Labor Relations & Wages Hours Update
September 2014
Hot Topics in LABOR LAW:
NMB certifies APFA as bargaining rep for newly merged American Airlines flight
attendants
The Association of Professional Flight Attendants (APFA) will welcome 8,500 new
members into its fold as the National Mediation Board on Tuesday, September 2,
certified the union as the bargaining representative for the new American Airlines (which
merged with US Airways in December 2013). In all, the combined airline employs more
than 24,000 flight attendants represented by the union.
APFA president Laura Glading announced the union’s certification in a letter to members
at the newly merged carrier on Tuesday, September 2. The union has represented
American flight attendants since 1977; the flight attendants from US Airways previously
had been represented by the AFA-CWA.
Two formal agreements between APFA and AFA-CWA paved the way for the
certification announcement: (1) an agreement on bargaining and representation and (2) a
negotiations protocol agreement. The documents detailed the way legacy US Airways
flight attendants would transition to APFA membership, as well as the process by which
the unions would reach a joint contract with the new company. Drawing on the hard
experiences of previous airline mergers, the unions “avoided the costly, distracting, and
divisive union elections that have plagued other mergers and put the combined
workgroup on a path towards an industry-leading contract.”
The negotiating committee is now in its final days of bargaining, according to the APFA.
The goal is to reach a tentative agreement on a joint industry-leading contract, which
would then be voted on by the combined membership.
Fast-food workers gear up for Thursday strike action
Fast-food workers — and the unions and worker organizations that are backing them in
their quest for higher pay — are readying themselves for another walkout in protest of
low wages and poor working conditions. “Fight for 15” has scheduled a nationwide job
action on Thursday, September 4 in a bid to secure a $15 per hour living wage for
employees working in fast-food restaurants. Organizers are hoping the work stoppage
will be the movement’s largest to date.
In July, Fight for 15 held a first-ever fast-food worker convention in Chicago, bringing
1,300 workers from dozens of cities, according to the organization, which is affiliated
with the SEIU. The two-day strategy session elicited promises from workers to “do
everything in our power” to secure a wage hike “and a union.” The workers will be
buoyed, no doubt, by the NLRB General Counsel’s recent determination that
McDonald’s Corp. could be held liable as a joint employer for the alleged labor
violations of its franchisees, as well as President Obama’s recent “shout out” to the Fight
for 15 movement over the Labor Day weekend.
HELP committee schedules hearing on Block nomination
The Senate HELP committee will take up the nomination of Sharon Block to serve as a
member of the NLRB in a hearing next Tuesday, September 9. Block, who had
previously served on the Board pursuant to a 2012 recess appointment that was
subsequently invalidated by the Supreme Court in Noel Canning v NLRB, was renominated by a determined President Obama in July. Obama had withdrawn her
nomination in 2013 as part of a deal with Senate Republicans in order to secure, at long
last, a fully functioning, Senate-approved NLRB. Since then, Block has served as senior
counsel in the DOL’s Office of the Secretary.
Block was an NLRB member from 2012-2013 and, prior to that, the DOL’s Deputy
Assistant Secretary for Congressional and Intergovernmental Affairs from 2009 to 2012.
She worked for the late Sen. Edward Kennedy (D-Mass) as senior labor and employment
counsel for the Senate HELP Committee from 2007 to 2009. She has also served as a
special assistant in the EEOC general counsel’s office and senior attorney for former
Board chair Robert Battista.
House workforce subcommittee to hold hearing on joint employment
The House Workforce Committee’s Subcommittee on Health, Employment, Labor, and
Pensions will hold a hearing on Tuesday, September 9 on “Expanding Joint Employer
Status: What Does it Mean for Workers and Job Creators?” Witnesses have not yet been
announced, but most invitees will likely take aim at the NLRB’ General Counsel’s recent
decision to hold McDonald’s Corp. potentially jointly liable with its franchisees for
violations of the NLRA.
After General Counsel Richard Griffin made the determination, House Education and the
Workforce Committee Chairman John Kline (R-Minn) issued a statement decrying
“activist decision” as “detached from reality.” Kline noted that at the same time the
NLRB was considering this very issue, the General Counsel was “trying to rewrite the
franchise model” that had been in place for decades.
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“Big Labor has scored once again at the expense of workers and employers,” according
to Kline. “Let’s hope wiser heads prevail and this absurd decision is rejected.”
Fast-food strike fallout: corporate pushback
By Lisa Milam-Perez, J.D.
“Fight for 15,” a labor-backed organization seeking to raise the wage rates of fast-food
workers, launched its latest coordinated strike effort on Thursday, September 4, with
thousands of workers reportedly walking off the job in support. AFL-CIO chief Richard
Trumka praised the latest concerted action, releasing a statement noting that “[w]orking
families everywhere applaud the courage of the fast food workers who are striking today
and engaging in acts of civil disobedience in over 150 cities. And we applaud the unity
and the collective spirit displayed by members of AFL-CIO state federations and labor
councils who have joined today’s protests in solidarity.” According to Trumka, the Fight
for 15 movement (a moniker that reflects the group’s long-term goal of a $15 an hour
wage rate) is surging, and the protests growing louder.
Some progressive public officials voiced their support too, including New York Attorney
General Eric Schneiderman, who noted that the average wage rate of fast-food workers,
at $8.74 per hour, left them well below the poverty level for a family of four. For its part,
Fight for 15 said thousands of strikers turned out in more than 150 cities, with nearly 500
arrests — pursuant to the group’s promised acts of civil disobedience.
Restaurant industry. However, the restaurant industry and business groups took pains to
frame Thursday’s work stoppage as a media event orchestrated by organized labor. The
Employment Policies Institute (EPI) had issued a preemptive strike on Wednesday, with
a media advisory asking the provocative question, “Who’s Behind the Curtain of the Fast
Food ‘Strikes’?” It offered food for thought for reporters to consider when covering the
day’s events, asserting that the strikes were hardly “grassroots” protests, but rather a
stage-managed event carried out under the direction of a New York PR firm with support
from Big Labor (the SEIU, in particular). EPI also noted that the strikers would likely
parrot carefully scripted talking points, citing commonly repeated tales of woe, and
contending that it would be hard to tell whether the participants were actually fast-food
workers or union campaign organizers. EPI also called the organization’s threatened civil
disobedience a “PR stunt” and the anticipated arrests a “frequent tactic of the SEIU.” (For
the record, the SEIU’s blog boasted that Thursday was “a historic day” and the work
stoppage “history making.” The union also looks to be deploying the model to home-care
workers, among other industries, recent indications suggest.)
Franchise association. The International Franchise Association (IFA) — still smarting,
no doubt, from the NLRB General Counsel’s recent announcement that McDonald’s
Corp could be held accountable for any potential labor law violations committed by the
corporation’s independent franchisees — also issued a statement in advance of
Thursday’s union-led protests. Steve Caldeira, IFA president & CEO, asserted that “the
protests for a higher minimum wage are much more than meet the eye,” adding that the
organizers have “self-interest, not public-interest, as their central aim.”
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The SEIU (the oft-maligned bogeyman of Fight for 15’s detractors) was again implicated,
as Caldeira noted that the union’s affiliates have staged and sponsored many such
protests in recent years “under the guise of trying to help the working poor.” Caldeira
noted, for good measure, that SEIU president Mary Kay Henry was spotted on Air Force
One over the Labor Day weekend, just prior to President Obama’s speech in Milwaukee
where he touted the fast-food campaign — a campaign that, in Caldeira’s view, “is
clearly part of an overt effort to undermine franchising.”
“The not-so-subtle subtext to the call for a higher minimum wage is the union’s effort to
persuade federal, state and local governments to declare that franchised businesses are
joint employers ignoring the fact that they are individually-owned, local small
businesses,” according to Caldeira. “The real reason for the protests is that the unions
believe they’ll have an easier time organizing a large entity compared to trying to
unionize thousands of separate businesses.”
“The protest’s focus on franchises is part of a special interest play by the SEIU,” Caldeira
continued. “It would be wrong to allow the SEIU and its affiliates to hide behind an
altruistic plea for higher wages when what they really want is a shortcut to refill their
steadily dwindling membership ranks and coffers.” Echoing this sentiment, the National
Restaurant Association said the protests were “nothing more than labor groups’ selfinterested attempts to boost their dwindling membership by targeting restaurant
employees.”
McDonald’s. No one had more skin in the game, of course, than McDonald’s Corp,
whose franchisees were the prime targets of Fight for 15’s wrath. In a media statement,
the company noted that, “during the most recent day of demonstrations, McDonald’s
restaurants were open for business as usual and welcomed customers.” It also said the
protests weren’t strikes, but staged events “in which people were transported to fast-food
restaurants. And, we have received reports that some participants were paid, up to $500,
to protest and get arrested.”
To its credit, McDonald’s corporate office used the planned work stoppage as an
opportunity to state its position on the minimum wage as a policy matter. “The topic of
minimum wage goes well beyond McDonald’s — it affects our country’s entire
workforce. McDonald’s and our independent franchisees support paying our valued
employees fair wages aligned with a competitive marketplace. We believe that any
minimum wage increase should be implemented over time so that the impact on owners
of small and medium-sized businesses — like the ones who own and operate the majority
of our restaurants — is manageable.
“Additionally, we believe that any increase needs to be considered in a broad context, one
that considers, for example, the impact of the Affordable Care Act and its definition of
‘full time’ employment, as well as the treatment, from a tax perspective, of investments
made by businesses owners.” The company also reiterated that 90 percent of McDonald’s
restaurants are independently owned by 3,000 U.S. franchisees that set their own wage
rates for their employees, in accordance with job demands and local and federal law.
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NLRB’s updated joint employer test: Job killer vs employee protector
By Pamela Wolf, J.D.
On Tuesday, September 9, a House Education and the Workforce Subcommittee held a
hearing on the NLRB’s reexamination of its joint employer test in light of current trends
— a move that Employment, Labor, and Pensions Subcommittee Chair Phil Roe (RTenn) called a “radical effort [that] is detached from reality.” At the hearing, Expanding
Joint Employer Status: What Does it Mean for Workers and Job Creators?, nearly the
entire panel of invited witnesses opposed the NLRB’s anticipated expansion of its current
rule to bring more workplaces under the reach of the NLRA. However, the single invited
witness who offered an opposing point of view discussed the realities of today’s
workplaces, painting a dismal picture of poverty wages and safety issues that he said
could rightly be addressed via an updated joint employer test.
Board reconsidering joint employer test. In May, the NLRB extended an invitation to
parties and interested amici to file briefs addressing its longstanding joint employer
standard, as raised in Browning-Ferris Industries (No 32-RC-109684). The Board had
granted the employer’s request for review of a Regional Director’s decision and direction
of election, finding it raised substantial issues warranting review.
The notice and invitation to file briefs focused on the following questions:

Under the Board’s current joint-employer standard, as articulated in TLI, Inc., 271
NLRB 798 (1984), enfd. mem. 772 F.2d 894 (3d Cir. 1985), and Laerco
Transportation, 269 NLRB 324 (1984), is Leadpoint Business Services the sole
employer of the petitioned-for employees?

Should the Board adhere to its existing joint-employer standard or adopt a new
standard? What considerations should influence the Board’s decision in this
regard?

