Labor Relations & Wages Hours Update
November 2013
Hot Topics in LABOR LAW:
Four former Social Security judges now NLRB ALJs
The NLRB has announced the appointments four new administrative law judges (ALJ) to
replace judges who have recently or will soon retire: Heather Joys, Dickie Montemayor,
Thomas Randazzo and Lisa Thompson. All of the new appointees are transferring to the
Board from similar positions with the Social Security Administration.
The NLRB’s Division of Judges is responsible for docketing unfair labor practice cases
brought by the Board’s General Counsel on charges filed by unions, employers and
individual employees. The Division disposes of those cases by either settlement or
conducting trials and issuing initial decisions, which then may be appealed to Board and
thereafter to a federal appeals court.
Heather Joys. Judge Joys was a judge with the Social Security Administration for the
last five years. Prior to that, she spent 17 years as a trial attorney and supervisor at the
DOL, mostly litigating cases before the Occupational Safety and Review Commission
and the Mine Safety and Review Commission. Joys also defended the Department in
personnel actions and handled other employment-related litigation. She received her B.A.
degree from St. Olaf College and her J.D. degree from the University of Wisconsin
School of Law. She also earned a Master’s degree from the University of Wisconsin’s
Industrial Relations Research Institute. Judge Joys is assigned to the Division’s Atlanta
office.
Dickie Montemayor. Judge Montemayor served as a Social Security judge for two and a
half years. He previously spent about 24 years as a lawyer and an administrative judge
with the EEOC, including a stint as a regional office chief administrative judge. He also
spent two years in the private practice of law. Judge Montemayor is a graduate of the
University of Wyoming and its school of law. He will take his assignments from the San
Francisco office of Judges.
Thomas Randazzo. Judge Randazzo was a Social Security judge for a little over three
years. Prior to that, he spent his entire legal career with the NLRB. He was a staff counsel
to several Board members for about four years and later transferred to the Board’s
regional office in Cleveland, where he served as a senior trial attorney for about 18 years.
Judge Randazzo received his undergraduate degree from Allegheny College and his JD
degree from the University of Toledo School of Law. He also earned an LLM degree
from Georgetown University Law Center. He will take his assignments from the
Washington office of Judges.
Lisa Thompson. Judge Thompson spent three years as a Social Security judge. Before
that, she served as an administrative judge with EEOC for nine years. She also worked
for several years as an attorney in the private practice of law, specializing in various
aspects of employment law. Judge Thompson received her undergraduate degree from the
University of Kansas and her JD degree from St. Louis University School of Law. She
will take her assignments from the San Francisco office of Judges.
Denver office moves to new location
On Thursday, October 31, the NLRB announced that effective Monday, November 4, its
Denver office (Region 27) will be relocated to a new address: Byron Rogers Federal
Office Building, 1961 Stout Street, Suite 13-103, Denver, CO 80294.
The agency said that office phones and computers, although disconnected all day on
November 1, will be up and running on November 4. The Regional Office phone number
will remain the same: (303) 844-3551. Phone numbers for all Region 27 staff also will
remain the same. The NLRB apologized for any inconvenience resulting from the move.
Griffin sworn in as GC, names Deputy and Assistant GCs
By Pamela Wolf, J.D.
On November 4, Richard F. Griffin, Jr., was sworn in as General Counsel of the NLRB
for a four-year term, according to an NLRB release. He was nominated by President
Barack Obama last August and was confirmed by the Senate on October 29 by a 55-44
vote that was cast along party lines, with Lisa Murkowski (Ark) being the sole
Republican voting in favor of confirmation.
Griffin, who replaces Lafe E. Solomon, Acting General Counsel since June 2010,
previously served as Board Member under a controversial recess appointment in January
2012. Griffin’s nomination to the NLRB was later withdrawn by the President as part of
an eleventh-hour deal with Senate Republicans in the face of their fierce opposition.
Prior to his controversial Board Member stint, Griffin held leadership roles with the
International Union of Operating Engineers serving as its General Counsel and was a
member of the board of trustees of its Central Pension Fund. He is a fellow of the College
of Labor and Employment Lawyers and started his legal career as counsel to various
board members from 1981-1983.
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Griffin has announced the selection of Jennifer Abruzzo to serve as his Deputy General
Counsel and Rachel Gartner Lennie as his Assistant General Counsel. Abruzzo left
private practice and began working for the NLRB in 1995 as a field attorney in the Miami
Office. She was promoted to the positions of Supervisory Field Attorney and Deputy
Regional Attorney before moving to the NLRB’s Division of Operations-Management in
Washington, D.C., in January 2006. In February 2011, she joined Solomon in the Office
of the General Counsel and most recently assisted with the Division of Legal Counsel.
Lennie clerked for federal district and appeals court judges before becoming an associate
with Morgan, Lewis & Bockius in Washington, D.C. In 1997, she began working for the
NLRB in the Appellate Court Branch and then served as counsel for various former
Board members. In 2010, she tapped for the job of Deputy Chief Counsel by former
Board Member Craig Becker and served in that capacity during Griffin's stint as Board
Member. Lennie most recently has been serving as Deputy Chief Counsel to Board
Member Kent Y. Hirozawa.
Machinists to consider Boeing proposal to guarantee Puget Sound work
Members of the International Association of Machinists (IAM) District 751, District W24 will vote on a proposal from the Boeing Co. that, if approved, would guarantee the
Boeing 777X wings and fuselage will be built by IAM members in the Puget Sound. In
exchange for the guarantee, Boeing proposes a new eight-year labor agreement that will
expire in September 2024, “providing an unprecedented degree of labor stability in the
volatile and competitive industry,” the IAM said.
The proposal is a significant development for the Pacific Northwest-based Machinists
local, which saw the company move a chunk of its manufacturing operations to South
Carolina, sparking a labor controversy that reached well beyond the parties to the
contract.
“Securing the Boeing 777X for the Puget Sound means much more than job security for
thousands of IAM members,” said Tom Wroblewski, District 751 directing business
representative. “It means decades of economic activity for the region and will anchor the
next generation of wide-body aircraft production right here in its historic birthplace and
will complement the 737MAX narrow body.” According to estimates, the 777X could
mean as many as 10,000 direct and 10,000 indirect jobs in the immediate vicinity, with
the project also serving as a long-term hub for advanced technology in electronics,
avionics, and composite technology required by the 777X, the union said.
The catch: Boeing’s proposal includes additional modifications to the current contract,
including cessation of pension accruals for current employees and the establishment of an
alternative company-funded retirement plan. To sweeten the deal, though, all members
would be paid a $10,000 signing bonus within 30 days of ratification
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The union said it would unveil the full details of the proposed changes as soon as printing
can be completed. A schedule of ratification voting is also being prepared and will be
communicated directly to IAM members.
“Only a project as significant as the 777X and the jobs it will bring to this region
warrants consideration of the terms contained in Boeing’s proposal,” said Wroblewski.
“While not all will agree with the proposal’s merits, we believe this is a debate and a
decision that ultimately belongs to the members themselves.”
The IAM represents more than 35,000 Boeing workers.
SEIU details employment difficulties faced by returning veterans
As America thanks those who have worn our country's uniform this Veterans Day, the
Service Employees International Union's Stand for Security—the nation's largest security
officers’ union — is releasing a report on working conditions for 230,000 veterans in the
mostly low-wage security industry.
According to the report, "Underpaid Heroes: What Kind of Jobs Are Veterans Coming Home
To?" vets comprise nearly 20 percent — one in five — of all security officers, as opposed
to 7.9 percent of the general population. Working conditions in the industry, however, are
generally poor, according to the SEIU. While the rate of fatal workplace injuries to
security officers in 2009 was more than twice that of workers in general, the median
security-officer wage is just $10.91 per hour. Many workers are forced to rely on public
assistance to make ends meet.
“Throughout much of the last century — whether from World War II, the Korean War,
the Vietnam War, or peacetime duty — America’s veterans returned to good jobs,
affordable housing, education opportunities, and a chance at a better life. But today’s
returning veterans — many of whom have fought in Afghanistan and Iraq — are more
likely to face unemployment, homelessness, disability-based discrimination, and
backlogs and cuts in healthcare, job training, education, and housing,” the SEIU wrote in
the report’s executive summary. They do not receive the hero’s welcome previously
extended to veterans.
Together with the SEIU’s Stand for Security, veterans have led the fight to build citywide security officer unions in 11 cities across the country designed to improve security
industry jobs and pump millions into the poor and middle class neighborhoods where
security officers live, the report explained.
Casino workers vote for union representation; medical center and parking workers
approve contracts
By Pamela Wolf, J.D.
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As last week came to a close, casino workers in Las Vegas opted for UAW
representation, medical center workers in Pennsylvania signed on to a new three-year
contract, and Boston-area parking workers approved their first contract.
Casino dealers. About 450 casino dealers at the Flamingo Las Vegas/Margaritaville
casinos voted 233-70 in favor of representation by the UAW on Friday, November 8. The
win is a first for casino dealers on the Las Vegas strip, according to the UAW.
“This is a great day for casino workers in Las Vegas,” said UAW Vice President Joe
Ashton, who oversees the union’s Gaming Department. “It is also a great day for gaming
workers everywhere who are asking themselves how they can stand up for good wages,
benefits and democracy in the workplace.”
The victory in Las Vegas comes on the heels of a similar victory in Ohio on October 29,
where 1,100 casino workers in Cincinnati joined the union. The food and beverage
dealers, slot technicians, maintenance, warehouse, valets, and count and cage workers
gained union recognition following an agreement with the company that it would remain
neutral and allow workers to make their own decision.
Hershey Medical Center. Members of Teamsters Local 776 at Hershey Medical Center
in Hershey, Pennsylvania, voted in favor of a new three-year contract on November 8.
The proposed deal covers more than 900 workers employed as clinical supportive
services and skilled trade workers at the medical facility.
The new contract includes wage increases for all job classifications, annual incentive pay
bonuses, more money for overtime and meal allowances, and higher premium pay for
those working on the evening and night shifts.
The employees at Hershey Medical Center are part of the Public Services Division of the
International Brotherhood of Teamsters, which represents more than 250,000 federal,
state and local employees across the country.
Parking workers. The Teamsters also announced that hundreds of workers at Central
Parking and Standard Parking in the Boston area have ratified a first contract by a 97percent margin. It is the first Teamster contract for parking workers in the Boston area.
The new contract provides workers with a pension and wage increases of up to 11.2
percent over the life of the contract. The deal also provides the right for workers to file a
grievance if the company violates their rights under the CBA; four-step discipline
language, “just cause” and an end to favoritism; seniority rights; part-timers with the right
to fill open full-time positions before an outside hire is made; improved holidays and
holiday pay; personal leave of absence up to 90 days with workers’ jobs and seniority
waiting for them when they get back; two personal days to use as workers see fit; the
opportunity to earn up to five weeks of vacation based on years of service; guaranteed
three breaks per 8-hour shift; a fourth break if workers work over 8 hours; and six paid
sick days.
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General Counsel’s office authorizes complaints against Walmart arising from
ongoing employee protests
The NLRB General Counsel’s office has investigated charges alleging that Walmart
violated workers’ rights during recent employee protest activities against the retail chain.
After finding merit to some of the charges, the General Counsel has authorized
complaints on alleged violations of the NLRA. However, other charges were found to be
without merit, the agency announced on Monday, November 18.
The General Counsel’s office found merit to allegations that on November 22, 2012,
during two national television news broadcasts and in statements to employees at stores
in California and Texas, the retailer unlawfully threatened employees with reprisal if they
engaged in strikes and protests. There was also merit to allegations that management
unlawfully threatened, disciplined, and/or terminated workers for engaging in legally
protected strikes and protests at Walmart stores in California, Colorado, Florida, Illinois,
Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, North Carolina, Ohio, Texas
and Washington. Finally, the General Counsel’s office found merit to charges that
Walmart stores in California, Florida, Missouri and Texas unlawfully threatened,
surveilled, disciplined, and/or terminated employees in anticipation of or in response to
employees’ other protected concerted activities.
There was no merit found, absent appeal, to allegations that Walmart stores in Illinois and
Texas interfered with their employees’ right to strike by telling large groups of nonemployee protesters to move from Walmart property to public property, pursuant to the
retailer’s lawful solicitation and distribution policy. The groups contained only a small
number of employees who either did not seek to stay on Walmart’s property or were
permitted to remain without non-employee protesters, the General Counsel’s office
found. Also, allegations that Walmart stores in California and Washington unlawfully
changed work schedules, applied company policies in a disparate fashion, or otherwise
coerced employees were found to be without merit.
Senate Republicans introduce bill to reform labor law
Legislation that “would significantly reform labor laws for the first time in more than 50
years” was introduced late last week by Senate Republicans. The “Employee Rights Act”
(S. 1712) was introduced on November 14 by Sen. Lamar Alexander (R-Tenn), current
Ranking Member of the Senate HELP Committee, and Sen. Orrin Hatch (R-Utah),
current HELP Committee member and its former chairman.
The measure would mandate secret-ballot elections for representation and decertification
elections and require secret-ballot strike votes as well. It would also preempt efforts by
the NLRB to reintroduce its “quickie” election rules by barring unions from obtaining
employees’ private information and “ensure due process” in determining appropriate
bargaining units and voter eligibility.
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Another significant provision mandates recertification elections to reaffirm a union’s
representative status (also through a secret-ballot vote) when employee turnover exceeds
50 percent. “If there is turnover in the workforce, there should be vote to determine if the
union still has the support of current employees,” Hatch said.
If enacted, unions would be barred from using workers’ dues and fees for political
activities without workers’ written consent. The bill also would allow every employee in
a union-represented bargaining unit — both union members and non-members — to
participate in contract ratification and strike votes.
The legislation includes a number of other provisions to “level the playing field for
workers against powerful labor unions,” according to a press statement announcing the
bill. S. 1712 would allow employees to collect lost wages, illegally collected union dues,
and liquidated damages from a union that interferes with employees’ NLRA rights,
including the right to file a petition for decertification. A procedural penalty would also
be imposed on a union for interfering with the filing of a decert petition. The bill would
conform the definition of a union “unfair labor practice” under the NLRA with that of an
employer and criminalize union threats or use of violence, eliminating loopholes that
exempted unions from federal anti-racketeering statutes, bill sponsors say. Unions also
would be mandated to provide audited financial statements to agency fee payers.
“The single biggest problem facing the American worker today is a persistently high
unemployment rate, and yet union leaders insist on further weakening workers’
opportunities,” said Alexander. “This bill empowers employees by giving them a say in
whether or not they want to join and pay dues to a union, ensuring the privacy of that
decision and allowing employees to opt out of having all of their personal contact
information and work schedule shared with union organizers.”
To put the introduced legislation in context, according to the latest available BLS figures,
in 2012 the union membership rate — the percent of wage and salary workers who were
members of a union — was 11.3 percent. Public-sector workers had a union membership
rate (35.9 percent) more than five times higher than that of private-sector workers (6.6
percent).
The Employee Rights Act has 22 cosponsors in the Senate, all Republicans. Congressman
Tom Price (R-Georgia) has introduced companion legislation in the House.
New contracts, election results, safety agreements, and planned Black Friday
protests
By Pamela Wolf, J.D.
In labor news, Las Vegas resort workers have a new contract, county corrections officers
have opted to remain with the Teamsters, and cable workers with CenturyLink are
protected by a new lead abatement program. With Thanksgiving approaching, union
members are making sure their nonunion counterparts that will work at Macy’s on that
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holiday know about the benefits of a union contract, and Walmart, predictably, is
expected to be the target of mass protests.
MGM Resorts. Following months of negotiations, members of the Culinary and
Bartenders Union have ratified a contract with MGM Resorts International to make it the
first Las Vegas Strip company to reach agreement with the union. The union reports that
more than 97 percent of participating members voted in favor of the contract, which
covers thousands of union workers across MGM Strip properties. The deal covers more
than 21,000 of the company’s employees at Aria, Bellagio, Circus Circus Las
Vegas/Slots A Fun, Excalibur, Luxor, Mandalay Bay, The Mirage, Monte Carlo and New
York-New York Hotel. The contract covers food and beverage workers, guest room
attendants, bell department, porters and employees in many other positions.
The previous contract expired on June 1, 2013. Terms of the new agreement are
retroactive to that date. Those terms include an economic package that permits workers to
keep their current high-quality health insurance and other important benefits, according to
the union. Specific changes in food and beverage terms are included with the goal of
providing necessary flexibility needed to reopen closed venues and bring workers back to
their jobs. There are also new measures in housekeeping that create departmental
language with the aim of increasing job safety.
“Both sides have crafted an agreement that, despite difficult economic times, addresses
the needs of Union workers and their families as well as those of the Company,” said
Corey Sanders, Chief Operating Officer for MGM Resorts. “Our aim has always been to
negotiate an agreement that works for everyone; one that will allow everyone to provide
and to succeed. We believe that’s what the Unions and the Company have achieved here:
a smart contract, one that charts our Company’s future growth with the Unions.”
County corrections officers. Officers at the Cook County Department of Corrections
(CCDC) have voted to remain members of Teamsters Local 700. In what the union called
a “landslide victory,” the Teamsters won the CCDOC election by a 5-to-1 margin,
securing more than 80 percent of the vote — 1,610 votes were cast for the Teamsters,
while Metropolitan Alliance of Police (MAP) received 105 votes and the Fraternal Order
of Police received 224 votes.
The Teamsters have represented CCDOC officers since 2009. In the past four years, the
Teamsters said they have won more than 2,800 grievances on behalf of members. In
addition to more than 3,200 members in the Department of Corrections, the Teamsters
represent more than 30 percent of all Cook County employees — more than any other
union in the county, according to the union.
CenturyLink. The CWA District 7 and CenturyLink have agreed to implement a new
landmark settlement related to work with lead cable, according to the union. CenturyLink
received nine citations for violations of the OSHA lead standard this year, the union said.
As a result, CWA, Minnesota OSHA, and CenturyLink have agreed to a landmark lead
abatement program that includes provisions for notification and training; coverage of safe
and healthful work practices and procedures; appropriate engineering, administrative, and
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personal protective equipment to prevent and control lead exposure; medical surveillance;
and personal hygiene.
Last month, CWA District 7, the union's Occupational Safety and Health Department
(OSHD), and CenturyLink negotiated an agreement to expand the Minnesota OSHA
settlement agreement to include District 7-wide implementation of the company's lead
abatement program, including notification, training, and medical surveillance for affected
technicians, the union reported. The OSHD and CenturyLink have agreed that the
program will cover all affected CenturyLink technicians throughout the country.
Because lead is a carcinogen that can damage workers' brains, nerves, red blood cells,
kidneys and reproductive systems, the new program is expected to ensure that
CenturyLink technicians who work with lead-encased cable and other lead products are
provided safe and healthful working conditions, the union said.
Macy’s. The UFCW Locals 7, 23, 367, 655, 700, 876, and 880 have reached out to their
nonunion counterparts at Macy’s following the retailer’s decision to kick off Black
Friday sales early on Thanksgiving Day. Macy’s recently announced that for the first
time, most of its department stores will be open at 8 p.m. on Thanksgiving.
The union pointed out that workers at UFCW-represented Macy’s stores in New England,
Seattle, New York, and other areas have a union contract that either preserves the day as
a paid holiday or ensures that workers can sign up to work on a volunteer basis, with
premium pay for the shift. Union members, seizing the opportunity to press for greater
UFCW representation, and hand-billed nonunion Macy’s workers to spread the word that
a union contract ensures that workers have a choice in whether to stay home on
Thanksgiving or work extra hours.
Walmart. Walmart workers are gathering momentum in their effort to stage massive
Black Friday protests the day after Thanksgiving, calling for a global week of action
against the retail giant, which has been the ongoing target of animosity over its wage and
benefits policies and purported retaliation against workers who protest or engage in
organizing activity.
The Teamsters reported that the UNI Global Union, an international federation of 900
unions in 140 countries, has called for global protests demanding respect and good jobs
throughout Walmart’s supply chain. On November 18-24, workers around the world are
expected to come together with their unions in countries such as Argentina, Brazil,
Canada, Chile, South Africa, the United Kingdom, Bangladesh and the United States to
demand better pay and working conditions for the 2.2 million Walmart workers and
countless supply chain workers.
A UNI resolution that was passed last month in support of the Walmart campaign created
the UNI Alliance @ Walmart, and demanded that Walmart permit workers to organize
without fear of retaliation and pay workers a living wage with decent working conditions.
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The global union is pressing the retailer to sign a global framework agreement
guaranteeing the rights of Walmart workers around the globe.
Walmart has also been the subject of widespread media reports regarding its employee
food drive to help its own workers buy Thanksgiving dinner. The Teamsters also point to
a Demos report indicating that the retailer could pay its U.S. workers $14.89 an hour if it
would stop buying up its own stock.
