Labor Relations & Wages Hours Update
July 2013
Hot Topics in LABOR LAW:
Thomas E. Perez confirmed as Secretary of Labor
By Pamela Wolf, J.D.
Near the end of a particularly tense week in the Senate, that Chamber today has
confirmed, by a vote of 54-46, President Barack Obama’s nomination of Thomas E.
Perez as Secretary of Labor. Yesterday, with a vote of 60-40, the Senate agreed to cloture
on the nomination. As a result, debate on the nomination was limited to up to 30 hours.
The cloture vote followed on the heels of a last-minute bargain to avert a threat by Senate
Majority Leader Harry Reid (D-Nev) to pursue the so-called “nuclear option”— a rules
change that would nix the filibuster as an option with regard to executive branch
nominations—if Senate Republicans refused to give Obama’s nominations for vacant
NLRB and some other positions an up or down vote. As part of the bargain, the president
withdrew his nomination of two controversial recess appointees to the Board, Sharon
Block and Richard F. Griffin, Jr., and quickly submitted two replacements, Kent
Hirozawa and Nancy Schiffer. The Senate Health, Education, Labor, and Pensions
(HELP) Committee has slated hearings on the NLRB nominations for July 23 and 24.
Senator Tom Harkin (D-IA), HELP Committee Chairman, quickly issued a statement
following Perez’s confirmation, noting that Perez was favorably reported out of the
committee in April. “Without question, Tom Perez has the knowledge and experience
needed to guide the U.S. Department of Labor. Through his professional experiences—
and especially his work as Secretary of the Maryland Department of Labor, Licensing
and Regulation—he has developed strong policy expertise about the many important
issues for American workers and businesses that come before DOL each day,” Harkin
said.
“As the Senate author of the Americans with Disabilities Act, I have been particularly
impressed by Mr. Perez’s record of strong leadership on disability rights issues,” Harkin
continued. “From his time as head of the Office of Civil Rights at the Department of
Health and Human Services in the Clinton Administration, and continuing through to this
day in his role as Assistant Attorney General for Civil Rights at the Justice Department,
he has helped ensure that people with disabilities have the choice to live in their own
homes and communities—rather than only in institutional settings—and to receive
supports and services to make this possible. Indeed, throughout his career Mr. Perez has
fought to enforce all of our most critical civil rights laws and has worked to safeguard the
rights of every American.”
Although Senator Lamar Alexander (R-Tenn) voted in favor of cloture on the Perez
nomination, he issued a statement yesterday clarifying that he would vote against
confirmation of the nominee. Referring to Perez’s prior stints at the DOJ and as an
Assistant Attorney General, Alexander said: “Mr. Perez did not discharge the duty he
owed to the government to try to collect the money owed to taxpayers. He did not
discharge the duty to protect the whistleblowers who were left hanging in the wind. And
at the same time he was manipulating the legal process to remove a case from the
Supreme Court in a way that is inappropriate for the Assistant Attorney General of the
United States.”
“My view of his record raises troubling questions about his actions while at the
Department of Justice and his candor in discussing his actions with [the HELP
Committee],” Alexander said.
Senate Republican leader faces mounting pressure to put NLRB nominees to a vote
before agency is shut down
By Pamela Wolf, J.D.
On Tuesday, July 9, U.S. Representative Linda Sanchez (D-Cal) and Communication
Workers of America (CWA) President Larry Cohen held a press conference to bring
attention to what they characterize as the “obstruction by Senate Republicans that is
blocking action on President Obama’s executive nominations to the National Labor
Relations Board and other agencies.” Earlier in the day, with a letter directed to Mitch
McConnell (R-Ky) that was signed by some 200 members of Congress, Sanchez, along
with Representative Joe Courtney (D-Conn), called on the Senate Republican Leader to
stop threatening to block a Senate vote on the full package of NLRB nominees.
President Obama has nominated Phil Miscimarra, Harry Johnson, and Chairman Mark
Pearce, along with two controversial recess appointees, Sharon Block and Richard
Griffin, to serve as Board Members. On May 22, the Senate HELP Committee approved,
largely along party lines, all five nominees. The slate of candidates, however, must be
approved by the full Senate. Unless the candidates are approved, the NLRB will
effectively cease to function on August 27, when the term of Pearce, the only confirmed
member, expires.
Recently, rallies and actions were held in 26 states, with CWA members joined by Sierra
Club, Blue Green Alliance, Jobs with Justice, and AFL-CIO activists, according to the
CWA. At last count, 3,350 letters were delivered to Senate offices in seven states, and
meetings with senators and staff were held in states including Delaware, Illinois, Indiana,
Michigan, Missouri, New York, Ohio, West Virginia, and Wisconsin, among others.
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At the press conference, Representative Sanchez said that Senate Republicans should stop
their “shameless attempt” to shut down the NLRB and prevent the agency from
protecting the rights of hardworking Americans. By refusing to the let the nominations
face an up or down vote in the Senate, McConnell is not permitting the normal function
of government to proceed, according to Sanchez. Working Americans “deserve a
Congress that works to make their lives easier, not harder,” she said, noting that the
government cannot protect workers’ rights if there is no quorum at the NLRB.
Cohen pointed out that the Supreme Court will not take up the Noel Canning case
challenging the president’s recess appointments to the NLRB until next term. He called
on the Senate to do its job before the NLRB is forced to shut down. Cohen also noted that
the NLRB is not the only agency whose nominees have been stalled. Richard Cordray’s
nomination to the Consumer Financial Protection Bureau, for example, also has not been
put to a vote.
Cohen said he expects that if McConnell fails to permit a vote on the package of NLRB
nominees, the Democratic Caucus will take up rules changes that would dissolve the
current obstructionist strategy. If necessary, that action is anticipated to be taken next
week or the following week.
As Cohen observed, if the Senate refuses to vote on the nominees, there may be no
NLRB on Labor Day.
Harry Reid files cloture on NLRB, Secretary of Labor nominees
By Pamela Wolf, J.D.
In a move that has escalated the stakes in battle over President Obama’s nominees,
Senate Majority Leader Harry Reid (D-Nev) on July 11 filed cloture on several pending
nominations, including the five candidates for the NLRB and Secretary of Labor nominee
Thomas Perez, all of whom were favorably reported out of the Senate Health, Education,
Labor, and Pensions Committee (HELP) in May.
Cloture is the only procedure by which the Senate can vote to place a time limit on
consideration of the nominees and thereby overcome filibuster.
The move comes on the heels of a press conference on Tuesday, July 9, held by
Representative Linda Sanchez (D-Cal) and Communication Workers of America (CWA)
President Larry Cohen in order to bring attention to what they characterized as the
“obstruction by Senate Republicans that is blocking action on President Obama’s
executive nominations to the National Labor Relations Board and other agencies.”
In a letter to Mitch McConnell (R-Ky) earlier that day, Sanchez, along with
Representative Joe Courtney (D-Conn), called on the Senate Republican Leader to stop
threatening to block a Senate vote on the full package of NLRB nominees. The letter was
signed by some 200 members of Congress. There have also been rallies and other actions
in 26 states, according to the CWA. Thousands of letters were also delivered to Senate
offices.
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President Obama has nominated Phil Miscimarra, Harry Johnson, and Chairman Mark
Pearce, along with two controversial recess appointees, Sharon Block and Richard
Griffin, to serve as Board Members. On May 22, the Senate HELP Committee approved,
largely along party lines, all five nominees. The slate of candidates, however, must be
approved by the full Senate. Unless the candidates are approved, the NLRB will
effectively cease to function on August 27, when the term of Pearce, the only confirmed
member, expires.
From the Senate floor, Reid said: “It is a disturbing trend when Republicans are willing to
block executive branch nominees even when they have no objection to the qualifications
of the nominee. Instead, they are blocking qualified nominees to circumvent the
legislative process, force wholesale changes to laws or restructure entire executive branch
departments. They are blocking qualified nominees because they refuse to accept the law
of the land … Yet the Republican Leader says there is no problem here. The status quo is
fine.”
“In the meantime, the term of one of the three remaining NLRB members expires next
month,” Reid pointed out. “And soon the board will once again be unable to function. Of
course, Republicans consider that a victory. In 2011, the senior Senator from South
Carolina, Lindsay Graham, said, quote, ‘the NLRB as inoperable could be considered
progress.’”
“Because Republicans refuse to accept the law of the land, they have denied the NLRB
the ability to safeguard workers’ rights and monitor unions. Workers who have been
illegally terminated from their jobs will have no appeal. The results of contested union
elections could be thrown out. And labor abuses and unfair employment practices would
go unchallenged. Yet the Republican Leader says there is no problem here. The status
quo is fine.”
According to Reid, “The Republican Leader has failed to live up to his commitments. He
has failed to do what he said he would: move nominations by regular order except in
extraordinary circumstances. And I refuse to unilaterally surrender my right to respond to
this breach of faith.
“If Senator McConnell wants to continue to defend the status quo of gridlock in
Washington, that is his right. If Senator McConnell wants to continue to believe there is
no problem in the United States Senate, that is his choice. But the American people are
fed up the gridlock, fed up with the obstruction and fed up with these politics as usual.
They want Washington to work for American families once again. I try every day to be
on their side. And I will wait not wait another month, another year, another Congress to
take action.”
Senator Reid has scheduled a procedural vote around 5:30 pm on Monday, July 15, and a
joint Democratic and Republican caucus meeting at 6:00 pm on Monday. If no agreement
on the nominations can be reached, the first cloture vote is slated for early Tuesday
morning. If cloture is invoked on any of the nominations, up to 8 hours of debate would
be permitted prior to a vote on confirmation of the nomination, except for the Perez
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nomination, which would have up to 30 hours of post-cloture debate. If cloture is not
invoked on a particular nomination, the Senate would proceed to vote on cloture on the
next nomination.
At the press conference earlier this week, Cohen suggested that if McConnell fails to
permit a vote on the package of NLRB nominees, the Democratic Caucus will take up
rules changes that would dissolve the current obstructionist strategy. Indeed, Democrats
could vote to change the rules to eliminate the filibuster on executive nominees.
President withdraws two NLRB nominations, Bureau of Consumer Financial
Protection nominee is confirmed
By Pamela Wolf, J.D.
Today, as a result of a brokered deal to avert a potential disaster, President Obama
withdrew the nominations of his two recess appointments to the NLRB, the question of
whether the Senate rules should be changed to get rid of the filibuster with regard to
executive nominations has been delayed, and one of the president’s nominees has been
confirmed by the Senate.
At about 11:00 am (ET) this morning, the Senate, by a vote of 71-29, agreed to a cloture
motion to limit the debate on President Obama’s nomination of Richard Cordray to be
Director of the Bureau of Consumer Financial Protection for a term of five years. The
move signaled a halt to Majority Leader Harry Reid’s (D-Nev) threat to impose the socalled “nuclear option,” under which he would move forward with a plan to change the
Senate rules to eliminate filibusters with regard to executive branch nominations.
The battle between the parties over the stall on Obama’s nominations reached fever pitch
this week, particularly with regard to Cordray, the five slated candidates to serve as
members of the NLRB, and the pending nominee for Secretary of Labor. Without action
on the NLRB nominees, the agency would be effectively shut down when the term of the
only confirmed board member expires on August 27.
Good for the Senate. In floor statements leading up to the cloture vote, Senator John
McCain (R-Ariz) noted that a meeting last night between 98 senators working to avoid
the nuclear option was a “productive discussion” on resolving issues. Reid noted this was
“not a time to flex muscles” and was appreciative of McCain’s “advocacy and
persistence.” Reid concluded that compromise was “good for the Senate.” Senator Bob
Corker (R-Tenn), a member of the Senate Banking Committee, noted that after moving
past the cloture vote on Cordray it was time to “work constructively” on the country’s
problems.
Deal to end stand-off. Under a deal forged to avoid the nuclear option, the president has
withdrawn the nominations of his two recess appointments to the NLRB, members
Richard Griffin and Sharon Block, and will nominate two other individuals with input
from organized labor, which traditionally has been aligned with Democrats, according to
media reports. In exchange, Reid agreed to delay action on the question of whether the
Senate rules should be modified.
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Senator Lamar Alexander (R-Tenn), the senior Republican on the Senate HELP
Committee, released a statement confirming the agreement reached by Senate leadership
and the White House, under which the administration will send two new nominees to the
NLRB and pull the Griffin and Block nominations. The White House, Alexander said,
will submit two new nominations shortly. The HELP Committee has already scheduled a
hearing for 10 a.m. on July 23 on the two new nominees, he noted.
HELP Committee Chairman Senator Tom Harkin (D-Iowa) also issued a statement:
“Today’s deal, while not ideal, will allow for a fully-confirmed Board for the first time in
a decade, and that is a step forward for our country. It is my hope that Republicans will
make good on their word to give swift consideration to these nominees, and that this
could bring a new beginning for the Board, so that the dedicated public servants at the
agency can do their jobs without the constant political attacks and interference that we
have seen in recent years.”
“While today’s agreement on nominees leaves the necessary work of Senate rules reform
still to be done,” he continued, “I am pleased that the minority appears to be willing to
allow the Senate to move on a number of important executive nominations, consistent
with the history of the Senate and, I believe, with the framers’ intent. In particular, I
welcome the news that the Senate will act to advance the nomination of Thomas Perez to
serve as Labor Secretary.”
Meanwhile, Cordray’s nomination was confirmed in the Senate by a vote of 66-34.
President submits two new nominations to NLRB as Senate deal moves forward
By Pamela Wolf, J.D.
President Barack Obama on July 16 withdrew two of his nominations to the NLRB and
announced the nominations of Kent Hirozawa and Nancy Schiffer to fill those two spots.
The move was part of an agreement that led to Senate action resulting in the confirmation
of Richard Cordray, another of the president’s nominees, to be Director of the Bureau of
Consumer Financial Protection.
After mounting tension this week over the executive nominations stalled in the Senate,
and Majority Leader Harry Reid’s (D-Nev) threat to deploy the so-called “nuclear
option” to change the Chamber’s rules so that filibuster would be eliminated as an option
with regard to executive branch nominations, a deal was struck that averted a full-scale
battle.
As part of the eleventh-hour bargain, the president withdrew his nominations of Sharon
Block and Richard F. Griffin, Jr., both of whom were serving under controversial recess
appointments, the lawfulness of which will be tested in the Supreme Court next term in
NLRB v Noel Canning (Dkt No 12-1281). Republicans reportedly agreed to permit
confirmation of replacement nominees, and Reid has delayed action on any change to the
Senate rules.
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Announcing the nominations, the president said, “The National Labor Relations Board is
responsible for enforcing protections that are fundamental to growing the economy and
creating jobs for the middle class. It gives me great confidence that such dedicated and
capable individuals have agreed to join the Board and I look forward to the agency
continuing its work to promote better wages and conditions for all American workers.”
Kent Hirozawa, whom the president nominated for a five-year term expiring on August
27, 2016 (formerly held by Wilma B. Liebman), is currently chief counsel to NLRB
Chairman Mark Pearce. Before joining the NLRB staff in 2010, Hirozawa was a partner
in the New York law firm Gladstein, Reif and Meginniss LLP, where he advised clients
on a variety of legal and strategic issues, including federal and state labor and
employment law matters. He previously served as a field attorney for the NLRB from
1984 to 1986. Hirozawa was a pro se law clerk for the U.S. Court of Appeals for the
Second Circuit from 1982 to 1984. He received a B.A. from Yale University and a J.D.
from New York University School of Law.
Nancy Schiffer, who has been nominated to serve a five-year term expiring December 16,
2014 (formerly held by Craig Becker), was Associate General Counsel to the AFL-CIO
from 2000 to 2012. Prior to working for the AFL-CIO, she was Deputy General Counsel
to the UAW from 1998 to 2000. She had previously worked as Associate General
Counsel for the UAW from 1982 to 1998. Earlier in her career, Schiffer was a staff
attorney in the Detroit Regional Office of the NLRB and worked as an attorney in private
practice. She received her B.A. from Michigan State University and her J.D. from the
University of Michigan Law School.
Senate HELP committee advances two new NLRB nominees, full slate now ready
for Senate vote
By Pamela Wolf, J.D.
The Senate Health, Education, Labor, and Pensions (HELP) Committee on Wednesday,
July 24, approved President Obama’s nominations of Kent Hirozawa and Nancy Schiffer
to serve on the National Labor Relations Board. The committee has now approved a full
slate of nominees, having voted on May 22 to advance the nominations of Phil
Miscimarra, Harry Johnson, and Chairman Mark Pearce, along with two recess
appointees whose nominations were withdrawn by the president last week as part of the
so-called “nuclear option” deal that ended the standoff on executive nominations.
“Once these five nominations are approved by the Senate, our country will have a fullyconfirmed, fully-functional Board for the first time in more than a decade — a huge step
forward for workers, businesses, and our economy,” said HELP Committee Chairman
Tom Harkin (D-IA).
“All five nominees to the NLRB are highly qualified experts in the field of labor and
employment law, and I am confident that all five will serve the Board well,” Harkin
continued. “I am hopeful that my Senate colleagues on both sides of the aisle will join me
in supporting these nominees when their nominations come before the Senate, so that the
Board can continue its important work.”
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At the July 23 hearing on the nominations, Senator Lamar Alexander (R-Tenn), the
senior Republican on the committee pressed the two nominees to protect state right-towork laws. Alexander cautioned against the Board trying to make an end run around
Congress to undermine these laws, citing a case in which acting general counsel moved
to stop Boeing, located in non-right-to-work state Washington, from expanding into
right-to-work-state South Carolina, according to his press release.
“Tennessee is one of 24 states with a right-to-work law, and we strongly support that
law,” Alexander said. “It’s been the primary driver of the expansion of our auto industry
over the last 30 years. It includes both a General Motors plant, which has United Auto
Workers’ partnership/membership, and it includes plants like Nissan and Volkswagen,
which do not, as well as hundreds of suppliers. So it is very important to us that the rightto-work law be protected.”
“The hearing is about nominees whose job it is to be judges, not advocates — that’s what
the board members of the National Labor Relations Board are supposed to do,”
Alexander observed. “The National Labor Relations Act talks about the job being ‘to
prescribe the legitimate rights of both employees and employers in their relations
affecting commerce,’ which suggests a high level of impartiality.”
Senate Majority Leader Harry Reid (D-Nev) previously indicated that the two new
nominations could proceed to a vote in the full Senate as early as tomorrow, according
media reports.
Cloture filed on NLRB nominations
Senate Majority Leader Harry Reid (D-Nev) filed cloture during Thursday’s Senate
session on three of the president’s NLRB nominations as well as his nomination for FBI
director. The Senate is in adjournment until Monday, July 29. There will be a cloture vote
at 5:30 pm that day on the FBI nominee, the first of Reid’s cloture filings.
Presumably, the Senate will later proceed to cloture votes on the NLRB nominations in
the following order: (1) Kent Yoshiho Hirozawa, of New York, to be a Member of the
Board; (2) Nancy Jean Schiffer, of Maryland, to be a Member of the Board; and (3) Mark
Gaston Pearce, of New York, to be a Member of Board.
Schiffer is a former associate general counsel to the AFL-CIO. Pearce is the current
NLRB chairman. Hirozawa is currently chief counsel to Pearce.
If cloture is invoked on any of the nominations, there would be up to 8 hours of postcloture debate time on each nomination. Once disposition of a nomination is reached, the
Senate would proceed to a cloture vote on the next nomination in the order listed.
Full Board is confirmed
By Pamela Wolf, J.D.
On Tuesday, July 30, the Senate confirmed all of President Barack Obama’s nominations
to the National Labor Relations Board. The NLRB now has a full complement of five
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members: Mark Gaston Pearce, Nancy Jean Schiffer, Kent Yoshiho Hirozawa, Harry I.
Johnson, and Philip Andrew Miscimarra.
Schiffer is a former associate general counsel to the AFL-CIO. Pearce is the current
NLRB chairman, and Hirozawa is currently chief counsel to Pearce. Johnson is currently
partner with Arent Fox LLP, and Miscimarra is a partner in the Labor and Employment
Group of Morgan Lewis & Bockius LLP.
After invoking cloture yesterday on the nominations of Pearce, Schiffer and Hirozawa,
each nomination proceed to a vote that fell along party lines. Pearce’s, however, was
confirmed by a vote of 59-38, with Republican Senators Lamar Alexander (Tenn.), Susan
Collins (Maine), Saxby Chambliss (Ga.), Christopher Coons (Del.), John McCain (Ariz.),
Lisa Murkowski (Alaska), and Rob Portman (Ohio) voting in favor of his confirmation.
Schiffer and Hirozawa were both confirmed by a vote of 54-44. Senator Murkowski was
the lone Republican casting a vote in favor of each of their nominations. Johnson and
Miscimarra were confirmed by voice vote.
The road to the first full complement of Board Members in a decade came only after
Majority Leader Harry Reid threatened to use the so-called “nuclear option” that would
have altered Senate rules to eliminate the option of filibuster in executive branch
nominations. In a resulting bipartisan bargain, the president withdrew the nominations of
two recess appointees and replaced them with two new ones. The Board will now have
three Democratic and two Republican members.
President Obama quickly issued a statement praising the confirmation of the five
nominations: “A critical part of our effort to strengthen the middle class is ensuring that
every American who works hard has a chance to succeed. That means providing wages
people can live on, safe working conditions and real opportunities to get ahead. Every
day, the NLRB is focused on the concerns of working Americans, from eliminating
unfair labor practices to upholding the right of employees to join a union and bargain
collectively with their employers. I applaud the Senate for putting in place a full board
and look forward to working together on other steps we can take to grow our economy.”
AFL-CIO President Richard also a statement, saying: “With today’s vote, our country has
qualified public servants on duty to defend America’s workers, businesses, and families.
We congratulate all of the nominees and look forward to having a functioning NLRB that
will fairly and impartially oversee the workplace rights of millions of Americans.”
Cable companies want a ruling from the Court as to whether all NLRB agents are
barred from acting due to unlawful recess appointments
By Pamela Wolf, J.D.
In a move that could put the NLRB out of business, CSC Holdings, LLC, and
Cablevision New York City Corp have filed an emergency application with the Supreme
Court that raises the question of whether, if the NLRB lacks a quorum and thus authority
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to act because of the purportedly unlawful recess appointments of three of its board
members, the impotence extends all the way to all of the Board’s agents.
The companies have asked for a stay of administrative proceedings on unfair labor
practice charges currently scheduled for hearing before a law judge, pending adjudication
of their petition for mandamus or prohibition in the D.C. Circuit that seeks to prevent the
NLRB from prosecuting ULP complaints and related proceedings, including any request
for Sec. 10(j) injunctive relief. Alternatively, the companies would like the Supreme
Court to treat their application as a petition for certiorari in advance of judgment, grant a
stay of the NLRB administrative proceedings pending consideration of the cert petition,
or at a minimum to delay determination pending the Court’s decision in NLRB v Noel
Canning.
The D.C. Circuit denied the companies’ request for a stay of the NLRB proceedings and
put their mandamus petition in abeyance pending determination of another mandamus
petition to prevent further action by the Board and its agents. According to the
companies, the D.C. Circuit’s resolution of the other mandamus request will come too
late to provide the companies with any relief.
The companies argue that the issues raised in their mandamus petition below—whether
the Board may lawfully prosecute the agency proceedings against them—plainly warrants
Supreme Court review. The issue turns on the legality of the President’s January 2012
recess appointments, which the Court has already agreed to decide, via the Noel Canning
case. Moreover, the companies assert, the question of “whether the Board’s agents may
exercise the agency’s statutory authority if the Board itself cannot implicates a separate
circuit split regarding the meaning of a federal statute and this Court’s decision in New
Process Steel.”
Meanwhile, NLRB Chairman Mark Gaston Pearce today issued a statement
commemorating the 78th anniversary of the signing of the National Labor Relations Act.
“For 78 years, the National Labor Relations Board has worked to fulfill the promise made
to working Americans by FDR and Congress when they enacted the National Labor
Relations Act,” he said.
“Our job today, just as it has been since the Great Depression, is to ensure the right of
millions of working men and women to organize and bargain collectively for better
wages, benefits and working conditions, to protect companies from unfair labor practices
and to resolve disputes by enforcing the law,” he continued.
“The National Labor Relations Board is proud of our on-going work to guarantee
democracy in the workplace and sustain a strong and expanding middle class. Across the
country today, businesses and workers are pulling together to emerge from the worst
economy since the 1930s. We look forward to continuing our work to help them resolve
disputes and build an economy that works for every American family.”
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As to whether the agency will be able to continue on an uninterrupted path to meet its
laudable goals will depend in large part on what the Supreme Court determines next term
in Noel Canning and perhaps, beyond.
4th Cir.: NLRB recess appointments constitutionally invalid; “recess” means only
“intersession” break
By Joy Waltemath, J.D.
In two consolidated cases in which the NLRB petitioned for enforcement, the Fourth
Circuit found that the Board lacked a quorum at the time it issued its 2012 decisions,
concluding that the President’s three January 4, 2012, Board appointments were
constitutionally infirm because the appointments were not made during “the Recess of the
Senate” (NLRB v Enterprise Leasing Co Southeast, LLC, July 17, 2013, Hamilton, C).
Accordingly, the court denied the Board’s applications for enforcement. The issue of the
constitutionality of the President’s recess appointments is currently pending before the
U.S. Supreme Court, which granted review in Noel Canning last month.
Both underlying disputes involved alleged refusals to bargain following a representation
election. Both employers raised constitutional and non-constitutional arguments that were
addressed initially by the court, noting it would attempt to resolve the disputes on nonconstitutional grounds, if possible. In each case, after a careful and thorough analysis of
the facts and relevant precedent, the court found that the Board’s determination was
supported by substantial evidence and that the employers could not prevail on their
statutory challenges under the NLRA — in Enterprise, that election results should not be
set aside, and in Huntington, that the bargaining unit determination was appropriate.
Turning then to the constitutional issues, the court addressed the validity of the three
recess appointments. Citing the Supreme Court decision in New Process Steel that
determined what constituted a valid NLRB quorum, the court reiterated that if the
appointments were invalid, the Board’s quorum requirement was not met at the time it
issued the 2012 decisions.
Senate not adjourned. The parties agreed that the Senate was not adjourned pursuant to
the Adjournments Clause when the President made the three 2012 recess appointments to
the Board at issue here. Noting that the Board’s view was supported by decisions of the
Second, Ninth, and Eleventh Circuits, while the employers’ positions were buttressed by
two recent decisions by the D.C. Circuit and the Third Circuit, the court addressed
specifically and exhaustively the following precedent: the Eleventh Circuit’s decision in
Evans, the D.C. Circuit’s decision in Noel Canning, and the Third Circuit’s decision in
New Vista Nursing.
What does “recess” mean? All parties agreed that the President may exercise his recess
appointment power only “during the Recess of the Senate.” To the court, there were three
plausible definitions of the term “the Recess” as used in the Recess Appointments Clause.
First is the definition adopted by the Noel Canning and New Vista Nursing courts:
intersession breaks of the Senate; that is, the time period between an adjournment sine
die and the start of the Senate’s next session. Second is the definition adopted by the
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court in Evans: intersession breaks as well as intrasession breaks (an intrasession break is
the time period between a non-sine die adjournment and the time the Senate reconvenes).
Although the Board agreed with the definition of the term “the Recess” as developed in
Evans, it offered another definition: a period when the Senate is not open for business
and, thus, unable to provide advice and consent on the President’s nominations. Under
this unavailable-for-business definition, when the Senate holds pro forma sessions, the
President may exercise his recess appointment power because the Senate is neither doing
business nor available to provide its advice and consent, argued the Board.
Recess defined. Agreeing with the Noel Canning and New Vista Nursing courts, the
Fourth Circuit held that the term “the Recess,” as used in the Recess Appointments
Clause, refers to the legislative break that the Senate takes between its sessions. In other
words, the term “the Recess” means the intersession break between an adjournment sine
die and the start of the Senate’s next session. Such an interpretation adheres to the plain
language of the Appointments and Recess Appointments Clauses, said the court, finding
it consistent with the structure of the Constitution, the history behind the enactment of
these clauses, and the recess appointment practice of at least the first 132 years of the
U.S. government.
The court did not agree that the case was about the propriety of legislative pro forma
sessions, as it indicated the Board would have it believe. “While the use of such sessions
arguably can have an impact on the President’s ability to make recess appointments, the
practice does not alter our conceptual understanding of the Recess Appointments Clause,
especially since the Senate is more than capable of conducting business during this time,”
it pointed out. The court specifically referenced the passage of the payroll tax extension
during a pro forma session on December 23, 2011, which the President signed the same
day, as evidence of coordination between legislative and executive branches showing the
Senate can perform its advice and consent function during such pro forma sessions.
Decrying the politicization of the issue “rather than a genuine, meaningful debate
regarding the true meaning of the clause,” the court accepted as its duty “to set forth that
meaning irrespective of political fortunes.” Accordingly, it concluded that the President’s
three January 4, 2012 appointments to the Board were not made during an intersession
recess because Congress began a new session on January 3, 2012. Consequently, the
appointments were invalid from their inception, the Board lacked a quorum of three
members when it issued its 2012 unfair labor practices decisions in both the Enterprise
and Huntington cases, and the court vacated the Board decisions and denied enforcement.
Concurrence. Judge Duncan, concurring in a brief opinion, suggested that the majority’s
careful textual analysis of the interplay of “recess” and “adjourn/adjournment” and the
framers’ use of “Session” tipped the scale in favor of the majority’s intersession-only
reading of the Recess Appointments Clause. The concurrence also found fault with the
dissent’s focus on the purpose of the clause and its “skating past the constitutional text.”
Finally, the concurring judge said the majority’s approach offered a more judicially
manageable interpretation of “the Recess” than that offered by the dissent.
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Dissent. Judge Diaz, in a 37-page dissenting opinion, challenged the majority’s
interpretation of “the Recess” as referring only to the break between the end of one
regular session of the Senate and the convening of the next (the so-called “intersession
recess”). As the Board pointed out, the majority’s view of the Recess Appointments
Clause, notwithstanding its textual analysis and early historical reference, “also deems
invalid over 500 appointments by fourteen Presidents dating back to the 1860s.”
The dissent suggested that the majority’s definition of “the Recess” presumed a textual
clarity not found in the clause and “upsets the Framers’ carefully crafted allocation of
power between the President and the Senate in the appointments process.” Consequently,
the dissenting judge would instead have ruled that “the Recess” refers to both intra- and
intersession recesses because the Senate can be unavailable to provide advice and consent
during both. That interpretation, said the dissent, looked at the clause’s original purpose,
provided a pragmatic understanding of the scope of the authority it conferred, and
maintained “the delicate balance of power that the Framers intended.”
The case numbers are 12-1514 and 12-2000.
Attorneys: Beth S. Brinkmann, U.S. Department of Justice, for NLRB. Daniel R. Begian
(The Lowenbaum Partnership) for Enterprise Leasing Company Southeast, LLC. Gregory
Branch Robertson, (Hunton & Williams) for Huntington Ingalls Incorporated. James B.
Coppess, AFL-CIO, for International Association of Machinists and Aerospace Workers.
President nominates Smithsonian’s Inspector General to serve as DOL’s IG
On Thursday, July 18, President Barack Obama sent to the Senate his nomination of Scott
S. Dahl for the job of Inspector General, Department of Labor. Dahl is currently the
Inspector General at the Smithsonian Institution.
Dahl began his stint at the Smithsonian in January 2012, according to a White House
announcement. He has also been an adjunct professor at Georgetown University Law
Center since 1992. Dahl previously served as Deputy Inspector General for the U.S.
Department of Commerce from October 2010 until January 2012, and Deputy Inspector
General for the Office of the Director of National Intelligence from 2007 until 2010.
Before that, he worked at the U.S. Department of Justice for more than 15 years,
including as Senior Counsel to the Inspector General, a prosecutor in the Public Integrity
Section of the Criminal Division, and trial attorney for the Civil Fraud Section in the
Civil Division.
Prior to his government service, Dahl was an associate at the D.C. law firm Arnold &
Porter. He received a B.A. from the University of Texas at Austin and a J.D. from the
University of Texas School of Law.
D.C. Cir.: Without notice and comment rulemaking, DOL’s 2010 Administrator
Interpretation deeming mortgage loan officers nonexempt invalid
By Ronald Miller, J.D.
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The D.C. Circuit reversed a district court order dismissing the Mortgage Bankers
Association’s (MBA) 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 Department of Labor 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 (APA)
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.
Contentious debate. Whether mortgage loan officers qualify for the administrative
exemption is a difficult and at times contentious question. In fact, DOL has found itself
on both sides of the debate. In 2006, the agency issued an opinion letter concluding on
the facts presented that mortgage loan officers with archetypal job duties fell within the
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administrative exemption. Just four years later, in 2010, the agency issued an
Administrator’s Interpretation declaring that “employees who perform the typical job
duties” of the hypothetical mortgage loan officer “do not qualify as bona fide
administrative employees.” The 2010 pronouncement “explicitly withdrew the 2006
Opinion Letter.”
Citing Paralyzed Veterans, the MBA challenged DOL’s decision to change their
“definitive interpretation without first undergoing notice-and-comment rulemaking as a
violation of the APA. The district court rejected this argument. In this appeal, the court
noted that Alaska Hunters’s takeaway is clear: reliance is but one factor courts must
consider in assessing whether an agency interpretation qualifies as definitive or
authoritative. DOL pushed back against this framework by treating reliance as a separate
and independent third element. However, the D.C. Circuit noted that “definitive” is a
term of art as used in the Paralyzed Veterans context. Once a court has classified an
agency interpretation as such, it cannot be significantly revised without notice and
comment rulemaking.
The case number is 12-5246.
Attorneys: Michael W. Steinberg (Morgan, Lewis & Bockius) for Mortgage Bankers
Association. Anthony J. Steinmeyer, U.S. Department of Justice, for Seth D. Harris.
Staffing company workers were not temps — at least as to the agency that
dispatched them; regional director calls for election
By Lisa Milam-Perez, J.D.
In what may represent a significant win for the nation’s ever-growing number of
contingent workers, an NLRB regional director has recently certified an election among
workers employed by a staffing agency who are dispatched to client companies on a
project basis.
Bergman Brothers Staffing, Inc. contended that the six certified asbestos abatement
workers who it assigned out to client companies had no reasonable expectation of
continued employment, and thus were temporary workers under the NLRA. But Region 5
Regional Director Wayne R. Gold on June 20 concluded that the workers were in fact
statutory employees, and constituted an appropriate bargaining unit. Accordingly, he
issued a decision and direction of election based on a petition filed by a Maryland local of
the Laborers union (LIUNA).
Client agreement. Under the terms of the agreements signed by client companies, the
staffing company employer provides the compensation (including payroll taxes) while the
client directs and supervises the dispatched employees at the jobsite and records the hours
worked. The client also is to verify the accuracy of employees’ time records, and is
required to acknowledge that it will be billed for overtime, if applicable. The agreement
also states that the staffing company employer has expended “considerable time, effort,
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and expense in recruiting, screening, and training temporary employees” who fill the
clients’ positions; as such, clients are restricted under the agreement from hiring the
staffing company’s employees directly or through a competing agency.
Employment relationship. For their part, employees sign an application and agreement
attesting that: “I am an employee of Bergman Brothers staffing (BBS) … and only BBS
or I can terminate my employment.” They also must affirm that they will not accept
employment from clients until the employee has worked for the client (through the
staffing agency placement) for 120 days, or 688 hours. Further, upon conclusion of an
assignment with a client, they agree to contact the staffing company immediately for
additional assignments. Specifically, the agreement provides, “as a condition of
employment, I understand that I must contact BBS for available work by reporting to
BBS within 24 hours of the conclusion of each work assignment.” Failure to do so would
be construed as a voluntary quit, and a denial of unemployment benefits.
The average client project lasts from one to two-and-a-half weeks. At the end of a given
project, the staffing company employees are released directly by the client. If the
company doesn’t immediately dispatch them for additional jobs, they are not terminated,
but rather, they are laid off until there’s more work, according to testimony from the
company’s president and CEO. Nonetheless, the CEO argued that the employees were
temps — that they had no expectation of continued employment.
