Labor Relations & Wages Hours Update
June 2014
Hot Topics in LABOR LAW:
U.S.: President Obama’s recess appointments to NLRB declared unconstitutional
By Ronald Miller, J.D.
President Obama’s January 2012 recess appointments to the NLRB failed to pass
constitutional muster, the U.S. Supreme Court held Thursday. Because the Board
appointments were invalid, the Board itself lacked a quorum and so could not lawfully
act. The High Court thus affirmed a decision of the D.C. Circuit invalidating the agency
appointments. However, the decision was not a total defeat for the executive branch. The
Court held that the Recess Appointments Clause empowers the president to fill any
existing vacancy during any recess — intra-session or intersession — of “sufficient
length.” Here it determined that three days were too short a time to trigger a recess within
the scope of the Clause. Justice Scalia filed a separate opinion concurring in the judgment
(NLRB v Noel Canning, June 26, 2014, Breyer, S).
The NLRB found that Noel Canning unlawfully refused to executive a collective
bargaining agreement with a labor union. The Board ordered the employer to execute the
agreement and make employees whole for any losses. Noel Canning petitioned for review
of an NLRB order claiming that the Board lacked a quorum because three of its five
members had been invalidly appointed. The nominations of the three members were
pending before the Senate when it passed a resolution for a series of “pro forma sessions”
with no business transacted.
Invoking the Recess Appointments Clause, which gives the president the power “to fill
up all Vacancies that may happen during the recess of the Senate,” the president
appointed the three members between two pro forma sessions. Noel Canning asserted
that the Board lacked authority to act for want of a quorum, arguing the three members
were never validly appointed because they took office under recess appointments when
the Senate actually was not in recess. Specifically, Noel Canning argued that the threeday adjournment between the two sessions was not long enough to trigger the Recess Ap-
pointments Clause. The court of appeals agreed that the appointments fell outside the
scope of the Clause.
Recess appointments generally. The Supreme Court considered three questions about
application of the Recess Appointments Clause. First, it addressed the scope of the words
“recess of the Senate.” The second question concerned the scope of the words “vacancies
that may happen.” The third question concerned the calculation of the length of a
“recess.”
As an initial matter, the Supreme Court held that the Recess Appointments Clause
empowers the president to fill any existing vacancy during any recess — intra-session or
intersession — of sufficient length. However, the court observed that the Recess
Appointments Clause sets forth a subsidiary, not a primary, method for appointing
officers of the United States. The Clause should be interpreted as granting the president
the power to make appointments during a recess – but not offering the president the
authority routinely to avoid the need for Senate confirmation.
The Court put significant weight upon the historical practice of recess appointments.
Further, the High Court observed that it has treated practice as an important interpretive
factor even when the nature or longevity of that practice is subject to dispute, and even
when that practice began after the founding era. Observing that presidents have made
recess appointments since the beginning of the Republic, the Court concluded that the
Senate and president have recognized that such appointments can be both necessary and
appropriate in certain circumstances. Thus, in interpreting the Clause for the first time,
the Court hesitated to upset the compromises and working arrangements that the elected
branches of government themselves have reached.
Inter-session and intra-session. The Court first turned to consider the scope of the
phrase “the recess of the Senate.” According to the Court, the phrase “the recess of the
Senate” applies to both intersession recess — breaks between formal sessions of the
Senate — and intra-session recesses — breaks in the midst of a formal session — of
substantial length. Finding the constitutional text ambiguous, the Court determined that
the Clause’s purpose demands the broader interpretation that it refers to both inter-session
and intra-session recesses. The Clause gives the president authority to make appointments
during “the recess of the Senate” so that the president can ensure the continued
functioning of the federal government when the Senate is away. Moreover, the Senate has
never taken any formal action to deny the validity of intra-session recess appointments.
Three days not enough. The NLRB recess appointments at issue in this case came
during a three-day recess. A Senate recess that is so short that it does not require the
consent of the House is not long enough to trigger the President’s recess appointment
power. A three-day break is not a significant interruption of legislative business.
Additionally, a recess lasting less than 10 days is presumptively too short as well.
Concluding that a three-day recess appointment was too short to trigger the Recess Appointments Clause, the Court held that President Obama lacked the authority to make
those appointments.
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“Vacancies that may happen.” With respect to the scope of the words “vacancies that
may happen,” the Court concluded that the phrase referred to vacancies that first come
into existence during a recess as well as vacancies that arise prior to a recess but continue
to exist during the recess. The court conceded that the most natural meaning of “happens”
as applied to “vacancy” is that the vacancy “happens” when it initially occurs. But that is
not the only possible way to use the word. However, considering the Clause’s purpose
and historical practice, the Court found that it supported the broader interpretation of
permitting the president to obtain the assistance of subordinate officers when the Senate,
due to its recess, cannot confirm them.
Presidents have consistently and frequently interpreted the Recess Appointments Clause
to apply to vacancies that initially occur before, but continue to exist during, a recess of
the Senate. The Senate as a body has not countered this practice for nearly three-quarters
of a century. The tradition is long enough to entitle the practice “to great regard in
determining the true construction” of the constitutional provision. In light of some
linguistic ambiguity, the basic purpose of the Clause, and the historical practices, the
Court concluded that the phrase “all vacancies” includes vacancies that come into
existence while the Senate is in session.
Calculation of length of recess. The third question concerned the calculation of the
length of the Senate’s “recess.” On December 17, 2011, the Senate by unanimous consent
adopted a resolution to convene “pro forma session[s]” only, with “no business . . . transacted,” on every Tuesday and Friday from December 20, 2011, through January 20, 2012.
At the end of each pro forma session, the Senate would “adjourn until” the following pro
forma session. The President made the recess appointments on January 4, 2012, in
between the January 3 and the January 6 pro forma sessions. The Court had to determine
whether, for purposes of the Clause, it should treat them as periods when the Senate was
in session or as periods when it was in recess.
In the Court’s view, the pro forma sessions count as sessions, not as periods of recess.
The Court held that for purposes of the Recess Appointments Clause, the Senate is in
session when it says it is, provided that, under its own rules, it retains the capacity to
transact Senate business. The Senate met that standard here. The Constitution provides
the Senate with extensive control over its schedule (neither House may adjourn for more
than three days without consent of the other). The Constitution thus gives the Senate wide
latitude to determine whether and when to have a session, as well as how to conduct the
session. This suggests that the Senate’s determination about what constitutes a session
should merit great respect.
Applying this standard, the court found that the pro forma sessions were sessions for
purposes of the Clause. First, the Senate said it was in session. Second, the Senate’s rules
make clear that during its pro forma sessions, despite its resolution that it would conduct
no business, the Senate retained the power to conduct business. Consequently, the Court
concluded that the Recess Appointments Clause did not give the president the
constitutional authority to make the appointments here at issue. As a result, the High
Court affirmed the appeals court’s judgment that the President’s appointments were
invalid, so that the NLRB did not have a quorum and could not lawfully act.
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Justice Breyer’s majority opinion was joined by justices Kennedy, Ginsburg, Sotomayor,
and Kagan. Justice Scalia filed an opinion concurring in the judgment, in which Chief
Justice Roberts joined, as well as justices Thomas and Alito.
Confusion and delay before NLRB. Commenting on the decision, former NLRB
member Brian Hayes, now with the law firm of Ogletree Deakins, stated, “Unfortunately,
the now conclusively unconstitutional appointments to the NLRB will result in more
confusion, delay and uncertainty for all parties before the NLRB. What is clear is that a
host of decisions, many of them far-reaching and controversial, are invalid because they
were decided by improperly seated NLRB Board Members. The NLRB will seek the
return of those cases that are still being contested in the federal courts, and will have to
reconsider and re-issue all that are returned. The Board may also have to deal with a host
of other claims related to the unconstitutional appointments.
The current Board has proposed an ambitious agenda; however, it should understand that
no priority is more important than resolving the decisions invalidated by virtue of the
unconstitutional appointments. Those cases involve real parties — employers, employees
and unions — that waited long enough to have their issues decided in the first place. It
would be wrong to have them wait any longer than necessary yet again by allowing any
matter to take priority over the reconsideration and re-issuance of all the invalidated
decisions.”
So what does this mean for labor practitioners? First, we now have several board
decisions now undone, including key decisions such as those involving social media and
the ever-increasing expansion of section 7 rights, continuation of union dues deductions
at contract expiration, confidentiality of internal investigations, and others, observed
Chris Bourgeacq, a Labor attorney for AT&T and a member of Employment Law Daily’s
Advisory Board. Second, as we saw with the aftermath of New Process Steel, where the
Court also unwound hundreds of board decisions based on the lack of a quorum, its déjà
vu all over again. With the board having to again revisit several hundred decisions,
administratively that task will temporarily put the brakes on the board’s pro-labor agenda
in rulemakings and new decisions.
Finally, when the dust finally settles on Noel Canning, don’t expect a change in approach
or bias from the board or its general counsel. We finally have a fully-constituted, Senateconfirmed board and general counsel who undoubtedly will continue to lean laborfriendly. Until that composition changes, if at all, with the next presidential election,
ultimately it will be business as usual from the NLRB. Meanwhile, management-side
attorneys can take a long-awaited victory lap and may wish to continue to keep their eyes
on the D.C. Circuit Court of Appeals as a favorable forum to correct errors they perceive
coming from the board, Bourgeacq commented.
The case number is: 12–1281.
Attorneys: Noel J. Francisco (Jones Day) for Noel Canning. Donald B. Verrilli Jr. (U.S.
Department of Justice) for NLRB.
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Much to sort out in the wake of Noel Canning
By Pamela Wolf, J.D.
Yesterday’s Supreme Court ruling that President Obama’s January 2012 recess
appointments to the NLRB were unconstitutional has understandably created more than
just a little buzz in the labor law community — there is a lot to sort out in its wake. The
Court found that because the Board appointments were invalid, the Board itself lacked a
quorum and so could not lawfully act — calling into question the many decisions made
during the non-quorum period. A fresh look at the Senate rules that some say gave rise to
the need for recess appointments may also be in order.
Not all clarity was lost, though, because the High Court also held that the Recess
Appointments Clause empowers the president to fill any existing vacancy during any
recess — intra-session or intersession — of “sufficient length.” However, in this case,
three days was too short a time to trigger a recess within the scope of the Clause.
Non-quorum decisions. Presumably understanding the enormity of the problem that the
ruling has caused for the NLRB, Chairman Mark Gaston Pearce quickly issued a
statement: “We are analyzing the impact that the Court’s decision has on Board cases in
which the January 2012 recess appointees participated. … The Agency is committed to
resolving any cases affected by today’s decision as expeditiously as possible.” Pearce
also pointed out the NLRB currently has a full contingent of five Senate-confirmed
members, who he said are prepared to fulfill the Board’s responsibility to enforce the
NLRA.
U.S. Chamber of Commerce President and CEO Thomas J. Donohue called the ruling “a
victory for the rule of law.” He also underscored the problem that the executive action
had created for employers: “The President’s unprecedented recess appointments left the
NLRB in a legal limbo, causing major uncertainty for both employers and employees
alike.”
What is the scope of the problem? Referring to the scope of the problem now facing the
Board, Donohue said, “hundreds of decisions after those appointments were made in
January 2012, including over 300 after the D.C. Circuit’s decision in Noel Canning v.
NLRB.” In January 2013, the appeals court invalidated an NLRB decision against Noel
Canning on the grounds that the Board lacked a quorum because three “recess”
appointments to it were unconstitutional.
Data provided by then-NLRB GC Richard F. Griffin, Jr. in a March, 26, 2014,
Memorandum indicated there were more than 142 cases that raised issues affected by the
controversial Noel Canning case. Griffin noted there were then about 107 pending cases
in the courts of appeals in which a party or the court has raised a question regarding the
validity of the recess appointments of Members Griffin, Block, or Flynn. Another 35
cases, according to the Memorandum, have raised the question of the validity of Member
Becker's appointment. The GC also pointed to a Southern District of Ohio case that had
been stayed since July 2013 awaiting the Noel Canning ruling — it was filed by National
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Right to Work on behalf of an individual seeking declaratory and injunctive relief that a
Board order dismissing his certification petition was ultra vires.
The Memorandum also noted that the NLRB’s Section 10(j) litigation program continued
to be affected by the issues raised in Noel Canning. While the validity of the president’s
appointment of three members to the Board on January 4, 2013, was challenged in some
district courts in response to Sec. 10(j) petitions, the primary challenges were to the
Board's 2011 delegation of authority to the GC to initiate 10(j) proceedings, either at its
inception or that it lapsed when the Board fell below a quorum.
Respondents have also challenged the 2001 and 2002 Board delegations, Griffin said, as
well as continued challenges to the validity of the 2011 delegation. This defense was
raised in response to Sec. 10(j) petitions in FY 2013. According to the Memorandum,
every court that addressed the issue upheld the validity of the Board's delegations of the
GC's authority to initiate 10(j) proceedings, avoiding the constitutional issue of the
validity of the recess appointments.
The GC also said that for the first time, respondents also mounted challenges in 2014 to
Regional Directors that had been appointed by the recess Board and to the President’s
designation of Acting General Counsel Lafe Solomon. He noted that a district court in the
Western District of Washington dismissed a 10(j) petition on the basis that Solomon's
designation was invalid under the Federal Vacancies Reform Act (FVRA). The appeal of
that case was still pending in the Ninth Circuit at the time the Memorandum was issued.
In contrast, a court in the District of Alaska denied a motion to dismiss and granted
injunctive relief after considering the FVRA and finding the employer brought an
impermissible collateral attack or a direct attack that failed pursuant to the de facto
officer doctrine. Similar challenges were litigated in three other cases, with one still
pending in district court at the time the data was provided. Two of the challenges were
rejected, with one under appeal in the Second Circuit, Griffin said.
Reactions on Capitol Hill. On the Hill, Sen. Lamar Alexander (R-Tenn.) called the High
Court ruling a “a powerful rebuke to the Obama administration.” He said the decision
serves as a reminder that the Constitution confers on the Senate powers that the executive
branch cannot usurp. “Our founders wanted a President, not a king, and our Constitution
is written to protect against precisely the kind of overreach this president demonstrated
with his so-called recess appointments to the National Labor Relations Board.”
Alexander traced the actions he and his colleagues took in an effort to undo the
president’s recess appointments to the Board:

In September of 2012, Alexander and 41 Republican senators filed an amicus
brief in the Noel Canning (the D.C. Circuit challenge).

In February 2013, Alexander called on the president’s appointees, Sharon Block
and Richard Griffin, to “leave the board,” after the D.C. Circuit in January ruled
their “recess” appointments to the NLRB were unconstitutional.
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
In March 2013, with 17 cosponsors, he introduced a budget amendment to defund
decisions and regulations made by what he called “the unconstitutional NLRB
‘quorum.’”

In April 2013, Alexander introduced the “Preventing Greater Uncertainty in
Labor-Management Relations Act,” to prohibit the NLRB from taking any action
that requires a quorum until the Board members constituting the quorum have
been confirmed by the Senate, the Supreme Court issues a decision on the
constitutionality of the appointments to the board made in January 2012, or the
first session of the 113th Congress is adjourned.
Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and
Pensions Committee, perhaps would consider these Republican-initiated efforts as aimed
at rendering the NLRB impotent. In the wake of the Supreme Court ruling he issued a
statement defending the president’s actions: “The American men and women who
manufacture our goods, nurse us back to health, and build our roads are the backbone of
the middle class and the driver of our economy. Our nation relies on them. The least we
can do is ensure that their basic rights are protected and that they have a voice in the
workplace. In that regard, and in the face of a Republican Party determined to reduce the
NLRB to a toothless body, I believe President Obama did the right thing in using recess
authority to appoint members to the National Labor Relations Board.”
Harkin also said that the most important thing going forward is to focus “on taking
necessary steps to ensure that we have a strong NLRB able to adjudicate our nation’s
labor laws and to ensure that our workers are able to participate in a democratic
workplace.”
Time to change Senate procedures? The CWA pointed to a different aspect of the High
Court ruling and the long road that put the recess appointment issue before the Justices.
“Today's Supreme decision is a sharp reminder that the U.S. Senate functions under
archaic procedures that must change. That's especially true of the rule requiring a supermajority, or 60 votes, for the Senate to recess.”
The Senate rules are contrary to those of other public bodies, according to the union: “In
every other democratic meeting, from the local city council to any major parliamentary
body, proceedings are recessed by a majority vote. Only the U.S. Senate requires a supermajority to proceed to debate on most motions, legislation, and including the motion to
recess.”
The consequence of this rule, according to the CWA, has been a “key tactic used by the
Senate minority to block confirmation of the president's executive and judicial
nominations.” The union said that Senate Minority Leader Mitch McConnell made it
clear that his party’s goal was to make President Obama a one-term president. “When
that didn't succeed, the Senate minority stepped up a campaign of delay and obstruction
of appointments and any progressive legislative advances,” the union observed. “The
minority's strategy of refusing to proceed to a vote for any recess has made a mockery of
the Senate's role in government.”
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In the eyes of the CWA, “the Senate's constitutional duty is to review the president's
nominees through ‘advice and consent’ — not use parliamentary tricks to impede his
policy agenda.”
U.S.: “Quasi” public employees can’t be forced to pay agency fees to union,
Supreme Court holds
By Lisa Milam-Perez, J.D.
In a blow to public employee unions seeking to expand their reach, the Supreme Court
has ruled that Medicaid-funded home care providers cannot be required, under the First
Amendment, to pay agency fees to a union pursuant to a collective bargaining agreement
negotiated with the State of Illinois. However, the decision applies only to a category of
ostensibly public workers who aren’t “full-fledged” state employees, and to which the
High Court’s 1977 holding in Abood v. Detroit Bd. of Ed. therefore does not apply. The
“questionable foundations” of that precedent, which held that state employees may be
compelled to pay agency fees to public-sector unions, were critiqued at length in a
majority opinion authored by Justice Samuel Alito. Nonetheless, the Abood ruling
survives another day, allowing public-sector unions to breathe a sigh of relief, having
averted what could have been a knock-out punch (Harris v Quinn, June 30, 2014, Alito,
S).
However, the Supreme Court affirmed the Seventh Circuit’s holding that the First
Amendment claims of home care providers in a different, but related program were not
ripe, as those employees had not yet unionized. The Court rejected the petitioners’
contention that, given the governor’s executive order allowing for collective bargaining,
unionization — along with the attendant compulsory fee payments — was imminent.
Dissenting, Justice Kagan (joined by Justices Ginsburg, Breyer, and Sotomayor) argued
that Abood fit quite nicely here and to apply it in this case “would fully comport with our
decisions applying the First Amendment to public employment." And, while the majority
“cannot resist taking potshots” at the case, the decision is “deeply entrenched,” she noted.
In Kagan’s view, the decision not to overrule this precedent “is cause for satisfaction,
though hardly applause.”
Home care providers. The federal Medicaid program funds state-run services that
provide home-based care to individuals with medical conditions that would otherwise
require institutionalization. Under such programs, federal funds are used to compensate
caregivers who attend to the daily needs of individuals needing in-home care. The Illinois
program at issue here allows individuals to hire home care providers, many of whom are
related to the person receiving care, and some provide care in their own homes. Illinois
law explicitly provides that there is an employment relationship between the person
receiving home care services and the individual providing it. The law also makes clear
that the state “shall not have control or input” in that relationship. Under the law, the
customer controls all aspects of the employment relationship with the care provider,
including hiring and training (with “complete discretion” over whom to hire); directing,
supervising, and evaluating the provider’s work; and imposing discipline or terminating
the relationship.
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The state, subsidized by the federal Medicaid program, pays the caregivers’ salaries.
Other than providing compensation, though, the state’s role “is comparatively small,”
setting some threshold employment requirements like having a valid Social Security
number, completing an employment agreement with the customer, and requiring an
annual performance review (by the customer). The state also suggests certain duties that
the care providers might assume, like “household tasks,” shopping and personal care.
Public employees? The Illinois Public Labor Relations Act (PLRA) authorizes state
employees to join labor unions and to bargain collectively, and provides for a union to be
recognized if designated as the representative of the majority of public employees in an
appropriate bargaining unit. The PLRA also contains an agency-fee provision, under
which members of a bargaining unit who do not wish to join the union are nevertheless
required to pay a fee to the union. A 2003 executive order by the governor designated
20,000 providers as public employees for collective bargaining purposes. That directive
was subsequently codified by the state legislature, which amended the PLRA to provide
that home care providers were “public employees” of the state, but solely for collective
bargaining — and for no other purpose. After a majority of home care providers voted for
SEIU Healthcare Illinois & Indiana, the union was designated as their exclusive
representative. The union subsequently entered into CBAs with the state that required all
home care providers who were not union members to pay a “fair share” of union dues, to
be deducted directly from their Medicaid payments.
Constitutional challenge. Assisted by the National Right to Work Foundation, a group
of providers filed a class-action suit against Illinois Governor Pat Quinn and the union,
challenging the agency fee provision. Rejecting the employees’ constitutional claim, the
Seventh Circuit held the agency fee requirement did not violate the First Amendment.
Because they were state employees, the union’s collection and use of fair-share fees was
permitted under Abood, the appeals court found. The state of Illinois and the customers
who receive in-home care were “joint employers” of the caregivers, the appeals court
reasoned.
Granting the employees’ petition for certiorari, the Supreme Court agreed to consider
whether a state may, consistent with the First and Fourteenth Amendments, compel the
care providers to financially support the union as their exclusive representative to petition
the state for greater reimbursements from its Medicaid programs.
Not “full-fledged” public employees. The care providers weren’t “full-fledged” public
employees, the Supreme Court observed. The employees answered to their customers, not
to the state, and they received few of the rights and benefits of employment that inure to
state workers. Moreover, the scope of collective bargaining on their behalf by the union
was quite limited; the union could negotiate only those terms and conditions of
employment within the state’s control — which wasn’t much. For example, the High
Court noted, traditionally mandatory subjects of bargaining, including the work schedule,
breaks, holidays and vacations, job duties, discharge, were all governed by the provider’s
service plan, of which the union had no input. And, as for adjusting grievances, the
union’s responsibility was constrained to resolving any grievance the provider may have
against the state; it had no authority to address a grievance against the customer for
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whom the employee actually works. Also, the majority noted, the state legislature had
“taken pains to specify” that these individuals were public employees for the sole purpose
of collective bargaining and that, for all other purposes, they were private-sector workers
in the eyes of the state.
“This approach has important practical consequences,” wrote the majority. For one:
Abood does not apply. And the majority refused to sanction “what amounts to a very
significant expansion” of that holding to apply “not just to full-fledged public employees,
but also to others who are deemed to be public employees solely for the purpose of
unionization and the collection of an agency fee.”
Abood “questionable on several grounds.” The majority nonetheless spent a
considerable amount of time tracing the private-sector cases leading up to the eventual
ruling in Abood and calling into question the Court’s analysis in that precedential case on
several grounds. In fact, in its 2012 decision in Knox v Service Employees, the Court had
noted that Abood was “something of an anomaly,” the Court pointed out here. Its earlier
decision “failed to appreciate the difference between the core union speech involuntarily
subsidized by dissenting public-sector employees and the core union speech involuntarily
funded by their counterparts in the private sector,” according to the majority. “In the
years since Abood, as state and local expenditures on employee wages and benefits have
mushroomed, the importance of the difference between bargaining in the public and
private sectors has been driven home.”
The Abood Court “also failed to appreciate the conceptual difficulty of distinguishing in
public-sector cases between union expenditures that are made for collective-bargaining
purposes and those that are made to achieve political ends. In the private sector, the line
is easier to see. Collective bargaining concerns the union’s dealings with the employer;
political advocacy and lobbying are directed at the government. But in the public sector,
both collective bargaining and political advocacy and lobbying are directed at the
government.” The majority also cited the administrative problems that resulted in
attempting to classify public sector union expenditures as chargeable or non-chargeable,
or the practical burden that would befall objecting nonmembers. Finally, according to the
majority, Abood rested on “an unsupported empirical assumption, namely, that the
principle of exclusive representation in the public sector is dependent on a union or
agency shop.”
At any rate, “whatever its strengths and weaknesses,” Abood applies only to public
employees, and extending the boundaries of that case “to encompass partial-public
employees, quasi-public employees, or simply private employees would invite
problems.” Cautioned the majority: “it would be hard to see just where to draw the line.”
Abood assumed the union possesses the full scope of power available to labor unions
under American law. “What justifies the agency fee, the argument goes, is the fact that
the State compels the union to promote and protect the interests of nonmembers.” But
under the Illinois scheme, “the union’s powers and duties are sharply circumscribed.”
Abood is therefore “a poor fit,” the majority said, and does not control here.
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No compelling interest. Consequently, generally applicable First Amendment standards
apply to the challenged agency-fee provision: it must serve a compelling state interest
unattainable through less restrictive means. And none of the interests cited here was
sufficient, the majority held, finding the provision was unable to satisfy even the test used
in Knox.
The majority rejected the notion that the agency-fee provision served a compelling
interest in that it promotes “labor peace,” noting that “[a] union’s status as exclusive
bargaining agent and the right to collect an agency fee from non-members are not
inextricably linked.” And even if it were, the “labor peace” rationale holds little sway
here, where the employees don’t work together in one state facility, but work
independently in private homes.
Also rejected was the argument that the agency-fee requirement promotes the well-being
of the care providers and, in turn, the rehabilitation program. “The thrust of these
arguments is that the union has been an effective advocate for personal assistants in the
State of Illinois, and we will assume that this is correct. But in order to pass exacting
scrutiny, more must be shown. The agency-fee provision cannot be sustained unless the
cited benefits for personal assistants could not have been achieved if the union had been
required to depend for funding on the dues paid by those personal assistants who chose to
join. No such showing has been made.” This is particularly so given the circumstances of
this case, the Court observed. The state here was hardly “the closed-fisted employer that
is bent on minimizing employee wages and benefits and that yields only grudgingly
under intense union pressure.”
Pickering did not apply. The majority also dismissed the contention that a Pickering
balancing test should apply in this context — and that union speech that is germane to
collective bargaining does not address matters of public concern and, as a result, is not
protected. “This Court has never viewed Abood and its progeny as based on Pickering
balancing,” it noted. And even assuming that Pickering applied, the related argument
“flies in the face of reality,” given that Medicaid costs amount to fully one-quarter of
state expenditures. As such, “speech by a powerful union that relates to the subject of
Medicaid funding cannot be equated with the sort of speech that our cases have treated as
concerning matters of only private concern.” And the balancing test that follows would
clearly tip in favor of the objecting caregivers’ First Amendment rights.
Kagan dissents. The state of Illinois has important interests in imposing fair-share fees,
Justice Kagan argued in dissent. In fact, she wrote, the case at hand “offers a prime
illustration of how a fair share agreement may serve important government interests.”
She noted that the state indeed benefits “by negotiating with an equitably and adequately
funded exclusive bargaining agent over terms and conditions of employment,” adding,
“[t]hat Illinois has delegated to program customers various individualized employment
issues makes no difference to those state interests.”
The only point of contention, Kagan suggested, was whether it mattered that the
caregivers here “are employees not only of the State but also of the disabled persons for
whom they care.” While much of the majority’s analysis rests “on the simple presence of
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another employer, possessing significant responsibilities, in addition to the State,” High
Court precedents “provide no warrant for holding that joint public employees are not real
ones. To the contrary, the Court has made clear that the government’s wide latitude to
manage its workforce extends to such employees, even as against their First Amendment
claims,” Kagan wrote. The majority too downplayed the significant role that the state
played in structuring the employment relationship, noting “Illinois has sole authority over
every workforce-wide term and condition of the assistants’ employment — in other
words, the issues most likely to be the subject of collective bargaining.”
Also, as for the majority’s observation that the scope of bargaining is more limited here,
given the customer’s authority over such matters as hiring and firing, Kagan simply
asked, “so what? Most States limit the scope of permissible bargaining in the public
sector — often ruling out of bounds similar, individualized decisions. The idea that
Abood applies only if a union can bargain with the State over every issue comes from
nowhere and relates to nothing in that decision — and would revolutionize public labor
law.”
Still, Kagan was gratified that the majority stopped short of overruling Abood, noting that
the petitioners here had “devoted the lion’s share of their briefing and argument to urging
us to overturn that nearly 40-year-old precedent.” The Abood rule is deeply entrenched,
and “has created enormous reliance interests,” she pointed out. “More than 20 States have
enacted statutes authorizing fair-share provisions, and on that basis public entities of all
stripes have entered into multiyear contracts with unions containing such clauses.” And
“the majority’s criticisms of Abood do not remotely defeat those powerful reasons for
adhering to the decision.”
Practitioners’ perspective. “Today, the U.S. Supreme Court ruled that individuals
performing jobs that were deemed by the State as State employees, but who in function
were not State employees, could not be compelled to join a union or pay agency fees. In
so doing, the Court refused to extend its holding in Abood that public employees could be
required to join or pay a fee to the union that represented them, to quasi-public
employees. Here, the employees were not even State employees, making the analysis far
easier,” notes W.V. Bernie Siebert, a partner in the Denver, Colorado firm Sherman &
Howard and member of the Employment Law Daily Editorial Advisory Board. “The
ruling does cast doubt on the continued viability of Abood, but the Court left that for
another day. It would seem doubtful that the decision will have far-reaching application
as it seems limited by its facts.”
“It seems the Supreme Court ruled as it did because it simply could not stomach the idea
that, in view of the First Amendment, either the state or the SEIU was providing much
value for the fees the employees at issue were being forced to pay,” said Brooke Duncan
III, a partner in the New Orleans firm Adams and Reese (and ELD Editorial Advisory
Board member). Duncan was particularly struck by the majority’s statement, “The
agency-fee provision cannot be sustained unless the cited benefits for personal assistants
could not have been achieved if the union had been required to depend for funding on the
dues paid by those personal assistants who chose to join. No such showing has been
made.”
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Another sentence that stood out, in Duncan’s view, was Alito’s conclusion: “If we
accepted Illinois’ argument, we would approve an unprecedented violation of the bedrock
principle that, except perhaps in the rarest of circumstances, no person in this country
may be compelled to subsidize speech by a third party that he or she does not wish to
support.”
“It may be that in actuality the decision will have limited impact, given the narrow factual
circumstances of the case,” Duncan suggested. “Nonetheless, the sentiment emanating
from the majority opinion could not be more clear — you can’t force people to pay to
support an organization that not only did they not choose to join but which doesn’t do
much for them either, at least not in the public sector. From that perspective, all publicsector unions should be worried that their utility may be limited unless they have real
power to advocate and bargain on behalf of the employees they claim to represent.
The case number is: 11–681.
Attorneys: Paul M. Smith (Jenner & Block) for SEIU Healthcare Illinois and Indiana.
Joel A. D'Alba (Asher, Gittler & D'Alba) for Service Employees International Union,
Local 73. William L. Messenger (National Right to Work Legal Defense Foundation) for
Pamela Harris. Jane Elinor Notz (Illinois Attorney General's Office) for Pat Quinn,
Governor of Illinois. John M. West (Bredhoff & Kaiser) for AFSCME Council 31.
FLRA final rule reflects changes in organizational structure
The Federal Labor Relations Authority (FLRA) has issued a final rule updating the
addresses and telephone numbers of its Regional Offices. The final rule, which is
scheduled for publication in the Federal Register on Tuesday, June 3, also makes
changes to the geographical jurisdictions of five of the seven Regional Directors as to
unfair labor practice charges and representation petitions. Effective June 9, 2014, the
regulatory updates reflect the agency’s current organizational structure.
The final rule updates the FLRA regulations at Paragraph (d) of Appendix A to 5 CFR
Chapter XIV to reflect changes in the addresses and/or phone numbers of the Atlanta,
Chicago, Dallas, Denver, and San Francisco Regional Offices, as well as the phone
numbers of the Chicago and Dallas Regional Offices.
Paragraph (f) of Appendix A, which sets forth the geographic jurisdictions of the
Regional Directors, is also updated with the aim maximizing the resources of the FLRA’s
Office of the General Counsel (OGC) and providing more efficient and effective case
processing. The General Counsel is realigning the geographical jurisdictions of the
Regional Directors to more evenly distribute case intake and optimize efficiency and
economy, according to the final rule notice. The OGC will continue to transfer cases
between regions on a recurring basis, as necessary, based on case intake and staffing in
order to maximize its resources.
FLRA withdraws final rule on changes to organizational structure
The Federal Labor Relations Authority (FLRA) has withdrawn from public inspection a
final rule updating the addresses and telephone numbers of its Regional Offices. The final
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rule, which was scheduled for publication in the Federal Register on Tuesday, June 3,
was withdrawn by the agency instead. The final rule also made changes to the
geographical jurisdictions of five of the seven Regional Directors as to unfair labor
practice charges and representation petitions. The regulatory updates, which were
discussed in Employment Law Daily yesterday, were said to reflect the agency’s current
organizational structure.
Reissued FLRA final rule shows changes in organizational structure
After previously issuing and then withdrawing a similar rule, the Federal Labor Relations
Authority (FLRA) has released a final rule once again that will update the addresses and
telephone numbers of its Regional Offices. This latest final rule is scheduled for
publication in the Federal Register on Friday, June 13. The rulemaking also makes
changes to the geographical jurisdictions of five of the seven Regional Directors as to
unfair labor practice charges and representation petitions.
Effective June 16, 2014, the regulatory updates contained in the final rule will reflect the
agency’s current organizational structure.
Specifically, the rulemaking updates the FLRA regulations at Paragraph (d) of Appendix
A to 5 CFR Chapter XIV to reflect changes in the addresses and/or phone numbers of the
Atlanta, Chicago, Dallas, Denver, and San Francisco Regional Offices, as well as the
phone numbers of the Chicago and Dallas Regional Offices.
Paragraph (f) of Appendix A, which sets forth the geographic jurisdictions of the
Regional Directors, is also updated with the aim of maximizing the resources of the
FLRA’s Office of the General Counsel (OGC) and providing more efficient and effective
case processing. The General Counsel is realigning the geographical jurisdictions of the
Regional Directors to more evenly distribute case intake and optimize efficiency and
economy. The OGC will continue to transfer cases between regions on a recurring basis,
as necessary, based on case intake and staffing in order to maximize its resources.
New Deputy Assistant GC appointed to Contempt, Compliance, and Special
Litigation Branch
NLRB General Counsel Richard F. Griffin, Jr., has named Nancy Platt as Deputy
Assistant General Counsel of the Contempt, Compliance, and Special Litigation Branch
in the Division of Legal Counsel, according to an agency announcement on Friday, May
30. Platt will serve as deputy to Barbara O’Neill, whose recent appointment as Branch
Chief will become effective in July.
The Contempt, Compliance, and Special Litigation Branch provides compliance and
contempt advice to the agency and conducts litigation involving, among other things, the
Bankruptcy Code, the Federal Debt Collection Procedures Act, and compliance with
outstanding court judgments. The Branch also conducts litigation and provides advice
and assistance when programs, statutes, or outside proceedings threaten the agency’s
ability to carry out its mission; ensures agency compliance with government regulations
that affect its work; and provides guidance and conducts litigation involving FOIA and
Privacy Act issues.
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Platt has spent most of the 25 years she has been practicing law employed by the Board
in the Special Litigation Branch, according to the announcement. She began as a staff
attorney in Special Litigation in December 1991, after two years in private practice. Platt
was promoted to supervisory attorney in 2000, and continued as a supervisory attorney in
the newly consolidated Contempt, Compliance, and Special Litigation Branch. During
her tenure, she has been detailed to the Washington Resident Office of Region 5, as well
as to the Solicitor’s Office.
The new appointee graduated from Cornell University in 1986 with a B.S. in Business
Management, and from UCLA School of Law in 1989.
General Counsel names three new appointees
NLRB General Counsel Richard F. Griffin, Jr., has announced three new appointments:
one to the Division of Enforcement Litigation’s Appellate and Supreme Court Litigation
Branch, and two to the Board’s Regional Office in Oakland, California (Region 32).
Ruth E. Burdick. On June 10, the General Counsel announced agency attorney Ruth E.
Burdick as Deputy Assistant General Counsel in the Supreme Court Litigation Branch,
which litigates cases involving enforcement and review of the Board’s orders in the U.S.
Courts of Appeals and, working closely with the DOJ’s Office of the Solicitor General,
handles the Board’s Supreme Court caseload.
Burdick graduated from Mills College in 1993, and UC Hastings College of the Law in
1996, where she served as Editor-in-Chief of the Constitutional Law Quarterly; she also
interned one summer for NLRB Judge William L. Schmidt. After law school, Burdick
earned an LL.M. at Georgetown University Law Center with an emphasis in Employment
and Labor Law, and clerked for the Honorable Chief Justice Shirley S. Abrahamson of
the Wisconsin Supreme Court. Before joining the Supreme Court Litigation Branch, she
worked as a staff attorney at the AFL-CIO’s General Counsel’s Office and an associate at
Bernabei and Katz in private practice.
In 2000, Burdick joined the then-Appellate Court Branch as a staff attorney. Prior to her
promotion to Branch supervisor in 2010, she worked for six months as Staff Labor
Counsel for Senator Edward M. Kennedy’s Labor Policy Office for the Senate Health,
Education, Labor, and Pensions Committee, and served in various positions, including
Vice President, of the union representing professionals working at NLRB Headquarters,
the NLRB Professional Association.
Valerie T. Hardy-Mahoney. On June 10, the General Counsel announced the
appointment of Valerie T. Hardy-Mahoney as the Regional Attorney of the Board’s
Regional office in Oakland. In her new position, Hardy-Mahoney will assist Regional
Director George Velastegui in the administration and enforcement of the NLRA in
portions of northern California and the northern half of Nevada. A career NLRB
employee, Hardy-Mahoney has been serving as Deputy Regional Attorney in Oakland.
She succeeds George Velastegui, who was promoted to Regional Director.
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Hardy-Mahoney received her B.A. from the University of Notre Dame and her J.D.
degree from the University of California, Berkeley School of Law. She began her career
at the NLRB's Oakland Regional Office in 1982, as a Field Attorney. She was promoted
to Supervisory Field Attorney in 2008 and to Deputy Regional Attorney in 2010.
Cynthia Rence. The General Counsel also announced on June 9 the appointment of
Cynthia Rence as the Assistant to the Regional Director of the Regional Office in
Oakland. In her new job, Rence also will assist Velastegui in the administration and
enforcement of the NLRA. A career NLRB employee, Rence has been serving as a
Supervisory Field Examiner in Oakland. She succeeds Shelley Coppock, who retired
from the Agency.
Rence received a Ph.D. in Economics from the University of California at Berkeley in
1978. She taught labor economics at Michigan State University for almost six years
before beginning her career with the NLRB. She began at the Oakland Regional Office in
1984 as a Field Examiner. She was promoted to Supervisory Field Examiner in July
2011.
CTUL wins “breakthrough” Responsible Contractor Policy for janitors cleaning
Target stores
By Pamela Wolf, J.D.
In a development that reflects the changing landscape of labor in the United States,
Target Corporation has agreed to implement a policy that will give the workers of its
contract vendors some of the protections they’ve been pushing for but have only been
able to achieve through avenues other than direct dealings with their own employers.
After putting four years of organizing into the effort, Centro de Trabajadores Unidos en
la Lucha (Center of Workers United in the Struggle) (CTUL) has declared a victory with
the giant retailer’s adoption of what the low-wage, worker-led organization called a
“breakthrough policy” that will protect the rights of sub-contracted janitors who clean
retail stores in the Twin Cities metro area in Minnesota. The policy will be implemented
with new cleaning contracts, the CTUL said in a June 10 release.
According to the worker organization, which partnered with the janitors in three strikes
against cleaning companies as well as a year of dialogue with Target Corporation, the
company is “taking a leadership role in the industry” via its new and “unprecedented”
Responsible Contractor Policy, which will provide significant protections for workers’
rights. Key elements of the policy include:

Protecting and ensuring workers’ rights to collectively bargain with their
employers;

Ensuring that workers have the right to form safety committees in the workplace
made up of at least 50 percent workers who are designated by their coworkers;
and
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
Ensuring that workers are not forced to work seven days a week.
CTUL pointed to a letter written by Jodee Kozlak, Executive Vice President and Chief
Human Resources Officer of Target Corporation: “As Target enters into new service
agreements with Twin Cities housekeeping service providers over the next few months,
the company will include additional language in those contracts aimed at promoting
positive and productive dialogue between Target vendors and their workers,” she wrote.
The worker organization also underscored a recent Minnesota Department of Health
(MDH) report showing that Minnesotans who live in areas with the highest median
household income live an average of eight years longer than those who live in areas with
the lowest median household income. The MDH concluded that “the growing economic
inequities and the persistence of health disparities in our great state are a matter of life
and death for many,” according to the CTUL.
Reactions. The development has caused a buzz in labor, business, and some political
circles. U.S. Representative Keith Ellison (D-Minn.) quickly expressed approval of the
development. “I applaud Target’s decision to lead the retail industry in responsible subcontracting practices,” he said in a statement. “I also congratulate CTUL and the workers
for having the courage to raise their voices.”
Ellison noted that over the last year, workers all over the country have organized “around
the principle that no one working full time in America should live in poverty.” “I hope
other retailers follow Target’s lead and move the industry towards higher wages and
better benefits for working Americans,” he said.
The SEIU promptly congratulated the CTUL on its successful campaign: “This is an
important victory for Minneapolis retail janitors, their families, and their communities,”
SEIU Executive Vice President Valarie Long said in a statement. “It could also have a
far-reaching impact on the future of our country as it will lead to improvements at other
Target stores nationally and give new hope to all underpaid workers fighting for justice
— whether they are security officers, food-service workers, laundry workers, adjunct
professors, healthcare workers, or fast-food workers.”
President steps in to halt strike, help resolve Philadelphia commuter rail labor
dispute
By Pamela Wolf, J.D.
President Obama took action on Saturday, June 14, to halt a strike by members of the
Brotherhood of Locomotive Engineers and Trainmen (BLET) and the International
Brotherhood of Electrical Workers (IBEW) that had shut down commuter rail service in
the Philadelphia metropolitan area earlier that day. An Executive Order (EO) issued by
the president establishes a Presidential Emergency Board (PEB) to investigate contract
disputes between the Southeastern Pennsylvania Transportation Authority (SEPTA) and
more than 400 workers represented by BLET and IBEW.
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Workers returned to work after midnight on June 15 pursuant to the EO. All pre-strike
conditions are restored and may not be changed for 120 days, except by agreement of the
parties to the disputes.
In the meantime, the PEB will establish a structure within which the two sides to the
labor dispute can resolve their disagreements. The PEB will hear evidence and, within 30
days, will deliver a report to the President recommending how the dispute should be
resolved.
Governor asks for intervention. Pennsylvania Governor Tom Corbett requested the
move in response to the strike. “I have requested federal intervention from the President
to immediately mediate the ongoing dispute between SEPTA and the Engineers and
Electricians Unions,” he said in a statement. “It is imperative that parties continue to
work toward an agreement for the benefit of the tens of thousands of people who use
SEPTA rail every day.
“The people of Philadelphia and the surrounding region expect and deserve a safe and
efficient rail system to get them to work, medical appointments, school, and recreation. I
call on both parties to work together, find common ground and place the riders at the
forefront of mind in their discussions.
The BLET had a different take on the 36 hours leading up to the Governor’s action.
“Responsibility for the shutdown lies squarely with SEPTA and with Governor Corbett,”
remarked BLET Vice President Stephen J. Bruno. “The BLET and IBEW agreed over six
weeks ago to binding arbitration on the two issues separating the parties — payment of
the full value of the TWU’s pattern contract and payment to our members of the full
value of that package during the term of the agreement — but SEPTA rejected that
proposal. “Then, in the hours leading up to the strike and in a response to a National
Mediation Board (NMB) request that the parties meet one last time in the public interest,
SEPTA and the Governor attempted to frustrate the authority of the NMB by proposing
an extra-legal, state-run process that would have done nothing but delay resolution of this
dispute even further,” Bruno said. “Not once during this meeting did SEPTA make a
single substantive proposal to resolve our dispute. It is unfortunate that SEPTA’s
intransigence caused this inconvenience to the good citizens of the Philadelphia area.”
PEB No. 246 appointed. The president has appointed Richard R. Kasher as Chair, and
Ann S. Kenis and Bonnie S. Weinstock as Members, of Presidential Emergency Board
No. 246. “I appreciate that these dedicated individuals have agreed to devote their talent
and years of experience working on labor-management disputes to help reach a swift and
smooth resolution of this issue,” Obama said.
Richard R. Kasher has been a member of the National Academy of Arbitrators (NAA)
since 1983 and a full-time arbitrator since 1978, according to the White House. He was
the NMB’s first General Counsel from 1971 to 1975. He is the sole neutral member of
the Health and Welfare Fund established by the Nation’s railroads and unions
representing approximately 190,000 employees, and has served on many rosters of
arbitrators, including the American Arbitration Association (AAA), the NMB, the
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Federal Mediation and Conciliation Service (FMCS), and the Pennsylvania public
employee arbitration/mediation agencies. Kasher was appointed ten times by former
presidents to serve as either Chair or a Member of a PEB. He received a B.A. from
Queens College and an M.L.L in Labor Law from New York University School of Law.
Ann S. Kenis has been a professional arbitrator for the FMCS and AAA since 1992 and a
hearing officer for the Illinois State Board of Education since 1994, the White House
noted. She has arbitrated hundreds of disputes in a wide array of industries, including the
railroads, manufacturing, automotive, education, transportation, postal service, public
sector, service industries, trucking, and transportation. From 1984 to 1991, Kenis was an
associate attorney for Arbitrator Elliott H. Goldstein. She began her career as an attorney
representing clients in matters of employment and education at Kerr & Longwell from
1981 to 1984. Kenis has been on the arbitration roster of the NMB for 20 years. She is on
permanent panels for the State of Illinois Department of Central Management Services
and its various unions, the Chicago Transit Authority and ATU Locals 241 and 308, and
Caterpillar and the United Auto Workers. Kenis is a member of the NAA and has served
as Secretary/Treasurer of the National Association of Railroad Referees. She received a
B.S. from University of Illinois, an M.A. from Northwestern University, and a J.D. from
Loyola University.
Bonnie S. Weinstock, according to the White House, has been a labor and employment
arbitrator and mediator since 1981. She is a member of the NAA. She is also on the
arbitration panels of the AAA, the FMCS, the NMB, and numerous state and local panels.
Weinstock has a nationwide practice and has served as an arbitrator in a variety of
industries, including airlines, hotels and restaurants, health care, education, service,
publishing, government, entertainment, and manufacturing. She has served as a member
of the Advisory Council for Cornell University’s Industrial and Labor Relations School
and the President's Council of Cornell Women. Weinstock was a founding member of the
Advisory Board of the Scheinman Institute on Conflict Resolution at Cornell University
and helped to develop curriculum for arbitration training. She is a former Member of the
Port Authority Employment Relations Panel. Weinstock received a B.S. from Cornell
University and a J.D. and LL.M. from New York University School of Law.
Company resolves back pay allegations after Board moves to garnish funds from
client
The NLRB, after several failed attempts to get the company’s attention, has finally
obtained back pay for employees that the agency contends were unlawfully fired by
Lintrac. The employer had steadfastly declined to respond to any of the NLRB’s actions
until the agency initiated garnishment proceedings against one of Lintrac’s clients,
according to a June 16 agency announcement.
On January 31, 2013, the NLRB’s Chicago Regional Office issued a complaint against
Lintrac, which maintains and repairs tractor trailer chaises and box cars in Northlake,
Illinois. The complaint alleged that Lintrac unlawfully fired its employees. Throughout
the agency’s entire charge investigation and even after the NLRB issued a complaint,
Lintrac purportedly refused to acknowledge and respond to allegations.
19
In light of the company’s failure to file an answer to the complaint, on April 17, 2013, the
Board directed Lintrac to make employees whole for all loss of earnings they suffered as
a result of the allegedly unlawful terminations. On July 8 and October 28, 2013, the
Seventh Circuit entered judgment enforcing the Board’s order. Lintrac continued to be
unresponsive, according to the NLRB, and on March 14, 2014, the Region initiated
garnishment proceedings in the Northern District of Illinois against one of the company’s
clients.
Soon after the garnishment proceedings began, the NLRB said, Lintrac contacted the
Regional Office and then sought to engage in settlement discussions. Lintrac agreed to
pay back pay to the employees who were unlawfully fired and also waived contesting that
the Board could seek an order directing the payment of funds held by Lintrac’s clients.
As stated in the settlement agreement, Lintrac made an electronic transfer to the Board
for back pay in the amount of $32,000, and Lintrac’s client made an electronic transfer to
the Board for back pay in the amount of $7,000.
Now that Lintrac has complied with the terms of the settlement agreement, the Board said
it will provide the company with a Satisfaction of Judgment and will seek an order from
the district court quashing the writ of garnishment, closing the case.
Union founder pleads guilty to embezzlement
Union founder JC Stamps pleaded guilty on Monday, June 23, to embezzling more than
$190,000 from the two labor organizations he launched plus an employee benefit plan. In
federal court in the District of Columbia, Stamps pleaded guilty to one count of theft
from an employee benefit plan, according to a DOJ release. The former union official’s
sentencing is slated for September 17, 2014. He has also agreed to pay $194,611 in
restitution and is subject to an $84,745-forfeiture money judgment.
Stamps, a retired detective from the Metropolitan Police Department, founded the
National Union of Protective Services Associations, which represented private security
guards, and the National Union of Law Enforcement Associations, which represented
police officers. Both labor organizations are based in Washington, D.C. Stamps also
founded a D.C.-based security guard firm, Stamps Associates.
Between 2004 and 2008, Stamps reportedly devised a scheme to defraud and embezzle
money in several ways from the unions and the National Union of Protective Services
and Employers Health and Welfare Fund (Health and Welfare Fund), an employee
benefit plan for which he was a trustee. For example, in 2007 and 2008, he used money
from the Health and Welfare Fund’s bank account to pay American Express for a total of
$48,541 in credit card charges for personal purchases and union expenses, the DOJ said.
None of these charges were related to the administration and operation of the Health and
Welfare Fund. Instead, they paid for personal expenses, according to the DOJ, such as
hotel stays, furniture, men’s fragrances, clothing, other retail purchases, and online
services, and for union expenses, including hotel rental charges (for a holiday party) and
automobile rentals.
20
Court documents also reflect that from 2006 to 2008, Stamps caused the withdrawal of
$36,203 from the Health and Welfare Fund’s bank account to pay an attorney for legal
expenses incurred by the unions — and not for the fund’s intended purpose.
Stamps also purportedly stole and embezzled at least $109,866 from the unions from
2004 to 2008. More than half of this money, according to court documents, was used to
cover debts of the former union official’s security guard company. Other money was
reportedly used for personal expenses and fraudulent salary payments for his close
personal friend, nominally the sole owner of the security guard company, although
Stamps controlled it.
The case was investigated by the DOL’s Office of Inspector General and Office of Labor
Management Standards, and the Employee Benefits Security Administration. It was
prosecuted by Trial Attorney Kelly Pearson of the Criminal Division’s Organized Crime
and Gang Section, and Assistant U.S. Attorney Ellen Chubin Epstein of the U.S.
Attorney’s Office for the District of Columbia.
Union urges better whistleblower protections for VA employees
The American Federation of Government Employees (AFGE) has sent a letter to the
Department of Veterans Affairs strongly urging the agency to implement enhanced
whistleblower protections in the wake of the U.S. Office of Special Counsel (OSC)'s
letter to President Obama regarding ongoing deficiencies at VA facilities. The letter from
OSC's Carolyn Lerner outlines the problematic practice of the VA's failure to take
whistleblower complaints seriously and implement changes that would improve patient
care.
In a June 13 letter to VA General Counsel William Gunn, AFGE General Counsel David
Borer has requested guidance explicitly stating that whistleblowers exposing deficiencies
in patient care should not be subject to unwarranted reprisal from management: “We ask
that your office issue guidance to VA employees and management in order to foster
transparency and to ensure that investigators are able to thoroughly examine and enhance
systems and procedures for the care of our veterans,” he wrote. “The guidance should
specify that employees may, without fear of reprisal, work with union representatives to
report to the VA Office of Inspector General, or OSC, or Congress, concerns about waste,
fraud, abuse, violations of law, policy, and safety and health concerns.”
According to AFGE, one of the most persistent obstacles to exposing patient care has
been HIPAA and the Privacy Act, which govern patient privacy in the medical field. In
many cases, the union said, VA employees have come forward to blow the whistle on
patient care abuses, only to be threatened by VA investigators with a potential HIPAA
violation — a fireable offense in much of the medical field. This obstacle prevents
employees from fully substantiating their patient care allegations and gives VA
management what the union called “a powerful tool to silence and intimidate
whistleblowers.”
“Fear of retaliation and reprisal among dedicated VA employees is a significant
hindrance to those wishing to voice their concerns about wrong doing,” said AFGE
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National President J. David Cox Sr. “Coupled with the agency's lack of meaningful
action when these issues arise [it] puts our veterans in a precarious position. It is time for
a culture change at the VA, where employees are empowered to come forward with
information that can institute positive change at the agency, and the department gets
serious about putting the needs of our nation's heroes above all else.”
Subcommittee scrutinizes NLRB activity
By Pamela Wolf, J.D.
The House Subcommittee on Health, Employment, Labor, and Pensions, chaired by Rep.
Phil Roe (R-Tenn), held a hearing on Tuesday, June 24, to discuss issues currently under
consideration by the NLRB. The issues targeted for discussion during the hearing, “What
Should Workers and Employers Expect Next From the National Labor Relations Board?”
included whether employees have a right to use work email accounts for union
organizing and the proper standard for determining joint employer status.
The invited witnesses for the hearing were the CEO of a franchiser, an attorney for a
union, a McKenna Long & Aldridge attorney, and a Jones Day attorney.
Pro-union agenda questioned. The hearing appeared to be aimed at what Roe saw as a
pro-union White House agenda, judging by his opening statement. Instead of focusing on
bipartisan solutions to help put people back to work, the Obama Administration “has
spent most of its time promoting a partisan agenda at the behest of powerful special
interests,” he said, asserting that this has certainly been the case with the NLRB.
“In response to a steady decline in its membership, union bosses have increasingly relied
on federal agencies to tilt the balance of power in their favor,” according to Roe. “The
NLRB is at the center of this effort, promoting a culture of union favoritism that makes it
virtually impossible for employers and workers to resist union pressure.”
The subcommittee chair pointed with disapproval to NLRB action taken under the current
administration: restricting access to the secret ballot, advancing an “ambush election rule
that will stifle employer free speech and cripple worker free choice,” and starting “to
bless micro unions that will tie employers up in union red tape while undermining
employee freedom in the workplace.” He said the Board has gone so far as to attempt to
dictate where a private employer can and cannot create jobs.
Roe also pointed to cases now before the Board that he said “threaten to further stack the
deck in favor of the administration’s union allies.” He cited the Board’s request for
feedback on how to determine joint-employer status under the NLRA and his contention
that the NLRB “may also be looking for ways to give union organizers greater access to
employer property, most notably employers’ email systems.” He called these
developments “part of a larger pattern that is generating a lot of uncertainty, confusion,
and anxiety in workplaces across the country.” He expressed support for workers’ rights
to freely choose whether to join a union. However, federal policymakers lack the
authority to make that choice for them, he said. “Today’s hearing is part of the
22
committee’s continued oversight of the NLRB, but more importantly, part of our
commitment to defending the rights of workers and employers.”
Joint employer standard.Andrew F. Puzder, CEO of CKE Restaurants Holdings, Inc.,
expressed concern among the “franchise community” over the NLRB’s request for
parties and amici to brief the issue of whether the Board should adhere to its existing joint
employer standard or adopt a new standard. Puzder’s company franchises the Carl’s Jr.
and Hardee’s quick service restaurant brands.
Specifically, Puzder pointed to the possibility that the Board will adopt a standard that
views franchisees’ employees as employees of the franchisor. “Such a standard could
completely disrupt the franchisor/franchisee relationship if it were to make franchisors
liable for their franchisees’ employment practices despite the fact that franchisors have no
control over such practices,” he said.
The CEO also noted that the Board’s current standard has been in place for over 30 years,
during which the franchise business model “has proven enormously successful at
enabling individuals to own and operate their own businesses, creating substantial
economic growth and jobs.” He said that the franchise model “has also provided
countless entrepreneurial opportunities for women, minorities, and veterans. Were the
NLRB to change that standard so as to hold franchisors responsible as joint employers
with their franchisees, it would have a significant and negative impact on both the
franchise business model and the small businessmen and businesswomen who have time,
energy and money with the aim of becoming successful franchisees, according to Puzder.
AFL-CIO Associate General Counsel James B. Coppess framed the joint employer issue
a little differently, noting that Browning-Ferris Industries, the case in which the question
is raised, involves “the increasingly common practice of employers staffing their
operations with workers who are directly employed by a third-party.” The case concerns
the right of employees to bargain collectively over their terms and conditions of
employment.
About 300 employees work at Browning-Ferris’ Milpitas, California, recycling facility,
Coppess explained, also noting that 60 of those employees are represented by Teamsters
Local 360. The case arose from the efforts of the other 240 employees to select the union
as their collective bargaining representative. “The principal difference between the unionrepresented employees and the employees who are seeking representation,” he pointed
out, “is that the latter are directly employed by Leadpoint Business Services, a firm that
Browning-Ferris has contracted with to staff the inside operations at the Milpitas facility.
Browning-Ferris has maintained control over the operations, including the functions
performed by the Leadpoint employees.”
According to Coppess, when the union petitioned for a representation election, it listed
Browning-Ferris and Leadpoint as joint employers because the terms and conditions
under which the employees work, in effect, are controlled by both companies. “That
circumstance makes it impossible to bargain over all the terms and conditions of
employment without both employers at the table,” Coppess explained.
23
The union attorney defended the Board’s decision to take a fresh look at the joint
employer standard in light of the increasingly typical use of the sort of arrangement
between the employers in this case. “[T]he Board would only be doing its duty were it to
clarify the collective bargaining rights of employees whose terms and conditions of
employment are effectively jointly controlled by two different entities,” Coppess said.
Employer email as property. Seth Borden, partner in the New York office of McKenna
Long & Aldridge, characterized the question of whether employees should be able to use
an employer’s email system for organizing purposes as “an issue of employer property
rights.” According to Borden, the Board has solicited amicus briefs in the Purple
Communications case with “an eye toward overruling longstanding Board law” and
“creating a new employee right to utilize employer equipment for union organizing and
other Section 7 purposes.”
Borden said the NLRB should decline to do so, asserting that there is “no compelling
reason for the Board to depart from decades of precedent, most recently outlined in the
Board's 2007 Register Guard case . . . which provides that absent evidence of
discrimination, employees have no statutory right to use employer equipment for Section
7 activity.”
The attorney focused his points around three contentions. First, the issue is one of
employer property rights and not employee communication. “Employers who invest their
money in the purchase and maintenance of equipment and materials for the furtherance of
their enterprise should be able to control the manner in which they are used,” said. Other
labor law principles protect employees' rights to engage in communication, solicitation,
and distribution in furtherance of union organizing or other Section 7 activity, so long as
their activity does not interfere with operations or other legitimate employer interests.
The question in Purple Communications is “to what extent an employer must provide and
pay for the means of employee communication and organizing activity,” he stated.
Next, Borden said the assertion of the NLRB’s General Counsel that email is the modern
day “virtual water cooler” is misplaced. Employer computer networks and email are the
21st century production floor. “The Board has long protected legitimate employer
interests — most significantly the means of production — without which there would be
no employees,” according to Borden. An employer “should not be compelled to open its
network to additional burdens on efficiency, external threats, and potential legal exposure
occasioned by non-business use,” he urged.
As his third point, Borden noted that for decades the NLRB has agreed that Section 7
provides employees with no such right to use employer equipment, reaching the same
conclusion with respect to each new technological development or increasingly common
type of workplace medium: bulletin boards, public address systems, telephones,
television, photocopiers, and most recently email systems. The examples have changed
over several decades, but the concept has remained the same: there simply is no such
statutory right, he pointed out. “If the Board wishes now to create one, it would seem that
the more measured and deliberative administrative rule-making process or statutory
amendment by the legislature are far more appropriate avenues.”
24
Email as protected communication. Coppess characterized Purple Communication
differently — he said the case “concerns employee communications with one another
using their work email addresses.” He noted that Register Guard was reversed on appeal,
an outcome that has it unclear as to when email communications on NLRA-protected
topics are protected and when they are not.
Most employers allow employees to use their work email addresses to communicate with
one another about various personal matters, both while they were at work and after work
hours from home, according to Coppess. “Given the convenience of email
communication, employees will inevitably use that means to engage in the same types of
communication that takes place through face-to-face conversation in the cafeteria or
breakroom,” he said.
The union framed the legal question that arises: “whether the employer can prohibit its
employees from using their work email addresses to communicate with one another about
topics that are protected by the National Labor Relations Act, most specifically about
union-related topics.” Coppess said “the Board has long held that singling out NLRAprotected communications for that sort of content-based prohibition constitutes illegal
‘discrimination.’” Coppess traced the problems caused by the NLRB’s somewhat
eccentric use of the term “discrimination” in deciding cases of like these.
Nonetheless, he pointed out, it is well-settled that the application of a rule “to prohibit
employees from discussing union organizing in a place where they were otherwise free to
engage in personal communications would be unlawful.” An employer could not lawfully
apply a similar rule, for example, to prohibit union-related conversations in an employee
cafeteria or breakroom. As a general matter, according to Coppess, “there is no reason to
treat employees’ communication by means of their work email addresses any differently
from other forms of employee communication.”
Theatrical union to revamp process that excluded African-Americans, Latinos
The New York Attorney General’s Office and the International Alliance of Theatrical &
Stage Employees, Local 52, have reached a $475,000 deal to resolve allegations that the
union has excluded African-Americans and Latinos. In addition to the monetary relief,
Local 52 has agreed overhaul its admissions process to ensure equal opportunity for
membership without regard to race, ethnicity, or national origin, according to a statement
by Attorney General Eric T. Schneiderman.
Local 52 is one of the labor organizations representing employees in the film and
television production industry. Headquartered in New York City, the Local’s active
membership totals over 3,500 employees who perform a variety of essential jobs, such as
electrical, grip, property, sound, and video on film and television shoots in New York and
four other states.
Beginning in 2012, the Office of the Attorney General (OAG) has received complaints
from experienced African-American and Latino applicants who were denied admission to
Local 52 (repeatedly, in many instances) regarding irregularities in the union’s
admissions process. The OAG’s investigation revealed that the Local followed a policy
25
of nepotism in admissions and inconsistently applied its application procedures — such
as prior work experience and examination requirements — to the benefit of family and
friends of mostly white existing members. These policies, according to the OAG, had a
discriminatory effect upon minority applicants and caused significant disparities between
the number of African-American and Latino members in the Local and the number of
minorities in the available labor pool in New York.
Under the terms of the settlement agreement, Local 52 will:

restructure its admissions process;

adopt EEO/anti-harassment policies;

hire a diversity consultant to assist in the creation of a recruitment plan to increase
the number of minorities in its applicant pool;

establish partnerships with educational and community organizations aimed at
identifying and preparing African-Americans and Latinos for the industry and for
membership in the union;

hire a full-time HR director to manage the new admissions and recruiting
processes;

develop EEO/anti-harassment training for all union leadership and new members
as they join the Local;