Advice memos urge dismissal of dueling claims arising from “OUR Walmart”
protests
By Lisa Milam-Perez, J.D.
In memoranda issued November 15 but released on November 20, the Division of Advice
recommended dismissal of charges that Walmart unlawfully interfered with workers’
right to strike by removing OUR Walmart protestors from its property. The Division also
urged dismissal of claims against the United Food and Commercial Workers arising from
the ongoing protests against the retailer.
Allegations against Walmart. Addressing allegations that Walmart interfered with
employees’ NLRA-protected activity by having police escort employees off store
property when they were picketing as part of the protests launched by OUR Walmart, the
Division of Advice concluded there was no evidence that the employees, who were picketing
among a larger group of non-employees, sought permission to stay on Walmart property
after the employer permissibly demanded that OUR Walmart cease picketing on the
premises and moved them to public property.
The charges arose from picketing incidents at the retailer’s stores in Dallas and Balch
Springs, Texas. The Balch Springs protest, staged by about 50 OUR Walmart picketers,
consisted of organizers from the UFCW, community activists, and a few off-site WalMart employees who arrived at the store on a coach bus. A Walmart manager spoke with
the UFCW organizer about moving the demonstration to public property. None of the
demonstrators identified him or herself as a Walmart employee, and there was no
evidence that store managers recognized any of the demonstrators as store employees at
the time they were asked to leave Walmart property. Also, no employee participant asked
or attempted to engage in separate protected activity on store property. Later, a Walmart
labor relations manager recognized four employees from another store among the crowd
of demonstrators, but those employees stayed with the larger group and made no effort to
engage in a separate demonstration on Walmart property.
In the Dallas protest, two store managers met the group of protestors in the parking lot
and told the UFCW organizer that they were not allowed to be there. One employee from
the Dallas store was in the group, and tried to hand the managers a letter stating that he
was going on strike, but the managers refused to accept it. There was conflicting evidence
as to whether the UFCW organizer told the managers that the demonstrators were
Walmart employees; but it was not disputed that the managers recognized two associates
in the group. After police told the demonstrators that they were illegally trespassing, the
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group moved to the public sidewalk and continued to picket. Still, no employee identified
him or herself as a store employee, and neither tried to engage in protected activity on
store property.
OUR Walmart lawfully excluded. Noting that Walmart had a uniformly applied
nonsolicitation policy, and that non-employee organizers do not enjoy the same rights of
access under Board law, the Division of Advice determined that Walmart lawfully
excluded the non-employee OUR Walmart demonstrators from its property; and, in the
absence of a request by any employee to remain on Walmart’s property to engage in
protected activities, there was insufficient evidence that the retailer denied access to any
employees who wished to engage in Section 7 activity.
The latest memo from the Division of Advice is consistent with an earlier advice memo
from August, also authored by Barry J. Kearney, Associate General Counsel, in which he
recommend dismissal of charges that arose after a similar protest. In that incident, which
took place at a Walmart in Illinois, the Division concluded that the presence of a van
emblazoned with the “OUR Walmart” logo reasonably led the retailer to believe the
protest was staged by non-employee organizers, who may lawfully be excluded from
employer property. The fact that a Wal-Mart employee was among the organizers of the
demonstration did not matter.
The most recent memoranda were released on the heels of an announcement from the
General Counsel’s office that it intended to issue a complaint against Walmart after
finding merit to some of the unfair labor practice allegations asserted against the
company in responding to the ongoing protest activity. (The advice memos were dated
several days earlier than the GC’s announcement, though.) However, the General
Counsel found no merit (absent appeal) to several of the charges, including the
allegations that the retailer interfered with employees’ right to strike in Illinois and Texas
by telling the non-employee protestors to leave store property.
Charges against union. In another advice memorandum, also issued by Kearney, the
Division of Advice recommended dismissal of allegations that the UFCW violated
Section 8(b)(1)(A) of the Act by threatening or making coercive statements to (or in the
presence of) employees and by offering a $50 gift card to employees to entice them to
participate in the Black Friday job actions held in November 2012. The alleged threats
were too ambiguous to constitute restraint or coercion, the memo concluded;
alternatively, there was no evidence that employees heard the challenged statement or
knew that the alleged threat was attributable to the union.
Nor did the union’s offer of a $50 gift card to employees who participated in the job
action amount to unlawful restraint or coercion. The gift card was a non-excessive strike
benefit, designed to reimburse employees for some of their lost wages if they struck, and
was clearly communicated to employees as such. Moreover, it was nondiscriminatory;
any employee who joined the Black Friday protest — not just OUR Walmart members —
was eligible for the gift card. As such, there was no evidence that the gift card was meant
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to buy support for OUR Walmart. It was more akin to non-objectionable election conduct
and thus not coercive.
Presidential Emergency Board created to help resolve Long Island Rail Road
Company labor dispute
By Pamela Wolf, J.D.
President Obama on November 21 issued an executive order (EO) establishing a
Presidential Emergency Board to investigate and help resolve the labor disputes between
the Long Island Rail Road Company (LIRR) and employees represented by several labor
organizations, thereby delaying a strike or lockout for 60 days. The cooling-off period
between the parties was set to expire at 12:01 a.m. on November 22.
Presidential Emergency Board process. The post-mediation dispute resolution process
for commuter railroads, such as the LIRR, provides for up to two emergency boards and a
public hearing, according to the National Mediation Board (NMB). If a settlement cannot
be reached, either party to a dispute or the governor of any affected state may ask the
president to create an emergency board to report on a dispute over the terms of a CBA.
The creation of an initial emergency board for a commuter railroad dispute delays a
strike, lockout, or other self-help generally for 60 days. The emergency board must issue
a report, which generally provides recommendations for settlement of the dispute within
30 days. The parties are then given a 60-day cooling-off period to consider the
recommendations and to reach an agreement. Where no agreement is reached after 30
days, the NMB is required to hold a public hearing.
If no agreement is reached within 60 days after the report, then either party to the dispute
or the Governor of an affected state can ask the president to create a second emergency
board to select among final offers. Final offers must be submitted to the board within 30
days of its creation, and the board has an additional 30 days to select a final offer. After
the second emergency board reports to the president, there is a final 60-day cooling off
period for the parties to consider the recommendations of both emergency boards and to
reach agreement. If no agreement is reached at the end of the final cooling-off period, the
parties may then engage in self-help, including strikes, lockouts and unilateral changes in
terms and conditions of employment.
LIRR dispute. In this instance, President Obama ordered, effective 12:01 a.m.
November 22, the appointment of a three-member board to investigate and report on the
disputes between the LIRR and the labor organizations representing the employees. The
president will appoint the members of the board, who cannot be pecuniarily or otherwise
interested in any organization of railroad employees or any carrier. According to the EO,
the board will perform its functions subject to the availability of funds.
The board is required to report to the President with regard to the disputes at issue within
30 days of its creation. Pursuant to Section 9A(c) of the RLA, for a period of 120 days
commencing from the date the board is created, the parties to the controversy, except by
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agreement, are barred from making any changes to the conditions out of which the
disputes arose. The board will dissolve upon the submission of its required report.
State workers have new contract, home care attendants begin first negotiations,
airline mechanics warn of potential strike
By Pamela Wolf, J.D.
On the labor front, New Hampshire state employees have a new contract, Missouri home
care attendants start their first contract negotiations, and United Airlines aviation
mechanics stage informational picketing in airports to warn of a strike if a purported
promise to restore pension plans is not honored.
New Hampshire state employees. After 10 months of collective bargaining with New
Hampshire Governor Maggie Hassan’s state bargaining team, the State
Employees’ Association (SEA) announced last week that the members of the Executive
Branch master bargaining unit have voted to ratify a tentative agreement reached late last
month. More than 36 percent of the bargaining unit’s members voted, and more than 80
percent of the votes were in favor of the new contract, according to SEIU Local 1984.
The vote was 1,574 to 385. The new contract will be in effect through June 30, 2015.
The new deal provides the first increase in wages since 2009; three raises compounded
equal a 6.12-percent increase over the next 19 months. Contract changes include several
first-time health-related provisions, including hearing aid coverage, a stand-alone dental
plan that provides up to 25 percent more in current and new dental benefits, annual
deductibles in the medical plan, and improved vision benefits.
Deductibles were a sticking point in prior negotiations because SEA member negotiators
believed the state was working from inaccurate health cost projections, according to the
union. “The SEA team knew about the state’s history of over-projecting health care cost
inflation during contract negotiations,” said SEA President Diana Lacey. “They knew
that employees had been a big part of achieving millions of dollars in annual health care
savings — surplus money — that kept going back to state agencies to balance the budget.
They were sure that out of pocket costs for employees were going to far exceed worker
raises. So they got innovative and collaborated with the state to create an agreement that
was fair for everyone.”
The same approach carried forward in non-health-related items. State negotiators sought
to create a new sick leave plan that would replace the current one. “We believed their
plan would hurt families and that’s a pretty big concern for us,” said Linda Huard, a
longtime bargaining team member. “But rather than shut down the discussion, we agreed
to form a committee to study the issue. We’ve done things like this in the past, and it
generally builds a lot of mutual understanding and suggestions for improvement.”
“Through continued negotiation, we were finally able to develop an agreement that helps
mitigate the cost of the deductible for employees while improving the health and dental
plan,” said James Nall, chair of the SEA Executive Branch bargaining team. “We were
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able to take advantage of future health care savings. And we were able to reach the
middle ground on leave and pay issues.”
The contract provides new resources for employees to play even more of an active role in
the way they use their health care. For example, there are financial benefits for those who
participate in activities that promote better health, like having an annual physical; having
blood pressure checked; and getting a flu shot. Employees can also help promote a more
competitive health market in New Hampshire by seeking lower-cost care at one of
Anthem’s Site of Service centers — laboratory and ambulatory surgical services, the
union said. The price-competitive Compass SmartShopper remains in place, as well.
Employees accessing that program receive a rebate for obtaining service from low-cost
providers.
Missouri home care attendants. Home care attendants met last week with the State of
Missouri for their first ever contract negotiation session, according to the AFSCME. The
Missouri Home Care Union bargaining team addressed a range of issues with the state.
According to the union, the first day was devoted to non-economic issues such as
representation rights, a voice in policies and procedures, adequate training, and resolving
late-payment issues. Economic issues are slated for later sessions. The next bargaining
date is scheduled for December 10.
The negotiations stem from the Quality Home Care Act, which Missouri voters
overwhelmingly passed in 2008. That law opens the door to improvements in the
Medicaid-funded program and allows the state’s 13,000 attendants to have a voice in
their work, AFSCME said. The Missouri Home Care Union, a partnership of AFSCME
and SEIU, saw two resounding election victories and fended off legal attacks on its way
to this month’s historic negotiations.
United Airlines aviation mechanics. On November 25, United Airlines (UAL)
professional aviation mechanics represented by the Teamsters Union held informational
pickets at 10 major airports around the country to inform the public that they may be
forced to strike if the company refuses to keep its purported promise to reinstate the
workers’ pension plans.
According to the union, the UAL took away the pensions for 11,000 professional aviation
mechanics in 2005, but promised that when the company’s financial situation improved
they would get their retirement plans back. UAL has since rebounded, the union said, and
is reporting hundreds of millions in profits. The second quarter of 2013 saw UAL earn its
highest revenue in history, according to the Teamsters, but nonetheless, after a year of
stalling, UAL executives broke off contract negotiations without agreeing to the pensions
they had promised and declared that 3,500 mechanics will be forced to pay an additional
$300-$500 each month for their health care.
Informational pickets were held at the following airports: A.B. Won Pat International
Airport Authority, Guam; Honolulu International Airport; Los Angeles International
Airport; San Francisco International Airport; Seattle–Tacoma International Airport;
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Denver International Airport; George Bush Intercontinental/Houston Airport; Cleveland
Hopkins International Airport; Dulles International Airport; and Newark Liberty
International Airport.
“We decided to hold informational pickets around the country because we think United’s
customers should know how the workers are being treated,” said Clacy Griswold, Airline
Division International Representative for the International Brotherhood of Teamsters.
“These mechanics are keeping United customers safe every day and they simply want the
pensions they were promised.”
LEADING CASE NEWS:
1st Cir.: Arbitration panel did not exceed authority in finding that revised CBA
regulated transfers to independent entities
By Ronald Miller, J.D.
An arbitration panel did not exceed the scope of its authority by crafting an award that
disregarded the express terms of a collective bargaining agreement between a union and
telecommunications company, ruled the First Circuit. The panel interpreted a revised
CBA provision limiting the transfer of jobs as not applying only to transfers between
entities owned by the employer but also governing transfers to independent entities. This
interpretation fell within the wide boundaries of discretion granted to arbitral decisions by
the courts, the appeals court determined; thus, a district court properly granted summary
judgment in favor of the union. Additionally, the district court properly denied the
union’s request for the imposition of fees and costs (Northern New England Telephone
Operations, LLC dba FairPoint Communications v Local 2327, International
Brotherhood of Electrical Workers, November 12, 2013, Torruella, J).
In April 2008, FairPoint purchased Verizon’s telecommunications operations in Vermont,
New Hampshire, and Maine. As a term of the purchase, FairPoint agreed to hire all
former Verizon employees represented by the union. As the cutover date approached,
FairPoint realized that its flowthrough rate (the number of service orders that required
human intervention) was significantily lower than expected. It also became clear that the
transition in ownership would require a ten-day “blackout period,” during which all
orders would be handwritten, resulting in a significant backlog. FairPoint approached the
union and explained that it would need to hire a “bubble workforce” until the backlog
created by the blackout period had been resolved and the flowthrough rate neared 94
percent.
Subsequently, FairPoint hired a staffing company to staff the bubble workforce. The
temporary staff handled simple assignments that would have been otherwise fully
automated, while union employees handled more complex work. Despite FairPoint’s
assurances that the bubble workforce was temporary, the simple work was never
allocated to union employees. In September 2010, the work was indefinitely transferred
to the staffing company and later transferred to a subcontractor in New York.
15
Revised CBA. A provision in the union’s CBA with Verizon entitled “Limitations on
Transfer of Jobs” provided that the company could not permanently transfer more than
0.7 percent of union-represented jobs to an area outside the New England states. A prior
grievance held that this restriction applied only to transfers between Verizon entities, not
transfers to external companies. The union negotiated a new provision with FairPoint that
deleted much of the language that had been subject to the earlier arbitration. Also
included in the revised CBA was a method for calculating the 0.7 percent cap, even
though the cap was deleted from the revised CBA. The parties also negotiated
amendments that focused on subcontracting of plant-technician jobs.
In 2010, the union filed a grievance alleging the wrongful transfer of the work that was
being performed by the bubble workforce. FairPoint cited the previous arbitration as
evidence that the Limitation on Transfer of Jobs provision applied only to transfers
between FairPoint entities, making transfers to independent entities acceptable.
Moreover, because union employees had never possessed the jobs in question, FairPoint
argued that they could not have been “transferred” away.
A three-member panel of arbitrators disagreed. It ruled that the plain meaning of the
provision restricted transfer of any business, not just those affiliated with FairPoint.
Moreover, it found no evidence that the parties intended to retain the pre-amendment
CBA’s more limited restrictions on job transfer. It ultimately concluded that the facts
presented constituted a wrongful transfer of jobs. An award was entered in favor of the
union requiring FairPoint to return the disputed work and to rehire any union employees
wrongfully laid off during the relevant time period. The district court granted summary
judgment in favor of the union. However, it denied costs and fees pursuant to FRCP 11,
reasoning that union failed to abide by the rules provisions.
Scope of panel’s authority. FairPoint first asserted that the panel acted in excess of its
authority granted by the CBA’s arbitration clause. The clause provided that an arbitrator
“shall have no power to add to, subtract from, modify or disregard any of the provisions
of this agreement.” However, the First Circuit noted that FairPoint’s argument asked too
much of the broadly worded arbitration provision in question. The court concluded that
the generic no-modification provision in question evidenced no intent to circumscribe the
arbitrator’s authority beyond accepted standards.
Subcontracting ban. Turning to the substance of FairPoint’s arguments, the appeals
court found that it struggled to identify precisely how the panel’s decision on
subcontracting veered over the line separating interpretation and modification. By
restricting subcontracting, the employer argued that the arbitrator wrongfully subtracted
its right to manage its business subject only to the limitations of the CBA. Moreover, it
argued that restricting subcontracting of certain plant jobs implied that the parties knew
how to explicitly limit subcontracting.
However, the appeals court saw no contradiction between the terms of the management
rights provision and the arbitrator’s interpretation of the Limitation on Transfer of Jobs
16
provision. The panel interpreted the Limitation on Transfer of Jobs provision in a manner
not expressly foreclosed by anything in the CBA. Moreover, in reaching its conclusion, it
neither “disregarded the lack of restrictions on FairPoint’s ability to subcontract” nor
“added subcontracting restrictions.” It simply read one provision as creating an exception
to another that, by its terms, allowed for just such exceptions.
Further, the appeals court also rejected FairPoint’s contention that the arbitration panel
manifestly disregarded the other CBA provisions limiting subcontracting for particular
plant jobs. The panel highlighted the parties’ extended negotiations regarding the
Limitation on Transfer of Jobs provision, during which they removed language that had
previously been interpreted as restricting only transfers between Verizon-owned entities.
Definition of transfer. FairPoint next contested the panel’s decision that jobs previously
completed by a computer program were wrongfully “transferred” away from union
employees. Although the panel’s interpretation of “transfer” was expansive, the appeals
court declined to say that it was beyond any plausible interpretation of the term as used in
the CBA – that subcontracting jobs to which union employees had a “legitimate claim”
constituted a “transfer.” The plausibility of this reading was further bolstered by the
panel's factual finding that some small portion of the disputed work was already
completed by union employees.
The case numbers are 13-1167 and 13-1186.
Attorneys: Arthur G. Telegen (Seyfarth Shaw) for Northern New England Telephone
Operations, LLC, and FairPoint Communications. Alfred Gordon O’Connell (Pyle Rome
Ehrenberg) for Local 2327, International Brotherhood of Electrical Workers.
5th Cir.: Employer’s bad faith precluded finding of impasse in bargaining, but
regressive bargaining proposals permissible
By Ronald Miller, J.D.
Substantial evidence in the record supported all the terms of an NLRB order except the
mandate that an employer cease and desist from presenting regressive bargaining
proposals for the purpose of frustrating negotiations, ruled the Fifth Circuit. Because the
record evidence established that the employer acted in bad faith, such a finding precluded
the employer from declaring that the parties had reached an impasse in bargaining. Bad
faith was demonstrated by the employer’s “end game,” a plan for a swift impasse
declaration and unilateral implementation following an anticipated rejection. However,
the court determined that the Board’s narrative of bad-faith bargaining should not have
encompassed the employer’s March 19 “final offer,” which contained regressive
proposals, as it was not part of the employer’s “overall plan to frustrate agreement”
(Carey Salt Co v NLRB, November 21, 2013, Garza, E).
Bargaining negotiations. The employer and union enjoyed 40 years of successful
bargaining history. In February 2010, they entered negotiations over the terms of a new
collective bargaining agreement. Twice during the course of negotiations, however, the
17
employer unilaterally implemented offers after claiming, over Union protests, that talks
had reached a valid impasse. In response to the implementation and other unfair labor
practices, employees went on strike. Prior to the strike, union negotiators accepted the
employer’s proposals on benefits and severance, but refused to yield on three “core”
issues of overtime distribution, alternate shifts, and cross-assignment. These issues had
been the subject of the company’s long-standing operational concerns, and even the
union conceded that vague overtime policies invited abuse and excessive overtime levels.
The union did propose a one-year trial period for the new shift, but the parties could not
agree on an escape clause.
On March 18, the union requested a “final” offer from the employer. According to the
union, it explained to the employer that it was seeking the proposal merely to obtain
membership feedback. Thereafter, the employer presented its “final” offer with terms
consistent with its position on the three core issues. The offer also include all items on
which tentative agreement had been reached, but omitted items that had been integrated
in earlier proposals. The employer confirmed that the omissions were intentional and
conceded that the omissions would make the offer harder to “sell” to the membership.
When the union rejected the offer, the employer declared an impasse over union protest.
Thereafter, the employer confirmed that it was unilaterally implementing the “final”
offer.
Believing the implementation to be an unfair labor practice, the union voted to strike.
Mediated talks produced a “modified final proposal.” However, union membership
rejected this offer and continued the strike. Thereafter, the employer presented a revised
offer that rolled back prior concessions and increased the number of core issues to seven.
On June 15, employees ended the strike; however, the employer recalled strikers by merit
rather than by seniority. After the union refused to vote on the employer’s June 23 offer,
it again claimed impasse and implemented changes in terms and conditions of
employment. In response, the union brought unfair labor practice charges against the
employer.
NLRB order. An NLRB administrative law judge found that the employer acted
unlawfully by failing to reinstate employees, and by failing to bargain with the union.
