn’t get
an IME appointment because she didn’t have a referral. Also, although she was willing to
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succumb to an exam, she noted, she wanted to know why. “[Is] this a policy that Carbon
County has now (to send employees to additional doctor’s [sic] when they are on FMLA
leave) and if so I would like a copy of it and when it went into effect. Also, I want to
know that the other employees on FMLA have had to do the same thing.” The county
attorney never responded, and the employee made no further effort to schedule an IME or
seek an answer to her questions.
The employee was eventually suspended with pay, then discharged soon thereafter, for
failing to timely complete the FMLA forms first sent to her; failing to schedule an IME;
suspected untruthfulness regarding her injuries and her ability to work; and abuse of sick
leave, among other infractions. A district court granted summary judgment to the county
on the FMLA interference claim that followed.
Interference or retaliation? The employee’s briefing, on appeal, conflated an
interference claim theory under FMLA, Sec. 2615(a)(1) and retaliation under Sec.
2615(a)(2). Though she had only pleaded an interference claim in her complaint, her
arguments on appeal were based on the elements of retaliation. Contending that she did
not have to use the term “retaliation” in order to raise such a claim, the employee refuted
the employer’s contention that she had waived a retaliation claim below. But the Tenth
Circuit, as an initial matter, agreed with the employer that any retaliation claim she might
have raised was now waived. Her claim was expressly captioned “Interference with
FMLA Rights,” and her allegations tracked the language of Sec. 2615(a)(1). Nothing in
her complaint suggested she intended to bring a claim of retaliation in addition to her
interference claim, and she did not dispute the employer’s assertion in its motion for
summary judgment that she raised only a claim of FMLA interference. Nor did she object
when the district court characterized her claim as an interference claim during a summary
judgment hearing. As such, the appeals court rejected the “belated attempt to assert a
claim of retaliation on appeal.”
Kind of FMLA-related. Although the record evidence was not entirely clear, the appeals
court assumed that the county took an adverse action that interfered with the employee’s
FMLA rights when it suspended and then terminated her while she was apparently on
partial FMLA leave. However, the evidence did not support an inference that her
termination was FMLA leave-related. To be sure, there was an indirect causal link
between her FMLA leave and her termination: in the county’s view, the employee “acted
insubordinately by choosing to submit her FMLA forms at almost the literal last minute,
more than seven weeks after the county made its first request for these forms to be
submitted as soon as possible and after several reminders that the county was still waiting
for the forms,” the court noted. “Since these were forms for FMLA leave, there is an
indirect causal link between Plaintiff’s exercise of FMLA leave and the ultimate
termination decision.” But this didn’t mean that her discharge was “related to” her
exercise of FMLA leave.
Similarly, the employer cited as a reason for discharge the employee’s reluctance to
schedule an IME to address its concerns about the validity of her FMLA leave
entitlement. That stated reason, while FMLA-related, was ultimately based on the
employee’s failure “to make more than a belated, half-hearted effort to comply with a
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direct and legitimate order from her supervisors.” The county successfully established
that it would have dismissed the employee regardless of her request for FMLA leave,
“and for the same type of conduct outside of the FMLA context.”
No reason for discharge? The employee also argued that the employer’s stated reasons
for firing her did not warrant termination. Her supervisor shouldn’t have credited the
hearsay statements of other county workers over the information that she and her healthcare providers submitted, she insisted. She pointed out that her supervisor had later
conceded that two of the witness reports were based on conduct that they observed prior
to her injury. But this was all immaterial, the appeals court said, citing the oft-quoted
“super-personnel department” adage. “What is important is not the absolute truth
regarding Plaintiff’s state of health, but rather whether the county terminated her because
it sincerely, even if mistakenly, believed she had abused her sick leave and demonstrated
significant evidence of untruthfulness.” And there was nothing here to suggest that the
county fabricated the reasons given for terminating the employee in order to justify an
attempt to interfere with her FMLA leave. Accordingly, her FMLA interference claim
failed as a matter of law.
The case number is: 13-4062.
Attorneys: Alan W. Mortensen (Dewsnup, King & Olsen) for Bridget Dalpiaz. Jesse C.
Trentadue (Suitter Axland) for Carbon County, Utah.
11th Cir.: Pursuit of claims despite “shocking lack of evidence” draws sanctions
By Kathleen Kapusta, J.D.
Affirming a district court’s award of more than $85,000 in fees and costs against an
employee’s attorney, the Eleventh Circuit, in an unpublished opinion, found that there
was no legal or factual basis to support the asserted FLSA wage and hour or hostile work
environment claims. Pointing out that “counsel refused to drop these claims, despite
warnings from opposing counsel and the court,” and that he continued to pursue them
“despite the shocking lack of evidence,” the appeals court had “no difficulty” finding that
the federal causes of action “were frivolous from the beginning,” and that sanctions under
Rule 11 were proper (Cook-Benjamin v MHM Correctional Services, Inc, July 12, 2014,
per curiam).