If the Board adopts a new standard for determining joint-employer status, what
should that standard be? If it involves the application of a multifactor test, what
factors should be examined? What should be the basis or rationale for such a
standard?
If notice that the NLRB was reconsidering its joint employer test failed to get the
attention of the business community, the Board’s announcement in July that giant
franchisor McDonald’s could be potentially liable as a joint employer as a result of
activities related to worker protests raised a huge red flag that was hard to miss — a
firestorm of controversy ensued.
Attack on franchise model. Many saw these two actions by the Board as a direct attack
on the franchise model — a business relationship they hold in very high regard. “Each
day more than eight million Americans go to work at our nation’s 757,000 franchise
businesses,” Roe said. “The franchise model has encouraged entrepreneurship, the
growth of small businesses, and job creation. Countless men and women invest their
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tears, sweat, and savings to realize the dream of owning their own business, and the
franchise model has helped turn those dreams into a reality.”
According to Roe, the Board’s effort to update the joint employer test “will force small
businesses to close their doors, or at the very least, discourage new small businesses from
being created.” He said that workers will be on the losing end of what he called a “Big
Labor Bailout” when they can least afford it.
After the hearing, the Subcommittee underscored the testimony of several witnesses,
including that of attorney Todd Duffield, a shareholder at management-side labor and
employment firm Ogletree Deakins. He explained the implications of the Board’s
efforts: “The [traditional] test is clear, it makes sense, and it’s worked for over 30 years
… Congress should understand that these are not small, technical legal changes to labor
law. The consequences of changing the board’s current joint employer standard threatens
established business relationships and will cause significant economic upheaval.”
The Subcommittee also pointed to the testimony of witnesses who are engaged in the
franchise business. Catherine Monson, chief executive officer of FASTSIGNS
International, warned of the harmful impact that would be inflicted on employers and
employees alike. “Such a rule change could completely upend the franchise model and
have devastating consequences for franchising as an economic force in the United States
… [I]ndividual entrepreneurs would be deprived of the opportunity to own their own
business, franchisors would be denied the opportunity to expand their business, and
millions of jobs will be lost.”
FASTSIGNS franchisee Clint Ehlers expressed these concerns: “If franchise owners have
less independence and control, they can also expect lower profits. If profits are lower,
there will be less demand from entrepreneurs to start franchised businesses … A revised
joint employer standard will result in fewer new franchised businesses, at a time when
our economy is thirsty for growth and expansion.”
Finally, the Subcommittee shared this comment by small-business owner and franchisee
Jagruti Panwala: “Mr. Chairman, I am no intermediary. I am a business owner and jobcreator … I strongly urge this committee, and the National Labor Relations Board, to
consider the tremendously adverse impacts on franchisees and workers.”
“The American people deserve to know what the federal government is up to and how it
will affect their families,” Roe concluded. “Today’s hearing has helped shine a light on
those consequences and I hope encouraged the NLRB to change course.”
Joint employer test no longer effective? Although the Subcommittee did not share any
excerpts from his testimony, Western New England University School of Law Professor
Harris Freeman offered another point of view on the Board’s effort to update its joint
employer test. The law professor focused his comments on the economic realities and
legal issues relating to joint employer status in workplaces, where he said “extensive
subcontracting of core business functions depends on temporary staffing services and
franchising relationships.”
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According to Freeman, scrutiny of these two forms of business organization is critical in
order to understand why the NLRB “is looking to its traditional joint employer test as one
means of making fundamental labor rights available to workers experiencing the
precarious consequences of the profound transformations now occurring in the modern
workplace.” Through its reexamination of the joint employer test, the Board “is fulfilling
the responsibility that the U.S. Supreme Court has held is entrusted to it, i.e., to ‘adapt the
Act to changing patterns of industrial life,’” Freeman said. “In my lifetime, no change in
the patterns of industrial life has been more upending than the rapid expansion of
precarious low-wage work and subcontracting that has irreversibly fissured the 21st
century workplace.”
Temporary staffing and franchising claim a disproportionate share of the economic
growth that followed the Great Recession of 2008, Freeman explained. He described the
economic impacts of this trend: “Soaring profits and substantial job growth in these
sectors has advanced hand in glove with poverty-level wages and extraordinarily high
rates of wage theft and health and safety violations.”
How do temp workers fare? “Compared to direct hires, temp workers experience a wage
penalty, which is most severe for blue-collar temps who now comprise 42 per cent of the
temporary staffing workforce,” according to Freeman. He cited the example of temp
workers who load and unload goods for WalMart and other big box stores in metro
Chicago — they comprise over two-thirds of the 150,000 workers in the warehouse
workforce. These workers are paid an average of $9 per hour or $3.48 less than direct
hires, Freemen said, and nearly two-thirds fall below the federal poverty line. “A well
documented, national epidemic of wage theft by unscrupulous staffing agencies and their
clients only makes matters worse for temps,” he added. Freeman also pointed to OSHA
complaints and protests by temp workers that revealed major health and safety issues,
which he said prompted OSHA to establish a Temporary Worker Initiative to determine,
in part, when the agency should hold staffing agencies and client employers jointly liable
for violations impacting the temp workforce.
What are the realities for franchise employees? The law professor noted that there are
more than 3.5 million fast-food workers, more than 75 percent of whom work in
franchised outlets. “Numerous studies indicate that under-employment, poverty-inducing
earnings and wage theft are the norms,” he observed. “Households that include an
employed, fast-food worker are four times as likely to live below the federal poverty
level. The social costs of these conditions are born by U.S. taxpayers who shell out about
$3.8 billion per year to cover the cost of public benefits received by fast-food workers
employed at the top-ten fast-food franchises who are compelled to rely on government
welfare programs to supplement poverty level wages.”
Making the test fit today’s realities. Freeman said that because these workplace ills that
are pervasive in temping and franchising arrangements are subject to correction through
unfair labor practice charges and collective bargaining, the NLRB is rightly reexamining
its joint employer test. “Nothing in the statutory text of the NLRA or in well-reasoned
precedent prevents the Board from returning to the traditional joint employer test that was
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the norm until 1980 when a rigid and narrower conception of joint-employment gained
sway in Board proceedings,” he pointed out.
“In temporary staffing arrangements, the user employer controls the day-to-day work
environment of the temporary workforce,” according to Freeman. “The standard staffing
contract assigns to the staffing agency only control over wage payments, withholding of
payroll taxes, provision of workers’ compensation and ensuring civil rights compliance.”
“Tightly controlled business format franchisee arrangements have expanded significantly
in the last decade to ensure that major franchisors like Burger King and other fast-food
corporations can maintain uniformity of brand, product and operations that are essential
to its business model,” according to Freeman. “Under these agreements, control over
franchisee workers’ terms and conditions of employment are exercised through training,
operating manuals, and communications with franchisees established in these business
format agreements.”
In light of economic realities, Freeman asserted, the NLRB is well within its
Congressionally granted authority to adapt its traditional joint employer test to determine
whether client employers of a temporary staffing agency or major franchisors are joint
employers.
Tentative deal gives a raise to home care workers in Washington
SEIU Healthcare 775 NW and Washington State labor officials have reached a tentative
agreement that would raise the average wage for home care workers in the state to more
than $14/hour. The deal, reached on Thursday, September 4, covers more than 33,000
individual providers of long-term supports and services to older adults and people with
disabilities. The deal marks the first time since 2004 that an agreement was reached at the
bargaining table without going to binding arbitration, according to the union.
The contract still must be ratified by union members and funding must be approved by
the state legislature. While the cost of the contract has not yet been officially set, union
officials estimate it would cost less than $60 million in state funds annually —
significantly less than the cost of the last arbitration award.
The tentative agreement also includes a modest initial defined-contribution retirement
benefit and an increase in paid-time off or PTO. Thousands of caregivers who work for
agencies such as ResCare or Catholic Community Services also will benefit. The CBA
leads to increased funding for private agencies to provide similar increases to their
caregivers, the union said.
“The state this year recognized that caregivers should not be required to take a vow of
poverty to do their jobs,” said Adam Glickman, SEIU 775 Secretary Treasurer. “Workers
also recognize the state’s precarious fiscal situation, and while we had hoped to reach $15
for caregivers, we understand that workers now are on a pathway to reach that iconic
goal.”
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The union vowed that the fight for caregivers is far from over. State-mandated reductions
in hours to vulnerable adults have made it difficult for many caregivers to pay the bills.
While caregivers and the state’s most vulnerable populations continue to suffer, the union
said, giant corporations enjoy massive tax breaks.
SEIU 775 represents 44,000 long-term care workers in Washington and Montana.
HELP Committee mulls controversial NLRB nominee Sharon Block
By Pamela Wolf, J.D.
The Senate Committee on Health, Education, Labor, and Pensions (HELP) on
Wednesday, September 10, held a hearing on President Obama’s controversial
nomination of Sharon Block to serve as Member on the National Labor Relations Board.
The nominee’s previous unconstitutional recess appointment, as determined by the
Supreme Court in its June 2014 Noel Canningdecision, created “a mess of confusion” for
Tennessee workers and employers who depend on the Board to create stability in the
workplace, according to Sen. Lamar Alexander (R-Tenn), the senior Republican on the
Committee. But Committee Chair Tom Harkin (D-Iowa) saw it differently, calling Block
“an exceptionally well-qualified and dedicated public servant.”
Block remained on the Board through July 2013, despite federal court rulings that found
her appointment unconstitutional, and despite Republican Senators’ repeated calls for her
to step down, Alexander noted in a statement. He also pointed out that the Supreme
Court’s decision invalidated 436 Board decisions in contested cases, which must now be
re-decided.
“I am concerned that the businesses and workers who count on the NLRB for stability are
being asked to rely on the judgment of someone who chose instead to create confusion
and instability,” Alexander said. “I am concerned too that in her time on the Board, Ms.
Block has demonstrated a willingness to tilt the playing field towards organized labor.”
Harkin expressed strong support for Block, however. “I believe any nominee that comes
before this Committee should be Pro-Act and am confident that Ms. Block — with her
labor and employment law expertise and wealth of experience at the Board – will be such
a person,” Harkin said in a statement. “Two of the qualities that have always impressed
me about Ms. Block are her commitment to public service and her ability and willingness
to work with Democrats, Republicans, or whomever as long as they are committed to
upholding and enforcing our nation’s labor and employment laws.
The Committee Chair also addressed the clamor regarding Block’s prior service as a
recess appointee, saying: “During that period, I watched as she courageously fulfilled the
duties she had sworn to carry out as a Member of the Board, even in the face of constant
political interference and even personal attacks. Those criticisms and attacks were unfair
then and they are unfair now. Ms. Block conducted herself appropriately at all times
during her previous service and instead of attacks, she deserves our appreciation because
without her service the Board would have lacked a functioning quorum and would have
had to shut down.”
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The Committee “would be hard pressed to find a more qualified nominee than Ms.
Block,” according to Harkin. “Keeping the NLRB fully staffed and able to do its work
will send a strong message to the American people that Washington can work, and yes,
our government can function. It will give certainty to businesses and assure workers that
someone is looking out for their rights and ready and able to enforce our nation’s labor
laws.”
But Alexander queried Block about several ongoing board issues, including an NLRB
effort to require employers to provide union organizers with employees’ personal
information: “In a secret ballot election last February, workers voted 712-626 to reject the
United Auto Workers’ bid to unionize the plant. If you were one of the 712 employees
who voted no, that you didn’t want to organize, would you want your boss to hand over
your email address to the union organizers? What about your cell phone number? Your
work location and shift details?”
The Republican Senator also asked Block about an upcoming NLRB decision on the
unionization of college athletes. “Do you believe that Congress, when it wrote the
National Labor Relations Act, intended that the quarterback at Vanderbilt University or
the woman’s basketball player at [Drake University] who is on scholarship be considered
an employee of the university?”
Alexander also said that Block has shown a willingness to tilt the playing field toward
organized labor during her time on the Board. “This nominee would not be the first to tilt
the playing field one way or the other. The NLRB has, in my opinion, become more
partisan in recent decades. Policy reversals and dramatic shifts are becoming a regular
expectation with each new Administration.”
Next week, Alexander and Sen. Mitch McConnell (R-Ky) plan to introduce legislation
aimed to restore the NLRB to what he characterized as its “intended role of acting as an
umpire and applying the law fairly and impartially, instead of acting as an advocate for
one side over the other.”
Senate Republicans move to constrain NLRB
By Pamela Wolf, J.D.
Senate lawmakers have introduced legislation purportedly aimed to turn the NLRB “from
an advocate to an umpire and keep the general counsel from operating as an activist for
one side or the other” — and, if enacted, the proposal will certainly constrain NLRB
activity. On Tuesday, September 16, Senate Republican Leader Mitch McConnell (RKy.) and Sen. Lamar Alexander (R-Tenn.) introduced the NLRB Reform Act, designed to
address what the lawmakers characterized as three problems with the Board — its
partisanship, its activist general counsel, and its slow decision-making.
Partisanship. The legislation, which the lawmakers said provides three solutions to these
problems, would end partisan advocacy by increasing the number of Board Members
from five to six, requiring an even split between Republicans and Democrats. Decisions
would require the agreement of four Board Members, resulting in consensus from both
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sides. The proposal would also synchronize over time the five-year terms of the Board
Members so that a Republican and Democrat seat were up for nomination at the same
time.
General counsel. The reform bill would also “rein in the general counsel” because,
according to the proposal’s sponsors, the NLRB’s most recent general counsels “have
stretched federal labor law to its limits — and sometimes beyond.” The NLRB Reform
Act would give both parties 30 days to seek review of a general counsel’s complaint in
federal district court. It would also establish new discovery rights permitting parties to
obtain memoranda and other documents relevant to the complaint within 10 days.
Timely decision-making. To address the NLRB’s “slow decision-making,” the proposal
ostensibly would “encourage” timely decision-making by permitting either party in a case
before the board to appeal to a federal appeals court if the Board failed to reach a
decision within one year. In what Mitchell and Alexander described as an effort to
“incentivize speedy decision-making,” the NLRB Reform Act would also reduce funding
for the entire NLRB by 20 percent if the Board is unable to decide 90 percent of its cases
within one year over the first two-year period post-reform.
Supreme Court line-up includes weighty labor and employment questions
By Pamela Wolf, J.D.
When the Supreme Court begins it Fall 2014 term on Monday, October, 6, it will face a
line-up of labor and employment law cases that give the Justices the opportunity to
substantially shape the practice area. The issues laid at the Court’s door include weighty
issues such as whether the NLRB must go through notice-and-comment rulemaking
before changing prior regulatory interpretations and the right of courts to pass judgment
on the adequacy of the EEOC’s pre-litigation conciliation efforts. The Justices will also
examine the increasingly controversial question of whether time spent in employer
security screens is compensable and the extent to which companies must accommodate
pregnant workers in keeping with the accommodations they extend to non-pregnant
workers.
Below is a brief run-down of labor and employment cases that are on Employment Law
Daily’s radar:
NLRB’s flip-flop on the application of the FLSA’s administrative exemption. Related
petitions in Perez v. Mortgage Bankers Association and Nickols v. Mortgage Bankers
Association ask the Court to resolve the question of whether a federal agency must
engage in notice-and-comment rulemaking before it can significantly alter an interpretive
rule that articulates an interpretation of an agency regulation. The petitions were brought,
respectively, by the Secretary of Labor and an intervening mortgage loan officer. The
Court has consolidated the petitions and slated the question for an hour of oral argument
on Monday, December 1.
Below, the D.C. Circuit reversed a district court order dismissing the Mortgage Bankers
Association’s challenge to a DOL Wage and Hour Division “Administrator
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Interpretation” concluding that mortgage loan officers were nonexempt under the FLSA
(Mortgage Bankers Association v Harris, July 2, 2013, Brown, J). According to the
appeals court, since the DOL’s most recent interpretation was at odds with its earlier
interpretations, the agency was required to go through the notice-and-comment process.
EEOC’s duty to conciliate. In Mach Mining v. EEOC, the Justices are slated to resolve
the increasingly controversial question of whether and to what extent courts may enforce
the Commission’s mandatory duty to conciliate discrimination claims before filing suit.
The case has not yet been set for oral argument.
The Seventh Circuit ruled that Mach Mining could not raise the EEOC’s failure to
conciliate in good faith as an affirmative defense to the agency’s sex discrimination in
hiring suit against the company. The decision was at odds with the rulings of other
federal circuit courts. The language of Title VII, the lack of a meaningful standard for
courts to apply, and the overall statutory scheme convinced the Seventh Circuit that an
alleged failure to conciliate is not an affirmative defense to the merits of a discrimination
suit. The Seventh Circuit also explained that finding in Title VII an implied failure-toconciliate defense would add to that statute an unwarranted mechanism by which
employers could avoid liability for unlawful discrimination.
There is a messy circuit split on the question that begs for resolution by the Court.
According to the EEOC, in contrast to the Seventh Circuit, the Second, Fourth, Fifth,
Sixth, Eighth, Tenth, and Eleventh Circuits have concluded that courts are permitted at
least to inquire into the sufficiency of the agency’s informal conciliation efforts.
However, those courts of appeals differ as to what standard the agency must meet and
whether its failure to meet that standard warrants dismissal of a Title VII lawsuit on the
merits.
Compensation for time spent in employer security screening.Integrity Staffing
Solutions, Inc. v. Busk presents a question that employees are challenging more and more:
Whether time spent in security screenings is compensable under the FLSA, as amended
by the Portal-to-Portal Act? The Court will hear oral argument on Wednesday, October 8.
The petition for cert was filed by an employer that was sued by warehouse workers
seeking back pay, overtime, and double damages under the FLSA for time spent in
security screenings after the end of their work shifts. The employees purportedly were not
compensated for up to 25 minutes spent at the end of their workday waiting to be
searched and passed through metal detectors.
The district court initially dismissed the warehouse workers’ claims on the grounds that
such activities were not compensable under the FLSA. But the Ninth Circuit saw it
differently and reversed. As alleged, the security clearances were necessary to the
employees’ primary work as warehouse employees and done for Integrity’s benefit,
according to the appeals court. As a result, the employees stated a plausible claim for
relief.
12
Integrity asserts that the Ninth Circuit’s ruling “squarely conflicts with decisions from the
Second and Eleventh Circuits holding that time spent in security screenings is not subject
to the FLSA because it is not ‘integral and indispensable’ to employees’ principal job
activities.”
Pregnancy accommodations. In Young v. United Parcel Service, Inc., the Justices are
asked to determine the extent to which employers must accommodate pregnant
employees in light of accommodations extended to other workers. Specifically, the
question for review is: “Whether, and in what circumstances, an employer that provides
work accommodations to nonpregnant employees with work limitations must provide
work accommodations to pregnant employees who are ‘similar in their ability or inability
to work.’” The case is scheduled for oral argument on Wednesday, December 3.
The petition for cert was filed by an employee who became pregnant during a leave of
absence to receive in vitro fertilization, but found when she tried to return to work, UPS
would not accommodate her 20-pound weight-lifting restriction. The question presented
is “exceptionally important,” according to the petition, which points to a recent
observation by the EEOC’s General Counsel: “[d]iscrimination against pregnant women
and caregivers potentially affects every family in the United States.”
The Fourth Circuit held that the UPS policy providing light-duty work only to employees
who had on-the-job injuries, employees with disabilities accommodated under the ADA,
and employees who had lost Department of Transportation (DOT) certification was not
direct evidence of pregnancy-based sex discrimination. Nor could a pregnant employee
who was unable to work during her pregnancy because of a lifting restriction establish a
prima facie case of pregnancy discrimination because the court agreed that she was not
similarly situated to employees with work-related injuries, ADA disabilities, or those
who had lost DOT certification.
Other cases of interest to labor and employment practitioners include:
---M&G Polymers USA, LLC v. Tackett, set for oral argument on Monday, November 10.
The case presents the question whether, when construing CBAs in LMRA cases, courts
should presume that silence concerning the duration of retiree health-care benefits means
the parties intended those benefits to vest and thus continue indefinitely.
---Department of Homeland Security v. MacLean, slated for oral argument on Tuesday,
November 4. The Justices are asked to determine whether certain statutory protections in
the Whistleblower Protection Act that are inapplicable when an employee makes a
disclosure “specifically prohibited by law” can bar an agency from taking enforcement
action against an employee who intentionally discloses Sensitive Security Information.
---Dart Cherokee Basin Operating Company v. Owens, scheduled for oral argument on
Tuesday, October 6, places an important procedural question before the Justices: Whether
a defendant seeking removal to federal court is required to include evidence supporting
federal jurisdiction in the notice of removal, or is alleging the required “short and plain
statement of the grounds for removal” enough?
13
---Public Employees’ Retirement System of Mississippi v. IndyMac, schedule for oral
argument on Monday, October 6 — the first day of the new term — asks the Court to
revisit the American Pipe tolling rule. The question is whether the filing of a putative
class action serves, under the American Pipe rule, to satisfy the three-year time limitation
in Sec. 13 of the Securities Act with respect to the claims of putative class members?
Opening conference. The High Court will hold its opening conference for it Fall 2014
Term on Monday, September 29. Any number of pending petitions for cert in labor- and
employment-related cases could be granted at that time, including the petitions for cert
that seek review of state same-sex marriage bans. Also raised in pending petitions are
questions regarding the nature of “actual knowledge” required by employers in religious
accommodation cases, the requirements of the test to determine compensable work under
the FLSA when health and safety matters are at issue, ERISA’s anti-retaliation
protections in the wake of unsolicited complaints to management, whether a granted
transfer request can be an adverse action in Title VII and ADEA discrimination cases,
and several arbitration-related issues.
Lawsuit pushes DOT to move on truck driver training rule
By Pamela Wolf, J.D.
A lawsuit filed in the District of Columbia on Thursday, September 18, aims to get the
U.S. Department of Transportation (DOT) moving on its truck driver training rule. Filed
by Advocates for Highway and Auto Safety, the Teamsters, and Citizens for Reliable and
Safe Highways (CRASH), the petition for writ of mandamus asks the federal appeals
court to direct the DOT to issue a long-overdue rule outlining training standards for
entry-level truck drivers.
Congress initially told the DOT to finish a rulemaking process on driver training by 1993,
but the agency has failed to do so. The petitioners brought suit against the DOT and the
Federal Motor Carrier Safety Administration (FMCSA), the agency charged with issuing
the rule. The petitioners are represented by Public Citizen.
Still waiting for the rule. In 1991, Congress passed a law requiring the DOT to complete
rulemaking by 1993 on the need to require training of entry-level commercial motor
vehicle operators, the petitioners pointed out in a release. In 2002, when no rule had been
issued, safety advocates went to court to force the agency to act. The DOT agreed to issue
the rule by 2004. While it did issue a rule that year, the petitioners characterized the rule
as “grossly inadequate, requiring only 10 hours of classroom lectures, none of it on-theroad training.” That remains the current rule.
After safety advocates return to court, a 2005 ruling found that FMCSA had disregarded
volumes of evidence that on-street training enhances safety, the petitioners explained in a
release. In 2007 the DOT issued another proposed rule, but it was never finalized. In
2012, Congress passed a second law, Moving Ahead for Progress in the 21st Century Act
(MAP-21), requiring the DOT to issue the entry-level training rule by October 1, 2013.
Congress specified that the rule had to include behind-the-wheel training.
14
During the next year, FMCSA held listening sessions. On September 19, 2013, the
FMCSA withdrew the 2007 proposed rule that had been in limbo and said it was going
back to the drawing board. On August 19, 2014, FMCSA published a notice indicating it
had not begun work on the new rule. Instead, FMCSA said that it was exploring
conducting a negotiated rulemaking, and that it had hired a “neutral convener” who
would interview all concerned parties, balance all the interests, and issue a report before
the agency decided what type of rulemaking to undertake. No timetable has been given
for completion of the rule.
Mandamus request. In light of these and other facts and circumstances, the petitioners
have asked the court to issue a writ of mandamus directing the DOT, the DOT Secretary,
and the FMCSA to publish proposed regulations that establish entry-level training
requirements for commercial motor vehicle operators within 60 days and to issue a final
rule 120 after the proposed rule is published.
“The FMCSA’s inaction to release a new notice of proposed rulemaking for entry-level
driver training is perpetuating a hazard for everyone on our roadways by permitting
inexperienced drivers to interact with the unknowing public,” said John Lannen,
executive director of the Truck Safety Coalition, a partnership between CRASH and
Parents Against Tired Truckers. “This hazard will only grow in scope as the turnover rate
for truck drivers continues to remain extremely high — over 90 percent — and the
current truck driver work force ages out.”
“Proper training is absolutely necessary for new drivers to operate their rigs safely,” said
Jim Hoffa, Teamsters General President. “The agency is shirking its responsibility by not
issuing this long-overdue rule.”
Republican lawmakers want NLRB complaints, communications, documents related
to joint-employer status
By Pamela Wolf, J.D.
As the controversy continues over the NLRB’s re-examination of its long-standing jointemployer standard, Republican lawmakers have asked NLRB General Counsel Richard
Griffin to produce documents and other information regarding what they called “his
effort to rewrite the joint-employer standard under the National Labor Relations Act.”
House Education and the Workforce Committee Chairman John Kline (R-Minn.) and
Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe (R-Tenn.)
sent a letter to Griffin that purports to seek insight into his reasoning for considering a
broader standard for determining joint-employer status under the NLRB.
The lawmakers also underscored, among other things, the General Counsel’s recent
authorization of complaints against USA, LLC and McDonald’s franchisees as jointemployers — some 43 complaints that they characterized as “unprecedented.”
A week ago, the Subcommittee held a hearing on the NLRB’s purported expansion of the
joint-employer test, which Roe called a “radical effort [that] is detached from reality.” All
but one of the invited panelists predictably opposed expansion of the standard.
15
In this latest move, Kline and Roe asked Griffin to provide the following information by
September 30, 2014:

A list of all open complaints in which joint-employer status is an issue;

Any documents and communications related to closed complaints in which jointemployer status was an issue; and