Additionally, the ALJ found that the company violated its bargaining duty by making
unilateral changes in employment in the absence of impasse, conditioning bargaining
over mandatory subjects of bargaining on union concessions, presenting a regressive
bargaining proposal to frustrate agreement, and improperly treating employees who
engaged in the strike. The NLRB adopted the ALJ’s findings and its final order required
the employer to cease and desist from violations of the Act. The employer petitioned for
review, and the Board cross-petitioned for enforcement of its order.
Unilateral changes. The Board found the employer unlawfully refused to bargain by
twice implementing unilateral changes to employment terms during negotiations in the
absence of impasse. On appeal, the employer argued that because the parties had
bargained to impasse, both implementations were lawful. The parties agreed that if the
18
first implementation was unlawful, then the strike, which responded to the
implementation, was a protected unfair labor practice strike.
The Fifth Circuit noted that it has recognized that when an employer and union bargain to
impasse, the employer may unilaterally implement changes in contract terms, so long as
the changes were previously offered during negotiations. Impasse is reached when
“further discussion [is] futile . . . in view of all the circumstances of the bargaining.”
Moreover, good-faith bargaining is a “necessary precondition” to a finding of impasse.
Here, the appeals court used the five factors enumerated by the NLRB in Taft
Broadcasting Co, (1) the parties’ bargaining history; (2) the parties’ good faith; (3) the
duration of negotiations; (4) the importance of issues generating disagreement; and (5)
the parties’ contemporaneous understanding of the state of negotiations to frame its
analysis.
Determination of bad faith. In this instance, the appeals court concluded that substantial
evidence in the record supported the Board’s no-impasse finding, based on facts in the
record establishing the employer’s bad faith. Bad faith precludes any finding of impasse.
In requesting the March 18 final offer, union negotiators were explicit to the employer
that talks would resume in the event the membership rejected the offer. Faced with
evidence supporting conflicting accounts regarding the final offer, the ALJ permissibly
credited the union testimony. The decision recounted union statements to the employer
that future talks were not foreclosed, and there was no evidence that the union was giving
up on negotiations. Thus, absence indications the NLRB ignored substantial parts of the
record, the court declined to disturb credibility determinations. Moreover, the court
observed that the employer never conclusively refuted the union’s account of the request
for a final offer, and the employer did not challenge this credibility choice on appeal.
Further, the sequence of events “both at and away from the bargaining table” supported
the Board faulting the employer for bad faith conduct in the days leading up to the
employer’s implementation of the final offer. After the membership rejected the final
offer, the employer confirmed its willingness to meet again, but the employer’s negotiator
made travel plans that would require her to depart the site of the final meeting. Further,
the employer’s CEO detailed the “end game,” a plan for a swift impasse declaration and
unilateral implementation following an anticipated rejection. Finally, the employer
merely confirmed the union’s rejection of the final offer before declaring impasse,
departing abruptly and refusing further talks. Thus, the court was satisfied that the
evidence relied upon was substantial enough.
Regressive proposal. However, the Fifth Circuit did take exception to the NLRB’s
finding that the March regressive proposal was part of the company’s “overall plan to
frustrate agreement.” Here, the court determined that its review of the record led it to
agree with the Board that the March 19 offer, while less favorable than the union
expected, did not necessarily foreclose all future bargaining. Its terms included a wage
increase not previously offered and all items on which a “tentative agreement” had been
reached were included. Moreover, as a matter of law, regressive offers are not per se
illegal. The label “regressive” has no independent legal force absent other circumstances.
19
The proper question was whether in fact the link between the March 19 offer and the
employer’s plan to frustrate agreement rested on substantial evidence. Here, the appeals
court concluded that it did not. The ALJ based her reasoning solely on the purported
admission by an employer negotiator that the regressive changes in the proposal would
make it less attractive and harder for the union bargaining committee to present to the
membership. However, the appeals court concluded that its review of the record did not
support the conclusion that the offer was part of the employer’s plan to frustrate
agreement.
The case number is 12-60757.
Attorneys: Stanley E. Craven (Spencer Fane Britt & Browne) for Carey Salt Co. Linda
Dreeben for National Labor Relations Board.
6th Cir.: CBA properly reformed to provide for wage increases on anniversary date
of agreement
By Ronald Miller, J.D.
A district court did not err in reforming the wage increase provision of a collective
bargaining agreement under the doctrine of mutual mistake and finding that the parties
intended to establish wage increases on the CBA’s anniversary dates, ruled a divided
Sixth Circuit in an unpublished decision. The appeals court agreed with the union that it
was a sensible interpretation of the CBA that a zero-percent wage increase should take
effect on the effective date of the contract, just as the prior agreement, with successive
increases taking effect on the respective anniversaries of the agreement (and not six
months later, as asserted by the employer). District Judge Thomas Anderson filed a
separate opinion dissenting on the finding of a mutual mistake (Local Union 2-2000 United
Steelworkers Union v Coca-Cola Refreshments USA, Inc, November 8, 2013, Donald, B).
Following extensive negotiations, the Steelworkers and Coca Cola came to an agreement
on a new CBA to replace an earlier contract. Negotiations resulted in a three-year
contract providing for no wage increase in the first year, a 2-percent wage increase in the
second year, and a 3-percent wage increase in the third year. However, the specific
effective dates for the wage increases were not discussed during negotiations. The
agreement was memorialized in a tentative settlement agreement (TA). The TA also
provided for increases in fringe benefits and provided specific dates for those increases.
A red-lined document highlighting the changes from the prior contract was presented to
the union membership for ratification. A copy of the red-lined document was also
presented to the union for proofreading. The union made very minor corrections. At some
point after the effective date of the agreement, Coca Cola prepared a chart, entitled
“Appendix A,” listing the effective dates for the agreed-upon wage increases, aligning
them with the wage increase dates from the previous CBA. The executed agreement was
printed in a booklet and distributed to employees over six months after the effective date
of the agreement. It was greeted with “immediate protests” over the inclusion of
20
Appendix A, which showed the effective date of the wage increases some six months
after the effective date of the contract. Nonetheless, Coca Cola preceded with the wage
increases according to Appendix A, and declined to arbitrate the matter.
In response, the union filed suit. The district court granted summary judgment in favor of
the union, and Coca Cola filed the present appeal.
Limitations period. On appeal, Coca Cola argued that the union’s action was timebarred and that the district court erred in reforming the wage increase provision under the
doctrine of mutual mistake. Because the LMRA does not set a specific limitations period,
federal courts must apply the most closely analogous state statute of limitations. CocaCola urged that the six-month limitation period contained in Sec. 10(b) of the NLRA
should apply because the claim was more analogous to an unfair labor practice claim.
The union countered that the suit was timely filed within Michigan’s six-year limitations
period for contract actions applicable to LMRA Sec. 301 actions to recover wages under
the terms of a CBA.
The Sixth Circuit observed that the union’s complaint did not assert that Coca Cola
engaged in unfair dealings in the aftermath of the CBA negotiations, but urged that
because the employer repudiated the terms of the agreement with respect to the dates of
agreed-upon wage increases, it was liable for damages for breach of contract. The union’s
claim here was that Coca Cola breached the CBA by failing to provide wage increases at
the appropriate time. Thus, the sole claim in the complaint was most analogous to a state
law claim for breach of contract. The fact that the union filed an unfair labor practice
charge and initiated a hybrid complaint suing Coca Cola did not make this an appeal of a
hybrid case. The union’s complaint did not allege a breach of the duty of fair
representation, so applying Michigan’s six-year limitations period will not frustrate or
interfere with the implementation of federal labor law policies. Since the union filed suit
less than two years after the CBA took effect, this action was timely filed.
Mutual mistake. Next, the court turned to the question of whether the district court erred
when it reformed the CBA under the doctrine of mutual mistake and granted summary
judgment to the union. The union contended that a wage freeze went into effect on the
effective date of the agreement and lasted for the entire “Year 1” of the three-year
agreement term. Accordingly, the two increases were intended by the parties to go into
effect on day one of “Year 2” and “Year 3,” respectively. The union also asserted that the
parties were explicit when they intended mid-contract year effective dates. Coca Cola
countered that the language of the final, signed agreement, which included the Appendix
A, unambiguously provided for March wage increase dates.
To obtain reformation of a contract, the plaintiff must prove a mutual mistake of fact by
clear and convincing evidence. While parol evidence is inadmissible to show additional
terms, such evidence is always admissible to show that there has been a mistake in
reducing the agreement of the parties to writing as grounds for seeking reformation of a
contract, the court observed. The only such factual support for Coca Cola’s position was
that the prior agreement commenced in March 2006 and, thus, its wage increases took
21
effect in March of each relevant year. However, there was no evidence that the March
dates were ever contemplated by the negotiating parties. Thus, this dispute was not a
matter of the union simply misunderstanding what they were bargaining for; rather, it was
a mutual mistake by the parties. When “terms are used in or omitted from the instrument
which give it a legal effect not intended by the parties . . . equity will always grant relief
unless barred on some other ground, by correcting the mistake so as to produce a
conformity of the instrument to the agreement.” Here, the record as a whole indicated that
the parties intended to establish wage increases coinciding with the CBA anniversary in
September, and the resulting document did not adequately reflect that agreement. The
district court’s grant of summary judgment was affirmed.
Partial dissent. While agreeing with the majority’s opinion on the statute of limitations
issue, Judge Anderson dissented on the contract issue. In Judge Anderson’s view, there
was simply a lack of clear and convincing evidence that a mutual mistake occurred when
Coca Cola reduced the parties’ CBA to writing. As to the issue of whether the parties
agreed to annual wage increases in October as opposed to the March dates included in the
final signed CBA, the dissent argued that the evidence supporting each party’s position
on the wage increases was fairly balanced. Accordingly, the dissent argued that the union
was not entitled to reformation of the contract.
The case number is 12-2630.
Attorneys: Stuart M. Israel (Legghio & Israel) for Local Union 2-2000, United
Steelworkers International Union. Noah G. Lipschultz (Littler Mendelson) for Coca-Cola
Refreshments USA, Inc.
7th Cir.: Payments to full-time union officials not performing work for company
unlawful under LMRA
By Lisa Milam-Perez, J.D.
Addressing an issue of first impression, a divided Seventh Circuit panel held that an
employer may not, under LMRA Sec. 302, pay the salaries of full-time union officials
who perform no work for the company (Titan Tire Corp of Freeport, Inc v United
Steelworkers, November 1, 2013, Manion, D). Chief Judge Wood dissented from the
circuit judges’ vote denying rehearing en banc, joined by Judges Williams and Hamilton.
Paying the full-time union salaries of the president and benefit representative of a
Steelworkers’ local is “so incommensurate” with the officers’ former employment with
the company that it no longer qualify as payments “in compensation for or by reason of”
that employment, the majority found. Concluding that an arbitration award upholding the
salary payments was contrary to public policy, the appeals court reversed a district
court’s order and vacated the award. The court stressed, however, that its ruling did not
invalidate “no-docking” clauses, which are permissible under NLRA, Sec. 8(a)(2) as
applied to union officers who are engaged in company work at least in part.
22
Payments to union officials. Titan Tire Corporation purchased a tire manufacturing
facility and entered into a series of labor agreements with Steelworkers Local 745, which
represented the plant’s workers. Initially, Titan paid the full union salaries of the local’s
president and benefit representative even though they were on leave of absence from the
company and primarily working away from the facility. But two years later, the company
told the union it would cease such payments. The payments violated Section 302(a) of the
LMRA, which prohibits an employer from paying money to union representatives, Titan
said. First, it reasoned, the payments were illegal because Local 745 also represented a
bargaining unit at a local school district, while the officials’ salaries were being paid
solely by the company. (Salary payments for union officials for their service to school
district employees were not part of the school district’s bargaining agreement with the
local.) The payments also were unlawful because the union officials were not working
full-time from the Titan facility and were not subject to Titan’s control. Instead of paying
the salaries, Titan instead paid directly to Local 745 amounts it believed due under the
various labor agreements for time the president and benefit representative worked on
union business. Titan also continued to offer fringe benefits to the union officials, and the
president and benefit representative maintained their seniority with the company.
The union filed a grievance, arguing that Titan violated various labor agreements when it
stopped paying the salaries. Under the governing labor and benefits agreements and the
parties’ course of conduct, Titan was responsible for directly paying the full salaries, the
union argued. For its part, the company contended that nothing in these agreements
required it to pay the local’s president and benefit representative their full-time salaries,
but instead claimed the labor agreements merely provided for payments to the union for
union business time. At any rate, it added, if the company had agreed to such terms, they
were illegal and could not be enforced. The union countered that the salary payments
were exempt from Sec. 302(a)’s general prohibition by Section 302(c), because the
president and benefit representative were current or former employees of Titan and the
payments were “by reason of” their service as employees of Titan.
Siding with the union, the arbitrator found that Titan made these payments “by reason of”
the officer’s former employment at the company; therefore, the payments were lawful
under Section 302(c) and in accordance with the contract. He ordered Titan to resume
paying the president’s and benefit representative’s full-time salaries. Titan filed suit to
vacate the award. Holding the payments were not in violation of Sec. 302, the district
court ruled for the union on its counterclaim for enforcement. Titan appealed.
Sec. 302(c) exemption. Paying the full-time union salaries of the local’s president and
benefit representative violated the LMRA, the appeals court held. The payments were
simply not commensurate with the officials’ former employment with the company, the
court reasoned; rather, they were payments “by reason of” their service to the local’s
members — which included Titan employees and school district employees. While its
conclusion was premised on the plain meaning of Sec. 302, the holding also furthered the
LMRA’s statutory purpose of preventing conflicts of interest, the court noted.
Section 302(a) provides: “It shall be unlawful for any employer … to pay, lend, or
deliver, or agree to pay, lend, or deliver, any money or other thing of value … to any
23
representative of any of his employees who are employed in an industry affecting
commerce.” However, Sec. 302(c) exempts from this general prohibition any thing of
value paid by an employer to a union or union officer “who is also an employee or former
employee of such employer, as compensation for, or by reason of, his service as an
employee of such employer.” The union contended that the exemption applied here
because the officials were former employees of Titan and the payments were made “by
reason of” that employment.
In support of its position, the union relied on Caterpillar, Inc. v. UAW, a 1997 Third
Circuit decision. In Caterpillar, a divided en banc ruling, the court held that paying the
full-time salaries of the union’s grievance chairmen did not violate Sec. 302 because such
payments were “by reason of” the union reps’ former employment at Caterpillar. But the
dissent in that case concluded that the plain language of the statutory provision barred the
company from paying the full-time salaries of the union grievance chairmen, reasoning
that such payments were not “because of” their prior service to the company, but rather
because of their current work for the union. The Seventh Circuit majority found the
dissent’s reasoning persuasive.
Not “by reason of” employment. The majority in Caterpillar did not dissect Sec.
302(c)’s “by reason of” language. The Seventh Circuit found it important to do so,
however, noting it meant something distinct from the “as compensation for” language
that also appeared in this provision. The result of its textual analysis: a finding that the
plain language of the section 302(c) exception did not encompass the payments at issue
here because they were not “by reason of” the officials’ former service to Titan. Rather,
the payments were “because of” the officials’ service to the local.
In characterizing the current payments as being “by reason of” the employees’ past
service to the employer, the majority in Caterpillar had reasoned that “every employee
implicitly gave up a small amount in current wages and benefits in exchange for a
promise that, if he or she should someday be elected grievance chairperson, Caterpillar
would continue to pay his or her salary.” The union here argued much the same. True,
courts have uniformly concluded that the “by reason of” exception of 302(c) allows union
workers to receive fringe benefits earned during their prior service to an employer. But
the reasoning of the Caterpillar majority (and the union here) “wrongly equates paying
fringe benefits to former employees for performing their past job with paying former
employees their current salaries for working for the union,” the court wrote.
“[P]aying a former employee a salary to do another job for another employer is different
in both kind and degree from paying fringe benefits to a former employee,” the court
continued. For one, the president’s union salary could well exceed the salary he would
have earned while actually working for Titan because his salary was based on 60 hours of
work per week at the highest base rate at the plant. At some point, the difference is so
significant that it would be incorrect to say the salary payment is “by reason of” past
service to the employer.
24
The payments were made pursuant to a CBA ratified by the union’s members, the union
noted. And it cited the Seventh Circuit’s own precedent in Toth v. USX Corp. which, it
contended, found such payments permissible under Sec. 302(c)(1) where the obligation
arises from a bargaining agreement. But the union’s argument misread Toth. That
decision did not stand for the proposition that any payments authorized by a CBA are “by
reason of” the former service of the employee, the appeals court explained. Such a
reading of Section 302(c)(1) would render the general prohibition contained in Section
302(a) a nullity.” And, while Toth held that inclusion in a CBA was crucial to the legality
of a payment to a union representative, the decision also held that there must be a “firm
connection” between the bargained-for term and “the terms of prior employment.” At
some point, a bargained-for payment can be “so incommensurate with that former
employment as not to qualify as payments ‘in compensation for or by reason of’ that
employment. That is what we have here.”
Statutory purpose. Noting that the LMRA was designed to eliminate practices that had
“the potential for corrupting the labor movement,” the majority concluded that its holding
here served that statutory goal. A central purpose of Sec. 302 is to prevent conflicts of
interest; to that end, Congress prohibited all payments from employers to representatives
of their employees and union officials in Sec. 302(a). The facts at hand illustrated the
dangers, the court suggested. Here, the local president was also head of the grievance and
negotiating committee, and so negotiated the very labor contract that endowed him with a
full-time salary at the highest factory rate. Although the salary was approved by the union
membership in the union bylaws, the members “had no way of knowing whether Titan’s
agreement to pay the union salaries came at the expense of lower salaries or benefits for
plant workers,” the court pointed out. “That is not to say that the payments were bribes or
backroom deals — there is no evidence of that kind. But the President has an incentive to
preserve his own salary and to make his generous salary appear cost-free to union
members by having it covered by Titan, rather than union dues. It is this conflict of
interest and diversion of employee wages to union leaders which Section 302(a) seeks to
address.”
No-docking clauses OK. The appeals court stressed, though, that its decision did not
address the legality of no-docking clauses, in which the employer agrees to permit shop
stewards to leave stop work for part of the day to engage in grievance-related union
business “without loss of time” (i.e. pay). Although the Third Circuit in Caterpillar found
no meaningful distinction between such provisions and the payment of salaries to union
officials doing full-time union work, the Seventh Circuit parted with its sister circuit on
this point as well.
Here, it looked to the Ninth Circuit, which had convincingly distinguished between the
two in Int’l Ass’n of Machinists & Aerospace Workers, Local Lodge 964 v. BF Goodrich
Aerospace Aerostructures Grp. That case held that the employer could legally pay the
union’s full-time chief shop steward because he was subject to the company’s control and
thus was an employee. But the Ninth Circuit had rejected the union’s argument that
paying the salary and benefits of a full-time union rep was permissible under a
contractual “no-docking” provision because such payments were authorized by NLRA
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Sec. 8(a)(2). The Ninth Circuit reconciled the seemingly disparate statutory provisions
(LMRA Sec. 302 and NLRA Sec. 8(a)(2)) by noting that the latter’s “without loss of
time” language was a “key linguistic signal” and that “if an employee’s only
responsibility is to represent union employees in the grievance process, no ‘working
hours’ could be ‘los[t] by his doing just that.”
The Ninth Circuit also expressly rejected the Third Circuit’s reasoning in Caterpillar that
there was no difference between a part-time no-docking provision and a full-time one,
finding it conceivable that Congress would want to treat these differently. “Quite simply,
the potential for corporate payments to undermine the independence of a union
representative may be considerably greater when the employee’s entire salary and
benefits are attributable to his conduct as a representative.” The Seventh Circuit agreed.
“Section 8(a)(2) permits no-docking provisions for employees and thus we read Section
302 as allowing the same. Nothing in the statutory language, however, permits full-time
pay for former employees — even if they are doing all of the same things an employee
might do part-time pursuant to a no docking provision.”
Because the arbitrator’s award ordering Titan to reinstate the salary payments to the
union officials would require the employer to violate the LMRA, the Seventh Circuit
vacated the decision as contrary to public policy.
Dissent: an important labor question. Dissenting from the majority’s decision “to
create a conflict with the Third Circuit… over the proper interpretation of section 302 of
the Labor Management Relations Act (LMRA),” and her colleagues’ rejection of en banc
consideration, Judge Wood noted the importance of the labor law question at hand of
“when an employer is entitled to pay money or any other thing of value to a union
representative who is a present or former employee.” She noted, in fact, that the Supreme
Court had granted cert in the Caterpillar case (although the dispute ultimately was settled
by the parties before the High Court ruled).