Not temps. On these facts, the regional director disagreed, concluding that the unit
employees were not temps under Board law but permanent employees of the staffing
company, even if they worked inconsistent hours. “Their employment is only temporary
vis-à-vis the Employer’s clients,” he wrote. “[W]hile the employees’ work for the
Employer’s clients may be for a specific project or set duration, their employment with
the Employer is indefinite.”
The record evidence reflected that employees had reason to expect the staffing company
would look to its current employee roster to fill future client project orders. In fact, the
staffing company required employees to contact the employer for future work at the
conclusion of any project. And it contractually restricted their right to work directly for
clients and competitors, the regional director observed. In fact, the admonition to clients
that they may not directly hire the staffing company’s workers conveys that these
employees are hardly “short-term, transient workers with no interest in future working
conditions.” The conclusion that they are permanent employees was further buttressed by
the CEO’s testimony that employees were laid off, not terminated, at the end of a client
project.
Oakwood inapplicable. The employer also argued without success that the election
petition should be dismissed under Oakwood Care Center because the union did not
name the staffing company clients in the amended petition. In Oakwood, the Board held
that an election petition seeking to combine employees who are solely employed by a
user employer and employees who are jointly employed by the user employer and a
supplier employer would constitute a multiemployer unit and would only be an
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appropriate bargaining unit with the consent of the parties. Combining such employees
into one unit contravened Sec. 9(b), the Board found, by requiring different employers to
bargain together regarding employees in the same unit.
Here, though, the union was not seeking to impose a bargaining obligation on different
employers; the staffing company’s clients did not need to consent. Also unavailing was
the employer’s contention that, under Oakwood, a petition naming only one employer of
a joint employer relationship is inappropriate and diminishes employees’ Sec. 7 rights.
The staffing company’s business model involved successive joint employer relationships
with its clients. There was no indication that the company had any intention of
performing asbestos abatement work itself as a sole employer. Therefore, the petition did
not implicate the Board’s concerns in Oakwood, where one group of employees had its
terms set by Employer A and another’s by Employers A/B.
The heart of the problem. Gold deftly articulated the crux of the problem for contingent
workers seeking to organize. “Were I to conclude that Oakwood requires any petition to
name both joint employers, the employees herein would effectively be denied any
opportunity to exercise their statutory rights,” the regional director explained. “The
Employer receives little advance notice of when its clients will need employees, and
those client projects typically are of relatively short duration. Even assuming a labor
organization could file a petition simultaneously with the Employer securing the project
from its client, it is unlikely that the Board would be able to conduct an election before
the project was complete, let alone engage in any meaningful bargaining. Moreover, this
futile process would have to be repeated for each of the Employer’s clients, despite that
the same employees of the Employer may immediately transition from Client A’s jobsite
to Client B’s jobsite,” he added.
“The result would be a fleeting and ultimately illusory opportunity for the Employer’s
employees to exercise their rights to bargain collectively. In reality, it would leave them
permanently unable to organize. Instead, by focusing on the employees’ broader and
ongoing relationship with the Employer, their Section 7 rights are not lost by focusing on
the narrow and brief duration of each client assignment — rightly keeping the forest more
prominent than its trees.”
Hyatt and UNITE HERE reach national framework agreement that would end
global boycott
By Pamela Wolf, J.D.
On July 1, Hyatt Hotels Corporation and UNITE HERE announced a national agreement
that creates a framework for the company and the union to work together moving
forward. Both UNITE HERE and Hyatt look at the pact as a positive development.
The agreement, however, will not go into effect until the settlement and ratification of
union contracts by Hyatt associates in San Francisco, Honolulu, Los Angeles, and
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Chicago. Pending associate approval, the contracts will provide retroactive wage
increases and maintain quality health care and pension benefits. These new contracts
would cover Hyatt associates into 2018.
The announcement follows protests held nearly a month ago at Hyatt Corporation's
annual shareholders meeting held at McDonalds Corporation’s Oak Brook campus on
June 10. There, hotel workers had been calling on Hyatt to reform allegedly longstanding
labor abuses and to add a hotel worker to the board of directors to provide front-line
employee leadership and help reform labor practices from the top down, according to
UNITE HERE.
Workers protested against Hyatt and supported the addition of a hotel worker to the board
because the chain had “singled itself out as the worst employer in the hotel industry by
abusing its housekeepers, replacing longtime employees with minimum wage temporary
workers, and imposing health-threatening workloads on those who remain,” the union
said. The federal government had also issued a letter to Hyatt last year, warning the
company of certain hazards their housekeepers face, according to the union.
A key provision of the newly penned agreement is a “fair process” that includes a
mechanism for employees at a number of Hyatt hotels to vote on whether they wish to be
represented by UNITE HERE. As part of the accord, once the union contracts are ratified,
UNITE HERE will end its global boycott of Hyatt.
“We look forward to a new collaborative relationship with Hyatt,” said UNITE HERE
President D. Taylor. “This agreement shows that when workers across the hotel industry
stand together, they can move forward, even in a tough economy. Both organizations
deserve credit for working out this constructive step forward.”
“We are delighted that our associates in Chicago, Los Angeles, San Francisco, and
Waikiki will have contracts and the pay raises that go with them,” said Doug Patrick,
Senior Vice President, Human Resources for the Hyatt.
Oakland, California, public employees hold one-day strike to call attention to
breakdown in contract negotiations
By Pamela Wolf, J.D.
After a one-day strike on Monday, 3,500 employees in Oakland, California, have left
their picket lines and returned to work, with city services returned to full operation by
Tuesday morning. The workers, represented by Service Employees International Union
(SEIU) Local 1021 and International Federation of Professional and Technical Engineers
(IFPTE) Local 21, called a strike after Bay Area Rapid Transit District (BART)
management purportedly left the bargaining table on June 30 just hours before the
expiration of union contracts.
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“We sat at the table for 10 hours on Saturday without any new proposals from BART
management,” SEIU Local 1021 said in a statement. “We offered a cost-saving plan that
would have cut the District’s retiree medical costs by $30 million that produced no
response. We declined a proposal that attempted to divide the two largest BART unions
on economic issues.”
“Now that the recession is over and city coffers are full, the City has not been straight
with employees or residents about the budget,” said IFPTE Local 21Representative
Vickie Carson. “They continue to put forward dishonest budget numbers and not engage
in substantive and meaningful contract negotiations. There is enough funding in the city
budget to strengthen public safety, expand economic development, restore core services
and hire key employees. There is money to help civilian employees who lost 27% of their
paycheck purchasing power to begin to recover with a small cost-of-living increase.”
Over the course of the last five years, Oakland civilian employees agreed to $150 million
in wage cuts, developed $20 million in budget efficiencies and streamlining, urged hiring
freezes, and proposed retirement incentive programs, in order to preserve core services
for Oakland residents during the economic downturn, according to IFPTE Local 21.
Nonetheless, in 15 weeks of negotiations the city failed to engage in meaningful and
substantial negotiations that might have deterred a strike, the union said, noting this was
the first strike in its history against the city.
IFPTE Local 21 also said that it filed an Unfair Labor Practice complaint against the city
on June 30 for failing to negotiate seriously and substantively.
Pete Castelli, SEIU Local 1021’s Lead Negotiator for the Oakland contract, complained
that Oakland Mayor Jean Quan was untruthful when she told the media that the Local
met with city negotiators last Friday and that the city put proposals on the table, offering
workers a raise.
Announcing the end to the one-day strike, Castelli said: “Today we took our struggle to
the streets with a successful one-day strike intended to draw the public’s attention to the
City’s inaction. We hope that the administration and Mayor Jean Quan got the message
and will come to bargaining on July 9 ready to settle a fair, no-concessions contract that
bolsters much-needed services and treats workers with respect.”
AFGE launches campaign to prevent additional work furloughs at EEOC
The American Federation of Government Employees (AFGE) is on a mission to prevent further
work furloughs of EEOC employees. On July 1, the EEOC began a reassessment period to
decide whether to go forward with a plan to order employees home for a second round of unpaid
furlough days to accommodate sequestration budget cuts, according to the AFGE. The EEOC
already has required employees to take five unpaid furlough days. The AFGE is urging the EEOC
to halt action on plans for an additional three days of furloughs.
The AFGE says that the EEOC’s employees, friends, and supporters are relying on a full range of
media to communicate to the civil rights agency that furloughs are not the way to go. Employees
are sending emails, friends are tweeting the agency, and supporters are changing their Facebook
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profile photos to a picture of a stop sign that says, “Stop EEOC furloughs,” according to the union,
which is also helping to support the effort with action emails to Congress.
The EEOC’s employees have also taken part in a letter-writing campaign to Commission Chair
Jacqueline Berrien to share their personal stories about the harmful effects of furloughs on their
work and finances.
“EEOC is facing a full court press as it deliberates more furloughs,” said Gabrielle Martin,
president of the AFGE’s National Council of EEOC Locals, No. 216. “Nobody but EEOC thinks
furloughs are a good idea. Workers facing discrimination on the job want EEOC frontline staff at
their desks to help. EEOC’s own employees are suffering from the lost pay and shortened time to
do the same work. Congress says furloughs should be a last resort.”
Martin added, “EEOC’s backlog was over 70,000 cases before this year’s employee furloughs.
Average discrimination charge processing time was over nine months before furloughs. Unless
Congress undoes sequestration, it is here to stay for 10 years. EEOC must find a better way to
manage than furloughing its entire workforce. Furloughs harm EEOC’s mission and its workers.”
Martin sent said she sent a letter to Chair Berrien on June 24, citing cost-savings measures that
should be employed instead of furloughs, such as reducing wasteful management travel,
reducing district budgets 5 percent commensurate with the sequestration reduction, discontinuing
the service contracts that allow contract support staff, paralegals, and mediators to get paid for
work EEOC employees perform, and canceling the EEOC’s August EXCEL and FEPA
conferences.
NLRB, OSC enter MOU to permit collaboration between agencies
The DOJ announced on July 9 that the Civil Rights Division’s Office of Special Counsel for
Immigration-Related Unfair Employment Practices (OSC) has entered into a Memorandum of
Understanding (MOU) with the NLRB, formalizing a collaborative relationship that allows both
agencies to share information, refer matters to each other, and coordinate investigations as
appropriate. The OSC is responsible for enforcing the antidiscrimination provision of the
Immigration and Nationality Act, which prohibits citizenship status discrimination and national
origin discrimination in hiring, firing, and recruitment or referral for a fee, as well as discriminatory
Form I-9 and E-Verify practices.
The MOU will permit the NLRB to make referrals to the OSC, with the express authority of the
NLRB charging party, when a matter before the Board suggests a possible violation of the INA
antidiscrimination provision, such as verification of employment authorization in the I-9 or E-Verify
process that appears to be discriminatory based on citizenship status or national origin.
Likewise, the DOJ will refer matters to the NLRB that appear to fall within that agency’s authority,
such as infringement on the right to form, join, decertify, or assist a labor organization, and to
bargain collectively through representatives of their own choosing or to refrain from such
activities. In addition, the MOU provides for cross-training and technical assistance to ensure that
staff within each agency can identify appropriate referrals.
“Employers cannot avoid liability under the law just because an employee has turned to the
wrong agency or is unaware of additional protections available under a different law,” said
Gregory Friel, Deputy Assistant Attorney General for the Civil Rights Division. “Employees
deserve to benefit from the efficiency of government cooperation, and employers will continue to
benefit from agency guidance on how to comply with the antidiscrimination provision and the
National Labor Relations Act.”
NLRB’s final rule on representation case procedures has no target date, OLMS’
“persuader agreement” rule to be finalized this November
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By Pamela Wolf, J.D.
The NLRB and the DOL’s Office of Labor-Management Standards (OLMS) have
released their Spring 2013 regulatory agendas outlining the rulemaking they expect
undertake during the next six months. Among the most notable items are the NLRB’s
controversial amendment of its rules on representation case procedures and the OLMS’
much-anticipated final rule on so-called “persuader agreements.”
NLRB. The NLRB lists only one long-term action on its regulatory agenda:
Representation-Case Procedures. The agency made a controversial proposal to amend its
rules and regulations governing the filing and processing of petitions relating to the
representation of employees for collective bargaining purposes. The notice of proposed
rulemaking (NPRM) expressed the NLRB’s tentative view that the proposed amendments
would: (1) remove unnecessary barriers to the fair and expeditious resolution of questions
concerning representation; (2) simplify representation-case procedures and render them
more transparent and uniform across regions, eliminate unnecessary litigation, and
consolidate requests for Board review of regional directors' pre- and post-election
determinations into a single, post-election request; and (3) permit the Board to more
promptly determine if there is a question concerning representation and, if so, to resolve
it by conducting a secret ballot election.
The NLRB issued a final rule addressing a number of the proposed amendments on
December 22, 2011, which took effect on April 30, 2012. However, on May 14, 2012, the
U.S. District Court for the District of Columbia issued a decision setting aside the final
rule (Chamber of Commerce v. NLRB, No 11-cv-2262). On May 15, 2012, the Board
temporarily suspended implementation of the amendments adopted in the final rule. The
Board is appealing the court's decision and also continuing to deliberate on the rest of the
proposed amendments. The date for final action on the proposed rule is yet to be
determined.
DOL OLMS. Two regulatory actions by the OLMS are related to so-called “persuader
agreements.” First, in a final rule, Employer and Labor Relations Consultant Reporting
Under the LMRDA, the DOL intends to publish a final rule revising its interpretation of
section 203(c) of the Labor-Management Reporting and Disclosure Act (LMRDA). That
provision creates an “advice” exemption from reporting requirements that apply to
employers and other persons in connection with persuading employees about the right to
organize and bargain collectively. The revised interpretation would narrow the scope of
the advice exemption. The new rule would use the common definition of advice, thereby
expanding the number of contacts that would have to be reported. The DOL expects to
finalize this rulemaking in November 2013.
In a related proposed rulemaking, Persuader Agreements: Consultant Form LM-21
Receipts and Disbursements Report, the DOL intends to publish a notice and seek
comments on consideration of the Form LM-21, Receipts and Disbursements Report,
which is required pursuant to section 203(b) of the LMRDA. The rulemaking will
propose mandatory electronic filing for Form LM-21 filers and will review the layout of
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the Form LM-21 and its instructions, including the detail required to be reported. The
DOL anticipates that it will issue a notice of proposed rulemaking in June 2014.
The entire Spring 2013 Agenda is available at reginfo.gov.
Low-wage airport workers protest outside US Airways shareholder meeting
Low-wage airport workers and supporters held a Midtown Manhattan rally outside the
US Airways shareholder meeting on Friday, July 12. They protested the fact that
executive pay is skyrocketing while passenger service workers remain mired in poverty
wages, according to SEIU local 32BJ.
Over 100 airport workers from Boston, Philadelphia, Fort Lauderdale, Newark, and New
York City said US Airways' business model is unjust because it calls for them to labor in
a shadow economy with no job security, working for minimum wage, relying on tips, and
lacking basic benefits while the airlines' top executives rake in millions of dollars.
32BJ SEIU President Hector Figueroa called the system unfair because it rewards a few
executives at the top at the expense of the worker bees for the good fortunes of the entire
industry. “Inside, US Airways' CEO, Douglas Parker, is asking shareholders for a 44%
pay raise,” Figueroa told workers protesting outside the meeting. “Imagine that. He wants
$5.5 million and the possibility of up to $86 million in total compensation for himself and
other top executives. That should be an embarrassment to US Airways. What about the
wheelchair attendant, the cabin cleaner, the security officer? Who is looking out for
them?”
The union says that US Airways' shareholders are expected to cast the final vote to
approve an $11 billion merger with American Airlines — effectively creating the world’s
largest airline — but the airline still fails to address wage and working conditions for
thousands of contracted security officers, cleaners, and wheelchair attendants who
struggle to get by.
“With wages as low as $4.77 an hour plus tips and with no health insurance, many airport
workers can barely cover the basic needs of their families,” the union said. The median
wage for airline subcontracted workers at Philadelphia International Airport, the nation's
leading big city for poverty, is $7.85 an hour. At the Port Authority of New York and
New Jersey airports, it is $8 an hour. Meanwhile, US Airways CEO Parker makes $2,640
an hour, according to the union.
Alaska Airlines’ pilots ratify new five-year contract
Alaska Airlines’ pilots have approved a new five-year contract, according to the Air Line
Pilots Association, International (ALPA). With nearly 94 percent of 1,343 eligible voters
casting a ballot, 67 percent voted in favor of the agreement. The new contract increases
pay by nearly 20 percent over the life of the agreement and contains job security and
work rule improvements. It also protects the pilots’ retirement and insurance benefits.
ALPA called it “particularly significant” that the pilots and Alaska management reached
the new contract agreement a little more than a month beyond the last agreement’s April
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1, 2013, amendable date. Contracts in the airline industry do not expire; they only
become amendable, and it is common for negotiations to last for years beyond the
amendable date, according to the union. The parties’ full negotiating teams began
meeting in summer 2012.
Alaska’s pilots and management now will begin the process of implementing the new
agreement and preparing to discuss changes needed to accommodate new flighttime/duty-time rules that are scheduled to go into effect on January 4, 2014.
“This agreement improved and protected the four cornerstones of our contract — pay, job
security, work rules, and benefits — in a way that allows the pilots to share in our
company’s prosperity and allows our company to continue to succeed,” said Captain
Chris Notaro, chairman of the Alaska Airlines Master Executive Council of ALPA.
“The pilots and management both approached these negotiations with the mindset that
they wanted to change the paradigm of protracted negotiations. The fact that we were
able to reach an agreement in a timely manner is a product of a mutual commitment to
find terms that would work for both the pilots and for the company,” Notaro said.
NLRB’s Puerto Rico and Milwaukee regions to become subregions of Tampa and
Minnesota regions, respectively
The NLRB is changing its regional offices in Puerto Rico and Milwaukee to subregional
offices assigned to the supervision of the Tampa and Minneapolis Regional Offices,
respectively, according to a notice slated for publication in the Federal Register
tomorrow. The Board is also revising its Statement of Organization and Functions
accordingly.
Specifically, the Board’s Puerto Rico office will be redesignated as Subregion 24, and the
Milwaukee office will be redesignated as Subregion 30. The changes were prompted by a
decline in unfair labor practice and representation case filings in each of the regional
offices subject to restructuring and the Board’s desire to equalize caseload and case
management responsibilities in all affected offices, according to the notice.
The Puerto Rico and Milwaukee Regional Offices have been headed by a regional
director with full authority for the processing of both unfair labor practice and
representation cases. However, the newly designated subregional offices will now be
headed by an officer-in-charge, each of whom will report to the respective regional
directors in Tampa and Minneapolis, the NLRB said. The changes will vest these
regional directors with case-handling authority for the geographical area covered by their
newly designated subregional office. The geographical areas covered by the subregional
offices, however, will remain the same as when they were designated as regional offices.
The NLRB is also revising its Statement of Organization and Functions to reflect the
addition of Subregions 24 and 30 supervised by their respective regional offices and the
elimination of Regions 24 and 30 as regional offices.
23
Since April 2013, the Board has solicited and received feedback on the proposed
restructuring of these offices. The Board’s decision to restructure operations as set forth
in the notice was informed by comments from stakeholders, members of Congress, and
agency employees, the Board stated.
Effective dates. The changes with respect to the Puerto Rico and Tampa offices will be
effective September 1, 2013. The changes announced above with respect to the
Milwaukee and Minneapolis offices will be effective August 1, 2013.
NLRB will have new division with three branches; headquarters offices realigned
The NLRB is restructuring and realigning the location and lines of authority of certain
agency headquarters offices to create an independent Division of Legal Counsel that
reports to the Office of the General Counsel, according to a notice scheduled for
publication in the Federal Register on July 25. The move is intended to centralize the
services of several headquarters’ offices; eliminate duplication of functions; improve the
delivery of services; and streamline, integrate and enhance management functions.
This new Division of Legal Counsel will have three branches, according to the notice:

Ethics, Employment and Administrative Law Branch, which will provide
legal counsel and advice in the areas of labor relations, employment, and
personnel law (including claims involving MSPB, FLRA, EEOC, US Office of
Special Counsel), government contracting, Federal Tort Claims Act matters, and
government and bar ethics.

Contempt, Compliance and Special Litigation Branch, which will provide
compliance and contempt advice and litigation involving, among other things, the
Bankruptcy Code, the Federal Debt Collection Procedures Act, and compliance
with outstanding court judgments; conduct litigation and provide the agency with
advice and assistance when programs, statutes, or outside proceedings threaten its
ability to carry out its mission; ensure agency compliance with government
regulations that affect its work, such as the Administrative Procedures Act (APA),
statutes relating to agency rulemaking, the Sunshine Act, the Health Insurance
Portability and Accountability Act, and the Right to Financial Privacy Act; and
provide guidance and conduct litigation involving FOIA and Privacy Act issues.

Freedom of Information Act (FOIA) Branch, which will provide advice on
FOIA and some related Privacy Act issues; handle all FOIA requests and appeals
for headquarters and regional offices; and prepare FOIA guideline memoranda
and annual FOIA reports.
When dealing with matters on behalf of the five-member Board or the various Board side
offices, the Division of Legal Counsel will coordinate through the Office of the Solicitor.
Lead Technology Counsel will conduct litigation and provide advice and assistance
involving e-litigation matters.
The following Headquarters’ offices will be affected by these administrative changes:
24

Labor Relations and Special Counsel moves from the Division of OperationsManagement to the Ethics, Employment and Administrative Law Branch of the
Division of Legal Counsel;

Government Ethics moves from the Administration Division and Bar Ethics
moves from the Division of Enforcement Litigation to the Ethics, Employment
and Administrative Law Branch of the Division of Legal Counsel;

Special Litigation Branch, and Contempt Litigation and Compliance Branch
moves from Enforcement Litigation Division to Contempt, Compliance and
Special Litigation Branch of the Division of Legal Counsel;

FOIA processing and preparation of FOIA guidance and reporting functions of
the Research and Policy Planning Branch move from the Division of Advice to
the FOIA Branch of the Division of Legal Counsel.

FOIA appeals processing on the Board side moves from the Solicitor’s Office,
and FOIA appeals processing on the General Counsel side moves from the Office
of Appeals in the Enforcement Litigation Division to the FOIA Branch of the
Division of Legal Counsel, with Jennifer Abruzzo as the Chief FOIA Officer for
the Agency;

Lead Technology Counsel moves from the Division of Enforcement Litigation
and will report directly to the Associate General Counsel of the Division.
These administrative changes are effective August 11, 2013. Because they relate to the
internal management of the agency, pursuant to 5 U.S.C. 553, they are exempted from the
notice and comment requirements of the APA, the NLRB said.
General Counsel takes issue with policies banning photography on company
premises, in one of several advice memos recently released
By Lisa Milam-Perez, J.D.
Social media policies that restrict employees from taking photographs or videos on
company premises may run afoul of the NLRA, according to an advice memorandum
dated March 21, 2012, but only recently released by the NLRB. To the extent the
guidance signals increased Board scrutiny of employers’ efforts to protect confidential
and proprietary information and guard against liability for improper conduct in our smartphone age, employers should take heed.
The guidance was one of several advice memos released by the Division of Advice in
recent weeks.
Unlawful policy provisions.Giant Food LLC implemented a social media policy
(without bargaining with the union) that banned employees from photographing or video
recording the company’s facility. Specifically, employees were barred from
photographing or videotaping the employer’s “premises, processes, operations, or
25
products” that included confidential company-owned information without prior approval.
Such a provision would reasonably be construed as preventing employees “from using
social media to communicate and share information regarding their Section 7 activities
through pictures or videos, such as of employees engaged in picketing or other concerted
activities,” the NLRB’s associate legal counsel concluded.
The policy also generally prohibited the disclosure — “either externally or to any
unauthorized [a]ssociate” — of confidential or “non-public” information about the
company, its employees, customers, or business partners. Without clarification, the
associate general counsel said the phrase “non-public information” was so vague that
employees would reasonably construe it to include subjects related to terms and
conditions of their employment. As for the ban on disclosing “confidential” information,
the Board has long recognized that this phrase, without limiting language, would
reasonably be interpreted to include information concerning working conditions.
A restriction on employee use of the company logo, trademark, or graphics also was
unlawful. Such a prohibition could be seen by employees as prohibiting their use of the
logo or trademark in their online Sec. 7 communications, such as electronic leaflets,
cartoons, “or even photos of picket signs containing” the logo. The employer’s
proprietary interest in its trademark would not be “remotely implicated” by employees’
noncommercial use of the images while engaged in Sec. 7 activity, the associate general
counsel advised.
Savings clause no cure. Moreover, a savings clause contained in the social media policy
did not cure the violations of employees’ protected rights. Although the policy expressly
stated that it would not be applied “in a manner that improperly interferes with or limits
employees’ rights under any state or federal laws, including the National Labor Relations
Act,” the associate general counsel noted that “an employer may not prohibit specific
employee activity protected by the Act and then escape the consequences of the
prohibition by a general reference to rights protected by the Act.”
When certain protected activities are specifically prohibited, employees would reasonably
believe that the general statement of rights set forth in the savings clause did not include
the activities at issue. “Furthermore, with regard to overbroad prohibitions that
reasonably would be interpreted to prohibit protected activities, a general disclaimer is
insufficient where employees would not understand from the disclaimer that protected
activities are in fact permitted.”
Lawful policies. On the other hand, a rule prohibiting employees from defaming or
discrediting company products or services did not run afoul of the Act, since such
conduct is not protected under Sec. 7. Nor did a rule encouraging employees to report
violations of the social media policy to management; it did not expressly restrict
communication or threaten discipline. Moreover, the directive would not serve to chill
Sec. 7 activity, at least once the policy’s unlawful terms are stricken, the associate
general counsel reasoned.
26
Casino access. In another advice memo released on July 18, the general counsel’s office
concluded that Maryland Live Casino did not unlawfully deny access to employees of an
on-site restaurant that had leased space inside the casino because they were distributing
UNITE HERE literature to casino employees at the employee entrance reserved for the
casino workers. The restaurant employees were “strangers or outsiders” at that site, so
their statutory interests were more closely aligned with the narrower access rights of nonemployee organizers than those of off-duty employees.
A related advice memo found the casino did not violate Sec. 8(a)(2) by insisting that any
union seeking access to the casino sign a labor peace agreement requiring that it waive its
right to take economic action against the employer, at any of its facilities, for a five-year
period. Because the casino didn’t unlawfully assist or support any union that did sign the
agreement in exchange for access, and did not discriminate among unions by denying
access solely to the union that refused to sign the pact, the general counsel’s office
recommended dismissal of this allegation of the unfair labor practice charge.
Election agreement. Also last week, the Division of Advice released a January 28, 2009
advice memorandum regarding issues arising from an election procedure agreement
(EPA) between Tenet Healthcare and the California Nurses Association (CNA). First, the
Division concluded the agreement did not unlawfully supplant the Board’s role in the
representation election because parties may lawfully agree to limit their election conduct
and to bring any election disputes to arbitration. Nor did the EPA amount to unlawful
assistance, in that it required the employer to grant union access to its hospitals and to
provide information about potential bargaining unit members. Such conduct on the
employer’s part would not tend to coerce employees, the associate general counsel found.
The associate general counsel also advised that the EPA did not infringe on protected
speech by limiting employer communication with employees about the union —
specifically, by prohibiting supervisors from discussing the union with employees. The
right of supervisors to express their views about the union is not protected under the
NLRA, the associate general counsel noted. Finally, an interest arbitration provision in
the EPA did not amount to unlawful pre-recognition bargaining; it did not have the
immediate effect of establishing terms and conditions of employment.
However, the employer did violate Sec. 8(a)(1) by denying antiunion employees the use
of conference rooms while granting all other requests for such access. Such a policy
amounted to unlawful content-based discrimination.
Union role at unrepresented facility. In Levi Strauss & Co, the associate general
counsel concluded that an employer did not unlawfully assist and support a union that
represents employees at one of its facilities by allowing the union to participate
temporarily on a “redesign team” charged with improving operations at an unrepresented
plant. Further, the employer did not improperly express support for the employer-union
partnership by suggesting to unrepresented employees that establishing a permanent
partnership (by selecting the union as their bargaining rep) would be good for the
company and employees. Finally, the employer did not unlawfully provide the union with
improper access to its employees by allowing organizational meetings to be held on paid
27
time on company premises. The employer's conduct “would not reasonably have either
inhibited employees in their free choice regarding a bargaining representative or
interfered with the Union's maintenance of an arms-length relationship with the
Employer,” the associate general counsel concluded.
Employee list for deauthorization petition. Finally, the Board released an advice
memorandum, Teamsters Local Union No 261, which advised that a union did not violate
Sec. 8(b)(1)(A) by failing to provide a bargaining unit employee in one facility in a
nationwide bargaining unit with the names and addresses of all unit employees covered
by the nationwide master agreement for the purpose of gathering support for the filing of
a deauthorization petition. The information requested by the employee did not pertain to
matters affecting her employment, the associate general counsel concluded; moreover,
the union’s refusal to provide the information “does not impair any policy embedded in
the Act.”
Nonunion Walmart-contracted warehouse workers strike in Riverside County,
California
On July 24, some 30 warehouse workers walked off the job to protest “the extreme
intimidation, spying and retaliation they have experienced since they exposed dangerous
and unsafe working conditions at a Walmart-contracted warehouse in Riverside County,”
according to Warehouse Workers United (WWU). The workers do not have a recognized
union, but they are prepared to strike for at least two days, calling for an end to
purportedly overbearing surveillance, retaliation and unfair labor practices at a warehouse
operated by Olivet International in Mira Loma, California, an unincorporated part of
Riverside County.
The striking workers primarily unpack, label and load boxes of suitcases destined for
Walmart, WWU said in a statement. Warehouse managers have told them that Walmart
comprises 70 percent of the warehouse’s client base. Workers at the warehouse filed a
detailed complaint in May with the California Occupational Safety and Health
Administration citing blocked fire exits, inadequate access to water, frequent collapses of
towers of boxes and more.
While warehouse operators have moved quickly to fix some of the most egregious
problems inside the warehouse, they have also increased worker surveillance, according
to WWU. Managers have allegedly issued new rules aimed at halting worker discussions
of health and safety problems, installed dozens of cameras to monitor workers, and
threatened workers that if they continued their collective effort they could lose their jobs.
Warehouse operators have also refused to address workers’ concerns about low pay,
inconsistent work schedules, and lack of health benefits, according to WWU, which
pointed to new research by University of Southern California Professor Juan D. De Lara
finding that warehouse workers are among the lowest paid in California, particularly
women who work in warehouses:

The median income for warehouse workers in the logistics industry is $14,500 per
year.
28

Temporary warehouse occupations pay an average yearly income of $9,255.

Female warehouse workers earn at least $6,000 per year less than male warehouse
workers.

28% of all warehouse workers in the logistics industry were employed for less
than 27 weeks per year.
“Improving the quality of warehousing jobs is critical to ameliorating the economic
health of this region. As long as major companies like Walmart refuse to address the
safety and quality of jobs, the Inland Empire will always lag behind the rest of
California,” Palma said.
The NLRB is currently investigating charges related to worker intimidation and
surveillance at Olivet International, according to WWU.
WWU is an organization committed to working with warehouse workers to improve the
quality of life and jobs in Southern California's Inland Empire; it works with warehouse
and other workers in Walmart’s global supply chain to improve the quality of life and
jobs.
Committee requests determination on whether “worker centers” must meet
LMRDA filing requirements
The House Committee on Education and the Workforce has asked freshly confirmed
Secretary of Labor Thomas Perez to weigh in on the question of whether “worker
centers” are “labor organizations” or otherwise fall under the Labor-Management
Reporting and Disclosure Act (LMRDA) and thus, are subject to annual filing
requirements.
In a July 23 letter to Perez, John Kline (R-Minn), Chairman of the Education and
Workforce Committee and David P. Roe (R-Tenn), Chairman of the Subcommittee on
Health, Employment, Labor and Pensions wrote: “In the last decade, the line between socalled ‘worker centers’ and labor organizations has blurred. Today, many of these
‘worker centers’ are dealing with employers directly on behalf of employees. Given these
activities, a case has been made that at least some ‘worker centers’ are labor
organizations as defined by the Labor-Management Reporting and Disclosure Act
(LMRDA), which would make them subject to annual filing requirements.”
The two committee chairmen accordingly have requested an official determination as to
the LMRDA filing requirements pertaining to worker centers, as well as all documents
and communications used by the agency to reach its determination.
According to the committee chairmen, so-called worker centers “have traditionally been
‘defined as community-based and community-led organizations that engage in a
combination of service, advocacy, and organizing to provide support to low-wage
workers.’” These organizations provide “information and training in workers’ rights,
employment, labor and immigration law, legal services, the English language, and many
29
other programs,” the chairmen wrote. They have, however also “taken direct action to
alter conditions of employment and organize employees.”
The committee chairmen say that in 2006, there were at least 139 of these organizations
in 32 states.
USW reaches tentative contract agreements with three major tire companies
The United Steelworkers (USW) announced tentative contracts on Monday, July 29, with
tire companies BF Goodrich and Bridgestone-Firestone. A day earlier, the union
announced a tentative agreement with Goodyear Tire.
BF Goodrich. The new three-year contract with BF Goodrich would cover 2,400
workers at facilities in Tuscaloosa, Alabama, and Fort Wayne, Indiana. The union and the
tire company had been working since June on a new CBA. The prior contract expires
today.
Details of the contract have been withheld until union members have had a chance to
review and vote on it. Ratification votes are scheduled to be completed by August 9.
Bridgestone-Firestone. The tentative four-year contract with Bridgestone-Firestone
would cover 4,500 workers at plants in Akron, Ohio; Des Moines, Iowa; Russellville,
Arkansas; LaVergne, Tennessee; Warren County, Tennessee; and Bloomington, Illinois.
The former CBA with Bridgestone-Firestone expired on Saturday.
The negotiating teams had been working on the contract since June. Contract details are
unavailable until union members have reviewed and voted on it. Ratification votes are
expected to take place over the next two weeks.
Goodyear Tire. Under the union’s tentative agreement with Goodyear, 8,500 hourly
employees at six locations would have a new four-year contract. The prior four-year
contract also expired on Saturday.
Specific details of the contract, which includes union members working in plants in
Buffalo, New York; Topeka, Kansas; Fayetteville, North Carolina; Danville, Virginia;
Gadsden, Alabama; and Akron, Ohio, will be available after the bargaining committee
members have been able to directly discuss contract provisions on the local level. Dates
for the informational meetings and ratification votes have not yet been set.
Teamsters take battle with McKesson Corporation to annual shareholder meeting
Today, in what appears to be part of an increasing trend of taking the battle for better
wages and benefits to the place where corporations may be most vulnerable, the
Teamsters held a protest outside the annual shareholder meeting of San Francisco-based
McKesson Corporation, a North American leading pharmaceutical distributor.
According to a release by the union, more than a year after Lakeland, Florida, workers
voted for Teamster representation, the company still has not agreed to a first contract
30
“that provides fair wages and affordable health care.” The Lakeland workers are
represented by Teamsters Local Union 79.
That’s not all the Teamsters were concerned about—the union sited the company’s $123
billion in revenues last year in the face of its efforts to avoid unionization in Lakeland
and the board of directors’ generosity in giving Chairman and CEO John Hammergren a
total compensation of roughly $50 million per year, including a pension with an
estimated value of $159 million.
Inside the shareholder meeting, Ken Wood, Teamsters International Vice President and
President of Teamsters Local Union 79, demanded that the McKesson board take swift
action to stem the escalating labor dispute in Florida and to get labor relations back on
track. The company also purportedly faced an investor backlash at the meeting over the
company's excessive executive pay practices and poor corporate governance.
The Change to Win Investment Group called for a vote against Chairman Hammergren,
and against the board's compensation committee chair and governance committee chair,
the Teamsters said. The Change to Win Investment Group purportedly cited concerns
about McKesson’s “executive pay practices and financial and reputational risks arising
from widespread price fixing allegations, which have already led to nearly a billion
dollars in legal settlements with the federal government, dozens of states and private
payors.”