A thorough description of the current joint-employer test the general counsel’s
office is applying, particularly its application to franchises.
In May, the NLRB extended an invitation to parties and interested amici to file briefs
addressing the Board’s joint employer standard, as raised in Browning-Ferris Industries
(No 32-RC-109684). On April 30, the Board granted the employer’s request for review of
a Regional Director’s decision and direction of election, finding it raised substantial
issues warranting review.
If that wasn’t enough to put the business community on high-alert, in June, the agency’s
Office of the General Counsel poured fuel on the fire when it announced that
McDonald’s would be named as a joint-employer respondent with regard to any
unresolved charges against its franchisees stemming from worker protests.
HELP Committee gives Sharon Block a thumbs-up
By Pamela Wolf, J.D.
On Wednesday, September 17, the Senate Health, Education, Labor, and Pensions
(HELP) Committee gave a thumbs-up to President Obama’s nomination of Sharon Block
to serve as Member on the NLRB. Chair Tom Harkin (D-Iowa) noted that the nominee
had advanced with bipartisan support. Ranking Committee Member Lamar Alexander
(R-Tenn.), however, was not part of that support.
Obama re-nominated Block in July — a move that stirred some controversy due to her
previous recess appointment, found to be unconstitutional by the Supreme Court in its
June 2014 Noel Canning decision. Block had remained on the Board through July 2013,
despite federal court rulings that found her appointment unconstitutional, and despite
Republican Senators’ repeated calls for her to step down.
“A strong economy starts with fair wages, good benefits, and safe working conditions,
and a fully-functional NLRB plays a critical role in helping American workers achieve
that,” Harkin said in a statement. “Sharon Block is an exceptionally well-qualified
nominee and I look forward to her consideration by the full Senate for this important
role.”
The nominee began her career labor and employment law career at Steptoe and Johnson,
where she represented employers. Block next became an NLRB attorney, working for the
agency for more than 10 years. Block has also held senior roles at the DOL and the
EEOC.
16
Harkin pointed to Block’s “vast experience” in labor and employment law, which he
noted includes working for officials on both sides of the aisle. She has served as a staffer
for Chairman Kennedy on the Senate HELP Committee and for Secretary Perez at DOL;
as counsel to Republican EEOC General Counsel Ron Cooper; and as a staffer of former
Republican NLRB Chairman Robert Battista.
Senator Alexander separately announced his vote against Block’s nomination, saying:
“Ms. Block showed a troubling lack of respect for the Constitution, the separation of
powers, and the Senate’s constitutional role of advice and consent by continuing to serve
on the board and participate in hundreds of decisions after the D.C. Circuit and then the
Fourth Circuit found her appointment unconstitutional. In those decisions where she did
participate, she aligned herself with a disturbing trend of the board becoming more of an
advocate than an umpire.”
Three new ALJs appointed
The NLRB has appointed three new administrative law judges (ALJs) — all of whom are
sitting ALJs transferring from the Social Security Administration: Judges Charles Muhl,
Ariel Sotolongo, and Amita Tracy.
Judge Muhl, who was with the Social Security Administration for the past year,
previously spent 11 years as a trial attorney with the Board’s Chicago regional office,
where he handled some of the region’s more significant cases. He was also a private
sector attorney and an economist with the DOL. Judge Muhl received his B.A. degree,
magna cum laude, from Washington University of St. Louis and his J.D. degree from
Georgetown University Law Center. He will be assigned to the Division’s Washington
office.
Judge Sotolongo has been a Social Security judge the past 13 years. Previously, he spent
22 years as an NLRB senior trial specialist in both Region 21 in Los Angeles and Region
32 in Oakland, where he handled some of the more complicated and complex cases in
those regions. He also served a short stint as a senior trial attorney in the DOJ,
specializing in immigration-related unfair employment practices. He received his B.A.
degree, with honors, from the University of California in San Diego and his J.D. degree
from the University of California at Davis. He will take his assignments from the
Division’s San Francisco office.
Judge Tracy, a judge with Social Security for three years, most recently was the hearing
office chief judge in San Rafael, California. Before that she spent five years litigating and
handling employment law matters and presenting cases in federal courts as an attorney
and supervisory attorney for the General Counsel of the Social Security Administration.
She previously spent four years as an attorney litigating unfair labor practice and related
cases with the Federal Labor Relations Authority. Judge Tracy received her
undergraduate degree from Vanderbilt University and her J.D. degree from Case Western
Reserve University School of Law. She will be assigned to the Division’s San Francisco
office.
17
AA flight attendants get tentative deal, passenger service agents unionize
By Pamela Wolf, J.D.
The Association of Professional Flight Attendants (APFA) has reached what the union
called an “industry-leading” tentative deal on a contract for the flight attendants of the
new American Airlines. In a separate development, passenger service agents opted for
CWA-IBT representation — something rarely seen in the South.
Flight attendants. While the effort itself spanned almost three years, the flight attendant
contract agreement came just 10 months after the merger of American and US Airways
closed in December of 2013. A joint negotiating committee comprised of both legacy
American and legacy US Airways flight attendants reached the agreement after 150 days
of expedited negotiations, according to an APFA release on September 19.
The union said that by supporting the US Airways bid to merge with American in
bankruptcy and pushing the plan from inside the Chapter 11 proceedings, it “played a
critical role in bringing together the two airlines last year.” Part of the APFA’s agreement
with US Airways was “a fast and direct path to an industry-leading contract following the
merger's close.” The parties developed a protocol that provided expedited contract
negotiations followed by a backstop of interest arbitration. The APFA explained that its
goal was to achieve the highest wages and best work rules from the network carriers
during negotiations, leaving nothing to arbitration — it was achieved on Friday,
September 19, the final day of negotiations.
“The ads are true: the new American has arrived,” APFA President Laura Glading
remarked. “Our team was tenacious, they were well-prepared, and in the end they brought
home an outstanding agreement. They proved to the company, in black and white, the
value flight attendants bring to the new American. I couldn't be more proud of their work.
And to the company's credit, they really stepped up in a way that puts the entire industry
on notice.” The deal would not have been possible without the merger, according to
Glading. “In my earliest conversations with [American CEO] Doug Parker and
[American President] Scott Kirby, they talked about building the greatest airline in the
world. We agreed that in order for that to happen, the employees needed to be
compensated appropriately. And we worked together for almost three years to make that
happen. This is a truly momentous accomplishment for the flight attendants.” The
tentative contract must be ratified by a membership vote. The APFA Executive
Committee will decide whether to send the tentative agreement to the membership for
approval. There is a 30-day balloting period for APFA contract ratification. All flight
attendants — legacy American and legacy US Airways — who are dues-current APFA
members will have the right to vote on the agreement.
Passenger service agents. Other American Airlines employees have scored a significant
victory. In what the CWA characterized as “the biggest organizing victory in the South in
decades,” 9,000 American Airlines passenger service agents joined with their nearly
6,000 US Airways colleagues and overwhelmingly voted for the union to represent them
at the merged airline.
18
On September 16, by an 86-percent vote — 9,640 to 1,547 — airport and reservations
agents agreed to representation by the CWA-IBT Association. US Airways agents have
been CWA members since 2000. US Airways merged with America West in 2005;
passenger service agents at the former America West had organized with the IBT in
2004. After the merger, the CWA and the IBT formed the Airline Customer Service
Employee Association, CWA-IBT.
Notably, three-fourths of the American agents work in Texas, North Carolina, Florida,
and Arizona, and 2,300 are home-based reservations agents.
CWA President Larry Cohen said the vote showed that workers who can make a fair
choice about union representation want bargaining rights. “When it is left to the
employees, they would rather have a voice,” he said.
A first for the Board: trial by international video conferencing
For the first time in the NLRB’s history, attorneys in the agency’s San Francisco regional
office conducted a trial examination of a witness via international video conferencing, the
Board announced on Tuesday, September 23. A former employee now working in
Madrid, Spain, was allowed to testify by video conference from the U.S. Embassy there,
at the General Counsel’s request.
There were a number of safeguards in place at the hearing: A representative of the
employer was present at the remote location at the embassy and observed the
proceedings; a reporter was present in San Francisco and transcribed the testimony; the
reporter, and all participants, could hear all of the speakers, wherever they were located;
cameras could be adjusted at both locations in order to afford not only a close-up view of
counsel and the witness, but also a panoramic view of the room; exhibits were exchanged
in advance of the videoconference session; and video technicians were present at
both sites in order to be available to attend to any technical difficulties that may have
arisen.
In a decision issued September 15, law judge Mary Cracraft rejected the employer’s
objection that the use of videoconferencing would not allow an adequate opportunity to
assess witness credibility and might not be trustworthy. Although the Board has not yet
ruled on the use of video testimony in unfair labor practice cases, Cracraft wrote that the
employer, EF International Language Schools, was not denied due process by the use of
videoconferencing for the testimony. In certain circumstances, she concluded, fact finders
could similarly assess video and live testimony. And, on the merits, she found the
employer violated the NLRA when it threatened and discharged an employee because of
her personal and email discussions with coworkers about their terms and conditions of
employment.
$1M in assistance to Hyatt housekeepers ends union’s hotel boycott in Boston
Hyatt and UNITE HERE Local 26, the hospitality workers union, have announced an
agreement that resolves a longstanding dispute between the two organizations. Both
UNITE HERE Local 26 and Hyatt hailed the pact as a positive step, one that will
improve the relationship between the union and the company.
19
Under the agreement’s terms, Hyatt will provide $1 million in assistance to housekeepers
who were terminated at Hyatt Boston Harbor, Hyatt Regency Boston, and Hyatt Regency
Cambridge in 2009. In addition, Hyatt will offer the housekeepers priority in the
application process for a housekeeping position at specified future Hyatt-managed hotels
within Boston and Cambridge. This financial assistance will be distributed based on each
of the housekeepers’ years of service.
In return, UNITE HERE Local 26 will end its boycott activities aimed at Hyatt Boston
Harbor, Hyatt Regency Boston, and Hyatt Regency Cambridge. “We never forgot the
courage these workers showed by speaking up when they were let go,” said Brain Lang,
president of UNITE HERE Local 26. “Hyatt is showing courage by doing the right thing
today.”
“Through this agreement, we are able to demonstrate care for our former colleagues,”
said Marc Ellin, senior vice president at Hyatt. “Each of these former associates made a
difference in the lives of guests who stayed in our hotels. We are very pleased to extend
assistance to them and offer them priority in hiring as new jobs become available at
future Hyatt-managed hotels.”
Hyatt and UNITE HERE Local 26 are working together to notify the housekeepers of this
agreement.
LEADING CASE NEWS:
3d Cir.: Union can’t benefit from favorable order where it failed to file appeal
By Ronald Miller, J.D.
A union that did not appeal a bankruptcy court order permitting an employer to
unilaterally terminate retiree benefits could not benefit from another union’s appeal of
that order, ruled the Third Circuit in an unpublished decision. Despite concluding that the
employer’s actions negated explicit procedural protections Congress intended to create as
part of the bankruptcy process, the appeals court found that the omission was forgiven
when an affected party did not seek legal redress and appeal the underlying decision of
the bankruptcy court (In re Visteon Corp, August 28, 2014, Chagares, M).
Termination of retiree benefits. An automobile parts supplier filed a bankruptcy
petition in 2009. Shortly after filing its petition, the employer sought permission under
the Bankruptcy Code, 11 U.S.C. Sec. 363(b)(1), to terminate “other post-employment
benefits” (OPEB) that it had previously provided to certain retirees. The employer gave
notice to every retiree that would be affected as well as the labor unions that had
represented them. At the time of the bankruptcy, most of the employer’s plants were
closed. The Automobile Workers (UAW) and Electrical Workers (IUE) along with
numerous employees contested the termination of benefits, arguing that the employer
would need to comply with Sec. 1114 of the Bankruptcy Code, which contains certain
substantive and procedural protections for retiree benefits in bankruptcy.
20
The bankruptcy court determined that the employer did not need to employ the
procedures of Sec. 1114, and could terminate the OPEB unilaterally while still in
bankruptcy. However, the bankruptcy court carved out the benefits for retirees for a plant
that was still operating and subject to an ongoing collective bargaining agreement
governing employee and retiree benefits. Only the IUE appealed the OPEB determination
to the district court, which affirmed. The IUE then appealed to the Third Circuit, which
reversed, holding that the employer could not terminate retiree benefits without
employing the procedures of Sec. 1114.
Thereafter, both the IUE and UAW filed motions to reinstate the OPEB for all retirees.
The bankruptcy court agreed and restored the benefits. It viewed the Third Circuit’s order
as voiding the termination of retiree benefits. It subsequently confirmed the employer’s
reorganization plan and reserved the employer’s right to terminate retiree benefits after it
emerged from bankruptcy. The employer appealed the bankruptcy court’s order restoring
retiree benefits to the district court. According to the employer, the UAW and its retirees
remained bound by the OPEB termination order because they never appealed it. The
employer further argued that because the UAW was not a party in the IUE’s appeal, it
could not now reap the benefit of the relief granted to the IUE. After the district court
ruled in favor of the employer, the UAW timely appealed.
Obligation to appeal. As an initial matter, the Third Circuit pointed out that it is clear
“that any party contesting an unfavorable order or judgment below must file an appeal.”
The appeals court found the Supreme Court’s ruling in Ackerman v. United States
instructive. In Ackerman, only one of three plaintiffs appealed the cancellation of their
naturalization. That plaintiff prevailed on his appeal, after which the remaining plaintiffs
attempted to avail themselves of his victory. The Supreme Court rejected their attempt. It
held that they had a “duty to take legal steps to protect [their] interest in [the] litigation,”
and that the outcome of the brother’s case could not undo their “voluntary, deliberate,
free, untrammeled choice . . . not to appeal.”
Those principles applied in this case. The UAW opposed the employer’s motion to
terminate OPEB for its retirees in the bankruptcy court and lost. The bankruptcy court
entered an order that was final and appealable as to this specific issue. If the UAW
wanted relief from that order, it had to appeal. It did not. The UAW’s decision not to
appeal, “was a risk” but one that it made in a “calculated and deliberate” fashion.
Although the Third Circuit’s judgment in Visteon I was admittedly broad, “[w]hen an
opinion is silent as to the scope [of the parties,] the district court should assume as a
general rule that only the issues and parties on appeal are included.”
The sole exception to the rule that to obtain relief a party must appeal is “where the
disposition as to one party is inextricably intertwined with the interests of a nonappealing party” and it is “impossible to grant relief to one party without granting relief
to the other.” This exception was not applicable to this case because it is possible to grant
relief to IUE retirees without also granting it to UAW retirees.
Bankruptcy order void. Next, the UAW advanced a number of arguments that the Third
Circuit found unavailing. First, the UAW argued that the bankruptcy court’s termination
21
order was void ab initio, or “null from the beginning.” However, the appeals court
pointed out that an order is only void ab initio if the court that entered the order (1)
lacked the power or jurisdiction to do so, or (2) acted in a manner inconsistent with due
process of law. “[A] judgment is not void . . . simply because it is erroneous, or is based
upon precedent which is later deemed incorrect or unconstitutional.” The OPEB
termination order fell into neither category. There was no question that the bankruptcy
court had jurisdiction over the parties and issues relevant to the OPEB termination order.
Thus, the OPEB order was not void ab initio.
Individual retirees bound. Thereafter, the UAW argued that its failure to appeal should
not bind its retirees because it was never appointed to represent them. According to the
UAW, because retirees are not employees that are current members of the UAW’s
bargaining unit, the UAW could only represent them after it was appointed to represent
them through the process of Sec. 1114. However, the appeals court pointed out that this
argument was inconsistent with the UAW’s course of conduct. It represented in court
filings that it was the authorized representative of the employer’s former hourly
employees at certain plants. Moreover, nothing prevents a union from representing its
retirees if “the union has a legitimate interest in protecting the rights of the retirees and is
entitled to seek enforcement of the applicable contract provisions.” At any rate, none of
the individual retirees appealed, so this argument would not further their cause.
The UAW next argued that the employer’s confirmed plan, which incorporated the OPEB
restoration order, mooted this appeal. Here, the UAW contended that because the
“provisions of a confirmed plan bind the debtor,” the employer would have needed to
appeal the plan in order to pursue an appeal of the OPEB reinstatement order. However,
the Third Circuit found that this argument squarely conflicted with its holding in In re
Pillowtex, Inc., that “[t]he confirmation of [the debtor’s] plan of reorganization does not
moot [an] appeal.”
Power of bankruptcy judge. Finally, the UAW argued that even if the Third Circuit’s
judgment in Visteon I did not obligate the bankruptcy court to restore OPEB to UAW
retirees, it was within the bankruptcy judge’s power to do so. In making this argument,
the UAW relied on cases involving the law of the case doctrine. However, the union
ignored an important limitation on the law of the case doctrine: it only governs the power
of a court to revisit its prior orders prior to “final judgment.”
The case numbers are: 12-3352 and 12-3353.
Attorneys: Peter D. DeChiara (Cohen, Weiss & Simon) and John G. Adam (Legghio &
Israel) for International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America, UAW. Heather A. Bloom (Kirkland & Ellis) and Laura
D. Jones (Pachulski Stang Ziehl & Jones) for Visteon Corporation.
7th Cir.: Union challenge to constitutionality of Indiana’s right-to-work law fails
By Ronald Miller, J.D.
22
Claims by members of the Operating Engineers union that the Indiana Right to Work Act
violated their rights under the United States Constitution and was preempted by federal
labor legislation were rejected by a divided Seventh Circuit. The appeals court was not
persuaded that Indiana’s law was somehow an extraordinary measure distinct from
numerous state statutes that have harmoniously existed under the federal labor law
framework. Judge Wood dissented (Sweeney v Pence, September 2, 2014, Tinder, J).
On February 1, 2012, the Indiana legislature passed the Indiana Right to Work Act, and
the measure was signed into law by the governor. Under the legislation, an employee
could not be required to become or remain a union member, pay dues or assessments to a
union, or pay an equivalent or pro rata amount to a third party. Further, the law was to be
applied to the building and construction industry. The law was also to be applied
prospectively. Officers and members of the Operating Engineers union brought suit
against Indiana officials alleging that the Indiana Right to Work Act violated their rights
under the United States Constitution and the Indiana Constitution. They further alleged
that the scheme of the federal labor law, specifically, the NLRA, preempted the new
legislation. The federal district court granted the state officials’ motion to dismiss on the
preemption claim and the federal constitutional claims. The union timely appealed.
Legislative history. The Seventh Circuit first examined whether the Indiana right-towork law was preempted by federal legislation. The history of the Taft-Hartley Act
indicated that Congress was concerned about abuse stemming from the “closed shop,”
whereby an employer agreed to hire only union members. Nevertheless, Sec. 8(3) of the
NLRA “shield[ed] from an unfair labor practice charge less severe forms of unionsecurity arrangements than the closed or union shop.”
Although Congress permitted less restrictive, post-hiring union-security agreements
under federal law, it also left states free to ban them. Section 14(b) provided that Sec.
8(3) did not protect a union-security agreement if it was “prohibited by State or
Territorial law.” At the time Sec. 14(b) was included in the NLRA, “twelve States had
statutes or constitutional provisions outlawing or restricting the closed shop and related
devices.”
The Supreme Court has clarified the relationship between these two provisions: Section
14(b) was intended to prevent other sections in the NLRA from “completely
extinguishing state power over certain union-security arrangements.” Thus, the Supreme
Court read Sec. 14(b) as protecting states’ authority to enact laws prohibiting unionsecurity arrangements that are permissible under Section 8(a)(3) and other provisions of
the NLRA. In Retail Clerks Intern. Ass’n, Local 1625 v. Schermerhorn (“Retail Clerks
II), the High Court concluded “that Congress in 1947 did not deprive the States of any
and all power to enforce their laws restricting the execution and enforcement of unionsecurity agreements” and that “it is plain that Congress left the States free to legislate” in
the field of union-security agreements.
Federal preemption. Against this backdrop, the Seventh Circuit considered the union’s
argument that provisions of the Indiana right-to-work legislation were preempted by
federal labor legislation. The union’s primary argument was that Sec. 14(b) permits states
23
to ban only union-security agreements “requiring membership,” or else compelling
workers to pay a full membership fee that serves as the functional equivalent of
membership. The Indiana statute goes further by prohibiting unions from collecting any
fees and dues from unwilling employees. The union asserted that this ban was too strict
because employees may still be required to pay a fee equal to their “fair share” of the
collective bargaining costs —something less than the full membership fee — and not
qualify as “members” of the union under Sec. 14(b).
Additionally, the union argued that its reading of the Act was necessary because unions
are required to act on behalf of all employees and may not discriminate against nonmembers. To compel the union to represent all employees equally using dues contributed
only by some workers, they argued, created a free-rider problem. However, the Seventh
Circuit was not convinced that Sec. 8(3) preempted the Indiana statute.
The Supreme Court has construed the term “membership” to have the same meaning in
Secs. 8(a)(3) and Sec. 14(b). As a result, “the agreements requiring ‘membership’ in a
labor union which are expressly permitted by the proviso are the same ‘membership’
agreements expressly placed within the reach of state law by Sec. 14(b).” Further, the
High Court has described union membership as synonymous with paying the portion of
dues germane to the union’s collective bargaining. Therefore, Section 14(b)’s express
allowance of state laws prohibiting “agreements requiring membership in a labor
organization as a condition of employment” necessarily permits state laws prohibiting
agreements that require employees to pay representation fees.
State statutory schemes. Also found compelling by the Seventh Circuit was the fact that
state right-to-work laws were in effect at the time of the Taft-Hartley Act’s passage. Of
the 12 state right-to-work statutes in effect in 1947, more than half included language
similar to Indiana’s statute. The stated purpose of Sec. 14(b) was to preserve the efficacy
of laws like these. Presently, 24 states have some form of a right-to-work law, and the
overwhelming majority of jurisdictions have adopted language substantially identical to
the prohibition in the Indiana law. The longevity of many of these statutes, coupled with
the lack of disapproval expressed by the Supreme Court, suggested to the appeals court
that Indiana’s right-to-work law fell squarely within the realm of acceptable law.
The Seventh Circuit also found persuasive the D.C. Circuit’s decision in Int’l Union of
the United Ass’n of Journeymen & Apprentices of the Plumbing & Pipefitting Indus.,
Local Unions Nos. 141, 229, 681, & 706 v. NLRB, the only other circuit to squarely
address this issue, which found that a union could not assess non-union employees for
representation fees in four right-to-work states. On the basis of the legislative history of
the Taft-Hartley Act, the D.C. Circuit found that the assessment of such fees constituted
an unfair labor practice.
Miscellaneous arguments. The Seventh Circuit made quick work of two other
preemption arguments. First, the union asserted the Indiana law’s criminal penalties
clashed squarely with language in Retail Clerks II, and so was preempted by federal law.
The Union’s second argument was that the NLRA preempts the Indiana statutory
provision which bars mandatory payments of an amount equivalent to union dues to a
24
charity. Here, the appeals court agreed with the district court that “nothing in language of
Sec. 19 of the NLRA suggests or supports interpreting it as an exemption to § 14(b) that
would preempt any state attempt to outlaw the kind of provision that § 19 permits.”
Constitutional claims. Contrary to the dissent, the majority concluded that its
interpretation of the federal statutory scheme did not work an unconstitutional taking on
Indiana unions. Here, the majority explained that the union’s alleged deprivation was the
product of federal law and the Indiana statute operating in tandem. Because it is federal
law that provides a duty of fair representation, Indiana’s right-to-work statute does not
“take” property from the Union — it merely precludes the union from collecting fees
designed to cover the costs of performing the duty. The majority pointed out that the
powers of the bargaining representative are “comparable to those possessed by a
legislative body both to create and restrict the rights of those whom it represents.” The
duty of fair representation is therefore a “corresponding duty” imposed in exchange for
the powers granted to the union as an exclusive representative. Thus, no information
before the Seventh Circuit persuaded the majority that the union was not fully and
adequately compensated by its rights as the sole and exclusive member at the negotiating
table.
Dissent. In dissent, Judge Wood argued that the majority had misunderstood the federal
statutory scheme. She argued that the plain language of Sec. 14(b) did not support such
sweeping force for Indiana’s right to work law. The dissent would find that the sections
8(2) and 8(3) of the Indiana statute were preempted by federal law. Rather, the dissent
argued that the Supreme Court’s decision in Communications Workers of Am. v Beck
made clear that union dues objectors are not members, but that they can be compelled to
pay for the services that they consume.
The case number is: 13-1264.
Attorneys: Frances Barrow (Office of the Attorney General) for Michael Pence, Governor
of the State of Indiana. Dale D. Pierson (IUOE Local 150 Legal Department) for James
M. Sweeney.
9th Cir.: LMRA did not preempt mall owner’s nuisance, trespass claims against
union over secondary boycott activity
By Lisa Milam-Perez, J.D.
LMRA, Section 303 does not preempt a shopping mall owner’s state law trespass and
nuisance claims against a labor union arising from conduct that arguably amounted to
unlawful secondary boycott activity under the NLRA, the Ninth Circuit held. Federal
labor law does not so thoroughly occupy the field that it always preempts such claims, the
appeals court found generally; nor did it conflict with the specific state law claims
presented here. The mall owner sought only to enforce time, place, and manner
restrictions against the union and those protesting on the union’s behalf, the appeals court
reasoned, and the trespass and nuisance claims touch upon interests that are “deeply
rooted in local feeling and responsibility.” As such, the Ninth Circuit refused to presume
that Congress meant to deprive state courts of jurisdiction to hear these causes of action.
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Reversing a district court order dismissing the claims, the Ninth Circuit remanded the
case for the lower court to consider the mall owner’s state-law tort claims (Retail
Property Trust v United Brotherhood of Carpenters, September 23, 2014, Bybee, J).
Labor dispute. National retailer Urban Outfitters, a tenant of the privately owned Brea
Mall, contracted with nonunion subcontractors to renovate the store in advance of its
opening. A union official notified the mall owner that the union intended to pursue a
labor dispute and to publicize its beef with the retailer “at the premises of everyone
involved in the labor dispute to inform the public of the presence of a ‘RAT’ contractor.”
The mall owner had a policy in place for accommodating speech-related activities on the
property. It requires petitioners, solicitors, and protestors to fill out an application in
advance, to agree to remain within one of two designated common areas, and not to
create noise of such volume as to impinge on the peace of the general public, obstruct
pedestrian traffic, or damage or destroy any property. The policy also prohibits “physical
force, obscene language or gestures, or racial, religious or ethnic slurs,” physical or
verbal threats, or “any disturbance which is disruptive to the Center’s commercial
function.” The rules specifically recognize “Qualified Labor Activity,” namely picketing
and leafleting, as a special class of protected activity, and grant more leeway to labor
organizations, unlike other members of the public, to choose between conducting their
activities in a designated area or in an alternate area chosen by the mall “proximately
located to the targeted employer or business.” However, the mall reserved the right to bar
labor-related activity from areas that “would threaten the personal safety of mall
patrons.”
Thumbing its nose at mall policy, dozens of union members, without completing an
application in advance, descended upon the mall and initiated a protest in the privately
owned common areas in front of the Urban Outfitters construction site. They marched in
a circle yelling, chanting loudly, blowing whistles, kicking the construction barricade,
and banging their picket signs against the mall railings — generally creating “an
intimidating and disquieting environment” that interfered with the normal operations of
the mall and its tenants, the mall claimed. Allegedly, the protesters also made cat-calls
and sexually provocative gestures at female patrons, and spread their protests to two other