As to the merits of that dispute, Wood wrote that the majority here “adopted a position
that is inconsistent with the LMRA” and also with “a long line of Supreme Court
decisions instructing courts to accept the results of consensual arbitration, even if we
think those results are mistaken or ill-advised.” Further, she added, “looking particularly
to labor law, I see nothing in this arbitral result that is either inconsistent with section 302
of the LMRA or that commands the parties to take an illegal action. To the contrary, the
majority has upset the balance that Congress wrote into the statute, by engrafting its own
limitations onto the existing structure.
“The case is thus important both for what it does to arbitration, and for what it does to
labor law.”
The case number is 12-1152.
Attorneys: Joshua G. Vincent (Hinshaw & Culbertson) for Titan Tire Corp. David R. Jury
for United Steelworkers.
26
7th Cir: Trustees’ acceptance of benefits under national agreement constituted
ratification of agreement with arbitration clause
By Ronald Miller, J.D.
A union welfare fund that provided prescription benefits to members of a local union was
bound by the arbitration provisions contained in a national agreement, even though the
trustees of the fund never voted to accept the national agreement. In this instance, the
trustees of the local benefit fund knew, both directly and by imputation, that the fund was
receiving pricing, audit reports, and credits guaranteed only under the national agreement.
By knowing that the fund received the benefits of the national agreement and never
repudiating those benefits, the trustees ratified the national agreement (NECA-IBEW
Rockford Local Union 364 Health and Welfare Fund v A&A Drug Co dba Sav-Rx Prescription
Services, November 25, 2013, per curiam).
The union welfare fund provided health benefits to members of a local union of electrical
workers. The fund negotiated a local agreement with a pharmacy benefit provider under
which the pharmacy benefit provider reimbursed pharmacies for dispensing medication
and then invoiced the fund for some of the costs. A few months later, the pharmacy
benefit provider negotiated a different agreement with the national union of electrical
workers. The national agreement offered locals reduced charges and more services than
the local agreement. It also contained a mandatory arbitration clause.
Local unions and local trust funds could opt into the national agreement, but the fund’s
trustees never voted on the matter. Over the next eight years, however, the fund accepted
the prescription services, audits, pricing, and credits provided by the national agreement.
After an annual audit disclosed possible overcharges, the fund’s trustees and the
pharmacy benefit provider exchanged letters and, at the fund’s request, the provider
offered a $5,000 credit. Thereafter, the fund sued the pharmacy benefit provider for
invoicing the fund at rates not authorized by either the local or national agreement. The
prescription drug company contended that the national agreement governed so that the
dispute had to be arbitrated. Finding that the fund had accepted the benefits of the
national agreement and were thus bound by it, a district court granted the drug company’s
motion.
The sole issue was whether the fund bound itself to the national agreement. As a general
matter, a party may become bound to an unsigned contract, including one that contains an
arbitration clause, by its or its agent’s conduct. In this appeal, the Seventh Circuit
concluded that because the pharmacy benefit provider established that the fund knew that
it was accepting benefits under the national agreement, it therefore ratified that
agreement.
Actual authority. The trustees voted to approve the pharmacy benefit provider as its
benefit manager, but they never voted to approve or reject the national agreement.
Similarly, there was no record evidence that the trustees voted to grant actual authority to
anyone else to enter into the national agreement. Thus, no one at the fund with actual
authority entered into the national agreement.
27
Implied authority. Turning to the question of implied authority, the pharmacy benefit
provider argued that the chair of the trustees was bound to the national agreement when
he asked it to apply the national agreement’s better pricing to the fund. However, the
appeals court determined that the arrangement with the pharmacy benefit provider did not
appear to be everyday business for the fund. Moreover, the national agreement would
forego an important right — access to the courts to resolve disputes. Accordingly, the
record did not establish the chair had implied authority to bind the fund.
Similarly, the pharmacy benefit provider could not invoke apparent authority to bind the
fund either. Apparent authority arises when a principal “creates, by its words or conduct,
the reasonable impression in a third party that the agent has the authority to perform a
certain act on its behalf.” Here, there was no evidence that the trustees held the chair out
as having the authority to bind the fund to the national agreement.
Ratification of national agreement. On the other hand, a principal like the fund can
ratify a contract when the principal enjoys the benefits of the contract and does not
repudiate it. Ratification requires “that the principal have full knowledge of the facts and
the choice to either accept or reject the benefit of the transaction.” A trust’s “knowledge”
may be imputed from its employees or agents. Courts presume that when employees
obtain information while acting for the benefit of the corporation, they “report that
knowledge to the corporate principal.”
Here, the record supported finding ratification because, by imputation or direct
knowledge, the fund’s trustees knew two critical facts necessary for ratification. First,
they knew the terms of the local and national agreements and therefore their differences.
Second, the trustees knew that the fund was receiving the discounted prices, audits, and
credits provided under the national agreement. By knowing that the fund received the
benefits of the national agreement and never repudiating those benefits, the trustees
ratified the national agreement. Under these circumstances, the record supported binding
the fund to the national agreement and its arbitration provision. Therefore, the district
court’s judgment was affirmed.
The case number is 12-3070.
Attorneys: Peter J. Flowers (Meyers & Flowers) for NECA-IBEW Rockford Local Union
364 Health and Welfare Fund. Edward King Poor (Quarles & Brady) for A&A Drug
Company.
8th Cir.: Making exception to holiday pay rule was within employer’s discretion;
contrary arbitration award vacated
By Ronald Miller, J.D.
In a divided decision, the Eighth Circuit vacated an arbitration award upholding an
employee’s grievance that she was improperly denied holiday pay. The parties’ collective
bargaining agreement was unambiguous, the majority concluded, in granting the
employer discretion to make exceptions to the agreement’s holiday pay provision. Thus,
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the arbitrator exceeded the scope of his authority by considering testimony regarding the
discussions that took place during negotiations concerning the provision. Judge Smith
dissented (Reyco Granning, LLC v International Brotherhood of Teamsters, Local Union No 245,
November 15, 2013, Beam, A).
At issue here was a policy in a CBA providing that to receive holiday pay, an employee
must have worked a minimum of eight hours on the last regularly scheduled shift
workday prior to a holiday. There was an exception if an employee was less than 60
minutes tardy arriving to work.
After being denied holiday pay because she arrived 45 minutes late due to a flat tire on
her automobile, a union employee filed a grievance under the CBA. The employer denied
her holiday pay under the exception because, in its view, the employee’s attendance
record did not justify granting the exception. After the grievance was submitted to
arbitration, the arbitrator concluded the word “may” gave the employer some discretion
in granting the exception, but based on the parties’ negotiation history, the employer’s
discretion was not unlimited because the parties intended for the exception to apply to
“vehicle mechanical trouble, oversleeping, or car wrecks.” The arbitrator directed the
employer to pay the employee holiday pay under the exception, which the district court
upheld and granted summary judgment in favor of the union.
Grant of exception not mandatory. The arbitrator recognized that the crux of the issue
in the case is whether the use of the word may in the CBA was discretionary or
mandatory, agreed the appeals court. Here, the arbitrator concluded the word “may”
indicated the company held “some discretion” and that the language of the contract did
not make granting the exception mandatory. Yet without making any determination as to
the ambiguity of the relevant contract terms, the arbitrator went on to look at the history
of the negotiations and determined that the parties intended to allow the exception for
“vehicle mechanical trouble, oversleeping, or car wrecks.”
No ambiguity. However, the appeals court discerned no ambiguity in the contract
language at issue. The term “may” is unambiguous, providing the employer with
discretion in granting the holiday pay exception. When dealing with an unambiguous
term, where the plain text of the agreement is unmistakably clear, the arbitrator normally
need look no further but must give effect to the parties’ agreement. Thus, the court
concluded that the arbitrator exceeded his authority by considering testimony regarding
discussions that took place during the CBA negotiations.
Arbitrator’s interpretation. Under the arbitrator's interpretation of the provision at
issue, the employer had discretion in granting the exception, except for the instances
where the employee is late due to “vehicle mechanical trouble, oversleeping, or car
wrecks.” In those circumstances, under the arbitrator’s decision, the employer did not
have discretion, thereby rewriting the CBA. Consequently, the arbitrator was not
construing an ambiguous contract term but rather was imposing a new obligation on the
employer. This interpretation altered the plain language of the contract as written,
29
concluded the majority. Accordingly, the appeals court vacated the decision granting
summary judgment in favor of the union.
Dissent. Judge Smith would have affirmed the district court’s order, suggesting that the
arbitrator at least arguably construed the relevant provision of the contract. According to
the dissent, a fair reading of the arbitrator's decision was that he first determined that
“may” is an ambiguous term. He argued that this erroneous textual analysis did not
justify disregarding the decision of the arbitrator that was agreed upon by the parties to
resolve their dispute over holiday pay.
The case number is 13-1002.
Attorneys: Rick Eugene Temple (Law Offices of Rick E. Temple) for Reyco Granning
LLC. Michael E. Amash (Blake & Uhlig) for International Brotherhood of Teamsters,
Local Union No 245.
Board law judges weigh in on key labor issues
By Lisa Milam-Perez, J.D.
The NLRB’s administrative law judges have issued several rulings in recent weeks on
important issues of note, including employer restrictions on recording devices, mandatory
waivers of class arbitration and union rights, discharge for seeking unpaid wages, and the
effect of Noel Canning’s pendency on an employer’s duty to bargain.
Restriction on recording devices. In Whole Foods Market, Inc, law judge Steven Davis
rejected charges that the retailer’s restriction on the use of recording devices was an
unlawful restraint on employees’ protected Section 7 rights. The rule, set forth in the
company’s handbook, provides that: “It is a violation of Whole Foods Market policy to
record conversations with a tape recorder or other recording device (including a cell
phone or any electronic device) unless prior approval is received from your store or
facility leadership.”
“The purpose of this policy,” it goes on to note, “is to eliminate a chilling effect to the
expression of views that may exist when one person is concerned that his or her
conversation with another is being secretly recorded. This concern can inhibit
spontaneous and honest dialogue especially when sensitive or confidential matters are
being discussed. Violation of this policy will result in corrective action up to and
including discharge.”
Rejecting the General Counsel’s assertion that the provision was facially overbroad, the
ALJ noted that, “Making recordings in the workplace is not a protected right, but is
subject to an employer’s unquestioned right to make lawful rules regulating employee
conduct in its workplace.” The GC cited no cases in which the Board has found that
recording conversations in the workplace is an inherently protected right. Even if
recording a conversation were a protected right, the employer was entitled to make a
valid rule to regulate its workplace and in doing so, to prohibit such activity, the ALJ
30
reasoned. Moreover, the rule itself did not prohibit employees from engaging in
protected, concerted activities, or even speaking about them; it merely forbids recording
conversations or activities with a recording device. An employee remained free to speak
to other employees and engage in protected, concerted activities — just not to record
those conversations.
The General Counsel also contended the rule could reasonably be interpreted by
employees as preventing them from recording statements or conversations involving
activities permitted by Section 7, such as picketing outside the store, or would preclude
them from “using social media to communicate and share information regarding working
conditions through pictures and videos obtained at the workplace, such as employees
working without proper safety equipment or in hazardous conditions.” However, the ALJ
noted, “Section 7 of the Act protects organizational rights ... rather than particular means
by which employees may seek to communicate.”
Further, Whole Foods offered a “clear, logical and legitimate explanation” for why the
rule was promulgated (and there was no allegation that it was imposed in response to
union organizing activity). Its rationale for the restriction was set forth in the handbook
immediately above the rule itself, noting that the policy was adopted “in order to
encourage open communication, free exchange of ideas, spontaneous and honest dialogue
and an atmosphere of trust.” Specifically, it cited the company’s “town hall” meetings,
held at least once each year, where division leaders visit stores and meet with employees
without store management present. Employees often speak critically of their managers at
these “open forums,” the employer asserted, and the recording of such a meeting would
“absolutely chill the dynamic,” leaving workers leery to voice their concerns lest their
managers hear their remarks. (While store management is advised of the general nature of
the comments of the workers “in the aggregate,” the identities of employees who spoke
are not divulged.) These reasons were sound, the ALJ concluded, noting candor in
employee opinions was essential, and citing the important interests at stake for the
company in hearing employees speak forthrightly about their concerns. “It is clear that
the use of recording devices would impede free and open discussion among the members
of the Employer’s work force,” the ALJ wrote, and the prohibition was embedded in the
handbook in a context that clearly states its lawful purpose.
Finally, the ALJ rejected the GC’s contention that the rationale for the rule is undermined
by the fact that the company had surveillance cameras in place in the same areas where
the employee meetings are held. As the handbook clearly informed employees, those
cameras were there to protect customers and employees and to discourage theft, thereby
reassuring employees of the company’s legitimate business need in maintaining the
cameras. Thus, the complaint was dismissed.
Precluding class arbitration. In FAA Concord H, Inc, ALJ Eleanor Laws applied the
Board’s challenged D.R. Horton ruling to invalidate, on Sec. 8(a)(1) grounds, a
mandatory arbitration agreement that required employees to resolve employment-related
disputes exclusively through arbitration. The ALJ also found the employer enforced the
31
agreement in a manner that precluded class-wide (if not collective) resolution of such
disputes.
The employer required employees to sign a mandatory arbitration agreement (MAA) as a
condition of employment. The MAA compelled employees to submit to binding
arbitration of employment-related disputes. When a dispute arose over the company’s
alternative workweek schedule, the union claimed the employer violated the California
Labor Code and Business and Professions Code and sought unpaid overtime wages. The
union’s attorney made an initial demand to invoke the alternative dispute resolution
system and binding arbitration on behalf of bargaining unit employees. She informed the
employer the union’s intent to arbitrate claims on a classwide basis, and identified three
class representatives.
The employer’s attorney responded that class arbitration would be inappropriate under
the FAA because the arbitration agreement did not authorize class arbitration; however,
he offered to arbitrate the threshold issue of class arbitrability. Instead, the union attorney
said the employees would arbitrate their claims individually — 19 individual actions. The
employer then asked to consolidate the claims, but the union would only agree to do so if
the company provided a list of employees, notified them of the arbitration, and allowed
them to join their claims in the consolidated complaint. The employer didn’t respond, but
instead filed a motion to consolidate with an arbitrator. The three original class
representatives then sought arbitration on behalf of themselves and similarly situated
workers. An arbitrator granted the employer’s motion to dismiss the class allegations, and
the matter remained pending on a consolidated basis, with 19 plaintiffs.
While the MAA does not expressly restrict Section 7 activity, employees would
reasonably construe the MAA’s language to prohibit Section 7 activity, the ALJ found. It
is written with singular language, repeatedly referring to actions “between myself and the
Company,” she noted. “This singular language, with no reference to the ability to pursue
claims about working conditions jointly (other than through the Board’s procedures)
would lead an employee to read the MAA as applicable to individual employment
disputes.” Moreover, because the MAA states that all communications related to or
during arbitration proceedings are privileged, employees would reasonably construe the
MAA as prohibiting discussions with coworkers about employment disputes that are
subject to arbitration.
The ALJ rejected the employer’s assertion that its MAA was distinguishable from the
agreement found faulty in D.R. Horton because it incorporated the California Code of
Civil Procedure, which permits joinder of claims. But the MAA did not incorporate the
entire CCP, though; importantly, it did not expressly reference the CCP provision
addressing consolidation of arbitration claims. Nor did it reference the provision
applicable to joinder of civil court actions (although other CPP provision applicable to
civil court actions, such as rules of pleading and evidence, were specifically mentioned).
Finally, the MAA did not otherwise mention the word “joinder.” The absence of a direct
reference to joinder or consolidation thus rendered the MAA silent on the matter in the
32
eyes of the average worker. As such, “employees would reasonably construe the MAA as
permitting individual arbitration actions only.”
Given its effort to consolidate the separate individual arbitration actions, the employer
clearly was not utilizing the MAA to prohibit collective arbitrations. (Rather, it was the
union that opposed consolidation, insisting on either class action arbitration or separate
individual arbitrations.) That left the ALJ to determine, though, whether D.R. Horton
requires an employer to permit both class and collective claims in one forum or another.
It was an issue the Board was not forced to resolve in that case — the agreement in
question there barred both types of claims. Ultimately, she observed that the Board has
clearly found both class and collective claims are protected Section 7 activities, and so
cutting off the right to either would violate the Act. The employer raised an interesting
defense, arguing that collective actions are more accurately aligned with employees’
Section 7 right not to engage in concerted activities because employees who don’t wish to
participate need not opt out. But it failed “regardless of its merits,” the ALJ said, in light
of the Board’s stance.
Finally, the ALJ declined to entertain the employer’s assertion that D.R. Horton was
wrongly decided, noting she was, at least as yet, bound to follow it. For similar reasons,
the employer’s lack-of-quorum defense failed as well.
Unlawful new hire “quiz,” waiver. Law judge Melissa M. Olivero, in Prudential
Protective Services, LLC, ruled a security services company violated the Act by
administering a questionnaire to recently hired guards implying that they would be fired
for discussing negative company business or pay rate issues, and also by asking
employees to sign a waiver indicating their understanding that they do not have any rights
to which a client company’s employees might be entitled — including the right to union
protection.
The company’s questionnaire, administered during the orientation process for new
guards, includes a true/false questions which states, “If you discuss any negative
company business or pay rate issues with other officers, clients, or site employees you
will be terminated.” It was stipulated that the correct response was “true.” As such, it sent
a message to employees that they were barred from discussing wages or negative
company business under threat of discharge. To the extent that the rule prohibited
discussion of wages, it explicitly restricted employees’ Section 7 activity. By inclusion of
“negative company business,” it also implicitly barred employees from discussing their
managers or working conditions. Because the underlying rule implied by the true/false
question prohibits concerted activity, the employer violated the Act by administering the
questionnaire.
Newly hired guards also had to sign a waiver entitled, “Notice Regarding Exclusivity of
Employment,” ostensibly intended “to advise you of your legal right surrounding your
employment” with the security guard company. It stated that, while the guard services
one or more particular clients of the company, “you remain the sole employee of [the
security company]. At no time will you be considered an employee of client, despite
33
whether you receive directives from [Respondent] or the client.” It goes on to note that
the employees of the client company may be entitled to “union protection” and other
“rights” that the security guards hereby waive, “including the rights to wage increases, to
insurance, to the withholding of taxes, and to claim discrimination, unemployment, or
workers’ compensation.”
The language of the waiver “explicitly restricts employees from engaging in union
activity,” the ALJ found. Indeed, the waiver states that by signing it, “you acknowledge
that you DO NOT have any rights that client’s employees may be entitled, including
Union Protection.” The employer insisted (and tried to introduce parol evidence at trial to
prove) that its waiver merely sought to signify that the employee lacked an employment
relationship with the client companies. But nowhere did the waiver state that the guards
were waiving these rights only as they related to the client companies because they were
not the client’s employees. Rather, “the form plainly states that the employees are
waiving their right to union protection.” As such, it violated the Act.
Discharged for wage claims. A Chinese restaurant unlawfully discharged two delivery
workers who were seeking legal action against it for unpaid minimum wage and overtime
pay and for refusing to sign blank pay notices after the employer got wind of their wage
complaints, ALJ Michael A. Rosas ruled in East Village Grand Sichuan, Inc, dba Grand
Sichuan.
During their break periods, workers congregated once or twice a week on a restaurant
balcony, where they discussed their grievances about the job. The restaurant owner saw
the workers on the balcony but could not hear their conversation. One day, though, two of
the workers met with the owner at a nearby coffee shop to present their concerns,
including the fact that they had been underpaid for years. The owner acknowledged as
much, and offered to pay them several thousand dollars, representing about three years of
back pay, he said. However, the workers were owed six years’ worth of unpaid wages
and told him as much. The workers pondered the proposal nonetheless, but a few days
later, said they would take nothing less $50,000 to $70,000 in back wages. Their demand
was rebuffed; the owner told them to file their lawsuit.
Shortly thereafter, the owner met with all the restaurant’s delivery workers and
distributed blank Wage Theft Prevention Act (WTPA) notices and forms from the New
York Department of Labor, instructing them to sign and return. But the workers were
reluctant to sign a blank form, fearing the owner would insert false wage information
after they signed, shortchanging them. One of the workers who refused to sign the WTPA
form was fired. Noting that he had been a regular member of the balcony crowd, the
owner told another employee, “I don’t know what they talk about, so I let him go first.” A
second employee also was fired for his refusal to sign.
The ALJ found the restaurant violated the Act by firing the employees and issuing a
written warning to a third worker for discussing unpaid wages and pursuing possible
legal action. While the restaurant insisted it lawfully fired the workers for misconduct
and/or for refusing to sign the pay notices, the ALJ noted that “the concerted refusal of
34
employees to sign documents is protected activity; it is not insubordination.” Also, the
ALJ observed, there was no evidence that the employer ever issued a written warning to
the workers for such infractions. The only warning ever issued was prepared by the
restaurant’s litigation counsel, who had been hired to defend the FLSA claims.
Moreover, the owner’s statement to the employee that he had fired the coworker because
“he knew the delivery employees were up to something” was direct evidence that the
owner had knowledge of the workers’ protected activity. Also tipping him off: his
encounter with the workers who directly demanded a settlement.