In addition, the union stated that two leading proxy advisors had called for votes against
several directors. While the company refused to provide vote results for the directors'
seats, a majority of shareholders did reject McKesson's advisory proposal on
Hammergren's compensation, according to the Teamsters.
A majority of shareholders also purportedly approved a so-called “clawback proposal”
for the first time ever, despite the company’s recommendations against it. “This proposal
signaled to company executives that costly settlements will have consequences and
corporate funds will be clawed back,” the Teamsters suggested.
The Amalgamated Bank’s Longview Funds and the UAW Retiree Medical Benefits Trust
said in a separate joint statement issued earlier this week that the clawback proposal “is
designed to increase transparency, encourage executive pay-for-performance, and
discourage senior executives from engaging in behavior that could cause significant
financial harm to the company.”
“Clawbacks reinforce pay for performance: if executives’ pay was based on misconduct
or false financial reports, it should be returned,” said Scott Zdrazil, Amalgamated Bank’s
Director of Corporate Governance. “It is not in the company’s or investors’ interest to see
a repeat of costly legal settlements at McKesson. If an executive’s actions have caused
significant financial harm to the company and its shareholders, the board should have the
authority to adjust pay accordingly and shareholders should know about it.”
“McKesson agreed last year to pay more than $23 million to the State of California to
settle claims it deliberately inflated the price of prescription drugs by as much as 25
31
percent, causing our state's Medicaid program to overpay millions of dollars in pharmacy
reimbursements," said Rome Aloise, International Vice President of the Teamsters Union
and President of Teamsters Joint Council 7, which represents 100,000 Teamsters in
Northern California.
“It's a disgrace that a multi-billion dollar health care corporation that profits off of the
billions of dollars in prescription drug purchases made by Teamsters and their families
each year can find tens of millions for the boss, but won't provide a decent standard of
living for their front line employees,” Wood commented.
LEADING CASE NEWS:
D.C. Cir.: Arbitration awards granting disputed work between unions to Plasterers
affirmed on appeal
By Ronald Miller, J.D.
Arbitration awards in favor of the Plasterers in a jurisdictional dispute with the
Carpenters arising under the provisions of a project labor agreement involving Los
Angeles school district construction projects were affirmed by the D.C. Circuit (United
Brotherhood of Carpenters and Joiners of America, AFL-CIO v Operative Plasterers’ &
Cement Masons’ International Association of the United States and Canada, AFL-CIO,
July 5, 2013, Henderson, K). Because this case involved a jurisdictional dispute, the fact
that the Carpenters had been certified as the exclusive bargaining representative for the
employees of the employers under NLRA Sec. 9(a) did not resolve work assignment
questions. The appeals court explained, certification of a particular bargaining unit was
not a determination of the work to which that unit was entitled, so the arbitrators were
authorized to make their awards.
Following voter approval of a capital improvement program, the Los Angeles Unified
School District (LAUSD) entered into a project labor agreement (PLA) with the Los
Angeles/Orange Counties Building and Construction Trades Council (LACTC) and local
chapters of several unions to stabilize labor relations on LAUSD construction sites. The
Carpenters and the Plasterers were both parties to the agreement. Under the PLA, all
contractors and subcontractors awarded work by the LAUSD must accept the
agreement’s terms. Anticipating conflicts over which employees should perform what
work, the agreement also provided a mechanism for the adjustment of jurisdictional
disputes. Decisions pursuant to the jurisdictional dispute resolution plan were final and
binding on contractors and unions who were party to the PLA.
A Carpenters’ regional council was certified as the bargaining representative of
subcontractor’s employees. The subcontractor was awarded a subcontract to perform
plastering work. The Carpenters and the subcontractor were parties to the PLA. After
learning that the contractor intended to assign the plastering work to its own employees
represented by the Carpenters, the Plasterers filed a complaint claiming the plastering
work. Subsequently, the Carpenters refused to participate in arbitration under the dispute
32
resolution plan, arguing that the certification of the Carpenters as bargaining
representative of the subcontractor’s employees ousted the arbitrator’s authority to
arbitrate the dispute. Ultimately, an arbitrator awarded the disputed work to the
Plasterers’ union.
In a second dispute, a second subcontractor was awarded plastering work at another
school. It also became a party to the PLA. This subcontractor also assigned the work to
its own employees, also represented by the Carpenters. Again, the Plasterers filed a
complaint. The Carpenters again argued that the arbitrator lacked authority to arbitrate
because it had been certified as the exclusive bargaining representative of the
subcontractor’s employees. This plastering work was also awarded to the Plasterers
union. Ultimately, the district court confirmed the arbitration awards in favor of the
Plasterers, and the Carpenters appealed.
Mootness argument. As an initial matter, because both construction projects were
completed the appeals court had to determine whether it had jurisdiction to hear the
dispute. Vacating the arbitration awards would provide the Carpenters no relief because
the plastering work no longer existed. However, the Plasterers argued that the court had
jurisdiction under the “capable of repetition but evading review” exception to the Article
III mootness doctrine. The exception applies if “(1) the challenged action was in its
duration too short to be fully litigated prior to its cessation or expiration, and (2) there
was a reasonable expectation that the same complaining party would be subjected to the
same action again.”
Census data revealed that educational construction projects typically last no longer than
two years and individual work assignments last for even shorter periods, thus the awards
satisfied the “evading review” prong. However, the court found a closer question with
respect to whether the disputes are “capable of repetition.” Here, the wrong was the
Carpenters’ loss of work caused by the award of work to the Plasterers pursuant to the
arbitration provision of the PLA. The question, then, was whether the Carpenters were
reasonably likely to suffer this legal wrong again.
Because the parties had already arbitrated three jurisdictional disputes arising under the
PLA, which continues to govern all construction work awarded before its September 30,
2013, expiration, it was not unreasonable to expect another dispute to arise between them
before the agreement expired. Moreover, the terms of the PLA were not unique.
Specifically, the court noted that the PLA’s recognition clause—the clause on which the
Carpenters based their arguments—was a common provision in PLAs. Further, given the
frequency of jurisdictional clashes involving the Carpenters and the Plasterers, future
arbitrable jurisdictional disputes raising the same legal issue between them were
reasonably likely to occur. Thus, these cases were not moot.
Merits of dispute. The appeals court turned to the merits of the jurisdictional disputes.
Here, the Carpenters argued that the arbitrators lacked authority to enter their awards, and
challenged their authority on three bases. First it argued that the PLA was void as
between the Plasterers and employers because the duty of exclusive bargaining forbid an
employer in a Sec. 9(a) relationship with one union from entering into a Sec. 8(f)
33
agreement with another union. The Carpenters, however, conceded that the PLA between
the employers and all signatory unions was permissible under Sec. 8(f). Section 8(f) is an
exception to the majority support requirement, however, not to the exclusive bargaining
requirement of sections 9(a) and 8(a)(5). The appeals court explained, a union party to a
Sec. 8(f) agreement served as the limited Sec. 9(a) representative of the bargaining unit it
purported to represent during the term of that agreement. Thus, the Carpenters’ argument
failed because if the PLA did not violate the duty of exclusive bargaining under section
8(f), it did not do so under section 9(a).
Effect of certification. Second, the Carpenters argued that the NLRB’s certification of it
as representative of the employers’ workers in effect decertified the Plasterers as
representative of the employers’ workers and voided the PLA as between the Plasterers
and the employers. Essentially, the Carpenters reasoned that the employees’ vote in favor
of it as exclusive representative also rejected, and therefore decertified, the Plasterers.
The appeals court rejected this reading of the PLA’s recognition clause. The clause
merely requires what Sec. 8(f) permits: employers must recognize the signatory unions as
the exclusive bargaining representatives of the employees they purport to represent—for
work governed by the PLA—irrespective of any showing of majority support and
irrespective of whether a particular employee is in fact a member of the signatory union.
Because the PLA’s recognition clause did not require the employers to recognize the
Plasterers as the representative of their employees, the NLRB’s certification of the
Carpenters did not affect the contractual relationship between the employers and the
Plasterers. Thus, the Sec. 9(a) certifications of the Carpenters did not void the PLA as
between the employers and the Plasterers.
Finally, the Carpenters argued that the disputes were representational in nature, and
therefore beyond the arbitrators’ authority. Essentially, the Carpenters argued that
because the Board has exclusive jurisdiction over representation questions, the arbitrators
had no authority to decide the dispute between the Carpenters and the Plasterers. But, the
Carpenters conceded that the Plasterers disclaimed any interest in representing the
employers’ employees and sought only to obtain the plastering work. Because this case
was simply a “contest between two groups of employees actively contending for disputed
work,” the dispute was unquestionably jurisdictional.
The appeals court noted that the Carpenters’ argument rested on the unstated assumption
that Sec. 9(a) certification entitled its members to all work contracted out to the
employers pursuant to the PLA. However, this assumption suffered from a fatal flaw
explained the appeals court—the NLRB’s certification of a particular bargaining unit is
not a determination of the work to which that unit is entitled. Consequently, because this
was a quintessential jurisdictional dispute, and a Sec. 9(a) certification does not resolve
work assignment questions, the arbitrators were plainly authorized to make the awards.
The case numbers are 11-7155 and 11-7161.
34
Attorneys: Alice Chih-Mei Chen for United Brotherhood of Carpenters and Joiners of
America. Keith R. Bolek (O'Donoghue & O'Donoghue) for Operative Plasterers’ &
Cement Masons’ International Association of the United States and Canada, AFL-CIO.
D.C. Cir.: Exemption from medical certification for Canadian and Mexican
commercial vehicle operators upheld
By Ronald Miller, J.D.
The decision of the Federal Motor Carrier Safety Administration (FMCSA) to exempt
commercial vehicle operators licensed in Canada or Mexico from certain statutory
medical certification requirements applicable to drivers licensed in the United States was
upheld by the D.C. Circuit in a 2-1 decision (Owner-Operator Independent Drivers
Association, Inc v U.S. Department of Transportation, Jul 26, 2013, Brown, J).
According to the FMCSA, applying these requirements to foreign drivers would violate
existing executive agreements between those countries and the U.S. The appeals court
determined that a facially unambiguous statute of general application was not enough to
abrogate an existing international agreement without some further indication Congress
intended such repudiation. Judge Sentelle filed a dissent.
Minimum standards. Under federal law, no individual may operate a commercial motor
vehicle without a valid commercial driver’s license. Individual states issue these licenses,
but the federal government specifies “minimum uniform standards.” In addition to
obtaining a commercial driver’s license, U.S. commercial vehicle operators must receive
medical certification verifying that their physical condition is adequate to enable them to
operate vehicles safely.
In 2005, with the enactment of the Safe, Accountable, Flexible, Efficient Transportation
Equity Act (SAFETEA), the Secretary of Transportation was required to establish and
maintain a current national registry of medical examiners qualified to perform
examinations and issue medical certifications. The Act further directed the Secretary to
require all commercial vehicle operators to have a current valid medical certificate, and
accept as valid only medical certificates issued by persons on the national registry.
Reciprocal agreements. To facilitate trade, the United States entered into “executive
agreements” with Mexico and Canada for reciprocal licensing of commercial drivers
operating across national borders. Executive agreements are not quite treaties, but carry
the force of law as an exercise of the President’s foreign policy powers.
While the U.S. separates the medical certification from the commercial vehicle licensing
process, Mexico and Canada incorporate physical fitness criteria as part of their licensing
regimes. For this reason, the Federal Highway Administration (FHWA) treats
commercial licenses from these countries as themselves proof of medical fitness. The
SAFETEA Act made no mention of the reciprocal agreements with Canada and Mexico.
Exemption. Several years later, the FMCSA proposed a new rule to implement more
stringent training and testing requirements for medical examiners. Under the proposal,
only medical certificates issued by examiners listed on the national registry would be
35
accepted as valid, except that Mexican and Canadian drivers would continue to be
governed by the provisions of the reciprocity agreements. The Owner-Operator
Independent Drivers Association (OOIDA) objection to the exemption, but their
complaint was rejected in the final rule. The OOIDA petitioned for review and asked that
the court set aside that portion of the final rule specifying that the national registry
requirements did not apply to the medical certification of properly licensed Canadian and
Mexican drivers.
The SAFETEA Act speaks in unambiguous terms, providing that commercial motor
vehicle operators must have “a current valid medical certificate,” and only a medical
examiner listed on the national registry may issue one. There is no exception made for
Canadian and Mexican drivers. Thus, the question raised was whether such language
sufficiently expressed Congress’s intent to abrogate the executive agreements. The
parties cited no cases of this kind, where the statute is textually clear with no express
reference or any other indication of its intended application to conflicting international
agreements.
No abrogation. The appeals court sided with the government that absent some clear and
overt indication from Congress, a statute will not be construed to abrogate existing
international agreements even when the statute’s text is not itself ambiguous. Precedents
from both the D.C. Circuit and the Supreme Court routinely characterize the presumption
against implicit abrogation of international agreements as a clear statement rule.
Moreover, OOIDA’s reading of the Act impinges on the President’s foreign
policymaking domain, as well as the FMCSA’s role in enforcing that prerogative. The
presumption requiring a clear statement rule “serves to protect against unintended clashes
between our laws and those of other nations which could result in international discord,”
the court noted. Consequently, the petition for review was denied.
Dissent. In dissent, Judge Sentelle argued that because the statute was last-in time and
clearly inconsistent with the earlier international agreements, the statute governed. He
noted that the DOT rule at issue here would permit Mexican and Canadian drivers to
operate commercial vehicles in the United States without following the statutory
requirements. Thus, the dissent urged that the court should vacate the rule and grant the
petition for review.
The case number is 12-1264.
Attorneys: Paul D. Cullen, Sr. (The Cullen Law Firm) for Owner-Operator Independent
Drivers Association, Inc. Dana Kaersvang, Department of Justice, Michael S. Raab
(Haynes and Boone), and Michael P. Abata (Dinsmore & Shohl) for Federal Motor
Carrier Safety Administration.
D.C. Cir.: Pilot program to permit Mexican truckers on U.S. highways survives
challenge from U.S. truckers
By Ronald Miller, J.D.
36
The D.C. Circuit denied petitions by the Teamsters union and Owner-Operator
Independent Drivers Association (OOIDA) challenging a pilot program authorized by the
Federal Motor Carrier Safety Administration (FMCSA) that allowed Mexico-domiciled
trucking companies to operate trucks throughout the United States so long as they
complied with certain federal safety standards (International Brotherhood of Teamsters v
U.S. Department of Transportation, July 26, 2013, Kavanaugh, B).
A NAFTA arbitration panel ruled that the U.S. had to allow Mexico-domiciled trucking
companies to operate throughout the U.S., but that they could be required to comply with
the same regulations that apply to American trucking companies. Had the U.S. failed to
allow Mexico-domiciled trucks to operate throughout the country, Mexico would have
been permitted to impose retaliatory tariffs. In response, Congress authorized the
FMCSA to grant permits to Mexico-domiciled trucking companies so long as they
complied with U.S. safety requirements. After an initial false start, in 2011, the FMCSA
instituted the pilot program now challenged by the Teamsters and OOIDA.
Standing. The first question presented was whether the OOIDA and Teamsters had
standing to challenge the pilot program. Here, the appeals court disagreed with the
government that the groups lacked standing. Both the OOIDA and the Teamsters suffered
an injury in fact under the doctrine of competitor standing, which recognizes that
“economic actors suffer an injury in fact when agencies lift regulatory restrictions on
their competitors or otherwise allow increased competition against them.” Because the
pilot program allowed Mexico-domiciled trucks to compete with members of both these
groups, they suffered an injury in fact.
Both groups also met the prudential standing “zone of interests” test. To establish
prudential standing under this test, the groups’ asserted injuries “must be arguably within
the zone of interests to be protected or regulated by the statutes” that they alleged were
violated. In authorizing the pilot program, Congress balanced a variety of interests,
including safety, American truckers’ economic well-being, foreign trade, and foreign
relations. The OOIDA and Teamsters were plainly within the zone of interests of the
statutes governing the pilot program.
Finally, the OOIDA and Teamsters both had organizational standing. An organization has
standing to seek injunctive relief if at least one of its members would have standing and if
the issue is germane to the organization’s purpose. Both groups had members hurt by the
increased competition, and the groups existed to protect the economic interests of their
members. Thus, both groups had standing to challenge the pilot program.
OOIDA challenges. Turning to the merits of the groups’ contention that the pilot
program violated various statutes and regulations, the appeals court found none of the
OOIDA’s arguments persuasive. First, the court rejected the argument that the pilot
program unlawfully allowed Mexico-domiciled truckers to use their Mexican drivers’
licenses. Two separate statutes directly addressed the issue of Mexican trucks, reflecting
Congress’s decision to allow Mexican truckers with Mexican commercial drivers’
licenses to drive on U.S. roads.
37
The court also rejected OOIDA’s assertion that the pilot program violated the statute
governing medical certificates for truckers. However, the Secretary of Transportation has
found that issuance of a Mexican commercial drivers’ license provides proof of medical
fitness to drive. Also, because specimens collected for drug testing under the pilot
program must be sent to certified labs for processing, it also complied with drug testing
regulations. The court also rejected OOIDA’s argument that the agency granted
“exemptions” to Mexico-domiciled trucking companies without following proper
statutory procedures. The statute made clear that pilot programs need not go through the
separately listed procedures for exemptions.
The OOIDA next argued that the agency failed to publish a list of safety laws and
regulations for which it would accept compliance with a corresponding Mexican law or
regulation. But the court found that the agency in fact published such an analysis. Finally,
the court turned aside the OOIDA’s argument that the pilot program was not designed to
achieve a level of safety that would otherwise be achieved through compliance with
applicable safety laws and regulations. Rather, the court determined that the agency
reasonably concluded that those requirements were designed to achieve an equivalent
level of safety. Hence, the OOIDA’s arguments failed.
Teamster challenges. Similarly, the court found none of the Teamsters’ arguments
persuasive. First, the Teamsters asserted that the pilot program was unlawful because not
all Mexico-domiciled trucks were required to display a decal certifying compliance with
American safety standards. However, the agency had concluded that the requirement did
not apply to Mexican trucks driven into and out of the U.S. since they were not imported
or introduced in interstate commerce. Because the trucks were instrumentalities of
commerce and not themselves wares or merchandise, it was reasonable for the agency to
conclude they were not imported within the meaning of the statute.
Next, the union contended that the vision tests given to Mexican truck drivers required
them to recognize only the color red, while American truck drivers were required to
recognize red, yellow, and green. But this argument was foreclosed by International
Brotherhood of Teamsters v Pena, which upheld the determination that Mexican medical
standards need not be identical to American standards. The Teamsters’ third argument
was that the pilot program was unlawful because Mexico has not granted U.S.-domiciled
trucks comparable authority to operate in Mexico. However, the union acknowledged that
Mexico has granted U.S.-domiciled trucks legal authority to operate in Mexico (even
though, as a practical matter, it was very difficult for American trucks to operate in
Mexico). Thus, this argument failed as well.
The Teamsters argument that the pilot program impermissibly granted credit to trucking
companies that participated in a 2007 pilot program also failed. Since the text of the
regulation did not prohibit the agency from crediting a company for time that it
participated in the earlier program, the court declined to find that the agency’s
interpretation was incorrect. Whether Mexico-domiciled trucking companies ultimately
avail themselves of the opportunity to participate in the program was outside the agency’s
control, thus, the court rejected the argument that the pilot program did not include a
“reasonable number of participants necessary to yield statistically valid findings.”
38
Finally, the court rejected the Teamsters’ contention that the agency violated the National
Environmental Policy Act, which requires agencies to analyze the environmental impact
of “major Federal actions significantly affecting the quality of the human environment.”
Noting that the agency had in fact prepared an environmental assessment, the court
rejected this argument. Moreover, any technical error in releasing the assessment late was
harmless error. Consequently, the appeals court denied the petitions for review.
The case numbers are 11-1444 and 11-1251.
Attorneys: Paul D. Cullen, Sr. (The Cullen Law Firm) for Owner-Operator Independent
Drivers Association, Inc. Barbara J. Chisholm and Stephen P. Berzon (Altshuler Berzon)
for International Brotherhood of Teamsters. Michael P. Abate, U.S. Department of
Justice, and Michael S. Raab (Haynes and Boone) for Federal Motor Carrier Safety
Administration.
1st Cir.: Verizon’s federal lawsuit challenging unemployment benefits awards after
work stoppage properly dismissed under Younger abstention doctrine
By Kathleen Kapusta, J.D.
Affirming a lower court’s dismissal of Verizon’s claims, in which the company
challenged a state agency’s award of unemployment benefits to union members who
engaged in a work stoppage during a labor dispute and sought declaratory and injunctive
relief, the First Circuit found that the complaint was properly dismissed on Younger
abstention grounds (Verizon New England, Inc v Rhode Island Department of Labor and
Training, July 17, 2013, Torruella, J).
Work stoppage. Verizon was a party to a collective bargaining agreement with six local
unions. During negotiations over a new agreement, Verizon sent a letter to the unions
notifying them that if a new agreement was not reached before the expiration of the old
one, “the arbitration provisions of the various labor contracts would not be in effect for
grievances.” When the parties were unable to reach a new agreement, the unions called
for a work stoppage; accordingly, union members began picketing Verizon’s facilities. A
new agreement was subsequently reached and the employees returned to work under the
terms of the expired agreement.
Federal challenge. After they returned to work, approximately 800 union members
applied for unemployment benefits. Although the director of the Rhode Island
Department of Labor and Training denied their applications, the department’s review
board reversed, finding the claimants were entitled to receive benefits because Verizon
had engaged in a constructive and actual lockout by, among other things, deleting the
arbitration provisions from the CBA. While Verizon’s state court appeal of this decision
was pending, it filed a complaint in federal court asserting that the board’s decision
should not be enforced because it was preempted by the NLRA. Dismissing Verizon’s
complaint, the federal district court found that the board’s decision was not preempted by
the NLRA and, in the alternative, it should abstain from hearing the matter under the
Younger abstention doctrine.
39
Younger abstention. On appeal, the First Circuit noted that pursuant to the Younger
doctrine absent extraordinary circumstances, federal courts should not “interfere with
ongoing state-court litigation, or, in some cases, with state administrative proceedings.”
In the First Circuit, abstention is appropriate “when the requested relief would interfere
(1) with an ongoing state judicial proceeding; (2) that implicates an important state
interest; and (3) that provides an adequate opportunity for the federal plaintiff to advance
his federal constitutional challenge.” Rather than challenging these criteria, Verizon
contended that Younger abstention was not available when a preemption claim is
“facially conclusive,” and that the board’s decision was preempted under International
Ass’n of Machinists & Aerospace Workers v Wisconsin Employment Relations
Commission.
While the court noted that other circuits have explicitly recognized an exception to
abstention where preemption is “facially conclusive” or “readily apparent,” it observed
that Verizon dismissed any concern that a disagreement was present here requiring a
detailed analysis of the factual record. Turning to the Machinists preemption doctrine, the
court pointed out that it holds that states may not interfere with areas of federal labor
relations intended by Congress “to be controlled by the free play of economic forces.”
According to Verizon, the board’s conclusion that Verizon’s deletion of the arbitration
provisions from the CBA constituted a “constructive lockout” improperly interfered with
such an area of federal labor relations.
Finding that preemption was not “facially conclusive” here, the court pointed out that the
Supreme Court, in New York Telephone Company v New York State Department of
Labor, held that “a State's power to fashion its own policy concerning the payment of
unemployment compensation is not to be denied on the basis of speculation about the
unexpressed intent of Congress.” Further, the Court in New York Telephone, addressing
the Machinists preemption challenge, expressly found that, even though “Congress was
aware of the possible impact of unemployment compensation on the bargaining process,”
the fact “that the implementation of [a] general state policy affects the relative strength of
the antagonists in a bargaining dispute is not a sufficient reason for concluding that
Congress intended to pre-empt that exercise of state power.” Thus, the court pointed out,
“if anything, it is facially conclusive that New York Telephone precludes Verizon’s
preemption claim, here.”
Nor could the court find preemption facially conclusive here because while Verizon
stated there was no factual dispute, its entire appeal was contingent on rejecting the
board’s factual finding that a lockout occurred and challenging the board’s reversal of the
director’s determination that the workers were unemployed a result of a strike. This
dispute over the claimants’ eligibility for unemployment benefits precluded the court
from agreeing with Verizon that preemption was “facially conclusive.”
The case number is 12-2398.
Attorneys: Arthur G. Telegen (Seyfarth Shaw) for Verizon New England, Inc. Thomas A.
Palombo, Rhode Island Attorney General's Office, for Rhode Island Department of Labor
and Training. Marc B. Gursky (Gursky Law Associates) for IBEW, Local 2323.
40
1st Cir.: Private equity fund not “passive” investor, found liable for withdrawal
liability to union pension fund under MPPAA
By Ronald Miller, J.D.
In an issue of first impression, the First Circuit found that a private equity fund was not
merely a “passive” investor but sufficiently operated a bankrupt company and was
advantaged by its relationship so as to be a “trade or business” for purposes of ERISA
Sec. 1301(b)(1) (Sun Capital Partners III, LP v New England Teamsters & Trucking
Industry Pension Fund, July 24, 2013, Lynch, S). With respect to a second private equity
fund, the appeals court concluded that further factual development was necessary to
determine its status. Thus, a district court erred in ending potential claims against the
funds by granting them summary judgment under the “trade or business” aspect of the
two-part “control group” test. On the other hand, the appeals court said the district court
was correct to enter summary judgment in favor of the private equity funds on claims that
the equity funds engaged in a transaction to evade or avoid withdrawal liability.
The plaintiffs, two Sun Capital private equity funds, sought a declaratory judgment
against a union pension fund regarding withdrawal liability for a bankrupt portfolio
company. The equity funds purchased underperforming companies with the aim of
turning them around and selling them for a profit. In 2007, the equity funds acquired
Scott Brass Inc (SBI), a leading producer of brass and copper products. SBI made
contributions to the union pension fund on behalf of its employees pursuant to a
collective bargaining agreement. Following the acquisition, a subsidiary of Sun Capital
contracted to provide management services to SBI. Numerous individuals with
affiliations to various Sun Capital entities exerted substantial operational and managerial
control over SBI. SBI continued to meet its pension obligations to the pension fund for
more than a year after the acquisition.
SBI bankruptcy. In 2008, SBI defaulted on a loan and was unable to pay its bills. It
stopped making contributions to the pension fund and, in so doing, became liable for its
proportionate share of the pension fund’s unfunded vested benefits. In November 2008,
involuntary bankruptcy proceedings were brought against SBI. Thereafter, the pension
fund sent a demand for payment of the estimated withdrawal liability to SBI. It also
demanded payment from the equity funds for SBI’s withdrawal liability. According to the
pension fund, the equity funds entered into a partnership or joint venture in common
control of SBI and therefore were jointly and severally liable for the withdrawal liability
under the MPPAA.
In the declaratory judgment action, the equity funds argued that they were not subject to
withdrawal liability because: (1) they were not part of a joint venture or partnership and
therefore did not meet the common control requirement; and (2) neither of the equity
funds was a “trade or business.” The district court granted summary judgment to the
equity funds but did not reach the issue of common control, instead basing its decision on
the “trade or business” portion of the two-part statutory test. The pension fund appealed.
41
Withdrawal liability. The MPPAA requires employers withdrawing from a
multiemployer plan to pay their proportionate share of the pension fund’s vested but
unfunded benefits. To impose withdrawal liability on an organization other than the one
obligated to the pension fund, two conditions must be satisfied: (1) the organization must
be under “common control” with the obligated organization, and (2) the organization
must be a trade or business. The Act’s broad definition of “employer” extends beyond the
business entity withdrawing from the pension fund, thus imposing liability on related
entities.
Here, the appeals court first found that a PBGC’s 2007 appeals letter applying a twoprong test to determine whether a private equity fund was a “trade or business” for
purposes of the first part of Sec. 1301(b)(1) was only entitled to Skidmore deference
(Skidmore v Swift & Co). Because the letter was not the result of public notice and
comment, and merely involved an informal adjudication resolving a dispute between a
pension fund and an equity fund, it received no more deference than the power to
persuade. Moreover, in this case, the equity funds made their investment and operational
arrangements in early 2007, while the PBGC did not issue its appeals letter until
September 2007.
“Trade or business.” The appeals court noted that under the MPPAA the issue is
whether there is mere passive investment to defeat pension withdrawal liability, and so it
was persuaded that the PBGC’s “investment plus” test was the appropriate approach
when evaluating the “trade or business” prong of Sec. 1301(b)(1). Using this approach,
the court determined that one of the equity funds was a “trade or business” for purposes
of Sec. 1301(b)(1). The court noted that even if it ignored the PBGC’s interpretation it
would still reach the same result through independent analysis, like the Seventh Circuit in
Central States, Southeast & Southwest Pension Fund v Messina Products, LLC, which
employed an “investment plus”-like analysis without reference to the PBGC
interpretation.
Here, the equity funds made investments in portfolio companies with the principle
purpose of making a profit. While a mere investment made to make a profit, without
more, does not itself make an investor a trade or business, the Sun Funds were actively
involved in the management and operation of their SBI property. It was the purpose of
the Sun Funds to seek out potential portfolio companies that were in need of extensive
intervention with respect to their management and operations, with the ultimate goal of
selling the company for a profit.
Further, the equity funds’ controlling stake in SBI placed them and their affiliated entities
in a position where they were intimately involved in the management and operation of the
company. Moreover, the Sun Funds’ active involvement management under various
service agreements provided a direct economic benefit to at least one of the equity funds
that an ordinary investor would not derive. Thus, the appeals court concluded that the
sum of these factors satisfied the “plus” component in the “investment plus” test.
The case number is 12-2312.
42
Attorneys: Renee J. Bushey (Feinberg, Campbell & Zack) for New England Teamsters &
Trucking Industry Pension Fund. Patrick F. Philbin (Kirkland & Ellis) for Sun Capital
Partners III, LP.
2nd Cir.: NLRB did not err in refusing to order backpay to undocumented workers
discharged in violation of NLRA; however, conditional reinstatement to be
considered
By Ronald Miller, J.D.
The NLRB did not err in refusing to order backpay to undocumented workers discharged
in violation of NLRA, ruled the Second Circuit (Palma v NLRB, July 10, 2013, Kearse,
A). Awards of backpay to undocumented aliens were precluded by the Supreme Court’s
ruling in Hoffman Plastic Compounds, Inc v NLRB, which interpreted the Immigration
Reform and Control Act (IRCA). Thus, the appeals court concluded that the Board’s
interpretation of Hoffman Plastic was correct. However, review was granted of the Board
order to the extent that the agency was required to consider issues relating to the workers’
request for conditional reinstatement.
Undocumented aliens. The petitioners, former bakery employees, engaged in protected
concerted labor activity, for which they were unlawfully discharged. The merits of the
unfair labor practice charge alleging that the discharges violated the NLRA were resolved
by stipulation, and a judgment was entered by the appeals court. The relief to be ordered
for the violations was to be conclusively determined after later proceedings. According to
the judgment, the petitioners were to be “made whole” with respect to the amount of
backpay due, and they were to be offered unconditional reinstatement, except to the
extent that the employer could establish that they were not entitled to an offer of
unconditional reinstatement.
During the subsequent NLRB compliance proceedings, the employer contended that
Hoffman Plastic precluded awards of backpay and/or reinstatement because the
petitioners were not legally authorized to work in, or to be present in, the United States.
The petitioners conceded that they were undocumented aliens. Examining Hoffman
Plastic, the Board ruled that the decision “broadly precludes backpay awards to
undocumented workers regardless of whether it is they or their employer who violated
the IRCA.” The Board concluded that an award of backpay would “trench upon ‘policies
underlying IRCA’ by legitimizing that relationship” and that such a remedy was therefore
“beyond the limits of the Board’s remedial discretion.” However, the Board did not
discuss whether the employer should be required to offer to reinstate the petitioners if
they would provide IRCA compliant documentation.
Interpretation of Hoffman Plastic. On this petition for review, the petitioners contended
that the Board erred in its interpretation of Hoffman Plastic as categorically barring
backpay for undocumented workers. Specifically, they asserted that Hoffman Plastic did
not apply to aliens who had not procured their jobs through fraudulent documentation.
However, the appeals court concluded that the Board’s interpretation of Hoffman Plastic
was correct. In Hoffman Plastic, the Supreme Court reversed an NLRB award of backpay
to an undocumented worker who admitted using false documents to secure employment,
43
noting that when “the Board’s chosen remedy trenches upon a federal statute or policy
outside the Board's competence to administer, the Board’s remedy may be required to
yield.”
In light of the General Counsel’s concession that the petitioners were undocumented, the
same concerns exist in this case as existed in Hoffman Plastic. Given petitioners’
undocumented presence in the United States, their seeking damages stemming from an
unlawful employment relationship, and their obtaining new unlawful employment
following their terminations, awards of backpay would have the same ill-advised
propensity discussed in Hoffman Plastic for condoning prior violations of the
immigration laws and encouraging future violations. Thus, the Second Circuit concluded
that the Board did not err by interpreting Hoffman Plastic to require the denial of backpay
to the petitioners.
Conditional reinstatement. On the other hand, the appeals court concluded that the
Board must address the appropriateness of reinstatement, and so remanded the order for
the agency to consider it in the first instance. The NLRB did not discuss whether the
employer should be required to offer to reinstate the petitioners if they would provide
IRCA compliant documentation. Although Hoffman Plastic did not directly deal with an
issue of reinstatement, its discussion plainly did not foreclose relief in the nature of an
order for reinstatement conditioned upon an employee's submission of documentation as
required by IRCA. Here, the appeals court did not understand the Board to have ruled
that the petitioners were not entitled to offers of reinstatement conditioned upon their
presentation to the employer of IRCA-compliant documentation to show that they were
lawfully present in, and authorized to work in, the United States.
The case number is 12-1199.
Attorneys: Matthew J. Ginsburg, AFL-CIO, for Christian Palma. Fred B. Jacob for
NLRB.
6th Cir.: Registered nurses employed as charge nurses were “supervisors,” couldn’t
bargain collectively with employer
By Ronald Miller, J.D.
Registered nurses (RNs) employed as charge nurses at a nursing home were
“supervisors,” and so not allowed to bargain collectively with their employer, ruled a
divided Sixth Circuit in a 2-1 decision (GGNSC Springfield LLC dba Golden Living
Center-Springfield v NLRB, July 2, 2013, Griffin, R). Here, the majority concluded that
the employer met its burden to demonstrate that its RNs utilized independent judgment in
determining whether to issue an employee memorandum (discipline), to provide verbal
counseling (not discipline), or to take no action at all. Consequently, substantial evidence
did not support the Board’s decision that the RNs lacked authority to discipline. Judge
Merritt filed a separate dissenting opinion in which he argued that in finding the RNs to
be supervisors, the majority expanded the meaning of “discipline” beyond any dictionary
definition.
44
In October 2011, a union sought to represent the registered nurses at the nursing home in
collective bargaining. The facility opposed the union’s petition, claiming that the RNs, all
of whom served as charge nurses, were “supervisors” under the NLRA, and therefore not
permitted to unionize. An NLRB regional director concluded that the RNs were not
supervisors, certified the requested bargaining unit, and directed an election. The Board
declined further review. The RNs elected the union as their bargaining representative.
Thereafter, the employer refused to bargain with the union, prompting an unfair labor
practice complaint. The employer admitted its refusal to bargain and contested only the
decision to certify the bargaining unit. The Board sustained the union’s complaint and
ordered the employer to bargain. This petition for review and cross-application for
enforcement followed.
Challenge to NLRB composition. Before addressing the merits of the petition, the Sixth
Circuit first considered the question of the NLRB’s composition. Specifically, after
briefing, the employer filed a letter citing the D.C. Circuit’s ruling in Noel Canning v
NLRB, as an additional independent ground for vacating the Board’s order. In Noel
Canning, the D.C. Circuit held that an order of the Board was void because it was issued
at a time when the Board did not have at least three lawfully appointed members. The
court concluded that the appointments were invalid because the vacancies they filled did
not “happen” during a break between formal Senate sessions.