The employee, through her attorney, sued her employer and an individual defendant
claiming failure to pay overtime as required by the FLSA. She also alleged that the
individual defendant’s disclosure to other staff that she had been shot in the head during a
domestic dispute violated HIPPA regulations, constituted defamation, and caused
intentional infliction of emotional distress. After dismissing the HIPPA claim because
there was no private right of action, the district court advised the employee’s attorney that
the FLSA claim was not properly pleaded and instructed him to file an amended
complaint clarifying the claims. The employee then filed an amended complaint alleging
defamation and IIED claims as well as wage and hour, HWE, and retaliation claims under
the FLSA.
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Defense counsel’s warning. During discovery, the employee admitted that she had not
kept any records relevant to her wage and hour claim. She also conceded that she had not
used her employer’s recording forms to obtain overtime pay. Though the defense counsel
notified the attorney that the complaint lacked merit and urged him to withdraw it or face
sanctions, he refused.
Contending that the employee admitted facts fatal to her FLSA claim, failed to follow the
court’s order to properly re-plead her claims, failed to conduct any discovery, and failed
to submit any evidence to support her claims, defense counsel moved for sanctions under
Rule 11. Counsel also urged that the employee’s attorney be sanctioned for failing to
review the facts before filing the complaint and continuing to litigate baseless claims
despite warnings that they were frivolous; the district court reserved ruling on the
sanctions until after the summary judgment stage.
Summary judgment, chastisement, and sanctions, oh my. In response to the
defendants’ motion for summary judgment, the employee waived her wage and hour
claims but reiterated that she was raising HWE and retaliation claims under the FLSA as
well as her state-law claims. The district court granted summary judgment on all claims.
Repeatedly chastising the attorney for his conduct, the court pointed out that he knew
from the beginning that the FLSA claim was frivolous but he waited to waive it. It further
noted that there was no evidence to support the FLSA retaliation claim and no reasonable
basis to bring a HWE claim under the FLSA. It then awarded fees and costs in the
amount of $85,217.28 against the attorney. No sanctions were imposed against the
employee individually.
Sticks and stoned and bullethead. On appeal, the employee cited to the following
statements as evidence of defamation: the individual defendant called her “bullethead”
and told a coworker that the employee was in a “stupider” state and that she was crazy.
Noting that she conceded that she was shot in the head, the court pointed out that
“technically” the individual defendant’s name-calling, “however inconsiderate,” was not
false. Moreover, his statements that she was “stupider” and crazy were mere opinion.
Further, because they did not refer to her profession, they were not actionable. Thus,
summary judgment was appropriate as to this claim.
IIED claim. As to her IIED claim, the employee cited to only four instances that
occurred over many years and conceded that she did not hear any of the comments
herself. Again pointing out that the individual defendant’s statements were inconsiderate,
the court found that they were not so extreme in degree or so outrageous in character as
to be actionable. Accordingly, summary judgment was affirmed at to this claim as well.
Frivolous claims. Affirming the award of sanctions, the appeals court found that
sanctions were appropriate because there was no legal or factual basis to support the
FLSA wage and hour or HWE claims. Not only did the employee concede that she did
not have any of her time sheets to show wage and hour violations, she admitted that she
did not avail herself of her employer’s process to obtain wages for the overtime she
worked.
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Further, pointing out that there is no HWE claim available under the FLSA, the court
observed that had “counsel conducted any meaningful research, he would have — and
indeed should have — discovered both the lack of evidence to support the overtime claim
and the inability to bring a cause of action for hostile work environment under the
FLSA.” Moreover, his “steadfast refusal” to drop the claims until the response to the
defendants’ summary judgment motion unnecessarily and unreasonably multiplied the
litigation,” the court stated, agreeing that sanctions were also appropriate under Sec.
1927. Accordingly, the court found that the district court did not abuse its discretion in
awarding sanctions and that there was no error in the amount of sanctions imposed.
The case number is: 13-15960.
Attorneys: Clifford H. Hardwick (Hardwick & Associates) for Mamie Cook-Benjamin.
Natasha L. Wilson (Greenberg Traurig) for MHM Correctional Services, Inc.
Cal. Sup. Ct.: Commissions can’t be allocated across pay periods to satisfy
minimum earnings requirement for overtime exemption
By Joy P. Waltemath, J.D.