Bargaining conditioned on Noel Canning. In Professional Transportation Inc, ALJ
William Nelson Cates held an employer violated Sec. 8(a)(5) when it conditioned
bargaining on the union’s agreement that, if a court of competent jurisdiction were to
hold the Board lacked a proper quorum at the time the union was certified, any contract
reached by the parties would be null and void, and the company would withdraw
recognition. The company’s dilatory tactics leading up to that point, including cancelling
seven previously scheduled bargaining sessions, also constituted an unlawful refusal to
bargain.
Months after the union had been certified, negotiations with PTI, the respondent
employer, still hadn’t meaningfully gotten underway. Finally, upon learning of the
successful challenge to the Board’s quorum in the D.C. Circuit and other circuits, the
employer told the union it needed time to “review the possible ramifications of Noel
Canning” and canceled a pending negotiating session. “PTI is not refusing to bargain at
reasonable times and places with Local 512. PTI simply wishes to better understand the
law in this complex situation as it moves forward.”
Next, the company agreed to bargain, but asserted that “If, prior to the time a CBA is
agreed to and ratified, a court of competent jurisdiction determines the NLRB lacked a
proper quorum at the time the Regional Director certified the bargaining unit,” the
company would stop negotiating and refuse to recognize the election result. Also, “If
after a contract is agreed to and ratified a court of competent jurisdiction determines the
NLRB lacked a proper quorum at the time the Regional Director certified the bargaining
unit, PTI will consider the contract as void and not recognize the union.” If the union
negotiator showed up at the bargaining session, the employer asserted, the union will, by
its conduct, have agreed to these terms.
The union rejected out of hand the company’s attempted “reservation of rights,” noting
there was a certified bargaining unit in place and that the employer had not raised any
objections to certification or bargaining and rejecting the notion that the pending quorum
dispute would nullify or decertify the bargaining unit. The union also asked to see “any
objections or positions you or your attorney has filed with the NLRB or any other
jurisdictional authority in this matter” and expressly stated it did not agree to the
employer’s stipulation. Upon doing so, the company’s lawyer said “there was no need in
proceeding forward.”
35
The company could not lawfully insist on the proposed conditional bargaining terms
without violating its duty to bargain in good faith, the ALJ ruled, concluding that the
employer was really just trying to challenge the regional director’s certification of the
union as the bargaining rep. However, the union had already been validly certified on
June 5, 2012, and there had been no final determination at that time that the Board lacked
a proper quorum. Thus, the certification and actions related thereto were binding on the
parties. “There is no merit to the argument that a party’s responsibilities under the Act are
somehow relieved or suspended, or that a party may insist on conditional bargaining,
while awaiting the outcome of pending litigation in the courts of appeals.” That reasoning
applied with equal force to cases before the Supreme Court, the ALJ added. Moreover,
even if Noel Canning were upheld by the High Court, the certification in question here, if
challenged, could simply be reaffirmed on remand.
At any rate, because the company never challenged the Regional Director’s certification
of the union previously, but rather began negotiating with it, the company through its
actions had voluntarily recognized the union as the bargaining representative of the unit
employees. What’s more, the employer had never challenged the conduct surrounding the
representation election, nor the outcome of the underlying election.
Ala. Sup. Ct.: State law prohibits payroll deductions for political activities of unions
By Ronald Miller, J.D.
On questions certified from the Eleventh Circuit, the Alabama Supreme Court held that a
state law prohibiting payroll deductions for unions to be used for political activities
prohibited only the use of state mechanisms to make payments to political action
committees, and was not meant to prohibit members from making payments to those
organizations by other means (State Superintendent of Education v Alabama Education
Association, October 25, 2013, Parker, T).
The state high court also took an expansive view of “political activity,” so that the law
was read to prohibit more than just “electioneering activities” on behalf of or in
opposition to candidates for elected offices. Chief Justice Moore filed a partial dissent.
Subject to certain conditions, Sec. 36-1-4.3 of the Alabama Code provides that the
comptroller may make deductions from the salary of a state employee upon the
employee’s request. Essentially, dues deductions for unions had to be authorized on an
annual basis. On July 1, 2010, the comptroller implemented a new policy regarding salary
deductions. The comptroller stopped making salary deductions designated for the
political action committees of several union; however, deductions continued to be made
for the payment of union dues. As a result of the change, the Alabama Education
Association (AEA) inquired whether the new policy on salary deductions was to be
applied to employees who had contributions deducted for its benefit. A portion of those
deductions benefited the AEA’s political action committee. Because the comptroller
could not ascertain what portion of the salary deductions were passed to the political
action committee, he ceased all salary deductions designated for the AEA.
36
The comptroller based these changes in the manner of making salary deductions on his
interpretation of Sec. 36-12-61 and Sec. 17-17-5. In 2010, the legislature amended Sec.
17-17-5 to provide that no payroll deductions may be made by any state, county, city,
school board or other governmental agency for contributions that are to be used for
political activities. In February 2011, the AEA and its political action committee filed a
complaint in federal court challenging the constitutionality of the 2010 law. The district
court enjoined enforcement of the new law. The state defendants appealed to the Eleventh
Circuit. A second suit challenging the law was filed by the political action committee of
firefighters against state and local government officials also challenging the
constitutionality of the law, and a second injunction was issued. Appeal to the Eleventh
Circuit was also made in that case.
The Eleventh Circuit certified to the Alabama Supreme Court two questions regarding the
scope of the law: (1) Did the law cover all contributions by state employees to political
organizations, and (2) did the term political activity refer only to electioneering
activities?
Meaning of “or otherwise” language disputed. Before the Alabama Supreme Court,
the unions argued that the “or otherwise” language in the Act is overbroad and that it can
be read to prohibit a state employee from paying dues to organizations such as the AEA
or from making donations to a political action committee, even if the state is not involved
in facilitating those payments in any manner. The state countered that the Act may be
read to prohibit only state facilitation of payments to organizations such as the AEA and
state facilitation of donations to a political-action committee, and that the members of
such organizations are free to make payments or donations by private means.
Viewing the language in question in the context of the entire Act, the Alabama high court
concluded that the Act is meant to prohibit only the use of state mechanisms to support
political organizations. The court observed that groups wishing to utilize payroll
deductions must certify that they are not engaging in “political activities.” Moreover, the
language of Sec. 17-17-5 was clear in showing that the government must be involved in
arranging for the payment of the state employee’s membership dues for the act to apply;
therefore, private forms of payment are not prohibited. The court also found it
noteworthy that the penalties for violating the act apply only to the organization to which
the dues are made and only when the dues are facilitated by the state.
Additionally, the court observed that its prior decisions showed that the phrase “or
otherwise” should not be interpreted as creating an essentially unlimited prohibition
against state employees’ arranging for payments to organizations engaged in political
activity. Consequently, the high court found that the term “or otherwise” refers not to any
manner of payment to organizations engaged in political activity but, instead, to any
manner of payment to such organizations that is in the nature of a salary deduction.
Political activity. Next, the Alabama court turned to the second question certified by the
Eleventh Circuit: Does the term “political activity” refer only to electioneering activities?
The state high court answered that question in the negative. Before being able to define
37
“political activity” under Sec. 17-17-5(b)(1), the court first had to discern the meaning of
the term “electioneering.” The dictionary defines electioneering activities to include only
those activities that involve working on behalf of or in opposition to candidates for
elected office.
The unions argued that the term “political activity” was unconstitutionality vague and
impermissibly expanded the reach of the act. The state, however, asserted that the term
“political activity” as used in the act is limited to working on behalf of or in opposition to
a candidate for elected office. Here, the court noted that the unions correctly observed
that the word “political” has a rather expansive definition in its legal usage. Since the
term “political activity” precedes the list of seven categories of activities set forth in Sec.
17-17-5(b)(1)a.-g., it embraces more than electioneering.
By their plain language, subparagraphs a. and c. define political activity, within the
context of “political communication,” as including, but not limited to, communications
that mention the name of a political candidate. Thus, these two subparagraphs cannot be
read as limiting political activity to only electioneering activities. Similarly, subparagraph
e., which defines political activity as “phone calls for any political purpose” goes beyond
electioneering activities. Additionally, subparagraph f., which defines political activity as
“distributing political literature of any type also goes beyond the reach of electioneering
activities. Consequently, the Alabama high court concluded that the term “political
activity” was not limited to activity on behalf of or in opposition to candidates for elected
offices.
Partial dissent. Chief Justice Moore, joined by Justice Bolin, filed a separate opinion in
which he dissented from the majority’s expansive definition of “political activity” to
include activities beyond electioneering activity on behalf of or in opposition of
candidates for elected offices. The dissent argued that the only reasonable interpretation
of the term “political activity” as used in Sec. 17-17-5, in keeping with its usage in the
rest of the code, referred only to electioneering activity. Thus, he would have answered
the second question certified by the Eleventh Circuit in the negative.
The case number is 1110413.
Attorneys: James W. Davis, Office of Attorney General, for Superintendent of Education,
State of Alabama. Sam Heldman (The Gardner Firm) and Annary Cheatham (Cheatham
& Associates) for Alabama Education Association.
Neb. Sup. Ct.: Union never requested bargaining; can’t claim employer’s unilateral
change to vacation policy unlawful
By Joy P. Waltemath, J.D.
After ample notice that a school district intended to change its vacation accrual policy, a
union local’s failure to provide input on those changes, as invited, or to request
negotiations on the changes even while it negotiated and signed new CBAs with the
district, waived its right to negotiate on what was otherwise a mandatory bargaining
38
subject (SEIU Local 266 v Douglas County School District 001, November 1, 2013,
Wright, J). The Nebraska Supreme Court accordingly affirmed an order of the state
Commission of Industrial Relations finding the school district had not committed a
prohibited practice.
At trial before the CIR, the parties presented differing accounts of how much the district
involved Local 226 in the development of the new vacation accrual policy. Based on the
evidence, the CIR found that the district had given “sufficient notice” of the proposed
change such that Local 226 had an obligation to “make a timely request to bargain” but
failed to negotiate to impasse on the matter. It concluded that Local 226 had failed to
prove the district committed a prohibited practice under Sec. 48-824(1).
Vacation is mandatory subject of bargaining. According to the Nebraska Supreme
court, this appeal raised one fundamental question: Whether the district committed a
prohibited practice by changing the vacation accrual policy in its “Policies and
Regulations” without negotiating with Local 226. Because vacation is a mandatory
subject of bargaining, the district could implement unilateral changes concerning its
vacation only under certain conditions. Under the CBAs with Local 226, the district had
the authority to make changes to the policies and regulations but could not enforce those
changes against Local 226 until after July 31, 2011 — when the CBAs had expired. Both
parties agreed that the district did not implement the changes until after the CBAs expired
but, explained the court, the district was still required to negotiate regarding the new
vacation accrual policy because it related to a mandatory subject.
No formal negotiations on the new vacation accrual policy took place before the new
policy was implemented, the parties agreed, and they also agreed that they had not in fact
negotiated to impasse. So unless Local 226 waived its right to negotiate, reasoned the
court, the district had committed a prohibited practice and a per se violation of its duty to
bargain in good faith by implementing the new vacation accrual policy without first
engaging in negotiations with the union.
Impasse. Although Local 226 claimed that the CIR implied it was not required to
negotiate to impasse before filing a petition before the CIR, the court disagreed. Instead,
considering the CIR’s order in its entirety, it stated that the district provided notice to
Local 226 of the proposed changes to the vacation accrual policy, at which point Local
226 became obligated to request negotiations if it objected to the changes. Before getting
to the point at which bargaining to impasse was an issue, Local 226 had to request
negotiations, and it did not. Consequently, any discussion of negotiating to impasse was
extraneous to the CIR’s ultimate conclusion.
Waiver. Citing extensive NLRA precedent, the court pointed out that a union can waive
its right to bargain by failing to request bargaining or to otherwise inform the employer
that the union wishes to bargain. Applying that standard of waiver to the facts here, the
court concluded that after receiving notice of the district’s intended changes to the
vacation accrual policy, Local 226 failed to make a timely request to bargain over the
39
changes, constituting a clear and unmistakable waiver of Local 226’s right to bargain on
what would otherwise be a mandatory subject of bargaining.
Notice. Giving weight to the CIR’s determination on conflicting evidence, the court
found that the district notified Local 226 that the board of education was considering
making changes to the vacation accrual policy, in which employees would accrue
vacation over the course of a year rather than all at once at the start of a school year. The
provision in the new policy allowing employees to take up to five days advance vacation
was explicitly added to address concerns raised by the unions.Further, the parties held
two meetings with Local 226 to advise the Local of the changes the district was going to
make. Although Local 226 claimed the policy was presented as “nonnegotiable” the
union was allowed to give “feedback” that was later incorporated into the new policy.
Further, letters sent to employees on three occasions informing them of the new vacation
accrual policy all were submitted to Local 226 for review prior to being sent.
No request to bargain. Perhaps most damning to the union’s position was that it had
numerous opportunities to express its concerns about the new vacation accrual policy
while negotiating with the district about the CBAs for the 2011-12 school year, meeting
for no less than 15 times from when Local 226 was informed of the proposed changes
until the changes were implemented. But Local 226 did not request negotiations over the
new vacation accrual policy; instead, said the court, it consistently passed over the
opportunity to do so. Further, after discussing only advance vacation, the union did not
protest the new policy at the board of education meeting before it was adopted. Less than
two months before the policy was to go into effect, Local 226 did send a letter to the
district alleging that the new vacation accrual policy was a prohibited practice and asking
the district to not implement it. When the district responded within a week stating it was
open “to working with Local 226 to address any concerns about the practical application
of the revised policy,” the union did not respond.
Moreover, it took an additional seven months for the union to file petitions with the CIR
alleging that the district’s policy implementation was a prohibited practice. In fact, Local
226 admitted it did not make any substantive proposals regarding vacation accrual during
negotiations of the CBAs for the 2011-12 school year. Instead, it entered new CBAs with
the district explicitly incorporating the new vacation accrual policy. Agreeing with the
CIR that the union’s position — that the district considered the vacation accrual policy
nonnegotiable — was not supported by the evidence, the court affirmed the CIR order
that no prohibited practice was committed.
The case number is S-13-009.
Attorneys: Timothy S. Dowd (Dowd, Howard & Corrigan) for SEIU Local 266. David J.
Kramer (Baird Holm) for Douglas County School District 001.
40
Hot Topics in WAGES HOURS & FMLA:
Court hears argument in donning and doffing case, releases oral argument schedule
By Pamela Wolf, J.D.
On Monday, November 4, the U.S. Supreme Court heard oral arguments in Sandifer v U.S.
Steel (Dkt No 12-417), a case that asks the court to determine that meaning of “changing
clothes” for purposes of Sec. 203 (o) of the FLSA. Under this provision, employees’
donning and doffing activities may be exempt from compensable time under the express
terms of, or custom or practice under, a bona fide collective bargaining agreement. But
what exactly are the sort of “clothes” to which Sec. 203 (o) is inapplicable and, thus, the
donning and doffing of which cannot be made exempt?
The stickiness of the issue in Sandifer is illustrated by this early colloquy between
plaintiffs’ Attorney Eric Schnapper and Justice Samuel Alito regarding the “clothing” at
issue, which includes fire retardant jackets and pants: “This is one of the aspects of your
argument that seems really puzzling to me. I don't know when a human being first got the
idea of putting on clothing. I think it was one of the main reasons, probably the main
reason, was for protection. It's for protection against the cold, it's for protection against
the sun. It's for protection against — against thorns. So you want us to hold that items
that are worn for purposes of protection are not clothing?”
Responding to Justice Alito, Schnapper said: “No, Your Honor. We've been — we've
tried to be quite specific about that. We distinguish between items that are designed and
worn to protect from a workplace hazard. And the court of appeals argued that everything
is, in a sense, protective. That is not the standard that we propose. Workplace hazards are
different. And in ordinary usage, when things are being used for that kind of protection,
they are typically described in other terms.”
The case below. Granting a petition filed by a class of some 800 current and former
workers employed at a Gary, Indiana, U.S. Steel plant, the Court agreed to resolve a key
circuit conflict regarding the scope of this provision. The employees contend that the
Seventh Circuit’s decision below conflicted with the First Circuit’s holding in Tum v Barber
Foods, Inc and, more importantly, with the High Court’s decision in IBP, Inc v Alvarez.
Hourly workers at U.S. Steel’s Gary Works plant had filed an FLSA collective action
alleging they were unlawfully denied pay for the time they spent putting on and taking
off their work clothes — fire retardant jackets and pants and steel-toed boots (as well as
safety goggles, ear plugs, hard hats, and other protective items not usually described as
clothes) — and going to their work stations and back again at the end of the day. The
Seventh Circuit held that because the applicable CBA did not require compensation for
donning and doffing activities, U.S. Steel did not have to pay workers for such time. The
Seventh Circuit’s ruling was in accord with the Fourth, Fifth, and Eleventh Circuits (the
Ninth Circuit was the lone outlier).
41
The employees had argued to no avail that Sec. 203(o) was inapplicable because their
“clothes” were not clothes within the meaning of the Act, but rather safety equipment.
The appeals court concluded that the required work gear was both clothing and personal
protective equipment, reasoning that it would be absurd to exclude all work clothing that
had a protective function from the reach of this provision.
The High Court also released its oral argument schedule for the session beginning January
13, 2004.
Oral argument schedule. The schedule released by the Court on Monday includes these
slots in January 2014 for oral argument of cases currently on the radar of labor and
employment law practitioners:

NLRB v Noel Canning (Dkt No 12-1281) — January 13: The Court will determine
whether President Obama’s controversial recess appointments to the NLRB were
constitutionally valid. The justices will review a decision by the D.C. Circuit
invalidating a Board ruling against employer Noel Canning, holding that the
agency lacked a quorum because the three “recess” appointments to the Board
were unconstitutional.

United States v Quality Stores Inc. (Dkt No 12-1408) — January 14: Here, the Sixth
Circuit held that payments made by Quality Stores to its employees upon ending
their employment involuntarily due to business cessation constituted supplemental
unemployment compensation benefits (SUB payments) that were not taxable as
wages under the Federal Insurance Contributions Act (FICA), affirming
judgment. The question to be addressed by the High Court is “Whether severance
payments made to employees whose employment was involuntarily terminated
are taxable under the Federal Insurance Contributions Act, 26 U.S.C. 3101 et
seq.”

Harris v Quinn (Dkt No 11-681) — January 21: Assisted by the National Right to
Work Foundation, a group of Medicaid home-based personal care providers filed
a class-action federal suit against Illinois Governor Pat Quinn and Illinois SEIU
and AFSCME locals over an executive order that designated 20,000 providers as
public employees for collective bargaining purposes. As such, a CBA that
required the attendants to pay an agency fee to a union did not violate the First
Amendment, the Seventh Circuit held. Two issues are raised for review: (1)
Whether a state may, consistent with the First and Fourteenth Amendments to the
United States Constitution, compel personal care providers to accept and
financially support a private organization as their exclusive representative to
petition the state for greater reimbursements from its Medicaid programs; and (2)
whether the lower court erred in holding that the claims of certain home care
attendants were not ripe for judicial review.
Two labor and employment law cases also of interest to labor and employment
practitioners are scheduled for oral argument this month. In Lawson v FMR LLC (Dkt No
42
12-3),
to be argued on November 12, the Court will determine whether an employee of a
privately-held contractor or subcontractor of a public company is protected from
retaliation under Section 806 of the Sarbanes-Oxley Act (SOX) (18 USC Sec. 1514A). In
Unite Here Local 355 v Mulhall (Dkt No 12-99), slated for argument on November 13, the
Court faces the question of exactly what is a “thing of value” for purposes of the Labor
Management Relations Act’s ant-bribery provisions.
Yelp facing class action by contributors who contend their “employer” is required
to pay them wages
By Pamela L. Wolf, J.D.
In a lawsuit that may ultimately define the outer boundaries of FLSA wage provisions as
they apply to those who toil for companies without compensation in wages, a group of
Yelp contributors has filed a class-action complaint under FLSA Section 216(b) against
the online media company and weblog network, asserting claims of misclassification and
unpaid wages, quantum meruit, and unjust enrichment.
According to the complaint, “Yelp earns its income by selling advertising on its site, the
content of which is created free-of-wages by hordes of solicited posters, in violation of
the “Federal Labor Standard Act.” The plaintiffs challenge Yelp’s “policies and practices
of refusing to pay wages to its workers by designating them variously as ‘reviewers’ or
‘Yelpers’ or ‘independent contractors’ or ‘interns’ or ‘volunteers’ or ‘contributors’ even
though they are performing vital work that inures to the benefit of Yelp’s various
business enterprises.” The plaintiffs say that Yelp would not exist, nor would it take in
the “enormous returns” it does without “its domination and control over non-wage
writers.”