The Sixth Circuit concluded that the employer was mistaken in its assertion that errors
regarding the appointment of officers under Article II are “jurisdictional.” The question
of the validity of the appointment of NLRB members did not concern “jurisdiction” in the
sense that the court had an independent obligation to raise and consider the matter on its
own before reviewing the merits of the Board’s decision. Because the appeals court held
that the employer’s belated challenge was not “jurisdictional,” it was not compelled to
consider it.
Test of supervisory status. Nonetheless, the Sixth Circuit did grant the employer the
relief it sought on the basis of its non-constitutional challenge. The NLRA creates “a
three-part test for determining supervisory status.” Individuals are supervisors if (1) they
hold the authority to engage in any one of the twelve listed supervisory functions, (2)
their “exercise of such authority is not of a merely routine or clerical nature, but requires
the use of independent judgment,” and (3) their authority is held “in the interest of the
employer.” In this instance, the employer argued that its RNs were supervisors because
they had authority to discipline, assign, and responsibly direct certified nursing assistants
(CNAs), all by using independent judgment.
The appeals court began by examining the employer’s argument on discipline. The
regional director determined that the charge nurses lacked the authority to discipline
CNAs, reasoning that they “merely report misconduct” to the director of nursing.
Specifically, he noted that RNs did not provide any input regarding the level of discipline
to impose. Further, the RNs’ authority to send CNAs home for the remainder of their
shift in cases of patient abuse also did not establish supervisory status. Because the
NLRB has repeatedly found that authority to send home employees, when limited to
45
flagrant misconduct, does not require independent judgment and therefore cannot
establish supervisor authority, the appeals court summarily rejected the employer’s
challenge to the Board’s conclusion.
Disciplinary authority. Nevertheless, the majority agreed with the employer that the
record evidence showed that the disciplinary authority the RNs possessed defied the
regional director’s characterization as only a reporting function, and his ruling was based
on a fundamental misunderstanding of the employer’s disciplinary regime. When
confronted with CNA misconduct RNs can either do nothing, provide verbal counseling,
or draw up a written memorandum. According to the employer choosing the appropriate
path in each instance involves independent judgment. The NLRB correctly pointed out
that a verbal warning is educational in nature, not disciplinary.
However, the Board’s point regarding the irrelevance of an RN’s choice between doing
nothing and providing verbal counseling failed to answer the employer’s contention that
RNs may also proceed by way of an employee memorandum, which is part of the
employer’s progressive disciplinary system and so is discipline. The appeals court found
this argument persuasive, since receipt of an employee memorandum leads automatically
to a written warning which is a step in the employer’s system of progressive discipline.
Therefore, the majority found that the authority of RNs to issue memoranda to CNAs was
the authority to discipline. Because RNs exercised independent judgment in choosing
whether to issue a memorandum or provide verbal counseling, they were supervisors
under the NLRA.
In the present case, the written warnings that follow from receipt of an employee
memorandum satisfy the criteria for discipline, concluded the majority. Under the
employer’s progressive discipline policy, the existence of earlier written warnings
determines whether suspension and termination are imposed for a later violation. Thus,
the warnings “lay a foundation” for future adverse employment action. Accordingly,
memoranda/warnings are discipline. The record also demonstrated that RNs exercised
independent judgment when issuing employee memoranda. The choice of whether to
issue an employee memorandum (discipline), to provide verbal counseling (not
discipline), or to take no action at all depended on the RN’s determination of how severe
the violation. Moreover, the record showed that consultation with a superior was not
required to issue a memorandum.
Dissent. In dissent, Judge Merritt pointed out that the NLRB has a longstanding
interpretation of the term “discipline” the court should pay deference to. To be considered
“discipline” under the statute, a warning or write-up must “not only initiate, or be
considered in determining future disciplinary action, but also it must be the basis of later
personnel action without independent investigation or review by other supervisors.” The
dissent observed that employee memorandums lead to no consequences until higher
management steps in, independently investigates the situation, and makes a management
decision.
The case numbers are 12-1529 and 12-1628.
46
Attorneys: Michael Manzler (Dinsmore & Shohl) for GGNSC Springfield LLC. Mark R.
Freeman, U.S. Department of Justice, and Gregoire Sauter for NLRB.
6th Cir.: Judge not entitled to qualified immunity on employees’ claims they were
terminated without due process of law when district refused to arbitrate as required
by CBA
By Kathleen Kapusta, J.D.
Affirming the denial of a state circuit judge’s motion for summary judgment based on
qualified immunity on the Sec. 1983 claims of terminated judicial district employees, the
Sixth Circuit in an unpublished decision found that the judge’s denial of the employees’
arbitration demands deprived them of due process in violation of their existing collective
bargaining agreement (Rodgers v 36th District Court, July 3, 2013, Gibbons, J). Judge
Daughtrey concurred in a separate opinion.
CBA. The employees worked for Michigan’s 36th Judicial District Court and were also
members of a collective bargaining unit represented by AFSCME. Under the parties’
collective bargaining agreement, they could be disciplined only for just cause. The CBA
also contained a five-step procedure whereby employees could submit grievances. If a
grievance remained unresolved after Step 4, a party could demand arbitration pursuant to
Step 5.
In March 2006, the district’s HR director wrote to AFSCME’s president notifying her of
the court’s intent to modify, amend, or terminate all or parts of the CBA. Between
February 2007 and February 2009, the district terminated the employees for engaging in a
variety of alleged misconduct. They submitted grievances to the district and in all but
four cases, their grievances were processed through Step 4. Although they demanded
arbitration, the district then refused to arbitrate, taking the position that the March 2006
letter constituted an effective notice to terminate the CBA. The employees sued the
district and the judge in federal court under Sec. 1983 alleging that they were terminated
from their positions without due process of law.
Lower court decision. Denying the employees’ motion for summary judgment, the
lower court granted summary judgment to the district and dismissed claims for damages
brought against the judge in her official capacity on the basis of sovereign immunity.
However, it denied the defendants’ motion for summary judgment on the basis of
qualified immunity as to claims brought against the judge in her individual capacity,
except with regard to three employees (as to whom the motion was granted).
Qualified immunity. On appeal, the Sixth Circuit first noted that qualified immunity
protects government officials from liability “when a reasonable official in the defendant’s
position would not have understood his or her actions to violate a person’s constitutional
rights.” Moreover, the appeals court noted, the Sixth Circuit has established a three-part
test for evaluating qualified immunity defenses: first, did the facts when viewed in the
light most favorable to the plaintiff show that a constitutional violation occurred; second,
did the violation involve a clearly established constitutional right of which a reasonable
person would have known; and third, did the plaintiff offer sufficient evidence “to
47
indicate that what the official allegedly did was objectively unreasonable in light of the
clearly established constitutional rights.”
Constitutional violation. Here, the court found that the employees were deprived of any
property interests they had in their employment when they were terminated. It further
found that the CBA created a property interest in their continued employment. As to
whether the employees were provided with adequate procedural protections, the judge
argued that the lower court incorrectly concluded that they did not receive pretermination hearings. Although the district court made contradictory statements on this
point, the court noted that the employees did not challenge the pre-termination process
they received. Rather, they argued that they did not receive hearings before a neutral
decision-maker because the judge denied their post-termination demands for arbitration.
This, the court found, was enough to establish a constitutional violation.
Clearly established right. Finding that a constitutional violation occurred, the court
turned to whether the violation involved a clearly established right of which a reasonable
person would have known. Both Supreme Court and Sixth Circuit precedent clearly
establish that public employees who may be fired only for “just cause” have property
interests in their continued employment protected by due process. Moreover, the
opportunity for a post-termination evidentiary hearing before a neutral decision-maker is
required for due process. Accordingly, the violation here involved a clearly established
constitutional right that a reasonable person in the judge’s position would reasonably
have known.
Objectively unreasonable. Finally, the court considered whether the judge’s actions
were objectively unreasonable in light of the employees’ clearly established
constitutional rights. Although it found that her subjective beliefs were irrelevant to the
question of whether she acted unreasonably, the court found that the district court erred
by failing to consider whether a reasonable official in the judge’s position would have
understood that she was violating the employees’ constitutional rights in light of the
circumstances at the time. The judge claimed that at the time of the employees’
terminations it was unclear whether the CBA remained in effect and how the CBA’s
termination would impact their status as just-cause employees under Michigan law.
Rejecting this argument, the court found that the employees alleged facts sufficient to
show that a reasonable official in the judge’s position would not have thought that the
CBA was properly terminated.
Here, the judge said her belief that the March 2006 letter terminated the CBA was
objectively reasonable. Disagreeing, the court noted that with the exception of one court
ruling, which was reversed on appeal a month later, every arbitrator and state court to
consider the issue during the relevant time period found that the CBA was not properly
terminated and remained in effect. Moreover, under the plain terms of the CBA, two
steps were required for termination of the agreement: written notice of intent to terminate
and some further action to terminate the contract. While the letter expressed the court’s
intent to “modify, amend, or terminate” the CBA, it did not specify which of these
options the district intended to pursue, and the district took no further action to terminate
the contract. Accordingly, the employees alleged sufficient facts for a jury to conclude
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that it was objectively unreasonable for the judge to believe that the CBA was terminated
and, therefore, that it was objectively unreasonable to fire the employees and deny their
demands for arbitration.
The case number is 11-2201.
Attorneys: Robert D. Fetter (Miller Cohen) for Arnette Rodgers. Matthew Scott Derby
(Kotz Sangster Wysocki) for 36th District Court.
6th Cir.: GM documents, testimony indicated work didn’t change after
restructuring; jury could find laid off “novices” were “capable of doing the work”
and entitled to seniority rights
By Lorene D. Park, J.D.
UAW Local 1869, which claimed that GM violated an agreement to lay off workers
based on seniority, presented sufficient evidence that the workers in question were
“capable of doing the work” notwithstanding GM’s assertions that they were “novices”
and all novice-level work was eliminated in a restructuring, determined the Sixth Circuit
in an unpublished opinion (UAW v General Motors, LLC, July 10, 2013, Cole, R, Jr).
Reversing summary judgment as to three of the workers, the court pointed to evidence
that the work in their department did not substantially change after the restructuring and,
even if it did, they were still capable of performing the work, as required to keep their
seniority rights. Two of the workers could not pursue their claims, however, because they
had been waived as part of their severance agreements.
In September 2009, GM laid off six union-represented employees as part of a reduction
in force in the design center surface product engineering department (SPE). According to
GM, due to restructuring, the type of work performed in the SPE changed and resulted in
a lack of novice-level work. After it experienced financial difficulties, the company laid
off employees it determined were not capable of performing more advanced tasks. UAW
Local 1869 filed suit on behalf of five of the employees, alleging the layoffs violated the
terms of a “local agreement,” which supplements a national CBA between GM and the
UAW and required GM to lay off workers in reverse order of seniority, assuming they
were “capable of doing the work.” Each employee had a significant level of seniority.
The parties disputed how GM classified “novices” and how it determined the employees
were not qualified to perform advanced tasks. The UAW alleged that the layoffs violated
the local agreement because the work in the SPE did not significantly change after the
restructuring and, even if it did, the workers were still capable of performing advanced
work. Granting summary judgment for GM, the district court found no evidence that the
laid-off employees were capable of performing the work and held that two of the
employees contractually waived their right to sue. The UAW appealed.
Capable of doing the work. Under the agreement, the term “capable of doing” meant
“more than capable of learning. It means capable of demonstrating good competent
performance, which, when necessary, would include some training, but without such
prolonged or detailed training as to burden the Corporation or cause undue loss of
49
efficiency.” The UAW argued the laid-off workers may not have been the most capable
employees but they were still capable and had seniority. In response, GM pointed out that
SPE employees were categorized in three subgroups (novice, proficient, and expert) and
the employees here were all in the novice subgroup. It provided an affidavit from a senior
director in the SPE claiming that when GM restructured, it eliminated almost all novicelevel work, incorporating it into the work done by higher-skilled workers.
The UAW contended that the work at GM did not really change. The union provided an
affidavit from a long-time SPE employee stating that the work previously done by novice
workers was still regularly performed at SPE and the only new work was a new computer
program upon which all subgroups of employees had to be trained. To the appeals court,
a reasonable jury could find that the long-time worker was a reliable and material
witness. Furthermore, the UAW admitted evidence that after the layoffs, GM rehired
novice workers into SPE who did not receive additional training. That refuted GM’s
claim that there was no longer novice-level work in SPE and amounted to additional
evidence that the work did not substantially change. It was undisputed the employees
were competent novice-level workers. Thus, there were issues of fact on whether the
work at SPE substantially changed and who was “capable of” performing it.
The UAW further argued that, even if the work did change, three of the employees were
capable of doing it. It claimed that the purpose of the subgroups was not to rank workers’
skill but to equalize overtime. It produced GM documents indicating the company had
other ways to evaluate employees, including ranking designers by levels. Level four, for
example, would be a worker in training who had to finish novice skill set requirements.
Here, two of the employees were level seven senior designers and one was a level six. To
be classified as a level six, an employee had to complete proficient skill set requirements
and level seven had to complete “expert” skill set requirements. Despite GM’s claim that
the documents were outdated and “general in nature,” the court found this was enough to
create an issue of fact on whether these three employees were capable of doing the work.
Failure to recall. The UAW further claimed that even if the workers were properly laid
off, the local agreement required GM to recall them before hiring new workers. GM
claimed that, even after it began hiring again, the employees were not “capable of doing
the work” and therefore not eligible for recall. The district court did not address the issue
but, in the appellate court’s view, there was a dispute of fact on whether the employees
had the right to be recalled. As it already noted, there was evidence that novice-level
workers were hired by GM after the layoffs. A jury could find that the hiring of new
novice workers was evidence that SPE had new novice-level work that the laid-off
employees could perform. Summary judgment was thus not appropriate on this issue.
Severance agreements. Two of the employees signed severance agreements waiving
their right to bring claims “relating to [their] employment and/or separations” from GM.
They did not challenge their layoff but alleged that GM violated their right to be recalled.
Affirming summary judgment, the appeals court found that the plain language of the
agreements barred their claims, which were related to their employment or separations.
The court noted that the agreements also stated that employees understood that “GM does
50
not intend for me to be eligible at any time in the future for reemployment.” Thus, they
knew they were giving up a right to future employment at GM and waived their claims.
The case number is 12-2327.
Attorneys: David R. Radtke (McKnight, McClow, Canzano, Smith & Radtke) for UAW.
David C. Vogel (Lathrop & Gage) for General Motors.
6th Cir.: Retirees must arbitrate ERISA, breach of contract claims arising from
change in healthcare benefits under CBA
By Lorene D. Park, J.D.
Because two plaintiffs retired after an applicable collective bargaining agreement (CBA)
was modified by a termination agreement, which broadly required arbitration of any
claims alleging a violation of the CBA or the termination agreement, their claim that
changes in healthcare benefits breached the CBA in violation of the LMRA was subject
to its arbitration provision, determined the Sixth Circuit, affirming a district court’s order
granting the employer’s motion to compel arbitration (VanPamel v TRW Vehicle Safety
Systems, Inc, July 23, 2013, Zouhary, J). Furthermore, the court explained that ERISA
claims can be subject to arbitration under a CBA even if “ERISA” was not listed in the
arbitration provision, “because the genesis of the claim is the agreement, not a statute.”
1993 CBA. The union and employer entered a series of CBAs, the last of which was
effective December 1993 through December 1996. It provided healthcare benefits for
retiring employees, including a complementary Blue Cross/Blue Shield Plan, and benefit
plans with defined employer contributions for early retirees who retired on or before
December 1, 1993. In 1997, the Washington Township plant closed. To prepare, the
employer and the union entered a termination agreement effective November 1996 that
governed the terms and conditions applicable to retirees represented by the union at the
plant. The agreement extended the 1993 CBA through the plant’s closure and provided
that any bargaining unit employee, retiree, or beneficiary receiving (or entitled to receive)
benefits under the pension plan or insurance coverage at the time of termination “shall
continue to receive . . . such payment and/or benefit as though the CBA and Pension Plan
had remained in effect.”
The two retirees retired in 1997 and 1998, respectively. Effective January 1, 2011, the
employer terminated prescription drug coverage for Medicare-eligible retirees, replacing
it with an annual contribution to a health reimbursement account. The retirees filed suit
on behalf of themselves and a purported class of similarly situated retirees and spouses,
alleging the changes violated LMRA Sec. 301 and ERISA Sec. 502(a)(1)(B). The
employer filed a motion to compel arbitration under the termination agreement and the
district court granted the motion. The plaintiffs appealed.
Arbitration agreement. Affirming, the Sixth Circuit first pointed out that when there is
a broad arbitration clause, the presumption of arbitrability is “particularly applicable” and
“only an express provision excluding a particular grievance from arbitration or ‘the most
forceful evidence of a purpose to exclude the claim from arbitration can prevail.’” Here,
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the termination agreement included a broad arbitration provision requiring that “[a]ny
alleged violation of the CBA, its changes and this Termination Agreement will be subject
to final and binding arbitration.”
With that in mind, the appeals court turned to the plaintiffs’ claim that no presumption
favored arbitration of healthcare benefit claims for retirees. It noted that none of the cases
upon which they relied addressed the precise issue here — whether a retiree who brings
an independent claim for contractual benefits under a CBA, negotiated by a union during
the retiree’s employment, is bound by an arbitration provision.
The appeals court also pointed out that in Cleveland Electric, it expressly held that the
presumption of arbitrability applies to disputes over retirees’ benefits if the parties
contracted for such benefits in their CBA and nothing in the CBA specifically excluded
the dispute from arbitration. In this case, the parties clearly bargained for retirees’
healthcare benefits in the 1993 CBA under which the two plaintiffs retired. Nothing in
the CBA or the termination agreement expressly excluded such benefits from arbitration.
Thus, the arbitration provision in the termination agreement was controlling and was the
exclusive remedy for disputes requiring interpretation or application of the termination
agreement and the 1993 CBA. The plaintiffs could not “circumvent the provision simply
by virtue of their retiree status,” concluded the court.
ERISA claims. Likewise, the appeals court was not persuaded by the plaintiffs citing the
Supreme Court’s decision in 14 Penn Plaza LLC v Pyett, which they claimed supported
their proposition that they could only agree to arbitrate ERISA claims by expressly listing
that specific statutory claim in the arbitration provision. To the contrary, that case
involved ADEA claims and ERISA claims were distinguishable because they derived, at
least in part, on rights a plaintiff may have under a CBA. “In other words, if Plaintiffs’
contractual claim fails because the CBA does not create a vested right to healthcare
benefits, their ERISA claims must fail as well.” Accordingly, ERISA claims can be
subject to arbitration under a CBA even if “ERISA” is not listed in the arbitration
provision, “because the genesis of the claim is the agreement, not a statute.”
Termination agreement applied. The plaintiffs’ argument that their right to healthcare
benefits derived only from the 1993 CBA and not the termination agreement also failed
because they retired after the termination agreement became effective. By its terms, the
termination agreement expressly modified the 1993 CBA and stated that if any CBA
provision was inconsistent with the termination agreement, the provisions of the latter
would govern. Accordingly, since the plaintiffs retired under the CBA as modified by the
termination agreement, which expressly required that all disputes be arbitrated (including
those involving retiree healthcare benefits), they were contractually bound to arbitrate
their claims.
Because the district court never certified a class and other retirees were not a part of the
appeal, the Sixth Circuit declined to reach the question of whether other retirees were
bound by the arbitration provision.
The case number is 12-2173.
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Attorneys: William A. Wertheimer, Jr. (Law Office of William A. Wertheimer, Jr.) for
Norman VanPamel. Todd A. Dawson (Baker & Hostetler) for TRW Vehicle Safety
Systems, Inc.
7th Cir.: Dispute over transfer of bargaining-unit work to nonunion workers at new
facility was arbitrable, involved interpretation of CBA
By Kathleen Kapusta, J.D.
An arbitrator’s conclusion that much of the labor at an employer’s two newest nonunion
warehouses was bargaining-unit work under the parties collective bargaining agreement
and his requirement that the employer return to bargaining unit employees the work that
had been moved to the new facilities was properly enforced by a lower court, the Seventh
Circuit ruled (Certco, Inc v International Brotherhood of Teamsters, Local Union No
695, July 17, 2013, Easterbrook, F).
Bargaining-unit work. The employer, which had one food-distribution warehouse in
Madison, Wisconsin, 10 years ago, now has four. While the jobs at its original site on
Verona Road dwindled, it staffed the three new locations with nonunion labor. When the
employer closed the Verona Road freezer facility and built a new freezer at one of the
newer sites, the union representing the company’s warehouse employees asked an
arbitrator to order the employer to return bargaining-unit work to its members. Although
the employer argued that there was not enough room at the old facility to house the larger
freezer installed at the newer warehouse, the union countered that the tasks of moving
food into and out of a freezer remained bargaining unit work.
Arbitrator’s decision. The arbitrator found that much of the labor at the employer’s two
newest warehouses was bargaining-unit work under Article 12 of the CBA, which, he
pointed out, covers all of the employer’s warehouse labor without limitation to a
particular site and forbids the transfer of bargaining-unit work to non-union workers. The
arbitrator then directed the employer to return to bargaining-unit employees “all work on
the transferred freezer products” that had moved to the new facilities.
District court. Pointing out that the NLRB, in 2006, decided that federal labor did not
deem jobs at its new Helegsen facility to be “accretions” to the bargaining unit, and thus
automatically within the union’s jurisdiction, the employer asked the district court to
deny enforcement. Moreover, it argued, the Board reached the same conclusion about its
Femrite facility. Because an arbitrator cannot contradict the Board’s decision, the
employer asserted that the union’s grievance was not arbitrable. Finding that the
arbitrator addressed the meaning and effect of Article 12 in the parties’ CBA, and not the
issue of accretion, the district court enforced the arbitrator’s award.
NLRB decisions. Turning to the Board’s decisions, the appeals court observed that in
2006, a Board ALJ found that work at the Helgesen facility did not accrete to the union,
as a matter of federal law under Sec. 8(a)(5) of the NLRA. While the staff at the
Helegesen warehouse was doing the same kind of work as the staff at Verona road, the
ALJ found that the General Counsel failed to show that the Helegesen employees
supported the union or otherwise the NLRA’s requirements for accretion. According to
53
the ALJ, “[t]he determination of questions of representation, accretion, and appropriate
unit do not depend upon contract interpretation but involve the application of statutory
policy, standards, and criteria. These are matters for decision of the Board rather than an
arbitrator.”
Observing that the 2006 NLRB decision also had nothing to do with the parties’ CBA,
and thus did not affect the arbitrability of a dispute about the meaning of Article 12, the
appeals court found this to be equally true about the 2010 decision finding that workers at
Femrite did not accrete to the bargaining unit under Sec. 8(a)(5). Moreover, the court
pointed out, the 2010 decision was not the Board’s decision. After Femrite opened, the
union charged the employer with unfair labor practices. The Board’s regional attorney,
however, declined to issue a complaint. On appeal, the General Counsel, who also
declined to issue a complaint, explained that bargaining is not required when physical
constraints such as space, rather than economic issues, lead to a transfer of work, and that
there had not been any discrimination since none of the union’s members applied for a
job at Femrite. These decisions, the court observed, are not only unrelated to the
arbitrability of a claim under Article 12, but also are not by the Board. The General
Counsel, not the Board, decides when to issue a complaint and its exercise of
prosecutorial discretion lacks legal effect, the court explained.
Finally, the court rejected the employer’s argument that Yellow Freight System, Inc v
Automobile Mechanics gives legal force to a regional decision not to issue a complaint.
Pursuant to Yellow Freight, once the Board has prescribed an election, an arbitrator
cannot make a decision that would foreclose that election. Pointing out that arbitrators
cannot override federal agency decisions, the court observed, “that eminently sound
conclusion has nothing to do with the General Counsel’s decision not to issue a complaint
(which leaves no decision by the Board) — and at all events our case does not concern
elections.”
Sanctions. The court also affirmed the lower court’s decision denying the union’s motion
for attorneys’ fees as sanctions. Although there is a presumption in favor of sanctions
when the losing side in arbitration asks a judge to disagree with the award, the employer
here did not ask the appeals court to disagree with the arbitrator’s decision. Rather, it
contended that the dispute was not arbitrable. Pointing out that arbitrability is a question
for the courts, the appeals court found that the lower court did not abuse its discretion in
deciding that the employer’s arguments were not frivolous.
The case numbers are 12-3387 and 12-3487.
Attorneys: Jacob B. Frost (Boardman & Clark) for Certco, Inc. Scott D. Soldon (Soldon
Law Firm) for Teamsters Local 695.
7th Cir.: Union discriminated against dissident member in operation of exclusive
hiring hall for job referrals
By Ronald Miller J.D.
54
A union acted unlawfully when it discriminated against a dissident union member with
respect to job referrals, ruled the Seventh Circuit in affirming three determinations of the
NLRB that the union’s conduct violated the NLRA (NLRB v Teamsters “General” Local
Union No 200, July 23, 2013, Tinder, J). The Board found that as the exclusive source of
referrals for its members, the union did not consistently use objective criteria in
determining which job-seekers to refer; discriminatorily failed to refer the member for
employment; and failed to provide him with specifically requested information
concerning job-referral procedures.
As a union member, the employee participated in union politics as part of a dissident
group, and served as a union officer for two years. In 2006, he lost his bid for reelection
following an acrimonious campaign. Before his term expired, the employee resigned his
union position after first referring himself to work at a power station project as a shuttle
bus driver. A year later he was laid off, but filed a grievance relating to the layoff.
Current union officials were his political rivals from the union campaign. The employee
and union business agent placed in charge of his grievance clashed throughout the
grievance process, with the employee alleging that his grievance was improperly handled.
Although the employee advised the union of his interest in returning to work at the power
station project, he learned from a political ally that he had not placed his name of the outof-work list. The existence of this list was news to the employee despite a number of
conversations with the business agent regarding his desire to return to work. While his
name was subsequently placed on the list it was marked with a question mark. Still, the
employee was not referred to the project, even though several other workers obtained
work. Facing continued unemployment, the employee requested information regarding
the workings of the referral system, but received no response. Ultimately, the employee
filed charges against the union with the NLRB. The union was found to have acted
unlawfully with respect to the operation of its hiring hall. The union appealed.
Referral list. By an agreement governing labor relations at the power station project, the
union had the exclusive right to refer union members for employment for a 48-hour
period after the employer placed a request for workers. In practice, the union never failed
to fulfill a request for workers. To determine which union members to refer for
employment, the business agent maintained an out-of-work list with member names and
contact information. Some entries also included an assessment of the individual’s
qualifications. The business agent claimed to have considered objective criteria in
determining which individuals to refer for positions, including order placed on list, layoff
status, seniority, experience, foreman requests and work history.
However, the record was unclear as to how those members whose names appeared on the
list first learned of its existence. Consequently, because there was no evidence that union
officials took steps to inform members on how to be placed on the list, or even to
publicize its existence, the union failed to explain exactly how this process worked in
practice.
Exclusive hiring-hall. As an initial matter, the union challenged the NLRB’s findings
that it operated its exclusive hiring-hall without objective, consistently applied criteria to
55
refer job-seekers. Here, the Seventh Circuit first addressed whether substantial evidence
supported the Board’s determination that the union operated an exclusive hiring hall. To
determine whether an exclusive hiring-hall exists, the Board examines the “totality of the
circumstances.” These circumstances may include any contractual language between the
union and the employer, as well as the actual hiring practices that these parties follow.
Here, the court examined the agreement provision that allowed the employer to look to
any source for employees after the union’s 48-hour exclusive referral period. The fact
that the union’s right to refer employees was temporary did not mean that it was nonexclusive. Rather, the 48-hour window simply required that the union exercise its
exclusive right within a given time frame, declared the court. Hiring is deemed to be
exclusive if the union retains sole authority to supply workers for some specified period
of time. Moreover, in practice, if job seekers showed up at the jobsite without the union’s
seal of approval, the employer directed them to the union. Thus, substantial evidence
supported the Board’s finding that the union operated an exclusive hiring hall.
Objective criteria. As the operator of an exclusive hiring-hall, the union was required to
exercise its hiring authority in a nonarbitrary and nondiscriminatory fashion. In the
Board’s, view an exclusive hiring-hall must utilize job-referral criteria that are both
objective and consistently applied. In this instance, although union officials could point to
objective criteria to explain their job referral decisions, the union did not apply those
criteria consistently. In view of evidence that employees were referred out of turn, it was
clear that a union business agent relied, in part, on his discretion and did not did not
consistently apply objective criteria in referring applicants. Accordingly, the appeals
court affirmed the Board’s holding that the union operated an exclusive hiring-hall
without consistently using objective criteria.
Discriminatory referrals. Further, the Seventh Circuit rejected the union’s contention
that substantial evidence did not exist to support the Board’s determination that the union
discriminated against the employee by failing to refer him for work. The Board found
that the union failed to refer the employee for employment based on his years-long
political opposition to the current union leadership. Applying the Wright Line framework,
the Board found that the union was aware of the employee’s political opposition to the
current leadership, and union officials made derogatory statements against him
throughout the most recent election. Further, the employee and union business agent
clashed during the grievance process. Thus, there was a sufficient basis for the Board’s
legal conclusion concerning the first Wright Line step.
Moreover, the appeals court concluded that it was permissible to rely on circumstantial
evidence to determine whether a union’s disapproval of a member’s intra-union political
conduct was a motivating factor of the union’s adverse action. Under the second Wright
Line step, the burden shifted to the union to show that the same outcome would have
occurred “even in the absence of the protected conduct.” However, given the haphazard
process by which job referrals were made, the union was unable to make such a showing.
Thus, the appeals court held that the Board’s conclusion that the union violated the
NLRA by discriminatorily refusing to refer the employee for employment had a
reasonable basis in law.
56
Information on operation of referral process. Finally, the appeals court turned to the
union’s claim that substantial evidence did not support the Board’s finding that it acted
unlawfully by failing to provide the employee with information concerning the union’s
job referral practices. Here, while the union acknowledged that it did not provide the
employee with his requested information, it claimed this failure did not violate the
NLRA. It was true that the employer provided job-seekers with information on job
referral procedures, but it failed to fulfill the employee’s request for a copy of the referral
list. The appeals court determined that the Board’s interpretation of Sec. 8(b)(1)(A) to
require the provision of specific information upon request had a reasonable basis. Thus, it
affirmed the Board’s holding that the union violated the NLRA by failing to provide the
employee with the information he requested concerning the union’s job-referral process.
The case number is 12-1586.
Attorneys: Usha Dheenan for NLRB. Scott D. Soldon (Soldon Law Firm) for Teamsters.
8th Cir.: Arbitrator did not exceed authority by awarding reinstatement, back pay
after union was decertified
By Sheryl C. Allenson, J.D.
Even though an arbitrator ruled that an employer lacked just cause to terminate an
employee, and ordered that she be reinstated with back pay beyond the time the union
was decertified, the Eighth Circuit found that he did not exceed his authority and
affirmed the district court’s ruling granting summary judgment confirming the decision
(Midwest Division-LSH, LLC dba Lee’s Summit Medical Center v Nurses United for
Improved Patient Care, CNA/NNOC, July 2, 2013, Loken, J).
The employee, a registered nurse, was terminated after her employer received a
complaint that she failed to properly care for a patient. Her union filed a grievance on her
behalf with the hospital, asserting that the hospital did not have just cause to terminate the
employee. Because they were not able to resolve the grievance, the parties submitted the
issues for binding arbitration under the CBA. Nearly a year after the employee was
discharged, and two weeks before the arbitration hearing, the NLRB decertified the union
because it disclaimed an interest in continuing to represent the employee’s bargaining
unit. Nonetheless, the parties stipulated that the matter was properly before the arbitrator
for decision and proceeded with the arbitration hearing.
Arbitrator’s decision. Finding that the employer lacked just cause to terminate the
employee, the arbitrator ordered the employer to reinstate the employee with back pay
from the date of termination to the date of reinstatement. In response, the employer filed
an action for declaratory judgment under the NLRA, seeking to vacate the arbitration
award to the extent it ordered reinstatement and back pay after the union was decertified.
The district court granted summary judgment confirming the arbitrator’s award.
On appeal, the Eighth Circuit applied the limited standard of review applicable to suits to
vacate labor arbitration awards. Apparently acknowledging that the merits of the
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arbitrator’s decision were “virtually unreviewable” in an action to vacate an award, the
employer instead argued that the arbitrator exceeded his authority in ordering a remedy
that extended beyond the date of the union’s decertification. Citing the U.S. Supreme
Court in United Steelworkers v Enterprise Wheel & Car Corp, the appeals court
explained that an arbitrator could award reinstatement and back pay beyond the
expiration of the governing CBA “so long as the arbitrator in fashioning this remedy was
interpreting and applying the CBA, and not simply ‘dispens[ing] his own brand of
industrial justice.’”
CBA authorization. There was no doubt that the employee’s claim was properly subject
to arbitration; the CBA expressly authorized arbitration for “matters which arose prior to
the time of expiration of the Agreement.” Thus, the CBA expressly gave the arbitrator
authority to rule on the dispute in this matter. Additionally, the parties submitted the
dispute to the arbitrator for final determination after the union was decertified, stipulating
that the issue to be resolved was whether the employer had just cause to terminate the
employee and if not, what the appropriate remedy would be. That said, the employer
could not now argue that the arbitrator acted outside the scope of his authority, the
appeals court ruled.
In so deciding, the appeals court drew on Ninth Circuit precedent for the position that,
where there is no provision in the CBA limiting back pay to a period ending with its
expiration, the arbitrator could properly award that remedy. An arbitrator is expected to
bring his "informed judgment" in deciding a fair solution to a problem especially when
formulating remedies.
CBA governed. The appeals court rejected the employer’s attempt to distinguish these
general principles with its argument that the CBA did not expire but was voided when the
NLRB decertified the union. Rather, the CBA governed and where it did not prohibit
post-expiration remedies for pre-expiration grievances, the CBA is deemed to authorize
those remedies. Thus, “the manner in which the CBA expires has no effect on the
arbitrator’s authority,” the appeals court wrote.
In response to the employer’s argument that the employee lost all CBA job protections
after the union was decertified, the appeals court rejected it an improper attack on the
fairness of the arbitrator’s remedy as opposed to his authority. Additionally, this
argument assumed evidence not in the record. The hospital had not presented any
evidence to the arbitrator of the effect of the union’s decertification on bargaining unit
members—no showing, for example, of a unilateral change to an at-will employment
relationship, or that the employee would have been discharged on the date of the CBA’s
expiration had she been reinstated before the contract expired. Although an arbitrator
would be “dispens[ing] his own brand of industrial justice” if he had ignored such
evidence, here the evidence was simply not in the record. Therefore, the appeals court
declined to express any opinion on this point. Instead, it found there was “no basis to
conclude that the arbitrator’s exercise of his remedial authority failed to ‘draw its
essence’ from the CBA.” Thus, it affirmed the district court’s decision.
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The case number is 12-2229.
Attorneys: Brian J. Christensen (Spencer & Fane) for Midwest Division-LSH, LLC. Scott
L. Brown (Blake & Uhlig) for Nurses United for Improved Patient Care, CNA/NNOC.
9th Cir.: Compensatory damages appropriately awarded to employer where union
protests violated injunction
By Ronald Miller, J.D.
A federal district court did not abuse its discretion when it awarded compensatory
damages to an employer after it found a union in contempt for violating an injunction
prohibiting it from engaging in certain protest activities, ruled the Ninth Circuit (Ahearn v
International Longshore and Warehouse Union, Locals 21 and 4, July 5, 2013, Collins,
R). However, the district court did abuse its discretion in awarding compensatory
damages to law enforcement agencies and a railroad that responded to the scene of the
union’s protest because they were not parties to an underlying NLRB action.
Following union protests at a grain terminal, the employer filed charges with the NLRB.
While the NLRB action was pending, the Board sought injunctive relief against the
union. A district court issued both a temporary restraining order and a preliminary
injunction prohibiting the union from engaging in certain protest activities. Nevertheless,
the union continued to engage in these activities. As a consequence, the district court
found the union in contempt and ordered it to pay compensatory damages to the NLRB,
the employer, various law enforcement agencies and a railroad.