Answering a certified question from the Ninth Circuit, the California Supreme Court held
that Time Warner may not allocate or attribute commission wages paid in one pay period
to other pay periods in order to satisfy California’s compensation requirements for
commissioned salespersons. Specifically, an employer satisfies the minimum earnings
prong of the commissioned employee exemption only in those pay periods in which it
actually pays the required minimum earnings, which are one and one-half times the
minimum wage. An employer may not satisfy the prong by reassigning wages from a
different pay period (Peabody v Time Warner Cable, Inc, July 14, 2014, Corrigan, C).
An advertising account executive filed a state court class action suit alleging, among
other things, minimum wage and overtime violations and late payment of wages under
California law. Her argument was that her earnings did not exceed one and one-half times
the minimum wage at all relevant times for the exemption from overtime for
commissioned salespersons to apply. Under Time Warner’s commission plan,
commissions were paid only on a monthly basis, so during approximately half of the
biweekly pay periods it was undisputed that the employee’s pay was insufficient to
qualify for the commissions-paid exemption from overtime, even though she regularly
worked more than 45 hours per week. The majority of her paychecks included only
hourly wages and so were less than one and one-half times the minimum wage. If
considered on a paycheck-by-paycheck basis, the overtime exemption would not always
apply.
Reassigning commissions paid. The analysis of whether the employee’s earnings
exceeded one and one-half times the minimum wage turned on how commissions could
be allocated over pay periods under California law. Time Warner argued that
commissions should be reassigned from the biweekly pay periods in which they were
paid to earlier pay periods, reasoning that the commissions should be attributed to the
“monthly pay period for which they were earned.” This approach would not only satisfy
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the overtime exemption’s minimum earnings prong (e.g., one and one-half times the
minimum wage), but it also would mean that the account exec’s compensation was, at all
times, higher than the applicable minimum wage.
Certified question. Time Warner removed the case to federal court, where the district
court granted summary judgment, and the Ninth Circuit affirmed in part, but it certified
the state law question to the California Supreme Court, which reformulated it as: “May
an employer, consistent with California’s compensation requirements, allocate an
employee’s commission payments to the pay periods for which they were earned?” The
California Supreme Court said no.
Commissioned employee exemption. Time Warner claimed the account exec was an
exempt commissioned employee, and under the asserted exemption in Wage Order No. 4,
overtime provisions do not apply to any employee whose earnings exceed one and onehalf times the minimum wage if more than half of that employee’s compensation comes
from commissions. The only way that prong could be satisfied here, however, was if
commission wages paid in one biweekly pay period could be attributed to other pay
periods, because it was undisputed that the majority of the account exec’s biweekly
paychecks did not satisfy the exemption’s minimum earnings prong, i.e., her earnings did
not exceed $12 per hour, or “one and one-half . . . times the minimum wage.”
Time Warner primarily argued that, although it issued the account exec a paycheck every
two weeks, “(1) it permissibly used a monthly pay period when paying commission
wages, and (2) in order to determine earnings for purposes of the exemption, commission
wages should be attributed not to the pay periods in which they were paid, but instead to
the weeks of the monthly period in which they were earned.”
Monthly pay period? The court began by pointing out it was going to construe the
statutes (and wage orders of the Industrial Welfare Commission) broadly in favor of
protecting employees and narrowly construe exemptions against the employer. Under
Labor Code Sec. 204(a), all wages earned “are due and payable twice during each
calendar month,” and wages includes “all amounts for labor performed,” including
amounts earned on a commission basis (Sec. 200(a)). In other words, said the court, all
earned wages, including commissions, must be paid no less frequently than semimonthly.
Moreover, limited statutory exceptions do exist, demonstrating to the court that “the
Legislature knows how to establish a different payroll period when it wishes to do so.”
Semimonthly pay period is required. The court had no trouble with Time Warner’s
commission plan requirements that three events must occur before commissions can be
paid; for example, that receipt of a client’s payment must occur before any commissions
on sold advertising are earned. Commissions are owed only when they have been earned,
even if it is on a monthly, quarterly, or less frequent basis. But, stressed the court, “this
does not create a monthly pay period in contravention of section 204(a),” which
establishes semimonthly pay periods.
In order to comply with the law, Time Warner wanted to attribute the account exec’s
commissions, always paid on the final biweekly payday of each month, to the weeks of
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the preceding month. The employer’s ability to satisfy the minimum earnings prong was
dependent on its ability to attribute commissions in this way. But the state supreme court
said it could not do so, ruling that “[w]hether the minimum earnings prong is satisfied
depends on the amount of wages actually paid in a pay period. An employer may not
attribute wages paid in one pay period to a prior pay period to cure a shortfall.”
The case number is: S204804.
Attorneys: J. Scott Carr (Wargo & French) for Time Warner Cable, Inc. Brian F. Van
Vleck (Van Vleck Turner & Zaller) for Susan J. Peabody.