establish new recordkeeping requirements; and

pay $475,000 in costs, fees, and restitution for complainants who participated in
the OAG’s investigation and were denied admission to the union.
“My office is committed to ensuring equal access to employment opportunities in New
York State,” Attorney General Schneiderman said. “For decades, the film and television
production industry has been a cornerstone of the New York economy, an international
symbol of our state, and a source of good-paying jobs. I applaud Local 52 for taking steps
that will make more of those jobs available to all workers regardless of their race,
ethnicity, or national origin.”
CAPS moves to enforce arb award for increased travel reimbursement
By Pamela Wolf, J.D.
The California Association of Professional Scientists (CAPS), on June 25, filed a petition
to confirm and enter judgment on a contract arbitration award that would give bargaining
Unit 10 members the same increased meal and lodging reimbursement rates given to
SEIU bargaining unit members as of July 2, 2013. The dispute centered around a contract
protection clause providing that if any other state bargaining unit entered into an
agreement with the state that does not have pension reform or provides a greater
value/total compensation package than the Unit 10 agreements, then Unit 10 employees
26
would be entitled to the difference between the packages/agreements. CAPS is the
exclusive bargaining representative of nearly 3,000 scientists who work for the State of
California.
In this case, after CAPS entered its agreement with the state in 2011, the SEIU negotiated
increased meal and lodging reimbursement for employees traveling on state business,
according to the petition. The increases were effective July 2, 2013. CAPs contended that
its Unit 10 employees were entitled to the same $6.00 a day meal reimbursement given to
SEIU employees and increased reimbursement for lodging given to SEIU employees in
all but three of 58 California counties.
After the union and the state could not come to an agreement regarding the meaning of
the contract protection clause and other contract interpretation issues, the matter went to a
hearing before an arbitrator. The arbitrator rejected the interpretations and arguments
advanced by the state which would have relieved it of the obligation to provide the SEIUnegotiated meal and travel reimbursements to the CAPS Unit 10 employees. Thus, the
arbitrator concluded that CAPS had established a contract violation and that the state was
required to provide the increased meal and lodging rates to Unit 10 employees that were
negotiated by the SEIU for other bargaining unit members. The arbitrator further required
that the reimbursements be made retroactive to the effective dates for SEIU represented
bargaining units.
LEADING CASE NEWS:
2d Cir.: Arbitrator within his authority under CBA to apply collateral estoppel,
derail grievance
By Lisa Milam-Perez, J.D.
An arbitrator did not exceed his powers under a collective bargaining agreement when he
applied collateral estoppel principles to find a postal employee’s grievance was
foreclosed by an earlier administrative decision by the Merit Systems Protection Board.
Reversing a lower court’s decision vacating an arbitration award in favor of the U.S.
Postal Service, the Second Circuit found the arbitrator acted within his authority under
the CBA’s broad arbitration agreement provision when he found, rightly or wrongly, that
the MSPB’s determination that the employee was totally disabled was the final word on
whether the employer breached the union contract by terminating her modified work
arrangement (American Postal Workers Union v U.S. Postal Service, June 6, 2014,
Cabranes, J).
Grievance, MSPB proceeding. The arbitration proceedings at issue arose when a mail
processing clerk, who was on a limited-duty position due to carpal tunnel syndrome, was
placed on leave without pay after the Postal Service concluded it no longer had work
available consistent with her restrictions. The American Postal Workers Union (APWU)
argued that the elimination of her position violated the CBA and initiated a grievance
pursuant to the contract.
27
Pursuant to the Postal Reorganization Act, postal employees also receive workers’
compensation protection under the Federal Employees’ Compensation Act, under which
employees with job-related disabilities may appeal to the MSPB to challenge an
employment-related decision. The MSPB has held that USPS employees have the right
both to file a grievance under the CBA and to file an MSPB appeal concerning the same
agency action. Accordingly, while her CBA grievance process was ongoing, the
employee filed an MSPB appeal, claiming that the USPS acted arbitrarily and
capriciously in eliminating her position. After an ALJ concluded that the USPS properly
eliminated her position because her doctor had declared her totally disabled, the MSPB
denied the appeal.
Arbitrator: estoppel applies. The CBA grievance was then submitted to an arbitrator,
who found the grievance was not arbitrable, having already been resolved by the MSPB
proceeding finding that the employee was totally disabled.
The arbitrator noted that a specific provision of the CBA related to claims brought under
the Veterans Preference Act expressly recognized the concept of res judicata when a
matter is simultaneously before the MSPB and arbitration. While the employee here was
not a veteran, the arbitrator nonetheless concluded on the basis of that clause that the
CBA embraced the application of preclusion principles generally. Applying collateral
estoppel and noting the “undeniable conclusion” that the ALJ’s decision denying the
employee’s appeal was a final MPSB determination that the employee was totally
disabled as of the date her modified duty assignment was terminated, the arbitrator found
the matter was not arbitrable.
The union successfully moved to vacate the arbitration award in the district court, though.
The lower court held the arbitrator had exceeded his powers under the contract. In its
view, the veterans’ provision cited by the arbitrator simply didn’t apply to the employee,
who was not a veteran, and the only implicit meaning to be derived from this particular
clause was that preclusion principles did not otherwise apply to the CBA.
Appeals court reverses. In its 2013 decision in Oxford Health Plans LLC v Sutter, the
Supreme Court found an arbitration award was wrongly vacated because the arbitrator
had focused on the text of the arbitration clause — “whether correctly or not makes no
difference” — when issuing the award. The situation here was analogous, the appeals
court said. Here, the arbitrator looked to the terms of the contract and concluded the
provision supported application of collateral estoppel. Nothing in the parties’ CBA
expressly foreclosed the application of preclusion principles to MSPB appeals, the
appeals court said. And, speaking in larger terms, it noted, “we have held that under a
broad arbitration agreement such as the one at issue in this case, arbitrators possess
authority to apply collateral estoppel based on prior judicial or administrative decisions.”
The arbitrator had determined that the veterans’ provision in the contract reflected “the
shared intent of the parties to the CBA to permit decisions of the MSPB to inform, and in
some cases, preclude decisions in a subsequent arbitration.” Nothing in the CBA
expressly foreclosed this conclusion, the appeals court observed. And while the trial court
discerned a different meaning from this clause, and it was “arguably a better
28
interpretation of the CBA,” it simply did not serve as the basis for vacating an arbitration
award. Because the arbitrator was “arguably construing or applying the contract,” his
decision must stand, meritorious or not.
Under the broad arbitration agreement in the CBA, the preclusive effect of a prior judicial
or administrative decision was to be decided by the arbitrator. Because it was in the
arbitrator’s authority to decide whether the contract permitted the use of collateral
estoppel, he did not exceed his powers under the arbitration agreement. Thus, the lower
court was not justified in vacating the award.
The case number is: 13-2579-cv.
Attorneys: Sarah T. Kanter (O’Donnell, Schwartz & Anderson) for American Postal
Workers Union. Michael J. Byars (U.S. Attorneys' Office) for United States Postal
Service.
8th Cir.: Wage grouping was organizational, did not show workers retained in
layoff were similarly situated; keeping less senior, more versatile workers not
discriminatory
By Lorene D. Park, J.D.
Finding that an employer did not breach policy or union agreements by laying off a longtime African-American employee and keeping less senior but more versatile workers, and
finding that the mere fact that workers retained in the layoff were in the employee’s same
wage group was not enough to show they were similarly situated, an Eighth Circuit panel
affirmed summary judgment on the employee’s race discrimination and retaliation claims
under Sec. 1981 (Young v Builders Steel Co, June 9, 2014, Bye, K).
The employee worked for the steel fabricator for over 26 years before being laid off in
2011; he was the only African-American there at the time. He was a union member and
two agreements (a 2005 and a 2008 agreement with similar language) governed his
employment. Both divided shop employees into job classifications and assigned each
classification a “Wage Group.” They stated that each employee “shall be paid within the
wage range, if applicable to the classification, but not less than the minimum hourly wage
rate set forth . . . for the classification.”
At the time of his layoff, the employee was in Wage Group 3, which has three
classifications (Welder A, Burner A, and Maintenance/Machine Operator A). He was
previously in a higher wage group but in January 2007 requested to “bid down” to a
lower classified position of Burner A, which he claimed was at the request of the
employer. The employee’s pay rate was reduced upon transfer. He was not a certified
welder and thus not qualified to be a Welder A but being a Burner A required no
certification. He claimed the employer promised him a raise to his original pay but did
not make good on the promise. He filed complaints of race discrimination in the bidding
down process and the failure to increase his wage. In March 2009, he filed a
discrimination charge with the Missouri Commission on Human Rights and the EEOC.
He filed a second charge in October 2009 and filed suit in state court in September 2010.
29
Layoff. In May 2011, the employer laid off 12 of the 23 employees in the shop, including
the employee, due to the decline in work. The employee was the most senior person laid
off and was the only one classified as Burner A to be laid off. The parties dispute how
many workers were retained. The employer claimed those with the most skills were
retained and that any worker classified as a Welder A or Maintenance Operator A could
perform the job duties of a Burner A. Thereafter, two laid off workers with less seniority
than the employee were called back to work while he was not. However, they had higher
job classifications and he did not allege that he was qualified to perform their jobs. The
employee filed this suit alleging race discrimination and retaliation under Sec. 1981. The
district court granted summary judgment for the employer.
Race discrimination. Affirming, the court noted it was undisputed that the employee
was in a protected class, met the employer’s legitimate expectations, and suffered an
adverse employment action. However, he failed to make a prima facie showing of
circumstances giving rise to an inference of discrimination. He argued that similarly
situated persons were treated more favorably but there were no other employees who
were classified as Burner A. While there were other employees in Wage Group 3, the
groups were a form of union negotiation and organization to systemize pay and were not
necessarily linked to similar jobs. Indeed, members of his wage group performed
different jobs and were required to have different types of certifications and different
knowledge to perform them. As a consequence, he could not show he was similarly
situated “in all relevant respects” to others in his group.
The employee also argued that the employer failed to follow its own policy but the court
disagreed. The union agreements provided seniority to long-serving workers, requiring
that in a decrease in force, the following factors must be considered: “(1) length of
continuous service, (2) ability, and (3) experience. Ability and experience being equal,
preference shall be given the employee with the greatest length of continuous service.” In
the court’s view, this did not require layoffs to happen by seniority but rather indicated
that when, out of two otherwise identical employees in aptitude and skill, one needed to
be laid off, the one with less seniority would be the one to go. The employer did not
breach the union agreements or any other policy in laying off the employee and keeping
less senior but more skilled and versatile workers.
Also rejected was the employee’s argument that the employer proffered false
explanations and untruths. As to the alleged promise of a pay raise after his voluntary
demotion, the court found that even if a question of fact remained on this issue, it was not
enough to create an inference of discrimination because the demotion was voluntary and
occurred years before the layoff. Additionally, he could not show any causal connection
or pretext as to the failure to increase his pay. And while the employee argued that the
employer misrepresented that a 2009 layoff (which did not affect him) was based on job
classification, that the 2011 layoff was based on job classification, and that the two
workers who were called back worked in job classifications higher than his, those claims
failed because they were based on the flawed argument that all jobs in Wage Group 3
were the same. However, as explained by the court, the evidence showed they were not.
Accordingly, summary judgment was appropriate on the discrimination claim.
30
Retaliation. Summary judgment was also affirmed on the retaliation claim because the
employee failed to demonstrate that his protected activity (administrative charges and
prior lawsuit) had a causal connection to the alleged adverse actions. He again claimed
that three things allowed an inference of retaliation: evidence that similarly situated
workers were treated better, evidence that the employer failed to follow its own policies,
and evidence that its proffered explanations were unworthy of belief. For the same
reasons discussed with respect to the discrimination claim, the appeals court rejected his
contentions.
The case number is: 13-1556.
Attorneys: Alan V. Johnson (Sloan, Eisenbarth, Glassman, McEntire & Jarboe) for
Michael Young. Jacy J.H. Moneymaker (Stinson & Leonard) for Builders Steel
Company.
8th Cir.: NFL Players’ Association can seek Rule 60(b) relief from dismissal of
collusion claim
By Kathleen Kapusta, J.D.
Providing a sliver of hope to the NFL Players’ Association in its attempt to set aside a
2010 stipulation of dismissal of its lawsuit against the National Football League, in which
it alleged that the League violated the terms of a settlement agreement by instituting a
secret cap on players’ salaries in 2010, the Eighth Circuit reversed a district court’s
decision prohibiting the Association from seeking relief from the dismissal under Rule
60(b). Emphasizing that its holding should not be read as an expression of a view on the
merits of the Association’s motion, the appeals court noted that “the Association bears a
heavy burden in attempting to convince the district court that the Dismissal was
fraudulently procured. We hold only that the Association should be given the opportunity
to meet this burden.” The court affirmed, however, the lower court’s denial of the
Association’s petition to set aside the dismissal on the ground that it was invalid because
the court had never approved the settlement as required by Rule 23(e) (White v National
Football League, June 20, 2014, Wollman, R).
Settlement agreement. In 1992, several NFL players sued the League on behalf of all
other NFL players, asserting that the League’s free agency system, the college draft, the
League’s practice of using standard-form contracts, and several other League rules
violated antitrust laws; the district court certified a class of plaintiffs (the White class).
While the lawsuit was pending, the League and the Association negotiated and signed a
stipulated settlement agreement (SSA), which although styled as a settlement of the
lawsuit, operated as a comprehensive collective bargaining agreement governing all
aspects of labor relations between the League and its players. It awarded monetary relief
to the class members and also set forth rules encompassing free agency, the college draft,
player salaries, and a host of other labor-related issues. The district court retained
jurisdiction to enforce the SSA through a Final Consent Judgment filed in the White class
action docket.
31
Accusations of collusion. Although set to expire in 1996, the SSA was extended four
times and all new players who entered the NFL after it was signed became subject to its
rules. When the NFL decided, in 2008, not to extend the agreement, its final year became
2010. Because the SSA mandated that the final year would be an uncapped year, the
players expected a marked increase in salaries. When this failed to happen, the
Association filed a complaint alleging that the League was colluding to suppress
competition for free agents during the 2010 season.
New agreement. After a flood of litigation, a lockout, and a decertification of the
players’ union, the League and the Association entered into a new CBA in 2011. As part
of the agreement, they settled the lawsuit over the alleged secret salary cap by signing a
Stipulation of Dismissal, also filed in the White class action docket. In the Dismissal, the
Association agreed to dismiss with prejudice all claims regarding the SSA, including its
collusion claim. After the Dismissal was signed, however, several NFL owners made
statements that the Association interpreted as admissions of collusion during the 2010
season to institute a secret salary cap in violation of the SSA.
The Association then petitioned the district court to reopen and enforce the SSA,
asserting that the Dismissal was invalid because the court never approved the settlement
as required by Rule 23(e). The court denied this petition and the Association moved
under Rule 60(b) to set aside the Dismissal on the ground that the League procured it by
fraud, misrepresentation, or misconduct. This motion was also denied.
Rule 23(e). On appeal, the Association first argued that the Dismissal was invalid
because it purported to settle the claims of a certified class without court approval
required by Rule 23(e), which mandates that “[t]he claims, issues, or defenses of a
certified class may be settled, voluntarily dismissed, or compromised only with the
court’s approval.” Observing that Rule 23(c)(1)(B), adopted the same year, states that
“[a]n order that certifies a class action must define the class and the class claims, issues,
or defenses,” the appeals court explained that by instructing courts to define the “claims,
issues, or defenses” of a certified class in the certification order, Rule 23(c)(1)(B) implies
that the “claims, issues or defenses” referred to in Rule 23(e) generally are those that
exist at the time of class certification.
Pointing out that the parties stipulated to class certification in 1993 and sued the NFL for
various anti-trust violations, the court found that the alleged imposition of a salary cap in
2010 was unrelated to any of those claims. Although they were linked peripherally by the
SSA, which settled the 1993 claims and gave rise to the 2010 claim, Rule 23(e) “in no
way suggests that negotiated resolutions of disputes peripheral to the class action need be
approved,” the court explained.
Not really a class settlement. Addressing the Association’s argument that the breach of
a class settlement may give rise to the claim of a certified class, the court found that Rule
23 procedures would still not be required here because the SSA was not a true class
settlement in most respects. Rather, it was a comprehensive collective bargaining
agreement that set the terms of employment between the League and its players.
Moreover, the concessions made by the League in the SSA were not given to the players
32
in exchange for the forfeiture of their legal claims against the League; they were given to
them in exchange for their agreement to play football for the League.
In addition, the court noted, for the most part, the parties treated the SSA as if it were a
normal contract, not a class settlement. Over the life of the SSA, the Association filed
numerous complaints for violation of the agreement on behalf of players, and neither the
parties nor the court ever invoked Rule 23 in litigating these claims, the court pointed out,
observing that the only time they did invoke Rule 23 was when they agreed to extend the
SSA itself. And even then, the court noted, they did not actually abide by the Rule as they
provided notice not to the original class members but to an entirely different subset of
players who were under contract to an NFL team at the end of the season in the year the
amendment took effect. “In short, the parties have never treated the SSA like a class
settlement, and we see little reason to start doing so now,” wrote the court.
As to the section of the SSA at issue here mandating that the final year be uncapped, the
court noted that it was inserted into the agreement to give the League an incentive to
renew the SSA before its last year. It did not vindicate any of the claims asserted by the
class. “Because we do not believe that this provision was truly awarded to the players in
exchange for the forfeiture of their legal claims against the NFL, we do not believe that
the NFL’s alleged breach of this provision gave rise to a class claim,” the court stated.
Only a tiny fraction affected. Finally, the court observed that even if it were to treat the
SSA as a bona fide class settlement, it would be hesitant to impose Rule 23(e)
requirements on a settlement that affects only a tiny fraction of the class. “Like the ship
of Theseus, whose planks were replaced one by one until no original plank remained, the
player composition of the NFL has undergone a slow but thorough transformation since
1993 as the members of the White class have gradually retired,” the court wrote. Thus, it
found that the failure of the district court and the litigants to abide by the class settlement
procedures of Rule 23(e) did not invalidate the Dismissal.
Rule 60(b). The Association next argued that even if the Dismissal was valid, the district
court erred in prohibiting it from seeking relief under Rule 60(b), which permits a court
to set aside a final judgment, order, or proceeding that was obtained by fraud,
misrepresentation, or misconduct. Specifically, the district court found that relief under
the Rule was unavailable to a party that stipulates to the dismissal of a lawsuit under Rule
41(a)(1)(A)(ii) because such a dismissal does not constitute a “judgment, order, or
proceeding” under Rule 60(b).
Although the appeals court pointed out that the district court relied on prior Eighth
Circuit rulings in denying the Association’s order, in which the appeals court held that
dismissal under Rule 41(a)(1)(A) is not a “judgment, order, or proceeding” and that a
party that stipulates to the dismissal of a lawsuit may not seek to set aside that dismissal
under Rule 60(b),” it noted that six other circuits had also considered this question and
reached the opposite conclusion. Those circuits have held that that a Rule 41(a)(1)(A)
dismissal constitutes a “judgment, order, or proceeding” under Rule 60(b) and that relief
under the Rule is thus available to a party that stipulates to the dismissal of a lawsuit.
33
Finding that the other circuits “have the better of this issue,” the court agreed that a
stipulated dismissal constitutes a judgment under Rule 60(b).
Noting that Rule 54 states that “‘[j]udgment’ as used in these rules includes a decree and
any order from which an appeal lies,” the court observed that it leaves unresolved the
question of whether a judgment includes a stipulated dismissal. Other rules, however,
explicitly use judgment to refer to a settlement between a plaintiff and a defendant.
Moreover, the court pointed out, in nearly all relevant respects, an accepted offer of
judgment is identical to a stipulated dismissal under Rule 41(a)(1)(A)(ii) as both may
operate as adjudications upon the merits.
The court also found that the concerns that underlie Rule 60(b) are equally as present
after a stipulated dismissal as they are after a court-ordered end to litigation. The Rule is
designed to prevent injustice by allowing a court to set aside the unjust results of
litigation, the court noted, and it gives no indication that the drafters were concerned with
how those results come about. Nor could the court see why such a distinction should
matter. Thus, given the ambiguous definition of “judgment” in Rule 54, the use of
“judgment” in Rule 68 to refer to settlement, and the salutary reasons for permitting a
settling party to seek relief from a fraudulent settlement, the court found that the
Association could seek Rule 60(b) relief from the Dismissal.
The case number is: 13-1251.
Attorneys: Benjamin Conrad Block (Covington & Burling) for National Football League.
David Barrett (Latham & Watkins) for National Players Association.
8th Cir.: Arbitrator found no insubordination; no error in reducing discharge to
suspension
By Joy P. Waltemath, J.D.
An arbitration award reducing a maintenance tech’s discharge for failing to safely
complete the repair of an overhead crane to a 30-day unpaid suspension was not contrary
to the collective bargaining agreement and thus was upheld by the Eighth Circuit (PSC
Custom, LP, dba Polar Tank Trailers v United Steelworkers Union, Local 11-770, June
26, 2014, Loken, J).
The facts were undisputed. After a serious safety issues arose due to a gear that was lost
in an attempted repair of an overhead crane, the company interviewed those involved
(along with the union’s president) and discharged the maintenance tech on the following
grounds: (1) failure to properly do an inspection that could have resulted in serious,
possibly fatal, accident; (2) clear disregard for doing the job by not locating loose gear
lying on the track; and (3) passive attitude about avoiding assignments, wasting time, not
asking for direction.
The union grieved the discharge and it went to arbitration. At the arbitration hearing, the
company explained its discharge decision by saying that the tech’s misconduct in failing
to properly repair the crane violated five standards of employee behavior enumerated in
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the “Standards of Conduct” the company adopted and publicized prior to the effective
date of the CBA, including: insubordination, careless or poor workmanship, continued
unsatisfactory performance of work duties, violation of safety rules, and providing false
information to the company, all of which were “considered grievous and will result in
immediate termination.” Admittedly the company did not refer to these violations in the
termination “paperwork.”
Arbitrator finds negligence. Upholding the grievance in part but concerned about due
process, the arbitrator limited his consideration of just cause to the grounds for discipline
listed when the tech was fired, which did not refer to the Standards of Conduct. The
arbitrator accepted the company’s version of the facts and found that the tech had been
negligent and put her “job and potentially her fellow employees in serious jeopardy.”
However, the arbitrator found no insubordination and instead imposed a 30-day unpaid
suspension. This meant the arbitrator found no just cause, and ordered the tech reinstated
with back pay less the 30-day suspension.
Appeal. After the employer sued to preclude enforcement of the award, the district court
upheld it, and this appeal followed. Although the employer claimed the arbitrator
disregarded unambiguous provisions of the CBA and therefore the award reflected “the
arbitrator’s own notions of industrial justice,” the Eighth Circuit was unmoved. First, the
employer argued a general provision declaring that all company rules must be observed
by employees was disregarded by the arbitrator because it prescribed the disciplinary
penalties for five enumerated violations, including insubordination. However, the
arbitrator did not ignore the “insubordination” mandate; instead, he considered the tech’s
poor performance and concluded that it constituted negligence but not “insubordination”
for which the CBA mandated discharge.
Due process. Second, the employer claimed the arbitrator improperly ignored testimony
that the tech violated five behavior standards for which discharge was mandated by its
Standards of Conduct. Although the company tried to argue that the arbitrator
disregarded these standards because they were unilaterally implemented, the court
pointed out that the union agreed to the CBA’s management rights clause that expressly
gave the employer the right to make such reasonable rules and regulations. Rather, said
the court, the reason the arbitrator gave for disregarding the Standards of Conduct was
that “none of them was included or cited in the grievant’s termination letter or in any
other notification to the grievant.” The arbitrator’s “due process” ruling was not error,
said the court, pointing out that “arbitrators have long been applying notions of ‘industrial
due process’ to ‘just cause’ discharge cases.”
Finally, Eighth Circuit precedent is that even though the CBA acknowledged the
employer’s right to adopt work rules, and the employees’ duty to observe those rules, that
does not include the right to renege on the collectively bargained agreement that the
employer will only discharge an employee for good cause. The arbitrator’s resolution of
the good cause issue, which it did by harmonizing “any discordant provisions within the
contract relating to the discretionary authority granted management and the just-cause
requirements limiting that authority,” was just what the parties agreed to in their CBA,
concluded the court.
35
The case number is: 13-1943.
Attorneys: Rick Eugene Temple (Rick E. Temple Law Office) for PSC Custom, LP. John
Philip Hurley (Jolley & Walsh) for United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local
No. 11-770.
NLRB: Although confidentiality rule overly broad, discharge for disclosing client
rates lawful
By Lisa Milam-Perez, J.D.
A trucking company lawfully fired an accounts payable employee for disclosing to the
company’s drivers the rates that it charged to customers, a three-member NLRB panel
found. Although the Board had previously held the confidentiality rule upon which her
discharge was based was overly broad and thus unlawful — a determination upheld by
the Fifth Circuit — reliance on the rule in terminating the employee in this instance
would not reasonably tend to chill other employees’ exercise of protected rights, the
Board found. While the employer may not have had a legitimate business interest in
maintaining an overly broad confidentiality rule, it undisputedly had a legitimate interest
in keeping its client rates confidential (Flex Frac Logistics, LLC, May 30, 2014).
Confidentiality clause. Employees of the trucking company were required to sign a onepage at-will employment agreement that included a confidentiality clause stating they
were not permitted to share confidential information with anyone outside the organization
on pain of possible “termination” or “legal action.” The list of confidential information
included “financial information,” including costs, which necessarily included wages and
thereby reinforced the likely inference that the rule proscribed wage discussions with
outsiders. The clause gave no indication that some personnel information, such as wages,
was excluded from its scope. Thus, although there was no explicit reference to the
discussion of wages or other specific terms and conditions of employment, an NLRB law
judge, a divided Board panel, and the Fifth Circuit all found the rule could reasonably be
interpreted as restricting employees’ exercise of Sec. 7 rights. The employer’s contention
that it had a legitimate business purpose in implementing the rule was rejected; it could
not have a legitimate business interest in a rule that broadly prohibited the discussion of
wages and other terms and conditions of employment.
Client rates disclosed. After the circuit court enforced its order, the Board remanded the
case to the law judge for further analysis of her finding that the discharge of an accounts
payable employee pursuant to that confidentiality rule also violated the Act. The
employee had access to well-guarded company information — specifically, the rates
charged to clients. Believing the employer was shorting its drivers in light of the variance
between the fees charged to clients and the rates paid to its drivers, the employee
divulged the client rate information to coworkers. Within days, several truckers
demanded more compensation and ultimately stopped servicing the company altogether.
The employee was discharged a month later.
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Discharge lawful. In Continental Group (2011), the Board clarified that discipline
pursuant to an unlawfully overbroad rule is unlawful only if the employee violated the
provision by engaging in protected conduct or by engaging in conduct that otherwise
implicates concerns underlying Sec. 7. Here, the Board found that even though the
conduct might have implicated Sec. 7 concerns, the discharge was lawful nonetheless.
First, it cited the employer’s legitimate business interest in maintaining the confidentiality
of its client rates — as borne out by the facts, given that the company’s business directly
suffered as a result of the disclosure.
Moreover, the employee was aware of the confidentiality interest at stake but nonetheless
used her position to access and disclose the information. Thus, while her conduct
“arguably implicated concerns underlying the Section 7 rights of others,” the employee’s
“deliberate betrayal” of her employer’s “strong, expressly articulated confidentiality
interest and the evident harm she caused were plainly and overtly the reasons the
[employer] discharged her.”
No chilling effect. As such, the Board was confident that, to the extent her coworkers
were aware of the incident, they would understand that the employee was discharged for
gross misconduct, not because of the company’s application of its overbroad
confidentiality rule. Thus, any chilling effect on their exercise of protected rights would
be minimal. “In other words,” the Board reasoned, the employee “was not discharged for
discussing wages or other terms and conditions of employment, nor would her discharge
have been perceived as such.” Accordingly, the Board affirmed the law judge’s finding
that her discharge was lawful.
The slip opinion is: 360 NLRB No 120.
Attorneys: Scott Edmund Hayes (Vincent Lopez Serafino Jenevein) for Flex Frac
Logistics, LLC.
NLRB: Hotel workers’ on-site work stoppage protected, despite availability of
grievance procedure to redress their concerns
By Lisa Milam-Perez, J.D.
The Los Angeles Hilton unlawfully suspended 77 employees for engaging in a work
stoppage to protest the suspension of their coworker, a union supporter, the NLRB found
in a decision on remand from the D.C. Circuit. The appeals court had rejected in part the
Board’s application of the Quietflex factors in determining whether the work stoppage
enjoyed the NLRA’s protections — specifically, the Board’s finding that employees did
not have an alternative, established means of resolving their group grievance. Accepting
the court’s conclusion that Hilton’s “open door” policy provided such a vehicle here, the
NLRB nonetheless found this single factor was outweighed by the remaining Quietflex
factors, thus the work stoppage was protected for its entire duration (Fortuna Enterprises,
L.P. dba The Los Angeles Airport Hilton Hotel and Towers, May 30, 2014).
Work stoppage. Believing that their coworker had been unjustly suspended because of
his union activity in the thick of a Unite HERE organizing campaign, and fearing they
37
might be next, 70-100 employees of a Los Angeles Hilton gathered in the staff cafeteria
and asked to meet with the hotel’s general manager (or the food and beverage director,
who oversaw the suspended worker’s department) to discuss the reasons for his
suspension. The gathering lasted about two and a half hours in all, during which the
hotel’s HR manager twice told employees who were not on break to return to work or to
clock out and go home. All the while, though, she said she was trying to reach the general
manager so the employees could talk with him about their concerns. Finally, an hour into
the work stoppage, the employees were ordered to return to work on threat of suspension.
A handful did so, and the holdouts were suspended one by one. Eventually they offered
to return to work after concluding management was unwilling to meet with them, but
management declined the offer. In all, 77 employees received five-day suspensions.
Earlier proceedings. In a previous ruling, the NLRB had found the employer unlawfully
suspended the employees for participating in the work stoppage. Applying the ten factors
set forth in Quietflex Manufacturing Co for determining the proper balance between
employees’ Section 7 rights and employers’ private property rights in on-site work
stoppage cases, an NLRB law judge concluded that the employees’ interests outweighed
Hilton’s, and the employees had not lost the protections of the Act. The Board agreed the
work stoppage was protected, noting, among other things, that Hilton management failed
to make it clear at the time that the employees would not be able to meet with senior
management and would have alternative opportunities to present their concerns.
On appeal, the D.C. Circuit upheld in large part the use of the Quietflex balancing test,
but determined that the Board’s application of those factors was flawed. It noted that the
NLRB had never quantified the weight to be given to any one of the factors. And it
questioned the premise of one factor — whether the work stoppage interfered with
production — given that many protected activities are deliberately meant to interfere with
production, as a means of exerting economic pressure on their employer. The appeals
court also concluded the Board erred in analyzing another factor: whether employees had
access to an established procedure for resolving group grievances. The court found
Hilton’s “open door” policy in its employee handbook was an established means of
addressing group grievances such as the one giving rise to the work stoppage. It rejected
the Board’s finding that the policy applied to individual complaints only, noting that the
open door policy had been used to resolve broader employee concerns about working
conditions and other issues in the past.
Although agreeing with the Board that Hilton suspended the employees without making it
clear that a meeting with senior management officials was not immediately possible or
offering them an alternative opportunity to meet, the court found those omissions were
“much less significant” given that employees had access to an established grievance
procedure. The court therefore remanded the case for the Board to rebalance the relevant
interests at stake, consistent with this factual determination, in deciding whether the
suspension was unlawful.
No hard and fast rules. Reiterating that no one factor in the Quietflex balancing test is
given controlling weight, and that “the precise contours within which [a work stoppage]
is protected cannot be defined by hard-and-fast rules,” the Board accepted as the law of
38
the case the D.C. Circuit’s finding that the employees had access to an established
procedure for resolving their group grievance. However, while this single factor thus
weighed against a finding that the work stoppage was protected, this lone factor was
substantially outweighed by the others, the Board held.
Specifically, the employees withheld their labor in protest of a coworker’s suspension
and thus were engaged in protected, concerted activity (factor 1); the work stoppage was
peaceful (factor 2); it was of short duration, lasting less than an hour before the
employees were suspended (factor 6). While Hilton warned employees that they would
be suspended if they did not return to work or go home, it began suspending them only
minutes later, while employees were still waiting for a manager to arrive and hear their
grievance (thus factor 5 was afforded little weight). No employees remained on Hilton
property beyond their shift or tried to seize company property (factors 8 and 9). Further,
they were suspended for insubordination by failing to go back to work or go home, as
directed; thus, factor 10 (the reason for the discipline — insubordination, in this case) did
not weigh against protection. “As we have held, employees are entitled to persist in a
peaceful work stoppage for a reasonable period of time, in the absence of evidence that
they are interfering with the work of nonstrikers.”
“Interference with production” explained. Factor 3 — whether the work stoppage
interfered with production — had been a sticking point for the court of appeals, which
found the Board’s finding of no such interference to be “at odds with reality,” as there is
obviously interference with normal production when employees stop working in the
middle of their shifts. The court found “the point of this Quietflex factor is unclear.” Did
the Board mean to suggest that if the stoppage exerted economic pressure — that is, if it
interfered with production or the provisions of services — this would render the activity
less protected? So the Board clarified this factor. There is no improper interference with
production when protesting employees merely stop working; it noted. “It is firmly
established that employees do not forfeit the protection of the Act by withholding their
own services,” the Board noted. Rather, when applying this factor, the focus is on
whether workers engaged in a stoppage are preventing other employees from doing their
jobs.
“The interference with production factor thus seeks to accommodate the right of
employees to concertedly withhold their services, with the right of the employer to
continue operating its business using nonstrikers and replacement workers,” the Board
explained. “Strikers overstep the bounds of protected conduct to the extent they interfere
with the employer’s legitimate efforts to continue operating, by preventing nonstriking
employees from working.” Thus, having found no evidence that the striking employees
interfered with the work of nonstrikers, “or of an appreciable loss of production or
disruption of services beyond the work the strikers themselves did not perform,” the
Board found this factor weighed strongly in favor of protection.
Alternate means of redress. While the D.C. Circuit found the employees had an
available grievance procedure at their disposal, the Board gave this Quietflex factor “due
weight, but not decisive weight.” It noted that employees generally are entitled to strike
without first exhausting a grievance procedure that had been unilaterally adopted by the
39
employer — citing the NLRA’s affirmative guarantee of the right to strike and noting
there was no such exhaustion requirement under the Act. While conceding that on-site
work stoppages are unique in that they implicate property rights considerations, as well as
the employer’s right to continue operating peacefully during a labor dispute, the Board
reasoned that the Quietflex balancing test gives fair weight to these countervailing
concerns. “This does not mean, however — nor have the Board or the courts ever held —
that the Act affords no protection to employees who engage in peaceful, nondisruptive,
onsite work stoppages without first attempting to resolve their complaint through
approved channels.” As the Board saw it, such a result “would permit an employer to
effectively foreclose the exercise of Section 7 rights on its property by unilaterally
establishing a grievance procedure.”
Johnson concurs. In a lengthy concurrence, Member Johnson agreed that Hilton
unlawfully suspended the workers but disagreed with his colleagues’ analysis of the
Quietflex factors, finding they rebalanced the factors in a manner that gave “substantially
greater protective weight to many of them” than in the prior Board analysis. “I have
doubts that they are entitled to do so under the law of the case here, and further fail to see
the basis for such reweighting.”
In particular, he wrote, “I believe this case boils down to assessing the weight to be
assigned to the employees’ failure to seek redress of their grievance through the open
door policy.” The majority failed to give adequate weight to the availability of the open
door policy as an alternative means to present their grievances, in his view, and, with
only a slight change in the circumstances of this case, he argued this factor would strike
the balance in favor of a loss of protection. The existence of an alternate means of
resolving a grievance “shifts the locus of the accommodation between employees’ rights
and private property rights,” which his colleagues failed to recognize, Johnson asserted.
“Consequently, employees who opt initially to pursue their grievance by engaging in an
on-site work stoppage and demanding direct, immediate discussion with management are
not prevented from doing so because of an established grievance procedure, but they have
far less latitude to do so before their employer is entitled to insist that they return to work
or continue their protest off its property. Thus, how and how long they may permissibly
carry out the stoppage must necessarily reflect the scope and extent of the employer’s
grievance procedure.”
Had Hilton “stood fast” on its grievance procedure and required the employees to adhere
to it, Johnson would have found the work stoppage lost protection. Instead, though, the
employer repeatedly sent mixed messages, at best, that staff members were trying to
secure an audience for the workers with upper-level officials. And employees were not
clearly told that they could not meet with those officials until after the suspensions began
to take place. As such, Johnson would have found the work stoppage remained protected
only until Hilton started to suspend the protestors. At that point — an hour into their
protest — it was still reasonable for them to stay onsite “while engaged in confusing
communications with management about whether they would be able to present their
grievance directly to senior officials.”
The slip opinion is: 360 NLRB No 128.
40
Attorneys: Stephen R. Lueke (Ford & Harrison) for Fortuna Enterprises LP.
NLRB: Disciplinary action taken against union supporter motivated by employer’s
anti-union animus
By Ronald Miller, J.D.
An employee, who was the leading union supporter at an employer’s facility, engaged in
protected concerted activity and such conduct provoked the employer’s unlawful
disciplinary action against him, ruled a three-member panel of the NLRB. Additionally,
the Board concluded that the employer was motivated by anti-union animus when it
placed the employee on a performance improvement plan (PIP). The employer was
unable to show that it would not have issued the disciplinary action or placed the
employee on the PIP absent his union activities. On the other hand, the employer lawfully
suspended the employee and a junior paramedic for failing to notify dispatch of their
lunch stop and of their subsequent delay in picking up a patient from a hospital (MetroWest Ambulance Service, Inc, May 30, 2014).
Anti-union animus. The employer provided emergency ambulance services in Oregon
and nonemergency transport throughout the Northwest. This case involved several
adverse actions the employer took against a training officer/senior paramedic, who was
the leading union adherent at its facility. Among the allegations was that the employer
unlawfully issued a corrective action plan (CAP) to the employee because of his
protected union activities. The Board observed that unlawful conduct by the employer
reflected a strong anti-union animus, and that such animus motivated the issuance of the
CAP.
In this instance, the Board pointed out that there was a delay in excess of one month
between a patient complaint about the employee and the employer’s discipline of him
that was purportedly triggered by that complaint. In the interim period, the employee
engaged in pro-union activities, including posting pro-union flyers on his locker, and
picketing the employer’s facility. Additionally, during this period, the union filed a
charge on behalf of the employee, and it was revealed that he was the creator of a prounion Facebook page, of which the employer was aware. The discipline issued soon
thereafter. As a consequence, the Board determined that the employer’s decision to
extend the employee’s CAP occurred because he engaged in pro-union activity and the
union filed charges.
Performance improvement plan. The Board also ruled that the employer acted
unlawfully by placing the employee on a PIP. Here, the record supported an inference
that the PIP was motivated by animus against the employee because of his union
activities and charges filed by the union on his behalf. As a result, the burden shifted to
the employer to prove that the employee would have been placed on a PIP in the absence
of the charges and his union activities. In support of the PIP, the employer asserted that
over the course of a year, the employee was involved in three patient-related mishaps.
Although these incidents might legitimately warrant a PIP, they were not subject to
contemporaneous discipline when they occurred; another employee involved in one of
41
the incidents was not disciplined; and the employer exaggerated the severity of the
incidents. Consequently, the record failed to establish that the employer treated the
employee in the same manner as other employees who engaged in comparable
misconduct.
Suspension. On the other hand, the employer lawfully suspended the employee and a
junior paramedic for their failure to notify dispatch of their lunch stop and, subsequently,
their delay in notifying dispatch of their arrival at a hospital to pick up a patient. The
delay at the hospital resulted from the employee engaging in a conversation in the
hospital parking area. His subsequent suspension was consistent with prior disciplinary
action resulting from a comparable delay, when the employer suspended a senior and
junior paramedic for taking a 33-minute detour without notifying dispatch.
Although the junior paramedic received lesser discipline than the employee, such conduct
did not show unlawful treatment. As the senior paramedic, the employee was responsible
for the operation of the ambulance. The employer has imposed heavier discipline on the
senior paramedics than junior paramedics when they have engaged in misconduct
together. Thus, the Board found that the suspension did not constitute an unfair labor
practice.
The slip opinion is: 360 NLRB No. 124.
Attorneys: Mark MacPherson (No Firm Listed) for Teamsters Local #223. Jennifer A.
Sabovik (Bullard Law) for Metro-West Ambulance Service, Inc.
NLRB: Employer ordered to rescind non-solicitation policy limiting solicitation to
non-work areas
By Brandi O. Brown, J.D.
A food service distributor was ordered to rescind a non-solicitation policy contained in its
employee handbook, which expressly limited solicitation discussions to nonworking
hours and non-work areas, after a three-member panel of the NLRB found that the rule
unlawfully restricted Sec. 7 activity by prohibiting union solicitation in work areas during
nonworking hours. Additionally, two Board members found that the employee’s activity
of sending repeated instant messages to a coworker (whom she had recommended for
hire) warning her that she was going to be fired was protected concerted activity under
Sec. 7 because it was for the employees’ “mutual aid or protection” (Food Services of
America, Inc, May 30, 2014).
Religious emails. The employee worked as a supplier e-commerce specialist for the
employer until March 2011. She worked alongside her boyfriend. Her supervisor used to
be a good friend, but that relationship had deteriorated. In November 2010, the employee
had complained to her second-level supervisor about emails from the supervisor that
indicated she would be more “promotable” if she adopted the supervisor’s religious
beliefs.
42
Just prior to that complaint, the employer had hired a part-time administrator based, in
part, on the employee’s recommendation. Unfortunately, the new hire began to have
performance issues soon after she began her employment. According to the employee,
her supervisor complained to her about the new hire’s performance and “berated” her for
recommending the new hire. Thereafter, the employee began telling the new hire that she
was going to be fired. She also assisted the new hire in looking for a new job.
Instant messages. Approximately two months later, the employee sent instant messages
to the new hire, noting again the supervisor’s displeasure with the new hire’s
performance, telling her that the supervisor was “super-mad” with her “because it’s really
difficult for you with this job” and that the supervisor was “pissed off that” she had
recommended her. She told the new hire that “the only reason she” had not been fired
was because the supervisor “had to prove that” she could not do the job and that she had
been scolded before when another employee quit. She also told the new hire that if she
did not understand something the supervisor was telling her to “play dumb and ask”
either her or the employee’s boyfriend. The employee also complained about having been
unable to train the new hire appropriately.
Later that month, the supervisor asked the new hire why her performance had been
declining and why she was uncommunicative. The new hire showed the supervisor the
instant messages from the employee and told her that the employee had told her
repeatedly she was going to be fired. The supervisor showed the messages to her