stores unrelated to Urban Outfitters or to the targeted contractor. The union official told
the mall that the union would continue its protests until the mall forced Urban Outfitters
to cease construction or the mall itself shut down the work. The mall received a number
of complaints from tenants, who were contractually entitled to “a quiet and peaceful
environment to conduct business.”
Complaint in state court. The mall filed suit in a California state court, alleging statelaw claims for trespass and nuisance and seeking declaratory and injunctive relief. The
union immediately removed the case to federal court; it argued that the mall had alleged
the equivalent of unlawful secondary boycott activity, in violation of LMRA, Sec. 303, so
the state-law claims were preempted by federal law and, also, that the mall had in effect
stated a federal cause of action. The district court denied the mall’s request to remand the
case to state court, finding that complete preemption applied because the mall’s “time,
place and manner restrictions prohibit the same conduct that is prohibited under NLRA
26
Sec. 8(b)(4).” The court also assumed supplemental jurisdiction over the mall’s trespass
and private nuisance claims. The mall then amended its complaint to assert that it was
bringing its action under Sec. 303 and also “pursuant to state-based property laws
regarding the unapproved use and trespass on its private property.” It also added a
statement that federal court jurisdiction was conferred by virtue of Sec. 303, with pendent
jurisdiction over the state-law property claims.
Because the mall’s original complaint only asserted state-law claims (and the parties were
not diverse), the mall wouldn’t have been able to file in federal court and, under the wellpleaded complaint rule, even if the union anticipated raising preemption as a federal
defense, that would not have been grounds for removal. But the union had convinced the
district court that Sec. 303 was one of the rare instances of “complete preemption,” and
thus removal was proper, relying on the Seventh Circuit’s reasoning in Smart v. Local
702 Intl’ Bhd of Elec. Workers, a 2009 case deeming state antitrust claims completely
preempted by Sec. 303. Although the district court’s reference to complete preemption
“was understandable in the context of the case, it was error,” the Ninth Circuit found.
Once the mall’s amended complaint endowed the district court with subject matter
jurisdiction, the union’s assertion of preemption was a defense, not grounds for removal,
the appeals court explained.
The unique procedural posture inspired a hornbook-worthy explication of labor law
preemption principles, with the appeals court articulating the distinction between
“complete” preemption and defensive preemption (aka “conflict” or “field” preemption)
and expounding on the Garmon and Machinists doctrines before ultimately determining
that the state-law tort claims were not preempted by Sec. 303 “simply because the
invasion of property happened to involve a secondary boycott by a union.”
Field preemption. The district court’s conclusion that Sec. 303 “completely preempts”
claims related to secondary boycotts ran counter to Local 20, Teamsters, Chauffeurs &
Helpers Union v. Morton and Sears, Roebuck & Co. v. San Diego Cnty. Dist. Council of
Carpenters, the Supreme Court cases articulating the preemption doctrine in the context
of Sec. 303. Morton did not hold that Sec. 303 preempts all state causes of action that
may affect secondary boycotts, the appeals court explained; rather, the Supreme Court
merely held that state law should prevail in cases where union violence was involved.
And, in a subsequent decision, the High Court stated more broadly that some state law
claims are not preempted by Sec. 303. “Our reading of Morton comports with several
sister circuits, which have emphasized that the Morton ‘Court was careful to limit its
holding,’” the Ninth Circuit noted.
Trespass, too, is not totally preempted, the Supreme Court later held in Sears, expanding
Garmon’s discussion of “what torts a union might be liable for under state law where its
picketing was either ‘arguably protected’ under [NLRA Sec. 7] or ‘arguably prohibited’
under [Sec.] 8.” As the Ninth Circuit reasoned, “If a union’s ‘arguably protected’ conduct
is not necessarily preempted by the NLRB’s primary jurisdiction under § 7, we are hard
pressed to understand how conduct arguably covered by § 303 must be preempted in
toto.” Thus, while the court below had staked its reasoning on the Seventh Circuit’s
holding in Smart, the Ninth Circuit reviewed its sister circuit’s sweeping statement as to
27
complete preemption in that case and deemed it “simply wrong.” At bottom, while the
appeals court acknowledged that some state claims would surely be preempted (such as
claims addressing state antitrust provisions or allegations of economic harms), it simply
did not believe that Sec. 303 “leaves no room for state action” where secondary boycotts
under Sec. 8 are involved.
Conflict preemption. Nor did Sec. 303 displace the mall’s specific claims here under
Machinists. The mall alleged property-based torts, not economic causes of action, the
appeals court pointed out; it wasn’t looking to restrain or punish labor-related conduct —
only conduct that violates its time, place, and manner rules. As such, the suit at hand was
not at heart “a labor case in the guise of an action in trespass; it is a trespass case
complaining only incidentally, at most, about union conduct.”
Noting that trespass and nuisance “are labor-neutral torts, far afield indeed from areas of
state law, such as antitrust, that most commonly raise preemption concerns,” the appeals
court held adjudicating the mall’s claims would not “impinge on [any] area of labor
combat designed to be free” from regulation. Rather, these tort causes of action invoke
the kinds of noneconomic interests “deeply rooted in local feeling.” Looking to the
particular facts of the case at hand, too, the appeals court concluded that the state-law
claims would work no interference with the purposes of federal labor law. The mall had
no intention of quashing all protected union activity, only the raucous conduct outlined
above, which isn’t the sort of “self-help” weapon that Congress sought to leave
unregulated, in the appellate court’s view.
Finding the conduct that the mall sought to challenge here was of only peripheral concern
to federal labor law, the Ninth Circuit held the district court erred in dismissing the mall’s
state-law claims on preemption grounds, and remanded for the court to take up those
claims in the first instance.
The case number is: 12-56427.
Attorneys: Yuliya S. Mirzoyan (DeCarlo & Shanley) for Carpenters Local No 803.
Yuliya S. Mirzoyan (DeCarlo & Shanley) for United Brotherhood of Carpenters and
Joiners of America. Stacey McKee Knight (Katten Muchin Rosenman) for The Retail
Property Trust.
NLRB: Termination of unionized subcontract to bring work in-house to nonunion
employees unlawful
By Ronald Miller, J.D.
CNN unlawfully replaced a unionized subcontractor in its Washington, D.C., and New
York City bureaus with an in-house nonunion workforce out of antiunion animus, ruled a
divided three-member panel of the NLRB. The Board agreed with an administrative law
judge’s findings that CNN and Team Video Services (TVS) were joint employers and
that CNN violated the NLRA by: (1) terminating the subcontracts with TVS out of
antiunion animus and thereby causing the discharge of TVS employees; (2) failing to
bargain with the union about the decision to terminate the subcontracts and the effects of
28
that decision; (3) making coercive statements; (4) implementing a hiring plan designed to
limit the number of discharged TVS employees it hired to staff its in-house operations in
order to avoid a successorship bargaining obligation; and (5) as a successor, failing to
recognize and bargain with the union and unilaterally changing employees’ terms and
conditions of employment. Member Miscimarra filed a separate opinion dissenting in part
(CNN America, Inc, September 15, 2014).
From the start of its operations, CNN decided that the operation of its electronic
equipment at its DC and NYC bureaus would be performed by outside contractors. Over
the years it awarded technical support contracts, known as Electronic News Gathering
Service Agreements (ENGAs), to a series of companies. Employees at both the DC and
NYC bureaus voted to unionize. Ultimately, TVS contracted with CNN to manage the
DC and NYC bureaus under ENGAs that contained similar provisions.
Joint employer status. With respect to joint employer status, the NLRB will find that
two separate entities are joint employers of a single workforce if the evidence shows that
they “share or codetermine those matters governing the essential terms and conditions of
employment.” Here, the Board determined that three of the factors outlined in its Laerco
Transportation decision — hiring, supervision, and direction — as well as other factors
on which it has relied to find a joint-employer relationship supported the ALJ’s finding
that CNN and TVS were joint employers.
Through the extensive requirements CNN placed on TVS through the ENGAs, its
decisive role in TVS’ collective-bargaining negotiations and its direct role in the
assignment, direction, and supervision of the TVS employees, CNN exerted significant
control over the essential terms and conditions of employment of the TVS employees. In
addition, CNN was properly named as a joint employer here as it “played a direct and key
role in [the] events alleged as unfair labor practices.”
Hiring and work hours. The ENGA provisions gave CNN considerable authority over
hiring and work hours, and it exercised that authority. The ENGAs also gave CNN
substantial control over the number of technicians hired by granting CNN “the right to
require changes in TVS staffing levels and to negotiate with TVS to adjust the number of
technicians” retained. TVS had to obtain CNN’s approval to hire additional technicians to
cover for those who were absent due to sick or vacation leave. CNN also controlled the
number of regular, part-time, and overtime hours of unit employees.
CNN wielded substantial control over TVS’ assignments of work to employees. At both
bureaus, CNN maintained an assignment desk that CNN and TVS assignment personnel
shared. In daily discussions, CNN decided the news stories to be covered and the TVS
workforce required for those stories. With respect to technicians, CNN personnel often
assigned the TVS employees their new assignments. At CNN’s various satellite studios,
where no TVS supervisors were present, CNN producers gave TVS technicians their
daily assignments. Similarly, CNN’s direction of the engineering technicians was also
common.
29
Through its involvement in the collective bargaining negotiations between TVS and the
union, CNN both possessed and exercised meaningful control over the wage rates of TVS
employees. Additional factors included that CNN solicited TVS to bid on the ENGAs,
CNN provided TVS technicians with email accounts on its system, CNN provided
virtually all of the equipment that TVS employees used to perform their jobs, and TVS
employees performed work that was at the core of CNN’s business and worked
exclusively for CNN. Thus, CNN exercised significant control over the essential terms
and conditions of the TVS technicians.
Contract termination. In mid-September 2003, CNN informed TVS that it was
terminating the ENGAs at both DC and NYC bureaus and bringing the technical work inhouse. Employees were advised that CNN would not be taking the union to its new
location and would only hire 50 percent of bargaining unit employees in order to get rid
of the union. Thereafter, CNN used a multistep “behavior interviewing” process to hire
over 200 technicians for the bureaus. CNN used an elaborate Excel spreadsheet system to
continuously track every applicant for every job category. While CNN hired only a
portion of the former TVS employees who applied for the new positions, it hired all
nonbargaining unit employees who applied for DC and NYC positions. CNN did not hire
any of the most active union members, despite praising them as some of TVS’ most
skilled technicians.
Having found that CNN and TVS were joint employers of the union-represented TVS
technicians, the NLRB found that CNN violated Sec. 8(a)(5) by canceling the ENGA
with TVS to avoid its obligation under the CBA, failing to bargain with the unions over
the termination of the ENGAs and the effects thereof, and by making unilateral changes
in the terms and conditions of employment when it operated with a new workforce.
Further, the Board found that the General Counsel correctly argued that the ALJ had
made all the necessary factual findings and conducted the proper 8(a)(3) legal analysis to
establish that the decision to terminate the ENGA and discharge the TVS technicians was
part of an unlawfully motivated plan to avoid the union and the obligations under the
CBA, but failed to find the 8(a)(3) violation.
CNN as successor. The ALJ also determined that CNN was a successor employer. The
test for determining successorship is (1) whether a majority of the new employer’s
workforce in an appropriate unit is former employees of the predecessor employer; and
(2) whether the new employer conducts essentially the same business as the predecessor
employer. Continuity in the workforce is established if the predecessor employed a
majority of the successor’s employees. In assembling its workforce, a successor “may not
refuse to hire the predecessor’s employees solely because they were represented by a
union or to avoid having to recognize the union.” If an employer is found to have
discriminated in hiring, the Board assumes that, but for the unlawful discrimination, the
successor would have hired the predecessor employees in their unit positions.
CNN was a successor employer because, on the day following the termination of the
ENGAs, it continued the same business operations with employees who performed the
same work, at the same locations, and using the same equipment as the TVS technicians.
Accordingly, continuity of the business enterprise and the workforce was established. As
30
a successor, CNN was obligated to recognize and bargain with the union. By failing to do
so and implementing unilateral changes in terms and conditions of employment, CNN
violated Sec. 8(a)(5).
Anti-union animus. Moreover, the Board found evidence of animus in this case was
overwhelming, as was the evidence that CNN’s explanation for its conduct was
pretextual. Here, the majority found that the ALJ correctly reasoned that CNN’s hiring
managers inconsistent application of their ostensibly objective guidelines of “behavioral
interviewing” evinced discriminatory motivation. As a result, CNN’s decision to
terminate its arrangement with TVS and its staffing program were all part of a plan to
replace a functioning union workforce with a nonunion workforce. The majority also
concluded that CNN’s reasons for failing to hire the TVS technicians were all pretextual,
and therefore it failed to establish that would not have hired the technicians absent union
animus.
Partial dissent. Member Miscimarra argued that the majority failed to adequately
address the complex business model set up by CNN in finding that it was a joint
employer. As a result of this erroneous joint-employer finding, the majority erroneously
evaluated CNN’s obligations under Sec. 8(a)(5) and (3). Unlike the majority, Miscimarra
would not have found that CNN had a Sec. 8(a)(5) duty to notify the union and bargain
over its decision to terminate the TVS contracting relationship. Similarly, the dissent
argued that the record failed to prove CNN violated Sec. 8(a)(3) based on its decision to
terminate the TVS relationship and bring that technical work in-house.
The slip opinion is: 361 NLRB No. 47.
Attorneys: Zachary Fasman (Paul Hastings) for CNN America, Inc. and Team Video
Services, LLC. Peter Chatilovicz (Seyfarth Shaw) for Team Video Services, LLC. Brian
Powers (O’Donoghue and O’Donoghue), Robert Marinovic (Myers, Suozzi, English and
Klein), and Stephen H. Sturm (Strum & Perl) for National Association of Broadcast
Employees and Technicians, Communications Workers of America, Local 11, AFL–CIO.
NLRB: Employer’s subcontracting OK, but its refusal to furnish bid info or bargain
violated NLRA
By Marjorie Johnson, J.D.
An employer did not violate the NLRA by unilaterally subcontracting bargaining unit
work of non-maintenance employees since the union, by its conduct during negotiations,
waived its right to bargain over the subcontracting decision, a divided three-member
panel of the NLRB. However, the employer acted unlawfully when it refused to furnish
the union with its request for proposals (RFPs) and the bids it received in response,
refused to bargain for a new contract for its maintenance employees, and prematurely
declared impasse and then unilaterally implemented new terms and conditions of
employment. Board members Hirozawa and Johnson each dissented in part (Galaxy
Towers Condominium Assn, August 29, 2014).
31
Ongoing negotiations. The union was certified on June 5, 2006. A month later, the
parties began negotiations for a collective bargaining agreement (CBA). On August 8, the
employer submitted a revised management-rights clause providing that it had sole and
exclusive management of the company’s operations and the direction of its working
force, including the right to subcontract any work. A week later, the union “accepted as
drafted” the language in the proposed management-rights clause.
In September and October, the parties continued to exchange proposals. Although they
made changes to various other terms of the agreement, the management-rights clause
remained unchanged. During ongoing negotiations, the parties decided to immediately
implement certain agreed-upon terms in a “final offer,” which covered wages, benefits,
vacation days, and paid time off. It also contained a “Contract Language” provision that
stated: “As agreed upon to date and/or as to be resolved by the parties during final
drafting as to any open items.” On January 2, 2007, the union signed a memorandum of
agreement implementing the terms of the final offer, including the Contract Language
provision.
Union’s untimely protest. On March 13, the employer sent a copy of a draft CBA
containing the management-rights clause to the union. Two months later, the union set
forth four issues that it wished to address in additional negotiations, which did not
include the management-rights clause. On August 1 — almost a year after the union had
“accepted as drafted” the management-rights clause granting the employer the unilateral
right to subcontract — the union objected to the inclusion of subcontracting language.
The employer was upset by the union’s attempt to renegotiate what it felt was agreed
upon during the negotiating process and filed an unfair labor practice charge alleging
regressive bargaining. In July 2011, it decided to subcontract bargaining unit work.
Union waived objections. Based on the totality of the parties’ conduct from 2006
through 2011, the NLRB found that the union clearly and unmistakably waived its right
to bargain over the employer’s July 2011 decision to subcontract bargaining unit work. In
August 2006, the union “accepted as drafted” the employer’s proposed managementrights clause, which granted the employer the right to unilaterally subcontract bargaining
unit work. Although this tentative agreement did not by itself waive the union’s right to
bargain over the employer’s subcontracting decision, the parties’ conduct made the
provision final and binding.
Specifically, in January 2007, the union ratified the memorandum of agreement, which
immediately implemented the contract language “agreed upon to date,” including all of
the parties’ tentative agreements. It was not until August 1 — almost seven months later
— that the union first raised any concerns about the management-rights clause. Even
after doing so, it ultimately agreed — pursuant to an informal settlement agreement —
that it would not engage in regressive bargaining and specifically that it would rescind its
withdrawal from the tentative agreement regarding the employer’s right to subcontract.
Accordingly, the employer did not violate the NLRA by subcontracting the work of
bargaining unit employees.
32
Employer’s violations. However, the employer unlawfully refused to furnish the union
with its RFPs and the bids it received in response. Although the union waived its right to
bargain over subcontracting, the requested information was relevant and necessary for
other reasons, ruled the Board. The union made its request immediately following a
bargaining session in which the employer discussed its purported economic savings from
subcontracting and asked the union for a proposal that would generate similar savings.
Thus, the parties were engaged in ongoing negotiations over the effects of the
subcontracting decision. Without the RFPs and the submitted bids, the union did not
know the source of the savings from the subcontracting, thereby limiting its ability to
effectively prepare a counteroffer.
Moreover, in a June 28, 2011 letter, the union noted that “matters incidental to the
potential subcontracting of bargaining unit work” had already arisen during bargaining. It
then stated that while it would “continue to do its best to work from the limited economic
information given to us regarding subcontracting, this does not mean we agree that [the
employer] has provided all information requested and needed in order for the Union to
properly assess [the employer’s] proposals and formulate its own proposals.” The Board
found that the letter and the circumstances surrounding the union’s request reasonably put
the employer on notice of a relevant purpose for requesting the information.
Refusal to bargain. The employer also unlawfully refused to bargain for a new contract
for its maintenance employees after having decided to subcontract the non-maintenance
work. The Board found that it would have been futile for the union to have requested
bargaining for these employees since the employer repeatedly insisted that the parties
conclude their bargaining over the subcontracting before negotiating an agreement over
the maintenance employees. In addition, it refused to respond to the union’s request for
information that was necessary for the union to effectively make contract proposals
regarding the maintenance employees.
The employer also prematurely declared impasse and then unilaterally implemented new
terms and conditions of employment. Notably, on June 30, 2011, the employer told the
union that the parties had reached impasse on its right to subcontract and on its March 16,
2011 final offer, and it subsequently implemented those terms unilaterally. However, the
employer’s conduct precluded a valid impasse and its implementation of its final offer.
Partial dissents. Dissenting in part, Board Member Harry Johnson would not have found
that the employer was obligated to supply the RFPs and the bids it received in response
since such information was requested only for bargaining about subcontracting itself. He
found that the entire thrust of the June 28 letter was to assert the union’s position that it
had not agreed to any subcontracting and was not calculated to inform the employer that
it now wanted the previously requested information for another purpose. He also would
not find that the employer refused to bargain for a new contract for its maintenance
employees, unlawfully declared impasse, or implemented new terms and conditions of
employment.
On the other hand, Board Member Kent Hirozawa disagreed with the panel’s ruling as to
the management-rights clause, finding that the employer failed to show that the parties
33
intended to implement the clause prior to execution of a full and final agreement. He
would have found that the employer did violate the NLRA by unilaterally subcontracting
bargaining work.
Judicial notice. In a footnote, the Board also denied the employer’s motion to take
judicial notice of a district court opinion involving the parties and to apply the doctrine of
judicial estoppel based on certain arguments made by the union in that matter. In
response, the General Counsel had moved to strike the employer’s motion on procedural
grounds. Adhering to the general rule not to apply judicial estoppel where the
government was not a party to the prior proceeding, both the employer’s and General
Counsel’s motions were denied.
The slip opinion is: 361 NLRB No. 26.
Attorneys: Steven Kern (Barnes, Iaccarino, Virgina, Ambinder & Shephard) and Michael
Kingman (Diktas Schandler Gillen Morejon) for Local 124, Recycling, Airport, Industrial
& Service Employees Union. Michael Lignowski (Morgan, Lewis & Bockius) for Galaxy
Towers Condominium Association.
NLRB: Employer who exceeded “indirect outflow” fell under NLRB jurisdiction
By Marjorie Johnson, J.D.
Although an administrative law judge correctly found that an employer unlawfully
discharged 15 workers in retaliation for their exercise of their Sec. 7 right to strike until
they received wages they were owed, the judge incorrectly found that the employer did
not meet any of the Board’s jurisdictional standards. Reversing the ALJ’s order in part, a
three-member panel of the NLRB exercised jurisdiction based on its finding that the
employer met its nonretail-employer criteria and found that the discharged employees
were entitled to a complete remedy of reinstatement, back pay, and notice (Newman
Livestock-11, Inc, August 28, 2014).
Indirect outflow. Finding that the employer met the nonretail-employer criteria for
asserting jurisdiction, the Board noted that it had discretionary jurisdiction over nonretail
employers with a “direct” or “indirect” business outflow or inflow of at least $50,000
across state lines. Direct outflow refers to goods or services provided out-of-state by the
employer itself, while indirect outflow refers to goods or services provided by the
employer to in-state customers meeting any of the Board's jurisdictional standards. Direct
and indirect outflow are added together in order to determine whether an employer meets
the $50,000 threshold.
Here, the record established that the Board had jurisdiction over the employer based on
its indirect outflow. Specifically, the California employer slaughtered and processed
livestock for business customers. Beginning in October 2011, it leased the slaughterhouse
facility involved in the instant action from a California livestock auction that sold
livestock. For at least the first 3 months of the lease, the livestock auction was one of the
employer’s customers. Significantly, it was undisputed that the livestock auction met the
34
Board’s jurisdictional standards and that during the relevant 12-month period, it sold and
shipped livestock product valued at more than $50,000 to customers outside California.
The employer also sold its services to a multistate processor and seller of animal hides
that undisputedly was under the Board’s jurisdiction. It was also undisputed that over the
relevant 12-month period, the multistate processor sold and shipped goods worth more
than $50,000 from within California to customers outside California.
Cumulative sales. Examining the employer’s cumulative sales of its services to the
auction house and the multistate processor, the Board determined it had jurisdiction over
the employer. The employer admitted that it made sales to the auction house of an
unspecified value during the relevant time period. The ALJ found that those sales totaled
at least $35,000, but were not shown to exceed that amount. The employer also did not
dispute that it provided slaughtering services to the multistate processor in the amount of
$20,793 over the relevant period. Thus, the employer’s sales to the two businesses totaled
$55,793, which exceeded the jurisdictional threshold of the indirect outflow standard.
Accordingly, the Board asserted jurisdiction.
The Board noted that the ALJ mistakenly suggested that its jurisdiction was impaired
because the employees’ discharges occurred after the auction house ceased doing
business with the employer. Even if the ALJ was correct as to this timing, it was
irrelevant. Rather, it is well established that for the purpose of determining jurisdiction,
any 12-month period may be used to assess an employer’s interstate business as long as
that period is reasonably related to the timing of the alleged violations, the unfair labor
practice charge, or the unfair labor practice proceeding.
Discharges violate NLRA. The Board went on to hold that the ALJ did not err in ruling
that the employees were unlawfully discharged for concertedly refusing to work until
they were paid the wages due them. The employer did not dispute this finding and there
was no merit to its assertion that the General Counsel failed to establish that the manager
who told the employees that they were fired had the actual or apparent authority. Rather,
the ALJ clearly credited the discharged employees who testified that she was their
supervisor. Moreover, she identified herself as the “plant manager.”
Full remedy. Finally, the discharged employees were entitled to a complete remedy since
they did not quit their jobs or commit any unprotected misconduct. Their unlawful
discharges therefore converted their status from economic strikers to discriminatees, and
they were consequently entitled to reinstatement and backpay. The Board found that the
ALJ incorrectly suggested that even if the mass discharge was unlawful, the appropriate
remedy would be limited to notice-mailing since the employer was no longer in business,
the employees told the company that they would not work until they received the pay
they were owed, and there was no showing that they requested and were denied
reinstatement. Like other employees unlawfully denied employment, the strikers had no
obligation to request or otherwise qualify for reinstatement. Rather, it was the employer’s
obligation to offer reinstatement to them.
35
With regard to reinstatement, the Board noted the existence of the employees’ former
jobs or of substantially equivalent positions might depend on whether the employer was
still in business, as might the duration of the backpay period. In addition, considering the
lapse of time since the violation occurred and the possibility that a workplace posting
requirement would provide inadequate remedial notice, the Board included a noticemailing requirement regardless of whether the employer remained in business.
The slip opinion is: 361 NLRB No. 32.
NLRB: Employer’s unilateral change to certification training, making it online and
only partially-paid, violated NLRA
By Marjorie Johnson, J.D.
A hospital violated the NLRA when it refused to submit any proposals or
counterproposals until it received the union’s entire contract proposal and when it
declared an impasse and refused to bargain unless the union directed employees to stop
using the union-provided dorm to document circumstances that they believed were unsafe
for patients or could jeopardize their nursing licenses, a three-member NLRB panel held,
partially adopting the findings of the administrative law judge and awarding the union
negotiating fees. The Board further ruled that the ALJ erred in failing to find that the
hospital unilaterally changed its certification training policy by requiring that the nurses
utilize a new online training program and failing to pay them in full for the time spent to
complete the training (Hospital of Barstow, Inc dba Barstow Community Hospital,
August 29, 2014).
Switch to online training. The hospital required its registered nurses to be certified in
basic life support, advanced cardiac life support, and pediatric life support, and to renew
those certifications every two years by completing requisite training classes. For several
years, it offered instructor-led training at its facility and paid RNs in full for the time
spent in those sessions. Alternatively, it allowed them to take the training classes at any
American Heart Association approved facility but did not pay them for the time spent in
those offsite sessions.
In early 2012, the union commenced an organizing campaign at the hospital and, on May
10, won an election to represent its registered nurses. Afterwards, the hospital began
offering certification training through HeartCode, a self-directed online program, and
capped the number of paid hours for completing the training. In June and July, the
hospital continued to offer onsite, instructor-led training sessions. On June 29, the union
was certified and soon thereafter, the parties began collective-bargaining negotiations.
On August 2, the hospital’s board of trustees signed and implemented a policy by which
HeartCode replaced instructor-led classes. In response, the union requested information
about the policy and also submitted a bargaining proposal to allow the RNs to obtain their
certifications through offsite, instructor-led training, as before. The hospital did not
respond to the request for information or the bargaining proposal.
36
Change occurred after election. The hospital did not dispute that it implemented the
HeartCode policy unilaterally but rather argued that it introduced the program to
employees before the election and therefore before it had an obligation to bargain. The
Board disagreed, finding that the policy was implemented on August 2. Although the