On appeal, the union argued that the district court’s contempt awards should be vacated
because the court did not have discretion to award compensatory damages to third parties,
or to award damages to the charging party in an underlying labor action where Sec. 303
of the LMRA allegedly provided the sole remedy. The events underlying this appeal
arose out of a dispute between the union and the employer concerning whether union
members would operate the grain terminal the employer was leasing from the Port of
Washington. The union claimed that under the terms of its collective bargaining
agreement with the port, the employer was required to hire union members. However, the
employer resisted attempts to enforce the CBA and informed the union it was going to
hire non-union workers to operate the terminal.
Contempt sanctions. In response, the union engaged in picketing activity at the terminal.
Thereafter, the employer filed charges with the NLRB, which pursued injunctive relief
against the union. The Board claimed that union members coerced people into refusing to
perform services for the employer through threats and harassment. According to the
injunction petition, the union’s picketing and trespassing resulted in the destruction of
employer property and the harassment of its employees and contractors. Ultimately, the
union was restrained from engaging in certain conduct. Despite the restraining order,
union members picketed on railroad tracks heading into the terminal and blocked a train’s
access to the terminal for seven hours. The next day picketers broke windows at the
terminal and threatened security guards.
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Following a contempt hearing, the district court awarded $250,000 in damages to the
employer, the NLRB, police departments and the railroad. Despite the initial damage
award, the union continued to engage in prohibited conduct, prompting additional
damages being awarded to the NLRB.
Remedy for damages. The Ninth Circuit first considered whether LMRA Sec. 303 was
the employer’s sole remedy for obtaining damages resulting from unlawful labor
activities. Here, the appeals court found that it was not. Section 303 allows private
employers to recover damages caused by secondary picketing. In the underlying NLRB
action, the employer alleged that the union picketed outside its facility for the purpose of
getting it, the secondary employer, to cease doing business with another port, the primary
employer. However, the district court declined to enjoin secondary picketing and the
parties entered into a settlement agreement to address the employer’s allegations. In
awarding compensatory damages to the employer, the district court did not cite Sec.
8(b)(4) or Sec. 303.
Nevertheless, the union urged the Ninth Circuit to follow the Second Circuit’s ruling in
NLRB v Local 3, Int’l Bhd of Elec Workers, where that court declined to award civil
contempt damages to third-party employers when they were not complainants in the
underlying Sec. 303 action and had not brought their own Sec. 303 claims against the
union. However, the Ninth Circuit reached a different conclusion. First, civil contempt
proceedings serve two purposes: (1) coercing compliance with a court order; and (2)
compensating the prevailing party. As the charging party, the employer was a “prevailing
party” for purposes of the NLRA and so was entitled to compensation for its actual
damages.
Second, the Ninth Circuit was not convinced that Local 3 stands for the broad proposition
that employers who are eligible to seek remedies under Sec. 303 are never entitled to civil
contempt damages for injuries related to secondary protest activities. Third, Sec. 303
states only that private employers “may sue” for damages caused by unfair labor
practices, not that they must do so. Finally, the court determined that it was not clear that
the employer could seek relief under Sec. 303 in this case because the district court did
not award injunctive relief under Sec. 8(b)(4).
Calculation of damages. The appeals court next turned to whether the record supported
the amount of compensatory damages awarded to the employer. In this instance, the
union did not dispute the district court’s contempt finding, but rather argued that there
was insufficient proof of the injured parties’ alleged damages to support the amount of
compensatory damages. Here, the district court reviewed various affidavits, declarations,
and photos submitted by the NLRB before awarding damages. Moreover, the union had
an opportunity to cross-examine witnesses and respond to the evidence presented by the
Board, and to submit its own evidence in opposition to the award. The district court also
adjusted the final damages in response to objections. Thus, appeals court found that the
procedures and evidence supported the district court’s contempt award.
Employer participation in contempt proceedings. Although NLRA Sec. 10(l) provides
only that the NLRB can pursue an injunction against unfair labor practices, the court
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observed that the statute also allows a charging party “an opportunity to appear by
counsel and present any relevant testimony.” Thus, the employer’s participation in the
contempt proceedings did not exceed the statutorily limited role given to charging parties
under the NLRA. Here, the appeals court noted that the record showed that the
employer’s participation in the contempt hearing was limited to questions regarding the
damage caused by the union at its facility and entering exhibits into evidence. The
employer did not “petition the court independently,” nor did it seek “relief different than
that sought by the NLRB.”
Damages to non-parties. However, the appeals court agreed with the union that the
district court abused its discretion by awarding compensatory damages to the railroad and
the various law enforcement agencies that responded to the union protests. The court
noted that the key for contempt sanctions are that they are available as compensation
when they are awarded to the prevailing party in the litigation. In this instance, neither
the law enforcement agencies, nor the railroad were parties to the underlying NLRB
action. Moreover, the district court’s award did not serve the first purpose of civil
contempt sanctions — to compel compliance with a court order.
The case number is 11-35848.
Attorneys: Emily M. Maglio (Leonard Carder) for International Longshore and
Warehouse Union, Locals 21 and 4. Kayce R. Compton, for NLRB.
9th Cir.: Employer had standing to seek damages under LMRA Sec. 303 even
though it did not seek to vacate arbitration award under Sec. 301
By Ronald Miller, J.D.
The Ninth Circuit reversed a district court’s dismissal for lack of statutory standing an
employer’s action seeking damages under LMRA Sec. 303 for unfair labor practices
allegedly committed at arbitration in violation of NLRB Sec. 8(b)(4)(ii)(A) (American
President Lines, Ltd v International Longshore and Warehouse Union, Alaska Longshore
Division, Unit 60, July 12, 2013, Tallman, R). Although the employer did not exhaust a
petition to vacate the arbitration award under Sec. 301, nothing in Sec. 303 precluded its
action for damages, concluded the appeals court. Whether the employer was considered
as either a neutral or primary employer, it sufficiently alleged that it suffered damages by
reason of the union’s alleged unfair labor practices, and it satisfied every statutory
requirement to establish standing under Sec. 303.
Pursuit of damages under Section 303. Section 303 provides a judicial forum to pursue
damages resulting from certain unfair labor practices committed by a union. In rare cases,
a union can commit a predicate unfair labor practice through its conduct in an arbitration
proceeding. In this instance, the employer’s claim required the court to resolve whether
Sec. 303 permits an action challenging a union’s conduct at arbitration when the
employer has admittedly failed to challenge the arbitration award itself under Sec. 301.
In this longstanding dispute between American President Lines (APL) and the
Longshoremen’s union (ILWU) regarding who may claim certain longshore work at the
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Port of Seward, Alaska, the employer was a signatory to a multiemployer bargaining
agreement (the AALA) with the ILWU covering dockside activity at covered ports in
Alaska. APL’s deep draft, ocean-going vessels cannot call at small ports, so it enters
connecting carrier agreements with local barge operators to bring cargo containers for its
customers to a deep water port. This dispute arose because one of the barge companies
contracted by APL used its own non-ILWU represented employees to perform cargo
handling at the Port of Seward. The ILWU believed that APL was in violation of the
AALA’s work preservation clause.
The ILWU brought a grievance against APL for breach of the then-effective CBA. In a
new a letter of understanding incorporated into a new AAPA, APL agreed that it would
probably stop doing business with the barge operator. However, APL could not get
another signatory to the AAPA to take on 100 percent of its Seward cargo. Thereafter, the
union refused to have ILWU-represented workers to handle APL’s cargo in Seward. The
union’s grievance alleged that the displacement of ILWU workers in Seward violated the
AALA.
Arbitration of dispute. An Alaska arbitrator conducted an initial arbitration based solely
on the parties’ written submissions and determined that the disputed work had previously
been performed by APL using a signatory to the AAPA as required, and that APL
controlled the hiring of the barge operator’s nonunion stevedores in violation of the
AAPA. APL was ordered to assign the disputed work to the ILWU. The arbitrator also
concluded that the union was violating NLRA Sec. 8(b)(4) by demanding the work. APL
appealed that decision to a Coastal arbitrator who remanded the matter for a full
evidentiary hearing. Following the full hearing, the Alaska arbitrator again required the
ILWU to receive APL’s Seward work.
APL, however, refused to give the work to the ILWU, contending that the arbitrator’s
interpretation of the work preservation clause rendered it a “hot cargo” agreement
prohibited by the NLRB Sec. 8(e). Thereafter, APL was thwarted in its attempt to appeal
the Alaska arbitrator’s decision to the Coastal arbitrator. APL proceeded to file its charge
with the NLRB alleging the arbitration award violated Sec. 8(e) and the ILWU violated
Sec. 8(b)(4)(ii)(A) and (B) when it pursued its interpretation of the work preservation
clause at arbitration. The Board dismissed the charges because they lacked merit. APL
then filed this action in district court under Sec. 303.
Again, APL asserted that the ILWU violated Sec. 8(b)(4)(ii)(A) and (B) when it
advanced an interpretation at arbitration that forced the employer to enter into a “hot
cargo” agreement and cease doing business with the barge operator. The district court sua
sponte ordered the parties to brief whether APL had Article III and Sec. 303 standing. It
concluded that the employer had Article III standing but lacked statutory standing under
Sec. 303 because it was attempting to litigate issues that had already been decided
through arbitration. The lawsuit was dismissed and APL filed this appeal.
Statutory standing found. Although APL twice failed to convince an arbitrator that it
had no duty under the AALA to give this work to the ILWU; then failed to convince the
NLRB General Counsel that ILWU’s interpretation of the AALA had turned the
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agreement into a “hot cargo”; and also failed to file a timely petition to vacate the
arbitration award, none of those failures deprived the employer of standing to bring this
action under Sec. 303. The Ninth Circuit concluded that the district court conflated the
merits of this case with whether APL had statutory standing.
The union contended that as a matter of policy, the interest in the finality of arbitration
proceedings should require the employer to first exhaust a petition to vacate the
arbitration award before it could claim a Sec. 303 remedy. However, the Ninth Circuit
said it could not place additional obstacles to enforcing the right to pursue damages
without congressional authorization. Consequently, because nothing in Sec. 303
precluded this action even without the employer’s failure to exhaust a petition to vacate,
the appeals court reversed the district court’s dismissal for lack of statutory standing.
Although this lawsuit could effectively undermine the arbitrator’s award, that would
occur only because the union itself allegedly committed an unfair labor practice in
obtaining the award. In this instance, APL was challenging the union’s actions, not the
arbitrator’s decision. The award was only relevant in this case to prove the union’s
conduct actually caused APL’s damages. Thus, the district court’s judgment was vacated
and remanded to consider the merits of APL’s claim.
The case number is 11-36080.
Attorneys: Philip L. Ross (Littler Mendelson) for American President Lines, Ltd. Robert
S. Remar (Leonard Carder) for International Longshore and Warehouse Union.
11thCir.: RV park did not qualify as recreational establishment exempt from
overtime provisions of FLSA
By Ronald Miller, J.D.
A recreational vehicle park that catered to retirees who traveled to Florida for the winter
was not a recreational establishment statutorily exempt from providing its employees
with overtime pay under the FLSA, ruled the Eleventh Circuit in an unpublished decision
(Mann v Falk, July 9, 2013, per curiam). The RV resort did not qualify as a recreational
establishment because its principal activity, selling recreational vehicles and leasing lots
to house those vehicles, was not recreational in nature.
The plaintiff served as the maintenance man and groundskeeper at the RV resort.
Following his termination, the employee complained of retaliation and denial of overtime
compensation, and filed suit against the owners. The owners of the resort moved for
summary judgment on the ground that it was a recreational establishment exempt from
the overtime provision. However, a district court ruled that the RV resort did not qualify
as a recreational establishment and entered partial summary judgment in favor of the
employee. After a jury awarded the employee more than $37,000 in overtime wages, the
owners appealed the judgment against them.
The RV resort derived approximately 92 percent of its income from renting lots, and the
remainder of its income came from selling recreational vehicles. About 10 percent of the
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park’s lots were occupied permanently. The residents signed a residential lease agreement
that referred to the resort as the “landlord” and the tenants as “residents.” The plaintiff
worked as an independent contractor for nearly five years before becoming an employee.
While the employee worked for the resort, it provided residents with free daily activities,
provided golf lessons and coordinated golf outings with local courses. An activities
committee comprised of residents organized many activities in the community, and
proceeds from those activities went to the committee, not the owners.
Recreational establishment. On appeal, the owners contended that the RV resort
qualified as a recreational establishment because it was a destination getaway that offered
activities for its clientele and its income flow established that it was a seasonal business.
However, the Eleventh Circuit concluded that the resort did not qualify as a recreational
establishment. To obtain the exemption, the employer must establish that its
establishment qualifies as a recreational establishment and that it is seasonal. Department
of Labor regulations, 29 CFR Sec. 779.385, define a “recreational establishment” as an
“establishment frequented by the public for its . . . recreation.”
Consistent with the regulation, Eleventh Circuit precedents establish that the business of
a recreational establishment is to provide amusement or entertainment for its customers.
A recreational establishment must also sell recreation or entertainment as its “principal
activity.” Moreover, the Wage and Hour Division of the Department of Labor has applied
the Eleventh Circuit’s “principal activity” test to determine if a business qualifies as a
recreational establishment.
In this instance, the principal activity of the RV resort was selling recreational vehicle
lots and recreational vehicles. Although the resort promoted and even provided some
recreational activities, providing recreation was not its principal activity. Rather, the
majority of recreational activities were organized and funded by the residents. Like a
resort hotel, the RV resort used the community activities to entice retirees to visit and
purchase a site for their recreational vehicle. Thus, the appeals court affirmed the
judgment in favor of the employee for unpaid overtime compensation.
The case number is 12-16434.
Attorneys: Angeli Murthy (Morgan & Morgan) for John Mann. Elizabeth Coke
(Richeson & Coke) for Michael Falk.
NLRB: Employer’s conduct of soliciting employee grievances during organizing
campaign warranted setting aside election results
By Ronald Miller, J.D.
An armored truck company engaged in objectionable conduct warranting setting aside a
union election where its safety and health manager solicited grievances from bargaining
unit employees, ruled a three-member panel of the NLRB (Garda CL Great Lakes, Inc,
June 28, 2013). The safety manager made two unprecedented visits to a facility were
employees were engaged in a union organizing campaign and questioned them about
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issues at the heart of the organizing campaign. Accordingly, the Board remanded the
proceedings for the purpose of conducting a second election.
As an initial matter, the Board agreed with an administrative law judge that the employer
engaged in objectionable conduct by granting benefits to unit employees. Moreover, in
the absence of exceptions, the Board adopted the law judge’s finding that the employer’s
director of risk management engaged in objectionable conduct by soliciting employees’
grievances and promising to remedy them.
The Board also found merit in the Acting General Counsel cross-exception to the ALJ’s
dismissal of an allegation that the employer additionally engaged in objectionable
conduct by soliciting grievances through the actions of its safety and health manager. In
an unprecedented action, the safety and health manager visited the facility, inquired about
the condition of trucks, including whether air conditioning worked, and whether the
employer supplied water to the employees. The questions indicated management’s
knowledge that those concerns were in large part motivating the union campaign.
Moreover, the safety manager made a second visit to the facility and spoke with
employees regarding the suitability of their uniforms for heat conditions, as well as
concerns about the lack of ballistic vests.
The solicitation of employee grievances during an organizing campaign “raises an
inference that the employer is promising to remedy the grievances,” and this inference is
“particularly compelling when, during a union organizational campaign, an employer that
has not previously had a practice of soliciting employee grievances institutes such a
practice.” Here, the employer failed to rebut the inference that the safety manager’s
unprecedented presence to speak to employees and solicit their grievances during the
organizing campaign carried with it the implicit promise to remedy those grievances.
The slip opinion number is 359 NLRB No 148.
Attorneys: Joseph F. Tansino for General Counsel. Eric Hult (Littler Mendelson) for
Garda CL Great Lakes, Inc. Jack Deml for United Federation of Special Police and
Security Officers, Inc.
NLRB: Store manager targeted union steward and employee for RIF because they
used union to voice work-related complaints
By Ronald Miller, J.D.
An employer acted unlawfully when it targeted a union steward for inclusion in a
reduction-in-force (RIF), ruled a three-member panel of the NLRB (Fresh & Green’s of
Washington, D.C., LLC, June 28, 2013). Similarly, the employer acted unlawfully when it
targeted a second employee for the RIF because he requested union assistance with a
scheduling complaint with management. Here, the Board determined that the General
Counsel met his initial Wright Line burden of proving that the employer was motivated to
discharge the union steward because she voiced job-related complaints, and it was
65
motivated to discharge the employee because he sought to voice his scheduling complaint
through the union. Moreover, the evidence established that the reasons given by the
employer for the discharges were pretextual.
The employer acquired eight stores after its parent company successfully bid in a
bankruptcy auction. The Food and Commercial Workers Union represented the
employees at the store in question. After acquiring the store, the employer hired most of
its predecessor’s employees and reached an agreement with the union on a contract
covering its employees. Ultimately, about 50 union-represented employees were
employed at the store. In the first year of operations sales at the stores were far below
expectations. Consequently, the employer decided that a RIF was necessary. The decision
regarding who would be terminated was left to each individual store’s manager.
However, managers were directed to identify employees based on “overall job
performance.” The store manager at the union location decided to terminate six
employees, including the union steward and the employee who sought union assistance.
Union steward characterized as troublemaker. An administrative law judge found that
the union steward’s discharge violated the NLRA after the store manager selected her to
be part of the RIF because she aggressively pursued her own and other employees’ workrelated complaints. In response to the steward’s activities, the store manager complained
to a union representative that she was a troublemaker and was getting employees “riled
up.” The Board agreed with the law judge that the employer’s reliance on complaints
about the steward’s performance shortcomings were pretextual to justify her termination.
Thus, the Board affirmed the ALJ’s finding that the steward’s termination was unlawful.
Work-related complaints. Contrary to the law judge, the Board also found that the
employer similarly acted unlawfully by selecting a second employee for the RIF because
he engaged a union representative to assist him in pursuing a work-related complaint with
management. Under the Wright Line analysis, the Board found that the employee’s
protected conduct was a motivating factor in the employer’s adverse employment action.
Although the law judge found that the employee had not engaged in protected union
activity aside from attending a union rally, the Board concluded that the ALJ failed to
recognize that he engaged in union activity when he enlisted a union representative to
pursue a scheduling complaint.
Moreover, there was ample circumstantial evidence in the record that supported an
inference that the store manager bore animus toward this protected activity. First, she
unlawfully discharged the union steward at the same time for getting employees “riled
up” by aggressively pursuing work-related complaints. Second, after a union
representative spoke with the store manager on behalf of the employee, she falsely stated
that she had previously suggested the possibility of a scheduling accommodation, and
insisted that the employee either quit or be prepared to work on both Fridays and
Saturdays. Third, although the employees’ separation notices indicated that the
employees were recommended for rehire, the store manager did not consider either of
them when later filling vacant positions.
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The Board also found the store manager’s assertion that she discharged the employee
because of scheduling conflicts pretextual. Here, the employee testified that he never
refused to be available to work both Fridays and Saturdays. Thus, the Board found the
employer violated the NLRA by discriminatorily discharging the employee.
The slip opinion is 359 NLRB No 145.
Attorneys: Gregory Beatty for General Counsel. John Ferrer (Morgan, Lewis & Bockius)
for Fresh & Green’s of Washington, D.C., LLC. Carey Butsavage (Butsavage &
Associates) for United Food and Commercial Workers, Local 400.
NLRB: Inclusion of Weingarten statement on back of union contract didn’t restrain
employees’ Section 7 rights, but was unlawful unilateral action
By Ronald Miller, J.D.
A union’s inclusion of a statement of Weingarten rights on the back of union contracts to
be distributed to bargaining unit employees did not chill employees’ exercise of their
right to forego union representation at a disciplinary interview, ruled a three-member
panel of the NLRB (California Nurses Association, July 2, 2013). However, the Board
did find that the union violated its duty to bargain in good faith when it printed the
Weingarten statement on the back of the union contracts because it was contrary to the
parties’ settled understanding on the issue of the contract’s cover text.
Weingarten statement. In 2009, the union and a hospital executed a new three-year
collective bargaining agreement, which required the union to provide the hospital with
printed copies of the agreement for distribution. The union unilaterally added a
Weingarten statement to the back cover. However, the hospital did not consent to the
statement and its inclusion was not discussed during negotiations. In response, the
hospital objected to the statement, and when the union refused to remove it, the hospital
filed an unfair labor practice charge. An administrative law judge found that the
statement could reasonably be read by bargaining unit employees to require them to
request union representation during a disciplinary interview. Thus, the law judge ruled
that the statement violated NLRA Sec. 8(b)(1)(A) by chilling employees’ exercise of
their right to forego Weingarten representation.
No violation of Sec. 7 rights. On review, the NLRB rejected the ALJ’s conclusion.
Section 8(b)(1)(A) makes it unlawful for a union “to restrain or coerce employees in the
exercise of” their Section 7 rights. Section 7 protects the right of represented employees
to refrain from exercising their Weingarten right to union representation. The law judge
found that this right to refrain was restrained by the sentence in the Weingarten statement
stating, “You must request that a CNA rep be called into the meeting.” When the legality
of a work rule applicable to employees is challenged on its face, the Board consistently
has emphasized the importance of reading a provision in its context. Applying the same
principle in analyzing the Weingarten statement at issue here, the Board concluded that
the ALJ erred in reading the challenged sentence out of context.
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Here, the Board determined that the challenged sentence clearly communicated the
established requirement that, for the Weingarten right to be triggered, the employee must
initiate the request for representation. No reasonable employee would read the challenged
sentence, in that context, to require him to exercise his Weingarten right, regardless of
whether he wished to do so, or face some sanction from the union. The statement as a
whole plainly was intended to provide an explanation of the Weingarten right and the
procedure for exercising it. Thus, the Board reversed the law judge’s decision and
concluded that the union’s printing of the statement did not violate Sec. 8(b)(1)(A).
Breach of bargaining duty. Still, the union’s unilateral inclusion of the statement on the
back of the contract violated Sec. 8(b)(3), which required it to bargain in good faith. In
this instance, the law judge found that the statement was “contrary to the settled
understanding of the parties on the issue of cover text.” Although the issue of the
Weingarten statement on the back cover was not discussed during negotiations, the
parties had a previous dispute over inclusion of identical language on the back cover of
their prior contract. That dispute was settled only after the union agreed to remove the
text from that cover.
The union’s contractual obligation to print the collective bargaining agreement only
could be understood as an obligation to print the agreement without the Weingarten
statement. Consequently, the NLRB had no difficulty under these circumstances
concluding that the union’s conduct was inconsistent with its statutory duty to bargain in
good faith. Applying the principles outlined in Electrical Workers Local 1464 (Kansas
City Power), the Board determined that because the parties had previously reached a clear
understanding that the printed contract would not contain the Weingarten statement, the
hospital was entitled to insist that the printed agreement conform to that understanding.
The slip opinion number is 359 NLRB No. 150.
Attorneys: Nikki N. Cheaney for Acting General Counsel of the NLRB. Brendan White
for California Nurses Association. Adam C. Abrams (Epstein Becker Green) for Henry
Mayo Newhall Memorial Hospital.
NLRB: Employer’s unilateral elimination of short-term disability benefit for union
employees unlawful, no showing union waived bargaining rights
By Ronald Miller, J.D.
An employer breached its duty to bargain when it unilaterally eliminated a short-term
disability benefit previously enjoyed by bargaining unit employees, ruled a three-member
panel of the NLRB (Enterprising Leasing Co of Florida, LLC d/b/a Alamo Rent-A-Car,
July 2, 2013). The Board rejected an employer’s argument that a provision in the theneffective collective bargaining agreement constituted a waiver of the union’s right to
bargain over the elimination of this benefit. Thus, the Board found that the union did not
clearly and unmistakably waive its right to bargain concerning elimination of the shortterm disability benefit.
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Elimination of short-term disability benefit. In December 2009, Enterprise Leasing
held a series of voluntary meetings with employees at a Miami International Airport
Alamo Rent-A-Car facility represented by the Teamsters. Enterprise informed the
employees that it would be eliminating the short-term disability benefit that they had
enjoyed for years as a component of its comprehensive group insurance plan “because of
their union contract.” Nonunion employees at other locations would continue to receive a
short-term disability benefit under a new time-off policy crafted for those employees.
Thereafter, the employer unilaterally eliminated the short-term disability benefit.
The NLRB rejected the employer’s contention that a CBA provision stating that the
provisions of the employer’s insurance plan or 401(k) plan were not subject to grievance,
arbitration or negotiation procedures constituted a waiver of the union’s right to bargain
over elimination of the benefit. Although the agreement detailed grievance and arbitration
procedures, it did not include any reference to a “negotiation procedure.” Under such
circumstances, the Board declined to find that the term cited by the employer constituted
incisive, direct and specific assaults on the existence of any negotiating responsibility
during the term of the contract or evidenced the parties’ desire to commit unresolved
issues to management prerogatives.
Elimination of benefit interfered with employee rights. The Board also found that
Enterprise interfered with employee rights under Sec. 8(a)(1) by repeatedly telling
bargaining unit employees that it was eliminating the short-term disability benefit
“because of their union contract,” but that nonunion employees would continue to receive
the benefit under a new time off policy. Unit employees would reasonably believe that
the employer was eliminating their short-term disability benefit because they chose to be
represented by the union. Because nothing in the CBA mandated that the employer
eliminate the benefit, or privileged it to take such action unilaterally, the statement was
not truthful and lawful.
Withdrawal of recognition. The Board found that Enterprise’s withdrawal of
recognition from the union was unlawful where pre-withdrawal unfair labor practices
tainted the decertification petition relied on by the employer when it concluded the union
no longer had majority support. An employee began circulating the decertification
petition just a few weeks after the employer repeatedly and unlawfully attributed the
impending elimination of the short-term disability benefit to the employees’ union
representation. The petition began to circulate on the very day the employer unlawfully
eliminated the benefit without bargaining with the union. Additionally, the employer’s
supervisors unlawfully assisted the employee’s decertification effort. Because signatures
on the decertification were secured from employees who were unhappy with the
employer’s unlawful elimination of the short-term disability benefit, the Board found a
strong causal connection linking the employer’s unfair labor practices concerning the
short-term disability benefit to the union’s loss of majority support. Accordingly, the
decertification petition was tainted and the withdrawal of recognition unlawful.
Post-withdrawal unilateral changes. Finally, the Board found that Enterprise acted
unlawfully by making several post-withdrawal unilateral changes to wages and benefits,
failing to process a grievance, and failing to continue dues checkoff from the point it
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unlawfully withdrawal recognition until expiration of the agreement. However, the Board
determined that the employer was privileged by Bethlehem Steel Co to discontinue
honoring the dues-checkoff arrangement established in the CBA once it expired.
Although the NLRB overruled Bethlehem Steel in WKYC-TV, Inc, the new rule was
applied prospectively only. Thus, Enterprise did not violate the NLRA by failing and
refusing to deduct and remit union dues after the CBA expired.
The slip opinion number is 359 NLRB No 149.
Attorneys: Karen M. Thornton for General Counsel. Daniel R. Begian (The Lowenbaum
Partnership) for Enterprise Leasing Company. D. Marcus Braswell, Jr. (Sugarman &
Susskind) for Teamsters.
NLRB: Employer acted unlawfully when labor relations director and attorney
engaged in individual interviews with employees
By Ronald Miller, J.D.
An employer acted unlawfully when its labor relations director solicited grievances from
an employee during a one-on-one meeting during a union campaign, where the meeting
represented a significant departure from the employer’s usual pattern of using a hot-line
to report complaints, ruled a three-member panel of the NLRB (Albertson’s, LLC, July 2,
2013). Moreover, the fact that the employee did not voice any complaints was not
controlling, since a finding of unlawful solicitation turned on whether the employer’s
conduct had a tendency to restrain employees in the exercise of their rights. Similarly, the
Board determined that the employer violated NLRA Sec. 8(a)(1) when its attorney
interviewed an employee on two occasions without providing him assurances against
reprisals as set forth in Johnnie’s Poultry Co.
After the labor relations director arrived at the store where the employee worked, her
supervisor directed her to the employee break room to voice any problems with the
schedule or to lodge any complaints she had. The employee found the store manager and
labor relations director waiting. According to the employee, although she was asked if
she “had any concerns,” she was too intimidated by the presence of the store manager to
feel comfortable answering whether she had issues or problems. To the employee’s
knowledge, one-on-one meetings of this kind had never been held before with labor
relations officials.
Solicitation of grievances. Settled NLRB precedent prohibits employers from soliciting
grievances during union campaigns where the solicitation carries with it the implicit or
explicit promise to remedy the grievances and impresses upon employees that union
representation is unnecessary. Here, the one-on-one meeting with the employee
conducted by a high-level official was a significant change from Albertson’s usual
reliance on its existing practice of addressing employee grievances through its telephone
hotline. Under well-established principles, the employer’s solicitation of grievances
during the organizing campaign violated Sec. 8(a)(1).
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The Board rejected Albertson’s contention that a finding of unlawful solicitation of
grievances under Sec. 8(a)(1) was foreclosed because the employee did not voice any
complaint. However, it is well settled that the legality of employer conduct under Sec.
8(a)(1) does not turn on an employee’s subjective reaction, but rather on whether, under
all the circumstances, the employer’s conduct had a reasonable tendency to interfere with,
restrain, or coerce employees in the exercise of rights guaranteed by the NLRA.
Attorney interviews. Moreover, the Board agreed with the Acting General Counsel that
Albertson’s again violated Sec. 8(a)(1) when, on two occasions, its attorney interviewed
an employee without providing him assurances against reprisals as set forth in Johnnie’s
Poultry. In Johnnie’s Poultry, the Board struck a balance between an employer’s need to
interview employees to investigate unfair labor practice charges or prepare for a hearing,
and the right of employees to be free of coercion in the exercise of their statutory rights.
Safeguards require the employer to: (1) communicate to the employee, before the
interview begins, the purpose of the questioning; (2) assure the employee that no reprisals
will take place for refusing to answer any question or for the substance of any answer
given; and (3) obtain the employee’s participation in the interview on a voluntary basis.
Once the interview begins, the employer’s questioning “must not be itself coercive in
nature.”
After the complaint was issued in this case, Albertson’s prepared its defense by
interviewing the employee on four occasions regarding his knowledge of various events
in the complaint. The employer satisfied the Johnnie’s Poultry safeguards with respect to
the first two interviews. However, the employer’s attorney admitted that he did not
provide the employee with assurances against reprisals at two interviews or tell him the
purpose of the interviews. The fact that the employee was perceived as being favorably
predisposed to the employer’s point of view and an administrative law judge found that
the attorney’s questioning was not coercive, did not save Albertson’s from committing a
Sec. 8(a)(1) violation. Here, the Board rejected the employer’s assertion that the earlier
Johnnie’s Poultry assurances, along with the fact that the questioning at the final two
interviews was mostly the same as the employee received at the first two interviews,
excused the need for subsequent notice.
The Board has held that compliance with Johnnie’s Poultry safeguards constitutes the
“minimum required to dispel the potential for coercion” in cases where an employer
questions employees in preparing for a Board hearing. By excusing Albertson’s
compliance with these safeguards on the basis that the assurances were previously given,
the ALJ effectively created an exception to the Board’s established “bright-line
approach” in enforcing the Johnnie’s Poultry requirements.
Because several months had passed between the interviews, the Board found that the
previous assurances did not reasonably diminish the risk that the subsequent interviews
were coercive. Moreover, those interviews did not cover the same subject matter as the
first two interviews. Additionally, the Board found that the employer had in fact violated
the employee’s Sec. 7 rights by coercing him to reveal that he had been an active
opponent of the organizing efforts of his coworkers. Thus, even if the attorney had
provided the employee with the Johnnie’s Poultry assurance against reprisals, the
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interview violated the requirement that the questioning “must not be itself coercive in
nature.”
The slip opinion Number is 359 NLRB No 147.
Attorneys: David Garza for General Counsel. Thomas Stahl (Rodey, Dickason, Sloan,
Akin & Robb) for Albertson’s, LLC. Joe Allotta for United Food and Commercial
Workers, Local 1564.
NLRB: Dog care techs, instructors made up acceptable bargaining unit; no
overwhelming community of interest with other dog-handling employees
By Joy P. Waltemath, J.D.
Under Specialty Healthcare precedent, a proposed bargaining unit composed only of
canine welfare technicians and instructors was an appropriate unit, the NLRB ruled
(Guide Dogs for the Blind, Inc, July 3, 2013). The Board agreed that the employer did not
meet its burden of proving that other “dog-handing” classifications of employees,
including those from the veterinary, admissions, graduate services, breeding, kennel, and
puppy-raising departments, shared an overwhelming community of interest with the
petitioned-for employees so as to require their inclusion in the unit.
The guide dog services provider employer had several administrative divisions, but the
employees involved here worked in either the community operations division or the
training division. Community operations included breeding, kennel, and puppy-raising,
while the training division included training, veterinary, and admissions and graduate
services. The unit the union sought to represent involved two classifications in just the
training department of the training division: canine welfare technicians (CWTs) and
instructors. But the employer wanted the unit to include “all employees involved in the
process of breeding, developing, training, and providing care for guide dogs.” All of the
employees in question shared similar benefits and were subject to the same policies and
procedures, and those that worked at the employer’s San Rafael facility shared the same
break room, lounge area, and parking lots.
Readily identifiable as a group. The Board first agreed that the CWTs and instructors
were “readily identifiable as a group,” meeting their first hurdle as an appropriate unit.
They comprised all the employees in the training department’s two classifications that
actually trained and cared for active service dogs at the guide dog facility.
Community of interest. As to factors supporting their community of interest, the Board
identified the following: CWTs and instructors worked in the same administrative
division and department and used the same training department office. They both worked
under the direction of the training department director, although they had separate
immediate supervisors. Their work had a shared purpose and was integrated functionally,
since both groups prepared the training dogs and students for service outside the
employer’s facility. Instructors were primarily responsible for providing substantive
training; the CWTs provided physical care to the dogs to facilitate that training. They
were the only employees who regularly worked with the guide dogs and students during
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their “training phase” and had only limited contact with other employees. Moreover, 95
percent of instructors progressed from the apprentice instructor positions, and most of the
apprentice instructors came from the ranks of the CWTs, creating a clear career ladder for
these positions. Further, both CWTs and instructors were hourly paid; received similar
benefits; and were subject to the same policies.
The differences between CWTs and instructors were insufficient to overcome the strong
evidence of community of interest, said the Board. Instructors were required to obtain
state certification and were paid at higher grade levels. CWTs and instructors also worked
different hours and at times in different physical spaces.
Fact-specific Specialty Healthcare burden. In order to include additional employees in
the petitioned-for unit, the employer had the burden of demonstrating the employees in
the other “dog handling” classifications shared an “overwhelming” community of interest
with the petitioned-for employees, such that there was “no legitimate basis” upon which
to exclude them from the larger unit because the traditional community of interest factors
“overlap almost completely.” This it could not do, said the Board.
Who knew dog training was so complex? Here, the Board found that employees in the
breeding, puppy-raising, and veterinary departments shared virtually no overlapping
factors with the employees in the petitioned-for unit. Those employees worked in
separate administrative departments, reported up different managerial chains, and worked
in separate physical spaces. They performed different job functions that required
“specialized skills and training”: breeding department employees needed experience in
breeding and canine reproduction; puppy-raising employees needed experience in dog
obedience and handling; and veterinary technicians needed veterinary experience.
Although recognizing that employees in the kennel department and in the admissions and
graduate department did perform somewhat similar tasks (kennel employees, in providing
physical care to dogs in various kennels, “somewhat resembled” that of the CWTs; and
field service managers (FSMs), in providing training functions offsite, were somewhat
similar to that of instructors at the employer’s facility), the Board found those factors did
not outweigh other factors demonstrating that there was not an overwhelming community
of interest.