superiors and a few days later the employee was fired. According to a vice president, the
employee was fired for harassing the new hire by lying to her and telling her she was
going to be fired.
Law judge’s decision. An administrative law judge found that the employer had not
violated Sec. 7 when it had terminated the employee and found the solicitation provision
lawful. According to the ALJ, the only arguable concerted activity the employee had
engaged in was her complaint about the religious emails, but found no evidence that
those had contributed to the termination decision. Instead, the law judge found that the
termination decision was based on the instant messages, “implicitly finding, without
explanation, that those instant messages did not constitute protected concerted activity.”
The General Counsel filed cross-exceptions. The employer filed answering briefs to both.
Solicitation policy. As an initial matter, the Board agreed with the law judge that the
record failed to show that the employee’s earlier complaint to management about her
supervisor’s religious overtures played any role in the decision to discharge her. Further,
in the only other portion of the decision in which all three panel members fully joined,
the Board found that the employer’s solicitation policy unlawfully restricted Sec. 7
activity by prohibiting union solicitation in work areas during nonwork times. Under
Board precedent employers may not prohibit union solicitation during nonworking times
or in nonworking areas. Because the employer’s rule expressly provided that solicitations
were limited to non-work areas and nonworking hours — indicating that both conditions
were necessary — by maintaining the rule the employer violated NLRA Sec. 8.
43
Concerted activity. Two members of the panel also found that the employee’s discharge
was unlawful because she had engaged in protected concerted activity with the newly
hired employee by sending the instant messages. An employee’s conduct was protected if
it was (1) concerted and (2) “engaged in for the purpose of mutual aid or protection.” The
Board has previously held that employee conversations regarding job security were
“inherently concerted” and that an employee’s warning to another employee that his or
her job was at risk constituted protected conduct. Thus, the majority determined that the
employee’s discussions with the new hire, both by instant message and in person, were
protected concerted activity.
“Mutual aid or protection.” Moreover, that concerted activity was for the employees’
“mutual aid or protection,” the majority found. The employee had testified, “without
contradiction,” that she had told the new hire about the termination risk because she had
the belief that “people who weren’t doing their job correctly usually got written up and
terminated.” Thus, the majority found that the employee had started the conversation in
order to encourage the new hire to improve her performance and also to stop the
supervisor’s criticism of the employee because of the new hire’s performance. The
majority rejected the employer’s argument that the statements were unprotected because
it never intended to fire the new hire. The statements were not shown to be “maliciously
untrue.” “At most,” testimony by the supervisor that she had not intended to fire the new
hire only showed that the statements were “inaccurate.”
The Board also rejected the employer’s contention that the statements were harassing
and, therefore, unprotected. “Neither the repetition nor the impact” of the statements
“rendered them unprotected.” Moreover, the Board noted that the new hire never
complained to the employee and never asked her to stop making the comments.
Although the employer contended that it would have fired the employee anyway because
she later solicited her boyfriend to forward company emails supporting her claims, along
with which he sent confidential business information, the Board found that defense
“lacked merit” because the employee had been fired before engaging in that conduct. It
also rejected the employer’s argument that the employee’s reinstatement and backpay
remedies should be limited because of that misconduct, noting that it had not met the
standard of proving flagrant misconduct.
Threat of reprisal. Additionally, two members of the panel also found that the
employer’s senior vice president had implicitly threatened the employee’s boyfriend with
“unspecified reprisals” when he told the boyfriend that he “could really have a future
with the company” if he ceased talking to the employee. He told the boyfriend that he
would then have a “clean slate.” The majority found that the boyfriend could “reasonably
understand” the vice president to be saying that if he spoke to her “his future with the
company” would be “jeopardized.”
The slip opinion is: 360 NLRB No. 123.
Attorneys: Richard Walker (Walker & Peskind) for Food Services of America, Inc. Paul
Louis Carrington, pro se.
44
NLRB: Union unlawfully attempted to enmesh neutral employer in area standards
dispute with primary employer
By Ronald Miller, J.D.
Substantial independent evidence showed that a union violated NLRA Sec. 8(b)(4)(ii)(B)
by unlawfully enmeshing a neutral employer in its area standards dispute with a primary
employer with the intent to coerce the neutral to cease doing business with the primary
employer, ruled a three-member panel of the NLRB. A letter sent by the union to neutral
employers promising to target only the primary employer in its dispute was directly
contradicted by threats made to the neutral employer by the union president himself.
However, there was insufficient evidence of an unlawful intent by the union to enmesh a
second neutral employer in its dispute with the primary employer; a union agent merely
explained the union’s lawful intent that it would picket if and only if area standards were
not met (Local 560, International Brotherhood of Teamsters, May 30, 2014).
In 2011, the union was engaged in an area standards dispute with the primary employer,
claiming that the employer was underpaying its drivers, thereby depressing wages of all
similar workers in the local area. The union engaged in picketing and other actions in
support of its position. To further publicize the dispute, the union sent a letter to area
construction industry employers and multi-employer associations. The letter stated that
the union would comply with the relevant law governing picketing and would target its
picketing solely at the primary employer, and not at neutral businesses.
In this case, the complaint alleged that the union violated Sec. 8(b)(4)(ii)(B) by
threatening to picket two neutral masonry contractors, Sharp Concrete (Sharp) and
Macedos Construction (Macedos), with the intent of coercing them to cease doing
business with the primary employer.
Moore Dry Dock standards. Section 8(b)(4)(ii)(B) of the NLRA prohibits labor
organizations from threatening, coercing, or restraining a neutral employer with the
object of forcing a cessation of business between the neutral employer and the employer
with whom a union has a dispute. In Sailors Union (Moore Dry Dock), the NLRB
established four criteria which, if met, presumptively indicate valid primary activity.
However, even though a union may be in compliance with the Moore Dry Dock
standards, its conduct will be found unlawful where there is independent evidence that
the union had an unlawful secondary objective to enmesh the neutral employer in the
primary dispute.
Applying the Moore Dry Dock standards, the Board has found it unlawful for a union to
make a statement to a secondary employer requiring it to take “specific affirmative
action” as a condition for the union not engaging in picketing. In contrast, the Board has
held that a union may lawfully inform neutral businesses that it will stop picketing the
common site if the work is performed by a contractor that pays area standards. The
central question in this case was whether the union went beyond explaining and
publicizing the dispute and its intent to engage in lawful primary picketing, and instead
threatened neutral employers to cease doing business with the primary employer.
45
Neutral employer threatened. The NLRB agreed with an administrative law judge that
the union unlawfully threatened Sharp in a telephone conversation with the intent of
coercing it to cease doing business with the primary employer. During the telephone
conversation, the union president told officials of Sharp that he would be “putting a
picket line against you” — referring to Sharp itself, rather than the primary employer.
Moreover, the union president reaffirmed this secondary intent when he additionally
cautioned Sharp that “before you run into a problem” you should consider these other
concrete suppliers instead. In so stating, the union president made clear that the
threatened picketing was specifically aimed at the neutral employer.
The Board concluded that it was quite clear from this conversation that the “problem”
that Sharp would “run into” was a secondary boycott of its business. The only discernible
purpose for making this statement was to coerce Sharp to cease doing business with the
primary employer. Even though the union’s letter expressly assured companies that there
would be no effort to enmesh neutrals, and, on its face, conformed to the law, the lawful
purpose stated in the letter was directly contradicted by the union president himself.
Picketing “the job.” However, the NLRB found that the telephone conversation between
a union agent and officials of Macedos was insufficient evidence of an unlawful intent to
coerce the neutral employer to cease doing business with the primary employer. In this
instance, the Board observed that the conversation was notable for its lack of any
reference to establishing a picket line “against Macedos” or any mention of the crossing
of picket lines. When Macedos’ superintendent directly asked the union agent why the
union would be picketing, the agent responded, “County would have to pay the [union
area standard] wages or else he would picket the job.” Statements concerning picketing
“the job” are consistent with primary picketing at the worksite.
Here, the union agent expressed no interest in whether Macedos “ceased doing business”
with the primary employer. When the superintendent asked whether Macedos could
continue doing business with the primary employer and avoid having a picket line at the
common site by “making up the difference,” the agent responded that the bottom line was
that “if the guys [a]re paid the right amount, it [i]sn’t a problem.” Thus, the Board was
satisfied that the only concern expressed by the union agent was whether area standards
were met.
The slip opinion is: 360 NLRB No. 125.
Attorneys: Paul A. Montalbano (Cohen, Leder, Montalbano & Grossman) for Local 560,
International Brotherhood of Teamsters. Brian P. Shire (Susanin, Widman & Brennan)
for County Concrete Corporation.
NLRB: Unilateral elimination of cross-docking at distribution center constituted
unlawful refusal to bargain
By Ronald Miller, J.D.
An employer acted unlawfully by failing to bargain over its decision to eliminate the
cross-docking of certain products and the effects of that decision, ruled a divided three-
46
member panel of the NLRB. Here, the Board determined that the collective bargaining
process may have found solutions to the employer’s need to gain greater efficiency in the
operations of its distribution center, so that the employer’s contracting out of work
previously performed by bargaining unit members was unlawful. Member Johnson filed a
separate opinion concurring in part and dissenting in part (Mi Pueblo Foods, June 11,
2014).
“Cross-docking” eliminated. The employer operated a chain of grocery stores that were
serviced out of its distribution center, which received and stored merchandise from
various vendors. Distribution employees prepared shipments and loaded grocery items
onto trucks for delivery to stores by the employer’s delivery drivers. In December 2010, a
union was certified as the representative of the drivers following a Board election.
Between December 2010 and April 2011, the employer reorganized the distribution
center’s operations in order to cut costs, increase productivity, and improve the efficiency
of its shipping operations. The resulting changes included the elimination of the “crossdocking” of products from a wholesale supplier and contracting out the delivery of those
goods.
The practice of cross-docking involved using a contract carrier to deliver products from
the wholesale supplier to the distribution center where they were unloaded, staged, and
reloaded onto the employer’s trucks for unit drivers to deliver to stores. Following the
reorganization, the employer directed a contractor to deliver those products directly to its
stores, thereby eliminating this aspect of the unit’s work. However, the employer
continued to use cross-docking for the distribution of the wholesaler’s products to some
of its smaller stores.
Reduction in work. An administrative law judge found that the employer did not
unlawfully refuse to bargain over its decision to have the contractor deliver the
wholesaler’s products directly to its stores. The NLRB disagreed. Prior to the
reorganization, the distribution center handled 88 pallets of the wholesaler’s products
daily and the elimination of cross-docking reduced this number to zero. The Board
overturned the ALJ’s finding that these figures, standing alone, did not establish what, if
any, impact the employer’s changes had on the drivers’ daily work. Rather, the Board
noted that by eliminating cross-docking, the employer assigned delivery work to a
subcontractor that was previously performed by unit drivers.
Under Fibreboard Paper Products Corp v NLRB and Torrington Industries, the employer
was required to bargain with the union prior to contracting out this work. Further,
bargaining was not excused simply because no driver was laid off or experienced a
significant negative impact on his employment.
Here, the employer continued to deliver the wholesaler’s products between suppliers and
its stores, changing only one aspect of that process — the delivery of the products to the
stores — by having that work performed by a subcontractor rather than unit employees.
The employer’s decision was not the result of a change in the scope or direction of the
enterprise, but instead a substitution of one group of drivers for another. Given the
essential continuity in the employer’s operations, it was no defense that the employer
47
subcontracted the work in an effort to achieve increased efficiency and reduced
congestion in the warehouse.
According to the majority, the employer’s decision to eliminate cross-docking in favor of
using a subcontractor raised issues amenable to resolution through the collective
bargaining process. Alternative solutions, such as adjustments in staffing, scheduling, or
distribution of work among unit employees, could have been explored through collective
bargaining. Accordingly, the elimination of the cross-docking work fell squarely within
the Fibreboard and Torrington framework.
Partial concurrence and partial dissent. Member Johnson concurred with the majority
that the employer acted unlawfully by its failure to engage in decisional bargaining with
the union prior to eliminating backhauls and the pickup of products, and replacing this
work with contractors. However, he would not analyze these unilateral changes under the
framework of Fibreboard and Torrington. Instead, Johnson would decide these
allegations under the test set forth in First National Maintenance Corp. v. NLRB. As a
result, he found that the decision to use subcontractors to perform the disputed work had
a direct impact on employment, since unit jobs were eliminated, but had as its focus the
economic profitability of the enterprise. Here, he found it clear that the potential benefits
of collective bargaining outweighed the burdens that such bargaining would place on the
conduct of the employer’s business.
Unlike the majority, though, Johnson would affirm the ALJ’s dismissal of the crossdocking unilateral change allegation based on the rationale that the employer’s decision
to eliminate cross-docking was a core entrepreneurial decision over which it was not
obligated to bargain under First National Maintenance. The dissent argued that the
employer changed its entire business model with respect to the distribution of the
wholesalers’ products.
The slip opinion is: 360 NLRB No 116.
Attorneys: Jennifer Mora (Littler Mendelson) for Mi Pueblo Foods. Adrian Barnes
(Beeson Tayer & Bodine) for International Brotherhood of Teamsters Local 853, a/w
Change To Win.
NLRB: Terminating housekeeper for circulating petition about coworker’s behavior
was unlawful
By Joy P. Waltemath, J.D.
Terminating a housekeeper after he circulated a petition soliciting signatures from
employees who shared his concerns about a cafeteria cashier’s attitude and behavior and
presented it to management violated Sec. 8(a)(1), ruled the NLRB, finding that the
housekeeper engaged in protected concerted activity. The Board reversed findings of the
ALJ that the hospital had maintained overbroad and discriminatory work rules and that
the housekeeper had been discharged because he violated them, but that he had not
engaged in protected activity. It found instead that the instructions to the housekeeper
were not work rules, but that the discharge of the housekeeper was unlawful because it
48
was based on his protected circulation of the petition (Dignity Health dba St Rose
Dominican Hospitals, June 12, 2014).
Cafeteria threats. The housekeeper who, among his other duties, cleaned the cafeteria
floor, had frequent contact with a cafeteria cashier, and the two did not get along. After
an altercation over whether he would be charged for two entrees when he came to her
register with hot dogs and rice (she allegedly said “Filipinos don’t know . . . hot dogs go
with bread, not rice,” and he may have threatened that he would “take care of” her), she
reported the threat, and the hospital took her claims seriously. It placed the housekeeper
on administrative leave and told him not to contact other hospital employees while he
was out.
Suspension activity. But he spoke with his union, who advised him he could collect
witness statements and statements attesting to the cashier’s character, so he did. He also
circulated a petition asking for signatures of other employees who had witnessed the
cashier behaving in a rude, sullen, or disrespectful manner. Seventeen employees signed
his petition, which he presented to his supervisor on return from his suspension, who
counted his seven-day administrative suspension as the discipline for making threatening
and harassing statements during his altercation. He was also warned not to retaliate
against any coworkers and that there would be zero tolerance for any retaliation.
Collecting more signatures. After the housekeeper returned to work, he continued to
collect signatures on his petition, the Board said, “because employees who also had
problems with [her] asked to sign it.” A few days after his return he attempted to give the
petition (with additional signatures, now numbering 28), to the cashier’s supervisor and
also to his own supervisor’s boss, who warned him that if he accepted the petition, the
housekeeper might lose his job. And that is precisely what happened: His termination
notice said he continued to “actively pursue” measures to get the cashier disciplined or
fired, to “smear her reputation” and otherwise retaliate against her, representing “blatant
insubordination.”
Instructions not work rules. The Board reversed the ALJ, who had found that the
hospital violated Sec. 8(a)(1) by promulgating unlawful work rules and by discharging
the housekeeper for violating them, but because his actions were in support of a purely
personal claim, they were not for the purpose of mutual aid and protection and were not
protected activity. Specifically, the ALJ characterized the supervisor’s instructions to the
housekeeper to not contact other employees during his leave and not retaliate against the
cashier as unlawful work rules, but the Board disagreed, pointing out that they were
directed only to the housekeeper, never given to anyone else, and furthermore, under the
circumstances here, the no-retaliation instruction would not “reasonably tend to interfere
with, restrain, or coerce an employee in the exercise of his Section 7 rights.”
But petition was protected. Additionally, the Board disagreed with the ALJ’s finding
that the housekeeper’s circulation of the petition was not for the purpose of mutual aid
and protection. It was unquestionably concerted, seeking to enlist the assistance of
coworkers. In fact, 28 of them joined him in expressing concerns about the cashier; they
signed the petition, they referred him to other concerned employees, or they approached
49
him to offer their support, and he in turn brought the group complaint to management’s
attention. And its purpose encompassed mutual aid and protection, because it sought to
improve the working conditions of the employees, many of whom had real or perceived
problems with the cashier’s workplace behavior and who wanted to – and did – support
the housekeeper’s petition.
The fact that personal vindication could have been one of the housekeeper’s goals did not
prevent a finding that he also was acting for the benefit of other employees in drawing
management’s attention to the cashier’s attitude. In a footnote, the Board also pointed
specifically to the response of the housekeeper’s supervisor when he first submitted the
petition on his return from administrative leave. At that time, his supervisor read the
petition, thanked him for submitting it, and never indicated that there was anything wrong
with the housekeeper’s circulating it. In the Board’s view, the housekeeper “would not
reasonably believe that continuing to engage in the Sec. 7 activity of circulating the
petition would constitute the sort of retaliation against [the cashier] that he had agreed to
refrain from.”
Accordingly, the Board held that by continuing to circulate the petition and presenting it
to his supervisor’s boss, the housekeeper engaged in protected concerted activity for the
purpose of mutual aid or protection. As the hospital knew his activities were concerted
and discharged him for engaging in them, the hospital violated Sec. 8(a)(1), the Board
concluded. It also found (contrary to the ALJ) that the supervisor’s boss violated Sec
8(a)(1) when he threatened the housekeeper with termination when the housekeeper gave
him the petition containing additional signatures.
The slip opinion is: 360 NLRB No. 126.
Attorneys: James Winkler (Littler Mendelson) for Dignity Health dba St. Rose
Dominican Hospitals.
NLRB: Anti-union bias motivated firing of Starbucks worker who swore in front of
customers during off-duty protest
By Marjorie Johnson, J.D.
Starbucks acted unlawfully when it fired a pro-union employee who, while staging a
protest of the retail giant’s ban on unions with other off-duty employees, became
involved in a disruptive altercation with an off-duty supervisor, ruled a three-member
NLRB panel. Reconsidering the matter on remand after the Second Circuit held that
Atlantic Steel’s analysis pertaining to employee outbursts did not apply, the Board found
that the employee’s discharge was motivated in part by his pro-union activities. In a
separate concurrence, Board member Miscimarra criticized the panel for failing to
address whether retail employees can engage in “otherwise protected” activities if they
engage in misconduct in the presence of customers. In his view, such an employee would
lose the Act’s protection if he caused actual or likely disruption to the business
(Starbucks Corp d/b/a Starbucks Coffee Co, June 16, 2014).
50
Procedural history. The NLRB previously issued a decision in this action finding that
Starbucks acted unlawfully when it fired the employee — an open union supporter —
allegedly because he uttered profanities at a manager in the presence of customers while
engaged in union activity during off-duty hours. Specifically, the Board adopted the
administrative law judge’s finding that, under the standard set forth by the NLRB in
Atlantic Steel Co., the employee’s outburst was not so egregious as to lose him the
protection of the Act. Although the ALJ also found that the discharge was unlawful under
the test set forth in Wright Line, the Board limited its ruling to the Atlantic Steel analysis.
On review, the Second Circuit found that the Atlantic Steel test was inapplicable to an
employee’s use of obscenities in the presence of an employer’s customers and remanded
the issue of his discharge back to the Board.
Factual background. Between 2004 and 2007, the union engaged in an organizing
campaign at several Manhattan Starbucks stores. The employee actively supported the
union and in an April 2005 email, a district manager identified him as a likely supporter.
A month later, on May 14, he became frustrated with an assistant store manager who
delayed providing assistance during a particularly busy period. When the manager finally
came to help, the employee said it was “about damn time” and noisily shoved a blender
in the sink. He also told the manager that “this is bullshit” and told him to “do everything
your damn self.” As a result, the employee was suspended for several days. Starbucks
claimed that he was given a final written warning but the employee asserted that he never
received it. He apologized after he was called back to work.
Later that year, on November 20, a district manager ordered certain employees to remove
their union pins. The next day, the employee and other coworkers entered the store
wearing pins while off duty in order to protest the pin prohibition. Shortly after the group
entered the store, an off-duty assistant manager from a different store approached the
employee and asked him in a confrontational manner what the union button was for.
After some discussion about the union, the employee accused the assistant manager of
insulting his father. The conversation escalated into a heated confrontation with the
employee telling the assistant manager, “You can go fu*k yourself, if you want to fu*k
me up, go ahead, I’m here.”
The on-duty assistant store manager admonished the employee while he remained seated
with his group and about 10 minutes later, they all left. Several weeks later, the employee
was fired, purportedly for disrupting business on November 21. The discharge
documentation prepared by the store manager stated that the employee was ineligible for
rehire because “[p]artner was insubordinate and threatened the store manager. Partner
strongly support [sic] the IWW union.”
Discharge motivated by antiunion animus. Even though Atlantic Steel did not apply,
the NLRB nevertheless found that the employee’s discharge was unlawful under Wright
Line since the decision was motivated in part by his clearly protected pro-union activities.
Notably, the ALJ found that he openly participated in many union rallies and protests,
that Starbucks suspected that he was a union supporter as early as April, and that the
company had engaged in numerous unfair labor practices demonstrating anti-union
animus. Moreover, its written documentation regarding the employee’s discharge
51
expressly stated the employee’s “strong[] support” for the union as a reason he would be
ineligible for rehire. Thus, there was sufficient evidence that his union activities were a
motivating factor in his discharge.
The employee’s discharge was also inconsistent with Starbucks’ more lenient treatment
of other workers who engaged in similar or worse misconduct. Moreover, his misconduct
was provoked by an off-duty supervisor who similarly used profanity. There was no
evidence that the supervisor received any discipline for the incident or that the Starbucks
considered this provocation in deciding whether to discharge the employee. The NLRB
also found it significant that Starbucks failed to identify the official(s) who made the
discharge decision.
Additionally, the ALJ credited the employee’s testimony that he never received a
warning regarding the May 14 incident, which critically undermined the company’s
contention that he could only be considered comparable to discharged employees who
engaged in misconduct following the issuance of a final warning. Moreover, even taking
into account the prior incident, the store manager’s explicit reference to the employee’s
strong union support in the discharge documentation cast considerable doubt on the
company’s claim that he would have been discharged in the absence of his protected
activity.
Concurrence. In a separate concurrence, NLRB member Philip Miscimarra criticized the
panel for having failed to decide what standard to apply when an off-duty retail employee
engages in misconduct in the presence of customers. In his view, such an employee
would lose the Act’s protection if he caused actual or likely disruption to the business. He
also concluded that this standard was satisfied here regardless of whether he was on or
off duty and if customers were aware of his employee status. Rather, his actions were
unprotected because he entered the Starbucks store for the purpose of conducting a
protest and — considering the business of Starbucks and the ALJ’s conclusion that he
engaged in disruptive conduct — likely could have disrupted business. Thus, the
employee’s conduct was unprotected and the decision to discharge him would have been
lawful had Starbucks acted based on that incident alone.
The slip opinion is: 360 NLRB No. 134.
Attorneys: Daniel Nash (Akin Gump Strauss Hauer & Feld) for Starbucks Corp. Stuart
Lichten (Lichten & Bright) for Local 660, Industrial Workers of the World.
NLRB: General Counsel substantially justified in litigation; employer denied EAJA
attorneys’ fees
By Ronald Miller, J.D.
An employer’s application for an award of attorneys’ fees and costs under the Equal
Access to Justice Act (EAJA) was denied, ruled a divided three-member panel of the
NLRB. The mere fact that the General Counsel lost his position (which was contrary to
prior precedent) did not mean that the litigation lacked substantial justification. Because
the Board had never before examined contract language that included an explicit
52
confirmation by the employer that the parties were forming a 9(a) relationship, but that
also only referenced employees’ union membership and representation, the General
Counsel’s case was reasonably grounded in fact and law and was substantially justified.
Member Miscimarra dissented (Austin Fire Equipment, LLC, June 24, 2014).
Bargaining relationship. In the underlying complaint, the General Counsel alleged that
the employer acted unlawfully when it changed employees’ terms and conditions of
employment during the term of an existing collective-bargaining agreement without
notifying and bargaining with the union. It was also alleged that the employer committed
additional violations after the contract expired. Those issues required determining
whether the bargaining relationship between the employer and the union was governed by
Sec. 8(f) or Sec. 9(a). If the relationship was governed by 8(f), then the employer was
free to terminate the relationship when the collective-bargaining agreement expired and
had no further bargaining obligations to the union. However, a Sec. 9(a) bargaining
relationship would have continued after the contract expired, along with the employer’s
duty to bargain.
To establish the requisite Sec. 9(a) relationship, the General Counsel relied solely upon
the parties’ execution of an acknowledgment form that that allegedly met all the
requirements of Staunton Fuel & Material. In Staunton Fuel, the NLRB held that
contract language alone will establish a Sec. 9(a) relationship in the construction industry
where the language unequivocally indicates (1) that the union requested recognition as
majority representative, (2) the employer recognized the union as majority representative,
and (3) the employer’s recognition was based on the union’s having shown, or having
offered to show, an evidentiary basis of its majority support. An administrative law judge
rejected the General Counsel’s argument that the acknowledgement form, standing alone,
established a Sec. 9(a) relationship under current Board law. The Board affirmed the law
judge’s decision.
Application for attorneys’ fees. Thereafter, the employer filed an EAJA application for
attorneys’ fees and costs. However, the ALJ found that the application should be denied,
and the employer filed exceptions to that denial. Under the EAJA, a qualifying party who
has prevailed in litigation before a federal government agency is entitled to an award of
attorney’s fees and expenses incurred in litigation unless the agency can establish that its
position was “substantially justified.”
As an initial matter, the Board observed that it has never before examined the precise
contractual recognition language at issue here. This case can fairly be said to straddle the
line between those decisions in which the Board has found contractual language
sufficient to establish a Sec. 9(a) relationship and cases where the particular language was
found insufficient.
The acknowledgement form in this instance stated that the employer confirmed that a
clear majority of the unit employees in its employ were members of the union for
collective bargaining purposes. It additionally acknowledged the union as the exclusive
bargaining representative of employees pursuant to Sec. 9(a). In Staunton Fuel, the Board
found that a Sec. 9(a) relationship was not formed based on contractual language stating
53
that the employer “recognized the union as the sole and exclusive collective bargaining
agent” for all employees in the defined unit. This language was insufficient to establish a
Sec. 9(a) relationship because it did not state that the employer’s recognition was based
on a contemporaneous showing, or offer by the union to show, that it had majority
support.
Similarly, the language in the acknowledgement in this case did not include additional
contractual language stating that the employer expressly acknowledged the union’s Sec.
9(a) representative status. Here, the Board found that the acknowledgment form
concerned only employees’ union membership and representation, and was insufficient to
form a 9(a) relationship under Staunton Fuel.
Substantial justification. Nevertheless, the Board found that the General Counsel’s
position was substantially justified under the circumstances. The acknowledgement
contained language that suggested the existence of a Sec. 9(a) relationship. Moreover, the
Board had never before examined contract language that included an explicit
confirmation by the employer that the parties were forming a 9(a) relationship but that
also only referenced employees’ union membership and representation. Thus, the Board
concluded that reasonable minds could differ on the effect of such a reference in an
otherwise insufficient contractual clause.
Dissent. Member Miscimarra filed a dissenting opinion in which he argued that under
Staunton, the employer’s actions would be lawful if the agreement stated that a majority
of the bargaining-unit employees were union “members” or “represented” by the union.
Here, the dissent argued that in substance, the General Counsel pursued litigation against
the employer based on an argument that the Staunton ruling rejected. This warranted an
EAJA recovery because the General Counsel did not have a reasonable legal basis for his
theory of the case.
The slip opinion is: 360 NLRB No. 131.
Attorneys: I. Harold Koretzky (Carver, Darden, Koretzky, Tessier, Finn, Blossman &
Areaux) for Austin Fire Equipment, LLC. William W. Osborn (Osborne Law Offices) for
Road Sprinkler Fitters Union No. 669, U.A.
N.Y. Sup. Ct.: Municipal employer’s unilateral discontinuance of practice of
assigning city vehicles to certain employees unlawful
By Ronald Miller, J.D.
A municipal employer refused to bargain in good faith when it unilaterally discontinued
the practice of assigning city vehicles to certain employees, ruled a divided New York
Court of Appeals. Although the city alleged that the permanent assignment of vehicles to
certain employees violated the city code, the New York high court concluded that the
Public Employee Relations Board (PERB) reasonably applied its precedent in
determining that the city acted unlawfully. However, the court determined that PERB’s
remedial order, which required the city to restore vehicle assignments to the affected
54
employees, was unreasonable because the vehicles had been sold. Judge Pigott, joined by
Judge Smith, dissented (Town of Islip v New York State PERB, June 5, 2014, Read, S).
The Town of Islip challenged a PERB ruling that it violated Civil Service Law Sec. 209a(1)(d) when it unilaterally discontinued the practice of permanently assigning cityowned vehicles to certain employees. The employees were allowed to use the “take
home” vehicles to commute to work. Section 209-a (1)(d) makes it an improper practice
for a public employer to refuse to negotiate in good faith with the bargaining agent for its
public employees. Many of the employees using “take home” vehicles belonged to
various collective bargaining units represented by a Teamsters union local.
Under the city’s code of ethics and financial disclosure rules, employees were not
permitted to use city-owned vehicles except to conduct official business. The city’s
administrative procedure manual also provided guidelines for the reporting of accidents
involving city-owned vehicles. Additionally, the manual provided for the permanent
assignment of vehicles to certain employees whose positions required them to be on-call
24 hours a day. Temporary assignments could also be made to other personnel. All
employees with “take home” vehicles were directed to keep a mileage log and not to use
the cars for personal errands. The town deducted $3 per day from the employee’s
paychecks to reflect the estimated value of the cars used for commuting.
New vehicle policy. In September 2007, the city and union began negotiations over a
successor collective bargaining agreement. The city proposed provisions regarding the
“take home” vehicles, but ultimately dropped the subject. In February 2008, an impasse
was declared and a mediator appointed. Meanwhile, the city council adopted a resolution
endorsing a new fleet policy. Under the new policy, only three categories of employees
would be assigned “take home” vehicles: elected officials, 24/7 responders, and
employees in multi-worksite jobs. All other employees would use pool vehicles available
at their work locations.
Thereafter, the union was notified that because of the policy change, 45 employees would
be shifted from assigned vehicles to utilization of pool vehicles. The union responded that
the employees’ use of city-owned vehicles was a mandatory subject of bargaining, and
demanded that the city retract any orders that bargaining unit employees turn in the keys
to assigned vehicles pending negotiations over the issue. The union filed an improper
practice charge with PERB, alleging that the city acted unlawfully by unilaterally
adopting the new vehicle policy. It also alleged that the city had adopted the new policy
in order to undermine the stalled contract negotiations, thus engaging in bad-faith
bargaining.
Administrative ruling. Following an evidentiary hearing, an administrative law judge
found that the union had carried its burden of demonstrating a clear and unequivocal 20plus year practice with respect to determining which employees/job titles were eligible
for “take home” vehicles, thus creating a reasonable expectation among union members
that the same practice would continue. However, the ALJ concluded that the union failed
to prove that the city refused to bargain the impact of the change; or engaged in bad-faith
bargaining by withdrawing the “take home” vehicle use proposals. Accordingly, the ALJ
55
held that the city violated Sec. 209-a(1)(d) by canceling “take home” vehicle assignments
without negotiation, and dismissed the union’s other claims.
PERB affirmed the law judge’s decision, and the city filed an action to annul the board’s
decision with respect to the Sec. 209-a(1)(d) violation. An appellate court confirmed
PERB’s determination. It held that substantial evidence supported PERB’s determination
that the permanent assignment of city-owned vehicles to the affected employees
constituted a past practice as to a term or condition of employment, a mandatory subject
of bargaining, which the Taylor Law barred the city from unilaterally discontinuing. This
appeal ensued.
Good-faith bargaining. The Taylor Law, Civil Service Law Sections 201(4), 203 and
204, requires all public employers and employee organizations to negotiate in good faith
to determine represented employees’ terms and conditions of employment. PERB has
long held that employee use of an employer-owned vehicle for transportation to and from
work is an economic benefit and a mandatorily negotiable term and condition of
employment; therefore, a public employer may not unilaterally discontinue a past practice
of providing its employees with this benefit.
The city urged that PERB’s determination of an improper practice was arbitrary and
capricious, an abuse of discretion, and not supported by substantial evidence for two
related reasons: first, an illegal practice cannot ripen into a binding past practice because
employees may not reasonably expect illegal activity to continue indefinitely; and
second, that it adopted the 2008 fleet/vehicle policy to conform its practice for
permanently assigning “take home” vehicles with the city code, and an employer has no
duty to negotiate with a union before discontinuing a past practice that is illegal under
local law.
However, the state high court observed that the city had never interpreted the code phrase
“personal convenience or profit” to encompass commuting to work by employees eligible
for “take home” vehicles on account of their work duties or seniority. Moreover, the
city’s interpretation of the code did not change in 2008 when it implemented the new
vehicle policy. As a result, the majority declined to reach the question of whether the
parties’ past practice was illegal under local law. Rather, it concluded that PERB
reasonably applied its precedent to determine that the city engaged in an improper
practice when it unilaterally discontinued the permanent assignment of “take home”
vehicles to employees who enjoyed this benefit before the city implemented the 2008
fleet/vehicle policy.
Remedies. On the other hand, PERB’s remedial order requiring the city to restore the
vehicle assignments to those unit members who enjoyed the benefit prior to
implementation of the new policy was found to be unreasonable. PERB did not seek an
injunction to preserve the status quo, and the city had sold some or all of the cars
formerly permanently assigned to unit employees. Forcing the city to invest significant
taxpayer dollars to replace those vehicles was unduly burdensome under the
circumstances, and did not further the goal of reaching a fair negotiated result.
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Dissent. In dissent, Judge Pigott argued that the question of whether a public employer
may unilaterally discontinue a past practice concerning a term or condition of
employment that a local law had declared illegal was squarely presented for review.
There was nothing in the previous collective bargaining agreements or in the laws and
regulations of the city that would allow public employees to take advantage of taxpayers
by obtaining municipally-provided transportation at discount rates, observed the dissent.
Thus, the dissent argued that the conduct engaged in by the city and its employees was
against the law and PERB’s determination could not make it legal.
The case number is: 95.
Attorneys: Ernest R. Stolzer (Rains & Pogrebin) for Town of Islip. David P. Quinn
(Mirabella & Quinn) for New York State Public Employment Relations Board. Liam L.
Castro (Koehler & Isaacs) for United Public Service Employees Union.
Va. Sup. Ct.: Workers’ state tort claims were not preempted by LMRA Section 301
By Ronald Miller, J.D.
A trial court erred in holding that state law tort claims of union workers for fraud and
negligent infliction of emotional distress were completely preempted by Sec. 301 of the
LMRA, ruled a divided Virginia Supreme Court. Finding that the underlying facts
supporting the employees’ fraud and emotional distress claims were outside the scope of
the collective bargaining agreement between Verizon and the Communications Workers,
the high court concluded that their claims were not completely preempted by Sec. 301.
Justice McClanahan filed a partial dissent in which he would have found that the
employees’ claims were completely preempted (Anthony v Verizon Virginia, Inc, June 5,
2014, Lemons, D).
Promise of enhanced severance benefits. The plaintiffs were technicians employed by
Verizon and members of the Communications Workers union (CWA). In May 2010, the
employees allegedly received an Enhanced Income Security Plan (EISP) which stated
that Verizon had a surplus of 12,000 employees and potentially could conduct layoffs. In
June 2010, the employees were told by the CWA and Verizon that their jobs were subject
to termination, and if they did not accept the EISP and voluntarily resign, they would not
receive enhanced severance benefits. Given this information, they resigned their
employment.
After they accepted the EISPs, the Virginia Employment Commission conducted a
hearing in which Verizon allegedly claimed that there was no surplus, the employees’
jobs were never in jeopardy, and they voluntarily resigned. Verizon allegedly advertised a
shortage of 200 technicians in the region shortly after representing to the employees that
there was a surplus. The employees filed suit in state court for actual and constructive
fraud against Verizon and constructive fraud against the CWA. One of the employees
also alleged negligent infliction of emotional distress.
The defendants sought removal of the action to federal court, arguing that the employees’
state-law claims were completely preempted by Sec. 301 of the LMRA because they
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required the reviewing court to interpret the parties’ collective bargaining agreements and
because the claims were inextricably intertwined with the terms of those agreements.
They also sought dismissal of the claims in federal court for failure to state a claim.
Ultimately, the federal court denied the defendants’ motions to dismiss and remanded the
case to state court. After the case was remanded, the trial court granted the defendants
demurrers, holding that the employees’ state law claims were completely preempted by
Sec. 301. This appeal ensued.
State court jurisdiction. Based on the defendants’ demurrer, the Virginia high court
observed that it was only concerned with whether the complete preemption doctrine
applied in this case. Here, the court concluded that the trial court erred by dismissing the
employees’ claims for lack of jurisdiction. The federal court had determined the claims
were not completely preempted by Sec. 301, so it could not exercise its removal
jurisdiction, and remanded the case back to the trial court to adjudicate the employees’
state law claims. However, following remand, the trial court dismissed the state tort
claims under the complete preemption doctrine.
The majority of federal courts have held that remand orders have no preclusive effect on
a state court’s subsequent substantive decisions. In Kircher v Putnam Funds Trust, the
U.S. Supreme Court made clear that remand orders are only conclusive as to the
determination of federal jurisdiction and a state trial court may not treat the remand as if
it were from an appellate court. Therefore, a federal district court’s decision concerning
its own jurisdiction is conclusive, and a state court is barred from reviewing it. In this
case, the trial court implicitly determined that the employees’ claims were completely
preempted, that the federal court possessed exclusive jurisdiction, and concluded that it
consequently lacked jurisdiction.
Clearly, the trial court possessed jurisdiction over the state law claims. If the employees’
claims were completely preempted, then, by operation of law, they were transformed
from state tort claims to Sec. 301 claims. Under the Supreme Court’s decision in Lingle v
Norge Div. of Magic Chef, state courts have concurrent jurisdiction to try Sec. 301
claims. It followed then that the trial court possessed jurisdiction to try the employees’
claims following remand. Therefore, the trail court erred by dismissing their claims, even
if they were completely preempted.
Complete preemption. Next, the Virginia high court turned to consider whether the
employees’ fraud and negligent infliction of emotional distress claims were completely
preempted by Sec. 301. Here, the state high court agreed with the federal district court
that the employees’ complaints did not give rise to Sec. 301 claims. A state-law claim is
transformed into a Sec. 301 claim when it is “inextricably intertwined with consideration
of the terms of the labor contract.” On the other hand, state law claims are not completely
preempted when the state law “confers nonnegotiable rights on employers or employees
independent of any right established by contract.”
As a result, the employees’ state tort claims are completely preempted only if they
implicate rights created by the collective bargaining agreements, or their claims are
“substantially dependent on analysis of the collective bargaining agreements.” Thus, the
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court had to examine the elements of actual and constructive fraud and negligent
infliction of emotional distress.
Fraud claims. The elements of common law fraud include: “[A] false representation of a
material fact; made intentionally, in the case of actual fraud, or negligently, in the case of
constructive fraud; reliance on that false representation to [plaintiff’s] detriment; and
resulting damage.” To establish fraud, “it is essential that the defrauded party
demonstrates the right to reasonably rely upon the misrepresentation. In this case, only
the falsity and reasonable reliance elements were in dispute.
The employees alleged that they were told by the defendants in June 2010, that their
employment was in serious jeopardy and they would have to decide whether or not to
accept the EISP or be terminated in August 2010. The employer later asserted that the
employees voluntarily resigned. According to the employees, the defendants
misrepresented material facts, knowingly and intentionally or negligently, and caused the
employees to believe they had no choice but to accept the EISP.
Whether Verizon had a contractual right under the CBA to declare a surplus and
terminate employees was not the issue before the court. Rather, the issue was whether
Verizon and the union knowingly or negligently misrepresented material facts to induce
the employees’ resignations. The court concluded that a trier of fact could resolve the
falsity element of the employees’ allegations without any reference to the CBA. Thus,
their allegations of a false representation were sufficient to survive demurrer.
Reliance element. Next, the employees alleged that they never would have accepted the
EISPs in the absence of the misrepresentation. Finding that they clearly pleaded that they
relied on the defendants’ statements in making their decisions to accept the EISPs, the
court concluded that their claims for fraud were based on facts outside the scope of the
CBA. As a result, their fraud claims were not completely preempted by Sec. 301.
Similarly, finding that the underlying facts supporting the emotional distress claim were
the same as those supporting the fraud claims, the court concluded that that complaint
was also outside the scope of the CBA, and therefore, not completely preempted.
The case number is: 130681.
Attorneys: D. Brooks Hundley (Hundley and Johnson) for Richard Anthony. Verizon
Virgina, Inc., pro se.
Hot Topics in WAGES HOURS & FMLA:
DOL releases $10.10 an hour minimum wage proposal for workers on federal
contracts
By Pamela Wolf, J.D.
On Thursday, June 12, Secretary of Labor Thomas E. Perez announced the release of a
proposed regulation to raise the minimum hourly wage to $10.10 for workers on federal
service and construction contracts. The move follows the directive made by President
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Obama in Executive Order 13658, announced on February 12. Federal agencies have
been asked to take steps to start implementing the wage increase, to the extent reasonable
and legally permissible, in advance of the rule’s finalization.
At a press conference about the proposal, Perez said: “No person who works a fulltime
job should have to live in poverty.” Referring to at least part of the impetus for the
minimum wage change, Perez commented, “The President knows that the federal
government should practice what it preaches.” The President has increasingly intensified
his push for an increase in the federal minimum wage. Perez stressed that the move to
raise the minimum wage for workers on federal contracts is not enough — he pointed out
that the current federal minimum wage is now worth 20 percent less than it was worth 30
years ago. “Congress must now follow the President’s lead,” he urged.
White House Domestic Policy Council Director Cecilia Muñoz, who also spoke at the
press conference, noted that the average minimum-wage worker is 35 years old, and half
of these workers are employed fulltime. A third of minimum wage workers are raising
children, she said, and more than half are women. Apparently referring to research
released by the White House earlier this year, Muñoz underscored that raising the
minimum hourly wage to $10.10 would help close the gender wage-gap by about 5
percent.
Executive order. EO 13658 applies to new contracts and replacements for expiring
contracts with the federal government that result from solicitations issued on or after
January 1, 2015, as well as to contracts awarded outside the solicitation process on or
after the same date, according to a DOL release. The order applies to four major
categories of contractual agreements: contracts for construction; service contracts under
the Service Contract Act; concessions contracts; and contracts entered into by the federal