hospital claimed that it held an information session for managers about the new training
in April, it appeared that this meeting was held to give managers a preview of the
HeartCode program that the hospital was then considering. Moreover, the chief quality
officer testified that no hospital policy became effective until approved by the board of
trustees. Finally, there was no evidence that the online training was even available to RNs
in April and the record revealed that the hospital continued to offer the alternative of
onsite, instructor-led training after the May 10 election.
Material and substantial. The Board also found that the change was material,
substantial, or significant since it replaced onsite, instructor-led training with the
HeartCode online training and limited the number of paid hours for taking that training.
This was a departure from its practice of paying its employees in full for the time spent
taking the onsite, instructor led certification training. The fact that only four employees
were shown to have failed to complete the HeartCode training within the allocated time,
and therefore did not timely receive reimbursement for excess time taken, did not make
the change insubstantial.
In addition, the change impaired employee choice or discretion related to employment
benefits. The Board found that onsite, instructor led training and online, self-directed
computer training are significantly different formats and their effectiveness will vary
depending on the learning styles of individual employees. Notably, an RN testified that
HeartCode training required computer skills beyond those normally required in the
workplace and that even he, a former onsite training instructor, had difficulty completing
the computer training.
Accordingly, the Board ordered the hospital to cease and desist, to give the union notice
and an opportunity to bargain prior to implementing any unilateral changes, and at the
union’s request, to rescind the HeartCode policy and restore the status quo ante. The
hospital was also ordered to compensate employees for any loss of wages and other
benefits they may have suffered as a result of the unlawful unilateral changes.
Negotiation fees. The Board also found that an award of negotiation expenses was
necessary to remedy the detrimental effect the hospital’s unlawful conduct had on the
bargaining process. The record revealed that it deliberately acted to prevent any
meaningful progress during bargaining sessions by refusing to provide any proposals or
counterproposals during the first five bargaining sessions until it received a full set of
proposals from the union. It also threatened to stop bargaining if the union persisted in
encouraging employees’ use of the union’s ADO form. At a subsequent mediated
bargaining session, the hospital refused to bargain further, erroneously claiming that the
use of the ADO forms caused the parties to be at impasse. Thereafter, it adamantly and
repeatedly refused to respond to the union’s requests for future bargaining dates, despite
the union’s open invitation to discuss any matter, including the ADO forms.
37
On this record, the Board found that the hospital’s misconduct infected the core of the
bargaining process to such an extent that its effects could not be eliminated by the
application of its traditional remedy of an affirmative bargaining order. The hospital, by
deliberately bargaining in bad faith, directly caused the union to waste its resources in
futile bargaining. The Board further noted that the hospital’s deliberate refusal to bargain
in good faith occurred in the critical postelection period when the union was highly
susceptible to unfair labor practices tending to undermine the employees’ support for the
union. Thus, reimbursement of its negotiation costs was necessary to ensure a return to
the status quo at the bargaining table.
Partial dissent. Board member Harry Johnson agreed that the hospital unlawfully
refused to bargain over the terms of an initial collective-bargaining agreement, but did
not believe that its request for a full set of proposals from the union during bargaining
reflected an unlawful refusal to bargain. He also would not find that the substitution of a
computerized training program for live instructor led training, without more, constituted a
material, substantial, and significant change triggering the statutory duty to bargain. He
opined that the circumstances were no different in terms of impact than simply switching
individual instructors who had different teaching styles.
The slip opinion is: 361 NLRB No. 34.
Attorneys: Don Carmody (Law Office of Don Carmody) for Hospital of Barstow, Inc.
d/b/a Barstow Community Hospital.
NLRB: Incorrect translation constituted threat to report workers to immigration
authorities
By Ronald Miller, J.D.
Finding that an incorrect translation of the employer’s comments to bargaining unit
employees constituted an unlawful threaten to report them to immigration authorities if
they supported a union, a five-member panel of the NLRB sustained the union’s
exception to the conduct of a representation election. In translating a speech into Spanish,
a company official remarked that in the event of a strike, the employer would replace the
workers with “legal workers” or a “legal workforce.” That comment, concluded the
majority, constituted an unlawful threat to use immigration status against the employees
if they supported the union. Members Miscimarra and Johnson filed a separate opinion
concurring in part and dissenting in part (Labriola Baking Co, September 8, 2014).
Incorrect translation. On September 21, 2011, Teamsters Local 734 was certified as the
bargaining representative for a unit of bakery drivers. A year later, the parties had not yet
agreed to a first contract, and an employee filed a petition to decertify the union. A week
before the election, the employer held a mandatory meeting for the drivers. At the
meeting, the employer’s COO spoke about the upcoming election. Because 80 percent of
the drivers were Spanish-speaking, the employer’s payroll administrator translated his
remarks. The COO followed a script in making his remarks including a statement that if
the employees chose union representation, “we believe the union would push your toward
a strike,” and the employer would then exercise its legal right to hire replacement
38
workers. However, the employees testified that the payroll manager’s translation ended
with the statement that the employer would replace the workers with “legal workers” or a
“legal workforce.” There was no evidence the employer attempted to correct or clarify
the translation.
The election was conducted and the employees voted to decertify the union. Thereafter,
the union filed an objection in which it claimed that the translation was a threat to report
employees to immigration authorities. A hearing officer concluded that the translation
was not objectionable because it did not expressly or impliedly threaten that the employer
would report employees to immigration authorities if they supported the Union. The
Board majority disagreed.
Generalized threat. According to the majority, the hearing officer failed to recognize the
threat of adverse consequences these words conveyed to non-English-speaking
employees, regardless of their immigration status. The hearing officer analyzed the
objection only in terms of whether the employer threatened to report employees to
immigration authorities. The majority found this reading of the union’s objection unduly
restrictive. Because the objection specifically alleged that the payroll administrator stated
the employer would take “action” to hire a “legal workforce,” the Board ruled that it was
not precluded from considering whether the statement amounted to a more generalized
threat.
In any event, the Board determined that it could consider conduct that does not “exactly
coincide with the precise wording of the objections” where that conduct is “sufficiently
related” to the filed objections. Thus, the question whether the payroll administrator’s
translation conveyed to employees that the employer would take some kind of action
against them based on their legal status was appropriately before the Board.
Objectionable statement. As an initial matter, the Board concluded that the employer
was responsible for the payroll administrator’s translation since it designated him to
perform that service. Moreover, the record supported a finding that the payroll
administrator’s statement warned that the union would call a strike and that the employer
would respond by hiring “legal workers.” Thus, the statement constituted more than an
innocuous announcement that the employer intended to comply with the law in the event
of a strike.
Turning to the substance of the payroll administrator’s statement, the Board first pointed
out that it has not previously considered the impact of the phrase “legal workers” on
employees; nevertheless, it concluded that its cases and Board policies underlying them
warranted a finding that his statement was objectionable. The Board has recognized that
employer threats touching on employees’ immigration status warrant careful scrutiny, as
they are among the most likely to instill fear among employees. The statement here —
“we will replace you with legal workers” — was part of a threat to retaliate against
employees for maintaining union representation; it was what the employer stated it
intended to do when the union “push[ed]” workers to strike.
39
It is both objectionable and unlawful for an employer to threaten immigration-related
problems for employees because they engage in union or other protected, concerted
activity. By telling non-English-speaking employees that it would replace them with
“legal” workers, the employer communicated that their immigration status would be
subjected to scrutiny, concluded the majority.
Employee perspective. In determining whether an employer’s statement is
objectionable, the Board examines it from the perspective of a reasonable employee. The
test is not what the speaker may have meant to say, but whether his actual words would
tend to interfere with employee free choice. Applying those principles to the facts of this
case, the majority had little difficulty in discerning the threatening nature of the payroll
administrator’s references to “legal workers” or a “legal workforce.” By asserting that the
union would “push” the employees to strike and thus jeopardize their employment, the
employer was skirting the limits of lawful persuasion. In that context, the import of the
administrator’s references to “legal workers” was that the employer would use
immigration to take action against the employees in the event of the all but inevitable
strike that the employer claimed the union would cause.
Because the objectionable statement was highly coercive and widely disseminated at a
captive audience meeting held shortly before the election, the Board found that the threat
interfered with employees’ freedom of choice.
Dissent. Although Members Miscimarra and Johnson agreed that it is highly
objectionable and unlawful for an employer to threaten or cause immigration-related
problems for employees because they engage in union or other protected concerted
activity, they dissented from the majority’s finding that the employer in this case engaged
in such conduct. Specifically, the dissent declined to support the majority’s finding that
the employer engaged in objectionable conduct by saying it will do something “legal.”
The dissent found three problems wrong with the majority’s finding. First, according to
the dissent, the allegation was contradicted by the record and the hearing officer’s
findings. Second, the majority improperly disregarded well-established principles
regarding burdens of proof and related standards governing representation proceedings.
Third, the majority’s finding appeared to reflect an underlying, mistaken premise that it is
objectionable for employers to make even the slightest reference to the legal requirement
of work authorization.
The slip opinion is: 361 NLRB No. 41.
Attorneys: Adam Wit (Littler Mendelson) for Labriola Baking Company. Martin Barr
(Carmell Charone Widmer Moss & Barr) for Juventino Silva, Petitioner and Teamsters
Local 734.
NLRB: Actions speak as loud as words to unlawfully create impression of
surveillance
By Lisa Milam-Perez, J.D.
40
A school transportation company violated the NLRA when a bus safety supervisor
snooped on the goings-on taking place in front of the employer’s facility, where a union
had set up a table to pass out literature and recruit drivers leaving from their shift, a
unanimous three-member NLRB panel held. The supervisor’s actions also unlawfully
created an impression of surveillance of employees’ union activities, in violation of
Section 8(a)(1) of the Act, the Board found (Durham School Services, LLP, September 5,
2014).
The employer operates 64 bus routes for the Baltimore school system. The Teamsters
union set up a table adjacent to the bus company’s facility in order to distribute literature
and speak to drivers leaving after the end of their morning shifts. Ostensibly in response
to complaints that employees were parking their personal cars on grass adjacent to the
facility’s driveway, the safety supervisor left the rear of the facility — where she was
normally stationed at that time, checking in returning buses and ensuring that no children
remained on board — in order to ask employees to move their vehicles. She then walked
to the gate at the front of the facility, where the union had set up shop, and stayed there
for about a half hour, writing notes on a clipboard and talking on her cell phone, returning
to the spot several times, walking back and forth down the driveway. One driver spotted
the safety supervisor near the union table with a camera at some point in the morning.
Emphasizing that the safety supervisor’s presence at the front of the facility was
“atypical,” the Board concluded that she had engaged in unlawful surveillance when she
positioned herself there in order to watch the union activity (preventing her from
observing the child checks taking place out back, which she would normally be
overseeing at that time). This conduct also created an unlawful impression of
surveillance. The Board rejected the employer’s contention that such a finding required
some verbal statement on the employer’s part suggesting that surveillance had occurred.
“The Board has consistently found that conduct alone, such as note taking while
employees are engaged in union activity, can create an impression of surveillance as
well,” it noted. Accordingly, it adopted a law judge’s finding that the employer had
interfered with its employees’ protected rights.
The slip opinion is: 361 NLRB No 44.
Attorneys: James Rosenberg (Abato, Rubenstein and Abato) for International
Brotherhood of Teamsters, Local 570. Charles Roberts, III (Constangy Brooks & Smith)
for Durham School Services, LP.
NLRB: Union shielded from claim that objector should be advised of reduced fees at
time of hire
By Ronald Miller, J.D.
Precedent shielded a union from the claims of a dues objector that she should have been
advised of the specific amount of the reduced dues and fees applicable to nonmember
objectors at the time of her hire, ruled a divided five-member ruling of the NLRB. Under
established Board precedent, a union is not required to calculate and provide such
detailed information until an employee elects nonmember status and then takes the
41
additional step of objecting to paying for nonrepresentational expenses. The majority
determined that the union properly relied on that precedent. Members Miscimarra and
Johnson filed a separate opinion concurring in part and dissenting in part (United Food &
Commercial Workers, Local 700 (Kroger Limited Partnership), September 10, 2014).
Established precedent. At the time the employee was hired by Kroger, the union did not
advise her of the specific amount of the reduced dues and fees applicable to nonmember
objectors, but it did timely provide her with that information once she resigned her
membership and requested objector status. Although the NLRB General Counsel
conceded that the union complied with Board law, he nevertheless argued that the Board
should overrule that precedent. The General Counsel urged that the Board should hold
that the duty of fair representation requires every union to provide each one of its
represented employees with specific reduced-payment information when the union first
informs the employee of his or her obligations under a union-security clause, even in the
absence of an employee request for information about or objection to the union’s regular
fees and dues.
The majority concluded that the Board’s established rule is not only permissible, but also
that it strikes the most reasonable balance between the competing interests at stake.
Accordingly, the Board decided to adhere to precedent. Although mindful that the D.C.
Circuit has reached a different result — concluding that a union must provide specific
reduced-payment information to all employees when it initially notifies them of their
obligations under a union-security clause — the Board concluded that the appeals court’s
rationale was based on an erroneous reading of the Supreme Court’s ruling in Chicago
Teachers Union, Local 1 v. Hudson. Here, the majority concluded that Hudson did not
compel a particular result on this issue.
United Food & Commercial Workers, Local 700 (UFCW) and grocery retailer Kroger
were parties to a collective bargaining agreement that required all bargaining unit
employees to join or pay fees to the union. About a month after the employee was hired,
she was sent a membership application packet and notice advising her of her right to be
and remain a nonmember of the union and to object to paying any fees or dues not
germane to the union’s representational duties. Several weeks letter the union sent her
another application packet and letter setting forth the applicable initiation fees and dues.
The employee joined the union. Approximately five months later, she resigned her union
membership and objected to paying fees for any purpose other than collective bargaining,
contract administration, and grievance adjustment.
In response, the union promptly notified her of the percentage of expenses attributable to
the union’s representational duties — 86.7 percent — and that her monthly financial core
fee would be $21.84, a reduction of $3.55. The union also provided the employee with
portions of the auditor’s report and the procedure for objecting to and challenging the
union’s calculation of nonmember fees. The employee did not challenge the union’s
calculations.
Three-stage framework. In California Saw & Knife Works, enforced by the Seventh
Circuit, the NLRB established a three-stage framework of notice-objection-challenge in
42
considering cases dealing with employee rights under Communications Workers of
America v. Beck. Underlying the California Saw decision was the Board’s determination
that a union’s performance of its obligations under Beck is to be judged under the duty of
fair representation standard. Under the fair representation standard, the union is lawfully
entitled to choose among competing interests as long as its actions are not arbitrary,
discriminatory, or in bad faith. Beck requires unions to make those sometimes difficult
judgments in balancing competing interests.
In this case, the General Counsel and the employee contend that the Board should revise
California Saw’s established framework to hold that every union, in its initial Beck notice
to each employee it represents, must inform the employee of the specific details of the
reduced fees and dues to be paid if she elected to remain a nonmember and then chose to
become a Beck objector. The majority rejected arguments that the Supreme Court’s
decision Hudson compelled this change. As a result, the Board found that the union did
not breach its duty of fair representation when choosing to calculate and include in its
initial Beck notice detailed information about the specific amount of reduced fees and
dues that would apply to Beck objectors.
Hudson requirements. The dissent argued that the Board’s California Saw process
disregards Hudson’s statement that “[b]asic considerations of fairness . . . dictate that the
potential objectors be given sufficient information to gauge the propriety of the union’s
fee.” As a result, the dissent argued that Hudson required unions to disclose specific
reduced-payment information in their initial Beck notices. However, the majority
disagreed.
The majority observed that Hudson arose because the union calculated and collected
proportionate share payments from nonmembers without any prior explanation of how
those reduced payments had been calculated. However, Hudson did not address the
question of whether, under a different, multistep dues system, a union must calculate and
specify in its initial notice to employees the specific amount of reduced fees and dues that
would apply if the employer choose to become a nonmember and dues objector. The
reasoning of the Hudson court does not apply to this case, which concerns only
employees who have not yet chosen to become nonmembers, who are not yet paying any
dues, and who have never voiced any objection to paying full dues. Thus, the majority
was not persuaded that Hudson compelled a revision of the California Saw framework to
require unions to include specific reduced fee and dues information in their initial Beck
notices.
Duty of fair representation. Applying the duty of fair representation standard, the
majority next examined new employees’ need for detailed reduced-payment information
before they have asserted their right to be a nonmember objector. Here, the majority
concluded that, under the duty of fair representation standard, unions permissibly may
choose not to provide the specific detailed information involved here at the time of the
initial Beck notice.
The majority first examined the purpose of a union’s initial Beck notice and whether a
new employee needs to know beforehand the specific amount by which her fees and dues
43
would be reduced in order to determine whether to choose objector status. Here, the
majority noted that California Saw’s Stage 1 notice informed employees of their basic
rights to choose membership or nonmembership and, if they later object to paying full
dues, the procedures for filing an objection. In Beck, the Supreme Court recognized that
the Board could reasonably expect a Beck objection will usually turn on ideological
concerns so that the precise reduction is less important.
Although the majority recognized that financial considerations play a part in a decision to
object, it concluded that a union’s duty of fair representation did not require it to perfectly
anticipate every interest of every employee. So, the duty fair representation is not
automatically breached merely because some potential Beck objectors might prefer
advanced disclosure of specific payment-reduction information as opposed to the general
information provided in this case. As a result, the Board found that California Saw’s
Stage 1 notice, as currently constituted, reasonably fulfills the interest of potential
objectors in being notified of their rights and in easily registering an objection without
any undue burdens.
Balance of interests. On the other hand, the majority concluded that unions could be
subjected to considerable burdens were the court to require that they calculate and
provide in their Stage 1 notice the specific reduction in fees and dues that would apply to
nonmember objectors. The majority pointed out that, if a union had no dues objectors, it
would have expended significant sums to perform unnecessary recordingkeeping.
Moreover, while the union in this instance had the ability to provide specific dues
information, smaller or regional independent unions may not have the resources to
develop the recordkeeping and accounting systems to implement a full-fledged Beck
system. Thus, the Board concluded that the balance of interests did not warrant
compelling unions to include more specific reduced-payment information in those initial
notices.
Dissent. However, in dissent, members Miscimarra and Johnson argued that the NLRA
required a union to provide more information earlier in order for employees to make an
informed choice. According to the dissent, requiring unions to provide employees with
the percentage of nonrepresentational expenses at Stage 1, before the employees must
decide their status, comports with basic considerations of fairness, is essential to the
exercise of their statutory rights, and is consistent with the overwhelming national
approach of “more notice, not less.”
The slip opinion is: 361 NLRB No. 39.
Attorneys: Jonathan Karmel (Karmel Law Firm) for United Food & Commercial
Workers International Union, Local 700 (Kroger Limited Partnership). James Plunkett
(National Right to Work Legal Defense Foundation) for Laura Sands.
NLRB: Termination of unionized subcontract to bring work in-house to nonunion
employees unlawful
By Ronald Miller, J.D.
44
CNN unlawfully replaced a unionized subcontractor in its Washington, D.C., and New
York City bureaus with an in-house nonunion workforce out of antiunion animus, ruled a
divided three-member panel of the NLRB. The Board agreed with an administrative law
judge’s findings that CNN and Team Video Services (TVS) were joint employers and
that CNN violated the NLRA by: (1) terminating the subcontracts with TVS out of
antiunion animus and thereby causing the discharge of TVS employees; (2) failing to
bargain with the union about the decision to terminate the subcontracts and the effects of
that decision; (3) making coercive statements; (4) implementing a hiring plan designed to
limit the number of discharged TVS employees it hired to staff its in-house operations in
order to avoid a successorship bargaining obligation; and (5) as a successor, failing to
recognize and bargain with the union and unilaterally changing employees’ terms and
conditions of employment. Member Miscimarra filed a separate opinion dissenting in part
(CNN America, Inc, September 15, 2014).
From the start of its operations, CNN decided that the operation of its electronic
equipment at its DC and NYC bureaus would be performed by outside contractors. Over
the years it awarded technical support contracts, known as Electronic News Gathering
Service Agreements (ENGAs), to a series of companies. Employees at both the DC and
NYC bureaus voted to unionize. Ultimately, TVS contracted with CNN to manage the
DC and NYC bureaus under ENGAs that contained similar provisions.
Joint employer status. With respect to joint employer status, the NLRB will find that
two separate entities are joint employers of a single workforce if the evidence shows that
they “share or codetermine those matters governing the essential terms and conditions of
employment.” Here, the Board determined that three of the factors outlined in its Laerco
Transportation decision — hiring, supervision, and direction — as well as other factors
on which it has relied to find a joint-employer relationship supported the ALJ’s finding
that CNN and TVS were joint employers.
Through the extensive requirements CNN placed on TVS through the ENGAs, its
decisive role in TVS’ collective-bargaining negotiations and its direct role in the
assignment, direction, and supervision of the TVS employees, CNN exerted significant
control over the essential terms and conditions of employment of the TVS employees. In
addition, CNN was properly named as a joint employer here as it “played a direct and key
role in [the] events alleged as unfair labor practices.”
Hiring and work hours. The ENGA provisions gave CNN considerable authority over
hiring and work hours, and it exercised that authority. The ENGAs also gave CNN
substantial control over the number of technicians hired by granting CNN “the right to
require changes in TVS staffing levels and to negotiate with TVS to adjust the number of
technicians” retained. TVS had to obtain CNN’s approval to hire additional technicians to
cover for those who were absent due to sick or vacation leave. CNN also controlled the
number of regular, part-time, and overtime hours of unit employees.
CNN wielded substantial control over TVS’ assignments of work to employees. At both
bureaus, CNN maintained an assignment desk that CNN and TVS assignment personnel
shared. In daily discussions, CNN decided the news stories to be covered and the TVS
45
workforce required for those stories. With respect to technicians, CNN personnel often
assigned the TVS employees their new assignments. At CNN’s various satellite studios,
where no TVS supervisors were present, CNN producers gave TVS technicians their
daily assignments. Similarly, CNN’s direction of the engineering technicians was also
common.
Through its involvement in the collective bargaining negotiations between TVS and the
union, CNN both possessed and exercised meaningful control over the wage rates of TVS
employees. Additional factors included that CNN solicited TVS to bid on the ENGAs,
CNN provided TVS technicians with email accounts on its system, CNN provided
virtually all of the equipment that TVS employees used to perform their jobs, and TVS
employees performed work that was at the core of CNN’s business and worked
exclusively for CNN. Thus, CNN exercised significant control over the essential terms
and conditions of the TVS technicians.
Contract termination. In mid-September 2003, CNN informed TVS that it was
terminating the ENGAs at both DC and NYC bureaus and bringing the technical work inhouse. Employees were advised that CNN would not be taking the union to its new
location and would only hire 50 percent of bargaining unit employees in order to get rid
of the union. Thereafter, CNN used a multistep “behavior interviewing” process to hire
over 200 technicians for the bureaus. CNN used an elaborate Excel spreadsheet system to
continuously track every applicant for every job category. While CNN hired only a
portion of the former TVS employees who applied for the new positions, it hired all
nonbargaining unit employees who applied for DC and NYC positions. CNN did not hire
any of the most active union members, despite praising them as some of TVS’ most
skilled technicians.
Having found that CNN and TVS were joint employers of the union-represented TVS
technicians, the NLRB found that CNN violated Sec. 8(a)(5) by canceling the ENGA
with TVS to avoid its obligation under the CBA, failing to bargain with the unions over
the termination of the ENGAs and the effects thereof, and by making unilateral changes
in the terms and conditions of employment when it operated with a new workforce.
Further, the Board found that the General Counsel correctly argued that the ALJ had
made all the necessary factual findings and conducted the proper 8(a)(3) legal analysis to
establish that the decision to terminate the ENGA and discharge the TVS technicians was
part of an unlawfully motivated plan to avoid the union and the obligations under the
CBA, but failed to find the 8(a)(3) violation.
CNN as successor. The ALJ also determined that CNN was a successor employer. The
test for determining successorship is (1) whether a majority of the new employer’s
workforce in an appropriate unit is former employees of the predecessor employer; and
(2) whether the new employer conducts essentially the same business as the predecessor
employer. Continuity in the workforce is established if the predecessor employed a
majority of the successor’s employees. In assembling its workforce, a successor “may not
refuse to hire the predecessor’s employees solely because they were represented by a
union or to avoid having to recognize the union.” If an employer is found to have
46
discriminated in hiring, the Board assumes that, but for the unlawful discrimination, the
successor would have hired the predecessor employees in their unit positions.
CNN was a successor employer because, on the day following the termination of the
ENGAs, it continued the same business operations with employees who performed the
same work, at the same locations, and using the same equipment as the TVS technicians.
Accordingly, continuity of the business enterprise and the workforce was established. As
a successor, CNN was obligated to recognize and bargain with the union. By failing to do
so and implementing unilateral changes in terms and conditions of employment, CNN
violated Sec. 8(a)(5).
Anti-union animus. Moreover, the Board found evidence of animus in this case was
overwhelming, as was the evidence that CNN’s explanation for its conduct was
pretextual. Here, the majority found that the ALJ correctly reasoned that CNN’s hiring
managers inconsistent application of their ostensibly objective guidelines of “behavioral
interviewing” evinced discriminatory motivation. As a result, CNN’s decision to
terminate its arrangement with TVS and its staffing program were all part of a plan to
replace a functioning union workforce with a nonunion workforce. The majority also
concluded that CNN’s reasons for failing to hire the TVS technicians were all pretextual,
and therefore it failed to establish that would not have hired the technicians absent union
animus.
Partial dissent. Member Miscimarra argued that the majority failed to adequately
address the complex business model set up by CNN in finding that it was a joint