Plaintiffs’ “work.” What did the plaintiffs do for Yelp? They “each worked a substantial
number of hours for [Yelp] over a number of years,” without being paid a single penny
for their work. “The work they performed — writing, researching, editing, lodging
reviews, upgrading prior reviews, and generally promoting the site — is central to
[Yelp’s] business model as a publisher,” the complaint states.
Business model. The plaintiffs contend that Yelp’s business model is “predicated entirely
on the exploitation of Plaintiffs’ work product in order for the company and its owners to
earn approximately $220 million annually. Its success is dependent upon the efforts of
hordes of non-wage-paid reviewers and its ability to use those reviews as ready-made
advertising-content to advertise businesses on their websites.”
According to the complaint, Yelp’s “practice of classifying employees as ‘reviewers’ or
‘Yelpers’ or ‘Elites’ or ‘independent contractors’ or ‘interns’ or ‘volunteers’ or
‘contributors’ to avoid paying wages is prohibited by federal law, which requires
employers to pay all workers who provide material benefit to their employer, at least the
minimum wage.”
43
Management and control. By virtue of its “management and control” over the nature of
the wages and work “of its writers,” the plaintiffs contend that Yelp is an “employer”
under federal labor law.
What sort of “management and control” are the plaintiffs referring to? According to the
complaint, “Yelp urges its non-wage-paid writers to increase the volume of their
production with such challenges as ‘100 Reviews in 100 Days’, their pay being liquor,
food, badges, trinkets, and titles.” The company’s promoters purportedly “instruct the
non-paid writers where to post their work product,” and when writers fail to follow up on
Yelp requests, “they are corrected and counseled to move their work to a directed
location.” The writers are also allegedly directed “to write more reviews at a faster pace if
in [Yelp’s] opinion its non-wage-paid writer production is declining.”
Among other things, the plaintiffs also point to Yelp’s exercise of its “right to fire any
worker at any time, with or without cause, with or without warning, with or without
explanation or offering any recourse or formal appeal rights.” At least two of the named
plaintiffs were purportedly “fired” by Yelp, with their badges and licenses revoked, “their
status and reputation sanctimoniously stripped away,” and “their extensive work product
deleted from the system with no recourse or ability to recover it.”
One contributor’s story. One plaintiff allegedly has written some 1,100 reviews for
Yelp, attracting 5,000 “followers,” the maximum number possible. She purportedly had a
“waiting list” of at least 100 individuals who wanted to become her “followers.” She was
allegedly awarded “the prestigious ‘First To Review’ and ‘Review Of The Day honors.”
For five years, Yelp designated her “Elite” reviewer, according to the complaint. To
maintain that status, she purportedly “was often directed to write more reviews if in
Yelp’s opinion her production seemed to slack off.”
And then she was “fired” from her position “with no warning, a flimsy explanation, and
no opportunity for recourse or appeal rights,” the complaint states. “Her license to write
reviews was revoked; the awards she had attained were taken away; and her reviews were
removed from the website, and she has been refused access to her own writings.”
Now that she has been “fired,” the plaintiff presumably no longer can avail herself of “a
system of cult-like rewards and disciplines to motivate [] non-wage-paid writers to labor
without wages or expense reimbursement, in violation of equitable principles and the
FLSA, by offering such rewards as trinkets, badges, titles, praise, social promotion, free
liquor, free food, and free promotional Yelp attire, such as red panties with ‘Make Me
Yelp!’ stamped across its bottom.”
The plaintiff will also miss out on the award and public recognition that are purportedly
offered on a regular basis for activities such as “being the first to review a new business;
frequently checking in with specific businesses; and for writing a certain number of
reviews within a given time-frame.” Yelp apparently also holds “highly-anticipated”
parties for its “Elite Squad,” the members of which are “selected invitees based on the
quality and quantity of their reviews.”
44
The motivational system also allegedly includes bestowal of titles on prolific reviewers,
such as “Duke” or “Duchess,” at the lower end, “Baron” or “Baroness” (for those with
the most “Dukedoms” in their neighborhood), and at the high end, “King” or “Queen” for
the person who has the most “Dukedoms” in a particular city. “These titles are used to
generate and maintain interest and productivity of its writers in lieu of monetary
compensation, as required by the FLSA,” according to the complaint.
It will be interesting to see how the Yelp contributors’ complaint will impact FLSA
litigation, if at all, in the wake of the many battles being waged by unpaid interns,
volunteers, and others.
Essential federal workers file collective action for FLSA timeliness violations due to
shutdown
By Pamela Wolf, J.D.
A group of federal employees who were required to work during the federal government
shutdown because they were deemed “essential employees” or “excepted employees”
(essential workers) have filed a lawsuit against the United States for its failure to timely
pay wages accrued during a five-day period during the shutdown. The plaintiffs, who are
four exempt and one non-exempt employees at the DOJ’s Bureau of Prisons, assert FLSA
timely wage payment and overtime claims as well as interest, attorneys’ fees and
reimbursement of expenses under the Back Pay Act.
According to the plaintiffs, essential workers were required during the shutdown to report
to work and perform their usual duties, but were not compensated for work performed on
or after October 1 until the shutdown ended and the next scheduled payday. Scheduled
paydays were October 11, 15 or 17, the plaintiffs allege, for pay period 19, which
included work performed during the bi-weekly period from September 22 through
October 5. At the filing of their complaint on October 24, none of the plaintiffs had yet
been paid for the work they performed during the five-day period at issue: September 29
through October 5. They were scheduled to be paid for that work on or about October 25
or during the following week.
The plaintiffs estimate that there were 1.3 million employees designated essential
workers during the shutdown who were timely paid at most for only two days of the
affected work-week; none were paid for any hours worked during the five-day shutdown
period at issue. As a result of the failure to pay the plaintiffs and the other essential
workers for hours worked during that five-day period on their regularly scheduled
paydays, the federal government violated the FLSA, according to the complaint.
The plaintiffs are seeking liquidated damages for all essential workers in an amount equal
to what they should have been paid to satisfy the FLSA minimum wage requirements on
their regularly scheduled payday. The complaint also seeks liquidated damages for nonexempt essential workers in an amount equal to the overtime they should have been paid,
again on their regularly scheduled payday.
45
As to exempt essential workers, the plaintiffs contend that by failing to pay them for
work performed during those five days on their regularly scheduled payday, the
government failed to pay them on a salary basis. The complaint thus seeks monetary
damages in the amount of the difference between what they were paid for overtime hours
worked and the one-and-a-half times their regular rate they are owed pursuant to the
FLSA, as well as liquidated damages for that amount.
The complaint also seeks, if liquidated damages are not awarded, payment of interest
from their scheduled payday to the date of judgments for amounts not paid in violation of
the FLSA, as well as attorneys’ fees and reimbursement of expenses under the Back Pay
Act (5 USC Sec. 5596).
The plaintiffs filed their suit in the Court of Federal Claims; the case number is 1:13-cv00834-SGB.
Attorneys: Heidi R. Burakiewicz (Mehri & Skalet) for Donald Martin, Jr., Patricia A.
Manbeck, Jeff Roberts, Jose Rojas and Randall L. Sumner.
Internships on the rise since recession; majority of interns are paid, SHRM survey
finds
By Lisa Milam-Perez, J.D.
Despite reports of high-profile employers like publisher Conde Nast canceling their
internship programs in response to a wave of wage-hour suits by unpaid interns, the
litigation and heightened media scrutiny have not deterred most organizations from
bringing interns on board. Since the start of the recession, 44 percent of organizations
have increased the number of internships they offer, according to new research from the
Society for Human Resource Management (SHRM) based on a survey of 359 randomly
selected HR professionals at organizations of all sizes throughout the country.
The fact that these student-workers were brought in during tough times would seem to
raise a red flag; the DOL criteria for determining whether interns are bona fide trainees
(and not misnamed employees) caution that interns should not displace regular
employees. Notably, though, more than three-quarters of organizations responding to
SHRM’s Intern Survey pay their interns — sidestepping altogether the “trainee vs.
employee” question at the heart of the FLSA suits — and approximately three-fourths of
paid interns received an hourly rate higher the minimum wage, according to respondents.
The survey revealed that 34 percent of organizations offered more internships this year
compared with 2012, while 58 percent had the same number of internships. Seventy-one
percent of organizations said they hired or have plans to hire interns this year. Fortyseven percent of organizations reported employing two to five interns this year, and 16
percent employed six to 10 interns.
Of those organizations that have internships, 69 percent reported that HR provides
guidelines on the type of work that interns can engage in. Sixty percent conduct criminal
46
background checks on all of their internship candidates, while 12 percent conduct such
checks only on selected candidates.
Most companies (89 percent) reported offering internships to undergraduate students,
while one-half of organizations gave internships to graduate students and 17 percent
extended such opportunities to high-school students. Almost all (93 percent) of survey
respondents indicated that they consider internships to be relevant work experience, and
approximately fourth-fifths of organizations have offered a full-time position to an intern
after the completion of the internship.
Harkin speaks out on Fair Minimum Wage Act legislation
Just a few days after U.S. Senator Tom Harkin (D-IA), Chairman of the Senate Health,
Education, Labor, and Pensions (HELP) Committee, introduced The Fair Minimum Wage
Act of 2013 in the Senate, he released a statement in support OF the legislation. The bill,
which was introduced by Congressman George Miller (D-CA) in the House, would
increase the minimum wage to $10.10 in three steps and provide for automatic annual
increases linked to changes in the cost of living. It would also gradually raise the
minimum wage for tipped workers, currently $2.13 an hour, for the first time in more
than 20 years — to 70 percent of the regular minimum wage.
“President Obama sent a key message in his State of the Union: raising the minimum
wage is a crucial factor to strengthening the middle class and growing our economy.
Low-wage jobs and income inequality are only increasing and families are struggling just
to put food on the table. Put simply, this legislation would result in raises for 30 million
American workers. It also has broad support: eighty percent of Americans support this
raise, including majorities across political parties.
“Our legislation would also give a boost to our economy as workers spend their raises in
their local stores and communities, increasing GDP by nearly $33 billion and generating
140,000 new jobs over the course of three years. Raising the minimum wage to $10.10 is
not just a popular idea or the right thing to do for working families — it is also the smart
thing to do for our economy. I thank the President for his support in this effort.”
According to Harkin, a Hart Research poll released in July found that 80 percent of
Americans support the Harkin-Miller minimum wage proposal. Ninety-two percent of
Democrats, 80 percent of independents, and 62 percent of Republicans support the
Harkin-Miller proposal, and three-quarters of Americans also say that raising the
minimum wage should be an important priority for Congress to address over the next
year, including 38 percent who say it is very important.
Senate subcommittee examines escalating problem of payroll fraud
By Pamela Wolf, J.D.
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On November 12, the Senate HELP Committee’s Subcommittee on Employment and
Workplace Safety held a hearing on the issue of payroll fraud — a burgeoning practice,
particularly in labor-intensive and low-wage industries, such as construction, day labor,
home healthcare, and trucking.
In her written remarks to the subcommittee, Cathy Ruckelshaus, a General Counsel of the
National Employment Law Project, said that the non-profit organization has seen lowwage workers in the economy’s growth sectors being forced to sign contracts saying they
are “independent contractors” as a condition of getting a job; employers changing
employees into independent contractors, franchisees, or other non-employee labels to cut
costs; and workers being paid off the books completely, with no reporting or withholding
of the basic payroll taxes or insurance.
According to Ruckelshaus, who also testified before the HELP Committee in June 2010,
home care workers, construction laborers and drywallers, cable installers, delivery
persons, and even restaurant servers are being called non-employees by their employers.
“They are not running their own businesses by any definition,” she said. “They want to
work and they too often accept whatever arrangement gets them a job. These same
occupations with high rates of independent contractor misclassification are among the
jobs with the highest numbers of workplace violations.”
What is the motivation fueling these growing practices? “Companies looking to cut
payroll costs to compete for work have become increasingly emboldened in the ways
they seek to skirt basic labor standards, insurance, and tax laws that apply to employers,”
Ruckelshaus said. “They call employees ‘independent contractors,’ even when the worker
is not running his own business; they require employees to form a limited liability
corporation or franchise company-of-one as a condition of getting a job, and they pay
workers off the books, without any payroll treatment at all.” Workers are sometimes
made to sign boilerplate contracts that attest to independent contractor status, even
though the functional relationships do not reflect true independence.
Such practices are referred to as “payroll fraud” because they are intentional aimed at
evading the law, Rukelshaus explained. “Companies do this to avoid having to report and
pay FICA and FUTA taxes, evade labor organizing, skirt baseline labor standards like
minimum wage and overtime, discrimination protections, health and safety and workers
compensation, and unemployment insurance.” They also construct these arrangements
because they permit under-bidding of competitors in labor-intensive sectors by saving as
much as 30 percent of payroll and related costs, Rukelshaus said.
Costs to state and federal governments. As to lost revenues to state and federal
governments as a result of payroll fraud, Rukelshaus pointed to several studies, including
a 2009 Government Accountability Office report estimating that independent contractor
misclassification cost federal revenues $2.72 billion in 2006. She also cited a 2013 bill in
the California legislature finding that an estimated $9 billion of corporate, personal, and
sales and use taxes goes uncollected in that state each year, with unreported and
underreported economic activity responsible for the vast majority of that total.
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Effective legislation needed. Reviewing reform efforts at the state level, Rukelshaus
concluded that “state reforms, including the state task forces and executive branch
activity, are an important first step and have brought real results to the state treasuries.
There is however a continued need for federal leadership and oversight, as nearly half of
the states have no payroll fraud provisions in place, and because the practices continue
largely unabated in many sectors.”
On the federal front, no legislation has yet been enacted to counter this growing problem,
Rukelshaus said, but she pointed to the DOL’s multi-agency task force that was launched
to combat payroll fraud as an important step. She also noted that IRS has launched its
Voluntary Worker Classification Settlement Program to permit employers to resolve past
worker misclassification problems by voluntarily reclassifying their workers
prospectively and making a minimal payment that covers past payroll tax obligations.
Rukelshaus also cited proposed legislation designed to address the problem:

The Payroll Fraud Prevention Act: Introduced in April 2011 by Senator
Sharrod Brown (D-Ohio),the bill would amend FLSA recordkeeping requirements
to mandate that employers notify all employees and non-employees who perform
services for remuneration of their status; establish a presumption that an
individual is an employee under the FLSA if the employer violates the notice
requirements; and provide for civil penalties. It would also amend the Social
Security Act to require state unemployment insurance programs to implement
investigative procedures and establish penalties for misclassification; require the
DOL to measure state performance in this independent contractor
misclassification enforcement when conducting unemployment compensation tax
audits; require information-sharing within the DOL on possible independent
contractor abuses under the FLSA and authorize sharing such information with
the IRS; and require that the Wage & Hour Division’s targeted audits include
industries with frequent incidence of employee misclassification.

Fair Playing Field Act (to close the IRS Safe Harbor). Under existing law, an
employer found by the IRS to have misclassified its workers as independent
contractors can have all employment tax obligations waived via the “Safe harbor”
at Section 530 of the Internal Revenue Act of 1978, which also prevents the IRS
from requiring the employer to reclassify the workers as employees in the future.
To get the safe harbor, a business can assert, among other factors, its belief that a
significant segment of its industry treated workers as independent contractors,
thereby perpetuating industry-wide noncompliance with the law. The loophole
prevents the IRS from collecting back payroll taxes and issuing regulations or
guidance to clarify the agency’s analysis of independent contractor practices for
purposes of payroll taxes, and has thus been a huge bar to effective enforcement
against independent contractor abuses. To close this loophole, Senator John Kerry
introduced the Fair Playing Field Act of 2012 (S. 2145), which would amend the
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Internal Revenue Code to modify the safe harbor rules and permit the IRS to issue
guidance on the subject.
In addition, Rukelshaus recommended that Congress support more federal criminal
prosecutions for egregious violators of federal criminal laws, including the failure to
report currency transactions, mail and wire fraud, and tax fraud. She also urged that the
IRS extend 1099 transaction reporting requirements to any payments made to
incorporated businesses as a means of helping the agency track down the companies that
received those payments but did not pay taxes. Finally, comprehensive immigration
reform, according to Rukelshaus, would enable more immigrants to come forward and
inquire about and protect their rights.
The Subcommittee on Employment and Workplace Safety also received testimony from
Matt Anderson, a residential construction trim installer, in Michigan; Danny Odom, Chief
Operations Officer and Vice President of Odom Construction Systems, Inc., in Knoxville,
Tennessee; and Chris MacKrell, President and COO of Custom Courier Solutions in
Rochester, New York.
Spa to pay back wages and liquidated damages to misclassified massage therapists
A federal judge in Seattle has order Redmond Herbal Spas LLC, dba Asian Miracle
Massage, and its owner to pay 23 massage therapists $67,768 in back wages and an equal
amount in liquidated damages, for a total of $135,536, following an investigation
conducted by the DOL’s Wage and Hour Division (WHD). Investigators found Redmond
Herbal Spas had misclassified employees who worked as massage therapists as
independent contractors. The WHD said they were typically paid on a commission-only
basis for the 54 to 74 hours a week they worked — and FLSA minimum wage and
overtime violations resulted.
The employees worked at a spa in Redmond, Washington, under the name of Redmond
Herbal Spa, as well as at locations in Northgate Mall in Seattle and Everett Mall in
Everett, which offers massage services under the name of Asian Miracle Massage. The
Redmond and Everett locations have closed, according to the WHD.
Seattle District Judge Thomas Zilly entered an order requiring the defendants to install
time clocks at each location, retain a third-party payroll vendor, supply a copy of the
payroll to the WHD on a quarterly basis, and distribute a notice of the employee’s FLSA
rights. The order requesting summary judgment granted by the court was filed by the
Regional Solicitor’s Office in Seattle. In accordance with a memorandum of
understanding between the state of Washington and the DOL, the case was referred to
state agencies for further action.
The misclassification of employees as independent contractors presents a serious problem
for affected employees, employers and the economy, the WHD noted. Misclassified
employees are often denied access to critical benefits and protections, such as family and
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medical leave, overtime, minimum wage, and unemployment insurance, to which they
are entitled.
Finding that Southern Cal screen printer willfully violated FLSA leads to damages
in excess of $171,000
Fashion Graphics LLC has paid $151,337 in back wages and liquidated damages to 185
employees after an investigation by the DOL’s Wage and Hour Division found the
company willfully violated the FLSA’s overtime and record-keeping provisions. An
additional $19,712 in civil money penalties were assessed due to the willful nature of the
violations. A consent judgment has been entered in the U.S. District Court, Central
District of California.
The department’s investigation established that the employer recorded employees’
overtime hours on a separate payroll, using aliases for former employees, family
members, and unidentified people to conceal true identities. Overtime hours were then
paid at employees’ regular, straight-time hourly rates, in unrecorded cash, rather than at
an overtime premium of one and one-half times those rates, as required by the FLSA.
Employees routinely worked more than 40 hours per week.
“When an employer willfully uses deceptive practices that prevent employees from
collecting wages owed under the FLSA, we must respond,” said Ken Morrison, director
of the San Diego District Office, which conducted the investigation. “This violation
affected worker paychecks and, in turn, their quality of life. This investigation sends a
clear message to this business and other employers that disregarding the basic rights of
vulnerable, low-wage workers will cost you more than if you’d paid them properly in the
first place.”
Whenever goods are produced in violation of the FLSA’s minimum wage, overtime or
child labor provisions, the department can restrain those goods from being shipped via
interstate commerce. This action is commonly referred to as invoking the “hot goods”
provision and is an enforcement tool that the department uses to ensure the nation’s
workers receive fair pay and treatment. In this case, Fashion Graphics voluntarily agreed
not to ship the goods produced after receiving the department’s notice that the goods
were “hot.” The company supplies products to retailers, including Macy’s Inc., Wal-Mart
Stores Inc., Kohl’s, and Hot Topic, and specializes in screen printing for T-shirts and
other garments.
In addition to enjoining the employer from future violations, the consent judgment in this
case requires Fashion Graphics to hire an independent third party to conduct annual
training on the FLSA for all of its managers and payroll personnel. It also requires the
employer to provide notice of this judgment to all employees, along with written notice
of their rights under the FLSA.
Agency recovers nearly $84,000 in back overtime wages, damages for 19 demolition
and construction workers
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The DOL’s Wage and Hour Division recovered $83,734 in back wages and liquidated
damages for 19 employees of Den-Man Contractors Inc., after finding that the Warren,
Michigan, demolition and construction company violated the FLSA. Specifically, the
company failed to pay workers overtime at a rate of one and one-half times their hourly
rates for all hours worked beyond 40 in a week and to maintain accurate payroll records.