government in connection with federal property or lands and related to offering services
for federal employees, their dependents, or the general public.
Proposed rule. The proposed rule provides guidance and sets standards for employers
regarding coverage, including for tipped employees and workers with disabilities, as well
as an enforcement process familiar to most government contractors, the DOL said. The
proposal also includes an economic analysis showing that nearly 200,000 workers will
benefit from the increase.
The DOL said the proposal came only came after extensive outreach to the federal
contracting community, workers, and procurement and contracting officials throughout
the executive branch.
Advance implementation. In addition to the proposed rule, which has been issued for
public comment, the Office of Management and Budget (OMB) and the DOL have
jointly provided initial guidance to agencies on steps they should take to begin
implementing the increased minimum wage in advance of the rule’s finalization. By
issuing this guidance, OMB and the DOL are asking agencies to take reasonable and
legally permissible steps immediately to start implementing the order, so that workers on
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federal contracts can benefit from wage increases as soon as possible after January 1,
2015.
Guidance. The DOL has also guidance on the requirements of the proposed rule,
including a Fact Sheet and Frequently Asked Questions.
Comments. The public may submit comments on the proposed rule for a period of 30
days after the notice of proposed rulemaking is published in the Federal Register. Only
comments submitted during that period will be taken into consideration.
Proposed DOL minimum wage regs for workers on federal contracts published,
comment period now open
By Pamela Wolf, J.D.
On June 17, the DOL published in the Federal Register its proposed regulations
increasing the minimum wage for workers on federal contracts to $10.10 an hour.
Announced by the agency last week, the proposed rule implements the provisions of
Executive Order (EO) 13658 issued by President Obama and published in the Federal
Register earlier this year on February 10. EO 13658 applies to new contracts and
replacements for expiring contracts with the federal government that result from
solicitations issued on or after January 1, 2015, as well as to contracts that are awarded
outside the solicitation process on or after January 1, 2015.
The DOL’s notice of proposed rulemaking, which would amend Title 29 of the Code of
Federal Regulations (CFR) by adding part 10, establishes standards and procedures for
implementing and enforcing EO 13658. The publication of the proposed regulations
means that the public may now submit comments on the proposed rulemaking.
Covered employers. According to a fact sheet released by the DOL in conjunction with
its announcement of the proposal last week, The EO applies to four major categories of
contractual agreements: (1) procurement contracts for construction covered by the DavisBacon Act (DBA); (2) service contracts covered by the Service Contract Act (SCA); (3)
concessions contracts, including any concessions contract excluded from the SCA by the
DOL’s regulations at 29 CFR 4.133(b); and (4) contracts in connection with federal
property or lands and related to offering services for federal employees, their dependents,
or the general public.
The EO and the proposed rule include what the DOL called “certain narrow exclusions”
from coverage. Those exclusions apply to: (1) grants; (2) contracts and agreements with
and grants to Indian Tribes under Public Law 93-638, as amended; (3) any procurement
contracts for construction that are not subject to the DBA (i.e., procurement contracts for
construction under $2,000); and (4) any contracts for services, except for those otherwise
expressly covered by the proposed rule, that are exempted from coverage under the SCA
or its implementing regulations (e.g., contracts for public utility services, including
electric light and power, water, steam, and gas; employment contracts providing for
direct services to a federal agency by an individual). The EO also does not apply to
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contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment
to the federal Government (i.e., those subject to the Walsh-Healey Public Contracts Act).
Minimum wage. The proposed rule states that the Secretary of Labor is required by the
EO to determine the minimum wage for covered contracts and solicitations on an annual
basis beginning January 1, 2016, according to the proposed regulation. The new
minimum wage rate is to be published in the Federal Register at least 90 days before it
takes effect. The minimum wage, pursuant to the EO, is to be not less than the amount in
effect on the date of the Secretary’s annual determination, and must be increased by the
annual percentage increase, if any, in the Consumer Price Index for Urban Wage Earners
and Clerical Workers (or its successor publication) as determined by the Bureau of Labor
Statistics. The increase must be rounded to the nearest multiple of $0.05.
Tipped wage. Pursuant to EO 13658, the minimum wage that must be paid to tipped
workers of covered employers must be equal to an hourly cash wage of at least $4.90
beginning on January 1, 2015. For each succeeding one-year period after that, until the
hourly minimum cash wage for tipped workers equals 70 percent of the minimum wage
in effect under the EO for such period, the hourly cash wage must equal the minimum
wage under the EO for the preceding year, increased by the lesser of $0.95 or the amount
necessary for the hourly cash wage for tipped workers to equal 70 percent of the
minimum wage. For each following year, the tipped rate must be at least 70 percent of the
minimum wage in effect for that year, rounded to the nearest multiple of $0.05.
Where workers do not receive enough in tips, when combined with the hourly cash wage
paid by the employer, to equal the minimum wage in effect, the cash wage paid by the
employer must be increased to equal the minimum wage rate. Consistent with applicable
law, if the wage required to be paid under the SCA or any other applicable law or
regulation is higher than the minimum wage required by the EO, the employer must pay
additional cash wages sufficient to meet the highest wage required to be paid.
Comment period open. Although the DOL previously released the proposed rule, its
publication in the Federal Register signals that the public comment period is now open
and will close on July 17, 2014. Instructions for submitting comments are provided in the
notice of proposed rulemaking.
DOL’s FLSA flip-flop on mortgage loan officers’ exempt status without notice and
comment to be reviewed
By Pamela Wolf, J.D. and Ronald Miller, J.D.
On Monday, June 16, the Supreme Court issued an order granting certiorari in a pair of
cases that challenge the way in which federal agencies administer the laws they are
charged with interpreting and enforcing. The Justices will determine whether those
agencies must go through the notice-and-comment process before revising their
interpretive rules. In this instance, the DOL is the agency under scrutiny for doing an
about-face on its earlier position that mortgage loan officers were exempt from FLSA
requirements. The petitions for certiorari, one filed by Secretary of Labor Perez, and the
other by intervening mortgage loan officers, seek review of a D.C. Circuit decision
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holding that since the DOL’s most recent interpretation declaring mortgage loan officers
nonexempt was at odds with its earlier interpretations, the agency was required to go
through the notice-and-comment process.
Decision below. The D.C. Circuit reversed a district court order dismissing the Mortgage
Bankers Association’s challenge to a DOL Wage and Hour Division “Administrator
Interpretation” concluding that mortgage loan officers were nonexempt under the FLSA
(Mortgage Bankers Association v Harris, July 2, 2013, Brown, J). Without addressing the
merits of the DOL’s interpretation, the appeals court remanded the case with instructions
to vacate it.
Administrator interpretations. Reflecting a change in direction for compliance
assistance, the DOL in 2010 announced that in lieu of opinion letters, it would issue more
generalized guidance in the form of Administrator Interpretations when it finds it
necessary to provide further clarity regarding the proper interpretation of a statutory or
regulatory issue. Administrator Interpretations would set forth a general interpretation of
the law and regulations that are applicable across-the-board to an entire industry,
category of employees, or to all employees, the agency explained. In the DOL’s view, the
approach represented a more efficient use of resources than attempting to provide
definitive opinion letters in response to fact-specific requests submitted by individuals
and organizations.
In the agency’s inaugural Interpretation Letter, the exempt status of mortgage loan
officers was addressed “to provide needed guidance on this important and frequently
litigated area of the law.” The 2010 Administrator Interpretation rescinded a 2006
opinion letter and held that mortgage loan officers did not qualify for the administrative
exemption. The appeals court found that the agency’s 2010 interpretation was
inconsistent with its white-collar exemption regulation, 29 CFR Sec. 541.203(b), as
revised in 2004. Because the agency’s new interpretation was at odds with the agency’s
prior interpretation, it had to conduct notice and comment rulemaking.
Notice and comment required. Relying on its decisions in Paralyzed Veterans of
America v. D.C. Arena L.P. and Alaska Professional Hunters Ass’n v. FAA, the appeals
court reaffirmed that when an agency has given its regulation a definitive interpretation,
and later significantly revises that interpretation, the agency has in effect amended its
rule, which it could not accomplish under the Administrative Procedure Act without
notice and comment.
The appeals court found itself in general agreement with the association that there is no
“separate and independent” requirement of reliance in determining whether an agency’s
interpretation qualifies as definitive. Rather, reliance is just one of several factors courts
can look to. Because the DOL conceded the existence of two definitive — and conflicting
— agency interpretations at oral argument, the association prevailed. Thus, the appeals
court reversed a lower court order and remanded the case with instructions to vacate the
2010 Administrator Interpretation.
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Cases consolidated. The Supreme Court ordered that the two petitions, Perez v.
Mortgage Bankers Association (Dkt No 13-1041) and Nickols v. Mortgage Bankers
Association (Dkt No 13-1052) be consolidated. The parties will have a total of one hour
of oral argument.
Tampa Bay area restaurant initiative reaps $1M-plus in back wages, damages for
1,518 workers
The DOL announced the results of its Wage and Hour Division’s (WHD) two-year-plus
“robust strategic enforcement initiative” aimed at strengthening labor law compliance in
the Tampa Bay, Florida, area’s restaurant industry, which reaped more than $1 million
for affected workers. Since fiscal year 2012, 152 full-service restaurants in the greater
Tampa Bay area have agreed to pay 1,518 employees $861,820 in back wages, plus
$152,081 in liquated damages, according to a June 3 release. The WHD investigations
uncovered FLSA overtime, minimum wage, recordkeeping, and child labor violations,
the DOL said. The WHD also assessed $12,509 in civil money penalties.
Types of violations. The FLSA violations resulted from the employers’ failure to
compensate employees properly for all hours worked, the DOL said. Common violations
that the WHD found included employers creating illegal tip pools involving kitchen staff,
which resulted in servers and waiters not being paid the proper minimum wage or
overtime compensation; paying straight-time wages for overtime hours; and making
illegal deductions from worker’s wages for credit card transaction fees, which reduced
wages below the required minimum wage. Employers also purportedly failed to maintain
accurate and thorough records of employees’ wages and work hours. The WHD cited
child labor violations for permitting minors to perform hazardous duties, such as
operating and cleaning a meat slicer.
Restaurants. The WHD found significant labor violations at the following restaurants:
Frenchy’s Original Café, 41 Baymont St., Clearwater; Frenchy’s Rockaway Grill on the
Beach, 7 Rockaway St., Clearwater; Frenchy’s South Beach Café, 351 S. Gulfview Blvd.,
Clearwater; Frenchy’s Saltwater Café, 419 Poinsettia Ave., Clearwater; Frenchy’s
Outpost Bar and Grill, 466 Causeway Blvd., Dunedin; Simply Delicious LLC, 4601 66th
St., Kenneth City; Vallarta’s Mexican Restaurant, 9212 Anderson Road, Tampa; and
Vallarta’s Mexican Restaurant, 13731 N. Dale Mabry Highway, Tampa.
In addition to paying the back wages and liquidated damages to the affected employees,
the restaurant owners have agreed to maintain future compliance with the FLSA, the
DOL said.
Continuing initiatives. The WHD is continuing its enforcement initiative this year to
identify and remedy FLSA violations in Tampa and the surrounding Hillsborough County
restaurant industry. It is also collaborating with the Florida Division of Alcoholic
Beverages and Tobacco, which is responsible for licensing and regulating the sale of
alcoholic beverages and tobacco, to identify problem areas of mutual concern and gain an
accurate understanding of local business models and issues. The state agency also
conducts investigations, audits, inventories, and tax assessments; imposes penalties for
violations; and encourages licensees to operate their businesses properly. As part of this
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collaboration, the WHD is referring case findings for review under state liquor licensing
guidelines.
In addition to its initiative in Florida, the WHD has other ongoing enforcement initiatives
throughout the country to identify and remedy violations that are common in the
restaurant industry.
Company pays $619,830 in back wages for time spent in mandatory staff meetings
Following an investigation by the DOL’s Wage and Hour Division (WHD), Justiss Oil
Co. Inc. has paid $619,830 in back wages to 270 current and former employees who were
not paid for the time spent they spent in mandatory staff meetings. The oil field services
company also neglected to record employees’ time spent at those meetings, according to
a WHD announcement on June 2. These practices violate the FLSA’s overtime and
recordkeeping provisions.
The investigation conducted by the division’s New Orleans District Office found that
Justiss Oil failed to pay workers for time spent attending mandatory safety and
orientation meetings that occurred on drilling rigs and platforms at the beginning of each
shift. The employer purportedly required the rig workers, who typically have a seven-day
tour of duty, to come to the meetings 30 minutes before the start of their 12-hour shift.
Because the employer failed to consider time spent at mandatory safety meetings as
compensable, employees were not paid for all hours worked and did not receive all of the
overtime pay to which they were entitled, the WHD said.
Justiss Oil Co. Inc. has paid all back wages in full and agreed to comply with all
applicable FLSA provisions in the future.
Feds say time workers spent in Integrity Staffing Solutions’ security screenings was
not compensable
By Pamela Wolf, J.D.
Noting both the DOL’s role, through its Wage and Hour Division, in enforcing the FLSA
and the Portal-to-Portal Act, and its own interest as an employer that requires physical
security checks in certain instances, the federal government weighed in with a resounding
“No!” on the question of whether time spent by employees in security screenings at
Integrity Staffing Solutions is compensable under the FLSA, as amended by the Portalto-Portal Act. According to an amicus brief filed by the Solicitor General of the United
States in support of the employer’s petition for certiorari to review the Ninth Circuit’s
reversal of a district court decision finding such activities were not compensable, the trial
court was right and the Ninth Circuit got it wrong.
The petition (Integrity Staffing Solutions, Inc. v. Busk; Dkt No 13-422), was filed by the
employer in the latest round of litigation arising from a lawsuit by warehouse workers
seeking back pay, overtime, and double damages under the FLSA for time spent in
security screenings after the end of their work shifts. The employees purportedly were not
compensated for up to 25 minutes spent at the end of their workday waiting to be
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searched and passed through metal detectors. Integrity Staffing provides warehouse space
and staffing for clients such as Amazon.com.
Holdings below. The district court initially dismissed the warehouse workers’ claims on
the grounds that such activities were not compensable under the FLSA. However, the
Ninth Circuit reversed. The appeals court found that, as alleged, the security clearances
were necessary to the employees’ primary work as warehouse employees and done for
Integrity’s benefit. Consequently, the employees stated a plausible claim for relief.
Government’s take. Employers are not required under the Portal-to-Portal Act to
compensate workers for the time they spend in activities that “are ‘preliminary and
postliminary’ to the principal activities they are employed to perform,” the Solicitor
General noted. “Petitioner’s post-shift and anti-theft screenings were noncompensable
because they were not integral and indispensable to the work performed by its warehouse
employees.”
The government took issue, among other things, with the appeals court’s conclusion that
the reasons for the screenings here — to prevent employee theft — “stems for the nature
of the employees’ work,” which involved “access to merchandise.” According to the
Solicitor General, the “integral and indispensable” test demands a more direct
relationship between a principal activity and the activity under scrutiny before the latter
loses it “preliminary” or “postliminary” nature and thus becomes compensable.
The Ninth Circuit applied an “unduly spare” test in evaluating the security screenings
here, according to the amicus brief. Because the employer required the screenings,
undergoing them was “indispensable” in one sense to working at the warehouse. But the
requirement is ‘“integral and indispensable’ to the employee’s productive work,” the
government asserted, pointing out that the phrase has not been broken into two separate
inquiries. Supreme Court decisions have found the general test met “when potentially
preliminary or postliminary activities were closely or directly related to the employees’
productive work.” But in this case, the anti-theft screenings after the employees’ shifts
“were not closely intertwined with their principal activity of filling orders in the
warehouse, and the court of appeals’ focus on whether they were done for the employer’s
‘benefit’[ ] was an insufficient proxy for determining whether they were integral and
indispensable to a principal activity,” the government asserted.
Nearly $5M obtained in back wages for workers on federally assisted project in
NYC
The DOL announced on June 9 that it has reached a settlement with MDG Design &
Construction LLC that resolves allegations of wage violations at the federally assisted
Grand Street Guild construction project in New York City’s Lower East Side. MDG and
other respondents have agreed to pay $3.8 million in back wages and fringe benefits to
about 200 of MDG’s subcontractors’ construction workers. Earlier, separate
investigations gave rise to the repayment of more than $1.1 million in back wages to
approximately 300 laborers and mechanics who worked for MDG’s subcontractors on the
Lower East Side project.
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MDG was the general contractor for the Grand Street Guild project, which involved the
refurbishment and rehabilitation of three 26-story apartment towers. The DOL’s Wage
and Hour Division (WHD) found numerous Davis-Bacon and Related Acts violations by
MDG subcontractors on the project, including failure to pay required prevailing wages
and submitting inaccurate or falsified payroll records to the government.
Under the terms of the settlement, MDG will implement and abide by a comprehensive
enhanced compliance agreement to ensure future compliance with the Davis-Bacon and
Related Acts, the FLSA, and applicable state and local wage laws. The general contractor
will also take steps to require that its subcontractors comply with applicable wage and
hour laws.
As part of the settlement, MDG will retain a WHD-approved independent monitor for
three years who will conduct regular reviews of the company and its subcontractors to
confirm compliance with applicable wage and hour laws on all prevailing wage and
federally assisted projects. The monitor’s findings will be reported to the WHD. The
monitor will also provide training to MDG staff, as well as to MDG subcontractors, and
establish a hotline, staffed 24 hours a day, to collect confidential reports of wage
violations and other instances of noncompliance.
In addition, MDG has agreed to implement substantial internal control measures at its
prevailing wage and federally assisted projects, including assigning dedicated supervisors
to these projects, providing written notification of pay rates to employees, and taking
steps to determine whether subcontractor bids ensure the payment of prevailing wage
rates.
The settlement agreement also includes respondents Charis Consulting LLC, Kona
Contracting LLC, as well as Michael Rooney and Nicola DeAcetis (owners of all three
companies) and Neys Escobar, an owner of Kona. All of the companies are based in
Huntington Station, New York.
The WHD previously obtained three-year debarments for the following MDG
subcontractors that worked on the Grand Street Guild project: ACJ Construction Corp.,
JECA Construction Corp., Millennium Century Construction Inc. and Omega Interior
Corp.
$1.15M deal would resolve overtime claims of misclassified managers at NJ Family
Dollar stores
By Pamela Wolf, J.D.
The parties to a class action filed against Family Dollar Stores are jointly seeking
approval of a settlement under which some 517 current and former store managers would
divvy up $1.15 million (less designated fees and costs) for unpaid overtime wages in
violation of New Jersey law. According to the complaint filed on March 3, 2011, the lead
plaintiff and putative class members regularly worked more than 40 a week without
receiving overtime compensation as required under state law because they were
misclassified by the employer.
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According to the brief filed on June 6 in support of the parties’ joint motion for
preliminary approval of the deal, the employer improperly misclassified the managers as
exempt from state overtime requirements. The Rule 23 class they seek to have
conditionally certified would include all current and former salaried managers employed
by Family Dollar in New Jersey from March 3, 2009, until the deal is preliminarily
approved.
Under the agreement, Family Dollar would pay out a maximum of $1,150,000, out of
which the plaintiffs’ counsel would seek an award of $345,000 (30 percent) in attorneys’
fees. Plaintiffs’ counsel could also ask for up to $10,000 in litigation costs. The class
representative would receive an enhancement of up to $7,500.
The litigation was stayed in June 2012 so that the parties could participate in mediation
scheduled for similar consolidated actions in New York. After extensive discovery in
those actions, the federal court in New York approved a settlement on June 7, 2013.
Using the discovery from the New York actions, the parties in this case then began
serious negotiations that led to the proposal they have now placed before the court.
State agency agrees to pay workers $425,000 in overtime back wages
The Southern Nevada Regional Housing Authority (RHA) will pay $425,000 in overtime
back wages to 77 current and former employees in the wake of an investigation by the
DOL’s Wage and Hour Division (WHD). Investigators found the Las Vegas-based state
agency violated FLSA overtime and recordkeeping provisions. The RHA, which is
regulated by the U.S. Department of Housing and Urban Development, provides
affordable and subsidized housing to low- and moderate-income families.
Investigators found that the RHA failed to record and pay for hours worked pre-shift,
post-shift and during meal breaks, according to a WHD statement on June 11. The state
agency also purportedly neglected to pay hourly employees time and one-half for hours
worked beyond 40 in a week. The WHD said the RHA also unlawfully considered some
salaried employees as exempt from overtime, though these employees did not meet the
criteria for exemption. These employees are due additional pay for overtime as well.
In addition to the payment of $425,000 in overtime back wages, the HRA has signed an
agreement with DOL and will take several steps to comply with wage and hour laws, the
WHD said, including implementation of new timekeeping procedures and advising all
employees of the noncompliance found during the investigation. The HRA is also
required to provide management and non-management staff with training on the FLSA.
$2.7M-plus deal would end wage-hour, vacation pay claims of 18,000 Applebee’s
franchise workers
By Pamela Wolf, J.D.
In an order entered on Friday, June 13, a federal district judge preliminarily approved a
proposed $2.765-plus deal to resolve Illinois litigation leveling class wage, overtime pay,
and vacation pay claims against AppleIllinois, L.L.C., dba Applebee’s Neighborhood
Grill & Bar, which has filed a Chapter 11 bankruptcy. The proposed settlement would
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resolve several strands of litigation stretching across nearly eight years in an effort to
obtain relief for an estimated 18,000 former and current employees.
In June 2013, the bankruptcy court approved the sale of 15 Applebee’s restaurants to
buyer RMH, Illinois, LLC. The proposed settlement, which would incorporate the
bankruptcy proceeds, resolves allegations that the several individuals sued violated FLSA
and Illinois Minimum Wage Law provisions by failing to pay tipped employees
minimum wages for performing non-tipped duties. It would also resolve Illinois Wage
Payment and Collection Act allegations that AppleIllinois failed to pay hourly employees
who separated from employment all of their earned vacation pay as part of their final
compensation.
Under the deal, one settlement class includes all those employed at AppleIllinois from
October 6, 2003, to the conclusion of litigation who worked as tipped employees earning
a subminimum, tip-credit wage rate. This class includes about 14,000 members. A second
settlement class includes all persons separated from employment with AppleIllinois in
Illinois between August 17, 2002, and the present who were subject to the company’s
vacation pay policy and did not receive all earned vacation pay benefits, and who were
employed for a year or more. This class, which includes members of the first settlement
class, includes about 18,000 individuals.
The maximum settlement amount under the proposal is $2,765,000 plus the bankruptcy
funds, as well as additional bankruptcy funds, if any, less service awards, attorneys’ fees
and costs, administration costs, and the employer’s portion of payroll taxes. Service
awards of $15,000 would go to each of five individuals; a sixth individual would receive
$12,000; and a seventh would receive $8,000. Class council would be permitted to seek,
without objection, attorneys’ fees of up to one-third of the settlement fund, as well as
actual litigation expenses incurred in the underlying litigation for minimum wage and
vacation pay violations.
The court approved the proposal as “fair, reasonable and adequate,” and has set a hearing
date of October 30, 2014, for final approval of the settlement.
Democrats introduce bill to gradually raise overtime salary threshold to cover more
workers
On June 18, Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education,
Labor, and Pensions (HELP) Committee, along with eight Senate Democrats, introduced
legislation that is designed to restore overtime protections for low- and mid-wage salaried
workers. The “Restoring Overtime Pay for Working Americans Act” would help to
restore the 40-hour workweek for these workers. In a news release, Harkin commented
that only 12 percent of salaried workers are guaranteed overtime pay based on their
salaries, compared to 65 percent in 1975. The bill is designed to restore overtime
protections by guaranteeing coverage to approximately 47 percent of salaried workers,
ensuring that people who work more get paid more, and boosting incomes for those who
work longer hours.
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“Every worker deserves a fair day’s pay for a hard day’s work, but because our overtime
laws are out-of-date, Americans around the country who work long hours away from
their families are denied a paycheck that reflects that work. That hurts their families and
our economy,” Harkin said. “Plain and simple, if you have to work more, you should be
paid more. Our legislation takes a commonsense approach to restoring overtime
protections by making clear who should be eligible for overtime, while strengthening
compliance provisions.”
According to Harkin, key provisions of the bill include:
Gradually raising the overtime salary threshold for executive, administrative, and
professional (EAP) workers from $455 a week to $1,090 a week to match the inflationadjusted level from 1975, the last time the threshold was set at an appropriate level, given
salary levels at the time. The new threshold would be phased in over several years and
indexed to inflation after that. This would ensure that low- and mid-wage workers
earning less than this threshold would be eligible for overtime pay.
Gradually raising the threshold for “highly-compensated employees” from $100,000
to $125,000, based on inflation since the concept was introduced in the regulations in
2004, and indexing it to inflation after that. Employees earning above this threshold are
more likely to be exempt from overtime than other white-collar workers because they
have a less stringent duties test that is used to determine their overtime eligibility.
Creating a “commonsense” definition of the term “primary duty.” This term is used
in regulations to determine if a worker’s duties are overtime exempt. Prior to 2004, a
primary duty was that which was performed the majority of the time. Regulations issued
in 2004 removed that 50-percent threshold, creating a loophole, suggested Harkin, that
allowed a worker to be exempt even if he or she only spends a few hours a week
supervising or doing other exempt duties. This is a common occurrence today for
employees like first-line supervisors in stores and restaurants. The bill would restore a
50-percent threshold.
Establishing recordkeeping penalties. Additionally, the bill would establish penalties
for violations of the recordkeeping provisions of the FLSA, which would be the same as
for violations of minimum wage or overtime: up to $1,100 if the violation is willful or
repeated.
Boston Medical Center would pay $1.5M to resolve claims of about 5,000-plus
patient workers under proposed deal
By Pamela Wolf, J.D.
In a case that was first dismissed in the district court and later revived by the First Circuit,
Boston Medical Center Corporation has agreed to settle the federal and state wage and
hour claims of more than 5,000 former and current patient care employees, according to a
joint motion filed by the parties on June 16. After more than four years of litigation
originally initiated in state court, Boston Medical Center has agreed to a $1.5-million
settlement of claims, among others, that the hospital system failed to compensate
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employees by making automatic deductions for meal breaks and for work performed
during pre- and post-shift periods, as well as mandatory training sessions.
After the trip up and back to the First Circuit, the plaintiffs in the two cases that would be
resolved by the proposed deal had intended to renew their motion to certify an opt-in
collective action as to their FLSA claims, and to move to certify an opt-out Rule 23 class
for their remaining claims. For damages, the plaintiffs sought the value of their own and
the putative class members’ unpaid wages, liquidated damages, attorneys’ fees, costs,
expert fees, and pre- and post- judgment interest.
Under the proposed agreement, Boston Medical Center would pay no more than
$1,500,000 to resolve the litigation. That maximum settlement amount, in addition to
payments to plaintiffs and class members, would include attorneys’ fees of 33.33 percent
($333,300) that would be sought by class counsel, incentive payments to plaintiffs and
declarants, administration costs, mediation costs, and employer payroll taxes.
The proposed settlement class would include (1) all individuals who worked at any time
during the class period as a non-exempt patient care employee of Boston Medical Center,
as determined by the health care systems’ records, and (2) all valid opt-ins, as defined in
the settlement agreement. The settlement class could include more than 5,000 members.
Class members who submit valid and effective claim forms would get a payment based
on their total number of eligible workweeks during the relevant time period as a
proportion of the total number of eligible workweeks of all members of the settlement
class, according to the proposal. If the calculated final settlement payment of an
authorized claimant who is also a valid opt-in is below $100.00, it would be increased to
$100.00. If the calculated final settlement payment of an authorized claimant who is not a
valid opt-in is below $25.00, it would be increased to $25.00.
Proposed rule extends FMLA rights to employees in same-sex marriages
By Lisa Milam-Perez, J.D.
U.S. Secretary of Labor Thomas E. Perez announced Friday a proposed rule that would
extend FMLA protections to all eligible employees in legal same-sex marriages,
regardless of the state in which they live. The proposal would help ensure that all families
will have the flexibility to deal with serious medical and family situations without fearing
the threat of job loss, according to a DOL release announcing the rule ahead of
forthcoming publication in the Federal Register. Specifically, the rule would revise the
definition of spouse under the FMLA in light of the Supreme Court’s decision in United
States v. Windsor, which found section 3 of the Defense of Marriage Act (DOMA) to be
unconstitutional.
“Spouse” under the FMLA. The FMLA allows eligible employees of covered
employers to take unpaid, job-protected leave for specified family and medical reasons,
including caring for a spouse who has a serious health condition. The proposed rule
would change the FMLA regulatory definition of “spouse” so that an eligible employee
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in a legal same-sex marriage will be able to take FMLA leave for his or her spouse or
family member regardless of the state in which the employee resides.
Currently, the definition of “spouse” applies only to same-sex spouses who reside in a
state that recognizes same-sex marriage. Under the proposed rule, the regulatory
definition of spouse in 29 CFR §§ 825.102 and 825.122(b) would be amended to look to
the law of the place in which the marriage was entered into, as opposed to the law of the
state in which the employee resides. With a “place of celebration” rule in place, all
legally married couples, whether opposite-sex or same-sex, would have consistent family
leave rights under federal law, even if the state in which they currently reside does not
recognize same-sex marriages. The proposed definition of “spouse” expressly references
the inclusion of same-sex marriages in addition to common-law marriages, and will
encompass same-sex marriages entered into abroad that could have been entered into in
at least one state.
Spouse (i.e., “husband or wife”) would be defined as follows: “the other person with
whom an individual entered into marriage as defined or recognized under State law for
purposes of marriage in the State in which the marriage was entered into or, in the case of
a marriage entered into outside of any State, if the marriage is valid in the place where
entered into and could have been entered into in at least one State. This definition
includes an individual in a same-sex or common law marriage that either (1) was entered
into in a State that recognizes such marriages or, (2) if entered into outside of any State,
is valid in the place where entered into and could have been entered into in at least one
State.”
FMLA rights extended. According to a DOL fact sheet, this definitional change would
mean that FMLA-eligible employees, regardless of where they live, would be able to take
leave to care for their same-sex spouse with a serious health condition; take qualifying
exigency leave due to their same-sex spouse’s covered military service; or take military
caregiver leave for their same-sex spouse. The proposed change also would entitle
eligible employees to take FMLA leave to care for their stepchild (child of employee’s
same-sex spouse) even if the in loco parentis requirement of providing day-to-day care or
financial support for the child is not met.
“The basic promise of the FMLA is that no one should have to choose between
succeeding at work and being a loving family caregiver,” said Perez. “Under the
proposed revisions, the FMLA will be applied to all families equally, enabling
individuals in same-sex marriages to fully exercise their rights and fulfill their
responsibilities to their families.”
OPM proposed rule. In related news, an Office of Personnel Management proposed rule
will appear in the June 23 Federal Register revising the definition of spouse in its FMLA
regulations. The revision will replace the existing definition, which contains language
from DOMA that refers to “a legal union between one man and one woman.” The new
definition permits federal employees with same-sex spouses to use FMLA leave in the
same manner as federal employees with opposite-sex spouses.
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The OPM administers Title II of the FMLA, which covers most federal employees. Title
II of the FMLA directs OPM to prescribe regulations that are consistent, to the extent
appropriate, with regulations prescribed by the Secretary of Labor to carry out Title I of
the Act. Accordingly, the proposed OPM regulation adopts the “place of celebration” rule
as well.
DOJ reports on post-Windsor efforts. Both the DOL and OPM rules were issued in
response to the Supreme Court’s June 2013 Windsor decision, which struck down the
DOMA provision that interpreted “marriage” and “spouse” to be limited to opposite-sex
marriage for the purposes of federal law. Following that ruling, President Obama directed
the Attorney General to work with the cabinet to review federal statutes to ensure that the
High Court’s holding, including its implications for federal benefits and obligations, was
implemented.
Also today, Attorney General Eric Holder issued a memorandum outlining the steps
taken thus far by the administration to implement Windsor. At the President’s direction, a
team of DOJ lawyers last year began working with attorneys in other federal agencies to
seek to extend federal benefits to same-sex marries couples, consistent with the Supreme
Court decision. The DOJ and the agencies have made many announcements pursuant to
these efforts over the last several months, a DOJ press release today noted. To date, for
example, the administration has announced that same-sex marriages will be recognized
for all federal tax purposes, that health insurance and retirement benefits are available for
same-sex spouses of all federal employees, and that the Defense Department will provide
spousal benefits for same-sex spouses of military servicemembers, according to the DOJ.
The federal agencies have chosen to implement the “place of celebration” rule. As noted
in the attorney general’s report, however, the Social Security Administration and
Department of Veterans Affairs are prohibited by federal statute from adopting this
approach for certain programs “of critical importance to millions of Americans.” It will
take Congress “to fix these parts of the law to ensure that Americans who rely on these
programs can obtain these essential benefits no matter where they live,” the DOJ noted.
Meanwhile, both the VA and SSA “have sought to extend benefits to the absolute
maximum extent, seeking out all legally available authority,” the DOJ reports. To that
end, the administration today announced that the VA Acting Secretary will designate any
individual in a committed relationship for burial in a national cemetery, which will allow
for the inclusion of same-sex spouses where the domicile provision would otherwise
govern. In addition, SSA will extend survivor benefits, lump-sum death benefits and aged
spouse benefits to same-sex couples if one partner could inherit from the other partner on
the same terms as a spouse under state law. This expands the number of states in which
these benefits can be extended, the DOJ said.
Proposed extension of FMLA protections to same-sex couples now open for
comment
The DOL has published in the Federal Register its proposed rule to extend FMLA
protections to all eligible employees in legal same-sex marriages, regardless of the state
in which they live. Although announced by the Secretary of Labor last week, the formal
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publication of the notice of proposed rulemaking on June 27 means that the period for
submitting comments on proposal is now open.
Specifically, the rule would revise the definition of spouse under the FMLA in light of
the Supreme Court’s decision in United States v. Windsor, which found section 3 of the
Defense of Marriage Act (DOMA) to be unconstitutional. Employment Law Daily editor
Lisa Milam-Perez previously discussed the changes that would be made by the proposed
rule.
Comments on the DOL’s proposal must be submitted on or before August 11, 2014, and
may be submitted electronically or by mail. Further instructions regarding submissions
are provided in the notice.
Farmers facing class allegations of wage violations for uncompensated pre-shift
work
By Pamela Wolf, J.D.
A group of seven plaintiffs has filed a lawsuit against Farmers Group, Inc. and Farmers
Insurance Exchange, whom they contend are joint employers, asserting state and federal
wage and hour violations for pre-shift work performed but for which they were not
compensated. According to their complaint, the companies knew that certain claims
representatives, claims adjusters, and appraisers were performing more than de minimis
pre-shift work but nonetheless failed to properly track this time or provide wages for this
work.
The plaintiffs allege they spent 30 to 60 minutes to perform required pre-shift tasks such
as starting up their computers, accessing applications on the companies’ websites,
obtaining assignments for the day, determining the locations they would need to visit and
ordering those visits, contacting body shops to confirm that vehicles they wanted to
inspect were available, contacting customers to confirm or get missing information
regarding damage to vehicles, and downloading forms on which to estimate those
damages.
The plaintiffs seek to represent an FLSA collective class and Rule 23 classes under the
Pennsylvania Wage Payment and Collection Law (PWPCL), Connecticut law, and
nationwide, under relevant state laws pertaining to employment agreements. The FLSA
collective group is estimated to include more than 1,000 current and former employees.
The Rule 23 class for the state law claims is estimated to include more than 2,050
(including some overlap with the FLSA group).
The complaint alleges that the companies violated the FLSA by permitting employees to
perform this “off-the-clock” pre-shift work, failing to require them to record this time,
and neglecting to compensate them for their pre-shift time. The companies also
purportedly violated the PWPCL by, among other things, “willfully and consistently
suffering and permitting” the plaintiffs and Pennsylvania class members to work 30 to 60
minutes daily performing tasks integral to the performance of their duties without paying
them any wages for the time they spent on these tasks, including overtime pay. The
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complaint also asserts claims under Connecticut law for workers who were not paid for
“off-the-clock” pre-shift work and for uncompensated overtime work.
Finally, the complaint asserts a nationwide breach of contract claim (except for
California) for the companies’ failure to pay the agreed-upon hourly wage for all hours
worked pursuant to the workers’ employment agreements.
Perez puts his weight behind U.S. Conference of Mayors resolution to boost
minimum wage
By Pamela Wolf, J.D.
Secretary of Labor Thomas E. Perez has thrown his support behind a resolution under
consideration at the meeting of the United States Conference of Mayors later this month
that would raise the minimum wage to $10.10 an hour. The boost would put privatesector employees on par with the minimum wage that will soon apply to workers on
federal contracts under an Executive Order issued by President Obama in February.
The 82nd Annual Meeting of the United States Conference of Mayors will convene from
June 20-23 in Dallas. Raising the minimum wage is just one of many resolutions that will
be considered. Others related to the workforce include increasing diversity in the teaching
profession, investing in summer youth jobs and financial education, strengthening career
pathways systems, expanding apprenticeships for good middle-class jobs, closing the
skills gap, and supporting a strong manufacturing sector.
In expressing his support for the minimum wage resolution, Perez also made an apt
observation about how change occurs, and may actually now be taking place with regard
to a livable working wage: “I support the resolution before the U.S. Conference of
Mayors calling on Congress to raise the national minimum wage and encouraging states
and local governments to do the same. This resolution, coupled with grassroots-powered
action nationwide, is part of a groundswell that proves change doesn’t always come from
Washington, sometimes it comes to Washington. I applaud San Francisco Mayor Ed Lee
and his colleagues from cities across the country for leading on this issue and introducing
the resolution. I urge its swift adoption.”
Perez pointed out that workers at the bottom of the income ladder haven’t seen a raise in
almost five years, even though their housing, transportation, food, utility, and child care
costs have all gone up. The labor secretary repeated what is becoming a familiar refrain:
“No one who works full time in America should have to raise their families in poverty.”
“That’s why President Obama has fought to increase the national minimum wage from
$7.25 to $10.10 per hour and boost the incomes of 28 million Americans, lifting two
million out of poverty,” Perez said. “These workers are not teenagers earning weekend
spending money, but hard-working adults with bills to pay and mouths to feed. They
deserve a raise.”
“From coast to coast, we’re seeing a surge of momentum on this issue, with states,
localities and forward-thinking businesses raising wages,” Perez continued. “They’re not
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just responding to overwhelming public support for higher wages; they know that it’s
good for the bottom line and invigorates an economy driven by consumer spending.”
Administration launches new initiatives to help support working families
The White House said that at its Summit on Working Families, Monday, June 23,
President Obama would reveal several more steps he is taking to create more
opportunities for working families to get ahead. The DOL and the Center for American
Progress (CAP) partnered with the White House to set an agenda for a 21st century
workplace. The White House also released a series of reports by the White House
Council of Economic Advisers.
The president has already raised the minimum wage for federal contractors, expanded
retirement opportunities, strengthened overtime protections, and signed an Executive
Order that protects workers from being retaliated against by their boss if they discuss
their wages. The president will build on this progress, according to a White House Fact
Sheet, by signing a Presidential Memorandum to help families better balance work and
spend time at home. He is also announcing a “package of both public and private sector
efforts that will take a strong stand to protect pregnant working women, increase
investments for research to understand the economic benefits of paid leave, expand
apprenticeships for women, target resources to help more women enter higher-paying
STEM and other fields, and make child care more affordable for working families.”
The June 23 Summit explores how, as the demographics of the U.S. workforce change,
workplaces can change to support working families, boost businesses’ bottom lines, and
ensure America’s global economic competitiveness in the coming decades. Businesses,
economists, labor leaders, legislators, advocates, and the media are convening for a
discussion on issues facing the entire spectrum of working families — from low-wage
workers to corporate executives, from young parents to baby boomers caring for their
aging parents.
Reports. In addition, the White House Council of Economic Advisers has released three
reports:
--Work-Life Balance and the Economics of Workplace Flexibility;
--The Economics of Paid and Unpaid Leave; and
--Nine Facts about American Families and Work.
Workplace flexibility. The president is issuing a Presidential Memorandum, according
to the fact sheet, directing federal agencies to implement existing efforts to expand
flexible workplace policies to the maximum possible extent. Agencies will be directed to
review their workplace flexibility and programs and report back any best practices and
barriers to their use. The memorandum will also clarify that federal workers have the
“right to request” a flexible work arrangement without fear of retaliation and will direct
agencies to establish procedures for addressing these requests by employees. It will also
call for training of employees and supervisors on the effective use of these tools and will
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direct the Office of Personnel Management to create a new Workplace Flexibility Index
that will be published online and updated annually to measure agencies’ success.
Pregnant Workers Fairness Act. Despite the Pregnancy Discrimination Act of 1978,
too many women still face discrimination in the workplace and a serious and unmet need
for reasonable accommodations that would allow them to keep working while they are
pregnant, the fact sheet states. For that reason, the president intends to urge Congress to
pass the Pregnant Workers Fairness Act, which would require employers to make
reasonable accommodations to workers who have limitations from pregnancy, childbirth,
or related medical conditions (unless it would impose an undue hardship on the
employer). The proposed law also would prohibit employers from forcing pregnant
employees to take paid or unpaid leave if a reasonable accommodation would allow them
to work.
Empowering pregnant workers. The president will also direct the DOL to release a new
online map that will be a one-stop shop where working families can learn about the rights
of pregnant workers in each state. The map will also permit families to see which states
are leading the charge in protecting their rights and which are lagging behind. This live
map will continue to reflect any future changes in state and federal policy.
Equal protections for all families. Last year, in United States v. Windsor, the Supreme
Court struck down Section 3 of the Defense of Marriage Act as unconstitutional. Seeing
the decision as a victory for same-sex married couples, the president instructed the
Cabinet to review all relevant federal statutes to ensure the decision, including its
implications for federal benefits and programs, was implemented swiftly and smoothly.
The DOJ has concluded that review. In almost all instances, the government is able to
extend benefits to same-sex married couples regardless of where they live. The DOL has
announced a Notice of Proposed Rulemaking to amend the definition of a “spouse” under
the FMLA so that eligible employees in legal same-sex marriages will be able to take
FMLA leave to care for their spouse or family member, regardless of where they live.
This change, according to the fact sheet, will ensure that the FMLA is applied to all
families equally, giving spouses in same-sex marriages the same ability as other spouses
to fully exercise their rights and responsibilities to their families.
State paid leave programs. The DOL is targeting funds for Paid Leave Analysis Grants
to fund up to five states to conduct research and feasibility studies that could support the
development or implementation of state paid leave programs, according to the fact sheet.
A preliminary announcement regarding the grants will go out this week to all state
governors.
DOL is also funding two new independent research studies that will examine how paid
leave programs impact employers and workers. One study already underway focuses on
state paid parental leave laws in California, New Jersey, and Rhode Island. The first
paper from this study, released in conjunction with the Summit, analyzes the positive
impact of the California law ten years after implementation. The second study, which
begins next month, will assess the current use of leave by workers and the likely effects
of alternative worker leave policies.
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Other initiatives. The fact sheet laid out several other initiatives designed to support
working families, including:

Promoting access to child care for workers in job training programs.

Expanding access to high-quality child care.

Supporting high-quality early education for all children.

Closing the gender pay gap and expanding women’s access to STEM and other
non-traditional occupations.

Federal science agencies leading efforts to increase women in STEM research
careers.

Expanding access to higher-paying jobs in construction fields for women.

Launching a new public-private partnership to recruit and train women for STEM
fields and apprenticeships.

Enforcing federal employment nondiscrimination laws to ensure men and women
have equal access to job opportunities.
Private sector partnership. The Obama Administration said that it is joined in these
efforts by private sector and non-profit partners. The National Center for Women &
Information Technology intends to announce a new commitment to add thousands of new
technical women to the U.S. talent pool by 2016 through their Pacesetters program, and it
is expanding access to the “Transforming Technical Job Ads” initiative, an effort to
produce job ads with more inclusive language to encourage more female applicants, to
over 150 corporate and small business and more than 300 college and university partners
in the coming months.
The Society of Women Engineers will be releasing new online training tools for parents,
educators, and mentors to inspire and encourage more young girls to pursue engineering
careers. With funding from the S. D. Bechtel Jr. Foundation, the online resource will give
parents information and tools to understand how engineering can improve girls’ academic
achievement and career prospects, and give teachers and mentors activities to use with
students to engage and build their interests in STEM fields. This new training builds on a
series of publicly available tools to encourage women and girls to pursue and succeed in
engineering careers.
Tax relief. Among the other steps discussed in the fact sheet is the president’s budget
proposal to make permanent the Earned Income Tax Credit and Child Tax Credit and the
American Opportunity Tax Credit.
Employers’ working group. In the private sector, a group of companies and businesses,
including Bright Horizons Family Solutions, Care.com, Ernst & Young, Johnson and
Johnson, and KPMG will launch a working group that that will bring together companies
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across diverse industries to explore ways they can address the needs of working families
in today’s changing economy. In consultation with the Administration, the group will
identify ways that employers can measure their own progress and help ensure they have
effective practices in place to respond to workers’ work-life needs, retain the best talent,
and are well-positioned for success in the 21st century global economy.
Union support. On the labor scene, in partnership with the U.S. Department of
Education, more than 40 unions and labor-management organizations have pledged to
expand low-skilled workers’ access to their training programs and share best practices on
effective workforce and career pathway programs. These organizations are wellpositioned to expand opportunities for women to improve their foundation skills to access
higher-wage occupations in the fields of healthcare, construction, transportation, and
manufacturing, according to the fact sheet. “This collaboration represents partnerships
with almost 8,000 employers and will provide unprecedented access to educational and
training opportunities as well as supportive services necessary for women and working
families to be successful.”
President puts his weight behind flexible work policies, work-life programs for
federal workers
By Pamela Wolf, J.D.
As promised in conjunction with the White House Summit on Working Families,
President Obama has issued a Presidential Memorandum with the goal of enhancing
workplace flexibility and work-life programs for federal workers. “To attract, empower,
and retain a talented and productive workforce in the 21st century, the Federal
Government must continue to make progress in enabling employees to balance their
responsibilities at work and at home,” according to the Memorandum. “We should build
on our record of leadership through better education and training, expanded availability
of workplace flexibilities and work-life programs, as appropriate, and improved tracking
of outcomes and accountability. In doing so, we can help ensure that the Federal
workforce is engaged and empowered to deliver exceptional and efficient service to the
American public while meeting family and other needs at home.”
The Memorandum thus declares it the policy of the federal government “to promote a
culture in which managers and employees understand the workplace flexibilities and
work-life programs available to them and how these measures can improve agency
productivity and employee engagement.” The federal government is also charged with
identifying and eliminating any arbitrary or unnecessary barriers or limitations to the use
of these flexibilities and developing new strategies consistent with statute and agency
mission to foster a more balanced workplace.
Flexible work schedules. The president has directed, among other things, that regarding
federal workers’ right to request work schedule flexibilities:
(1) Agencies must make federal employees aware, on a periodic basis, that they have
the right to request work schedule flexibilities available to them under law,
pursuant to an applicable CBA or under agency policy, without fear of retaliation or
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adverse employment action as a consequence of making such a request.
(2) With the aim of facilitating conversations about work schedule flexibilities, each
agency must review, and if necessary amend or establish, procedures within 120
days of the date of the Presidential Memorandum. Subject to CBAs, agency
procedures must provide the following:

Provide employees an ability to request work schedule flexibilities,
including telework, part-time employment, or job sharing;

Upon receipt of such requests, supervisors (or their designees) should meet
or confer directly with the requesting employee as appropriate to understand
fully the nature and need for the requested flexibility;

Supervisors must consider the request and supporting information carefully
and respond within 20 business days of the initial request, or sooner if
required by agency policy; and

The agency should remind employees on a periodic basis of the workplace
flexibilities available to them.
(3) The Director of the Office of Personnel Management (OPM) must issue guidance
to Chief Human Capital Officers regarding the requirements set forth in this section
within 60 days of the date of this memorandum, and must assist agencies with
implementation of this section.
(4) Nothing in this section can be construed to impair or otherwise affect the discretion
granted to an employee's supervisor in making a decision on the request for work
schedule flexibilities, in accordance with the agency's mission-related requirements.
The Presidential Memorandum also directs that agency heads must ensure the following
workplace flexibilities are available to the maximum extent practicable, in accordance
with the laws and regulations governing these programs and consistent with mission
needs:

part-time employment and job sharing, including for temporary periods of time
where appropriate;

alternative work schedules, including assurance that core hours are limited only to
those hours that are necessary;

break times for nursing mothers and a private space to express milk;

telework;

annual leave and sick leave, including the advancement of leave for employee and
family care situations;
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
sick leave for family care and bereavement;

sick leave to care for a family member with a serious health condition;

sick leave for adoption;

FMLA leave, including permitting employees to take their FMLA leave
intermittently as allowed under the Act, including for childbirth, adoption, and
foster care;

leave transfer programs, including leave banks;

bone marrow and organ donor leave; and

leave policies related to domestic violence, sexual assault, and stalking situations.
Work-life programs. The president’s directive also encourages agency heads to take
steps to increase the availability and use of these work-life programs to the maximum
extent practicable:

dependent care programs, including the availability of on-site child care, child
care subsidies, emergency child care, and elder care;

Employee Assistance Programs, including counseling, resources, and referrals;

support for nursing mothers, including worksite lactation support programs and
resources; and