employer. As a result of this erroneous joint-employer finding, the majority erroneously
evaluated CNN’s obligations under Sec. 8(a)(5) and (3). Unlike the majority, Miscimarra
would not have found that CNN had a Sec. 8(a)(5) duty to notify the union and bargain
over its decision to terminate the TVS contracting relationship. Similarly, the dissent
argued that the record failed to prove CNN violated Sec. 8(a)(3) based on its decision to
terminate the TVS relationship and bring that technical work in-house.
The slip opinion is: 361 NLRB No. 47.
Attorneys: Zachary Fasman (Paul Hastings) for CNN America, Inc. and Team Video
Services, LLC. Peter Chatilovicz (Seyfarth Shaw) for Team Video Services, LLC. Brian
Powers (O’Donoghue and O’Donoghue), Robert Marinovic (Myers, Suozzi, English and
Klein), and Stephen H. Sturm (Strum & Perl) for National Association of Broadcast
Employees and Technicians, Communications Workers of America, Local 11, AFL–CIO.
NLRB: Employer violated NLRA by wrist-slapping union steward for rogue
information requests
By Lisa Milam-Perez, J.D.
An employer unlawfully issued a disciplinary warning to an employee who, ostensibly
pursuant to his role as union shop steward, made frivolous information requests that had
not been authorized by the union and were irrelevant to his role in processing grievances,
a divided NLRB panel held, reversing a law judge. As the Board majority saw it, the
47
employer’s admonishment that future “similar” requests could result in harsher discipline
would lead the employee to think that even legitimate information requests were
proscribed — a notion that Member Miscimarra rejected, in dissent (Dover Energy Inc,
September 17, 2014).
Rogue information requests? Amid negotiations between the union and employer for a
successor bargaining agreement, the shop steward, who was responsible for processing
contract grievances on the union’s behalf, made a written request to the company’s
director of HR for information about “financial relationships between the employer and
union members, including the union bargaining committee.” According to the request, the
information was necessary “for the purpose of future bargaining.” The HR director asked
the union president and bargaining committee members about the steward’s request, and
whether the union had authorized it. The union assured the HR director that it had not,
and told him not to provide the information. So the employer denied the information
request, stating that such requests must be made through the bargaining committee. And,
since the steward was not on the bargaining committee, his request was “outside [his]
scope.”
Two months later, the steward again sought information, this time asking about the hours
and pay of all employees, for the coming payroll period and continuing until the new
contract’s ratification. He also asked for photocopies of employee paychecks from two
specified earlier pay periods. He said that the information was being sought “for labor
board investigation.” Again, the employer checked with the union, which again
confirmed that the request had not been authorized and to disregard it.
Disciplinary warning. Shortly thereafter, the steward was issued a “verbal warning”
(albeit in a written letter) for making frivolous requests for information and “interfering
with the operation of the business.” The steward was not on the bargaining committee, it
reminded him, and he had failed to work within the parameters of that committee. “We
are not individually bargaining with you or any other individual,” the letter stated,
cautioning that “similar requests such as this” would result in further discipline, up to and
including discharge. The General Counsel issued a complaint, alleging that the employer
violated Section 8(a)(1) by threatening the steward with discipline for engaging in union
and protected concerted activities.
Unlawful interference. The law judge found that because the union had not authorized
the shop steward’s information requests, they did not amount to protected union activity.
Nor were the requests otherwise protected activity, since there was no evidence the
steward had sought the information on behalf of other employees, or had discussed with
his coworkers the underlying concerns that prompted his requests. However, framing the
question as whether the disciplinary warning would reasonably be understood to have
proscribed future protected activity by the steward, the Board majority disagreed.
Section 7 protects a union steward’s activity in seeking information for the purpose of
investigating potential grievances pursuant to a bargaining agreement, the Board noted; it
also protects concerted activity by an employee seeking “to initiate or to induce or to
prepare for group action.” Having recited the black-letter law, the Board did not decide
48
whether the specific information requests made by the steward were themselves
protected. Nonetheless, it reasoned that future requests for wage and hour information of
the type sought by the steward could well be protected, the majority reasoned. The
steward might legitimately need information about hours and pay of bargaining unit
members in the course of investigating a grievance. And from the language of the
warning, the steward might rationally fear that such a request in the future, however
legitimate, could trigger further discipline or discharge.
Dissent. Member Miscimarra, dissenting, concluded that a reasonable employee in the
steward’s shoes “would have understood perfectly well that the warning did not threaten
future discipline over legitimate information requests.” The steward knew that his
authorization from the union was limited to his role in grievance processing, and he
would surely understand that the “similar requests such as this” language did not mean
future legitimate requests for wage and hour information for the purpose of investigating
potential grievances. Such a request would clearly be within the scope of his role as
steward, after all. Rather, the warning’s language referred to “continued frivolous
requests” for information related to bargaining, which fell outside the scope of his duties.
Also, there was no evidence in the record that the steward had ever been issued a
disciplinary warning for making information requests pursuant to investigating a potential
grievance. Therefore, Miscimarra would have affirmed dismissal of the charges.
The slip opinion is: 361 NLRB No. 48.
Attorneys: Patrick Edsenga (Miller Johnson Snell & Cummiskey) for Dover Energy, Inc..
NLRB: Overbroad “no-disruptions" rule and CEO’s coercive speech require new
union elections
By Joy P. Waltemath, J.D.
Leaving for another day a decision on the lawfulness of an electronic communications
policy that prohibited employees from using Purple Communication’s email system for
any nonbusiness reason, a three-member panel of the National Labor Relations Board set
aside representation elections at two of the employer’s sites because of campaign
speeches given by Purple’s president/CEO and its maintenance of an overbroad nodisruption policy that could have discouraged employees from engaging in many types of
permissible campaigning. Two new elections were ordered (Purple Communications, Inc,
September 24, 2014).
CEO speeches. During the weeks before union elections were held to represent
interpreters at the sign-language interpretation provider, the president/CEO made
speeches to large groups of interpreters at each of the seven call centers where an election
was to be held. Although he did not have a script, the topics he covered included Hostess
Bakery’s then-recent bankruptcy filing; Purple’s financial difficulties and its belief that
revenues would soon decrease; the elections; and the company’s expenditures in
opposing the union campaigns. He also discussed the productivity standards and asked
the interpreters to give Purple a chance to address their concerns before they brought in a
union.
49
Productivity standards. The election campaign had focused significantly on
productivity standards, which Purple had increased a couple of months earlier, shortly
before the union filed election petitions. These new productivity standards affected both
the physical demands on the interpreters and their eligibility for bonuses. Less than a
week after the CEO’s speeches, Purple notified interpreters that it was easing its
enforcement of the standards. But even after the downward adjustment, the standards
remained higher than they had been before the increase.
Promises. The Board found that in his speeches, the president/CEO implicitly promised
improvements in the productivity standards and implicitly threatened the interpreters by
telling them that the money Purple had spent to oppose the union could instead have been
spent on employee bonuses. Although an employer’s “generalized expressions” asking
for another chance or more time typically are within “the limits of permissible campaign
propaganda” so long as an employer does not make any “specific promise that any
particular matter would be improved,” the Board did not consider the statements here just
“generalized expressions.”
In the Board’s view, his implied promises of improvements were directly linked to the
increased productivity standards – a central issue in the elections and a significant
physical and financial concern for interpreters. The president/CEO said that the
productivity standards might have been raised too high; said that he “regretted” it; and
said that that Purple was “looking into” “recalibrating” the standards. While this was not
an “express promise to take specific action on the matter,” he indicated that action was
being contemplated, and even was likely, to respond to the interpreters’ concerns. These
implied promises had the tendency to interfere with employees’ free choice in the
elections and were objectionable.
In a footnote, the Board noted that three days after the speeches and about a week before
the election, Purple modified the productivity standards to reduce the burden on
interpreters. At approximately the same time, the union notified Purple that it would not
file unfair labor practices about the standards if Purple would lower them and, in fact, the
union did not do so, nor did it file election objections regarding the modifications. But the
Board said the coercive effect of what the CEO had promised several days earlier was a
separate issue.
Threats. Also found objectionable and coercive were the president/CEO’s statements
about the money the company had spent opposing the union campaign and how it could
have been used to give bonuses to the interpreters. Citing numerous cases, the Board
found the statements would reasonably have communicated to employees that their union
campaign had potentially cost them bonuses and might continue to do so. It also found
objectionable the president/CEO’s statement at one site that he could make improvements
only at the facilities that did not have elections pending.
Elections set aside. Parting ways with the ALJ, the Board concluded that the
objectionable conduct, considered together or separately, could have affected the election
results and required setting aside elections at both challenged sites. The ALJ had found it
appropriate only to set aside one election, where the vote was 15 for representation, 16
50
against, and 2 challenged ballots; the Board also set aside the other election, where the
vote was 10 for, 16 against, and 1 challenged ballot.
“No-disruptions” rule. The Board specifically rejected the ALJ’s conclusion that the
unlawful no-disruptions rule was insufficient, standing alone, to require new elections.
The rule had applied to all employees for approximately the past six months, and the
Board found it extraordinarily broad: It prohibited employees from “[c]ausing, creating or
participating in a disruption of any kind during working hours on Company property,”
which could have discouraged employees from engaging in many types of permissible
campaigning.
Although acknowledging that the testimonial evidence of the rule’s dissemination to
employees was “somewhat limited,” the Board emphasized that Purple stipulated that the
employee handbook containing the rule has been “in effect and applied” at both facilities.
Characterizing both elections as close (saying that at one, changing only three
employees’ votes could have reversed the election’s outcome, depending on the
challenged ballot; while at the other, a single changed “no” vote would have made the
difference), the Board would not conclude that it was “virtually impossible” that the nodisruptions rule affected the election results at either. As the same was true for the
president/CEO’s implied promises and threats, the Board set aside both elections.
The slip opinion is: 361 NLRB No 43.
Attorneys: David Rosenfeld (Weinberg, Roger & Rosenfeld) for Communications
Workers of America, AFL–CIO. Robert Kane (Stuart Kane) for Purple Communications,
Inc..
Hot Topics in WAGES HOURS & FMLA:
South Carolina man pleads guilty to foreign labor contracting and visa fraud, wage
and hour violations
Reginald Wayne Miller, of Marion, South Carolina, has pleaded guilty to fraud in foreign
labor contracting, the Justice Department announced on Wednesday, September 3. Miller
also entered a guilty plea to visa fraud and wage and hour violations. A sentence will be
imposed after the court’s review of a presentence report, which will be prepared by the
U.S. probation office.
Evidence presented at the hearing established that Miller knowingly recruited and enticed
foreign students to attend Cathedral Bible College, where he was president. In doing so,
Miller recruited the students outside of the United States for employment at the college
by means of false representations and promises regarding employment. Further, he made
material false statements under penalty of perjury on the related immigration documents
for these student employees. Also, once the students arrived in the country, Miller
violated the FLSA by failing to pay them the applicable minimum wage.
The maximum penalty for fraud in foreign labor contracting is imprisonment for five
years and/or a fine of $250,000. The maximum penalty for visa fraud is imprisonment for
51
15 years and/or a fine of $250,000. The maximum penalty for wage and hour violations is
imprisonment for six years and/or a fine of $10,000.
The case was investigated by agents of the Department of Homeland Security,
Immigration and Customs Enforcement.
Raiderettes have $1.25 mil settlement to cheer about
The Oakland Raiders football team and its “Raiderette” cheerleaders have reached a
proposed $1.25 million settlement resolving the first of several recent class action
lawsuits in the NFL for wage violations. The suit claimed that the Raiders failed to pay
their cheerleading squad, The Raiderettes, in accordance with the requirements of state
law. The suit covered those who worked as Raiderettes from January 22, 2010 through
the 2013-2014 football season.
A California state court will consider the parties’ joint motion for preliminary approval
on September 26. If approved, the settlement would pay an average of $6,000 to each
Raiderette for each season she worked between 2010 and 2012 (90 Raiderettes, in all).
For those who work in the 2013-2014 season, the recovery would be approximately
$2,500. A smaller portion of the settlement is allocated to the 2013 season because the
Raiders paid minimum wage in 2013 before the lawsuit was filed. Under the settlement,
the dancers will be compensated for all the hours they worked for which they had not
already been paid, including practices and appearances. They will also receive money for
unreimbursed expenses, interest on the past wages, and penalties under the California
Labor Code.
The class action suit, brought by two Raiderettes whose identities are protected in
keeping with Raiders policy, set off a cascade of similar lawsuits around the NFL by
football dance squads who claim they are underpaid for their labor. “I never dreamed that
my decision to find a lawyer and file a lawsuit would lead to the kind of sweeping
changes we are now seeing for the women of the NFL,” said Lacy T., the first of the NFL
cheerleaders to speak out publicly against the wage and hour violations. “It’s pretty
breathtaking. But as a mom, it makes me proud to know I’ve stood up for myself, other
women, and my daughter.”
The cheerleaders were represented by Levy Vinick Burrell Hyams, an Oakland-based
firm specializing in representing employees.
DOL’s flip-flop on administrative exemption slated for argument December 1
By Pamela Wolf, J.D.
When the Justices re-convene this fall, the line-up of oral arguments includes several
cases that are surely on the radar of labor and employment law experts. On Thursday,
September 4, the Court released its argument calendars for November and December.
Perhaps the most controversial is a pair of cases that call into question the DOL’s flipflop on the application of the administrative exemption to mortgage loan officers – the
agency’s recent reversal of its earlier position takes loan officers out of the exemption’s
reach.
52
The D.C. Circuit reversed a district court’s dismissal of a challenge to a Wage and Hour
Division “Administrator Interpretation” declaring mortgage loan officers nonexempt.
According to the appeals court, since the DOL’s most recent interpretation was at odds
with its earlier interpretations, the agency was required to go through the notice-andcomment process. The Justices will decide the question in Perez v. Mortgage Bankers
Association and Nickols v. Mortgage Bankers Association, both of which are set for oral
argument on Monday, December 1.
On November 4, the Justices will hear argument in Department of Homeland Security v.
MacLean, in which the Court is asked to examine whether Whistleblower Protection Act
protections made inapplicable by certain prohibited disclosures nonetheless bar an agency
from taking enforcement action against an employee who intentionally discloses sensitive
security information.
M&G Polymers USA, LLC v. Tackett is slated for argument on November 10. The case
gives the Justices the opportunity to resolve a circuit split on whether, when construing
CBAs in LMRA cases, courts should presume that silence concerning the duration of
retiree health-care benefits means the parties intended those benefits to vest and thus
continue indefinitely.
On December 3, the Court will hear argument in Young v. United Parcel Service, Inc., on
whether, and in what circumstances, an employer that provides work accommodations to
nonpregnant employees with work limitations is required to also provide work
accommodations to pregnant employees who are “similar in their ability or inability to
work.”
Animator files suit against Lucasfilm, Pixar over no-poach agreements
By Linda O’Brien, J.D., LL.M.
Visual effects and animation companies engaged in a conspiracy to suppress the wages
and salaries of their employees by agreeing on wage and salary ranges and entering into
non-solicitation agreements, according to a class action complaint filed in the federal
district court of San Jose, California (Nitsch v. DreamWorks Animation SKG, Inc.,
September 8, 2014).
DreamWorks, Pixar, Lucasfilm, The Walt Disney Company, Digital Domain,
ImageMovers, and Sony are in the business of creating visual effects and animation for
motion pictures. Creating such effects and animation required the labor of thousands of
skilled animators, graphic artists, software engineers, and other technical and artistic
workers. Robert Nitsch was a senior character effects artist at DreamWorks and a
cloth/hair technical director at Sony.
The complaint alleges that, in 1986, the executives of Lucasfilm and Pixar reached an
express agreement to restrain competition for the skilled labor that worked for the two
companies. The executives allegedly agreed that (1) they would not “cold call” each
other’s employees, (2) they would notify the other company when making an offer to an
employee of the other company, and (3) the company making such an offer would
53
decline to increase that offer if the current employer made a counteroffer. Lucasfilm and
Pixar eventually formed similar non-solicitation agreements with DreamWorks, The Walt
Disney Company, Digital Domain, ImageMovers, and Sony.
The defendants’ conspiracy extended beyond their illicit non-solicitation agreements to
regular discussions and agreements on wage and salary ranges, according to Nitsch. At
least once per year, some or all of the defendants allegedly met to discuss common job
positions in order to set parameters of a compensation survey. In addition, the
defendants’ human resources and recruiting personnel met at social gatherings or
elsewhere to communicate about wages and salaries for their workers in order to
implement the conspiracy more effectively. No studio acting in its independent selfinterest would share such information in the absence of a conspiracy, the complaint
claimed.
Soliciting a competing studio’s employees was an effective way of recruiting employees
and a key competitive tool in a properly functioning labor market for skilled labor. The
defendants were charged with agreeing to severely limit their competition by not actively
solicit employees for other defendants. Through these agreements, the defendants harmed
their respective workers by depriving them of the wages and salaries they would have
received in a competitive market, the lawsuit alleged.
Any applicable statute of limitations has been tolled as a result of the defendants’
fraudulent concealment of their conspiracy. The plaintiff had no actual or constructive
knowledge of the relevant facts and could not have discovered through the exercise of
due diligence of the existence of the conspiracy until September 2010, when the U.S.
Department of Justice revealed that its investigation into non-solicitation agreements
among high-tech companies included visual effects and animation company, Pixar. The
defendants’ conspiracy was concealed and carried out in a manner to avoid detection,
with the defendants attempting to create the false impression that their decisions were
independent and they were acting in accordance with the antitrust laws, the complaint
alleged.
The plaintiff asserts claims for unfair competition, disgorgement, restitution, and
violations of Section 1 of the Sherman Act and California’s Cartwright Act. The action
seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest,
costs of suit, attorneys’ fees, and any other just and proper relief.
Forestry contractors must pay $500K-plus in back wages, face prison, debarment
Following a three-year multi-agency investigation, a federal court in South Dakota has
ordered five South Dakota forestry contractors to pay more than $541,000 to 66 workers
as a result of significant violations of the FLSA, the Service Contract Act (SCA), the
Contract Work Hours and Safety Standards Act (CWHSSA), and the Migrant and
Seasonal Agricultural Worker Protection Act (MSPA). The owners of the Black Hills
logging companies Munoz Logging and Construction, Black Hills Thinning, Escalante
Logging & Thinning, Escalante Thinning, and SM Logging & Services have also agreed
to plea bargains for convictions on violations of several statutes, according to a
September 15 DOL announcement.
54
The five logging companies worked on contracts awarded by the U.S. Forest Service for
projects in the Black Hills National Forest and had been awarded at least $22.67 million
in federal contracts since 1986, according to federal procurement data. The DOL, Forest
Service, Department of Homeland Security, and several other federal and South Dakota
state and local agencies collaborated on the investigations.
The SCA requires contractors and subcontractors performing services on prime contracts
in excess of $2,500 to pay service employees in various classes no less than the wage
rates and fringe benefits found prevailing in the locality. The CWHSSA, which applies to
federal service contracts and federal and federally assisted construction contracts over
$100,000, requires contractors and subcontractors to pay laborers and mechanics
employed in the performance of the contracts one and one-half times their basic pay rate
for all hours worked over 40 in a workweek. The MSPA protects migrant and seasonal
agricultural workers by establishing employment standards related to wages, housing,
transportation, disclosures, and record keeping. It also requires farm labor contractors to
register with the DOL.
Conspiracy scheme. The investigating agencies brought charges that included
conspiracy to defraud the federal government by underpaying workers employed on
federal contracts with the Forest Service for work in the Black Hills National Forest.
According to a federal grand jury indictment, since January 2008, the nine owners of the
logging companies devised a scheme to violate immigration law and defraud the Forest
Service by underpaying workers and conducting other unlawful activities. This process
permitted the companies to underbid their competitors for the contract work. The five
companies often bid on the same federal contracts, and once the contract was awarded, all
the firms ultimately performed or assisted in the performance of various contracts, the
indictment alleged.
Plea bargains. In April and May 2014, the defendants accepted plea bargains that
included fines, imprisonment, and restitution. The companies face debarment from
competing for future government contracts, the DOL said.
“The resolution of these cases, through conviction of the offenders, was the result of
successful coordination and collaboration between multiple agencies and makes evident
that fraud and unlawful treatment of workers in America will not be tolerated,” Wage and
Hour Division Regional Administrator Cynthia Watson said. “These actions help to level
the playing field in the Rapid City area for forestry contractors and ensure compliance
with payment of required wages under numerous federal contracts. Every worker who
performs a job in America deserves to be paid the wages they earn.”
Shell Oil, Motiva Enterprises will pay $4M-plus in OT back wages
In the wake of DOL investigations unearthing FLSA violations, Shell Oil Co. and Motiva
Enterprises LLC, which markets Shell gasoline and other products, have agreed to pay
$4,470,764 in overtime back wages to 2,677 current and former chemical and refinery
employees. The investigations, which were conducted in five states, were a coordinated
effort, according to a September 16 agency release.
55
The DOL’s Wage and Hour Division (WHD) conducted investigations at eight Shell and
Motiva facilities in Alabama, California, Louisiana, Texas and Washington, and
determined that the companies violated FLSA overtime provisions by not paying workers
for the time spent at mandatory pre-shift meetings and by failing to record the time spent
at these meetings.
The WHD’s Houston District Office coordinated investigations with the Gulf Coast, New
Orleans, San Francisco and Seattle District Offices to ensure nationwide compliance by
the two companies. Investigation findings showed that all eight Shell Oil and Motiva
refineries failed to pay workers for time spent attending mandatory pre-shift meetings.
The companies also required the workers to come to the meetings before the start of their
12-hour shift. As a result of the companies’ failure to view time spent at mandatory preshift meetings as compensable, employees were not paid for all hours worked and also
did not receive all of the overtime pay they earned, the WHD said. Moreover, the
refineries purportedly failed to keep accurate time records.
Shell, with U.S. headquarters in Houston, is an oil and natural gas producer involved in
processing crude oil to manufacture energy products, including gasoline, diesel fuel, jet
fuel, and petroleum coke. Motiva, which is partially owned by Shell, is a leading refiner,
distributor, and marketer of fuels in the Eastern and Gulf Coasts. It markets petroleum
products under the Shell brand.
Both companies have signed settlement agreements that require them to provide FLSA
training to all managers, payroll personnel, and human resources personnel. The training
will stress the importance of requiring accurate recording and pay for all hours worked
with emphasis on pre-and post-shift activities.
Farm labor contractor sued for labor violations at New Jersey nursery
The Department of Labor has filed suit against Philadelphia-based farm labor contractor
Heng Heng Agency Inc. and its president and owner, Visith Oum, for violations of the
FLSA and the Migrant and Seasonal Agricultural Worker Protection Act’s wage,
recordkeeping, registration, and transportation provisions.
The lawsuit, filed by the DOL’s regional Office of the Solicitor with the Office of
Administrative Law Judges, seeks $146,100 in civil money penalties based on the farm
labor contractor’s willful and repeat violations of the FLSA and MSPA.
Investigators from the Wage and Hour Division’s Southern New Jersey district office
found that Heng Heng failed to pay the federal minimum wage, a violation for which the
company was previously cited in 2012. Investigators also found that the contractor failed
to keep proper records, to provide safe transportation vehicles, and to obtain the required
insurance coverage, as required by the MSPA. The violations were uncovered at Medford
Nursery, in Lumberton, New Jersey, where Heng Heng had supplied 125 temporary
employees to work cultivating and harvesting nursery stock.
The workers were jointly employed under the FLSA by Medford Nursery and Heng
Heng, and the companies are individually and jointly responsible for complying with the
56
law’s requirements, the agency found. Medford Nursery has paid $36,505 in back wages
to the 125 workers and settled its involvement in the matter.
Heng Heng owner Visith Oum “has a history of labor law violations and employs
vulnerable South Asian and Hispanic workers in the Philadelphia area, who are
transported to various farms and nurseries,” said Charlene Rachor, director of the
Southern New Jersey district office. “The nature of seasonal agricultural work makes the
seasonal farm worker vulnerable to unfair and unsafe labor practices.”
Subway franchise owner to pay back wages after falsifying time records
Subway of Buffalo, Inc., the owner of a Subway sandwich franchise that failed to pay
minimum wages and shaved hours from employees’ time records, will pay 16 workers a
total of $9,800 in back wages and liquidated damages under the terms of a consent
judgment issued by a federal district court in Minnesota, the DOL announced. The
agency filed an FLSA suit after the Wage and Hour Division found minimum wage
violations as a result of the company’s rounding and shaving hours from time records.
Workers also were not properly compensated at the overtime rate for hours exceeding 40
in a workweek. The consent judgment permanently enjoins the company and one of its
store managers from violating the FLSA in the future.
The franchise also failed to maintain accurate records of hours worked and of cash
payments made to workers, and it failed to provide proof of wages paid to employees
who appeared on time records but not on corresponding payroll records. When
investigators requested wage records, the manager acknowledged that he destroyed
original time records due to the restaurant’s illegal pay practices.
“Subway of Buffalo falsified its records to facilitate underpaying its workers and then
provided altered records to our investigators for inspection,” said Theresa Walls, district
director for the Wage and Hour Division in Minneapolis. “It is unfortunate that there are
employers that believe they can exploit vulnerable workers. This judgment will put hardearned wages back into the pockets of workers and sends a clear message that denying
employees their rightfully earned wages will not be tolerated.”
The Wage and Hour Division recently announced a collaborative effort with Subway’s
corporate headquarters to increase compliance with federal labor laws at Subway
locations nationwide. Although these restaurants are independently owned and operated,
the franchisor is providing a forum and resources to assist the DOL in educating the
chain’s franchisees.
Majority of employers think minimum wage should be increased
With state, local, and midterm elections just five weeks away, the minimum wage
remains one of the nation’s top socioeconomic and political issues. Recent national polls
have shown support for minimum wage increases among voters at large, and according to
a new CareerBuilder survey, many businesses are right there with them. The survey
found that a strong majority of employers (62 percent) think the minimum wage in their
state should be increased, including 58 percent of company senior leaders. The
nationwide survey, which was conducted online by Harris Poll on behalf of
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CareerBuilder from May 13 to June 6, included a representative sample of 2,188 full-time
hiring and human resource managers and 3,372 full-time workers in the private sector
across industries and company sizes.
What is a fair minimum wage? While most employers would like to see a hike in their
state, only 7 percent think a minimum wage of $15 per hour or more would be fair. Nine
percent don’t think there should be a set minimum wage. Nearly half (48 percent) think a
fair minimum wage should be set between $10 and $14 per hour:

$7.25 per hour (current federal minimum): 8 percent

$8.00 or $9.00 per hour: 29 percent

$10.00 per hour: 29 percent

$11.00-$14.00 per hour: 19 percent

$15.00 or more per hour: 7 percent

No set minimum wage: 9 percent
Why do employers say the minimum wage should be increased? Among employers
who want an increase in their state, improving the standard of living of workers led all
business-related reasons for their support. A majority say a higher minimum wage helps
the economy and helps them retain employees.

It can improve the standard of living: 74 percent

It can have a positive effect on employee retention: 58 percent

It can help bolster economy: 55 percent

It can increase consumer spending: 53 percent

Employees may be more productive/deliver higher quality work: 48 percent

It can afford workers the opportunity to pursue more training or education: 39
percent
Why do employers say the minimum wage shouldn’t be increased? Employers who
do not support a minimum-wage increase in their state cite several reasons related to
negative effects it may have on their business.

It can cause employers to hire less people: 66 percent

It can cause issues for small businesses struggling to get by: 65 percent

It can cause hikes in prices to offset labor costs: 62 percent
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
It can mean potential layoffs: 50 percent

It can lead to increased use of automation as a replacement for workers: 32
percent

Wages for higher-level workers may suffer and create retention issues: 29 percent
Majority of minimum-wage workers struggle to get by. A separate sample found that
79 percent of full-time, non-management-level employees have worked in a minimumwage job in the past or are currently in a minimum-wage job. Of these workers, 59
percent were not or are not able to make ends meet financially.
Firms hiring minimum-wage workers this year. Twenty-seven percent of employers
are hiring minimum-wage workers in 2014, including 51 percent of retailers and 58
percent of leisure and hospitality firms. Of those employers who currently employ
minimum-wage workers, 45 percent are hiring more minimum-wage workers today than
they did pre-recession.
Interestingly, employers currently hiring minimum-wage workers are more likely to
support a minimum-wage increase than those who are not by an 11-point margin (70
percent vs. 59 percent).
Industry and demographic breakdown. By state, CareerBuilder also looked at the
percentage of employers favoring a minimum-wage increase:

Gender: 57 percent male; 68 percent female.

Age: 71 percent age 18-34; 61 percent age 35-54; and 56 percent age 55+.

Industry: 65 percent Health Care; 68 percent Retail; 60 percent Leisure &
Hospitality; 67 percent Information Technology; 52 percent Manufacturing; 54
percent Financial Services; and 59 percent Professional & Business Services.

Region: 64 percent Northeast; 63 percent South; 58 percent Midwest; and 62
percent West.

Company size (employees): 59 percent <50; 62 percent 51-500; 67 percent 5011000; and 63 percent >1001.
Employer group urges FLSA rule reform of a different sort
By Lisa Milam-Perez, J.D.
A trade group representing the top HR brass at large U.S. corporations has weighed in on
President Obama’s recent directive to reform (i.e., expand) the FLSA’s overtime and
minimum wage protections. In a letter to Labor Secretary Thomas Perez, the HR Policy
Association, which represents the chief human resources officers at more than 360 of the
largest companies doing business in the United States, urged the Department of Labor
(DOL) to take a different approach than what is widely anticipated, saying the agency
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should focus less on further narrowing the current overtime exemptions and more on a
whole-scale modernization of the outdated regulations. The letter expanded upon the
concerns expressed by the organization in its meeting with Perez last May. “Our goal is
not to move more employees into exempt roles, but to see that the regulations carry out
the original intent of the law in this new global, wireless world,” said Daniel V. Yager,
HR Policy Association president and general counsel.
In March, President Obama directed the DOL to update and “modernize” the overtime
rules, signaling that the goal was to broaden the FLSA’s overtime protections to cover a
greater number of workers. But the Association told Perez that the white-collar
exemption rules, in particular, were so out of sync with today’s workplace that a more
radical reworking is due.
Outdated and unworkable. Embedded within the FLSA and its enabling rules are
assumptions based on the workplace of 1938, when the law was enacted. But work today
differs sharply, in a number of important ways, the Association pointed out. Occupations,
skills, and where and when employees perform their work — all have been dramatically
transformed, a reality that should be factored into any rule changes that the DOL
proposes, the HR executives urged.
Offering a stark illustration of just how far behind the FLSA remains, the Association
noted that the current statutory definition of “computer professionals” has been frozen in
time since 1996, when “less than 40 percent of Americans owned a cell phone, let alone a
smart-phone, less than 3 percent of U.S. homes had broadband access, and Facebook
didn’t exist.” Yet today, more than 90 percent of Americans have smart phones and over
70 percent use social networking sites and have broadband at home. “Needless to say,
how and where work gets done has changed dramatically, and the computer professional
exemption is woefully outdated.”
“Hours worked” past expiration date. As a practical matter, the flexibility that these
technological advancements affords employees is ill-fitted to the current regulatory
framework, which deters employers from allowing nonexempt workers to take advantage
of such conveniences like telecommuting or working outside of normal hours. The
onerous challenge of tracking these nontraditional “hours worked” is disincentive enough
under the current rules. But even more problematic: a nonexempt employee checking
email from home at night invites more than just the prospect of a few minutes’ extra
compensable time. As some plaintiffs’ attorneys argue, the otherwise brief task could
then mark the official end of the workday under the FLSA’s “continuous workday” rule,
meaning that in such instances, even the time spent commuting home by the employee
would have to compensated.
“Exemptions” have become extinct. Even more daunting is the challenge of “forcefitting” the current exempt vs. nonexempt distinctions, still tied to “mid-twentieth century
skills and occupations,” to the contemporary workforce, the Association wrote. Indeed,
this is the biggest FLSA compliance problem employers face, and its discussion takes up
much of the lengthy letter, which lists entry-level engineers and accountants and inside
sales reps as just a few of the professionals whose exempt status is frustratingly murky
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under the white-collar rules currently in place, with their unworkable “duties” tests and,
in the case of “learned professionals,” an illogical analysis that treats employees
performing the same work differently depending upon where they acquire their advanced
knowledge and expertise. Of course, there is also a “large and growing number of
occupations whose duties do not squarely fit within any of the exemptions,” the
Association noted.
A litigation feeding frenzy. When it authorized a private right of action under the FLSA,
Congress could never have anticipated the explosion in wage-hour litigation to come. The
“significant boom in the last decade [is] beyond anything the law’s framers could have
possibly envisioned,” the Association asserts, calling the confusion that abounds from the
outdated statutory provisions and regulations “a veritable playground for the plaintiff’s
bar.” The letter cites a GAO study which found a 514 percent increase in FLSA suits
filed since 1991, and notes too that wage-hour litigation has grown by 1,000 percent since
the statute was first passed. Companies often simply settle these cases — leery of taking a
risk given the lack of clarity in the law — with a median settlement cost of $7.4 million
for federal cases and $10 million for state cases, according to the Association.
“Nonexempt” status not so great. Ultimately, all this concern about “exemptions” from
overtime is much ado about nothing, the Association suggests. “Nonexempt status under
the FLSA determines how an employee is paid, not how much,” the letter points out,
contending that merely being covered by the statute’s overtime provisions doesn’t equate
to greater pay. In fact, being nonexempt might well mean a smaller paycheck if the
employer sets a lower hourly rate in order to offset the costs of paying overtime.
Plus, there are downsides. Nonexempt employees are unable to enjoy the flexibility borne
by the availability of new technologies and necessitated by the demands of modern life.
They have less access to professional development and training, “particularly if they are
at risk of capping-out the amount of hours they are allowed to work for cost reasons,” in
turn jeopardizing their professional growth. Also, being exempt is often viewed, “rightly
or wrongly,” as being among the professional ranks to which many employees aspire, and
nonexempt employees are perceived as lower-status. In fact, the HR executives indicated
that, in their experience, employees who are reclassified from exempt to nonexempt are
often bitterly resentful of the change. “Employees realize, eventually if not at the outset,
that it may mean little, if any, extra pay (possibly even less) accompanied by less
flexibility in their scheduling and an inability to take advantage of the virtual workplace.
Rather, the only change is how their pay is calculated.”
Recommended reforms. Simply narrowing the overtime exemptions to expand the
number of employees covered by the rigid restrictions would only exacerbate these
problems, the Association contends. And an expected hike in the minimum-salary floor
for exempt status to apply would be “extremely damaging” to many employers,
particularly small businesses “where a substantial increase in costs could mean the
difference between staying in business and closing their doors.” Instead, the letter urged
the DOL to broaden its rulemaking approach, and offered the following (non-exhaustive)
list of recommendations for reform:
61

Clarify what constitutes “hours worked” when digital devices are used away from
the workplace — and offer a “realistic” de minimis exception — so that it’s easier
for employers to let employees telecommute and/or work flexible schedules;

Establish a safe harbor rule for those employers that have clearly communicated
to their nonexempt employees that “work outside of normal working hours must
be both authorized and recorded”;