Kennel employees worked in a different department and division than the CWTs and
instructors, they reported to different managers, and they provided physical care for
puppies and career-change dogs, a wholly distinct population than the training dogs cared
for by the CWTs. Kennel employees’ work was not connected to the discrete training
module jointly administered by CWTs and instructors. Similarly, while FSMs and
instructors had comparable qualifications and performed related substantive duties, FSMs
were in a different department, reported to a different managerial chain, were
geographically diverse, working away from the employer’s worksite and almost
exclusively in home visits in different parts of the country. They used a separate field
training manual and, unlike most of the other employees, FSMs were salaried rather than
hourly.
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Because each classification had a “separate role in the process” and employees in the
training department had only limited interaction and interchange with other
classifications, the Board declined to find an overwhelming community of interest
between them and found the petitioned-for unit appropriate.
The NLRB slip opinion number is 359 NLRB No. 151.
Attorneys: Andrew Baker (Beeson Tayer & Bodine) for Guide Dogs for the Blind, Inc.
NLRB: Employer’s unilateral movement of drivers between bargaining units
constituted unlawful breach of bargaining duty
By Ronald Miller, J.D.
An employer acted unlawfully when it unilaterally moved a classification of drivers and
the work they performed from coverage under a construction agreement to coverage
under a less-favorable ready-mix agreement; bypassing the drivers’ exclusive bargaining
representative and directly dealing with the drivers; and denying employment
opportunities to those drivers who refused to agree to work under the ready-mix
agreement (Aggregate Industries, July 8, 2013). The NLRB found that the movement of
the drivers was a change in the scope of the bargaining units — a permissive subject of
bargaining — and could not be implemented without first reaching an agreement with the
union. Moreover, even if the employer’s action was properly classified as a transfer of
unit work — a mandatory subject of bargaining — it violated the NLRA by acting
without giving the union sufficient notice and opportunity to bargain concerning the
change.
The employer quarried and hauled crushed stone, performed grading and paving work,
operated concrete plants, hauled concrete and road construction under various trade
names. Employees performing aggregate hauling were represented by the union. This
case involved “off-site material haul” drivers who hauled aggregate from a quarry to
construction sites, and were covered under the construction agreement. On the other
hand, the ready-mix agreement covered bulk and transport drivers who hauled cement
powder and drove hauls between plants. There was a substantial difference in wage rates
under the two agreements with the construction agreement paying substantially more.
In July 2010, the employer announced to the union that it was “going to move” the
drivers hauling aggregate from coverage under the construction agreement to coverage
under the ready-mix agreement. The union opposed the plan. When the parties were
unable to reach an agreement on the issue, the employer procured drivers from other
sources. Thereafter, only those drivers who agreed to the employer’s transfer plan
continued to perform the unit work, but they no longer worked under the construction
agreement.
Scope of bargaining unit. The Board and the courts have drawn a distinction between
mandatory and permissive subjects of bargaining. Generally speaking, mandatory
subjects are encompassed within the definition of wages, hours and other terms and
conditions of employment. All other bargaining subjects are permissive. A party may
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insist to impasse on, and then implement, a bargaining proposal concerning a mandatory
subject. But if the subject is a permissive one, the other party may refuse to discuss it; a
proposal cannot thereafter be implemented absent an agreement to do so.
A proposal to alter the scope of an existing bargaining unit is a permissive subject of
bargaining. Thus, an employer could not unilaterally change a bargaining unit even after
bargaining to impasse. But a transfer of unit work is a mandatory subject of bargaining.
An employer may not, under the guise of transferring unit work, alter the scope of the
bargaining unit.
Unlike the administrative law judge, the Board did not find that the employer’s plan to
move the work was simply a transfer of unit work; a mandatory subject of bargaining for
which the union’s consent was not required. Rather, the Acting General Counsel’s
argument that the move altered the scope of the bargaining units was “equally
compelling.” The Board found merit in the Acting General Counsel’s position, and so
concluded that the employer’s action in moving the drivers constituted a change in the
scope of the two bargaining units. Accordingly, the move was a permissive subject of
bargaining that the employer was not privileged to implement absent the union’s consent.
After the employer moved the disputed work to the ready-mix unit, it used the same
drivers to perform that work using the same trucks and same procedures. The effect of the
move was to substantially reduce the size and bargaining power of the construction unit.
Unilateral implementation. The Board further noted that, even assuming that the move
was properly characterized as a transfer of unit work, the employer’s implementation of
the move still violated the NLRA. In this instance, the parties did not bargain to impasse
over the change, nor did the union waive its right to bargain over the change. Rather, the
employer presented the change to the union as a fait accompli. The Board has repeatedly
held that where the manner of the respondent’s presentation of a change in terms and
conditions of employment to the union precludes a meaningful opportunity for the union
to bargain, the change is a fait accompli and a failure by the union to request bargaining
will not constitute a waiver.
In this instance, at the time of the employer’s announcement of the move, it had a fixed
intent to transfer the disputed drivers and their work and so presented the union with no
opportunity for meaningful bargaining. Because the employer had no intention of altering
its plans, it would have been futile for the union to request bargaining over the matter.
Consequently, the union’s failure to do so was excused by the Board. Accordingly, even
assuming that this change was a mandatory subject of bargaining, the Board found that
the union did not waive its right to bargain over it by failing to request bargaining.
The slip opinion number is 359 NLRB No 156.
Attorneys: John Giannopoulos for General Counsel. James T. Winkler (Littler
Mendelson) for Aggregate Industries. Richard G. McCracken (McCracken, Stemerman &
Holsberry) for Teamsters.
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NLRB: HR manager’s one-on-one questioning of employees constituted unlawful
interrogation
By Ronald Miller, J.D.
An employer acted unlawfully when a HR manager interrogated employees in one-onone meetings in her office regarding the leadership abilities of their supervisor as well as
an assessment of team morale, ruled the NLRB (Grand Canyon Education, Inc dba
Grand Canyon University, July 12, 2013). Although an employee was reportedly not
apprehensive regarding the meeting, such conduct still constituted unlawful interrogation
where the employee was not informed of the purpose of the meeting, it was conducted in
the HR manager’s office, and in view of the employee’s hostility toward employee
protected activity, the manager could reasonably appear to seek the information to take
action against employees.
One-on-one meetings. After hearing complaints from its “grad team” enrollment
counselors, the management official held one-on-one meeting with team members. The
official did not inform the employees of the purpose of the meeting, that their
participation was voluntary, or that there would be no reprisals for refusing to cooperate.
Each employee was asked a standard set of questions seeking an evaluation of the
supervisor and her leadership abilities as well as an assessment of team morale. At the
end of the meeting, the manager advised each employee not to discuss their conversation
with other employees.
In this instance, an administrative law judge found that the manager’s admonishment not
to discuss the conversations violated NLRA Sec. 8(a)(1) as an oral promulgation of an
overbroad and discriminatory rule against employees discussing terms and conditions of
employment. While the Board agreed with that finding, it rejected the law judge’s
conclusion that the questioning did not constitute an unlawful interrogation. The ALJ
reasoned that although the manager did not state the purpose of the interrogation, the
employee testified that she did not feel uneasy or apprehensive in the meeting.
In determining whether an interrogation is unlawful, the NLRB applies a totality-of-thecircumstances test. Relevant factors include whether the employer has a history of
hostility or discrimination concerning employee rights; the nature of the information
sought; the identity and organizational level of the questioner; the place and method of
the interrogation; and the truthfulness of the reply. Contrary to the law judge’s analysis
here, the standard is an objective one, considering whether the questioning would
reasonably tend to coerce the employee. The determination does not turn on whether the
questioned employee felt intimidated.
Coercive interrogation. Applying the above standards, the Board found that the
manager’s interrogation was coercive. By the time of the meeting, the employer had
already demonstrated antagonism towards employees’ protected activity. Employees
were forbidden to read or forward emails critical of upper management, and were
threatened with discharge if they did so. Moreover, during the meeting the employee was
unlawfully admonished to keep the discussion confidential. With regard to the nature of
the information sought, the manager asked about a supervisor’s management abilities.
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While such questioning is appropriate if done in a noncoercive manner, in this instance,
the employee was asked about the identity of other employees who complained about the
supervisor. By this questioning, the manager sought information concerning protected
activity by other employees, concerning their terms and conditions of employment. In
view of prior threats, the Board found such questioning could reasonably appear to seek
information in order to take action against employees.
The Board also found that the identity of the questioner and the place and method of the
interrogation would also reasonably contribute to a perception of coercion. Here, the HR
manager was an admitted supervisor, who conducted interrogation of employees on a
one-on-one basis in her office with the door closed. Employees were also unlawfully
directed to keep the discussions confidential. With the exception of the employee’s
apparent candor in answering questions, the Board found that the indicia of coercion
surrounding the questioning weighed in favor of a determination that it was coercive.
Attorneys: Chris J. Doyle for General Counsel. Richard S. Cohen (Jackson Lewis) for
Grand Canyon Education, Inc.
Hot Topics in WAGES HOURS & FMLA:
Suit seeks back wages, liquidated damages against Staples Contract and
Commercial Inc. for alleged FMLA violations
The DOL has filed a lawsuit against Staples Contract and Commercial Inc. seeking back
wages and liquidated damages for a former employee after a Wage and Hour Division
(WHD) investigation found the employer had failed to notify the employee of his FMLA
rights despite being aware of his need to take full and partial days of leave to care for his
spouse. The DOL is also requesting a permanent injunction against the company to
prevent future FMLA violations.
Under Staples’ policy and practice, an employee’s job performance expectations may be
modified when FMLA leave is requested and any pre-existing PIP would be placed on
hold while the employee is on FMLA leave, the WHD said in a statement on July 1.
However, the DOL asserts, because Staples failed to provide notice to the employee of
his rights and responsibilities under the FMLA, he was not afforded the opportunity to
take FMLA leave to care for his spouse, his job performance expectations were not
modified, and he was subsequently terminated. The employee reportedly was not placed
on a PIP until after informing his employer of his wife’s serious illness.
“For more than 20 years, the FMLA has served as the cornerstone of the department’s
effort to promote work-family balance. No worker in this country should have to lose his
or her job when faced with a serious health condition or the need to care for an ill family
member,” said Michelle Garvey, director of the Wage and Hour Division’s Columbia
District Office.
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Companies and their officials jointly and severally liable for nearly $79,000 in back
wages, damages and penalties under consent decree
The DOL has obtained a federal court consent judgment ordering furniture designer
S.O.L.E. Design Inc., manufacturer Best Upholstery Inc., and two company officers to
pay 21 current and former employees $72,472 in back wages and liquidated damages,
plus more than $6,000 in penalties, the Wage and Hour Division announced on July 2.
S.O.L.E. Design and Best Upholstery work collaboratively to design and manufacture
home furniture that is sold to several major national retailers. The companies operate out
of the same facility located in El Monte, California, and constitute a single enterprise for
purposes of FLSA coverage, the DOL said.
The judgment follows a WHD investigation that found the company willfully violated
FLSA overtime, minimum wage, and recordkeeping provisions. According to
investigators, employees were paid straight time for all hours worked and did not receive
an overtime premium for hours worked beyond 40 in a workweek, as required by the
FLSA. Several employees working as upholsterers were also paid piece-rate wages that
amounted to less than the federal minimum wage in some workweeks. Moreover,
investigators found that the employers paid some wages in cash and off the books, and
falsified payroll records by excluding overtime hours worked by the employees in
violation of FLSA recordkeeping provisions.
“Our investigators found employees working up to 60 hours a week without overtime
pay, and often for wages below the federal minimum wage,” said Daniel Pasquil, director
of the Wage and Hour Division’s West Covina District Office. “What’s worse is that the
employers utilized off-the-record pay practices and maintained false and incomplete
records of employees’ wages and work hours. This judgment puts hard-earned wages
back into the pockets of many vulnerable workers, including liquidated damages, to make
them whole for the financial difficulties they suffered due to the wage violations.”
Under the consent judgment approved by the court, both companies and their officers are
jointly and severally liable for the payment of $36,236 in back wages, plus an equal
amount in liquidated damages, to the affected employees, and an additional $6,468 in
civil money penalties assessed by the DOL. The judgment also permanently enjoins the
defendants from committing future violations of the FLSA, and orders them to implement
specific practices to ensure FLSA compliance, including maintaining accurate time and
payroll records reflecting all hours worked and all compensation paid to employees.
Further, the defendants may not falsify timecards, require or cause employees to sign
inaccurate timecards, or require employees to work off the clock. The defendants are also
required to display a notice of the DOL’s findings and the court’s order in both English
and Spanish in areas highly visible to employees.
The DOL filed its lawsuit the Central District of California.
New developments on the unpaid intern front
By Lisa Milam-Perez, J.D.
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When New York federal judge Harold Baer in May refused to certify a Rule 23 class in a
wage suit filed by unpaid Hearst Corp interns under the New York Labor Law, some
practitioners expected the ruling would stem an anticipated surge in intern wage
litigation. Weeks later, though, another judge in the Southern District of New York
injected new life into intern wage claims, concluding as a matter of law that Fox
Searchlight production interns were statutory employees under the FLSA — and
certifying both an FLSA collective action and a Rule 23 class.
In light of the Fox Searchlight decision, Judge Baer last week granted a motion by the
Hearst interns to challenge on interlocutory appeal his ruling denying class certification.
Controlling questions of law are at stake, including whether the facts supported his
finding that predominance and commonality criteria were not satisfied, and their
resolution would impact other suits pending in the circuit, he noted, citing the Fox case in
particular.
The questions raised in this case are “difficult and one of first impression,” Baer noted,
and “they clearly provide fodder for different opinions and have spawned them.” Indeed,
in the Hearst and Fox Searchlight cases, both courts applied the totality of circumstances
test set forth in the DOL Fact Sheet #71, yet reached contrary results, Baer said. “If the
Second Circuit provides clarification or a different legal standard, it will guide a
resolution of the outstanding issues pending in the Circuit.”
Other developments. Meanwhile, there has been more movement on the intern front. On
the heels of its victory in Fox Searchlight, New York law firm Outten & Golden LLP
launched a proposed class action wage suit on behalf of former Conde Nast interns who
had worked at W magazine and The New Yorker. The plaintiff’s firm, which has largely
driven this growing area of class wage litigation, has set its sights on large media
companies. Outten & Golden also represents the plaintiffs in the Hearst suit. Just today,
the firm set its sights on NBC Universal; one named plaintiff worked in the booking
department at MSNBC; another was an intern on the staff of Saturday Night Live.
“This case is about the fundamental principle that if you work, you must be paid,” said
Outten & Golden’s Juno Turner, one of the attorneys representing the Conde Nast
interns. “Our clients seek to end the wage theft endemic in the media industry.”
Also last week, a New York state judge gave the final sign-off on a $250,000 settlement
resolving a suit brought by Outten & Golden on behalf of unpaid interns of PBS’ Charlie
Rose show. The deal was reached, and given preliminary approval, last December.
Of course, Outten & Golden isn’t the only firm bringing these claims. Liddle & Robinson
attorneys in June filed a complaint against Gawker Media seeking to certify a class of
unpaid interns who alleged they should have been treated as employees and paid for the
work they performed for the online media company. Those duties — writing,
researching, editing, lodging stories and multimedia content, promoting content on social
networking sites, moderating comments and managing the online user community —
“was central to Gawker's business model as an internet publisher,” the suit contends.
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Not just a wage issue. Finally, Oregon last month enacted HB 2669, a measure that
extends employment discrimination protections to unpaid interns. It’s not a wage bill; in
fact, the statute expressly provides that it does not create an employment relationship
between an employer and an intern for purposes of the state’s wage and hour laws (and
other provisions, including Oregon’s family leave law). Nonetheless, it affords interns in
the state the standard protections from harassment and discrimination based on race,
color, religion, sex, sexual orientation, national origin, marital status, disability, and
uniformed service that paid employees enjoy. And, for a population of workers who are
even more vulnerable, to finally have legal recourse in the face of such workplace
indignities is significant.
Worth noting: the bill passed both houses of the Oregon legislature unanimously; and,
deemed an emergency measure, it took effect on passage. This could be the start of
something.
Ninth Circuit denies mandamus petitions in pending California wage hour litigation
as “frivolous”
The Ninth Circuit recently denied three petitions for writs of mandamus directed to
pending wage hour litigation in the Northern and Southern Districts of California, calling
all three petitions “frivolous and wholly without merit.” One petition was filed on behalf
of Con-Way Freight, Inc., and two on behalf of Nordstrom, Inc., due to the companies’
dissatisfaction with the respective federal district courts’ unwillingness to grant their
motions for summary judgment against plaintiffs’ state wage law claims brought against
them as potential class actions. In addition, the Ninth Circuit directed the attorneys who
filed the petitions to “show cause in writing why monetary sanctions should not be
imposed against counsel individually for filing a frivolous petition for writ of
mandamus.”
Con-Way Freight. In Con-Way Freight, the issue was how the company compensated its
linehaul truck drivers to transport freight. Linehaul drivers’ compensation was calculated
by multiplying a pre-set mileage rate by the number of miles in a trip. Con-Way also paid
drivers a separate hourly rate for work performed at its facilities, such as loading and
unloading freight. Drivers were not compensated at their hourly rate for pre- and post-trip
vehicle inspection time, or for the first hour of wait time over the course of a shift,
treating that time as being built in to the per-mile rate. Both parties moved for partial
summary judgment on whether this compensation system, which allows an employer to
‘build-in’ time for non-driving activities such as vehicle inspections into an employee’s
per-mile rate, is permissible under the California Labor Code, or whether such time must
be compensated separately. The Northern District of California found that California law
does not allow an employer to “build in” time for non-driving tasks into a piece-rate
compensation system, saying that the California Labor Code required employees to be
paid an hourly rate for all time performing tasks other than driving.
Nordstrom, Inc. Two consolidated cases challenged Nordstrom’s commission
compensation system for its salespersons. Plaintiffs and members of the Balasanyan
proposed class were paid on commission based on net sales, and they alleged that
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Nordstrom underpaid its salespeople by only compensating them for time spent on
stocking assignments, pre-opening, and post-closing periods through commissions
earned, which they believed could only be used to compensate for commission-producing
activities. The non-commission producing activities included performing marketing
activities such as contacting customers to inform them of new product lines. The
Maraventano plaintiffs alleged that Nordstrom did not pay employees for “stocking time
… unless they failed to meet their minimum commission draw.” Only the Balasanyan
plaintiffs included an FLSA claim. On motion for summary judgment, the Southern
District of California found that Nordstrom’s “pay averaging” approach conflicted with
California state case law that employees must be directly compensated at least minimum
wage for all time spent on activities that do not allow them to directly earn wages.
“Nordstrom’s employees are not being compensated directly for stocking, pre-opening, or
post-closing time, during which they usually cannot earn a commission,” said the court. It
did however grant summary judgment to Nordstrom on the Balasanyan FLSA claim.
New Jersey grocer facing agency suit after 17-year-old operating meat grinder
suffers arm amputation
The DOL is suing Mi Esquina Corp., doing business as Paterson, New Jersey, grocer El Nuevo
Bodegon, and a company officer for violations of the FLSA’s child labor provisions. The move
came after a Wage and Hour Division investigation found a 17-year-old minor had suffered the
amputation of his right arm below the elbow when it was crushed by a meat grinder he was
operating in the store.
In a July 2 announcement, the DOL said investigators found that the minor used, operated, and
handled a meat grinder, slicer and cutter daily as part of his job duties in the butcher section of
the store, which violated the FLSA’s Hazardous Occupations Order No. 10. The order prohibits
minors from operating power-driven meat processing machines such as meat slicers, saws, and
meat choppers. It also prohibits minors from cleaning the equipment, including the hand-washing
of the disassembled machine parts.
The investigation also revealed that the employer had failed to maintain any records for the
injured minor, including proof of age, as required by the law. The company was assessed a
penalty of $40,350 for the violations and filed an exception, requesting a hearing.
Under the DOL’s Child Labor Enhanced Penalty Program, as established under the Genetic
Information Nondiscrimination Act, the agency can assess greater penalties in cases involving
violations of child labor provisions that cause the death or serious injury of a minor.
“This minor suffered a life-changing injury because he was allowed to perform prohibited,
hazardous jobs,” said Joseph Petrecca, director of the Wage and Hour Division’s Northern New
Jersey District Office. “Violations of child labor laws will not be tolerated. Employers who commit
them will be prosecuted to the fullest extent of the law.”
The suit has been filed with the DOL’s Office of Administrative Law Judges.
WHD holding contest to develop app for consumers to determine whether
particular establishment is labor-law compliant
The DOL’s Wage and Hour Division (WHD) is sponsoring a contest to develop a
smartphone application that would permit consumers to determine whether an
establishment they wish to frequent is compliant with federal labor laws.
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As part of the FLSA’s 75th anniversary, WHD is “challenging innovative minds to
develop a smartphone application that will transform the way the public is able to use
departmental enforcement data,” the agency announced on July 9. “By providing
consumers with information at their fingertips about which businesses have treated their
workers fairly and lawfully, the creator of this application will help empower consumers
to make informed choices about where to bring their business.”
The DOL Fair Labor Data Challenge seeks a smartphone app that integrates the
department's publicly available enforcement data with consumer ratings websites, geopositioning Web tools, and other relevant data sets, such as those available from state
health boards. The WHD says the winning app is expected to be creative, innovative,
easy to use, and will incorporate DOL enforcement data.
“The app we would like to see developed would work with existing social media and
would allow consumers to see if an establishment that they want to frequent has been in
compliance with federal labor laws,” said Laura Fortman, principal deputy administrator
of the WHD. “The app could also prove a useful tool for job seekers and for companies
that are deciding which firms they may want to do business with. It could also help
individuals get in touch with the Labor Department if they have any questions.”
Submissions will be accepted through October 11. The winner will be announced on or
about November 2. The successful developer will receive a complimentary trip to
Washington, D.C., for the award ceremony, where a meeting with high-ranking
government officials and private-sector entrepreneurs will be held.
The DOL said that to facilitate the challenge, it has launched http://developer.dol.gov, a
unique website that makes it easier for software developers to incorporate department
data into online and mobile applications through published application program interfaces
and software development kits.
Restaurant pays back wages to delivery drivers, cooks, servers after WHD finds
minimum wage, overtime violations
The DOL’s Wage and Hour Division (WHD) announced on July 18 that H & WH Inc., doing
business as China Inn Cafe, has paid $106,573 in minimum wage and overtime back wages to 14
delivery drivers, cooks and servers. The payments followed an investigation in which the WHD
found violations of FLSA minimum wage, overtime, and recordkeeping provisions.
China Inn Cafe paid cooks a salary without regard to the numbers of hours worked, which was
less than the federal minimum wage of $7.25 per hour for all hours worked, the WHD found. The
salary paid to the cooks resulted in an overtime violation because cooks did not receive any
additional compensation for their hours worked over 40 in a workweek. Moreover, the employer
paid drivers and wait staff day rates, which did not include overtime pay for hours worked beyond
40 in a week as required by the FLSA, according to the WHD. The company also failed to
maintain accurate pay and time records.
“Failing to pay workers minimum wage and overtime, as required by the FLSA, shortchanges
employees and gives some businesses a competitive edge in the restaurant industry,” noted
Cynthia Watson, the WHD’s regional administrator for the Southwest. “In this case, employees
regularly worked up to 66 hours per week.”
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China Inn Cafe has agreed to change its pay practices to fully comply with the FLSA in the future,
the WHD said. The employer has also installed a time clock to accurately record hours worked
and has paid back wages in full.
Bill aims to shift Davis-Bacon Act wage claim payment to DOL
House Workforce Protections Subcommittee Chairman Tim Walberg (R-MI) and Senior
Democratic Member Joe Courtney (D-CT) on July 19 introduced the Streamlining
Claims Processing for Federal Contractor Employees Act (H.R. 2747), legislation that
moves responsibility for wage claims adjustments for federally contracted workers from
the GAO to the DOL.
Under the Davis-Bacon Act, federally contracted workers must be paid the “local
prevailing wage” on all government projects, the bill’s sponsors noted. The Contract
Work Hours and Safety Standards Act (CWHSSA) requires federally contracted workers
to be paid one and a half times their basic rate of pay for hours worked in excess of 40
hours. Although the DOL is responsible for enforcing these laws, an outdated policy puts
the GAO in charge of paying those workers who did not receive the appropriate wage.
Since it no longer provides this service in other areas of the federal government, the GAO
has requested this authority be moved to the appropriate enforcement agency, according
to the bill’s sponsors.
In an effort to reduce bureaucracy and ensure workers receive their compensation more
efficiently, the Streamlining Claims Processing for Federal Contracted Employees Act
will transfer this payment authority to the DOL, which oversees other aspects of the
Davis-Bacon Act and the CWHSSA. Identical legislation was approved by the House
with overwhelming bipartisan support during the 112th Congress.
“This commonsense legislation is a win for both workers and taxpayers,” said Rep.
Walberg. “GAO is no longer responsible for other claims functions, so it is time we move
this administrative duty to the agency responsible for enforcing the law. Doing so will
help decrease redundancies and ensure greater efficiency within the federal government.”
ETA proposes to delay beleaguered 2011 Wage Rule indefinitely
The DOL’s Employment and Training Administration (ETA) will publish in the Federal
Register on July 23 a notice proposing to delay indefinitely the effective date of its
beleaguered Wage Methodology for the Temporary Non-agricultural Employment H-2B
Program final rule (2011 Wage Rule). The reason for the delay is to comply with
recurrent legislation barring the DOL from using any funds to implement it and to allow
the agency to consider further comments sought in conjunction with an interim final rule
published April 24, 2013 (78 FR 24047).
The 2011 Wage Rule revised the methodology by which the DOL calculates the
prevailing wages to be paid to H-2B workers and U.S. workers recruited in connection
with a temporary labor certification for use in petitioning the Department of Homeland
Security to employ a nonimmigrant worker in H-2B status. The 2011 Wage Rule was
originally scheduled to become effective on January 1, 2012, and the effective date has
been extended a number of times, most recently to October 1, 2013. The DOL is now
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proposing to delay the effective date until such time as Congress no longer prohibits the
agency from implementing the 2011 Wage Rule.
The April 24 interim final rule was issued in response to a March 21 order by a federal
district court in Pennsylvania in Comité de Apoyo a los Trabajadores Agricolas v Soli,
which vacated portions of DOL’s current prevailing wage rate regulation, and to ensure
there is no question that the rule is effective nationwide in light of other outstanding
litigation. The rule also contains revisions to DHS’s H-2B rule to clarify that DHS is the
Executive Branch agency charged with making determinations regarding eligibility for
H-2B classification after consulting with DOL for its advice about matters with which
DOL has expertise, particularly, in this case, questions about the methodology for setting
the prevailing wage in the H-2B program.
Comments on the proposed indefinite delay must be received on or before August 9,
2013; instructions for submitting them are contained in the notice.
Company will pay $595,000-plus to 121 workers for FLSA violations found through
oil and gas fracking initiative in Southwest
Morco Geological Services Inc., dba Morco Geological, has agreed to pay $595,737 in back
wages to 121 current and former mudlogging technicians after a DOL Wage and Hour Division
(WHD) found violations of FLSA minimum wage, overtime, and recordkeeping provisions. Morco
Geological provides well mudlogging services for oil and gas drilling companies.
Investigators from WHD’s Albuquerque District Office concluded that Morco Geological
improperly classified nonexempt employees, such as mudlogging technicians, as exempt from
overtime pay. The company paid them a fixed daily rate without regard to the actual number of
hours worked, rather than time and a half their regular rates of pay for hours worked beyond 40 in
a workweek. There were minimum wage violations when new technicians working 24-hour shifts
were only paid $75 daily, which did not amount to the minimum wage of $7.25 per hour. The
company also failed to maintain accurate records of employees’ work hours as required,
according to the WHD.
“These mud logging technicians worked 24-hour shifts, often up to 100 hours in a workweek,
performing physically and mentally demanding work,” said Cynthia Watson, regional administrator
for the Wage and Hour Division in the Southwest. “They were denied the basic minimum wage
and overtime pay guaranteed them by law for their hard work.”
These violations reflect one of the problems that the WHD has found in the oil and gas extraction
industry — employees improperly classified as exempt from the FLSA and not paid proper wages
in accordance with federal law, Watson explained. The WHD’s ongoing enforcement initiative
seeks to identify and remedy such common violations.
The investigation in this case was conducted under a multiyear enforcement initiative focused on
vendors who perform various phases of the oil and gas fracking process at active shale drilling
sites throughout the Southwest.
Morco Geological has agreed to comply fully with the FLSA in the future, the WHD said. The
payment of back wages is ongoing.
House bills would limit federal worker bonuses and provide unpaid administrative
leave, ensure targets of regulatory enforcement can record meetings
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The House Oversight and Government Reform Committee on July 24 approved by voice
vote a series of bills, including two that affect federal workers and one that impacts
private individuals, including business owners and operators, who are the target of
executive agency enforcement efforts.
The Common Sense in Compensation Act (HR 1541), introduced by Representative
Mark Meadows (R-NC), would limit the size of bonuses that senior federal executives
may receive and also restrict the number of senior agency employees who may receive
awards in a given year.
Under the Government Employee Accountability Act (HR 2579), introduced by
Representative Mike Kelly (R-Pa), federal agencies would be permitted to place
employees on unpaid “investigative leave” when the agency determines that the conduct
under investigation is “serious or flagrant.” Although similar legislation was passed in the
House last year, it died in the Senate.
A third bill, the Citizen Empowerment Act (HR 2711), introduced by Representative
Lynn Jenkins (R-Kan), is intended to ensure that individuals, including business owners
and operators, have the right to record in-person and telephonic meetings with federal
regulators that are engaged in enforcement activities. Notice of the right to record must
be provided in written materials the agency provides about the enforcement activity.
Although, no vote is yet scheduled in the full House of Representatives, the bills are
expected to be considered soon.
Landscaping company to pay back wages to H-2B workers, civil money penalties for
misrepresentations, impermissible deductions, housing violations
Pittsburgh-based landscape company Ed Bayer Design Group has been ordered to pay $9,372 in
back wages to 11 temporary workers from Mexico employed as landscape laborers and $17,483
in civil money penalties after an investigation by the DOL’s Wage and Hour Division (WHD) found
violations of the H-2B temporary nonimmigrant visa program, according to an agency
announcement on July 25.
The decision and order, entered by Administrative Law Judge Thomas M. Burke, resolves a
lawsuit filed by the DOL’s Philadelphia Regional Solicitor’s Office. The judge upheld the findings
by investigators that the company misrepresented the dates of need, number of employees
sought, job requirements and job duties to be performed, and drug testing requirements, when
submitting an application for workers under the H-2B program.
The company also made impermissible deductions from the workers’ wages for employerprovided substandard and overcrowded housing as well as application and recruitment fees,
according to the WHD. Under the FLSA, an employer cannot take credit for the cost of housing
that is furnished in violation of any law, and the judge’s decision states “testimony clearly shows
that the lodging violated the state housing code.”
“Employers who choose to participate in the voluntary H-2B program must realize they are
required to follow all of the labor standards of the program,” said John DuMont, WHD District
Director in Pittsburgh. “The department is committed to protecting the rights of all workers
covered by the laws we enforce. This case demonstrates that we are using all tools available,
including penalty assessments, to remedy violations, promote accountability and ensure a level
playing field for law-abiding employers.”
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The H-2B guest worker program permits employers to temporarily hire nonimmigrants to perform
nonagricultural labor or services in the United States. H-2B employment must be of a temporary
nature, such as a one-time occurrence, or for a seasonal or peak load need. Under the program,
the employer must attest to the department that it will offer a wage that equals or exceeds the
highest of the prevailing wage, applicable federal minimum wage, state minimum wage, or local
minimum wage for the occupation in the area of intended employment during the entire period of
the approved certification. Certain recruitment and displacement standards have also been
established to protect similarly employed workers in the United States.
Construction company owner sentenced to two years imprisonment following guilty
pleas to employee wage theft, filing false tax returns
The owner of Irvine, California-based Southland Construction last week pleaded guilty to
embezzling more than $350,000 in employee wages from two public works contracts and filing
false tax returns to hide his theft. The plea was the result of a criminal referral by California Labor
Commissioner Julie A. Su's office in January 2012, according to a release by California
Department of Industrial Relations (DIR).
Orange County Superior Court Judge R. Fitzgerald on July 26 sentenced the 58-year-old
company owner and resident of Tustin, California, to two years in state prison. A restitution
hearing is scheduled for November 29. The Labor Commissioner’s office is working to restore the
wages to 18 affected workers.
In late December 2010, the Labor Commissioner’s office opened an investigation of Southland
after receiving numerous complaints filed by workers and by the Center for Contract Compliance,
which revealed that Southland did not pay proper prevailing wages and overtime wages to 25
workers. In January 2012, Southland was assessed $121,163 in unpaid wages and $128,300 in
penalties on the Tracks at Brea project administered by the City of Brea. The Labor
Commissioner’s office referred their findings to the Orange County District Attorney's office, which
contributed to the successful prosecution of the company’s owner.
Investigators determined that the owner had coached his workers on what to say if a public works
investigator asked questions about their wages. He systematically submitted fraudulent certified
payroll records to the Labor Commissioner that falsely stated he was paying his workers the
correct wage of $42 to $53 an hour for each project — the workers were actually paid $120 to
$150 per day and were never paid for overtime.
The owner required the workers to return a portion of their pay back to him after they cashed their
checks, or made them pay for another worker's pay, according to the DIR. Using this scheme, the
owner embezzled over $396,000 in worker wages from his public works contracts for his personal
gain.
In a joint effort, the Orange County District Attorney’s office and the Labor Commissioner’s office
also investigated the Hiltscher Trail Improvements project in Fullerton, California. Investigators
there established that Southland failed to pay employer payment contributions to five workers. In
September 2012, the Labor Commissioner's office issued a civil wage and penalty assessment of
$96,652 in unpaid wages and $15,450 in penalties.
The owner has pleaded guilty to 15 felony counts of failing to file a return with the intent to evade
tax, 15 felony counts of willful failure to pay tax, seven felony counts of taking and receiving a
portion of a worker’s wage on public work, six felony counts of recording false and forged
instruments, and three felony counts of filing false tax returns, the DIR advised. He also admitted
to allegations that enhanced his sentence — loss exceeding $100,000, property damage over
$200,000, and a prior strike conviction for criminal threats in 1999.
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Puerto Rico farms were a single enterprise that will pay $275,000 in back wages and
liquidated damages to 174 workers
Under a consent judgment obtained by the DOL, Sabana Grande, Puerto Rico-based agricultural
employers Jose V. Fabre Laboy, dba Bananera Fabre, and his son, Jose V. Fabre Santiago, dba
Finca La Plata, will pay a total of $275,000 in back wages and liquidated damages to 174
agricultural workers. A Wage and Hour Division (WHD) investigation found that the defendants
tried to divide the farm to avoid FLSA coverage, the DOL said in a July 30 release. But the two
businesses were found to constitute a single enterprise.
The DOL filed a lawsuit against the defendants, maintaining that they willfully and repeatedly
violated FLSA minimum wage provisions. The defendants paid workers only $6.25 to $6.50 per
hour instead of the legally required minimum of $7.25 per hour.
Under the judgment resolving the suit, the employers’ fruit and vegetable wholesalers are
required to comply with the FLSA’s minimum wage and recordkeeping requirements; post
information on the FLSA and Migrant and Seasonal Workers Protection Act for the employees;
and inform workers of their rights and the terms of the judgment. It also prohibits the defendants
from firing or retaliating against employees who disclose FLSA violations, provide information
during an investigation, or refuse to participate in any FLSA violations.
The investigation was conducted by the WHD’s Caribbean District Office in Guaynabo. The
department’s Regional Office of the Solicitor in New York litigated the case for the division.
“These back wages can be life-changing for these workers, who have worked long hours in the
fields without earning the minimum wage to which they are entitled,” said Jose R. Vazquez,
director of the division’s Caribbean District Office.
The DOL filed suit in the District of Puerto Rico; the case number is 3:12-cv-01774.
LEADING CASE NEWS:
2nd Cir.: CEO of grocery store chain found to be “employer” under FLSA, may be
individually liable for wage violations
By Ronald Miller, J.D.