worksite health and wellness programs, and opportunities to utilize those
resources.
Guidance. In support of these directives, the Presidential Memorandum requires, among
other things, that the Director of OPM work with the various federal agencies to
encourage the use of flexible work policies and work-life programs. To that end, several
steps are mapped out, including that the Director provide education and guidance to
agency employees (including managers and supervisors) on the use of workplace
flexibilities and work-life programs “as strategic tools to assist with the recruitment and
retention of employees, with an emphasis on furthering positive outcomes for employees
and the agency that result from optimizing their use.”
Best practices and barriers. Within 120 days after the Director issues the called-for
guidance to Chief Human Capital Officers, each agency must review its workplace
flexibilities and work-life policies and programs to assess whether they are being
effectively used to the maximum extent practicable and submit a report to OPM. The
report is to include any best practices the agency has employed to create a culture and
work environment that supports the productive and efficient use of workplace flexibilities
and work-life programs. It also must include any barriers to or limitations that may
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unnecessarily restrict the use of existing workplace flexibilities and work-life programs
and recommendations for addressing or eliminating such barriers or limitations.
Agencies are also required, within 120 after those reports are submitted, to prepare a
report to the president that includes information on agency best practices on the use of
existing workplace flexibilities and work-life programs, recommendations for addressing
or eliminating barriers or limitations, proposals for future data reporting, and metrics for
tracking the use and cost-benefit of work-life programs.
Texas restaurant to pay $800,000 in back pay from illegal tip-pooling arrangement
In the wake of a Wage and Hour Division (WHD) investigation finding FLSA minimum
wage and recordkeeping violations, Big Texan Steak Ranch in Amarillo, Texas, has
agreed to pay $650,000 in back wages and $150,000 in liquidated damages to 279 current
and former wait staff. The violations stemmed from an illegal tip-pooling arrangement by
the restaurant, according to a June 23 DOL release.
The investigation determined that Big Texan illegally retained a portion of the restaurant
workers’ tips to pay for business costs, such as menus, glassware, trays, and contest
prizes. The employer also purportedly made illegal deductions from workers’ paychecks
for uniforms and withheld additional percentages of tips as a disciplinary tactic, bringing
those workers’ hourly wages below the required federal minimum wage. Additionally,
the restaurant failed to maintain accurate time and payroll records, the WHD said.
“Through investigations such as this one, the Wage and Hour Division continues to
combat widespread labor violations among restaurants to protect workers and to ensure a
level playing field for law-abiding employers,” WHD Regional Administrator Cynthia
Watson remarked. “The restaurant industry employs some of our country’s lowest-paid
workers, who are vulnerable to exploitation. We will continue our effort in the restaurant
industry to promote awareness and improve compliance, so workers and businesses can
prosper together.”
NY restaurant chain to pay $1M-plus to resolve FLSA violations
Under a consent judgment obtained by the DOL from a federal court in New York,
restaurant chain Manna’s will pay a total of $956,482 in back wages and liquidated
damages to 85 low-wage workers in the wake of an investigation by the Wage and Hour
Division (WHD).
The restaurant chain, owned by Betty Park, Kenny H. Kim, and Andrew Kim, will also
pay the DOL $31,952 for post-judgment interest and $39,737 in civil money penalties
due to the repeated and willful nature of the FLSA violations, bringing the total to
$1,028,171, according to a June 30 WHD announcement.
The investigation found widespread violations by the restaurants of the FLSA’s minimum
wage, overtime, and record-keeping requirements. The restaurants purportedly paid
cooks, dishwashers, and cashiers flat salaries for all hours worked instead of paying them
overtime at time and one-half their regular rates of pay when they worked more than 40
hours in a workweek, as required by law.
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In addition to paying the back wages owed, the restaurant chain agreed to maintain future
compliance with the FLSA; to post FLSA posters in English and any other languages
spoken by employees; and to inform employees of the terms of the judgment in a
language they understand.
The DOL has also secured a lien on property owned by Park in Palisades Park, New
Jersey, to ensure that the restaurant chain complies with the terms of the judgment. If the
defendants fail to make scheduled payments, the court can appoint a receiver to ensure
that the judgment’s terms are met.
The restaurants where FLSA violations were found include these New York locations:
Manna’s Soul Food Restaurant, 829 Broadway, Brooklyn; Manna’s Restaurant, 956
Flatbush Ave., Brooklyn; Manna’s Soul Food Restaurant, 478 Rockaway Ave.,
Brooklyn; Manna’s Soul Food Restaurant, 54 E. 125th St., New York; Manna’s Soul
Food Restaurant, 70 W. 125th St., New York; Manna’s Restaurant, 2331 Frederick
Douglass Boulevard, New York; and Manna’s Restaurant, 486 Lenox Ave., New York.
“This was the division’s second investigation of these businesses,” explained WHD
District Director Maria Rosado. “In 2006, several of the restaurants paid more than
$166,000 in back wages for similar overtime violations. The recurring and deliberate
nature of these violations is unacceptable.”
The cases were litigated on behalf of the WHD by the DOL’s Regional Office of the
Solicitor in New York City.
LEADING CASE NEWS:
1st Cir.: Employee’s role in internal corruption investigation prompted discharge,
not FMLA leave
By Lisa Milam-Perez, J.D.
An employee of the Puerto Rico Electrical Power Authority (PREPA) was unable to
revive her FMLA claims against the agency based on her discharge, and other adverse
actions, allegedly resulting from several instances of FMLA leave to care for her ailing
mother. Given the "larger picture" surrounding her discharge — namely, her role in an
internal corruption investigation implicating her supervisor, and subsequent (allegedly
retaliatory) charges against her —the employee could not plausibly demonstrate that her
discharge was causally connected to her requests for FMLA leave. The lower court did
not err in granting the employer’s motion to dismiss her FMLA interference and
retaliation claims, nor did it abuse its discretion by not granting or explicitly denying the
employee’s post-judgment request to amend her pleadings, the appeals court found
(Carrero-Ojeda v Autoridad de Energia Electrica, June 20, 2014, Thompson, O).
Corruption investigation; FMLA leave. According to the employee’s complaint,
PREPA’s internal affairs office initiated an investigation of corruption in the “technical
office” in which she worked, and her supervisor was among the targets. She testified and
provided information pursuant to the investigation. Her supervisor, in conspiracy with
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other employees, allegedly retaliated by commencing “a pattern of discriminatory acts”
against her, including interfering with her FMLA rights. The supervisor also launched an
administrative investigation against her, ostensibly in order to photocopy her personnel
file without his consent, while she was on FMLA–protected leave to care for her mother,
who was undergoing a medical procedure. A subsequent investigation ended in
administrative charges against the employee for violations of the agency’s rules of
conduct.
After her mother fell and injured herself, the employee requested and was granted leave
again to care for her. While she was away, three of her coworkers were promoted; the
employee was never given the chance to interview for the posts, even though she had
applied. This, the employee contended, “deprived her of an opportunity for promotion in
violation of her FMLA rights.” Also while she was out on leave, the supervisor and two
coworkers instigated a second investigation against her, and the ensuing inquiry caused
another set of administrative charges against her for violating the rules of conduct. One
hearing officer had already recommended her termination based on the earlier charges,
but the newly appointed executive director ordered a second hearing on those charges
before a different officer. After the new official was informed that the employee was a
collaborating witness in the internal corruption investigation, a second hearing officer
recommended her discharge.
Soon thereafter, the employee again applied for FMLA to care for her mother, who
continued to suffer from various serious health conditions, but she did not take leave
immediately. Meanwhile, the initial corruption investigation resulted in a
recommendation that the supervisor be charged with embezzlement, and the employee
alleged she was thereafter subjected to threats and retaliation. The employee’s lawyer
then received a letter from the executive director stating that the employee was
discharged. Although her lawyer told her about the letter, the employee was not
personally notified of her termination, so she kept working. Also during this time, the
employee’s mother fell and was injured. The employee notified her supervisor that she
needed three months of FMLA leave to care for her, asking that her previously approved
(but not yet taken) leave be “activated.” She was terminated days later and, a few days
after the employee’s discharge took effect, her lawyer received a letter from the agency's
labor office refusing to acknowledge her leave activation request. It wasn’t until nine
months later, the employee contended, that she personally received a letter notifying her
of her discharge — a month after her mother passed away.
In her subsequent lawsuit against the agency and individual defendants, the employee
asserted FMLA claims and other causes of action. Appealing only the dismissal of her
FMLA interference and retaliation claims, the employee said the lower court erred in
concluding she had not raised sufficient factual allegations to make out a plausible claim
for relief under the Act. The appeals court affirmed.
Retaliatory discharge. The employee first argued that the employer unlawfully
retaliated against her for exercising her FMLA rights when it fired her while "she was
under the protection of [the] FMLA." In her view, her termination was the culmination of
a "pattern of discriminatory acts" that began after she started helping with the internal
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corruption investigation. And, to the extent that the other alleged mistreatment coincided
with or followed her use of family leave, those acts amounted to FMLA retaliation as
well, she asserted. However, she “offers too little to connect her taking of FMLA leave
and her termination to push her claim across the plausibility threshold,” the First Circuit
concluded. It rejected her conclusory statement that there was no “justification" for her
termination during the period when she was out on FMLA leave other than to "retaliate
against her.”
“Calling her discharge FMLA retaliation does not make it so,” the appeals court wrote.
“Indeed, to the extent the actions about which she complains could be seen as retaliatory,
[her] participation in the internal corruption investigation offers a more likely
explanation.” Although she said she was terminated while her FMLA leave was in effect,
and “she appears to assume that the chronological overlap between her termination and
her leave renders the causal connection between the two actions obvious,” temporal
proximity is not enough — especially if the surrounding circumstances undermine any
claim of causation, the court noted. And she offered no further facts beyond the timing of
her discharge (such as negative comments, indications of reluctance by superiors or
coworkers about her FMLA leave-taking, discussion of her FMLA leave status in
performance reviews) that would suggest that her FMLA requests or leave status were
factored into the discharge decision.
Moreover, the employee’s complaint set forth another explanation for her termination:
after an investigation of alleged misconduct, two different officers recommended her
termination after two separate hearings, and the executive director followed their advice.
“Whether the investigation was well-grounded or instead part of a long-standing desire to
get rid of [the employee], the key point is that both the investigation and the alleged
animus pre-existed” the attempt to take FMLA leave. This cut directly against any
conclusion that her firing was related to FMLA-protected activity.
Other alleged retaliation. The employee also asserted that she suffered adverse (and
retaliatory) actions prior to her discharge, noting that these coincided with, or followed,
her taking of leave. For example, the misconduct investigations were launched while she
was out on family leave, and three coworkers were promoted while the employee didn’t
get an interview. Again, though, an employer can take adverse action against an
employee while she is on leave for reasons other than her leave status. Thus, this
allegation alone, without more, is not enough to support a plausible claim, the court said.
And “beyond synchronicity,” she was unable to tie these acts to her leave-taking.
Moreover, the employee expressly stated that her supervisor took these actions because
of her participation in the internal corruption investigation.
As to her failure to secure a promotion while she was out on FMLA leave, an employee
has no greater (or lesser) right to promotion by virtue of her FMLA-leave status, the court
pointed out, and the employee offered no factual allegation as to why her FMLA leave
had any bearing on the decision not to interview her or award her the position. Thus, the
district court rightly found the employee had not alleged a sufficiently plausible
retaliation claim to withstand her employer’s motion to dismiss.
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FMLA interference. Nor could her FMLA interference claim survive dismissal. Quite
simply, the employer had provided her all the benefits to which she was entitled under the
Act. She did not allege that the employer wrongfully denied her requests for FMLA
leave; indeed, she said the agency permitted her to take FMLA leave on two occasions
and approved her third FMLA leave request. Rather, she alleged that the employer
interfered with her FMLA rights by terminating her once she “activated” her third leave,
rather than permitting her to take the three months' leave she requested.
The employee admitted that her lawyer was notified of her discharge prior to her attempt
to take her final FMLA leave, but she claimed she was not informed of her termination at
that time — and she insisted that she remained employed when she then triggered her
previously-approved FMLA leave. Further, she contended, she was entitled to that leave
and was "protected by the law at the time she was illegally discharged." Not true, the
appeals court found. Once her discharge took effect, she was no longer entitled to FMLA
leave benefits; consequently, she could not state a plausible FMLA interference claim.
The district court correctly granted the employer’s motion to dismiss on this ground as
well.
The case number is: 12-2133.
Attorneys: Angel A. Valencia-Aponte (Angel A. Valencia Law Offices) for Autoridad de
Energia Electrica. Wilbert Mendez (Law Office of Wilbert Mendez-Marrero) for Minerva
Carrero-Ojeda.
2d Cir.: Mentor at public high school was a volunteer, not a statutory employee
under FLSA
By Lisa Milam-Perez, J.D.
A student mentor at a New York City public high school was not an employee under the
FLSA, but a public agency volunteer, and thus was exempt from the statute’s minimum
wage and overtime requirements, the Second Circuit held. Considering for the first time
the scope of the FLSA’s public agency volunteer exception while a number of live
private-sector “intern” wage-hour cases loom in the circuit, the appeals court panel was
careful to note that “we express no view on FLSA issues that may be presented to this
court in other cases respecting purported private sector volunteers.” It affirmed a lower
court’s grant of summary judgment to the New York City Department of Education on
the mentor’s FLSA claims (Brown v New York City Department of Education, June 18,
2014, Raggi, R).
“Volunteer internship.” The plaintiff, a recent high school graduate, maintained close
ties with his alma mater and was a regular visitor to the school. Unable to secure paid
employment after graduation, his high school’s director of student life asked him if he
would be interested in mentoring students at another public high school that shared its
facilities, and he readily accepted the opportunity. The school principal determined that
the plaintiff didn’t have the necessary higher education and personal criteria necessary for
a paid staff position, but he “bent some rules” to create a “volunteer internship” for him.
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Neither the plaintiff nor the student affairs director discussed compensation or, for that
matter, the plaintiff’s employment status. He never submitted to the standard legal
requirements for employment with the city’s department of education, such as an
application, interview, background check, job classification, and formal assignment. The
plaintiff accepted the internship, he conceded, in order to build his resume, to model
himself on the student affairs director, and to be someone who could “stand up, and make
a change, and show the kids that we do care.”
Volunteer duties. The plaintiff served at the school for more than three years, generally
reporting five days a week from 9:30 a.m. until 4:00 to 6:00 p.m. or later. He also assisted
with a Saturday test prep program for students and offered his services during a summer
session as well. According to the plaintiff, he was needed five days per week, and he
didn’t think he had any choice but to come in that frequently because otherwise, he
“would be letting [the director of student life] down, and would be letting the school
down.” But on the few occasions when he was absent, he was neither criticized nor
disciplined.
He was offered little opportunity to actually “mentor,” though, until several years into his
service. Instead, he filled in for staffing shortages: answering phones, printing out
schedules, contacting parents, and providing classroom coverage for teachers. He also
took on a disciplinary role, assisting with lunchtime supervision and detention and
monitoring hallways, and was assigned to the school’s “I-team” (intervention team),
performing the same duties as paid staff members, who engaged in student conflict
resolution and helped to enforce school rules.
On a few occasions, the plaintiff asked the student affairs director or principal for money
— usually followed by a request to be put on the school payroll — and they would
provide him with $40 or $50 in cash, meals, and transit cards. According to the plaintiff,
the principal said there was not enough money in the budget, but he promised that he
would try to find money to fund a paid part-time position. The plaintiff contended he was
led to believe that he would receive a stipend when the principal informed him that he
applied for a grant that might enable such payment to the interns. But the school never
got the funding and he was never put on the payroll.
Volunteer defined. In 1985, Congress specifically codified an FLSA exception from the
statutory definition of “employee” for individuals who volunteer their services to public
agencies, defined as “a state, a political subdivision of a state, or an interstate
governmental agency.” Specifically, FLSA Sec. 203(e)(4)(A) applies where (1) the
individual receives no compensation, or is paid expenses, reasonable benefits, or a
nominal fee to perform services for which the individual volunteered; and (2) such
services are not the same type of services which the individual is employed to perform
for the agency. The DOL has articulated additional criteria for the exception to apply: the
individual must (1) perform work for “civic, charitable, or humanitarian reasons;” (2) do
so “without promise, expectation or receipt of compensation” for these services; and (3)
perform such work freely and without pressure or coercion, direct or implied, from the
employer.
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While the FLSA is a remedial statute and its exceptions are to be construed narrowly, in
the case of the volunteer exception, “we recognize, as DOL has, that `Congress did not
intend’ for the FLSA requirements to be construed ‘to discourage or impede volunteer
activities undertaken for civic, charitable, or humanitarian purposes,’” the appeals court
noted.
Mixed-motive argument fails. The plaintiff admitted that, in agreeing to volunteer at the
school, at least one of his motives was “civic, charitable, or humanitarian.” Specifically,
he wanted to help high school students by showing that people like himself genuinely
cared about them. However, he argued that he didn’t satisfy the regulatory criteria on this
point because he didn’t act solely for an altruistic purpose. But the district court had
rejected his argument that a person acting with mixed motives did not qualify as a
volunteer, and the Second Circuit did too. The regulatory text contained no qualifying
modifier requiring “civic, charitable, or humanitarian reasons” to be “exclusive,"
"singular", or even "predominant,” the appeals court observed, and nothing in the
legislative or regulatory history suggested that either Congress or the DOL “intended to
limit the volunteer exception to persons acting solely for civic, charitable, or
humanitarian reasons.”
Moreover, “common sense and human experience inform our consideration” of this
“exclusive-purpose theory, the court said, and “[t]hey instruct that human actions are
frequently informed by multiple reasons.” The appeals court also reasoned that “to
exclude all services provided with such mixed motives from the public agency volunteer
exception to the FLSA would undoubtedly discourage and impede a significant amount
of public agency volunteering, contrary to Congress’s intent.”
Instead, an individual’s mixed motives simply go to the totality of the circumstances to
be considered by the court in deciding whether, as a matter of law, a person is a volunteer
or an employee. Here, the court found, “[t]he fact that this unemployed, recent high
school graduate hoped also to build his resume and to emulate his role model does not
legally preclude a court from finding him to have served as a public agency volunteer
exempt from the FLSA’s minimum and overtime wage requirements.”
Nor did it matter that the plaintiff had hoped to achieve his civic and humanitarian goals
by playing a mentoring role but wound up performing disciplinary functions instead. In
the court’s view, these duties also allowed the plaintiff to undertake his humanitarian
objectives, and nothing in the nature of his work removed him from the public agency
volunteer exception.
No compensation promised. The plaintiff claimed that he expected to be compensated
for his services to the school given the principal’s promise “to search the budget” for
money to pay him, as well as his assertion that he was applying for a grant from which he
hoped to fund a stipend for the school’s interns. But these facts were not enough to
establish a dispute of fact that the plaintiff was promised compensation, thereby
precluding application of the public agency volunteer exception. Giving the term
“promise” its ordinary meaning in the absence of a regulatory definition, the appeals
court found such “forward looking statements as to future possibilities” were insufficient.
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The only promise made here was to search the budget and to apply for a grant that might
make it possible to pay the plaintiff. But “before the outcome of the search was known or
the grant received, no person would be justified in understanding that defendants had
made a commitment to pay [him].” True, the plaintiff had a lengthy history with the
school, and “few people voluntarily work such long hours for so extensive a period
without expecting compensation.” But the plaintiff had conceded that no one ever told
him he was going to get paid. And his understanding that he wasn’t going to be
compensated was evident from his repeated requests for a paid position — and the
negative response with which these requests were met.
Also, contrary to the plaintiff’s contention, his professed subjective expectation of
payment was not enough; the district court did not err in requiring him to demonstrate
that his expectation was objectively reasonable. Otherwise, individuals would be able “to
wish themselves (however unreasonably) into being owed FLSA wages, despite the
(reasonable) belief of public agencies that they were accepting volunteered services,” the
court wrote.
No compensation paid. Nor did the modest cash and benefits that he received on
occasion demonstrate a receipt of compensation precluding volunteer status. The appeals
court rejected the plaintiff’s assertions that these items were more than nominal and that
the lower court erred in failing to apply an economic reality test in determining the
significance of these payments.
A de novo consideration of the employer’s ability to hire and fire, to supervise and
control, and to maintain records provided little assistance in deciding whether the cash
and benefits received here amounted to compensation for services. Worker skill level,
initiative, and integrality to the employer’s business were also unhelpful in distinguishing
between employees and volunteers, the appeals court said. Permanence and duration of
the working relationship were more probative factors to consider as to “economic
realities,” and on this point, the court noted once again that it was “unusual” for a person
to provide uncompensated services for 40-hour weeks over the course of years. Also
relevant, though, was the history and nature of the relationship between the parties. And
here, the court found, the director of student affairs and the school principal were acting
more in their capacities as professional educators who, when learning the recent graduate
was unemployed, offered him an unpaid internship to help build his resume. “In this
respect,” the court reasoned, “the parties’ relationship was not that of a typical
employer/employee but, rather, retained some of the mentoring features of
educator/student.”
Rejected, too, was the plaintiff’s suggestion that the cash and other payments he received
were hardly “nominal” in light of the economic realities of his impoverished condition.
Even if it were to fully credit his claims of indigence, the court said, it declined to hold a
combined cash allowance of $1,450 over the course of three years was anything more
than nominal. Furthermore, nothing in the record indicated that these payments were tied
to hours worked or performance goals met by the plaintiff. Finally, as for subway fares,
meals, and other benefits given to the plaintiff on occasion, the FLSA regulations provide
that public agency volunteers may receive expenses, reasonable benefits, or even a
89
nominal fee from an agency without losing their status as volunteers, and these were
precisely the types of payments allowable under this provision.
Conscience, not coercion. According to the plaintiff, he “sometimes” had no choice over
whether to come to work at the school. But this compulsion arose out of his own sense of
obligation rather than any coercion on the school officials’ part. The plaintiff
acknowledged that he was driven by “his own laudable sense of responsibility.” The
“voluntariness” prong of the public agency volunteer exception was thus satisfied as well.
Accordingly, summary judgment was correctly granted in favor of the school district on
the plaintiff’s FLSA claims, the Second Circuit found. The lower court also was well
within its discretion in dismissing the plaintiff’s New York Labor Law claims against the
school principal.
The case number is: 13-139-cv.
Attorneys: Larry Sonnenshein (New York City Law Department) for New York City
Department of Education. Chinyere Y. Okoronkwo (Law Office of Chinyere
Okoronkwo) for Jayquan Brown.
3d Cir.: Police officers’ FLSA claims fall short due to Sec. 207(k) exemption,
bargaining custom or practice
By Lisa Milam-Perez, J.D.
Police officers employed by the city of Teaneck, New Jersey, fell short on their FLSA
claims seeking compensation for unpaid overtime, for donning and doffing their uniforms
and gear, and for “muster” time during daily roll calls. The Third Circuit found no error
with respect to a district court’s findings that the FLSA’s 207(k) exemption applied to the
officers’ overtime claims; in so ruling, it held public employers need not expressly state
their intent to apply the exemption, resolving the issue as a matter of first impression, and
in accord with all other circuits to have addressed the question. Nor was the officers’
donning and doffing time compensable; it was excluded pursuant to Sec. 203(o) of the
Act based on the bargaining history between their union and the city, the appeals court
found, applying the Supreme Court’s guidance in Sandifer v. United States Steel Corp.
for deciding whether the items at issue were “clothes” within the meaning of this
provision (Rosano v Township of Teaneck, June 10, 2014, Fisher, D).
Officers’ work periods. Under the parties’ CBA, police officers had regularly recurring
work cycles of either seven or nine days. They worked under either a "six and three" plan
(six 8-hour shifts over six consecutive days, then three consecutive days off) or a "five
and two" plan (of five 8-hour shifts, then two days off). These work periods combined so
that the officers worked an average of 39.25 hours per week over the course of a calendar
year.
The applicable contract also provided that, if an officer performed work in excess of his
or her normal hours in any tour of duty, the work was considered overtime and was paid
at time and one-half. Overtime pay accrued in blocks based on the amount of time
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worked after a regular tour. For example, if an officer works less than 31 minutes past his
scheduled tour, he receives no overtime; if the officer works between 31 minutes and 44
minutes past his scheduled tour, he receives 30 minutes of overtime; if he works between
45 and 52 minutes past his scheduled tour, he receives 45 minutes of overtime; and if he
works between 53 and 59 minutes past his scheduled tour, he receives one hour of
overtime. Any overtime beyond one hour accrued in blocks of 15 minutes.
Partial exemption applied. At issue here was whether the FLSA’s Sec. 207(k) partial
overtime exemption applied, which allows public agencies to establish a "work period" of
anywhere from seven to 28 days for employees engaged in law enforcement or fire
protection activities. It was undisputed that the officers were engaged in law enforcement
within the meaning of the exemption; however, the officers contended that the city had
not established a “qualifying work period,” as required under the exemption. They didn’t
challenge the “five and two” and “six and three” plans per se; rather, they argued that the
city never made it known that it intended to adopt the Sec. 207(k) exemption, thus the
exemption did not apply. Whether such a notice requirement must be satisfied before
using the 207(k) exemption was a matter of first impression for the Third Circuit.
Sec. 207(k) does not specify how an employer establishes a qualifying work period.
However, nothing in the language of the statute requires employers to express their intent
to operate under the exemption, the appeals court observed. The statutory text requires
only that a qualifying work period exists, “nothing more.” Refusing to require employers
to clear a hurdle not provided for in the statute, the Third Circuit held employers seeking
to qualify under Sec. 207(k) “need not express an intent to qualify for or operate under
the exemption. Employers must only meet the factual criteria set forth” therein. Here, the
officers’ seven-day or nine-day, regularly recurring rotations amounted to a valid Sec.
207(k) work period. Therefore, the lower court properly concluded that the municipality
qualified for the partial exemption.
Calculation of overtime. The appeals court next rejected the officers’ contention that the
city’s timekeeping records were so inaccurate as to render the proper calculation of
damages impossible — and that the district court thus should have shifted the burden of
proof to the city to rebut the officers’ evidence of overtime worked. However, the court
below entered summary judgment because the officers failed to set forth any evidence of
uncompensated overtime — actual or estimated — not because of a failure to shift the
burden of proof.
The only evidence of overtime damages submitted by the officers was a spreadsheet
which calculated overtime liability based on the assumption that overtime accrued for any
time worked beyond an eight-hour shift. However, that provided no means of
determining whether individual officers exceeded the overtime threshold over the work
period, which is what matters under the FLSA, not the work day. What’s more, the
spreadsheet failed to account for the Sec. 207(k) exemption, which increases the number
of hours officers may work in a given work period before overtime requirements are
triggered.
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Absent any evidence to support their estimates of overtime damages, the officers'
calculations on the spreadsheet were “mere speculation,” and were insufficient to support
the requisite inference necessary to meet their burden of proving that they performed
work for which they were not properly compensated, the appeals court found. Therefore,
the district court properly granted summary judgment to the city on the officers’ claim for
overtime.
Muster time. The CBA also provided for inspection and roll call, or "muster time,"
which takes place 10 minutes prior to the start of officers' shifts and 10 minutes at the end
of their shifts. As a result, for each 8-hour shift, officers may work for 8 hours and 20
minutes. On any given day, they may work less than that amount depending on the length
of the post-shift muster period. In those instances, officers are still credited for the full 8
hours and 20 minutes. They argued nonetheless that they were entitled to overtime pay
for the 20 minutes of muster time on each shift, and contended on appeal that the district
court erred in finding this time was already factored into their salaries under the CBA.
This dispute was a matter of contract interpretation, the Third Circuit noted, and under
the CBA, it was clear that muster time was contemplated as a component of the officers'
base salaries. The appeals court cited a provision stating that "[a] normal tour of duty
shall be an eight (8) hour time division of the day for the purposes of assignment,” but
which later states that "[e]mployees will report for duty ten (10) minutes prior to the start
of their tour . . . and . . . will be dismissed from duty ten (10) minutes after the end of
their tour." The “only reasonable interpretation” of this provision, according to the court,
was that the officers’ work schedule on any given day is 8 hours and 20 minutes. “Such a
reading would therefore encompass the tour of duty, the assignment, and pre- and posttour muster time.”
This conclusion was buttressed by the parties’ extensive bargaining history, the appeals
court added, finding no indication that muster time was ever treated as a separate entity
from the normal shift, or was ever compensated separately. Nor was there any evidence
that the officers ever disputed this arrangement.
Donning and doffing time. In addition, the contract set forth specific uniform and
equipment requirements for officers while on duty. Officers are not required to don or
doff their uniforms and gear at headquarters, but some officers choose to do so partly at
home and partly at work, and others do so completely at headquarters. The option to
change at work is primarily for the benefit of police officers, according to the record
evidence; the officers feared the risk of loss or theft of uniforms and gear at home; safety
issues with performing firearm checks at home; or felt uncomfortable wearing the gear
while commuting, among other concerns.
The parties’ current CBA, as well as all past bargaining agreements going back 30 years,
were silent as to whether the officers were entitled to compensation for time spent
donning and doffing. And the union never requested, through contract negotiations or
other means, compensation for this time; it never filed a grievance or demanded
arbitration over the issue. “Those facts certainly establish a longstanding acquiescence on
the part of the officers and the unions to a ‘custom or practice’ of non-compensability of
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change time,” in the appellate court’s view. Thus, while this time was not excluded from
pay under the express terms of a bona fide CBA, the parties had nonetheless established a
custom or practice of not compensating the officers for the donning and doffing time.
Accordingly, the first element of Sec. 203(o) applied.
“Clothes.” Moreover, the vast majority of the donning and doffing time in question here
was spent changing "clothes," as defined by the Supreme Court in Sandifer v. United
States Steel Corp., issued earlier this year. While noting that its definition “leaves room
for distinguishing between clothes and wearable items that are not clothes, such as some
equipment and devices,” the High Court had cautioned that its “construction of 'clothes'
does not exclude all objects that could conceivably be characterized as equipment,” the
Third Circuit pointed out. The question, rather, “is whether the period at issue can, on the
whole, be fairly characterized as 'time spent in changing clothes or washing,’” the
Supreme Court instructed. “If an employee devotes the vast majority of the time in
question to putting on and off equipment or other nonclothes items . . . the entire period
would not qualify as 'time spent in changing clothes' under Sec. 203(o), even if some
clothes items were donned and doffed as well. But if the vast majority of the time is spent
in donning and doffing 'clothes' as we have defined that term, the entire period qualifies,
and the time spent putting on and off other items need not be subtracted.”
Accordingly, the appeals court perused the list of items used or worn by the officers:
uniform hat; uniform jacket; shirts; pants; dress blouse; leather gear; shoes/boots; socks;
tie; winter/summer uniform; sweaters; gloves; rainwear; bullet resistant vest; nightstick;
handcuffs; nameplate; medals; awards; Shield and Department I.D. card; notebook and
pen; firearm and ammunition; whistle; baton; watch; pepper spray (when issued); and a
flashlight. It found the first 14 of these clearly fit within the Supreme Court's definition of
"clothes," while the last 13 items did not. Despite this near tie, the appeals court
concluded it could not say that the "vast majority of the time in question" was spent
picking up the nonclothes items. Rather, the vast majority of time was spent donning and
doffing “clothes,” for Sec. 203(o) purposes. And, because both elements of the Sec.
203(o) exclusion thus applied here, the officers were unable to seek pay for the time spent
donning and doffing their uniforms and equipment. The appeals court thus affirmed
summary judgment in the municipality’s favor on the officers’ donning and doffing
claims, too.
The case number is: 13-1263.
Attorneys: Angelo J. Genova (Genova Burns Giantomasi & Webster) for Township of
Teaneck. Marcia J. Tapia (Loccke, Correia, Schlager, Limsky & Bukosky) for Gerard
Rosano.
3d Cir.: Employee received all leave to which he was entitled, FMLA claims
properly dismissed
By Ronald Miller, J.D.
Because an employee received all the leave to which he was due under the FMLA and
suffered no adverse employment consequences for doing so, the Third Circuit affirmed a
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district court’s grant of summary judgment in favor of an employer on his FMLA
interference and retaliation claims. The employee failed to allege that his employer
withheld any entitlement guaranteed by the FMLA, thus he failed to state a claim for
interference. With respect to his retaliation claim, the fact that the employee was placed
on a performance improvement plan based on documented performance problems well
before the employer knew he was sick defeated any retaliatory inference based on timing
(Ross v Gilhuly, June 17, 2014, Jordan, K).
The plaintiff was a business development manager for Continental Tire, reporting to a
regional manager. Because much of his work put him on the road, he began working
from his home, independently setting his travel schedule and work priorities. The
employee’s contact with his regional manager consisted of biweekly sales conference
calls during which the regional director would review his schedule and recommend
changes as needed. There was also regular email contact and phone contact, “a minimum
of two to three interactions a week.”
Performance improvement plan. Shortly after he started in his position, the regional
manager began receiving negative comments from a larger customer regarding his
performance. Ultimately, the customer asked that the employee be taken off its account.
After confirming the employee’s performance deficiencies, the regional manager began
reporting his findings to HR. A formal meeting was held with the employee discussing
his poor performance. Later, the regional director spoke with HR regarding the
development of a performance improvement plan (PIP) for the employee. Thereafter, the
employee met with the regional director to discuss the PIP and conduct his annual
review. The employee was given specific areas for improvement.
Less than a month after the PIP was implemented, the employee forwarded a letter to the
regional manager and HR from his physician informing them he had been diagnosed with
prostate cancer. Despite his illness, the employee wanted to move forward with the PIP.
The employer sent an email of support to the employee regarding his illness, and there
was a suggestion that “the PIP timetable may need to be adjusted.” After receiving notice
that the employee’s treatment plan called for surgery, the PIP timetable was extended by
at least 30 days. However, because the employee did not want the PIP to “hang over his
head” during his recovery, he requested the PIP be completed before his surgery.
FMLA leave. It was undisputed that the employee requested and was granted FMLA
leave that began on the date of his surgery, and ended when he returned to work. It was
also undisputed that he continued to receive his regular compensation and insurance
benefits while on leave. During the time he was on leave, his PIP remained “pending.”
When he returned to work, the status of his PIP was yet “to be determined,” but he did
return to the same job from which he left.
Approximately a month after the employee returned to work, he received a memorandum
from the regional manager informing him that his performance was still not satisfactory
in all the identified areas in the PIP.
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Grant of summary judgment. The employee filed this lawsuit alleging interference with
his FMLA rights and retaliation. While the suit was pending, Continental terminated the
employee. He amended his complaint to add a wrongful discharge claim. Ultimately, all
claims were resolved in favor of the employer. This appeal was timely filed. The only
issue on appeal was whether the district court erred in granting summary judgment
against the employee on his FMLA claims.
In this instance, the employee argued that there were genuine issues of material fact that
barred the district court’s grant of summary judgment. Specifically, he asserted that his
rights were violated when the regional manager failed to conclude the PIP before he was
expected to start his FMLA leave and then adding an addendum to the PIP upon his
return to work. Accordingly, the employee argued that he established a prima facie case
of interference and that there exists a causal link that could have led a reasonable
factfinder to conclude that he was retaliated against for taking FMLA leave.
Interference claim. To establish a claim of interference under the FMLA, an employee
must establish: (1) he or she was an eligible employee under the FMLA; (2) the
defendant was an employer subject to the FMLA’s requirements; (3) the plaintiff was
entitled to FMLA leave; (4) the plaintiff gave notice to the defendant of his or her
intention to take FMLA leave; and (5) the plaintiff was denied benefits to which he or she
was entitled under the Act. Here, there was no dispute that the employee met the first,
third, and fourth prongs. The parties only disputed whether the regional manager was
liable as an “employer” under the FMLA (the third prong) and whether the employee
showed that he had been denied benefits to which he was entitled (the fifth prong).
The Third Circuit concluded that because the employee had received all the benefits to
which he was entitled by taking leave and then being reinstated to the same position from
which he left, he could not satisfy the fifth prong of the interference analysis. Because he
failed to make a prima facie showing of interference, the appeals court determined that it
need not address whether the regional manager was an “employer” under the FMLA.
Further, the court rejected the employee’s contention that his termination and the
addendum to his PIP amounted to a denial of FMLA benefits. For an interference claim
to be viable, the employee must show that FMLA benefits were actually withheld.
Because the employee did not allege that the regional manager withheld any entitlement
guaranteed by the Act, he failed to state a claim for interference.
Retaliation claim. To succeed on an FMLA retaliation claim, the employee had to show
that (1) he invoked his right to FMLA-qualifying leave, (2) he suffered an adverse
employment decision, and (3) the adverse action was causally related to his invocation of
his FMLA rights. Here, the defendants conceded that the employee satisfied the first two
elements, but they argued that he failed to submit sufficient evidence to raise a genuine
dispute of material fact as to whether the addendum to his PIP and his subsequent
termination were causally related to his invocation of his FMLA rights. The only
question, therefore, was whether the employee was able to meet the shifting burdens of
McDonnell Douglas.
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The Third Circuit answered that question in the negative. Even assuming that the
employee established a prima facie case, the defendants submitted a legitimate,
nondiscriminatory reason for his termination — his poor job performance — and the
employee did not adduce any meaningful evidence to allow a reasonable factfinder to
find pretext. A finding that the PIP was originally justified only on the basis of the
customer’s concerns did not help the employee because customer feedback, particularly
from an important customer that accounts for millions of dollars of revenue, was an
obviously valid factor in evaluating performance. At any rate, the customer’s complaint
was not the sole justification for implementing the PIP or the later addendum, and they
were not the sole reason for his ultimate discharge. The employee admitted to his sub-par
performance in a memorandum to the regional manager, and his other deficiencies were
documented in detail in the final memorandum.
Temporal proximity. The appeals court also rejected the employee’s contention that
pretext was apparent because of the temporal proximity between his asking for FMLA
leave and the employer’s decision to extend the PIP. Under Third Circuit precedent, “the
timing of the alleged retaliatory action must be unusually suggestive of retaliatory motive
before a causal link will be inferred.” Here, there was nothing unusually suggestive about
the timing of the addendum or the employee’s termination. It was perfectly sensible for
the employer to delay the timeline of the PIP to accommodate the employee’s FMLA
leave, the appeals court pointed out.
The case number is: 13-2437.
Attorneys: Madeline S. Baio (Nicholson Law Group) for Kevin Gilhuly. Wayne A. Ely
(Kolman Ely) for Ronald Ross.
4th Cir.: Lower court’s summary judgment ruling in GEICO investigators’ FLSA
misclassification suit not a final order; Fourth Circuit lacked jurisdiction over
dueling appeals
By Lisa Milam-Perez, J.D.
Cross-appeals of a district court’s split decision in an FLSA overtime action brought by
GEICO security investigators were interlocutory, the Fourth Circuit held, dismissing
them for lack of jurisdiction. The court let stand a grant of partial summary judgment in
the employees’ favor as to liability (finding the employees were improperly classified as
exempt administrative employees), as well as partial summary judgment against them on
several remedial issues —finding no willfulness on GEICO’s part, and applying the
fluctuating workweek method of calculating damages (Calderon v GEICO General
Insurance Co, June 6, 2014, Traxler, W).
After finding that GEICO security investigators had been improperly classified under the
FLSA as administrative employees, exempt from overtime, the district court granted
partial summary judgment in their favor as to liability and then entered a “stipulated order
relating to remedy” that it characterized as a “final judgment.” The order contained a
“complete formula” for computing back pay based on the court’s numerous rulings
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(including its holding that the fluctuating workweek method was appropriate and that no
extended liability due to willfulness would attach) and the parties’ stipulations.
However, the order also noted that both parties reserved the right to appeal the underlying
rulings, and that it would “have no effect unless a judgment of liability is entered and
sustained after all judicial review has been exhausted.” The order also provided that the
district court would “have jurisdiction to resolve or supervise the resolution of any issue
concerning the remedy that the parties are unable to resolve.”
Judgment not final. Citing its precedent in Carolina Power & Light Co. v. Dynegy
Mktg. & Trade, the Fourth Circuit noted that “a judgment on liability that does not fix
damages is not a final judgment because the assessment of damages is part of the merits
of the claim that must be determined.” As such, the lower court’s order here was not
final, the appeals court noted. While the court below had “completed its work on many of
the issues that will eventually be used to determine the amount of damages to which each
plaintiff is entitled,” its order nonetheless did not embody “the essential elements of a
money judgment,” because it had not found all the facts necessary to compute the
damages due; nor did it determine how the back pay formula would apply to the
particular facts.
Although the order did provide that initial damages calculations would be performed by
an entity acceptable to the parties, both the employees and GEICO retained the right to
“review and confirm” those determinations, and the court retained jurisdiction to resolve
any remedial issues that the parties could not. Therefore, it could not be said that there
was nothing left for the court to do but enforce a judgment, the appeals court reasoned.
Precedent distinguished. The appeals court rejected the contention that its holding in
Ram v. Paramount Film Distributing Corp. supported a conclusion that the order here
was a final one. In that 1960 Fourth Circuit case, the judgment was deemed final because
even though it did not set out the total amount to be paid, that amount could be
determined from the court’s statement that a specific sum was due by each defendant,
with interest at 3 percent, from a date specific. Thus, in Ram, the district court “had
already found all the facts and resolved all questions of law necessary to determine the
amount of recovery,” the appeals court explained here. “All that remained was the
ministerial act of performing the necessary calculations.”
Not so in the case at hand. Here, “any number of factual or legal issues might arise that
will affect the amount of damages,” the appeals court noted — as evidenced by the fact
that the district court retained jurisdiction in order to resolve those issues if need be.
Accordingly, the lower court’s work was not completed; the judgment was not final. And
the Fourth Circuit had “no choice” but to dismiss the appeals before it.
The case numbers are: 13-2096 and 13-2149.
Attorneys: Matthew Hale Morgan (Nichols Kaster) for Samuel Calderon. Eric
Hemmendinger (Shawe & Rosenthal) for Geico General Insurance Co.
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5th Cir.: Company-wide analysis reveals oil well field service employees exempt
from FLSA overtime under Motor Carrier Act exemption
By Ronald Miller, J.D.
Land-based field service employees (FSEs) of an oil well services company were exempt
from the overtime provisions of the FLSA under the Motor Carrier Act (MCA)
exemption where they engaged in safety-affecting interstate activities, ruled a divided
Fifth Circuit. The company’s various districts operated under a single Department of
Transportation (DOT) number; were not independent legal entities; borrowed personnel
and equipment from each other; and solicited and accepted projects outside their
geographic areas, so the majority affirmed a district court’s use of a company-wide
analysis to measure the interstate activities of the FSEs. Judge Dennis dissented (Allen v
Coil Tubing Services, LLC, June 13, 2014, Higginson, S).
“Company-wide analysis.” The employer divided itself into six geographic “districts.”
The districts operated under a single DOT number and were not legal entities distinct
from the parent company. They sometimes borrowed personnel and equipment from each
other, and also on occasion solicited and accepted projects outside their respective
geographic boundaries. The plaintiffs worked in four of the six districts, holding various
positions. Their job duties varied by position. In filing this suit, the employees alleged
that they worked more than 40 hours a week and that their employer wrongfully denied
them overtime pay.
After initially denying the employer’s motion for summary judgment based, in part, on a
district-by-district analysis of the employees’ interstate activities, a federal district court
reconsidered its ruling and then, using a company-wide analysis, found that the MCA
exemption applied to land-based FSEs. It used the same individualized analysis to
establish the class of FSEs and to determine that only FSEs who worked on land-based
wells engaged in activities affecting motor vehicle safety. It then reasoned that a
company-wide analysis of these employees’ interstate activities was appropriate because
“[t]here is insufficient evidence or legal authority . . . to treat the districts separately.”
Measuring the interstate activities of the land-based FSEs on a company-wide basis, the
district court found there was a “reasonable expectation” that they could be assigned to
drive interstate. However, the district court granted the employees’ request to file an
interlocutory appeal, explaining that its rulings involved controlling questions of law as
to which there was a substantial ground for difference of option, and that “an immediate
appeal from those rulings is likely to materially advance the ultimate termination of this
litigation.”
Motor carrier exemption. For the motor carrier exemption to apply, employees must be
(1) employed by carriers whose transportation of passengers or property by motor vehicle
is subject to the jurisdiction of the Secretary of Transportation under Sec. 204 of the
MCA and (2) engaged in activities of a character directly affecting the safety of operation
of motor vehicles in the transportation on the public highways of passengers or property
in interstate or foreign commerce within the meaning of the MCA. To satisfy the first
requirement, an employer “must be engaged in interstate commerce.” Courts have
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defined “interstate commerce” as the actual transport of goods across state lines or the
intrastate transport of goods in the flow of interstate commerce.
To satisfy the second requirement, “what is controlling is the character of the activities
involved in the performance of [the employee’s] job.” As a general rule, if the bona fide
duties of the job performed are in fact such that the employee ordinarily is called upon to
perform, either regularly or from time to time, safety-affecting activities, he comes within
the exemption in all workweeks when he is employed at such job. On the other hand,
where the continuing duties of the employee’s job have no substantial direct effect on the
safety of operation, or where such safety-affecting activities are so trivial, casual, and
insignificant as to be de minimis, the exemption will not apply to the employee. To
measure whether employees are likely to perform safety-affecting activities that are
interstate in nature, courts look to whether the employees “could reasonably have been
expected to [engage] in interstate commerce consistent with their job duties.”
How to measure. It was undisputed that the employer satisfied the first requirement -being subject to the DOT’s jurisdiction – because it was a motor carrier engaged in
interstate commerce. However, there was a dispute as to whether the FSEs engaged in
activities that affected “the safety of operations of motor vehicles in the transportation on
the public highways of passengers or property in interstate commerce.” Specifically, the
parties contested whether, in measuring the interstate activities of the FSEs, an
“employee-by-employee,” “district-by-district,” or “company-wide” analysis was
appropriate.
Here, the majority concluded that a company-wide analysis was appropriate because Fifth
Circuit precedent effectively foreclosed an employee-by-employee analysis, and the facts
of this case and the arguments advanced by the parties, did not support a district-bydistrict analysis. The majority observed that under the binding analysis of Songer v Dillon
Res, Inc, where a carrier’s few interstate trips were distributed indiscriminately to all
drivers, the DOT had jurisdiction to regulate all the carrier’s drivers, even though some
drivers had not engaged in interstate trips during the relevant period, and that the drivers
were not entitled to overtime under the FLSA.
“Reasonable expectation.” According to the majority, the district court explicitly and
closely adhered to Songer’s reasonable expectation analysis. The district court examined
the job duties of each member of the Bellwether group to find that employees holding
different classifications had sufficiently similar duties to belong to the class of land-based
FSEs engaged in safety-affecting transportation activities affecting interstate commerce.
It further found that seven percent of projects company-wide required class members to
cross state lines; that the employer assigned such interstate trips indiscriminately; and that
these employees, therefore, had a “reasonable expectation” that they “could be assigned
to drive interstate.” Since this analysis adhered to the reasonable expectation approach of
Songer, the majority declined to find that, after using an individualized analysis to form
the class of FSE employees, the district court erred by not repeating the individualized
analysis to measure the interstate activity of each member of the class.
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Dissent. Arguing that the majority had departed from controlling Supreme Court and
circuit precedent, and misinterpreted and misapplied Department of Labor regulation 29
C.F.R. Sec. 782.2(a) and the decision in Songer, to find that the FSEs were exempt from
FLSA overtime, Judge Dennis filed a dissenting opinion. According to the dissent, these
employees were extremely unlikely to be called upon to drive interstate in the course of
their work. Moreover, the dissent argued that while the district court and majority cited
DOL regulations and Songer as support for their decisions, they misread and
misinterpreted those sources of law, neither of which supported the “group”- or “class”
based analysis that was applied here on a “company-wide basis,” but that the law
required individualized analysis of each employee’s actual job circumstances.
The case number is: 12-20194.
Attorneys: Christopher Earl Moore (Ogletree Deakins) for Coil Tubing Services, LLC.
Clyde J. Jackson III (Abraham, Watkins, Nichols, Sorrels, Agosto & Friend) for Donald
Allen.
7th Cir.: Uncertainty of cancer treatment made FMLA leave unforeseeable,
changing notice requirement; combo care of daughter and grandchildren covered
By Lorene D. Park, J.D.
Noting an employee’s daughter’s status was changeable due to the uncertain outcome of
her cancer treatment, a Seventh Circuit panel explained that the employee was not
required by the FMLA to provide a specific return date but rather to follow the
employer’s policy, which she did. Furthermore, although she mainly babysat her
grandchildren, the employer conceded that she also provided “some” care to her daughter
and such a combination of care was sufficient for FMLA coverage. For these reasons, the
grant of summary judgment for the employer was reversed and the case was remanded
with instructions to enter summary judgment for the employee on her FMLA claim
(Gienapp v Harbor Crest, June 24, 2014, Easterbrook, F).
The employee, who worked at a residential nursing care facility, told the top manager in
January 2011 that she needed time off to care for her daughter, who was being treated for
thyroid cancer. While on FMLA leave, the employee mailed in her FMLA form but did
not answer a question about the expected duration of her leave. The employer did not ask
her to fill in the blank or pose any written questions as to the duration. A physician’s
statement on the form said the daughter’s recovery was uncertain and that if she did not
recover she would require assistance through July 2011 at least. The top manager inferred
from this that the employee would not return by April 1, her leave’s outer limit, and in
mid-February hired someone else. When the employee reported for work on March 29,
the manager informed her that she no longer had a job.
Granting the employer’s motion for summary judgment on the employee’s FMLA claim,
the district court ruled that the employee forfeited her rights under the Act by not telling
the employer exactly how much leave she would take, though the FMLA form called for
that information. The employee appealed.
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“Unforeseeable” leave. As an initial matter, the Seventh Circuit panel explained that,
because the employee’s daughter’s status was changeable, the employee could not have
given a firm date, which meant her situation involved “unforeseeable” leave under DOL
regulations. The daughter might die and require no further care or she might live, in
which case she might need more care than the family could provide. The point was that
the date upon which the employee’s assistance might become unnecessary could not be
known in January 2011. In the appellate court’s view, that left two possibilities: the
employee “might have said something like ‘I will return no later than April 1, and earlier
if possible’ or something like ‘I will stay with my daughter as long as necessary, even if
that means giving up my job, but will return by April 1 if things work out.’”
While the employer’s position was that putting either of those statements on the form
would have complied with the FMLA’s notice requirement and held the employee’s job
open, the appeals court found that neither statement would have provided more
information than the blank box plus the physician’s statement. “It is hard to see why
omitting something obvious should have such a striking legal effect – certainly not when
Harbor Crest could and should have asked,” the court wrote.
Moreover, 29 C.F.R. Sec. 825.303, the regulation applicable to unforeseeable leave, does
not require employees to tell employers how much leave they need, if they do not know
yet themselves. Instead, it tells workers to comply with employer policies (which might,
for example, require updated estimates on about how long leave will last). Here, the
employer required the employee to call in monthly, and it was conceded that she did so.
The record did not reflect that the employer requested extra information during those
calls so the appeals court assumed that the employee complied with the employer’s
policies. As a consequence, it was not possible, on the summary judgment record, to
conclude that the employee fell short under Sec. 825.303. Instead, what seemed to have
happened was that the manager drew an “unwarranted inference from the physician’s
statement,” thereby confusing the anticipated duration of the daughter’s need for care
with the anticipated duration of the employee’s absence.
FMLA definition of covered “daughter.” The appeals court rejected the employer’s
alternative argument that the employee did not qualify for FMLA leave because her
daughter was over 18 years of age. While it was true she was over 18 in 2011, she was at
that time “incapable of self-care because of a . . . physical disability” and that was
sufficient to meet the statutory definition of a covered “daughter.” Nor did it matter that
the daughter was married and the employee was therefore no longer “standing in loco
parentis,” explained the court, because she only needed to satisfy one of the possible
definitions of “son or daughter” under the Act and she did so under the “incapable of selfcare” prong.
No need to be “primary” caregiver. Furthermore, to the extent that the employer
argued that the employee was not entitled to leave because she was no longer her
daughter’s “primary” caregiver, the court found that the statute did not support that
position. Employees are entitled to leave to “care” for their children and the word
“primary” is simply not there. And while the employer could argue that the employee
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provided care only for her grandchildren, and not for her daughter, such an argument
lacked a basis in undisputed fact and could not be resolved on summary judgment.
Employee wins summary judgment. Having found that the employer was not entitled to
summary judgment, the Seventh Circuit continued its analysis and concluded that the
employee was. The manager who made the decisions at issue testified in deposition that
the employee told her by phone that she planned to stay home as long as her daughter
needed care, which could be July 2011 or later. The employee denied saying any such
thing. Although that was a material dispute in the district court, the employer’s appellate
brief let the matter drop. The employer therefore waived on appeal any contention that
the employee told the manager that she would not return by the April 1 deadline.
The only other material dispute of fact that could prevent summary judgment for the
employee was whether she did provide care for her daughter as well as her grandchildren.
The employer preserved this argument for appeal by asserting that she was never at her
daughter’s bedside but was instead taking care of her grandchildren so her son-in-law
could go to work. In the appellate court’s view, because the employer conceded in the