Nev. Sup. Ct.: Constitutional amendment raising Nevada’s minimum wage rate also
repealed statutory exemptions
By Lisa Milam-Perez, J.D.
A voter-approved minimum wage amendment to the Nevada Constitution impliedly
repealed the state’s statutory minimum wage scheme, which excluded cab drivers and
other specific workers from its protections, ruled a closely divided Nevada Supreme
Court. Rejecting a lower court’s conclusion that the constitutional amendment could be
harmonized with the existing statutory provision, thereby keeping the statutory
exemptions intact, the high court held the court below had erred in dismissing a minimum
wage complaint brought by cab drivers (Thomas v Nevada Yellow Cab Corp, June 26,
2014, Cherry, M).
Minimum wage suit. Alleging they had not been paid the constitutionally mandated
minimum wage, a group of cab drivers brought a putative class action for unpaid wages
against several taxicab companies. They based their claims on the Minimum Wage
Amendment to the Nevada Constitution, a voter-approved amendment that increased the
state minimum wage rate above that set forth in the statutory provision, NRS 608.250. At
issue here was whether that amendment otherwise revised the statutory minimum wage
scheme, under which cab drivers (and five other classes of employees) were expressly
excluded from the state’s minimum wage protections.
The lower court dismissed the drivers’ claims, concluding that the Minimum Wage
Amendment did not entirely supplant NRS 608.250 and its exemptions; rather, it could be
harmonized with the existing statute. The state supreme court disagreed, finding an
inherent conflict between the two. “By clearly setting out some exceptions to the
minimum wage law and not others,” the amendment supplants the exceptions set forth in
the statute, including the taxicab driver exemption, it found.
Conflicting exemptions. The amendment “expressly and broadly” defines the term
employee to mean any person who is employed — except for individuals who are under
18 years of age, working for a nonprofit doing after-school or summer work, or working
as a trainee (for no more than 90 days). These very specific exemptions from the
amendment’s definition of employee “necessarily and directly conflict with the
legislative exception for taxicab drivers,” and it “necessarily implies” that all employees
not exempted from the amendment — including cab drivers — must be paid the
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minimum wage. Thus, the statute, and its exceptions from the minimum wage mandate,
were “impliedly repealed” by the amendment.
“An alternative construction that would attempt to make the Minimum Wage
Amendment compatible with NRS 608.250, despite the plain language of the
Amendment, would run afoul of the principle of constitutional supremacy,” the high
court majority reasoned, adding that statutes “are construed to accord with constitutions,
not vice versa.”
Divining voter intent. The cab companies also argued, but offered no basis for its
contention, that Nevada’s voters only intended to raise the minimum wage rate when they
voted for the constitutional amendment — they did not intend to create a whole new
minimum wage scheme. But it would be impossible to identify every Nevadan who voted
in favor of the amendment and to query them as to why, the court said. Moreover, “to
seek the intent of the provision’s drafters or to attempt to aggregate the intentions of
Nevada’s voters into some abstract general purpose underlying the Amendment, contrary
to the intent expressed by the provision’s clear textual meaning, is not the proper way to
perform constitutional interpretation.”
Dissent. Justice Parraguirre, joined by two other justices, argued that the Minimum Wage
Amendment was intended only to increase the minimum wage rate. He noted the
presumption that a statute is constitutional, and that implied repeal is disfavored in
Nevada; as such, the court should attempt to harmonize the provisions. Reading them
together, an ambiguity surfaces: it is unclear whether the amendment intended to
impliedly repeal the statutory exemptions or simply raise the minimum wage rate.
Because both constructions were reasonable, the ambiguity must be interpreted in light of
legislative history and public policy. Noting that the statute has been in existence since
1965, and addresses the same subject matter, and also that the Minimum Wage
Amendment does not even mention the statute, “we should presume that if the voters
intended to restructure the entire legislative scheme, they would have done so explicitly.”
The dissent also found considerable merit in the cab company’s assertion that voters had
intended only to enact a rate hike. As proposed, the constitutional amendment was
entitled, “Raise the Minimum Wage for Working Nevadans,” and it did not hint at any
proposed modification to the statutory exemptions. And the condensed ballot question
asked merely whether the state constitution should be amended to raise the minimum
wage, making no mention “of changing the group of employees entitled to minimum
wage,” the dissent observed. As such, Parraguirre would find that the amendment was not
intended to abolish the long-standing minimum-wage exemptions, and he saw no basis
for the majority’s conclusion that voters had a contrary understanding.
The case number is: 61681.
Attorneys: Tamer B. Botros (Yellow Checker Star Transportation) for Nevada Yellow
Cab Corporation. Christopher Thomas, pro se.
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