The CEO of a grocery store chain was found to be an “employer” under the FLSA and so could
be held individually liable for wage violations, ruled the Second Circuit in affirming that portion of
a district court decision (Irizarry v Catsimatidis, July 9, 2013, Wesley, R). Noting that the CEO
dealt with customer complaints, in-store displays and merchandising, and the promotion of store
personnel, the appeals court determined that his involvement in the company’s daily operations
merited far more than the symbolic or ceremonial characterization he urged. The fact that the
CEO “only occasionally” exercised these actions was irrelevant when considered in the context of
his overall control of the company. However, the appeals court vacated a grant of summary
judgment in favor of employees on their New York Labor Law claims.
In 2004, a group of employees of a supermarket chain sued several companies involved in
operating the stores and three individual management officials. A federal district court certified a
class composed of department managers and co-managers who were not paid overtime
compensation for all hours worked in excess of 40 in a workweek. After more than two years of
litigation, the district court granted the employees’ summary judgment motion on claims involving
reduction of hours, withholding overtime, misclassification as exempt employees, and retaliation.
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Following the summary judgment order, the parties reached a settlement agreement. The
corporate defendants later defaulted on their payment obligations under the settlement.
Thereafter, the employees moved for partial summary judgment to hold the grocery chain’s CEO
personally liable as an employer. The district court granted the motion, reasoning that there was
no area of the company that was not under the CEO’s control, whether or not he chose to
exercise it. Because he had operational control, the CEO could be held liable as an employer.
This appeal followed.
Definition of “employer” under FLSA. The Supreme Court has consistently construed the
FLSA liberally to the furthest reaches consistent with congressional direction. The common law
agency test was found too restrictive to encompass the broader definition of the employment
relationship contained in the FLSA. “Accordingly, the court has instructed that the determination
of whether an employer-employee relationship exists for purposes of the FLSA should be
grounded in ‘economic reality rather than technical concepts.’” The “economic reality” test applies
equally to determine whether workers are employees and whether managers or owners are
employers.
The Second Circuit “has treated employment for FLSA purposes as a flexible concept to be
determined on a case-by-case basis by review of the totality of the circumstances.” It established
four factors to determine the “economic reality” of an employment relationship: “Whether the
alleged employer (1) had the power to hire and fire the employees; (2) supervised and controlled
employee work schedules or conditions of employment; (3) determined the rate and method of
payment; and (4) maintained employment records.”
Individual liability. However, the question presented in this case was whether an individual
within a company that undisputedly employed a worker was personally liable for damages as that
worker’s “employer.” The Second Circuit noted that its decision in Herman v RSR Sec Servs Ltd,
highlighted two legal questions that were relevant here. The first concerned “operational control”
over a company; that is, at what level of a corporate hierarchy, and in what relationship with
employees, must an individual possess power in order to be covered by the FLSA. The second
inquiry concerned to what extent and with what frequency must an individual actually use the
power he or she possesses over employees to be considered an employer.
Operational control. “Operational control” is at the heart of this case, declared the Second
Circuit. With that in mind, the court rejected the CEO’s argument that he was a high-level
employee who made symbolic or, at most, general corporate decisions that only affected the lives
of the plaintiffs through an attenuated chain of but-for causation. He contended that an FLSA
employer must exercise decision-making in a “day-to-day” capacity. Most circuits to confront this
issue have acknowledged that a company owner, president, or stockholder must have at least
some degree of involvement in the way the company interacts with employees to be an FLSA
employer. Evidence that an individual is an owner or officer of a company or otherwise makes
corporate decisions that have nothing to do with an employee’s function is insufficient to
demonstrate employer status.
Instead, to be an employer, an individual defendant must possess control over a company’s
actual operations in a manner that relates to a plaintiff’s employment. As recognized in RSR, it is
appropriate to require some degree of individual involvement in a company that affects
employment-related factors such as workplace conditions and operations, personnel, or
compensation — even if this appears to establish a higher threshold for individual liability than for
corporate “employer” status. Even so, “evidence showing an individual’s authority over
management, supervision, and oversight of a company’s affairs in general” is relevant to “the
totality of the circumstances in determining the individual’s operational control of the company’s
employment of the plaintiff employees.”
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Potential power. As noted in RSR, “operational control” need not be exercised constantly for an
individual to be liable under the FLSA. In this case, the parties disputed the importance of
evidence indicating that the CEO only rarely exercised much of the power he possessed. While
RSR does not state unambiguously that unexercised authority is insufficient to establish FLSA
liability, the Second Circuit saw no need to address that issue in this case in light of the evidence
of the authority that the CEO did exercise. Still, the appeals court observed that cases discussing
this issue indicate that a clear delineation of an individual’s power over employees is an important
factor in the economic reality test. Ownership, or a stake in a company, is insufficient to establish
that an individual is an employer without some involvement in the company’s employment of the
employees.
CEO as employer. Using the economic reality test, the appeals court determined that the CEO
was an employer for purposes of the FLSA. Although the CEO did not exercise managerial
control in stores on the day-to-day level of a manager, the evidence demonstrated that he
exercised influence in specific stores on multiple occasions. He would also address problems that
occurred in individual stores. Additionally, he was automatically forwarded copies of any
consumer complaints, which he then forwarded by email to responsible parties.
The evidence demonstrated that the CEO possessed, but rarely exercised, the power to hire or
fire anyone he chose. Although the CEO’s involvement in the company and stores demonstrated
some exercise of operational control, it did not appear that he “supervised and controlled the
employees’ work schedules or conditions of employment.” However, as in RSR, the CEO
“controlled the company financially.” The CEO’s actions demonstrated his active exercise of
control the company, his ultimate responsibility for the employees’ wages, his supervision of
managerial employees, and his actions in individual stores. Thus, based on the totality of the
circumstances, the appeals court concluded that he was an employer under the FLSA.
The case number is 11-4035-cv.
Attorneys: Jonathan D. Hacker (O’Melveny & Myers) for John Catsimatidis. Deepak
Gupta (Gupta Beck) for Bobby Irizarry.
2nd Cir.: Class claims properly dismissed for failure to plead sufficient facts
establishing length and frequency of unpaid work
By Ronald Miller, J.D.
Because the plaintiffs in four putative collective and class actions failed to plead sufficient facts to
establish a plausible claim that they worked uncompensated hours in excess of 40 in a given
week, a federal district court properly dismissed their FLSA and New York Labor Law (NYLL)
claims, ruled the Second Circuit (Nakahata v New York-Presbyterian Healthcare System, Inc,
July 11, 2013, Pogue, D). To plead a plausible FLSA overtime claim, plaintiffs must provide
sufficient detail about the length and frequency of their unpaid work to support a reasonable
inference that they worked more than 40 hours in a given week.
Suits against healthcare industry employers. Current and former healthcare employees of four
New York area healthcare systems brought suit on behalf of a putative collective and class
members, alleging that the employers violated the FLSA, RICO, New York Labor Law (NYLL) and
New York common law. Specifically, the plaintiffs alleged: (1) the defendants have a policy of
automatically deducting time for meal breaks from employees’ paychecks despite consistently
requiring them to work during meal breaks; (2) employees engaged in work activities before and
after scheduled shifts without compensation; and, (3) defendants required employees to attend
training sessions for which they were not compensated.
These lawsuits are just a few among many such actions brought by a single law firm and
premised on a stock set of allegations concerning underpayment in the healthcare industry. The
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defendants filed a motion to dismiss the complaint in each case before the district court for failure
to state a claim. The district court issued a single opinion dismissing each complaint in its entirety.
This appeal followed.
After first finding that the district court abused its discretion in not permitting the plaintiffs to file an
amended complaint, the Second Circuit turned to the merits of their complaints. The hearts of the
plaintiffs’ claims were allegations that the defendants failed to compensate them appropriately for
all hours worked under the FLSA and NYLL. The district court dismissed both the FLSA and
NYLL claims for lack of sufficient allegations. In particular, the district court found three categories
of facts lacking: (1) when unpaid wages were earned and the number of hours worked without
compensation; (2) specific facts of employment including dates of employment, pay, and
positions; and (3) the entity that directly employed the plaintiffs.
Requirements FLSA overtime claim. In order to state a plausible FLSA overtime claim, a
plaintiff must sufficiently allege 40 hours of work in a given workweek as well as some
uncompensated time in excess of the 40 hours.” In this instance, the complaints merely alleged
that the plaintiffs were not paid for overtime hours worked. They contained no specific allegations
of the number of hours worked in a typical week and the alleged time worked without pay.
Although allegations that the plaintiffs were not compensated for work performed during meal
breaks, before and after shifts, or during required trainings raised the possibility that they were
undercompensated; however, absent any allegation that the plaintiffs were scheduled to work 40
hours in a given week, these allegations did not state a plausible claim for relief. Consequently,
the district court properly dismissed the FLSA and NYLL overtime claims.
The case numbers are 11-0734, 11-0710, 11-0713, and 11-0728.
Attorneys: Michael J. Linge (Thomas & Solomon) for Masahiro Nakahata. James S. Frank
(Epstein Becker & Green) for New York-Presbyterian Healthcare System, Inc. Victoria Scalzo,
Office of Corporation Counsel of the City of New York, for New York City Health and Hospitals
Corp. Leonard M. Rosenberg (Garfunkel Wild) for Westchester County Health Care Corp. Nancy
V. Wright (Wilson Elser Moskowitz Edelman & Dicker) for Bronx-Lebanon Hospital Center, Inc
4th Cir.: Circumstances, not labels, dictate whether an individual is deemed an
employee able to bring claims under North Carolina wage act
By Sheryl C. Allenson, J.D.
Rejecting an employer’s claim that an individual was an independent contractor and despite the
labels used in an employment agreement, the Fourth Circuit, in an unpublished opinion, affirmed
a magistrate judge’s finding that he was regarded as an employee under the North Carolina
Wage Claim and Hour Act, and was entitled to summary judgment on his claims under that act
(Church v Home Fashions International, LLC, July 8, 2013, per curiam). Moreover, the magistrate
judge did not error in calculating damages due the individual. Additionally, the appeals court
affirmed the magistrate judge’s ruling denying the company’s motion for reconsideration.
Though the Fourth Circuit did not make clear, it seems that the parties entered into an agreement
whereby the individual was identified as an independent contractor and the company regarded
him in that vein. The individual filed suit seeking unpaid wages and commissions under the North
Carolina Wage and Hour Act (NCWHA), and after a magistrate judge granted his motion for
partial summary judgment, the employer challenged his status, asserting he was an independent
contractor not eligible to maintain a claim under the NCWHA.
Relevant factors. After outlining the relevant inquiry for considering whether an individual is an
independent contract under North Carolina law, the Fourth Circuit affirmed the magistrate judge’s
determination that the individual was in fact the company’s employee. Of note, the individual
worked exclusively for the company on a regular basis for 18 months, and did not during that time
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hold himself out as a contractor or independent worker. Additionally, the company paid him
guaranteed wages of $11,000 per month, regardless of the work he performed; he also received
commissions on his sales. The individual receive an office and reimbursement for certain
business-related expenses (which in some cases had to be pre-approved by the company). He
could not hire assistants without the company’s approval, and he was not responsible for paying
those assistants.
Subject to control. While each of these factors played an important role in determining that the
individual was an employee, another factor was the most important, the appeals court explained.
During his tenure with the company and “consistent with the broad terms of his employment
agreement” the individual collaborated with company executives to expand into a certain area of
manufacturing. “Consequently, [the individual] was clearly subject to [the company’s] control and
was not entitled to independently employ his own judgment regarding how best to achieve [the
company’s] goals,” wrote the appeals court.
These factors, not the labels used in an employment agreement or at the whim of the employer,
determined whether the individual would be regarded as an “employee” under the NCWHA,
explained the appeals court. Therefore, although the company may have regarded the individual
as an independent contractor for its own purposes, and may have included that term in an
agreement, that simply did not make it a reality. Rather, the magistrate judge properly regarded
the individual as an employee under the act and his ruling granting the employee’s motion for
partial summary judgment was affirmed.
Damages proper. Though there were questions as to whether the company preserved its
challenge to the magistrate judge’s calculation of damages, the appeals court nonetheless
addressed the argument. There was no error, the appeals court ruled. Here, the magistrate judge
awarded the individual six months unpaid wages he was due under the terms of the employment
agreement; there was no indication that the award of liquidated damages under state statute was
an abuse of discretion.
The case number is 12-2322.
Attorneys: Paul E. Culpepper (Young, Morphis, Bach & Taylor) for Kenneth E. Church. Nicholas
Stevens (Starr, Gern, Davison & Rubin) for Home Fashions International, LLC.
4th Cir.: No evidence that firing employee during FMLA leave was based on
anything other than recently discovered poor job performance
By Joy P. Waltemath, J.D.
Firing an employee for failing to maintain food stamp benefits for its clients, which the employer
discovered while coworkers were covering the employee’s job duties during her FMLA leave, was
not FMLA interference, ruled the Fourth Circuit in an unpublished opinion (Mercer v The Arc of
Prince Georges County, July 11, 2013, per curiam). Further, neither the employee’s
disagreement with her performance assessment nor the timing of her firing establish an issue of
fact on pretext, concluded the court, affirming summary judgment for the employer.
Lapse in clients’ food stamp benefits. Twice during periods of medical leave, coworkers
covering the employee’s job responsibilities discovered that many of the employer’s food-stampeligible clients were no longer receiving benefits, which was one of the employee’s job duties.
Upon the employee’s first return from leave, she was told to submit the necessary paperwork to
reinstate those benefits. In her performance review following her first medical leave, she received
satisfactory ratings, but her employer soon learned that food-stamp-eligible clients were no longer
receiving benefits, and it again told her to get those benefits reinstated.
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During the employee’s second medical leave following an automobile accident a few months
later, coworkers again discovered that “many more eligible clients were no longer receiving
benefits” due to the employee’s failure to act on requests over an extended period of time prior to
her taking FMLA leave. When she returned, she was placed immediately on administrative leave
while the employer conducted an investigation; she then returned to FMLA leave for several more
weeks and was terminated for unsatisfactory job performance by letter, apparently while she
remained on leave.
After she sued for interference and retaliation, the district court granted the employer summary
judgment on both FMLA claims, concluding that because the employee failed to perform her
duties satisfactorily even before she took leave, she was not entitled to keep her job whether or
not she took leave, and she could not show interference. Additionally, the district court concluded
that the employee failed to establish that her employer’s proffered explanation for her termination
was pretext for FMLA retaliation. The Fourth Circuit agreed.
Interference. Not persuaded by the employee’s past satisfactory performance reviews, the court
rejected her characterization of the lapses in clients’ food stamp coverage as “routine.” The court
found positive reviews did not negate the employer’s ability to fire the employee upon its
discovery of previously unknown poor performance, even if it made the discovery, and the
decision, while she was on FMLA leave. None of the employee’s contentions created a genuine
issue of material fact as to why she was terminated, which was for poor performance regardless
of her FMLA leave, said the court, noting that timing alone was insufficient to allow a jury to
conclude otherwise and affirming summary judgment on her interference claim.
Pretext. Given that the employee had established a prima facie case (allowing temporal proximity
to satisfy her prima facie burden), the court turned to the employee’s evidence that the reason for
firing her — poor performance — was pretext. Noting that the district court had carefully
evaluated the evidence, the court reiterated that timing alone did not create a material fact issue
absent other evidence. Nor did the employee’s prior performance reviews, because the employer
relied on evidence of poor performance it discovered after her performance reviews. The court
did not believe the employer’s reasons for the employee’s termination had been inconsistent or
shifting; although the words used varied somewhat and the examples became more specific over
time, the reason offered by the employer throughout the litigation was always unsatisfactory job
performance. Finally, the fact that the employee disagreed with the employer’s assessment of her
performance was immaterial, so long as it truly was the reason for its decision, the court
reminded, and it affirmed the district court.
The case number is 13-1300.
Attorneys: Kevin Michael Plessner (Law Office of Kevin M. Plessner) for Adesina A. Mercer. Eric
Matthew Rigatuso (Eccleston & Wolf) for The Arc of Prince Georges County.
5th Cir.: Employee discharged for poor performance several months after return
from FMLA leave fails to establish retaliatory motive
By Marjorie Johnson, J.D.
An employee who took 12 weeks of FMLA leave to care for her sick daughter, and was
discharged several months later ostensibly for poor performance, failed to establish that her
employer’s motives were pretextual, the Fifth Circuit ruled in an unpublished decision affirming
dismissal of her FMLA reprisal claim on summary judgment (Lorentz v Alcon Laboratories, Inc,
July 8, 2013, per curiam).
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Ill daughter necessitates leave. In 2007, the employee was hired as an account manager and
was assigned to sell two types of intraocular lens implants in a sales territory that included the
Houston area and parts of Louisiana and Mississippi. Although her 2007 performance review
stated that she fully met expectations, it also identified several areas in need of improvement,
including issues related to timeliness and “personal obligations.” From January to April 2008, her
territory management “was below expectations,” and she continued to suffer performance
deficiencies. Part of these employment problems stemmed from her efforts to manage her 13year-old daughter’s medical problems, which had become serious in October 2007.
After it became difficult for her to manage her daughter’s illness and her job, she met with her
supervisor and requested FMLA leave. He was allegedly taken aback by her request, grew red in
the face, and said they needed to end the conversation before either one of them said something
they would regret. However, her request was granted and she took 12 weeks of FMLA leave from
May 5 to July 25, 2008. When she returned on July 28, her territory consisted only of the greater
Houston area due to the employer’s earlier plan to realign its U.S. territories.
Performance suffers. The employee continued to struggle despite the reduced territory.
Although she had used all of her PTO, she missed an additional three days of work. On
September 10, she met with both her supervisor and the regional director to further discuss her
performance deficiencies and additional absences. A letter dated September 17 summarized the
meeting and listed the areas in which she needed to improve. The letter also warned that her job
performance was trending toward a below expectations rating.
About three weeks later, the three met again to discuss her continuing problems, which included
being late to pick up her supervisor during a field visit, repeatedly failing to make three sales calls
per day, and failing to send call planning reports. The regional director told her that he had lost
confidence in her ability to do her job and that she could resign. When she refused, she was
placed on a 90-day performance improvement plan (PIP) and her 2008 overall performance was
rated as below expectations. Her performance was reviewed after the 90-day period and the PIP
was extended for another 60 days. However, at the end of that period her administrative duties
remained deficient and she was discharged on May 15, 2009.
She filed the instant action asserting claims of FMLA interference and reprisal. The district court
granted the employer’s motion for summary judgment as to all claims. On appeal, the employee
argued that summary judgment was improper as to her FMLA reprisal claim because the
employer’s purported reason for terminating her — deficient performance — was pretextual.
Statements not retaliatory. The Fifth Circuit squarely rejected the employee’s characterization
of the September 10 meeting with her supervisor and regional director as evidencing a retaliatory
motive. Although she argued that they teamed up and confronted her about her time away from
work, a review of the transcript of the meeting — which she secretly recorded — showed that her
description of the meeting was inaccurate and that quotations she relied upon were taken out of
context. The meeting actually was about how her personal life continued to interfere with her work
despite the fact that she had used up all her remaining PTO and FMLA leave. The three talked
about the workdays that she had missed since returning from FMLA leave either because she
was sick or because her daughter had to be taken to the doctor. This led to the regional director’s
comment that “it seems like your work has to fit with your life,” and that “it doesn’t matter to me
why [you miss work]. All [that] matters to me is that all of these things keep you away or are
reasons why you either can’t be there or you have to cut the day short, whatever. And all I’m
telling you is . . . that can’t happen.”
The regional director returned to this topic many times throughout the meeting, stating, “I don’t
know if it’s the timing in—in your life and this job. But . . . now it seems to be in conflict with
everything else, and that can’t be . . . . So we have to figure that out, or ultimately, we’ll have to
part ways.” The employee agreed, stating that “my family comes before anything else. But I do
recognize that, you know, there has to be a balance there.” The director observed that “there’s
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always a good reason [for your absence]. And [we are] not saying that there are no good
reasons. There are mitigating circumstances, but there is a body of evidence, all of it keeping
you, again, from being in your job, you know, all the time doing things we need you to do.”
The regional director’s statements reflected the difficult position a manager faces when an
employee exhausts her PTO and FMLA leave, but continues to miss work for personal reasons,
ruled the court. Indeed, he encouraged her to contact the HR department, but stressed that her
missing work — regardless of the reasons — could not continue. Nothing in the September 10
meeting transcript demonstrated that management cared about the fact that the employee had
taken FMLA leave. Rather, they were concerned that she was failing to keep up with her work.
Deficient performance. The Fifth Circuit also rejected the employee’s attempt to show pretext by
arguing that her work was not deficient. She pointed out that the only review of her work to have
been completed prior to her FMLA leave listed her as fully meeting expectations at the end of
2007. However, she did not address the many parts of her 2007 performance review that were
critical of her performance. These included the need to better document her call activity, the
timeliness of her reporting and completion of administrative tasks, and conflicts between her
personal obligations and work performance.
Indeed, the same problems continued to plague her in the subsequent 2008 performance review,
which also commented on the need for more consistent and documented reporting and her lack
of good communication. Comparing the two reports, it was clear that her performance problems
arose before she went on FMLA leave. Moreover, she did not refute the many specific
documented infractions, including the late filing of three weekly reports, failure to submit
documentation of calls, tardy expense reports, unplanned PTO, and being late to pick up her
supervisor during a field visit. Thus, she failed to show that she was not deficient in her work or
that her employer was unconcerned with her failure to complete what she termed “minor
administrative tasks.”
Less favorable treatment. Finally, the employee failed to identify similarly situated coworkers
who had the same performance deficiencies but were not subjected to additional administrative
duties. While she pointed to her replacement — who allegedly performed below expectations and
was not placed on a PIP or terminated — that individual was supervised by the employee’s
original supervisor for only a short period of time. The other purported comparators also were not
supervised by the same individual responsible for the employee’s discharge.
The case number is 13-20049.
Attorneys: Steven E. Petrou (Law Office of Steven Petrou) for Pamela A. Lorentz. Gretchen
Agena (Littler Mendelson) for Alcon Laboratories.
6th Cir.: Employee’s interpretation of FMLA regs rings hollow; Ohio Bell properly
requested medical certification after disability claim decided
By Sheryl C. Allenson, J.D.
Ruling that Ohio Bell properly requested a medical certification under the FMLA, the Sixth Circuit
affirmed a lower court’s decision granting the employer’s motion for summary judgment on an
employee’s FMLA interference claim (Kinds v Ohio Bell Telephone Co, July 29, 2013, Gilman, R).
Contrary to the employee’s interpretation of the FMLA regulations, there was more than one
reason the employer could request medical certification more than five business days after the
employee gives notice of leave, the appeals court ruled.
The employee lived with her boyfriend who subjected her to mental and physical abuse. At one
point, he threatened to kill her and assaulted her, sending her to the ER. She told her supervisors
about the abuse and asked for time off to find a new place to live and to “get her affairs in order.”
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Though she did not have vacation time available and was not eligible for FMLA leave, the
employee’s supervisors granted her a one-week discretionary leave for the first week of
September.
Leave starts. Thereafter, she returned to work and kept working until October 12, 2009, when
she had enough hours to become eligible for FMLA leave. The next day, she applied for FMLA
protected leave, and did not work again until she returned part time on December 15, 2009. After
she was absent eight days in October, Ohio Bell did three things: (1) it notified the third-party
administrator of its short-term disability insurance plan; (2) it notified its FMLA operations
department of the absences; and (3) it sent the employee a form confirming that she was eligible
for FMLA leave, that a short-term disability claim had been commenced, and that she did not
need to submit an FMLA medical certification at that time.
The employer’s FMLA operations department then sent the employee a letter explaining the
coordination between short-term disability benefits and FMLA leave. Specifically, the letter stated
that the disability claim and FMLA would run concurrently if the short-term disability were
approved, but that even if it were denied, the employee could seek FMLA consideration. In that
event, however, she would have to provide medical certification. The letter emphasized that the
medical certification was only required if her request for disability benefits was denied.
Treatment sought. A few weeks later, on November 3, the employee sought mental health
treatment for the first time. The social worker diagnosed the employee with a severe depressive
episode, and recommended further counseling, which the employee received. Later that month,
the disability insurance administrator informed the employee that her claim was approved, but
only for the period of November 10, 2009, through December 14, 2009; the period of October 20,
2009, through November 9, 2009, was expressly denied.
Ohio Bell automatically approves the first seven days of an employee’s leave as covered by the
FMLA, whenever any part of that absence is approved for disability benefits and the employee is
FMLA eligible. Thus after the disability claim was decided, the employer approved as FMLA leave
the first week of the employee’s absence, and also the period for which she was approved for
short-term disability benefits. Ohio Bell asked the employee to submit an FMLA medical
certification to support her request for FMLA leave for the period not approved for disability
benefits, and she was given 15 days to supply that documentation.
Although she failed to timely provide the medical certification, the employer granted her an
extension. Her doctor sent a letter to the disability administrator within the time provided, but due
to HIPAA restrictions, the administrator did not forward that letter to the employer. In the absence
of a medical certification, the employer denied the employee’s FMLA leave request. The denial
letter explained that “[i]f this request for FMLA has been final[ly] denied due to circumstances
beyond the employee’s control, [the FMLA Operations Department] must be advised of the
reason and provided a valid medical certification form accompanied by proof of extenuating
circumstances within 15 days of the date of [the] final denial letter dated February 2, 2010.”
Although the employee’s doctor submitted a medical certification form within the specified
timeframe, neither the employee nor her doctor explained why the certification could not have
been submitted in the first instance. As a result, the FMLA operations department found that the
leave request was properly denied.
Because the FMLA leave was not approved, Ohio Bell decided that the employee’s October 20
through November 9, 2009, absences were unexcused. In light of her history of unexcused
absences, she was at risk for termination; however, Ohio Bell did not actually terminate her until
after the disability administrator denied her appeal.
After she was terminated, the employee filed suit against Ohio Bell, asserting that the company
interfered with her FMLA rights. The district court granted the employer’s motion for summary
judgment.
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Timely certification requirements. On appeal, the only issue was whether the employer failed
to timely request medical certification as required by the FMLA regulations. Under the FMLA, an
employer may require that an employee’s leave request be supported by a certification from a
health care provider. If the employee fails to timely provide that medical certification, an employee
will generally be precluded from advancing an FMLA interference claim.
Too narrow a reading. Here, the Sixth Circuit found that Ohio Bell properly requested a medical
certification under the FMLA. The employee claimed that Ohio Bell was precluded from denying
her request for leave for lack of certification because the company’s request for medical
certification was defective. She argued that the employee did not ask for certification within five
business days of receiving notice of her leave, and was not aware of information suggesting that
she had been dishonest about why she took leave. According to the employee, the latter
explanation provided the only basis in the regulation for an untimely request. Distinguishing cases
relied upon by the employee, the Sixth Circuit explained that this argument provided too narrow a
reading of the FMLA statute and regulations. Rather, there was nothing in the text of the statute
or regulations stating that employee fraud was the only “acceptable reason” for a request for
medical certification after the five-day period.
Reading the regulation “according to its plain meaning,” the appeals court ruled that the
employer’s December 29, 2009, request properly triggered the employee’s duty to provide a
medical certification. Additionally, the employee received more than the time provided by the
FMLA regulations to comply with her employer’s request for medical certification; nonetheless,
she failed to provide the requisite notice. The failure to provide medical certification is an
independent basis for denying FMLA leave notwithstanding the appropriateness of that leave, the
appeals court ruled.
Interplay between disability and FMLA. Though it said it did not have to consider whether the
employee had a serious health condition during the relevant period, the Sixth Circuit did analyze
the interplay between the disability claim and the FMLA leave. The disability administrator’s
denial of the employee’s disability claim, while not sufficient to “deny outright her request for
FMLA leave, provided an adequate ‘reason to question the appropriateness of the leave.’”
Comparing the standard for disability status under the employer’s short-term disability policy with
the FMLA’s “serious health condition” standard,” the appeals court found that the denial of the
former at a minimum raised a question about the appropriateness of the latter.
Ruling that the employee’s interpretation of the FMLA regulations was without merit, the Sixth
Circuit determined that the employer properly deferred its request seeking medical certification
from the employee; therefore, the district court properly granted the employer’s motion for
summary judgment on the employee’s FMLA interference claim.
The case number is 12-4048.
Attorneys: Mark P. Herron (Herron Law Offices) for Debra Kinds. Laura A. Lindner (Littler
Mendelson) for Ohio Bell Telephone Co.
7th Cir.: Interstate school bus driver fell within MCA exemption; thus ineligible for
OT pay under FLSA
By Kathleen Kapusta, J.D.
A school bus driver who transported passengers across the Illinois-Indiana border as part of his
regular route fell within the motor-carrier exemption and thus was ineligible for overtime pay
pursuant to the FLSA, the Seventh Circuit ruled (Almy v Kickert School Bus Line, Inc, July 16,
2013, per curiam). The appeals court also affirmed summary judgment to the employer on the
employee’s state law claims for unpaid overtime.
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Interstate route. The employee, who lived in Indiana, picked up children at private schools in
Illinois and dropped them off at their homes in Indiana. He also drove charter trips that required
him to occasionally pick up children at Illinois schools and drive them to destinations in Indiana.
When his employer began providing overtime pay in early 2008, he sued under the FLSA for the
years he had not received overtime. Granting summary judgment to the employer, the district
court found that school bus drivers who transport passengers across state lines fall within an
exemption under the Motor Carrier Act and are thus ineligible for overtime pay under the FLSA.
The district court also dismissed the employee’s claim for overtime wages under the Illinois Wage
Payment Collection Act for failure to exhaust the grievance process, finding that the claim was
governed by federal law because it required interpreting the employee’s collective bargaining
agreement. Finally, exercising supplemental jurisdiction, the court granted summary judgment to
the employer on the employee’s claim for overtime under the Illinois Minimum Wage Law
because that law exempts workers covered by the MCA, which the court had already determined
applied to the employee.
Interplay in MCA. On appeal, the employee argued that a school bus driver is not a motor carrier
with respect to whom the Secretary of Transportation can set maximum hours. He pointed to
language in Sec. 135069a)(1) of the Act stating that the secretary lacks “jurisdiction under this
part over . . . a motor vehicle transporting only school children and teachers to or from school.”
The district court, which had rejected this argument, found that this provision applied to that part
of the MCA governing registration and insurance requirements. The employee, however,
contended that Sec. 31502 of the MCA (the section granting the power to set maximum hours),
by referencing Sec. 13501 (a general jurisdiction section), impliedly incorporated the language in
Sec. 13506(a)(1), another part of that jurisdictional chapter concerning school bus drivers.
Specifically, he argued that Sec. 13506(a)(1), in depriving the Secretary of Transportation of
jurisdiction “under this part” over interstate school bus drivers, limits the jurisdictional scope of
Sec. 13501 and thus precludes the Secretary from setting maximum hours for school bus drivers.
Rejecting this contention, the appeals court observed that all the circuit courts that have
addressed the exemptions listed in Sec. 13506 (and the similarly worded Sec. 13505) have ruled
that these sections do not divest the secretary of the power to set maximum driving hours; thus
employees covered by these sections are exempt from the FLSA’s overtime requirements.
Moreover, the court found that the employee’s reading of the MCA was at odds with the Act’s
plain language and structure. First, the section giving the secretary power to set maximum hours
explicitly applies to transportation “described in sections 13501 and 13502 of this title.” The
secretary thus has the authority to set maximum driving hours for all transportation described in
two specific sections of the MCA without including the limitations listed in later sections, such as
13505 and 13506, the court explained. Second, the court noted, the MCA is divided into two
subtitles of Title 49, one of which generally contains the Department of Transportation’s economic
regulations (Subtitle IV), and the other its safety regulations (Subtitle VI). Sections 13501 to
13508 provide the scope of jurisdiction for the economic regulations, not the safety regulations.
“Joining with our sister circuits, we hold that the exemption listed in 49 U.S.C. § 13506(a)(1) does
not divest the Secretary of Transportation of the power to set maximum driving hours for
interstate school bus drivers,” the court wrote.
Legislative history. Turning to the legislative history of Sec. 13506, the court noted that the
current section and its prior versions have always served to exempt school bus drivers from
economic regulations, not from safety regulations such as maximum driving hours. Although the
court found that there has been a statutory change in the authority responsible for economic
regulation of motor carriers, there has been no change in the provision’s meaning.
Also rejected was the employee’s contention that by interpreting the DOT’s regulations too
narrowly, the district court failed to recognize that he was exempt from maximum driving hours.
Here the employee argued that the DOT, pursuant to 49 C.F.R. Sec. 390.3(f)(1) exempts school
97
bus drivers from maximum driving hours “[u]nless otherwise specifically provided,” which he
argued was not the case here. Although the court agreed that the employee’s hours were largely
unregulated, it pointed out that as long the secretary has the power to set maximum hours, the
FLSA’s motor carrier exemption applies.
The case number is 13-1273.
Attorneys: Robert T. Almy, pro se. Harry Sangerman (Littler Mendelson) for Kickert School Bus
Line, Inc.
8th Cir.: Forcing employee to take FMLA leave when healthy was not interference;
nor was refusing her attempts to return to work
By Lorene D. Park, J.D.
An employee’s allegations that her employer forced her to take FMLA leave based on its
erroneous belief that she had a serious health condition and then refused to allow her to return,
despite three physicians’ certifications that she was fit to do so, did not state a cognizable claim
under the FMLA, found the Eighth Circuit, affirming dismissal of an employee’s interference claim
(Walker v Trinity Marine Products, Inc, July 19, 2013, Colloton, S). Because she admitted that
she did not have a serious health condition, she was not entitled to the benefits provided by the
Act. Equitable considerations did not apply, notwithstanding the employer’s reversal of position in
arguing she had no serious health condition in the first place. The appeals court also affirmed the
dismissal of her discrimination claim.
Coerced leave. The employer told the welder it believed she had a serious health condition,
placed her involuntarily on FMLA leave, and required her to obtain a doctor’s certification of her
fitness to return. She provided one, but the employer refused to allow her to return until she
obtained a second medical opinion. She did so, presenting a second certification, but the
employer still refused her return to work. Instead, it instructed her to consult a physician at
Vanderbilt University Medical Center. She was examined twice by a Vanderbilt doctor and the
physician sent a certification stating she was fit to return to work. When the employee presented it
to her employer, she was informed she had exhausted her FMLA leave the prior month and was
terminated.
The employee filed suit, alleging the employer interfered with her rights under the FMLA by
placing her involuntarily on FMLA leave while she was healthy, and refusing to permit her to
return to work. She also asserted that it unlawfully fired her because she attempted to exercise
her right to return to the position that she held prior to taking leave. Moving to dismiss, the
employer reversed its position and claimed she never suffered from a serious health condition
that entitled her to FMLA leave in the first place. The district court dismissed her claims.
Involuntarily leave not interference. The Eighth Circuit noted that it has not addressed whether
placing an employee involuntarily on FMLA leave is a form of interference under the FMLA but
found that, even assuming there was such a cause of action, the employee’s claim could not
proceed. She argued that the employer interfered with her FMLA benefits because, by forcing her
to take leave when she did not have a serious health condition, it interfered with her right to use
FMLA leave when she actually needed it. However, the Sixth Circuit case upon which she relied,
which held that being forced to take leave may state a type of “interference claim,” emphasized
that the claim “ripens only when and if the employee seeks FMLA leave at a later date, and such
leave is not available because the employee was wrongfully forced to use FMLA leave in the
past.”
Here, the employee did not claim she was denied FMLA leave as a result of being required to
take it earlier; she argued her claim was ripe because her discharge amounted to “actual harm as
a result of the forced leave.” In the court’s view, however, “if forced leave can amount to
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interference with a right provided under the FMLA, it can do so only if the employer’s action
prevents the employee from using benefits to which she is entitled under the Act.” Because the
employer did not interfere with the employee’s right to a certain amount of leave under the Act,
the district court properly dismissed the claim.