“Investigators found that many of the employees were paid for overtime hours in cash
off-the-books at the employees’ straight-time hourly rates, a clear violation of the Fair
Labor Standards Act,” said Timolin Mitchell, district director for the Wage and Hour
Division in Detroit. “The department is committed to ensuring that workers are paid
fairly, in accordance with federal labor laws. We are especially vigilant in areas, such as
construction, where these violations are common. No employer should derive an unfair
advantage and make financial gains by exploiting their employees.”
A total of $41,867 was due in back wages and an equal amount was assessed in damages.
The company has completed the back wages and damages payments totaling $83,734 to
the affected employees. Den-Men Contractors has signed a settlement agreement that
requires future compliance with the FLSA, documentation of employees’ daily and
weekly work hours and payment of the legally required overtime.
New online resource to provide guidance on short-term comp or work-sharing
programs
A new online resource will provide guidance and information to states interested in
developing or improving short-time compensation programs, also known as worksharing, the DOL announced on November 14. The STC program is designed to avert
employee layoffs for businesses faced with a temporary slowdown in business activity.
The online resources, which will be available to state workforce agencies, state
policymakers, and the general public, are located at: https://stc.workforce3one.org.
The STC program is an alternative to layoffs for employers faced with a reduction in
available work. Employers can reduce work hours for a group of workers rather than
laying off one or more workers. Employees affected by a reduction of hours can collect a
percentage of their unemployment benefits to replace a portion of their lost wages. This is
a win-win situation both for employers and employees. Employees' jobs — and benefits
— are preserved while participating in an STC program, and employers get to maintain
their skilled and trained workforce without having to rehire and retrain new workers
when business activity increases.
The new website provides helpful tools that can be used to expand STC education and
outreach to states and the public. The website includes guidance and model legislation for
states interested in developing an STC program. The site also offers a compendium of
state practices, outreach efforts, operational tools and vignettes from STC participants
(employers and employees) who have benefitted from the program.
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Bill would amend FLSA with respect to misclassification
A bill that would amend the FLSA ensures that employees are not misclassified as
nonemployees was introduced into the U.S. Senate earlier this week. Sen. Robert Casey
(D-Pa) introduced S.B. 1637, known as the “Payroll Fraud Prevention Act of 2013.” The
bill, cosponsored by several other senators, was introduced on the heels of a hearing on
payroll fraud, chaired by Casey, who is the Chair of the Senate Subcommittee on
Employment and Workplace Safety. A similar bill was introduced in the Senate in April,
2011.
According to Casey, the Payroll Fraud Prevention Act would protect workers from being
misclassified as independent contractors, thereby ensuring access to safeguards like fair
labor standards, health and safety protections, and unemployment and workers’
compensation benefits. The Act would also prohibit employers from using
misclassification to avoid paying their fair share of taxes.
Among other things, the bill provides that the FLSA would be amended to add language
defining a non-employee as an individual who has engaged in the course of the trade or
business of the person, for the performance of labor or service, and is not an employee of
the person. The bill also includes a provision defining a “covered employee” when used
with respect to an employer or other person. Moreover, the bill provides language that
requires employers to properly classify individuals as employees or nonemployees and to
provide them with certain notices.
“Companies should not be able to cheat their employees out of fair compensation by
deliberately misclassifying them,” said Senator Casey “This unscrupulous practice
disadvantages law-abiding companies, impacts hard working middle class families and
hurts our economy. That is why I have introduced the Payroll Fraud Prevention Act to
help ensure all workers are accurately classified,” said Casey in a written statement.
Wage Hour Division to join forces with New York state labor agency on employee
misclassification enforcement
Officials from the U.S. Department of Labor and the New York State Labor Department
signed memoranda of understanding on Monday, November 18, pledging to work jointly
to prevent the misclassification of employees as independent contractors or as any other
nonemployee status, the agencies announced. Officials from the office of New York State
Attorney General Eric T. Schneiderman also signed on. According to a press release, the
collaboration represents “a new effort on the part of the three agencies to work together
to protect the rights of employees and level the playing field for responsible employers by
reducing the practice of misclassification.”
“These memoranda of understanding send a clear message that we are standing together
with the State of New York to protect workers and responsible employers and ensure
everyone has the opportunity to succeed,” said Laura Fortman, principal deputy
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administrator of the Wage and Hour Division. “Misclassification deprives workers of
rightfully-earned wages and undercuts law-abiding businesses.”
“This partnership with the U.S. Department of Labor will help New York continue our
work of aggressively enforcing the labor laws and ensuring a level playing field for
employers who play by the rules.Sharing information and cooperating in investigations
will help protect the rights of New York's workforce, and will lead to more effective
enforcement and greater compliance by employers,” said Terri Gerstein, the New York
attorney general’s labor bureau chief. The state attorney general’s office brings select
cases to enforce the state's labor laws, including both civil and criminal cases.
With today’s agreements, New York becomes the latest state to partner with the DOL on
misclassification enforcement efforts. Memoranda of understanding with state
government agencies arose as part of the department’s Misclassification Initiative, with the
goal of preventing, detecting and remedying employee misclassification. California,
Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts,
Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements.
In the last two years since implementation of these agreements with other states, the
DOL’s Wage-Hour Division has secured over $18.2 million in back wages for more than
19,000 workers where the primary reason for FLSA minimum wage or overtime
violations was that the workers were not treated or classified as employees. This
represents a 97 percent increase in back wages since the onset of such joint efforts.
“Working with the states is an important tool in ending misclassification,” said M.
Patricia Smith, U.S. Solicitor of Labor. “These collaborations allow us to better
coordinate and ensure compliance with both federal and state laws alike.”
Janitorial services company will pay $273,000-plus in minimum wage and overtime
back wages
Following a DOL Wage and Hour Division (WHD) investigation that found FLSA
minimum wage, overtime, and recordkeeping violations, Soji Services Inc., dba Metro
Clean Commercial Building Services, has agreed to pay $273,132 in minimum wage and
overtime back wages to 266 janitors. The company provides commercial janitorial
services to corporations in the Houston area, including Chase Bank, Amegy Bank, the
Marriott Hotel, and the Houston Independent School District.
The investigation found that Metro Clean Commercial Building Services paid one
employee below the federal minimum wage of $7.25 per hour when it failed to pay for all
hours worked. The WHD also said that some employees worked an average of 65 hours a
week and were paid straight-time wages, rather than receiving overtime pay at one and ahalf times their regular rates of pay for hours worked beyond 40 in a workweek, as
required by the FLSA. In addition, the employer failed to maintain accurate records.
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The company has agreed to fully comply with the FLSA in the future, according to the
WHD.
“This employer took advantage of workers for its own monetary gain,” said Cynthia
Watson, the Wage and Hour Division’s regional administrator for the Southwest. Watson
also urged that companies contracting for these types of services be aware of a
contractor’s labor compliance history when selecting service providers. “Whether it’s the
people landscaping your property, providing security services or cleaning your building,
we all have a responsibility to ensure that an honest day’s work receives an honest day’s
pay,” she said.
Hotel franchisee to pay $123,678 in back wages, liquidated damages to housekeepers
who averaged less than $5 an hour
The DOL’s Wage and Hour Division (WHD) announced on November 19 that a Days
Inn franchisee in San Bernardino, California, has agreed to pay $123,678 in back wages
and liquidated damages to 16 housekeeping employees after the agency’s investigation
found the franchisee had violated FLSA minimum wage, overtime and recordkeeping
provisions. The actual hourly wage for these employees averaged less than $5 an hour,
well below the current federal minimum wage of $7.25 per hour, according to
investigators. The Days Inn brand is part of Wyndham Hotel Group LLC, which is a
subsidiary of Wyndham Worldwide Corp.
Franchisee Sahkar Hospitality Corp. also failed to pay the overtime premium required for
hours worked beyond 40 per week, the WHD said. Employees typically worked more
than eight hours of overtime per week during the hotel’s busiest periods. The employer
also violated FLSA recordkeeping requirements by not maintaining records of the hours
employees worked or recording the portion of their wages paid in cash.
Although Sahkar Hospitality showed payment of $8 per hour to employees on its payroll,
it actually paid $4 per room cleaned, without regard to the number of hours worked,
according to the WHD. Amounts paid on the payroll were subtracted from the amounts
earned on a per-room basis, and the remainder, if any, was purportedly unrecorded and
paid in cash. The agency assessed a civil money penalty of $4,928 due to the willful
nature of the violations.
In addition to paying back wages, liquidated damages and penalties, Sahkar Hospitality
signed a settlement agreement enjoining the company from violating the FLSA in the
future. The employer also agreed to hire a third-party human resources firm to direct and
monitor its future compliance with labor laws.
“Evasive practices like those identified by this investigation deprive vulnerable workers
of an honest wage, as guaranteed by the FLSA,” said Daniel Pasquil, director of the
WHD’s West Covina District Office. “Failure to pay required minimum wage and
overtime have been identified as typical violations in the hotel and motel industry.”
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Suit seeks unpaid wages, damages for 15 workers at Ohio home health care
company
The DOL has filed a complaint in federal court seeking back wages and liquidated
damages for 15 workers of Mentor, Ohio-based Nightingale Home Support & Care Inc,
following an investigation conducted by the Wage and Hour Division (WHD) that found
FLSA minimum wage, overtime, and recordkeeping provisions. The company also
purportedly misclassified some workers as independent contractors instead of employees.
The suit names the owner of Nightingale Home Support & Care and the corporation
itself. The agency’s investigation found violations at all divisions of the company. The
owner operates the home health care company as well as S Generation Center, an adult
day care; Nsong Management, which operates John Henry Salon; and Home Health Care
Supply Outlet, which sells home health care equipment, the WHD said in a statement on
November 20.
The owner misclassified current and former employees as independent contractors and
willfully failed to pay them for all hours worked, according to the lawsuit. Interns were
allegedly paid a flat salary, which resulted in them earning less than minimum wage for
all hours worked per week. Two employees were also purportedly paid on a commissiononly basis, which resulted in them not earning minimum wage.
Additional minimum wage violations resulted from the employer’s failure to provide
final paychecks on regularly scheduled pay days and to make good on paychecks
returned for insufficient funds, the WHD said. Nightingale Home Support & Care also
allegedly required employees to pay the fees for background checks, drug screenings, and
physicals as part of the employment process.
According to the WHD, overtime violations resulted from not including time employees
spent traveling between job sites as work time, and failing to combine hours worked in
different divisions of the company in the same workweek to determine if overtime was
due. The employer also paid some nonexempt employees flat salaries, without regard to
the number of hours they had worked, the agency said. Some employees were
purportedly misclassified by the firm as independent contractors, and were not paid an
overtime premium for hours worked beyond 40 in a workweek. Moreover, the employer
allegedly failed to keep proper records of all hours worked.
The case is Perez v Nightingale Home Support & Care Inc; the case number is 1:13-cv02563.
New law shifts wage claims adjustments for federally contracted workers from
GAO to DOL
On Thursday, November 21, President Obama signed into law the Streamlining Claims
Processing for Federal Contractor Employees Act, H.R. 2747, which transfers statutory
authority from the Government Accountability Office (GAO) to the DOL for processing
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and disbursing back wages owed to employees of federal contractors in violation of
certain federal wage requirements.
Under the Davis-Bacon Act, federally contracted workers must be paid the “local
prevailing wage” on all government projects, the bill’s sponsors noted. The Contract
Work Hours and Safety Standards Act requires federally contracted workers to be paid
one and a half times their basic rate of pay for hours worked in excess of 40 hours.
Although the DOL is responsible for enforcing these laws, an outdated policy puts the
GAO in charge of paying those workers who did not receive the appropriate wage. Since
it no longer provides this service in other areas of the federal government, the GAO
requested this authority be moved to the appropriate enforcement agency, according to
the sponsors of H.R. 2747.
The newly enacted law thus moves responsibility for wage claims adjustments for
federally contracted workers from the GAO to the DOL.
California resort and spa agrees to pay 53 employees back wages for unpaid
overtime
The hotel Miracle Springs Resort and Spa in Desert Hot Springs, California, will pay
$59,790 in back wages to 53 employees, including maintenance and housekeeping
employees, following an investigation by the DOL’s Wage and Hour Division (WHD)
that found FLSA overtime violations.
Investigators concluded that Miracle Springs Resort and Spa and the nearby Desert Hot
Springs Spa and Hotel were under the same management, but that they recorded
employee hours on separate payrolls, the WHD said in a statement last week. When the
affected employees’ hours were combined, the hours often totaled more than 40 per
week, entitling the employees to overtime compensation for hours worked beyond 40 per
week, according to the agency. The employer also purportedly deducted automatically a
30-minute lunch break from some employees’ work hours, even when they did not take
the break.
In addition to paying the full back wages to the affected employees, the employer has
agreed to maintain future FLSA compliance by combining the hours for employees who
work at both hotel locations, according to the WHD. The employer will also deduct lunch
breaks only when employees take the 30-minute break.
The WHD has been targeting the hotel and motel industry, which employs many lowwage workers who, due to a lack of knowledge of the law or an unwillingness to exercise
their rights, are vulnerable to disparate treatment and labor violations. The division said it
is concentrating its resources on identifying and remedying violations, informing workers
of their rights, and providing compliance assistance to employers.
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LEADING CASE NEWS:
2d Cir.: Reopening settled case to enter judgment against defaulting defendants did
not restart time to appeal
By Lorene D. Park, J.D.
Finding that an order approving the settlement of an FLSA overtime suit and awarding an
employee attorneys’ fees did not require the entry of a separate document under Rule
58(a) and that the subsequent reopening of the case and entry of judgment against the
defaulting defendants did not reset the Rule 4(a) period for filing a notice of appeal, a
divided Second Circuit panel dismissed the defendants’ appeal of the attorneys’ fees
award as untimely (Perez v AC Roosevelt Food Corp, November 6, 2013, Straub, C).
The employee filed suit seeking overtime wages in October 2010. The defendants
initially failed to appear and default was entered January 18, 2011. Class certification was
granted in May and notice was sent. The defendants appeared on October 31, 2011 and
the default was vacated. The class was voluntarily decertified the next February and the
parties reached settlement in June, 2012. On August 13, 2012, the district court approved
the settlement, granted the employee’s motion for attorneys’ fees, and entered an order
stating that the clerk was “respectfully directed to close the case.” The defendants failed
to pay and on November 8, 2012, the employee filed to reopen the case and have
judgment entered. The motion was granted and judgment was entered on January 7, 2013.
The defendants’ notice of appeal was filed February 6, 2013. They challenged only the
lower court’s decision on the employee’s motion for attorneys’ fees.
Rule 4. Under Fed. R. Civ. P. 4(a)(1)(A) a notice of appeal “must be filed . . . within 30
days after entry of the judgment or order appealed from.” Under Rule 4(a)(7), entry of a
judgment or order for purposes of this rule depends upon whether Rule 58(a) requires a
separate document. Where a separate document is not required, the judgment or order is
considered to have been entered “when the judgment or order is entered in the civil
docket.” Under Rule 58, a separate document is not required for an order disposing of a
motion for attorneys’ fees under Rule 54. In the appellate court’s view, “[i]t follows that
the order setting the amount of attorneys’ fees was entered for purposes of Rule 4 when it
was ‘entered in the civil docket.’”
Appeal untimely. Here, the order setting the amount of attorneys’ fees was entered on
August 13, 2012, explained the appeals court. Thus, the 30 days provided for by Rule
4(a)(1)(A) had long since run when the defendants filed their notice of appeal in February
2013. The defendants argued that the 30-day period should be measured from the January
7, 2013 judgment. However, a new or amended judgment only renews the 30-day limit if
it “changes matters of substance, or resolves a genuine ambiguity” in the previous
judgment. “No issue of substance — indeed, no issue of triviality — differs between the
two orders. It follows that the entry of judgment did not reset Defendants’ time to appeal,
that the appeal was untimely, and that we lack jurisdiction,” explained the appellate court.
Consequently, the appeal was dismissed.
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Dissent. Judge Jacobs dissented on the issue of timeliness, reasoning that the August
2012 order approving settlement and granting attorneys’ fees did not meet the “separate
document” requirement of Rule 58. In Judge Jacob’s view, the award of attorneys’ fees is
usually made after an entry of judgment on the merits, and in that respect is like other
exceptions to the separate-document rule. But here, the fee award predated the entry of
final judgment and an immediate appeal would have raised the issue of prematurity.
Thus, the 30-day period should have run from the January 7, 2013 entry of final
judgment. Although finding the appeal timely, Judge Jacobs would have affirmed the
district court’s award of attorneys’ fees on the merits because the employee was the
prevailing party under the FLSA.
The case number is 13-497-cv.
Attorneys: LaDonna M. Lusher (Virginia & Ambinder) for Miguel G. Perez. Andrew
Squire (Law Office of Andrew Squire) for AC Roosevelt Food Corp.
2d Cir.: Starbucks’ shift supervisors eligible to participate in tip pools under New
York Labor Law
By Ronald Miller, J.D.
Finding that Starbucks’ policy of allowing shift supervisors to participate in store tip
pools did not violate New York law, the Second Circuit in an unpublished decision
affirmed a district court’s grant of summary judgment to Starbucks against an employee
class action. Previously, the appeals court certified to the New York Court of Appeals
questions regarding what types of employees are eligible to participate in a tip-pooling
arrangement, and what factors the court should consider in determining eligibility.
Having received the state high court’s answers to those questions, the Second Circuit
determined that, because shift supervisors did not have a “substantial” degree of
“managerial responsibility,” they were akin to general wait staff and entitled to
participate in the tip pool (Barenboim v Starbucks Corp, November 21, 2013, per curiam).
New York Labor Law Section 196-d states that “[n]o employer or his agent or an officer
or agent of any corporation, or any other person shall demand or accept, directly or
indirectly, any part of the gratuities, received by an employee, or retain any part of a
gratuity or of any charge purported to be a gratuity for an employee.” It further states that
Sec. 196-d shall not be construed as affecting “the sharing of tips by a waiter with a
busboy or similar employee.” In response to the Second Circuit’s certified questions, the
state high court rejected an employer’s argument that Sec. 196-d bars any employee with
“even the slightest degree of supervisory responsibility” from sharing tips. Rather, the
state court concluded that under Sec. 196-d, “employer-mandated tip splitting should be
limited to employees who, like waiters and busboys, are ordinarily engaged in personal
customer service, a rule that comports with the expectations of the reasonable customer.”
Thus, an employee whose personal service to patrons is a principal or regular part of his
or her duties may participate in an employer-mandated tip allocation arrangement under
Sec. 196-d, even if that employee possesses limited supervisory responsibilities. The state
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court concluded that “the line should be drawn at meaningful or significant authority or
control over subordinates,” including the ability to discipline subordinates, assist in
performance evaluations or participate in the process of hiring or terminating employees,
as well as the creation of employee work schedules.
In this case, it was undisputed that Starbucks’s shift supervisors spent a majority of their
time performing the same duties as baristas and were primarily responsible for serving
food and beverages to customers. While the shift supervisors had some supervisory
responsibilities, and were authorized to open and close stores, to change cash register
tills, and deposit money in the bank, the limited nature of their supervisory duties did not
establish the “meaningful or significant authority or control over subordinates”
contemplated by Sec. 196-d.
Accordingly, the Second Circuit concluded that Sec. 196-d permitted shift supervisors to
participate in Starbucks’s tip pool.
The case number is 10-4912-cv.
Attorneys: Shannon Liss-Riordan (Litchten & Liss-Riordan) and Daniel Maimon
Kirschenbaum (Joseph, Herzfeld, Hester & Kirschenbaum) for Jeana Barenboim. Daniel
L. Nash (Akin Gump) for Starbucks Corp.
5th Cir.: Dismissal of employees’ wage claims as sanction for discovery violations
affirmed
By Ronald Miller, J.D.
The Fifth Circuit affirmed a district court’s grant of summary judgment to Citgo against
claims by console supervisors at a refinery that they were misclassified as exempt from
the overtime requirements of the FLSA. Many of the employees’ claims were dismissed
as a sanction for failing to comply with discovery orders, and the remaining three
plaintiffs were barred from testifying about damages because they failed to provide the
employer with an estimate of their damages. However, the appeals court reversed the
lower court’s reduction of taxable costs find that a reduction based on the comparative
financial strength of the parties abused the trial court’s discretion as a matter of law.
Judge Dennis filed a partial dissent in which he argued that it was well within the district
court’s discretion to reduce the award of costs (Moore v Citgo Refining and Chemicals Co,
LP, November 12, 2013, Smith, J).
Console supervisors at a Citgo refinery filed suit alleging that the company misclassified
them as exempt from the overtime pay requirements of the FLSA. Citgo served the
plaintiffs with requests for discovery and interrogatories. It alleged that their responses
were deficient, and the court entered a discovery order requiring the plaintiffs to produce
certain documents and respond to interrogatories. Again, Citgo complained of the
plaintiffs’ continued non-compliance, whereupon the court entered a second discovery
order, and warned the plaintiffs that if they were found to have violated the order to
preserve their notes and/or documents, their claims would be dismissed. Following two
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evidentiary hearings, the court determined that 17 plaintiffs had failed to participate in
discovery, failed to properly supplement responses, and failed to preserve documents.