district court proceedings that the employee provided “some” care to her daughter, the
issue was whether a combination of assistance to one’s daughter plus care of
grandchildren, “which could take a load off the daughter’s mind and feet,” counts as
“care” under the FMLA. Answering “yes,” the Seventh Circuit pointed out that care
includes psychological as well as physical assistance to a covered family member. “A
person who knows that her family is well looked-after has an important resource in trying
to recover from a medical challenge,” stated the court. For these reasons, no material
dispute of fact remained for resolution in the district court and the employee was entitled
to summary judgment.
The case number is: 14-1053.
Attorneys: John F. Doak (Katz, Huntoon & Fieweger) for Suzan Gienapp. Stephen E.
Balogh, III (Williams & McCarthy) for Harbor Crest.
8th Cir.: No FMLA violation in termination of casual employee days after taking
FMLA leave
By Kathleen Kapusta, J.D.
A casual employee with a history of chronic attendance problems who was terminated
after four unexcused absences in an eleven-month period, two of which occurred within
15 days of each other during a holiday period and within days of taking FMLA leave,
failed to show that she was terminated because she invoked her rights under the FMLA,
an Eighth Circuit panel ruled. Accordingly, the court affirmed a district court’s grant of
summary judgment to her employer (Malloy v United States Postal Service, June 301,
2014, Colloton, S).
Employed by the Postal Service for five years as a “casual employee,” the employee had
a history of poor attendance. Pursuant to Postal Service policy, casual employees could
be terminated for absenteeism, including a single unexcused absence, without prior
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notice. During her tenure with the USPS, she received several warnings about her
attendance.
FMLA leave and termination. In April 2010, the employee requested FMLA leave for
her lower back pain; she was authorized to take one day per one incident each month.
Authorized to take an extra day of leave on four occasions during 2010, she took leave on
December 17 and 18. In addition to her FMLA leave, she was also absent without excuse
on four occasions, including December 27. On December 29, she was terminated,
purportedly as a result of the unexcused absences. She then sued, asserting that she was
terminated in violation of her FMLA rights. Finding that she failed to show that similarly
situated employees were treated differently, the district court granted summary judgment
for the Postal Service.
Timing of termination. On appeal, the employee argued that she demonstrated a
submissible case with evidence of the temporal proximity of the exercise of her FMLA
rights to her termination; the Postal Service’s more lenient treatment of other casual
employees who did not exercise their FMLA rights; and its mendacity about the reasons
for her termination. Turning first to the evidence of temporal proximity, the appeal court
found that the 11-day period between her use of FMLA leave and her termination could
not be viewed in isolation.
Pointing out that the Postal Service repeatedly warned her about her attendance problems
before she requested leave, the court observed that evidence that an employer was
concerned about a problem before the employee engaged in the protected activity
undercuts the significance of the temporal proximity. Moreover, the employee used
FMLA leave several times during the seven months prior to her termination without
repercussions, suggesting that the agency was not hostile to her use of leave. In addition,
the employee’s termination followed immediately after a second unexcused absence;
thus, any inference of discrimination arising from temporal proximity to the December 17
and 18 FMLA leave was undermined by the inference of nondiscrimination arising from
temporal proximity to the December 27 unexcused absence.
Comparators fail to add heft. As to the employee’s contention that other casual
employees who were absent without excuse, but who did not take FMLA leave, were
treated more leniently, the court found that she failed to show that they reported to the
same supervisors or were absent without excuse during the busy holiday season.
Observing that these putative comparators were not similar in “all relevant respects,” the
court found that the evidence added “no heft to her case.”
No internal inconsistency. The employee next argued that the Postal Service’s
mendacity regarding its reasons for her termination supported an inference of
discrimination. Specifically, she contended that her supervisor’s testimony, in which he
stated both that a good worker deserves leniency and that he did not discuss her job
performance with her other supervisor before he discharged her, was internally
inconsistent. Because he also testified, however, that he was familiar with her
performance and that he checked with her other supervisor shortly after the termination,
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when there was still time to reverse it, the court found no support for an inference of
discriminatory motive.
Shifting explanations. Also rejected was the employee’s contention that the Postal
Service gave shifting explanations for her termination. Though she contended that when
she was terminated, the operations manager cited the fact that she had been absent four
times in the last 11 months and twice in the previous 15 days, he later added that her
supervisors complained about her work performance. This addendum, however, was not
the sort of shifting explanation that supports an inference of discrimination, the court
explained. The agency maintained all along that she was terminated for poor attendance.
That the manager supplemented the consistent explanation with comments about her
performance — perhaps to explain why leniency was unwarranted in this instance — did
not undermine its legitimate reason for the action, explained the court. Similarly, noting
that the Postal Service’s reliance on her missing work during its busiest season “was an
amplification of the core justification of poor attendance,” the court found that there was
no substantial change in its stated reason.
Finally, the court found that the employee’s claim that the Postal Service suddenly
enforced its workplace policies after she used FMLA leave was unsupported by the
record. Here, it noted that she used FMLA leave frequently during 2010 with no negative
consequences. That her attendance problems finally triggered action by the USPS did not
mean that it deviated from ordinary practice. Pointing out that the December absences
were not similar in kind to her previous ones, the court explained that they occurred in
close succession during the holiday season. Moreover, they came after she already
compiled a record of poor attendance and received warnings that she could be discharged
for additional infractions. Thus, the judgment of the lower court was affirmed.
The case number is: 13-1764.
Attorneys: Andrew L. LeGrant (LeGrant Law Firm) for Melissa Malloy. William C.
Purdy (U.S. Attorney's Office) for United States Postal Service.
9th Cir.: Approval of class settlement affirmed; no need for monetary valuation of
injunctive remedies
By Lorene D. Park, J.D.
In a class action against a janitorial franchising company alleging that it misclassified
franchisees as independent contractors, a divided panel of the Ninth Circuit found no
error in a district court’s approval of a settlement agreement that included a $475
payment and injunctive relief for each plaintiff and an attorneys’ fee award of $994,800.
Contrary to the arguments of the sole objector, the attorneys’ fee award was reasonable
given the contentious nature of the litigation, the skills and efforts of plaintiffs’ counsel
and the risks of continued the litigation. Moreover, there was no need for the district
court to assign monetary values to the injunctive remedies provided by the agreement
(Laguna v Coverall North America, Inc, June 3, 2014, Gould, R).
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The plaintiffs brought this class action in 2009 against a janitorial franchising company,
alleging that it misclassified its California franchisees as independent contractors, thereby
avoiding the protections provided by California’s labor laws. They also alleged that the
company breached its franchise agreements and committed fraud and unfair practices by
removing customer accounts from franchisees without cause so it could resell the
accounts to other franchisees. After two years of litigation, the parties agreed on a
settlement. The sole objector filed an objection and, although it was not timely, the court
considered the objection in the interest of the merits. After a fairness hearing, the court
approved the settlement agreement under Rule 23(e).
On appeal by the objector, the most contested provisions in the expansive agreement
included: (1) the company pledged to assign customer accounts to current franchisees,
conditioned upon their payment of franchise fees in full; (2) former franchise owners
would receive $475 each along with a $750 purchase credit toward a new franchise; and
(3) new franchisees would have a 30-day right to rescind their franchise agreements and
upon rescission would receive their money back except the $75 background investigation
fee. Beyond the agreement, the objector opposed the award of $994,800 in attorneys’ fees
to the plaintiffs’ attorneys.
Attorneys’ fees. Addressing attorneys’ fees first, the Ninth Circuit pointed out that the
context here involved compromise and noted that it had previously made it clear that
“since the proper amount of fees is often open to dispute and the parties are
compromising precisely to avoid litigation, the [district] court need not inquire into the
reasonableness of the fees at even the high end with precisely the same level of scrutiny
as when the fee amount is litigated.” It also explained that the lodestar method is most
appropriate where the relief sought is “primarily injunctive in nature,” and a fee-shifting
statute authorizes “the award of fees to ensure compensation for counsel undertaking
socially beneficial litigation.” That was precisely the situation here because the settlement
provisions were mostly injunctive in nature and Sec. 17082 of the California Business
and Professions Code is a fee shifting statute. Accordingly, the district court did not err in
using the lodestar method in gauging the fairness of the fees award.
The appeals court also found that the court correctly calculated the lodestar amount,
almost $3 million, and that an award of a third of that amount was reasonable. The lower
court took into account that the case had been contentiously litigated for over two years
and found that the over 4,500 hours billed by six attorneys, a paralegal, and a law clerk
was fair and accurate. Moreover, the district court cross-checked the award amount
against the alternative percentage-of-recovery method, as the appeals court had
encouraged courts to do. “Generally, courts use a benchmark figure of 25 [percent] to
gauge the reasonableness of an award under the percentage-of-recovery method, which is
most appropriate in common fund settlement cases.”
Here, the value of the settlement, particularly the injunctive terms, was disputed. While
the objector’s figure of $56,525 was clearly incorrect because it gave no value to the
injunctive terms, the plaintiffs may have overstated the value of the settlement at $20
million. In the appellate court’s view, the lower court reasonably surmised that even if the
value of the settlement was $4 million, the attorneys’ fee award would still be within the
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bounds of reasonableness. The appeals court rejected the objector’s argument that the fee
award was unreasonable because the amount of the cash payments was so low. While the
benefit obtained for the class is certainly important in determining whether to adjust the
lodestar, the district court did not abuse it discretion in finding that the settlement
contained significant non-cash benefits for the plaintiffs. The award was therefore
reasonable.
Settlement was fundamentally fair. Turning to the settlement as a whole, the appeals
court further found that the district court did not err in concluding that the proposed
settlement was fundamentally fair as required by Rule 23(e). The court took into account
that class certification might be difficult under California law following the Wal-mart
Stores, Inc v Dukes case and found that the poor financial health of the company here
seriously increased the chance that the plaintiffs would be left with nothing if they
continued to litigate their claims. The district court also determined that no governmental
entity had weighed in on the matter; that the plaintiffs’ attorneys had significant
experience and demonstrated skill and diligence; that only two class members had opted
out of the agreement; and that the settlement would yield significant benefits to the
plaintiffs given the risks and costs of continued litigation.
Non-monetary terms require no assigned monetary value. The appeals court rejected
the argument by the objector that the district court was obligated to make clear, factbased findings regarding the monetary value of the non-monetary terms of the settlement.
The court explained: “we have never required a district court to assign a monetary value
to purely injunctive relief. To the contrary, we have stated that courts cannot ‘judge with
confidence the value of the terms of a settlement agreement, especially one in which, as
here, the settlement provides for injunctive relief.’ Monetary valuation of injunctive relief
is difficult and imprecise.” Thus, the district court had no obligation to make explicit
monetary valuations of injunctive remedies.
Also rejected was the objector’s assertion that the district court erred by not conducting a
heightened review, given “warning signs” indicating collusion. Although the district
court did not explicitly outline the three warning signs set forth by the Ninth Circuit in In
re Bluetooth Headset Prods. Liab. Litig., it was sufficient that the court addressed two of
the three. Specifically, the lower court found the presence of a reversion clause (fees not
awarded revert to the defendants rather than to the class fund), though not preferable, to
be balanced against the overall benefits of the settlement to the plaintiffs and the fact that
the cash payment represented a small amount of those benefits. In the appellate court’s
view, balancing the reversion clause against the overall strength of the settlement was
adequate. It also noted that the third warning sign (a disproportionate attorneys’ fee
award) was not present. For these reasons, the district court correctly concluded that the
agreement was fair, reasonable, and adequate.
Deposition requirement. The appeals court also concluded that the lower court did not
abuse its discretion in approving the settlement term that objectors be available for
depositions. Rule 30(a)(1) allows a party to conduct depositions and courts commonly
require objectors to make themselves available given the power they hold. The court also
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noted the deposition’s utility and the scant possibility that the objector would be harassed
or intimidated by giving a deposition.
CAFA requirements. Finally, the district court did not abuse its discretion when it
approved the settlement agreement consistent with the Class Action Fairness Act (CAFA)
notice requirement under 28 U.S.C. Sec. 1715(b) and (d). When a defendant violates
CAFA’s notice provisions, a class member may refuse to comply with or be bound by the
settlement agreement or consent decree. Here however, the objector did not ask to be
exempt but demanded relief beyond Sec. 1715 by seeking rejection of the entire
settlement agreement. Because he sought no relief tied to Sec. 1715, he could not show
that a favorable decision would provide him redress and he therefore lacked standing on
his claim.
Dissent. District judge Edward M. Chen for the Northern District of California, sitting by
designation, dissented, finding that the case should be remanded for more factual
development. Judge Chen found the record “bereft of crucial information” needed to fully
review the adequacy of the settlement and reasonableness of the fee award. “In particular,
the record is silent as to two essential matters: (1) the portion of the class eligible to
receive the chief non-monetary benefit of the settlement (i.e., the assignment of customer
accounts to current franchisees) and (2) the value of the monetary relief to the class (and
whether there is a justification for imposing a claims process with a reverter of unclaimed
funds back to the defendant).” Whether the assignment provision would actually benefit
franchisees posed a “troubling question” because assignment is conditional upon the
franchisee paying for a customer account in full. The record contained no information on
how many franchise owners have paid their fees in full, how long it takes to pay off a fee
on average, or whether franchisees typically leave before fees are fully paid. Chen also
pointed out that the court did not address the fact that certain customer accounts were
deemed not assignable and there was no information as to how many accounts fell within
that category.
The case number is: 12-55479.
Attorneys: Norman M. Leon (DLA Piper) for Coverall North America, Inc. Shannon
Liss-Riordan (Licthen & Liss-Riordan) for Amrit Singh. Raul Cadena (Cadena Churchill)
for Sabrina Laguna.
9th Cir.: Delivery drivers were employees, not independent contractors; California
wage claims revived
By Lisa Milam-Perez, J.D.
Home delivery drivers were employees under California law based on “the totality of the
undisputed facts,” the Ninth Circuit found, reversing a district court’s holding that the
drivers were independent contractors. Their delivery company employer had the right of
control over the details of their work, and additional secondary factors also weighed in
favor of a finding that they were employees. Finding the facts here quite similar to the
plaintiffs in Estrada v FedEx Ground Package Sys, in which a state appeals court held
drivers were employees under state law, the Ninth Circuit reinstated the drivers’ state-law
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causes of action alleging failure to pay sick leave and other wage-related claims (Ruiz v
Affinity Logistics Corp, June 16, 2014, Pregerson, H).
Independent contractor agreement. The named plaintiff was previously employed as a
driver for Penske Logistics Corporation, a furniture delivery company that had a delivery
contract with Sears. When Sears terminated its contract with Penske, it advised the
drivers that Affinity Logistics Corporation, a company providing home delivery services
for various home furnishing retailers, would take over Penske’s contract. The retailer
advised the plaintiff, along with other drivers who had worked for Penske, to confer with
Affinity’s manager about jobs there. The manager told the drivers that they’d have to
become independent contractors if they wanted to work for Affinity: to obtain a fictitious
business name, a business license, and a commercial checking account. Affinity then
advised the drivers on how to complete the necessary paperwork — even completing the
forms for the named plaintiff, leaving only a blank space for his signature. With
Affinity’s help, he formed R&S Logistics, and secured an Employer Identification
Number and a separate business banking account for his “company.”
Affinity drivers had to sign an independent truckman’s agreement (ITA) and equipment
lease agreement (ELA), both of which stated that the parties were entering into an
independent contractor relationship. The ITA was a one-year contract that automatically
renewed from year to year. The company did not require that drivers obtain special
licenses, or have any specific work experience or training. It simply required drivers to
hold a driver’s license, to sign ITAs and ELAs, and to pass a drug test and physical exam.
Direction of work. Affinity’s drivers loaded, unloaded, and installed furniture and
appliances at customers’ homes. Affinity provided a manual that outlined procedures
drivers were required to follow regarding loading trucks, delivering goods, installing
goods, interacting with customers, reporting to Affinity after deliveries, and addressing
returns and refused merchandise, damaged goods, and checking in with Affinity after
deliveries. The procedures manual included mandatory language such as “must,” “will
report,” “must contact,” “required,” “not acceptable,” “100 percent adherence,” and
“exactly as specified.” The drivers worked five to seven shifts per week, and every route
had approximately eight deliveries — thus approximating a fairly regular rate of pay.
Also, the drivers had to request time off three to four weeks ahead of time; Affinity
denied those requests if, in the company’s discretion, the delivery schedule was too busy.
Wage claims. The drivers filed suit contending they had been misclassified as
independent contractors and, consequently, were denied paid sick leave, vacation pay,
and other benefits of employment status in California. Following a bench trial, a district
court held that they were independent contractors under Georgia law. However, in a
previous ruling, the Ninth Circuit concluded that California law, not Georgia law,
applied, and remanded. The district court held the drivers were independent contractors
under California law too. With the case before it once again on appeal, the Ninth Circuit
reversed.
Right of control. Undertaking a Borello analysis (i.e., the test set forth by the California
Supreme Court in S.G. Borello & Sons, Inc. v. Dep’t of Industrial Relations), the Ninth
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Circuit noted that the right to control is the most important consideration in determining
whether workers are employees or independent contractors; and that here, this factor
“indicates overwhelmingly that the drivers were Affinity’s employees.” Based on the
undisputed facts, Affinity controlled the details of the drivers’ work and retained all
necessary control over that work. And the district court’s contrary conclusion that
Affinity failed to exercise sufficient control over the drivers’ work was in error.
The company set the drivers’ flat “per stop” rate, and drivers weren’t able to negotiate for
higher rates, “as independent contractors commonly can.” It decided what days the
drivers worked and retained the discretion to deny days off. Affinity determined their
routes and instructed them not to deviate from the order of deliveries listed on the route
manifests that the company created. And it controlled the drivers’ appearance by
requiring them to wear uniforms and prohibiting earrings, tattoos, and certain facial hair.
On this point, the likeness to the California appeals court’s 2007 Estrada holding was
clear; in that case, FedEx exerted control “over every exquisite detail of the drivers’
performance, including the color of their socks and the style of their hair,” and such
control supported a finding of employee status.
Affinity also closely monitored and supervised the drivers, requiring them to report each
morning to the warehouse and attend a “stand-up” meeting, thereby exercising control
over their start times. The company observed them loading their trucks, conducted
“follow alongs,” required them to call their Affinity supervisor after every few stops,
monitored each driver’s progress on the “route monitoring screen,” and called drivers
who were thought to be running late or off course. Affinity also retained control by way
of its procedure manual, which contained specific guidelines that “were more than mere
‘suggestions,’” as even the district court observed. The manual outlined required
procedures for wearing uniforms, loading trucks, delivering goods, and reporting back
after deliveries. Under the ITA, too, Affinity retained the right to terminate drivers
without cause with 60 days’ notice and to transfer drivers to other locations.
Hired help irrelevant. In finding that Affinity lacked the right to control the drivers’
work, the district court looked almost entirely to the fact that the drivers could hire
helpers and secondary drivers. However, the appeals court noted, the lower court had
“overlooked the fact” that the drivers hired on additional help because Affinity required
them to do so. And — again as in Estrada — the company retained ultimate discretion to
approve or disapprove the hired help. True, such approval was based largely on neutral
factors, such as required background checks that were required under federal regulations.
Nonetheless, the appeals court said, “it is still true that the drivers did not have an
unrestricted right to choose these persons, which is an ‘important right[] [that] would
normally inure to a self-employed contractor.’” In any regard, the lower court’s reliance
on this factor alone, “in light of the overwhelming evidence of Affinity’s control over its
drivers,” was error. “While ‘purporting to relinquish’ some control to the drivers by
making the drivers form their own businesses and hire helpers, Affinity ‘retained absolute
overall control’ over the key parts of the business.”
Secondary factors. Most of the secondary factors outlined in Borello also pointed to the
conclusion that the drivers were employees, the appeals court said. For example, each
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driver had formed a distinct occupation or business, but even the district court recognized
that the drivers would not have done so had Affinity not demanded it. Nonetheless, the
court below reasoned that the drivers’ underlying motive for setting up their own
business was irrelevant because they “ultimately had the ability to expand their
businesses by hiring more employees, operating multiple trucks, and making managerial
decisions regarding the employment and performances of the employees hired.” The
appeals court disagreed, finding it was clear error to disregard the fact that Affinity
required the drivers to create these businesses as a condition of employment, and even
helped set up the businesses by filling out the necessary paperwork. Moreover, “in the
real world, these businesses were in name only,” the Ninth Circuit noted. The drivers’
only business was with Affinity because they weren’t allowed to use their trucks for any
purpose other than their work for Affinity.
Affinity also provided the main tool of their trade, advancing the drivers’ costs of leasing
and maintaining their trucks and then deducting these advances from their paychecks. So
too, with the other equipment they used: it required them to use a specific type of cell
phone, provided the drivers with these phones, and deducted the monthly costs from their
pay. Although the district court recognized these cost-advancing arrangements, it
concluded that because the drivers ultimately paid for them, they essentially furnished
their own tools. This conclusion was “clearly erroneous,” according to the appeals court.
“The drivers did not own the trucks or cell phones, but only leased them from Affinity to
perform their work for Affinity.”
The district court also erred in finding the payment scheme was closer to “by the job”
rather than “by the hour” (and thus more akin to an independent contractor arrangement).
There were no set hours to the drivers’ work day, and the amount of time per delivery
varied. Still, though, the court had found that drivers made approximately eight deliveries
per day, and the amount paid to each driver “essentially remained the same.” This
supports the conclusion that, although labeled “by the delivery,” the drivers were
essentially paid by a regular rate of pay. Consequently, this secondary factor, too,
weighed in favor of a finding of independent contractor status, the Ninth Circuit found.
The case number is: 12-56589.
Attorneys: Daniel A. Osborn (Osborn Law) for Fernando Ruiz. James H. Hanson
(Scopelitis, Garvin, Light, Hanson & Feary) for Affinity Logistics Corp.
9th Cir.: Employee who filed putative class action must individually arbitrate her
claims
By Kathleen Kapusta, J.D.
Reversing a lower court’s denial of Nordstrom’s motion to compel an employee who
filed a class action lawsuit against the retailer alleging that it violated various state and
federal employment laws to submit to individual arbitration, a Ninth Circuit panel found
that Nordstrom satisfied the minimal requirements under California law for providing
employees with reasonable notice of a change to its employee handbook by sending a
letter to them informing them of the modification and not seeking to enforce the
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arbitration provision during the 30-day notice period. Further finding that the retailer was
not bound to inform the employee that her continued employment after receiving the
letter constituted acceptance of the new terms of employment, the appeals court
concluded that the parties entered into a valid agreement to arbitrate disputes on an
individual basis (Davis v Nordstrom, Inc, June 23, 2014, Smith, W).
Following the Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion,
Nordstrom revised its employee arbitration policy contained in its employee handbook to
preclude employees from bringing most class action lawsuits. Prior to this revision, the
arbitration provision required employees to arbitrate individual disputes but permitted
them to bring class action lawsuits against the company. Pursuant to the handbook’s
notice provision — which required Nordstrom to provide employees with 30 days’
written notice of any substantive changes to the arbitration provision in order to “allow
employees time to consider the changes and decide whether or not to continue
employment subject to the changes” — Nordstrom sent letters to its employees,
informing them of the change. It also sent them a copy of the entire Dispute Resolution
Program, including the arbitration provision.
The lawsuit. Several weeks later, the employee filed a purported class action lawsuit
against the retailer seeking redress for nonpayment of wages, failure to provide meal
periods and rest breaks, and unfair competition. Nordstrom, relying on its revised
arbitration policy, sought to compel her to submit to individual arbitration of her claims.
Finding that Nordstrom failed to provide employees with the required 30-days’ notice of
the change in the arbitration provision, and to inform employees that their continued
employment constituted acceptance of the new arbitration provision, the district court
ruled that no revised agreement was ever reached. Accordingly, it denied Nordstrom’s
motion to compel.
Binding agreement to arbitrate. On appeal, the Ninth Circuit first observed that the
handbook the employee received when she began work established the ground rules of
her employment, including that she and Nordstrom would arbitrate certain disputes;
because she accepted employment on this basis, there was a binding agreement to
arbitrate. Pointing out that under California law, Nordstrom was entitled to enforce the
terms of employment identified in its handbook, and any modifications made to it, the
court observed that Nordstrom was not required to provide notice of the change in any
particular way. Rather, an employer can terminate or modify a contract with no fixed
duration period after a reasonable time period, if it provides employees with reasonable
notice, and the modification does not interfere with vested employee benefits.
Compliance with notice requirement. Because the terms of the arbitration provision in
the employee’s initial handbook stated that she would be provided 30-days’ written
notice of substantive changes, the first question was whether Nordstrom complied with
this requirement. The court found that it did. Not only did the company send the revised
provision to all employees, it asserted that it did not enforce the provision against the
employee, or anyone else, within 30 days of her receiving it. Moreover, the employee
never objected to the revised provision, and never quit her job. While the
communications with its employees “were not the model of clarity,” the court found
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Nordstrom satisfied the minimal requirements under California law for providing
employees with reasonable notice of the change.
Continued employment. Nor was Nordstrom required to inform the employee that
continued employment after receiving the letter constituted acceptance of the new terms
of employment. Citing to Asmus v. Pac. Bell, in which the California Supreme Court held
that an employer seeking to terminate a unilateral contract must provide reasonable notice
of the termination and refrain from interfering with vested rights, the appeals court
explained that this requirement also applied to unilateral contract negotiations and that
nowhere in Asmus did the state high court require that employees must be expressly told
that continued employment constitutes acceptance; nor have any California state
appellate court decisions imposed such a requirement.
Gentry and unconscionability. Turning to the employee’s argument that the arbitration
agreement was unconscionable under Gentry v. Superior Court, in which the California
Supreme Court concluded that employees had certain unwaiveable rights to overtime, and
that under certain circumstances a waiver that precluded an employee from seeking to
vindicate those rights as part of a class action could lead to a de facto waiver of those
rights, the appeals court noted that in Gentry the state high court relied primarily on its
earlier decision in Discover Bank v. Superior Court, which was subsequently overruled
by the U.S. Supreme Court as running afoul of the FAA.
Though Nordstrom argued that Gentry similarly infringed on the FAA, the appeals court
observed that the district court never reached the unconscionability issue. While finding
that the record in this case was fully developed and that the employee pressed her
unconscionability argument before the district court as well as on appeal, the Ninth
Circuit nonetheless concluded that resolution of the issue was not clear; thus, it declined
to exercise its discretion to address the unconscionability question in the first instance.
Indeed, the appeals court pointed out that at the time of its decision, the California
Supreme Court had pending before it Iskanian v CLS Transp. Of Los Angeles, LLC, a
case that would decide whether Gentry remained valid under California law.
The case number is: 12-17403.
Attorneys: George S. Howard Jr. (Jones Day) for Nordstrom, Inc. Courtland W.
Creekmore (Scott Cole & Associates) for Faine Davis.
9th Cir.: Class action waiver valid; employee who failed to opt out of agreement
must arbitrate individually
By Ronald Miller, J.D.
Bloomingdale’s may compel arbitration under the Federal Arbitration Act (FAA) of a
putative class action brought by a former employee to recover unpaid overtime wages,
ruled the Ninth Circuit. Finding the employer’s arbitration agreement valid, the appeals
court held that under the FAA, the agreement must be enforced according to its terms.
Because the employee failed to opt out of the arbitration agreement when given the
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opportunity, she was bound by a provision barring pursuit of her overtime claim on a
class action basis (Johnmohammadi v Bloomingdale’s, Inc, June 23, 2014, Watford, P).
The plaintiff brought a class action to recover unpaid overtime wages from her former
employer. She initially filed this action in state court, and all of her claims arose under
state law. However, after Bloomingdale’s removed the action to federal court, it moved to
compel arbitration. The district court granted the motion after determining that shortly
after being hired by the employer, the employee entered into a valid, written arbitration
agreement and that all of her claims fell within the scope of the agreement.
Stay or dismiss. The Ninth Circuit observed that in circumstances such as this, Sec. 3 of
the FAA seems to direct that the action shall be stayed pending completion of arbitration.
That is the position held by the Third and Tenth Circuits. However, notwithstanding the
language of Sec. 3, the Ninth Circuit has held that a district court may either stay the
action or dismiss it outright when, as here, the court determines that all of the claims
raised in the action are subject to arbitration. The choice matters for purposes of appellate
jurisdiction: an order compelling arbitration and staying the action isn’t immediately
appealable, on the other hand, an order compelling arbitration and dismissing the action
is. Because the district court chose to dismiss the employee’s action, the Ninth Circuit
determined that it had jurisdiction to hear this appeal.
Opt-out provision. When Bloomingdale’s hired the employee, she received a set of
documents describing the company’s dispute resolution program. Those documents
informed her that she agreed to resolve all employment-related disputes through
arbitration unless she returned an enclosed form within 30 days electing “NOT to be
covered by the benefits of Arbitration.” The employee did not return the opt-out form to
Bloomingdale’s. By not opting out within the 30-day period, she became bound by the
terms of the arbitration agreement. Included in the arbitration agreement was a provision
that employees who failed to opt out waived their right to pursue employment-related
claims on a collective basis in any forum, judicial or arbitral. The only question in dispute
was whether this provision was enforceable.
Class action waiver. Relying on the Norris-LaGuardia Act, and the NLRA, the
employee argued that federal law rendered the class action waiver unenforceable. NorrisLaGuardia states that, as a matter of public policy, employees “shall be free from the
interference, restraint, or coercion of employers of labor, or their agents, in the
designation of . . . representatives [of their own choosing] or in self-organization or in
other concerted activities for the purpose of collective bargaining or other mutual aid or
protection.” It declares that any “undertaking or promise in conflict with the public
policy declared in section 102 . . . shall not be enforceable in any court of the United
States.” The NLRA essentially says the same thing.
The employee asserted that filing this class action on behalf of her fellow employees is
one of the “other concerted activities” protected by the Norris-LaGuardia Act and the
NLRA. While there is some judicial support for the employee’s position, the Ninth
Circuit determined that to prevail, she must still show that Bloomingdale’s interfered
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with, restrained, or coerced her in the exercise of her right to file a class action. In the
appeals court’s view, Bloomingdale’s did none of these things.
Right to file class action. First, the court summarily brushed aside any notion that
Bloomingdale’s coerced the employee into waiving her rights to file a class action. The
employer did not require her to accept a class action waiver as a condition of
employment. Rather, Bloomingdale’s gave the employee the option of participating in its
dispute resolution program, which would require her to arbitrate any employment-related
disputes on an individual basis.
No interference. Nor was there any basis for concluding that Bloomingdale’s interfered
with or restrained the employee in the exercise of her right to file a class action. If she
wanted to retain that right, nothing stopped her from opting out of the arbitration
agreement. Bloomingdale’s merely offered her a choice: resolve future employmentrelated disputes in court or resolve such disputes through arbitration. In the absence of
any coercion influencing the decision, the Ninth Circuit failed to see how asking
employees to choose between those two options can be viewed as interfering with or
restraining their right to do anything.
No offer of benefit. The court rejected the employee’s contention that Bloomingdale’s
action in offering the arbitration agreement was akin to cases in which an employer offers
its employees a benefit in exchange for the employee’s agreement to refrain from
protected activity. To prevail on that argument, the employee needed to show that
offering the arbitration agreement constituted “conduct immediately favorable to
employees,” which Bloomingdale’s undertook with the express purpose of impinging
upon its employees’ “freedom of choice” in deciding whether to waive or retain their
right to participate in class litigation.
Here, the Ninth Circuit concluded that the offer of the dispute resolution agreement was
not of such a character that it would tend to interfere with an employee’s freedom of
choice about whether to forego future participation in class actions.
Individual negotiations. Next, the employee argued that an employee may never waive
the right to participate in class litigation by negotiating an individual contract with her
employer. The Ninth Circuit noted that except for an instance where the employee is
covered by a collective bargaining agreement that supersedes any individual agreement,
nothing prevented the employee from making an individual contract with her employer.
Thus, the court concluded that the employee’s decision to enter into the arbitration
agreement did not amount to or result from an unfair labor practice.
The case number is: 12-55578.
Attorneys: David E. Martin (Office of Corporate Counsel, Macy's, Inc.) for
Bloomingdale's, Inc. Dennis F. Moss (Law Office of Dennis F. Moss) for Fatemeh
Johnmohammadi.
11th Cir.: No plausible FMLA claims by employee fired after exhausting 12-weeks
of leave, despite employer’s promise to combine leaves
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By Marjorie Johnson, J.D.
A county employee who asserted that her employer promised to combine her private and
FMLA leave to allow her a longer absence, but discharged her shortly after she
completed 12 weeks of leave, failed to state plausible FMLA claims since she was
granted all of the FMLA leave to which she was entitled. Summary judgment was also
properly granted against her on her claims that the employer breached its duties under the
collective bargaining agreement and its promise to combine her leaves since she failed to
exhaust the CBA’s administrative remedies, the Eleventh Circuit ruled in an unpublished
decision affirming dismissal of her claims (Dixon v Public Health Trust of Dade County
dba Jackson Memorial Hospital, May 29, 2014, per curiam).
Extended leave. The employee worked at a hospital run by a county’s public health trust.
In August 2011, she asked for a temporary leave of absence so she could care for her
seriously ill mother. Her request was granted and she began her leave on September 25.
The HR agency hired by the hospital told her that it would work out the leave to combine
private and FMLA leave so that the leave would be valid into the year 2012. The public
health trust also sent her a letter approving her for “qualified” leave from September 25,
2011, to March 24, 2012.
On November 1, the employee received a letter from the hospital advising her to return to
work on November 23. She spoke with a representative at the hospital’s HR agency, who
assured her that her return date would be moved to January 3. However, on December 20,
a member of the hospital’s integrated leave management office informed her that she had
exhausted her available leave and was required to return by December 22. When she
failed to do so, she was discharged.
The employee’s discharge letter noted that she failed to return to work on December 19
(not December 22) and stated that based on the hospital’s personnel policy, she was
deemed to have resigned by failing to appear for three days. Although she received the
letter when she returned home on December 30, she did not contact anyone about her
discharge until her attorney sent a letter to the hospital on March 14, 2012, asserting
violations of the FMLA and CBA.
Lower court proceedings. The employee brought the instant action asserting that her
employer violated the FMLA by firing her before she completed her FMLA leave and
failing to restore her to her previous position after her leave ended. She also brought two
claims under the CBA alleging that she was denied her leave of absence guaranteed by
the contract and fired her in violation of the “for cause” requirement. The district court
dismissed her FMLA claims with prejudice, ruling that since she had received all of the
FMLA leave to which she was entitled by December 18, the decision to discharge her on
December 22 did not violate the statute.
It also dismissed her CBA claims without prejudice, finding that she failed to allege that
she had followed the grievance and arbitration procedures mandated by the CBA. She
amended her CBA claims and added a new claim for breach of contract. The district court
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subsequently dismissed those claims on summary judgment, concluding that she had not
filed a timely grievance or submitted her claims for arbitration, as required by the CBA.
FMLA leave exhausted. The employee failed to state plausible claims under the FMLA
since the record revealed that she was terminated after she had already received the 12
weeks of leave to which she was entitled under the FMLA. Since it was undisputed that
her leave began on September 25, she received the 12 weeks of leave guaranteed by the
FMLA by December 18. Thus, because she was fired three days later, none of her FMLA
claims were viable.
The Eleventh Circuit rejected her contention that the district court failed to account for
the employer’s promise to combine private and FMLA leave so that the leave would be
valid into 2012. Rather, the employer had the statutory right to count her leave against
her 12-week FMLA guarantee and was not obligated to notify her in advance that it
would exercise that right. How the public health trust initially characterized her leave was
irrelevant.
CBA and contractual claims fail. Since the CBA required the employee to exhaust her
administrative remedies under it and she did not, summary judgment was properly
granted against her on her claims that she was denied leave that she had been guaranteed
under the CBA, that she was fired in violation of its “for cause” requirement, and that the
employer breached its agreement to combine leaves. Notably, the CBA set forth a
mandatory grievance procedure which stated that a grievance would be void if the
employee did not initiate the grievance procedure within 10 workdays of the decision on
which the grievance was based. Thus, at issue was whether the employee’s three claims
fell under the definition of “grievance.”
Pursuant to the CBA, a claim was a “grievance” if it was a disagreement that related to or
affected specific provisions of the CBA. Since all three of the employee’s non-FMLA
claims met that definition, they necessarily concerned the interpretation or application of
a specific provision of the CBA. Notably, her breach of contract claim also related to a
specific CBA provision since it alleged that she was promised an unpaid leave from
September 2011 to March 2012, and the CBA defined the circumstances in which
division directors and vice presidents were authorized to “grant a leave of absence”
without pay.
The court squarely rejected the employee’s assertion that her claims were not
“grievances” since the December 22 termination letter invoked the hospital’s personnel
policy instead of a CBA provision. According to her, the CBA’s three-step procedure did
not apply unless the employer invoked a specific CBA provision when it fired an
employee. Her argument misunderstood the CBA’s definition of “grievance,” which
focused on the “dispute” and not on the action by the employer that led to the
disagreement.
All three of her non-FMLA claims concerned specific provisions of the CBA and thus,
because they were “grievances,” were void under the CBA since she did not follow its
three-step grievance procedure. Indeed, although she learned of her termination by
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December 30, she took no take that could be construed as a step in the grievance
procedure until over two months later, when her attorney sent a letter to the public health
trust. Thus, her failure to initiate the CBA’s grievance procedure within the 10-workday
window rendered her claims void.
The case number is: 13-13054.
Attorneys: Marlon Delano Moffett (Miami-Dade County Attorney's Office) for Public
Health Trust of Dade County. John Otto Sutton (Jamerson & Sutton) for Janet Dixon.
Cal. Sup. Ct.: Class action waivers in arbitration agreements valid, but waivers of
PAGA representative actions against public policy
By Ronald Miller, J.D.
A divided California Supreme Court has ruled that its decision in Gentry v Superior
Court has been abrogated by recent decisions of the U.S. Supreme Court, so that the
state’s refusal to enforce an arbitration agreement that waived the right to class
proceedings was preempted by the Federal Arbitration Act (FAA). However, the court
concluded that an arbitration agreement requiring an employee as a condition of
employment to give up the right to bring representative PAGA actions in any forum was
contrary to public policy. The FAA’s goal of promoting arbitration as a means of private
dispute resolution did not preclude the California Legislature from deputizing employees
to prosecute Labor Code violations on the state’s behalf, the majority concluded. Justice
Chin filed a separate concurring opinion. Justice Werdegar dissented from the majority’s
holding that the mandatory class action class arbitration waivers in the employee’s
employment contract was lawful (Iskanian v CLS Transportation Los Angeles, LLC, June
23, 2014, Liu, G).
Procedural history. The driver for a transport company signed an arbitration agreement
in December 2004 providing that all claims arising out of his employment were to be
submitted to binding arbitration. The arbitration agreement contained a class and
representative action waiver. In August 2006, the employee filed a class action alleging
that the employer failed to pay overtime, provide meal and rests breaks, and to reimburse
business expenses, among other claims. He sought to bring a class action lawsuit. In
defense, the employer asserted that all of the employee’s claims were subject to binding
arbitration and moved to compel arbitration. The trial court granted the employer’s
motion.
Shortly after the trial court’s order but before the Court of Appeal’s decision in this
matter, the California Supreme Court decided in Gentry v Superior Court that class action
waivers in employment arbitration agreements were invalid under certain circumstances.
The employer voluntarily withdrew its motion to compel arbitration, and the parties
proceeded to litigate the case, in which driver brought a class action claim and PAGA
claims in a representative capacity. However, in April 2011, after the U.S. Supreme Court
issued AT&T Mobility LLC v Concepcion, the employer renewed its motion to compel
arbitration. The trial court found in favor of the employer, and the parties were compelled
to arbitrate. Concepcion expressly overturned Discover Bank, but Gentry was not
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referenced in the decision. The Court of Appeal affirmed, concluding that Concepcion
invalidated Gentry.
Class action waiver. The California Supreme Court first addressed the validity of the
class action waiver and the viability of Gentry in light of Concepcion. The U.S. Supreme
Court in Concepcion invalidated Discover Bank, which had restricted consumer class
action waivers, and held that “[r]equiring the availability of classwide arbitration
interferes with fundamental attributes of arbitration and thus creates a scheme
inconsistent with the FAA.” Gentry considered a class action waiver and an arbitration
agreement in an employment contract. The employee contended that Gentry survived
Concepcion because it was not a categorical rule against class action waivers. However,
the California high court concluded that the fact that Gentry’s rule against class waiver
was stated more narrowly than Discover Bank’s rule did not save it from FAA
preemption under Concepcion.
Concepcion held that because class proceedings interfere with fundamental attributes of
arbitration, a class waiver is not invalid – even if an individual proceeding would be an
ineffective means to prosecute certain claims. Because Concepcion held that the FAA
prevents states from mandating or promoting procedures incompatible with arbitration,
the California high court concluded that the FAA preempts the Gentry rule.
D.R. Horton rejected. The California court also rejected the employee’s argument that
the class action waiver was unlawful under the NLRA, thus refusing to adopt the NLRB’s
position in D.R. Horton Inc that the NLRA generally prohibits contracts that compel
employees to waive their right to participate in class proceedings to resolve wage claims.
Horton involved an employee who claimed he was misclassified as exempt from
overtime protections under the FLSA and sought to initiate a nationwide class arbitration.
The employer asserted that an arbitration agreement barred arbitration of collective
claims. Ultimately, the NLRB concluded that class proceedings to address wage
violations constituted concerted activity; an agreement compelling an employee to waive
the right to engage in that activity as a condition of employment was an unfair labor
practice; and its rule was not precluded by the FAA.
However, the Fifth Circuit disagreed with the Board‘s ruling that the class action waiver
in the arbitration agreement was an unfair labor practice. Relying on Concepcion, the
Fifth Circuit rejected the argument that the Board’s rule fell within the savings clause of
the FAA. The Fifth Circuit also found that there was no “inherent conflict” between the
FAA and the NLRA, and held that the NLRA did not foreclose enforcement of a class
action waiver in an arbitration agreement.
Disfavors arbitration. The California high court agreed with the Fifth Circuit that, in
light of Concepcion, the NLRB’s rule is not covered by the FAA’s savings clause.
Concepcion makes clear that even if a rule against class waivers applies equally to
arbitration and nonarbitration agreements, it nonetheless interferes with fundamental
attributes of arbitration and, for that reason, disfavors arbitration in practice. The state
court also agreed that there is no inherent conflict between the FAA and the NLRA.
Thus, it concluded that in light of the FAA‘s “liberal federal policy favoring arbitration,”
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sections 7 and 8 the NLRA do not represent “a contrary congressional command”
overriding the FAA’s mandate.
Withdrawing motion to compel arbitration. Similarly, the state court rejected the
employee’s contention that the employer waived its right to arbitrate by withdrawing its
motion to compel arbitration after Gentry. California Code of Civil Procedure Sec.
1281.2 provides that one ground for denying a petition to compel arbitration is that “[t]he
right to compel arbitration has been waived by the petitioner.” Here, the employee
asserted that the employer waived its right to arbitration by failing to diligently pursue
arbitration. The fact that the party petitioning for arbitration has participated in litigation,
short of a determination on the merits, does not by itself constitute a waiver.
In this case, the employer initially filed a timely petition to compel arbitration in response
to the employee’s complaint. After Gentry issued, rather than continue to litigate the
petition to compel arbitration, the employer withdrew the petition and proceeded to
litigate the claim. After Concepcion, the employer renewed its petition to compel
arbitration. The California high court observed that futility as grounds for delaying
arbitration is implicit in the general waiver principles it has endorsed. The fact that a
party abandoned its motion after a change in the law made the motion highly unlikely to
succeed weighed in favor of finding that the party had not waived its right to arbitrate. As
a result, the employee did not demonstrate that the employer’s delay in pursuing
arbitration was unreasonable or that pretrial proceedings had resulted in cognizable
prejudice.
PAGA representative action. With respect to the provision waiving PAGA
representative actions, however, the California Supreme Court concluded that requiring
an employee as a condition of employment to give up the right to bring representative
PAGA actions in any forum is contrary to public policy. Here, the arbitration agreement
required the waiver not only of class actions but of “representative actions.”
An aggrieved employee’s action under the PAGA functions as a substitute for an action
brought by the government itself. The civil penalties recovered on behalf of the state
under the PAGA are distinct from the statutory damages to which employees may be
entitled in their individual capacities. Thus, an agreement by employees to waive their
right to bring a PAGA action serves to disable one of the primary mechanisms for
enforcing the Labor Code. The PAGA was clearly established for a public reason, and
agreements requiring the waiver of PAGA rights would harm the state‘s interests in
enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter
violations.
The California Supreme Court concluded that an employee’s right to bring a PAGA
action is unwaivable. The FAA’s goal of promoting arbitration as a means of private
dispute resolution did not preclude the California Legislature from deputizing employees
to prosecute Labor Code violations on the state’s behalf. Thus, the court concluded that
where, as here, an employment agreement compels the waiver of representative claims
under the PAGA, it is contrary to public policy and unenforceable as a matter of state
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law. Therefore, the FAA did not preempt a state law that prohibits waiver of PAGA
representative actions in an employment contract.
Dissent. Justice Werdegar dissented from that portion of the majority opinion that the
mandatory class action and class arbitration waivers in the employee’s employment
contract were lawful and would reverse the appellate court decision in its entirety. The
dissent concluded that the employer was arguing that the FAA was a super-statute,
limiting the application of both past and future enactments. Accepting the rationale of the
NLRB, the dissent would have found that the waiver in this instance was unenforceable
as an unfair labor practice under Norris-LaGuardia and the NLRA.
The case number is: S204032.
Attorneys: David F. Faustman (Fox Rothschild) for CLS Transportation Los Angeles,
LLC. Glenn A. Danas (Capstone Law) for Arshavir Iskanian.
Cal. Sup. Ct.: Newspaper home delivery carriers could challenge classification as
independent contractors as a class action
By Ronald Miller, J.D.
A suit by newspaper home delivery carriers alleging that they were improperly classified
as independent contractors was amenable to class certification, ruled the California
Supreme Court. Whether a common law employer-employee relationship existed turned
foremost on the degree of a hirer’s right to control how the end result was achieved. In
turn, whether the hirer’s right to control can be shown on a classwide basis will depend
on the extent to which individual variations exist in the hirer’s rights vis-à-vis each
putative class member, and whether such variations, if any, are manageable. Because the
trial court principally rejected certification based not on differences in the defendant’s
right to exercise control, but on variations in how that right was exercised, its decision
cannot stand, concluded the state high court. Separate concurring opinions were filed by
Justices Baxter and Chin (Ayala v Antelope Valley Newspapers, Inc, June 30, 2014,
Werdegar, K).
Antelope Valley Newspapers provided daily circulation to its subscribers. To distribute
the paper, it contracted with individual carriers using a preprinted, standard form
contract. The named plaintiff sued on behalf of a putative class of carriers. According to
the complaint, the carriers were treated as independent contractors when, as a matter of
law, they are employees. The complaint alleged unpaid overtime, unlawful deductions,
failure to provide breaks, and failure to reimburse for business expenses, among other
violations. The plaintiffs sought class certification, contending the central question in
establishing liability was whether the carriers are employees, and that this question could
be resolved through common proof, including but not limited to the contents of the
standard contract. Antelope Valley opposed certification. It alleged that because of the
individual variations in how carriers performed their work, the question of employee
status could not be resolved on a common basis.
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The trial court denied class certification. It concluded common issues did not
predominate because resolving the carriers’ employee status would require “heavily
individualized inquiries” into Antelope Valley‘s control over the carriers’ work. A
unanimous court of appeal affirmed in part and reversed in part. It agreed with the trial
court that the plaintiff had not shown how her overtime, meal break, and rest break
claims could be managed on a classwide basis. However, with respect to the remaining
claims, it concluded that proof of employee status would not entail a host of individual
inquiries. The California Supreme Court granted Antelope Valley’s petition for review.
Class action principles. “The party advocating class treatment must demonstrate the
existence of an ascertainable and sufficiently numerous class, a well-defined community
of interest, and substantial benefits from certification that render proceeding as a class
superior to the alternatives. In turn, the community of interest requirement embodies
three factors: (1) predominant common questions of law or fact; (2) class representatives
with claims or defenses typical of the class; and (3) class representatives who can
adequately represent the class.” Here, the presence or absence of predominant common
questions was the sole issue on appeal.
The question at this stage is whether the operative legal principles, as applied to the facts
of the case, render the claims susceptible to resolution on a common basis. As an initial
matter, the state high court observed that the trial court and appeals court correctly
recognized as the central legal issue whether putative class members were employees for
purposes of the provisions under which they sued. In deciding whether the plaintiffs were
employees or independent contractors, the trial court and appeals court applied the
common law test. Despite requesting supplemental briefing concerning additional tests
for employee status, the high court ultimately decided to leave for another day the
question what application, if any, other tests for employee status might have to wage and
hours claims such as these, and confined itself to considering whether the plaintiffs’
theory that they were employees under the common law definition was one susceptible to
proof on a classwide basis.
Common law employee status. Under the common law, “[t]he principal test of an
employment relationship is whether the person to whom service is rendered has the right
to control the manner and means of accomplishing the result desired.” What mattered was
whether the hirer “retains all necessary control” over its operations. While the extent of
the hirer’s right to control the work is the foremost consideration in assessing whether a
common law employer-employee relationship exists, a range of secondary indicia may in
a given case evince an employment relationship. Courts may consider “(a) whether the
one performing services is engaged in a distinct occupation or business; (b) the kind of
occupation, with reference to whether, in the locality, the work is usually done under the
direction of the principal or by a specialist without supervision; (c) the skill required in
the particular occupation; (d) whether the principal or the worker supplies the
instrumentalities, tools, and the place of work for the person doing the work; (e) the
length of time for which the services are to be performed; (f) the method of payment,
whether by the time or by the job; (g) whether or not the work is a part of the regular
business of the principal; and (h) whether or not the parties believe they are creating the
relationship of employer-employee.”
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What matters under the common law is not how much control a hirer exercises, but how
much control the hirer retains the right to exercise. A court evaluating predominance
“must determine whether the elements necessary to establish liability (here, employee
status) are susceptible to common proof or, if not, whether there are ways to manage
effectively proof of any elements that may require individualized evidence.”
Consequently, at the certification stage, the relevant inquiry was not what degree of
control Antelope Valley retained over the manner and means of its papers’ delivery, but
whether its right of control over its carriers was sufficiently uniform to permit classwide
assessment.
Right of control. According to the state supreme court, the trial court lost sight of this
question. Whether Antelope Valley varied in how it exercised control did not answer
whether there were variations in its underlying right to exercise that control that could not
be managed by the trial court. Likewise, the scope of Antelope Valley’s right to control
the work did not in itself determine whether that right was amenable to common proof.
At the certification stage, the importance of the form contract was not in what it said, but
that the degree of control it spelled out was uniform across the class. However, the trial
court afforded only cursory attention to the parties’ written contract. The high court
observed that the existence of variations in the extent to which a hirer exercised control
did not necessarily show variation in the extent to which the hirer possessed a right of
control, or that the trial court would find any such variation unmanageable. By
considering only variations in the actual exercise of control, and by finding such variation
sufficient to defeat certification, the trial court erroneously treated them as the legal
equivalent of variations in the right to control, or uniform lack of such a right.
After identifying various differences in how carriers delivered papers, the trial court
concluded the putative class of newspaper carriers was not subject to the pervasive and
significant control of Antelope Valley over the means and manner by which they
performed their work. The high court concluded that addressing the extent of Antelope
Valley’s legal right of control on a motion for class certification was not necessarily
erroneous. But it cautioned that such an inquiry generally should occur only when
“necessary.”
Certification of class claims based on the misclassification of common law employees as
independent contractors generally does not depend upon deciding the actual scope of a
hirer’s right of control over its hirees. The relevant question is whether the scope of the
right of control, whatever it might be, is susceptible to classwide proof. Here, the trial
court bypassed that question and proceeded to the merits. When a court’s ruling on a
class certification question is based on erroneous legal assumptions about the relevant
questions, that decision cannot stand. As a result, because the reasons given by the trial
court were unsound, the ruling must be reversed.
The case number is: S206874.
Attorneys: Kathleen Dunham (Callahan & Blaine) for Maria Ayala. Sue J. Stott (Perkins
Coie) for Antelope Valley Newspapers, Inc.
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