Refusing return to work. The employee also claimed that the employer interfered with benefits
to which she was entitled under the FMLA when it refused to permit her to return to work, even
after she received multiple certifications of her fitness to do so. Affirming the dismissal of this
claim, the appeals court reasoned that she admitted she never suffered from a serious health
condition. Thus, she had no right to the benefits provided by the FMLA.
Equitable considerations. Despite her admission that she was healthy, the employee claimed
that equitable considerations prevented the employer from denying that she was entitled to FMLA
protections. She asserted that the company was bound by its own decision to treat her as having
a serious health condition when it required her to take FMLA leave.
Even assuming equitable estoppel applies in the FMLA context, the Eighth Circuit refused to
apply it here. It noted that “a plaintiff invoking the doctrine must show that she has changed her
position to her detriment in reasonable reliance on another’s misleading representation.” The
employee’s only colorable argument of reliance was that she sought several medical opinions
due to the employer’s insistence she had a medical condition. But the FMLA limits damages to
“‘actual monetary losses sustained by the employee as a direct result of the claimed
interference,’” explained the court. Her inconvenience was not a cognizable detriment for
purposes of an estoppel claim invoking the FMLA.
Termination. The appeals court also found that the employee could not state a claim for unlawful
discrimination based on her termination after she sought restoration to her position. The
employer’s mistaken belief that she had a serious health condition could not entitle her to the
benefits of the FMLA, the court explained. Although other statutes may permit “regarded as”
claims, the FMLA was not one of them. Because her leave was not for an “intended purpose” of
the FMLA, she had no statutory right to be restored to her former position and the lower court
properly dismissed her discrimination claim.
The case number is 12-2468.
Attorneys: William L. Jenkins, Jr. (Wilkerson & Gauldin) for Tracy Walker. Joshua D. Bortnick
(Ogletree Deakins) for Trinity Marine Products.
8th Cir.: Undocumented status of restaurant workers didn’t adversely affect
standing to suit for FLSA violations
By Ronald Miller, J.D.
After a jury awarded six undocumented restaurant workers minimum wages, overtime pay,
statutory liquidated damages, and attorney fees, the Eighth Circuit rejected an employer’s
contention that it was entitled to judgment as a matter of law on their wage claims based on its
contention that aliens without work authorization lacked standing to sue under the FLSA (Lucas v
Jerusalem Café, LLC, July 29, 2013, Riley, W). Disagreeing with the employer’s assertion, the
appeals court ruled that the FLSA does not allow employers to exploit any employees’
immigration status or to profit from hiring unauthorized aliens in violation of federal law.
During the employees’ tenure, the employer paid its workers in cash at fixed weekly rates that did
not vary based on overtime hours worked. In January 2010, one of the employees called police
after being struck by the restaurant owner’s nephew. Fearing police would discover the illegal
status of its workforce, the employer offered the employee $500 to drop charges and return to
work. When the employee refused, he was fired. The employer later terminated the other workers
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when they refused to falsify an employment application to appear that they had not been working
for the café before March 2010. The employees filed suit alleging that the employer willfully failed
to pay minimum and overtime wages.
The district court found the workers’ immigration status “irrelevant” because they were seeking
FLSA wages for previous work—not prospective relief, which is unlawful under the Immigration
Reform and Control Act (IRCA). Following a four-day jury trial, the jury found in favor of the
workers. The employer moved for judgment as a matter of law or a new trial, arguing the workers,
“as undocumented aliens,” were “prohibited by law from receiving any wages and lacked standing
to sue for backpay under the FLSA.” The district court denied the motion and held that the
employer waived its IRCA argument by failing to raise it until after trial.
Applicability of FLSA to unauthorized aliens. The Eighth Circuit first observed that only the
Eleventh Circuit, in Patel v Quality Inn S, has directly addressed the question of FLSA
applicability to unauthorized aliens, but that numerous district courts and the Secretary of Labor
all agree that employers who unlawfully hire unauthorized aliens must otherwise comply with
federal employment laws. There is no reason why the fact that the employers unlawfully hired the
workers should exempt them from paying wages “that if lawful” they “would have to pay.” Thus,
like the Eleventh Circuit, the Eighth Circuit held that aliens, unauthorized to work or not, may
recover unpaid and underpaid wages under the FLSA.
Starting with the statutory text, the appeals court noted that the FLSA states that “every employer
shall pay to each of his employees who in any workweek is engaged in commerce or in the
production of goods for commerce, or is employed in an enterprise engaged in commerce or in
the production of goods for commerce, wages at the minimum wage rate.” Moreover, the FLSA’s
sweeping definitions of “employer” and “employee” unambiguously encompasses unauthorized
aliens. Because the FLSA by its plain terms protects aliens working without authorization, the
employer’s argument failed.
The court also rejected the employer’s contention that in view of the Supreme Court’s ruling in
Hoffman Plastic Compounds, Inc v NLRB, the IRCA implicitly amended the FLSA to exclude
unauthorized aliens. The question in Hoffman was whether the NLRA’s remedial power extended
to allow an award of backpay to an illegal alien for years of work not performed. The court’s
reading of Hoffman was consistent with the overwhelming majority of post-Hoffman decisions.
Moreover, the court observed that shortly before it heard argument in this case, the Eleventh
Circuit reaffirmed its decision in Patel that “undocumented aliens may recover their unpaid wages
under the FLSA in Lamonica v Safe Hurricane Shutters, Inc.
Agency interpretation. The Secretary of Labor has explained that there is no conflict between
the FLSA and IRCA. Both statutes work in tandem to discourage employers from hiring
unauthorized workers by assuring that the wages and employment of lawful residents are not
adversely affected by the competition of illegal alien employees who are not subject to the
standard terms of employment. Applying the FLSA to unauthorized aliens “is essential to
achieving the purposes of the FLSA to protect workers from substandard working conditions, to
reduce unfair competition for law-abiding employers, and to spread work and thereby reduce
unemployment by requiring employers to pay overtime compensation.” The appeals court agreed
with the Secretary’s position because Congress’s purposes in enacting the FLSA and the IRCA
are in harmony.
Standing. Because the FLSA gave the workers a right to sue the employer and obtain a real
remedy for a statutory wrong, the workers had both Article III and prudential standing to recover
damages from the employer. First, the underpayment for actual work was “an ‘injury in fact.’”
Second, that underpayment “fairly can be traced to the challenged action of the defendants.”
Third, the district court’s judgment, awarding actual and liquidated damages for the employers’
FLSA violations, was a “favorable decision” providing “redress” in the form of financial damages.
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The court noted that the employer did not raise its prudential standing argument until after the jury
reached its verdict and after the court entered judgment in the workers’ favor; thus, if a challenge
alleging a lack of prudential standing was waivable, the employer resoundingly waived it.
However, the Eighth Circuit has never directly decided whether prudential standing is waivable.
Here, the court determined that it need not resolve that issue to resolve this appeal. The court
noted that a plaintiff has prudential standing to bring any claim if “the constitutional or statutory
provision on which the claim stands properly can be understood as granting persons in the
plaintiff’s position a right to judicial relief.” Because the workers here were “employees” under the
FLSA, they plainly fell within the “zone of interests protected or regulated by the Act.” Thus, the
alien workers had prudential standing.
The case number is 12-2170.
Attorneys: Mark Van Buren Dugan (Dugan & Schlozman) for Elmer Lucas. Tarak A. Devkota
(Law Office of Tarak A. Devkota) and Jonathan Sternberg (Law Office of Jonathan Sternberg) for
Jerusalem Café, LLC.
8th Cir.: Truck driver for disabled veterans’ organization ineligible for overtime
under FLSA’s motor carrier exemption
By Kathleen Kapusta, J.D.
A truck driver for the Disabled American Veterans (DAV) who picked up and delivered donated
merchandise was exempt from overtime under the motor carrier exemption, the Eighth Circuit
ruled in affirming a lower court’s grant of summary judgment to the employer on his wage suit
(McCall v Disabled American Veterans, July 31, 2013, Smith, L).
The salaried employee operated trucks that had an actual weight of less than 10,000 pounds but
a gross vehicle weight rating (GVWR) of greater than 10,000 pounds. Alleging that he sometimes
worked more than 40 hours per week, he sued DAV for overtime. He contended that he was a
covered employee under Sec. 306 of the Safe, Accountable, Flexible, Efficient Transportation
Equity Act (SAFETEA-LU) Technical Corrections Act (TCA) and thus was eligible for overtime
because, despite their GVWR rating, the trucks that he drove actually weighed less than 10,000
pounds.
Denying the employee’s motion for partial summary judgment and granting the employer’s, the
district court found that the proper measure of a vehicle’s weight for purposes of the TCA is the
GVWR. The court based this conclusion on a 2010 DOL field assistance bulletin that made clear
that the FLSA’s overtime requirements only applied to vehicles with a GVWR exceeding 10,000
pounds. Thus, the overtime protections did not apply to him.
Motor carrier exemption. Under the motor carrier act exemption, the FLSA’s overtime provisions
do not apply to “any employee with respect to whom the Secretary of Transportation has power to
establish qualifications and maximum hours of service pursuant to the provisions of section
31502 of Title 49.” This provision allows the secretary of transportation to prescribe requirements
for a “motor private carrier.” The definition originally described a person who transported property
by any motor vehicle, regardless of weight. In August 2005, though, SAFETEA-LU limited the
definition of “motor private carrier” to mean only commercial motor vehicles—defined to include
any vehicle that “has a gross vehicle weight rating or gross vehicle weight of at least 10,001
pounds, whichever is greater.” Thus, SAFETEA-LU limited the scope of the motor carrier
exemption.
However, in June 2008, Congress passed the SAFETEA-LU Technical Corrections Act (TCA).
The TCA amended the definition of “motor private carrier” by defining it as a “motor vehicle” and
not a “commercial motor vehicle,” thus returning the pre-SAFETEA-LU definition and again
expanding the transportation secretary’s authority. Yet the TCA also provided that the FLSA’s
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overtime provisions would apply to “a covered employee” notwithstanding the motor carrier
exemption and defined a “covered employee” to include a driver of a motor vehicle “weighing
10,000 pounds or less.”
GVWR is appropriate criterion. According appropriate deference to the DOL bulletin, the
appeals court found that GVWR, not actual weight, is the appropriate criterion for determining if
the TCA applies to place a driver’s wage regulation under the FLSA. According to the court, the
“Secretary’s use of GVWR establishes an objective and predictable standard for determining
whether the motor carrier act exemption applies.” Thus, because the employee operated trucks
with GVWRs in excess of 10,000 pounds, he was not entitled to overtime under the FLSA.
The case number is 12-301.
Attorneys: Michael F. Brady (Brady & Associates) for Birdell McCall. Sara B. Anthony (Ogletree &
Deakins) for Disabled American Veterans.
9th Cir.: Litigation costs not enough to establish prejudice to employer seeking to
show that employees waived right to compel individual arbitration
By Sheryl C. Allenson, J.D.
Because defendants failed to show that they were prejudiced by a putative class action suit filed
by former and current employees, the district court erred when it ruled that the employees had
waived their right to compel individual arbitration of their wage and hour claims, ruled the Ninth
Circuit, in an unpublished opinion, reversing the lower court’s judgment (Biernacki v Service
Corporation International, July 16, 2013, per curiam).
Current and former employees of Service Corporation, International filed a putative class action.
After class certification was denied, they filed a motion to compel individual arbitration of their
wage and hour claims. The district court denied the motion, ruling that by filing the putative class
action and seeking to compel arbitration after class certification was denied, the employees
waived their rights to compel individual arbitration.
California law governs. Waiver of the right to compel individual arbitration is governed by state
law, and the defendants bore the burden of establishing waiver, the Ninth Circuit explained. To do
so under California law, the defendants had to show the plaintiffs’ knowledge of an existing right
to compel arbitration, acts inconsistent with that existing right, and prejudice to the defendants
resulting from the inconsistent acts.
In an effort to satisfy the final element, the defendants claimed they were prejudiced by the
commencement and continuation of the litigation. California law, however, did not support this
position; a party opposing arbitration cannot rely only on the fact that it incurred court costs and
legal expenses to establish prejudice, the appeals court explained. In this instance, the
defendants did not demonstrate that they suffered prejudice beyond having to litigate the
underlying claim. The district court erred when it found the defendants “met their burden to show
that they were prejudiced by the time and expense of litigating this case for the past three years.”
In the absence of other prejudice, the appeals court reversed the lower court’s finding of waiver
and denying the employees’ motion to compel individual arbitration.
The case number is 11-17495.
Attorneys: Sarah E. Cressman (Thomas & Solomon) for Joseph Biernacki. Nicholas P. Forestiere
(Gurness & Daniels) for Service Corporation International.
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11th Cir.: Underreporting cash wages on W-2s did not change gross receipts
amounts; employer’s businesses did not meet FLSA enterprise coverage threshold
By Joy P. Waltemath, J.D.
An employer’s admission that he made unreported overtime cash payments to a few employees,
albeit rarely, making their W-2 statements not entirely accurate, did not create a genuine issue of
material fact on whether the business’ gross receipts equaled or exceeded $500,000 for purposes
of enterprise coverage under the FLSA, the Eleventh Circuit found in an unpublished opinion
(Arilus v Joseph A. DiEmmanuele, Jr, Inc, July 8, 2013, per curiam). Affirming summary judgment
for the employer, the court pointed out that the W-2 inaccuracies would affect expenses, not
annual gross receipts, which was the relevant factor in determining enterprise coverage.
Along with two other workers who settled their claims, the employee worked for a lawn
maintenance service and tree service, both owned by a single individual. The employees sued for
unpaid overtime, and the district court granted summary judgment because, treated as joint
employers, the entities’ combined annual sales were less than $500,000 during the relevant
period. The district court relied on the employers’ combined tax returns for 2007 and 2008 to
show gross receipts totaling approximately $430,000 for 2007 and $364,000 for 2008, well below
the threshold for FLSA coverage.
Below enterprise coverage amount. The employer’s admitted failure to report “a few cash
payments” on the employees’ W-2 statements did not create a genuine issue of material fact
about whether his business’ gross sales were less than the $500,000 coverage amount, agreed
the appeals court. Those cash wages paid would affect only the expenses reflected in the
employers’ tax returns, not the amount of gross receipts that were reported in those returns,
which determined the “annual gross volume of sales made or business done” in the year, said the
court.
Although the employee also argued for a genuine issue of material fact about how many times
and to whom cash wages were paid, deposition testimony showed only that payments were made
on “several occasions” and “to seven or eight illegal immigrants.” Further, the employee saw cash
collected on only one or two occasions (four customers gave him cash payments) but the other
employees testified that it was against policy for employees to collect payment from customers,
whether in cash or otherwise. It would take several leaps to infer that cash wages had come from
cash customers whose payments then were not reported on the 2007 and 2008 tax returns, the
court pointed out. “Evidence of certain cash payments being made to employees at unspecified
times is not enough to allow a jury to infer that the employers underreported the gross receipts on
their tax returns by nearly $70,000 in 2007 and $136,000 in 2008.”
Willfulness. Attempting to recover for an additional year by claiming the employer’s violation was
willful, the employee argued that the 2006 tax returns were “fraudulent” because, even though
those returns showed $521,701 in gross receipts for 2006, the employers presented evidence
showing that they used a cash basis of accounting and at least $31,075 of those receipts was for
business done in 2005, making the gross volume of sales made or business done for 2006 still
less than $500,000. But the appeals court pointed out the employee had not shown willfulness,
and that in any event, he could not show the employers’ annual gross volume of sales made
during 2006 was less than $500,000. Because the employers used a cash basis of accounting,
some of the sales made or business done in 2006 might be actually reported on the 2007 tax
returns, just as some 2005 business had been reported on the 2006 tax returns. Using the tax
basis of accounting does not make the tax returns “fraudulent,” however, noted the court,
agreeing that the employee did not present any compelling evidence showing that enough of the
employers’ 2007 receipts related to business done in 2006 to make the total annual sales or
business done in 2006 in excess of $500,000.
The case number is 12-15324.
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Attorneys: Jason Saul Remer (Remer & Georges-Pierre) for Marius Arilus. Chris Kleppin (Glasser
& Kleppin) for Joseph A. DiEmmanuele, Jr., Inc.
11th Cir.: Cable installers were employees, not independent contractors; FLSA
collective overtime action revived
By Lisa Milam-Perez, J.D.
Cable installation and repair technicians were employees, not independent contractors, the
Eleventh Circuit held, reversing a district court’s finding that the technicians were not covered
under the FLSA and reviving their collective action wage claims (Scantland v Jeffry Knight, Inc
dba Knight Enterprises, July 16, 2013, Anderson, R). The installation company for whom the
technicians worked controlled the jobs they did, how much they were paid, how many hours and
days they worked, their daily work schedule, whether they could work for others, and whether
they could earn additional income from customers, the appeals court observed. The company
also closely monitored the quality of their work. These facts, combined with the remaining factors
analyzed under the “economic realities” test, compelled a conclusive finding of employee status.
The technicians installed and repaired cable, internet, and digital phone services for Knight
Enterprises, an installation and repair service contractor for the cable company Bright House
Networks (BHN). They filed a putative collective action under the FLSA, but, applying the
economic realities test, a district court disposed of their claims, concluding that they were
independent contractors, not statutory employees under Sec. 203(e)(1) of the Act. Considering
the same factors and the facts alleged, the Eleventh Circuit disagreed.
Control over work. Knight exercised significant control over the technicians such that they did
not stand as “separate economic entities” who were “in business for themselves,” the court of
appeals concluded. The technicians regularly worked more than 40 hours a week, five to seven
days a week. Some technicians had to work six or even seven days a week because they were
required to work rotating Sundays. If they wanted to take time off, they either had to inform their
supervisors or request time off in advance.
The technicians had to report to a Knight facility by 7:00 to 7:15 each morning where they
received a “route” detailing the current day’s work orders. While their “independent contractor
service agreements” stated that they could decline work assignments, the technicians asserted
that, in fact, they could not reject a route or a work order without threat of being terminated or
denied assignments. In practice, they had no real power to turn down unprofitable assignments.
Sometimes, the morning routine included mandatory quality control meetings and classes on new
equipment, or a monthly equipment inventory that required the technicians to unload their trucks
and account for BHN equipment. Their preliminary routine could last up to two hours before they
could head to their first assignments. During occasional down time, technicians could request
additional jobs; they also could be required to assist other technicians or be assigned additional
jobs that they could not refuse. Technicians might be required to stay on the job until all the
technicians in their area had completed their work; they could also be called back to jobs long
after completing them to address problems.
Moreover, the technicians were closely supervised and monitored. The manner of their work was
tightly regulated by Knight; they had no discretion in how to approach a particular job. They
routinely communicated with dispatch throughout the day and were required to log in and out of a
timekeeping system on their cell phones (a service they paid for via payroll deductions) to log
arrival and completion times for each job. They were also subject to site checks of their work, and
their “quality control discrepancy rate” was tracked. Technicians with consistent quality control
issues could be given “remedial training” at a “mock house”—or could simply be terminated. They
could also be “downloaded,” or fired, for incorrect or fraudulent billing, stealing, rudeness, a “bad
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attitude,” or low quality control ratings. In fact, one installation manager testified that she and a
fellow manager had downloaded more than 100 technicians.
For its part, Knight contended that the quality control measures and “periodic communication”
with the company were consistent with duties required of independent contractors. But the
specific facts alleged here diverged from the “usual path” of an independent contractor, and the
communications they were required to maintain were constant, not periodic, the appeals court
observed. The company also argued that its quality control measures and regulation of work
schedules stemmed from “the nature of the business” and thus were not the type of control that is
relevant to the economic dependence inquiry. But the appeals court flatly rejected that notion.
“The economic reality inquiry requires us to examine the nature and degree of the alleged
employer’s control, not why the alleged employer exercised such control,” wrote the court.
“Business needs cannot immunize employers from the FLSA’s requirements. If the nature of a
business requires a company to exert control over workers to the extent that Knight has allegedly
done, then that company must hire employees, not independent contractors.”
Opportunity for profit and loss. This factor also suggested a high degree of economic
dependence, and consequently an employment relationship. The technicians’ ability to earn
additional income through their own initiative or business acumen was limited. While they
theoretically could “upsell” by convincing customers to add additional BHN services, those orders
had to be approved by Knight, and the extra income was minimal and often not worth the
additional effort. They could not sell non-BHN services to customers and could not work for other
companies, either because they were flatly prohibited from doing so or because the work
schedule imposed by the company made it unfeasible. Similarly, their contracts allowed them to
hire others to help them, but any such “employees” had to be technicians already engaged by
Knight and, as such, bound by the company’s policies. Therefore, their ability to hire and manage
others was illusory.
Also, the technicians could not bid for jobs or negotiate the prices for jobs or their pay rates. (In
fact, the billing codes they submitted were subject to unilateral change by the company.)
Consequently, their opportunity for profit or loss depended more upon Knight’s provision of work
orders and technicians’ own technical skill and efficiency than their managerial skill. Their
opportunity for profit was largely limited to their ability to complete more jobs than assigned,
“which is analogous to an employee’s ability to take on overtime work or an efficient piece-rate
worker’s ability to produce more pieces,” noted the court. “An individual’s ability to earn more by
being more technically proficient is unrelated to an individual’s ability to earn or lose profit via his
managerial skill, and it does not indicate that he operates his own business.”
As for the flip side—the technicians’ opportunity for loss—the appeals court was not swayed by
Knight’s assertion that they could control their individual losses by avoiding company-assessed
chargebacks. (These uncontestable fines were levied against technicians for failing to meet job
specifications, not using the time system properly, misplacing inventory, or being late to a job—
and they could wipe out their earnings from a single job.) As the court saw it, chargebacks related
to the quality of a technician’s skill, not his managerial or entrepreneurial prowess.
Knight also asserted that the chargebacks were consistent with a contractual relationship in which
money would be withheld when work was not done correctly. The court saw it differently. “When
an independent contractor fails to follow specifications, the usual penalty is the actual cost of
damages, whereas here the chargebacks were flat charges that could exceed the actual value of
the job at issue.” Thus, the chargebacks were more consistent with employee discipline.
Remaining factors. The technicians’ investment in equipment or materials required for the job
favored independent contractor status, albeit weakly. Knight provides the hardware that is
actually installed in customers’ homes and businesses, such as cable boxes, DVRs, and cable
modems. Technicians must have their own vehicles, auto insurance, tools and safety equipment,
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and commercial general liability insurance. However, the court reasoned, most technicians
already own a vehicle suitable for the work and many technicians purchased specialty tools from
Knight directly via payroll withholdings. Thus, “there seems to be little need for significant
independent capital and very little difference from an employee’s wages being increased in order
to pay for tools and equipment.” Further, “even though a technician who initially bought his tools
from Knight and paid for them via withholdings has some economic independence when the tools
are paid for, it is analogous to the independence any employee has who has gained experience
and the ability to market himself to competing employers,” the court noted. “In sum, these
expenditures seem to detract little from the worker’s economic dependence on Knight, which is
the lens through which we evaluate each of the several factors.”
Moreover, while the technicians were “clearly skilled workers,” the skill level factor did not suggest
that they were in business for themselves or economically independent because they acquired
their skills through the company. All but 10-15 percent of the technicians were inexperienced
when they started and underwent unpaid training by Knight, followed by unpaid ride-alongs with
experienced technicians, before performing work on their own. “Plaintiffs were, therefore,
dependent upon Knight to equip them with the skills necessary to do their jobs.” And while the
skills attained afforded them a degree of economic independence to the extent they could market
their prowess to a competing employer, this fact did not significantly distinguish them from the
“usual path of an employee.”
Analyzing as well the degree of permanency and duration of the working relationship, the appeals
court held this factor leaned heavily toward employee status. On average, the technicians worked
for Knight for more than five years. Their one-year contracts were automatically renewed, and
were terminable only with 30 days’ notice. Knight urged the court to consider the lack of
exclusivity in the parties’ relationship; in fact, though, the evidence suggested that the relationship
was quite exclusive: the technicians could not work for other companies, they had to work long
hours, and they could not turn down work orders. Thus, their relationship with the company was
both of long in duration and exclusive.
Finally, the service rendered by the technicians was an integral part of Knight’s business; thus,
this factor weighed “clearly and strongly” toward employee status. Approximately two-thirds of
Knight’s business consisted of the installation and repair services performed for BHN by the
company’s 500 technicians. In fact, Knight’s website described its installation services unit as the
“backbone” of its business. “If Knight had truly outsourced such a large portion of its business, as
would be true if plaintiffs were independent contractors, then the company would retain far less
control over the business,” the court reasoned. “However, because of Knight’s concern with the
quality of the services it provides through this arrangement, it does, as one might expect, control
the relationship in much the same way a company would control its employees.”
Accordingly, the Eleventh Circuit concluded that the installation and repair technicians were
“employees” — not independent contractors — under the FLSA. Thus, the district court erred in
granting summary judgment to the company on their wage claims.
The case number is 12-12614.
Attorneys: Harold L. Lichten (Lichten & Liss-Riordan) for Scantland. Luis A. Cabassa (Wenzel
Fenton Cabassa) for Jeffry Knight, Inc.
11th Cir.: Lynn’s Food rule applies to former employees; no valid settlement of
wage claims where no “stipulated judgment”
By Lisa Milam-Perez, J.D.
A hotel front desk clerk and the owner of the hotel that once employed her did not reach a valid
settlement of her FLSA overtime claims when they met without her attorney present to hash out
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an agreement, the Eleventh Circuit held, reversing the court below (Nall v Mal-Motels, Inc, July
29, 2013, Carnes, E). Concluding that the policy considerations that informed its earlier ruling in
Lynn’s Food, Inc v United States applied with equal force to former employees as to workers still
under the thumb of the defendant employer, the appeals court found this precedent controlling
here.
The employee worked for the hotel as a front desk clerk and night auditor. While she initially used
a time clock to track her hours worked, the owner told her instead that he would pay her an hourly
salary, and she would verbally report her work hours to him. There were no accurate written
records of hours worked. However, the employee did contend that she periodically worked more
than 40 hours per week without getting paid at the overtime rate. She hired a lawyer and filed suit
against the hotel and hotel owner, contending the employer owed her at least $3,780 in unpaid
overtime, plus another $3,780 in liquidated damages, for a total of $7,560.
“Don’t bring your lawyer.” The hotel owner conceded that he owed her some unpaid overtime,
but disputed how much. The owner filed an answer to her complaint without assistance of
counsel, but his answer was stricken because as a non-lawyer, he could not represent the hotel.
Still acting without an attorney, he called his former employee and asked if she would meet with
him at the motel, without her lawyer present, to discuss a settlement. She was “ruining his
business,” he pleaded. He presented the plaintiff with two documents to sign, prepared by a legal
assistant: a voluntary dismissal with prejudice and a letter to her attorney informing him that the
case had been settled. In exchange, he offered a check for $1,000 along with $1,000 or $2,000 in
cash (the amount was disputed). She felt pressured, she testified, but signed anyway because
she trusted him and she “was homeless at the time and needed money.”
The voluntary dismissal document was filed in district court; but the court issued an order stating
that because the complaint had been filed by an attorney, and the plaintiff did not have
permission to appear without her attorney, her pro se voluntary dismissal had no effect. The hotel
owner finally hired a lawyer to represent him, who filed a motion to set aside the default judgment
against the hotel and a motion to enforce the settlement agreement. There was no written
settlement agreement, however.
A magistrate judge held an evidentiary hearing and heard conflicting testimony about the number
of hours of overtime the plaintiff had worked. The parties also testified about the circumstances
surrounding the putative settlement. Overruling the plaintiff’s objection, the district court adopted
the magistrate’s recommendation that the case be dismissed with prejudice because the parties
had reached a fair and reasonable resolution of the FLSA claim. This was error, the Eleventh
Circuit found.
Limits on private settlements. Lynn’s Food, which involved a settlement agreement between
employees and their current employer, recognized Congress’ concern about “great inequalities in
bargaining power between employers and employees” and, as a result, the appeals court placed
limits on the ability of private parties to settle FLSA lawsuits. It provided for only two means of
settling back wage claims under the Act: under the supervision of the Secretary of Labor, or upon
entry by a district court of a stipulated judgment, after scrutinizing a proposed settlement for
fairness.
While the greatest cause for concern exists when the plaintiff is still working for the defendant
employer and negotiations are carried out under the looming specter of potential retaliation and
other concerns, the appeals court noted that “the purposes of the FLSA are undermined
whenever an employer is allowed to escape liability for violations of the statute, regardless of
whether those who were victimized by those violations are still employees.” Ensuring that a
plaintiff receives the damages to which she is entitled “is no less important when the plaintiff is a
former employee,” the appeals court added. Thus, it concluded that the rule of Lynn’s Food
applies to settlements between former employees and employers as well.
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Settlement not valid. Thus, the agreement between the employee and hotel owner was valid
only if the district court entered a “stipulated judgment” approving it. While the court did enter a
judgment approving the settlement, it was not a stipulated one, the appeals court found. Although
Lynn’s Food did not define the term, “it takes two (or more) to stipulate,” the court noted, and “a
judgment to which one side objects is not a stipulated one.”
At the evidentiary hearing on whether to approve the settlement agreement, the employee’s
attorney objected to approval, contending that the terms were not fair and reasonable. When
plaintiff’s counsel asks the court to reject a settlement agreement reached without the attorney’s
knowledge or participation, it is not a “stipulated judgment” within the meaning of Lynn’s Food, the
appeals court reasoned. The court below should not have granted the opposed motion to approve
and enforce the settlement agreement and dismissed the complaint.
The case number is12-13528.
Attorneys: Mauricio Arcadier (Arcadier & Associates) for Candace Nall. Herbert Stuart Zischkau,
III (Herbert S. Zischkau III, Attorney at Law) for Mal-Motels, Inc.
Haw. Sup. Ct.: Employees could use state wage law to enforce resort service charge
disclosure law under consumer protection chapter
By Joy P. Waltemath, J.D.
Answering a question certified from the federal district court in Hawaii, the Hawaii Supreme Court
held that when a hotel or restaurant applying a service charge for the sale of food or beverage
services allegedly violates HRS Sec. 481B-14 (1) by not distributing the full service charge
directly to its employees as “tip income” (in other words, as “wages and tips of employees”), and
(2) by failing to disclose this practice to the customer, employees may bring an action under HRS
Secs. 388-6, 10 and 11 (Villon v Marriott Hotel Services, Inc, dba Wailea Marriott Resort, July 15,
2013, McKenna, S). Notably, remedies under Chapter 388 include civil penalties of twice the
unpaid wages, plus interest, as well as costs and attorneys’ fees.
Employees of Marriott and Starwood resorts had filed separate class action complaints alleging
that for banquets, events, meetings, etc., the resorts added a preset service charge to customers’
bills for food and beverages, but did not remit the total proceeds of the service charge as tip
income to the servers. Instead, the resorts admittedly retained some of the service charges (or
used it to pay managers or other non-tipped employees who were not servers). Further, both
Marriott and Starwood admitted they did not disclose to their hotels’ customers that the service
charges were not remitted in full to the food and beverage servers. The complaints suggested
that customers were misled into believing that the entire service charge was given to employees
when, instead, a smaller percentage went to servers, and that this led to fewer additional tips.
Unpaid wages claim. Important to the complaints were allegations that the resorts’ actions
deprived employees of “income which constitutes wages,” which would be actionable under Secs
388-6, 10 and 11, and which would include liquidated damages, interest, and attorneys’ fees.
Plain language of statute. The court began with a thorough analysis of the plain language of the
statutes in question. HRS Sec. 481B-14 addresses hotel or restaurant service charges, and the
language of the employees’ complaints tracked the statute. Service charges for the sale of food
or beverage services must be distributed “directly to employees as tip income” or must be “clearly
disclosed to the purchaser” that the service charges are used to pay for costs or expenses “other
than wages and tips.” This means, noted the court, that 100 percent of the service charge is
“wages and tips of employees” and, should a hotel or restaurant distribute less than 100 percent
of a service charge directly to its employees without disclosing this to purchasers, that portion
withheld constitutes “tip income” or “wages and tips of employees.”
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Looking next to the plain language of Chapter 388, the court agreed with the employees that its
language supported their claim that Sec. 481B-14 was enforceable through Secs. 388-6, 10, and
11. Sec. 388-1 defines “wages” to “not include tips or gratuities of any kind, provided that for the
purposes of section 388-6, “wages” shall include tips or gratuities of any kind.” Accordingly, for
enforcement purposes, “wages” did includes service charges as “tips or gratuities of any kind,”
because Sec. 481B-14 defines service charges as “tip income” and “wages and tips of
employees.” Sec. 388-6 prohibits an employer from retaining any part of compensation earned by
an employee unless required by law or authorized in writing by the employee. Secs. 388-10 a and
11 provide remedies for violating Sec. 388-6; liquidated damages of twice the unpaid wages, plus
interest, as well as costs and attorneys’ fees to prevailing employees.
Even though Sec. 387-1 defines “wages” to exclude “tips or gratuities,” it does so solely for the
purpose of calculating the tip credit under Sec. 387-2. The same was true for the implementing
regulation, Hawaii Administrative Rules Sec. 12-20-1, said the court, noting it was over 30 years
old and became effective 20 years before Sec. 481B-14 changed the definition of wages. To the
extent Sec. 481B-14 redefined service charges, the regulation’s exclusion of service charges
under its definition of “tips” was not entitled to deference, concluded the court.
Legislative history. Although noting that an analysis of the legislative history was not necessary
because the plain language of the statute was clear, the court nevertheless addressed it, pointing
out that the legislative history revealed that enforcing Sec. 481B-14 through Chapter 388 was not
an “absurd result” could not have been the legislature’s intent. The court carefully combed
through documents and testimony surrounding Sec. 481B-14’s enactment. It found that the law
addressed two issued: first, that customers might not know that service charges were used for
something other than employees’ wages and tips; and second, that employees might not be
receiving tips or gratuities” from these service charges.
Further, during the statute’s “journey through the legislature, this “concern for employees was
never abandoned.” In fact, the court characterized the law’s dual focus as evidence of “a causeand-effect relationship: the cause (nondisclosure to consumers) has an effect (employees
receiving a smaller gratuity than the customer intended).”
Reading the statutes in pari materia Alternatively, the court found that Sec. 481B-14 and
Chapter 388 could be read in pari material, which, it explained, meant that laws about the same
subject matter should be construed with reference to each other. Chapter 388 is “Payment of
Wages and Other Compensation.” Although the title of Sec. 481B-14 is “Hotel or restaurant
service charge; disposition,” the statutory text is about “tip income” and “wages and tips of
employees,” and prior to its enactment, as a bill ( H.B. 2123) it was titled, “RELATING TO
WAGES AND TIPS OF EMPLOYEES.” Under the Hawaii Constitution, the title of a law must
reflect its actual subject, and each law must address only one subject. Consequently, the bill title
was relevant to the court’s analysis, especially where none of the parties were arguing that the
law was misleading, deceptive, or obscure in connection to the subject matter expressed in its bill
title. Reading the two statutes in pari material, the court found a relationship existed that
supported the employees’ contention that Sec. 481B-14 violations could be enforced through
Chapter 388.
No exclusivity of remedies. Finally, the court was not convinced that, as the resorts argued, the
exclusive remedy for a violation of Sec. 481B-14 fell within the consumer protection chapters
(Chapters 480 and 481B), given that they argued precedent that explicitly did not decide whether
that law could be enforced through Chapter 388. The plain language of Chapters 480 and 481B
did not suggest that their remedies were exclusive, the court said, pointing out that if it had
chosen to do so, the legislature knew how to draft an exclusive remedies provision. Further, a
statement in Sec. 480-13(d) saying that the remedies in that section were “cumulative,” also did
not help the resorts as it expressly did not apply to Sec. 481B-14. Accordingly, it said that
Chapter 388 could be used by employees to enforce rights under Sec. 418B-14.
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The case number is SCCQ-11-0000747.
Attorneys: Ashley Ikeda (Weinberg, Roger & Rosenfeld) for Bert Villon and Mark Apana. Barry W.
Marr (Marr Jones & Wang) for Marriott Hotel Services. Paul Alston (Alston Hunt Floyd & Ing) for
Starwood Hotels & Resorts Worldwide.
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