Thus, their claims were dismissed as a discovery sanction.
Citgo moved for summary judgment on the merits, contending that the remaining
plaintiffs were exempt from the FLSA’s overtime requirements. However, the court did
not rule on the summary judgment motion before dismissing four additional plaintiffs for
discovery violations. Specifically, some of the plaintiffs failed to preserve emails, or
disclose passwords. Among those who disclosed email passwords, they failed to preserve
the contents of their inbox. With respect to the remaining three plaintiffs, the court
prevented them from testifying at trial about damages, because after a year of discovery,
not one had provided Citgo with any calculation or estimation of the damages he was
seeking. Because the employees had no way of proving their damages, the district court
granted Citgo’s motion for summary judgment on damages. The court thereafter,
dismissed the employee’s claims. Although Citgo submitted a bill of costs for more than
$50,000, the court awarded only $5,000, based in part on a finding of the company’s
“enormous wealth” and the plaintiff’s “limited resources.” This appeal ensued.
On appeal, the employees challenged the district court’s ruling entering discovery
sanctions against 24 plaintiffs, and dismissing the remaining three plaintiffs after
preventing them from testifying about damages. Citgo asserted that the district court
erred in reducing its cost award.
Discovery sanctions. The Fifth Circuit noted that FRCP 37(b)(A)(v) expressly
contemplates dismissal as a sanction, and the district court’s discretion under that
provision is broad. Thus, the question before the appeals court was whether the lower
court abused its discretion in dismissing the plaintiffs’ claims. Several factors must be
present before a district court may dismiss a case as a sanction for violating a discovery
orders: (1) “the refusal to comply results from willfulness or bad faith and is
accompanied by a clear record of delay or contumacious conduct;” (2) the violation of the
discovery order must be attributable to the client instead of the attorney, (3) the violating
party’s misconduct “must substantially prejudice the opposing party;” and (4) a less
drastic sanction could not substantially achieve the desired deterrent effect.
In this instance, the district court made specific findings that each dismissed plaintiff
failed to preserve documents. Moreover, the court inferred willfulness from their conduct,
because the plaintiffs were aware of its rulings but nevertheless failed to conduct
themselves in accordance with them. This failure evidenced a blatant disregard for the
judicial process. The court did not abuse its discretion by refusing to credit the plaintiffs’
claims that their disobedience was grounded in confusion or sincere misunderstanding.
Also rejected was the plaintiffs’ contention that their failure to preserve handwritten
noted and personal emails did not substantially prejudice Citgo. The district court
specifically found that the “emails go directly to two of Defendant’s defenses,” thus, the
prejudice finding was not clearly erroneous. Notwithstanding the severity of the sanction,
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the appeals court found that on this record there was no showing of an abuse of
discretion.
Damages ruling. The district court subsequently barred the final three plaintiffs from
testifying about damages. Here, the appeals court observed that an order barring plaintiffs
from testifying about damages is a sanction that is expressly permitted by Rule
37(b)(2)(A)(ii). Whether the district court abused its discretion in deploying it is
determined by examining “(1) the importance of the witnesses’ testimony; (2) the
prejudice to the opposing party of allowing the witnesses to testify; (3) the possibility of
curing such prejudice by granting a continuance; and (4) the explanation, if any, for the
party’s failure to comply with the discovery order.”
The district court found that there was no good explanation for the plaintiffs’ delay in
providing damages calculations and that allowing testimony without discovery would
prejudice Citgo. After over a year of discovery, not one plaintiff had provided Citgo with
any calculation or estimation of damages. Thus, the appeals court concluded that the
relevant factors weighed in favor of a finding that the district court did not abuse its
discretion.
Reduction in costs. Rule 54(d)(1) provides that “unless a federal statute, the [Federal
Rules], or a court order provides otherwise, costs—other than attorney’s fees—should be
allowed to the prevailing party.” “Because the Rule authorizes the district court to deny
the award, we review that exercise of authority for abuse of discretion.” Although it is
undisputed that Citgo is the prevailing party, the district court reduced Citgo’s cost award
based on (1) a finding of plaintiffs’ good faith, (2) Citgo’s “enormous wealth,” and (3)
“Plaintiffs[’] limited resources.”
The Fifth Circuit ruled that the district court erred as a matter of law in relying on Citgo’s
“enormous wealth” — or the comparative wealth of the parties — as a basis for reducing
the cost award. The plain language of Rule 54(d) does not contemplate a court basing
awards on a comparison of the parties’ financial strengths. As a practical matter, the
approach adopted by the district court would be impermissibly punitive by preventing
profitable corporations such as Citgo from recovering costs when litigating against
individuals acting in good faith.
The case number is 12-41175.
Attorneys: Gregg M. Rosenberg (Rosenberg & Sprovach) for Steve Moore. Stanley
Weiner (Jones Day) and Ralph F. Meyer (Royston, Rayzor, Vickery & Williams) for
Citgo Refining and Chemicals Co LP.
9th Cir.: H-2A employer subject to both H-2A, FLSA expense reimbursement rules;
Mexican farmworkers’ suit to recoup expenses revived
By Lisa Milam-Perez, J.D.
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Rejecting the notion that applying the general FLSA regulation for reimbursement of
travel expenses on top of the specific H-2A rule would render the latter superfluous, the
Ninth Circuit revived a claim for immigration and travel expenses brought by H-2A
workers whose expenses in procuring employment and traveling to the United States
dropped their pay below the minimum wage (Rivera Rivera v Peri & Sons Farms, Inc,
November 13, 2013, O’Scannlain, D).
Expenses incurred. Peri & Sons Farms, an agricultural employer, faced a lawsuit
brought by 24 foreign workers it hired to cultivate and harvest onions. The farmworkers
were employed in the U.S. pursuant to the DOL’s H-2A program. They had incurred
expenses related to their employment, including the cost of obtaining H-2A visas from
the U.S. consulate in Mexico and the costs of lodging in Hermosillo, Sonora, where the
consulate was located. Upon entering the country, they had to pay to obtain a Form I-94
from USCIS. En route, they incurred travel expenses of more than $400, and at least $100
in traveling from the employer’s Nevada farm back to Mexico. Some of the farmworkers
also paid a hiring or recruitment fee of between $100 and $500 to current Peri & Sons
employees in order to be considered for employment. And, once on the job, they
purchased protective gloves, essential for the performance of their jobs, at a cost of at
least $10 per week.
The farmworkers claimed that these expenses were primarily for the employer’s benefit,
but that the company did not properly reimburse them. They filed suit, alleging that Peri
& Sons violated the FLSA by failing to reimburse them during their first week of
employment for the travel and immigration expenses. The district court rejected the
FLSA claims, finding that 29 C.F.R. Sec. 531.35 did not treat the relevant expenses as
kickbacks. The court dismissed their related state law claims as well. The appeals court
reversed.
Both rules apply. Both the specific rules governing the H-2A program and the DOL’s
general FLSA regulations control whether employers must reimburse employees for
inbound travel and immigration expenses. The H-2A rules require only that employers
reimburse an employee who “completes 50 percent of the work contract period . . . for
reasonable costs incurred by the worker for transportation and daily subsistence from the
place from which the worker has come to work for the employer . . . to the place of
employment.” However, the FLSA regulations require reimbursement in the first week to
the extent that the travel and immigration expenses reduced an employee’s wages below
the minimum wage.
While the employer did not dispute that it was subject to the DOL’s H-2A provision, it
contended the FLSA regulation did not apply. In its view, applying the FLSA regulation
to H-2A employees would render the H-2A rule superfluous; moreover, it argued,
deducting travel costs would frequently reduce a worker’s first week’s wages far below
the minimum wage. Thus, it urged, it was only obligated to reimburse the workers’ travel
expenses after they had completed half of their work, rather than during each employees’
first week.
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The Ninth Circuit disagreed. Because the H-2A regulations require full reimbursement
over a longer period of time, they are not superfluous, the court noted; an employee paid
more than the minimum wage would receive some reimbursement in the first week and
some reimbursement later. Moreover, it noted, the DOL has clarified that “the FLSA
applies independently of the H-2A requirements and imposes obligations on employers
regarding payment of wages.” In doing so, the agency rejected many of the same
arguments raised by the employer here. Granting Chevron deference, the appeals court
found the DOL’s interpretation “neither makes it impossible to comply with both
provisions nor creates surplusage.” The agency’s construction of the statute was a
reasonable one, the employer was subject to the FLSA reimbursement regulations as well
as the H-2A provision.
Benefit to employer. Moreover, the specific travel and immigration expenses incurred
by the farmworkers here were covered by these regulations because they were of primary
benefit to the employer. The appeals court rejected the employer’s assertion that the
immigration expenses incurred were primarily for the benefit of the employee, thus not
reimbursable. Again, under this regulatory test, the status of inbound travel and
immigration expenses is ambiguous: the costs incurred are essential to bring an H-2A
employment relationship to fruition, and both parties presumably benefit from that
relationship, so the identity of the primary beneficiary is ambiguous. And once again, in
light of the ambiguity, the appeals court deferred to the agency’s reasonable
interpretation of its regulations.
The DOL has expressly addressed the status of inbound travel expenses. Section
655.122(p) explains that an H-2A employer who is “subject to the FLSA may not make
deductions that would violate the FLSA.” As for recruitment and immigration expenses, a
separate regulatory preamble provides that “an H-2A employer covered by the FLSA is
responsible for paying inbound transportation costs in the first workweek of employment
to the extent that shifting such costs to employees (either directly or indirectly) would
effectively bring their wages below the FLSA minimum wage.” Consequently, the lower
court erred in holding the employer was not required to reimburse employees during the
first week of work for inbound travel and immigration expenses to the extent that such
expenses lowered their pay below the minimum wage.
Contract claims. In addition to their FLSA claims, the farmworkers asserted that the
employer breached their employment contracts by violating the terms of the job orders
submitted to the DOL. The breaches, they alleged, stemmed not only from the abovenoted FLSA violations but also from the employer’s refusal to reimburse the farmworkers
for the cost of their outbound travel and the costs of gloves (essential for performing the
job). While the lower court dismissed these claims, finding the farmworkers did not plead
specific violations of the contracts beyond reiterating the wage claims, the appeals court
held their complaint sufficiently identified the DOL job orders as the “contract” at issue
and adequately articulated damages by noting that they suffered “substantial injuries in
the form of lost wages.” Finally, they alleged a breach by the employer. As such, the
factual allegations plausibly stated a contract claim.
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State law claims. Because claims brought under Nevada wage-hour laws were largely
duplicative of the farmworkers’ FLSA claims, the district court disposed of them on the
same grounds, reasoning that the Nevada Supreme Court would interpret Nevada law to
follow federal precedent on these issues. The appeals court agreed that Nevada would
likely follow federal law; however, having rejected the lower court’s resolution of the
federal questions, the appeals court revived the state-law claims as well.
Similarly, other statutory claims for failure to pay wages were dependent on the success
of the farmworkers’ contract claims; because the appeals court found (contrary to the
court below) that these claims were adequately pled, the state law causes of action were
deemed erroneously dismissed as well.
Time-barred claims. Concluding that the farmworkers waived their argument that the
district court erred in failing to apply Nevada’s catch-all four-year statute of limitations to
their state constitutional claims, the appeals court found these claims were properly
dismissed as time-barred to the extent they accrued more than two years before they filed
suit. With regard to their FLSA claims, though, the lower court erred in applying a twoyear limitations period. The complaint clearly alleged that the employer’s violations were
“deliberate, intentional, and willful,” and this assertion was sufficient, at this stage, to
implicate the FLSA’s extended three-year statute of limitations for willful violations.
No attorneys’ fee demand. Moreover, the court properly dismissed the farmworkers’
claims for attorney’s fees for their state law claims because they failed to make the
requisite demand in writing, as the relevant Nevada statutory provision requires.
The case number is 11-17365.
Attorneys: Jose Jorge Behar (Hughes Socol Piers Resnick & Dym) for Victor Rivera
Rivera . Brad Johnston, Gregory A. Eurich (Holland & Hart) for Peri & Sons Farms, Inc
Nev. Sup. Ct.: Tip-pooling policy that distributed all tips to employees valid under
state law
By Joy P. Waltemath, J.D.
A casino’s revised tip-pooling policy for its table games employees that required tips to
be shared did not violate state law, the Nevada Supreme Court ruled, reiterating that there
is no “direct-benefit” test imposed to determine whether a tip-pooling policy violates
NRS 608.160 (Wynn Las Vegas, LLC v Baldonado, October 31, 2013, Douglas, M).
Because the district court failed to further review the state Labor Commissioner’s
determinations of the tip pool’s validity under two additional state law provisions, the
court remanded the case.
In a restructuring, the casino eliminated several managerial and supervisory positions in
the table games department. Afterwards the department consisted of casino managers,
assistant casino managers, casino service team leads (CSTL), boxpersons, and dealers.
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Under the current tip-pooling policy established by the casino, all tips are gathered and
divided among the dealers, boxpersons, and CSTLs.
Dealers then filed a class action with the Labor Commissioner arguing the casino's
restructured tip-pooling policy violated NRS 608.160, 608.100, and 613.120 because it
required the dealers to share their tips with employees of different ranks. The Labor
Commissioner denied the dealers class-action status, dismissed all unnamed
complainants, and after an investigation, found that the casino's new tip-pooling policy
did not violate Nevada law. Disagreeing, the district court set aside the Labor
Commissioner's decision, finding that the new tip-pooling policy violated NRS 608.160
because the policy directly benefited the casino. It also held that the Labor Commissioner
should not have dismissed the unnamed complainants because the Commissioner had the
power to hear a class action suit.
No direct benefit test. NRS 608.160 makes it unlawful for employers to take all or part
of any tips or gratuities bestowed upon their employees or to apply a tip credit toward the
payment of the statutory minimum hourly wage. It does not prevent employees from
entering into an agreement to divide such tips or gratuities among themselves. According
to the state supreme court, the district court erred in overturning the Labor
Commissioner's decision because the casino did not keep any of the tips from the pool;
rather, it distributed the money among its employees.
Tip-pool valid. In so ruling, the court clarified confusion about whether its earlier
precedent had established a direct benefit to the employer test; it had not, the court
stressed. Rather, the issue it had addressed earlier was whether an employer can impose a
tip-pooling policy even though the employer did not keep the tips or “reap any direct
benefit from the pooling.” It had used this language because it is possible that an
employer, while not keeping the tips, could take them for use in a manner impermissible
under the statute. A direct-benefit test should not be imposed to determine whether a tippooling policy violates NRS 608.160, said the court, noting such a test would be
unworkable “because every tip-pooling policy directly benefits the employer in some
manner.” Instead, here the casino distributed all the tips to its employees, and all the law
prohibits is an employer that takes and keeps its employees’ tips. The statute does not
prohibit a tip policy that splits the tips among the employees.
Because the district court decided that the tip-pooling policy violated NRS 608.160, it did
not review the Labor Commissioner’s decisions regarding the tip-pooling policy under
NRS 608.100 and NRS 613.120. [NRS 608.100 generally makes it unlawful for an
employer to pay less than agreed upon in a CBA or by statute or to pay less than an
employee has earned. NRS 613.120 makes it unlawful for individuals to demand or
receive, either directly or indirectly, from any employee under his direction or control,
“any fee, commission or gratuity of any kind or nature as the price or condition of the
employment.”] But state law entitled the dealers to judicial review of the Labor
Commissioner’s determination and, as such, the court remanded these statutory issues for
the district court’s review.
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Class certification. Finally, the court ruled that the district court should have deferred to
the Labor Commissioner’s own interpretation of statutory or regulatory language. Thus,
the district court erred in ruling that the Labor Commissioner should not have dismissed
the unnamed complainants because the Commissioner had the power to hear a class
action suit. Rather, NAC 607.200 says that a complaint filed with the Labor
Commissioner must include the full names and addresses of all complainants, and the
Labor Commissioner interpreted that to mean NAC 607.200 does not permit class claims.
Further, Nevada laws do not require the Labor Commissioner to grant class certification
under any circumstances. Accordingly, the district court erred in failing to defer to the
Labor Commissioner’s decision to decline class certification.
The case number is 60358.
Attorneys: Bryan J. Cohen (Kramer Zucker Abbott), Eugene Scalia (Gibson, Dunn &
Crutcher) for Wynn Casino Las Vegas. Leon M. Greenberg (Leon Greenberg PC) for
Daniel Baldonado.
W. Va. Sup.Ct.: Employee fired for submitting false letter of FMLA approval
cannot advance disability bias claims
By Marjorie Johnson, J.D.
A Verizon employee who was denied his request for FMLA leave after he missed a day
of work due to injuries suffered in a car accident, and was subsequently fired after he
provided his supervisor with what appeared to be a false document purporting to be
corporate approval of his FMLA leave, failed to advance his state law claim of disability
bias. Affirming dismissal of his claims on summary judgment, the West Virginia
Supreme Court found that there was overwhelming evidence that the approval letter was
falsified and that the employee failed to cast doubt on Verizon’s assertion that he was
discharged for submitting false information in violation of its company rules (Chapman v
Verizon Communications, Inc, November 22, 2013, per curiam).
While on his way to work, the employee was involved in a car accident on Friday, June
12, 2009. He called his supervisor from the ambulance to advise him of the situation. The
supervisor allegedly told him not to worry about work and that he would take care of
everything. At the hospital, the employee received twenty staples for a laceration on his
head and he also had a bruised sternum, abrasions and back pain. He was released from
the hospital after a few hours with a written excuse to miss three days of work.
FMLA request denied twice. The employee returned to work the following Monday and
was given light duty assignments for two weeks. He required no further medical
treatment and recovered from his injuries within one month of the accident. In order to
have his June 12 absence excused, his wife had submitted an FMLA request form to
Verizon’s Absence Reporting Center (ARC), which was the centralized office
responsible for reviewing and approving employee leave requests. The ARC denied the
FMLA request after having determined that the employee’s condition did not qualify as a
“serious health condition” under the FMLA. The ARC denied his appeal and he was
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subsequently suspended for ten days pursuant Verizon’s attendance policy based on the
ARC denial and his “unsatisfactory overall performance.”
Suspicious “approval” letter submitted. When the employee returned from his
suspension, he provided his manager with a letter that purported to be the ARC’s
approval of FMLA time for his absence on June 12. However, management doubted the
authenticity of the approval letter and opened an investigation. The internal investigator
reviewed the documents, interviewed the employee and others, and ultimately concluded
that the approval letter was a falsified document. Notably, the ARC had no record of
sending an approval letter, and although the employee’s manager had received an emailed copy of the denial letter, he never received any approval letter from the ARC.
Moreover, the contents of the purported approval letter were not consistent with the form
letter used by ARC for such matters. Instead, the approval letter appeared to be a
compilation of different types of letters sent by the ARC, and it failed to include a
paragraph that had recently been added to similar form letters. Finally, although the
employee produced an opened envelope postmarked August 27 in which he claimed he
had received the approval letter, the ARC’s records showed that the envelope containing
the denial letter would have been postmarked on that day. Accordingly, the employee
was discharged for violating Verizon’s Code of Business Conduct by submitting a
fraudulent FMLA approval letter and for making false statements during the
investigation.
Summary judgment granted by lower court. The employee brought the instant action
under the West Virginia Human Rights Act, asserting unlawful disability termination and
the failure to offer reasonable accommodations. The trial court dismissed his claims on
summary judgment. Among other things, it concluded that the employee admittedly was
not disabled; that he failed to dispute that his supervisors thought his FMLA request had
been denied; that Verizon properly initiated the investigation; and that it was reasonable
for Verizon to have concluded that the approval letter was falsified. Moreover, regardless
of who fabricated the approval letter, the submission of a falsified document was a
legitimate, non-discriminatory basis for his termination, which he failed to refute as
pretextual.
No showing of pretext. Ruling that summary judgment was warranted against the
employee, the state high court first noted that he had admitted during his deposition that
he had no impairment that substantially limited his life activities. However, even if his
June 12th injuries constituted a temporary disability subjecting him to WVHRA
protections — and also assuming that he established a prima facie case of discrimination
— his claims still could not advance because he failed to refute Verizon’s legitimate,
non-discriminatory reason for his discharge. There was overwhelming evidence that the
approval letter he submitted was falsified and that submission of false information clearly
violated Verizon’s company rules. Moreover, the employee presented no evidence to
refute these proffered reasons as pretextual. Rather, he admitted during his deposition that
he had no reason to doubt that the proffered reasons were indeed the reasons for his
termination.
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The case number is 13-0466.
Attorneys: J. Patrick Stephens for Randall Todd Chapman. David Fenwick (Goodwin &
Goodwin) for Verizon Communications, Inc. and Verizon West Virginia, Inc.
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