Amend the duties tests for determining the exempt status of administrative and
professional employees, established in the 1950s, so that they are better aligned
with the professional responsibilities of the contemporary workplace;

Establish a process for employers to reclassify employees without triggering a
potential class action suit in the process. Specifically, the Association called for
the creation of a streamlined procedure by which employers could obtain the
equivalent of a settlement agreement with the DOL that would foreclose a private
lawsuit.
Given the significant impact that the pending DOL revisions promise to have on
employers, the Association also urged Secretary Perez to issue an advance notice of
proposed rulemaking before making any specific rule changes, affording the employer
community ample opportunity for review and comment.
LEADING CASE NEWS:
1st Cir.: Employee or no, FedEx driver can’t recover wages under Massachusetts
law
By Lisa Milam-Perez, J.D.
A FedEx driver failed on numerous fronts in his wage suit under Massachusetts law, the
First Circuit held, affirming a lower court’s dismissal and grant of summary judgment in
the courier’s favor on alternate theories of recovery — several hinging on employee
status, and one that was contingent on not being an employee. Once the district court had
ruled he was not an employee, procedural lapses on the driver’s part foreclosed his
alternate claim arising under an independent contractor theory. At any rate, though, more
artful pleading wouldn’t have saved him; he wasn’t quite “independent” enough from
FedEx, his sole client, to bring a viable claim under the state’s unfair business practice
statute (Debnam v FedEx Home Delivery, September 8, 2014, Kayatta, W).
Independent contractor? The plaintiff had started driving a single route for FedEx in
2004. He was classified by FedEx as an independent contractor, and he signed on to this
arrangement in a form independent contractor agreement. Indeed, the facts alleged here
(unlike in the most recent Ninth Circuit cases addressing the status of the courier’s
drivers) suggested an honest-to-goodness independent contractor relationship, of the type
oft-envisioned by the company: the driver had soon acquired the rights to service
multiple routes and, as of June 2009, he was operating nine routes for the courier. He
owned or leased 11 delivery vehicles, which he paid to maintain, repair, and insure. He
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also oversaw drivers who worked under him, paid their federal employment taxes,
purchased their uniforms, and hired temporary drivers to replace them when they took
time off. On the other hand, FedEx was entitled under the contract to set vehicle and
driver appearance standards and qualifications as to whom he could employ as drivers.
The courier also reserved the right to reconfigure his service area as its sole discretion
and on only five days’ notice, and adjust his pay accordingly. It also could terminate the
contract for any reason, on 30 days’ notice.
Numerous claims, competing theories. The plaintiff filed a state law wage action
against FedEx, asserting seemingly alternate claims under Massachusetts law: two causes
of action that were contingent on employee status, including a claim under Chapter 149,
the state’s basis wage payment law; and another, an unfair business practice claim under
the state’s “Chapter 93A,” which cannot be brought by an employee against an employer.
FedEx quickly moved to dismiss the latter given that, in his complaint, the driver had
“forcefully and without reservation staked out the position” that he was a FedEx
employee.
After the district court dismissed the Chapter 93A claim as incompatible with an
employee-employer relationship, and thus inconsistent with the “gist” of his complaint
(which asserted that the independent contractor moniker was erroneous), the driver never
amended his complaint. And when the court later ruled on summary judgment that he
was not an employee under the Massachusetts wage payment law, but rather was engaged
in a legitimate “business-to-business,” independent contractor relationship with FedEx,
he was left claimless. So he sought recourse in the First Circuit, appealing the court’s
earlier dismissal of his Chapter 93A claim, as the court’s ruling had been predicated on
his being a FedEx employee.
Unfair business practices. Chapter 93A prohibits “unfair or deceptive acts or practices
in the conduct of any trade or commerce” with respect to transactions between businesses
or people engaging in business (the provision that matters here). The statute creates a
cause of action only where both parties were engaged in "trade or commerce" while
taking part in the transactions that gave rise to the suit. State courts have shortened the
reach of the statute, interpreting “trade or commerce” as excluding certain activities such
as those implicating an employee’s “services” to his or her employer.
Inartfully drafted complaint. Given the constraints of Chapter 93A, a plausible claim
hinged on the driver’s ability to assert that he was an independent contractor. But the
driver had hemmed himself in by his “inartfully drawn” complaint, which failed to argue
in the alternative. Having staunchly and repeatedly asserted that he was not an
independent contractor, he was precluded from arguing that he was an independent
contractor for purposes of Chapter 93A.
Granted, the factual allegations could have supported an independent contractor finding
(and ultimately, the court found precisely that, of course). And courts don’t typically heed
a complaint’s assertions of “legal conclusions” (i.e. employee status) couched as fact, the
appeals court noted. Nonetheless, once the court indicated how it intended to construe the
complaint, the driver never sought to amend it to make clear that he intended to plead that
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he was an employee or, alternatively, an independent contractor. (Indeed, the lapse
“remarkable,” the appeals court noted.) Ultimately, though, the appeals court did not have
to entertain the question of whether the court erroneously read the complaint as
incompatible with independent contractor status; even if the complaint’s factual
allegations were enough to preserve that claim in the alternative, the complaint still failed
to plead a violation of Chapter 93A.
Trade or commerce. A Chapter 93A claim depends on establishing that the plaintiff and
FedEx were interacting in “trade or commerce” within the meaning of the statute. And,
regardless of whether he was an employee or an independent contractor, the driver failed
to establish that his actions as a driver satisfied this element of the statute. The complaint
allegations could not plausibly support a conclusion that he was offering his delivery
services “generally… for sale to the public in a business transaction.” Rather, his
business was devoted entirely to servicing FedEx alone, so he was not engaged in trade or
commerce. Under Massachusetts’ Chapter 93A, it seems, FedEx can have its
“independent contractor” cake and eat it too.
The case number is: 13-2335.
Attorneys: William M. Jay (Goodwin Proctor) for FedEx Home Delivery. James W.
Simpson, Jr. (Law Offices of James W. Simpson) for Darrell D. Debnam.
7th Cir.: Jointly employed manager covered by FMLA
By Kathleen Kapusta, J.D.
Upholding a jury’s award of less than $50,000 to an employee who was fired by Trans
States Airlines when he took FMLA leave despite the company’s denial of his request, a
Seventh Circuit panel found that he was covered by the FMLA even though the airline
employed only 33 employees at or within 75 miles of O’Hare airport where he worked
because he was a joint employee of at least one other company. The appeals court also
found that the district court did not abuse its discretion in awarding $325,000 in
attorneys’ fees to the employee in light of the defendants’ conduct (Cuff v Trans States
Holdings, Inc, September 19, 2014, Easterbrook, F).
Trans States Holdings (Holdings), the parent company of Trans States Airlines (Trans
States), also owned GoJet Airlines, which employed 343employees at the time of the
employee’s discharge. After the employee was fired, he sued both companies under the
FMLA and the district court granted summary judgment in his favor on the issue of
coverage. After a jury determined that he met the other standards of leave eligibility, it
awarded him $28,800 in compensatory damages; the judge added $14,400 front pay in
lieu of reinstatement. The court also awarded about $325,000 in attorneys’ fees and
$6,000 in costs.
Muddy waters. Addressing the issue of whether the employee was covered by the
FMLA, the appeals court first noted that pursuant to 29 C.F.R. Sec. 825.106(a), workers
are covered by the Act when they are jointly employed by multiple firms that collectively
have 50 or more workers. In addition, Sec. 825.104(c) provides that two or more firms
64
may be treated as a single employer when they operate a joint business. Noting that the
defendants “muddied the waters,” by directing much of their argument to the jointbusiness question, the court rejected their contention that the airlines were not joint
employers because the National Mediation Board concluded that the pilots at Trans States
and GoJet had to negotiate separately because the carriers did not conduct joint air
operations. “The joint-employment inquiry under Sec. 825.106(a) is person-specific,” the
court stated, noting that “it is possible for one person to be employed jointly by two firms
that otherwise have distinct labor forces.”
Noting that Sec. 825.106(a) provides a list of factors to consider, and that the two lead
factors are whether “there is an arrangement between employers to share an employee’s
services” and whether “one employer acts directly or indirectly in the interest of the other
employer in relation to the employee,” the court found that here, both questions “must be
answered ‘yes.’” Specifically, the employee represented all three companies in their
dealings with United Airlines and O’Hare; his business card bore the logos of all three
firms; a Holdings vice president testified that the employee was hired to provide services
to both Trans States and GoJet; and the internal directories of Holdings identified the
employee as the person to contact with questions about how both airlines operated at
O’Hare.
After-acquired evidence. The defendants next argued that after-acquired evidence of the
employee’s misconduct limited its damages. Specifically, they contended that he had a
sexual relationship with a subordinate, lied about it in an internal investigation, failed to
report an arrest for driving while intoxicated, and was taking so many narcotic drugs for
his medical conditions that he was not fit for work. Here, the appeals court first found
that the Supreme Court’s decision in McKennon v. Nashville Banner Publishing Co., a
case arising under the ADEA in which the Court found that after-acquired evidence of an
employee’s misconduct can limit damages even if the evidence does not retroactively
erase the violation, applies to the FMLA as well.
While the court found, however, that the trial court improperly excluded some evidence
of misconduct, it noted that the defendants failed to make offers of proof regarding the
excluded evidence. Noting that the defendants conceded that they had not made even one
offer of proof at trial, the court found that this “scuttles a McKennon defense because
without anyone in authority testifying that [the employee] would have been sacked when
the truth came out (had he still been on the payroll), there was no basis to stop the
running of damages.” Thus, the court upheld the jury’s verdict.
Attorneys’ fees. As to the award of attorneys’ fees, the defendants argued that an award
of almost $325,000 was not reasonable in relation to the employee’s recovery. Noting
that the ratio “certainly seems high,” and that “rational people do not set out to invest
$325,000 in order to obtain $50,000,” the court observed that at each turn the defendants
injected new issues and arguments into the case and the “defense was conducted in
blunderbuss fashion.” For example, the court pointed out, the defendants contended that
the employee was not qualified for FMLA leave because he was not taking all of the
medications his physician prescribed. Observing that the defense did not cite any statute,
regulation, or judicial decision in support of this argument, but rather thrust the burden of
65
legal research on the employee’s lawyers (and the judge), the court pointed out that the
employee’s lawyers “did the work and discovered that the defense argument was nothing
but hot air.”
Further, the court pointed out, the defendants’ attempts to use McKennon required
extensive discovery and a trial, and it was all a waste because they did not take a basic
step such as making an offer of proof. “And so it goes for issue after issue after issue in
this litigation,” the court stated, noting that the defendants did not argue that the number
of hours the employee’s lawyers devoted to refuting their defenses was unreasonable;
rather, they only contested the aggregate outlay. “Yet,” the court stated, “the high total is
the expected result of the way the defense was conducted.” Accordingly, it found that the
district court did not abuse its discretion in deeming the employee’s legal expenses
reasonable.
The case number is: 13-1241.
Attorneys: Alejandro Caffarelli (Caffarelli & Siegel) for Darren Cuff. David J.A. Hayes
III (Trans States Airlines) for Trans State Holdings, Inc..
8th Cir.: Leasing agent’s commission not owed until after termination; judgment
reversed
By Brandi O. Brown, J.D.
Reversing summary judgment for a leasing agent under a Minnesota wage law which
imposes penalties for untimely payment and granting judgment for his employer, an
Eighth Circuit panel concluded that, because conditions precedent (including the signing
of a lease and payment to the employer) were not met at the time he was fired for
performance issues, the leasing agent was not owed commissions at that time and
statutory penalties did not apply. The court noted, however, that the employer agreed that
the employee was entitled to a commission and that it expected the employer to “follow
through on its representations” (Karlen v Jones Lang LaSalle Americas, Inc, September
9, 2014, Kelly, J).
In January 2012, after two years with the commercial real estate company, the leasing
agent’s compensation structure was altered such that he could earn up to 30 percent of
leasing revenue that he directly generated. Shortly thereafter, the employee was
terminated. At the time, he was in the process of completing a lucrative lease deal. The
final lease had been sent to the tenant; it was executed three days after the employee’s
termination.
The employee contacted his former employer several times demanding the commission.
The employer and employee agreed in February that the employer would pay the
employee for any commissions based on a “protection list” of his former clients, as was
industry practice. The tenant at issue was included on the list. In April, the employee filed
suit, claiming he was owed the commission, as well as a bonus for 2011 and expense
reimbursements. He also sought statutory penalties under state law for failure to promptly
pay wages. Thereafter, the employer sent him three checks, which represented the 30
66
percent commission. After questioning by the employee, the employer informed him that
it would consider him cashing the checks to represent settlement of any additional claims.
The employee returned the checks.
Lower court decision. Following discovery, the employer moved for summary
judgment. After a hearing at which it granted summary judgment to the employer on all
claims except the commission claim, the district court, sua sponte, granted summary
judgment to the employee on that claim. The lower court determined that the employer
had breached its contract with the employee and that it owed him a commission. The
lower court also found that the employer had violated applicable state statutes because it
had “altered the method or procedures for payment.” It awarded the employee over
$69,000, doubling the commission value. It also awarded the employee 15 days’ worth of
average daily earnings because of the employer’s failure to pay wages promptly. Finally,
it ordered the employer to pay costs and attorney’s fees. However, it awarded less than
half of the fees requested by the employee. Both parties appealed.
When, not what. Reviewing the summary judgment grant de novo, the three-judge
appeals court panel agreed with the employer that the district court had erred in awarding
the commission, wages, and statutory late payment penalties. First, the panel found that
the employer did not owe the employee a commission at the time of his termination. The
Eighth Circuit had previously explained that the statute in question, Minn. Stat. Sec.
181.13, is concerned with timing and only applied when an employer owed unpaid
commissions and wages under an employment contract that were earned through the last
day of employment. Based on the contract here, the employer did not owe the employee a
commission at the time he was discharged.
Conditions precedent. It was undisputed that the commission payments for the lucrative
deal were subject to two conditions precedent that had not been met when the employee
was fired. First, leasing agents only earned commission payments on revenue actually
received by the employer. If the employer did not receive the revenue, the employee did
not receive a commission. The employer’s leases were structured to receive two
payments from property owners — one immediately after execution of the lease and one
when the tenant opened for business. The first payment for the lease at issue did not
arrive until well after the employee was terminated.
“Second, and perhaps more fundamentally,” the panel noted, the lease in question was
not actually executed until after the employee was fired. Execution of that lease was
critical to the employee earning the commission. Prior to the time he was terminated,
then, the employee “had, at most, an expectation of earning” a commission and that
expectation “lasted only as long as” he was employed. Thus, the employer did not owe
the employee payment at the time he was terminated and there was no breach of contract
justifying statutory late payment penalties.
“Nevertheless,” the panel explained, the district court had determined that the employer
owed the employee a commission and held that it had changed the method or terms of the
payments by improperly attaching conditions to the payments. It was unclear to the
appeals panel what theory the lower court operated under, however, in reaching that
67
conclusion. The appeals panel did not believe that the statutory sections in question,
Minn. Stat. Sections 181.03 and 181.13, could be “interpreted so broadly as to provide
penalties for late payment of commissions that were not owed under the employment
contract prior to termination.”
Employer’s agreement to pay. Because the employee had also admitted that he and the
employer had not reached an agreement after his termination, he was also foreclosed
from proceeding under the theory that a post-termination agreement was breached. And
he did not appeal the lower court’s dismissal of his unjust enrichment and promissory
estoppel claims. Therefore, the panel determined that the employer was entitled to
summary judgment and it vacated the award of costs and attorney’s fees to the employee.
However, it noted that the employer acknowledged that it had agreed to pay the employee
the 30 percent commission and that the employee was entitled to a commission of over
$34,000. The appeals panel noted that it “expects” that the employer “will follow through
on its representations.”
The case numbers are: 13-2379 and 13-2835.
Attorneys: Kenneth Hiroyasu Fukuda (Sapientia Law Group) for Todd Karlen. Jaime N.
Cole (Ogletree Deakins) for Jones Lang LaSalle Americas, Inc..
8th Cir.: Pathologist was independent contractor; employment discrimination
claims against hospital fail
By Marjorie Johnson, J.D.
Because a pathologist was an independent contractor for the hospital for which he
provided medical services, he was unable to advance his ADA, ADEA, FMLA, and state
law bias claims, in which he asserted that it unlawfully terminated their relationship due
to his heart attack, heart transplant, and hospitalization for bipolar disorder. Affirming
dismissal of his claims on summary judgment, the Eighth Circuit found that he exercised
complete control over his professional services; was free to set his schedule and hire
substitutes and assistants at his own expense; was provided no benefits or malpractice
insurance; was able to work elsewhere during his tenure; and reported his compensation
as the income of a self-employed independent contractor (Alexander v Avera St. Luke’s
Hospital, September 30, 2014, Loken, J).
Professional services agreements. The pathologist began his relationship with the
hospital in 1991, when he entered into a contract with another pathologist who had an
exclusive agreement with the hospital. The contract expressly provided that he would
become a member of the hospital’s medical staff and that he was an independent
contractor. In 1994, the pathologist took over the other doctor’s duties as the hospital’s
director of pathology and entered into a new contract with the hospital, entitled
“Agreement for Pathology Services.”
The pathologist and hospital entered into substantially identical contracts in 1998, 2002,
and 2008, which all stated that he was an independent contractor and that the hospital had
no authority to control or direct performance of his services. He was also solely
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responsible for paying taxes, obtaining malpractice insurance, and paying for his
professional licenses, and he was given the right to hire assistants and substitute
pathologists at his own expense.
The 1994, 1998, and 2002 contracts specified his annual compensation, providing that
one-half was to be paid to the other pathologist. However, the 2008 contract omitted
these provisions, significantly reduced his compensation, and provided that if he was
unable to provide his services for more than 35 days in a year due to illness, vacation,
medical education, or any other reason, he would be responsible for finding and
compensating a qualified substitute pathologist.
The contracts required him to provide his services in accordance with the hospital’s
bylaws, rules, and regulations, which applied to all of the hospital’s medical staff. And,
beginning in 1994, the hospital provided all necessary facilities, equipment, and nonmedical assistants. It also billed patients and paid the pathologist in equal monthly
installments. He and the other doctor were free to determine their own work schedules so
long as one of them was present while surgeries were taking place.
By 2004, the two pathologists’ relationship had become very acrimonious and in 2011 the
hospital learned that the other doctor was terminating his relationship. A few months
later, it gave the pathologist its 90-day notice of termination. Meanwhile, it entered into
contracts with two new pathologists entitled “Physician Employment Agreements”
declaring it “hereby employ[ed]” them. The contracts also stated that it would maintain
their malpractice insurance; provide medical and retirement benefits; and withhold
income and FICA taxes. In return, they agreed to work a specified number of hours per
week and not to compete with the hospital.
ADA and ADEA claims. The Eighth Circuit concluded that the balance of common-law
factors utilized to determine whether an individual is an individual contractor for
purposes of the ADA and ADEA, which the U.S. Supreme Court revisited in its decision
in Nationwide Mut. Ins. Co. v. Darden, tilted heavily towards the determination that the
pathologist was an independent contractor of the hospital under his 2008 agreement. The
appeals court rejected his assertion that he was an employee since the hospital required
him to abide by its bylaws, rules, and regulations, and provided him equipment, supplies
and staff. Significantly, he testified that no one from the hospital exercised control over
his professional services and that he maintained complete freedom to set his schedule and
determine the manner of his performance, including the hiring of substitute pathologists
at his own expense. Indeed, he explicitly agreed in each contract that he was an
independent contractor, as was typical in hospital/staff physician relationships.
Moreover, he was not provided with benefits or malpractice insurance; the hospital did
not withhold income and FICA taxes; it reported his income on a Form 1099; and he
reported his compensation as the income of a self-employed independent contractor. By
contrast, the hospital withheld taxes for its employee-physicians (such as the two new
pathologists) and utilized W-2 forms. The pathologist also had the contractual right to
hire substitutes and assistants at his own expense, had no weekly hours requirement, was
never assigned duties not specified in his contract, held other medical employment during
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much of his tenure, and was never bound by a non-compete agreement. These facts
showed that he retained substantial “freedom of choice” in determining the extent to
which he committed his available professional time to the hospital.
FMLA claim. Adopting the hybrid test for purposes of determining whether he was an
employee or independent contractor under the FMLA, the Eighth Circuit rejected the
pathologist’s contention that the claim should be governed by the six-factor “economic
realities” test developed in cases that involve FLSA minimum wage or maximum hours
claims. Moreover, as the appeals court explained concerning his ADA and ADEA claims,
the pathologist was an independent contractor under the common-law standard of
Darden, taking into account economic realities that included his freedom to use his fixed
contractual compensation to hire substitute pathologists and assistants; his responsibility
to pay his professional licensing and malpractice insurance expenses; and the economic
independence reflected on his tax returns.
Focusing more directly on the “economic realities” underlying the FMLA, Congress
considered this a statute establishing minimum labor standards for unpaid leave. Here, the
pathologist’s 2008 agreement more than met this minimum standard. It provided him
unlimited freedom to hire — at his expense — a qualified substitute pathologist if he was
unable to provide necessary services to the hospital for more than 35 days in a calendar
year. Thus, the conclusion that he was an independent contractor did no violence to the
“economic realities” underlying the FMLA.
SDHRA claim. Finally, no reasonable jury could find that the pathologist was an
employee of the hospital for purposes the South Dakota Human Rights Act. The appeals
court initially concluded that like the federal anti-discrimination statutes, the SDHRA
protects employees but not independent contractors. Moreover, it found that the state
supreme court would adopt the Darden common-law test, perhaps with the “economic
realities” supplement, in determining whether the pathologist was an independent
contractor. Accordingly, for the reasons already discussed, summary judgment was
warranted as he was undisputedly an independent contractor under the SDHRA.
The case number is: 13-2592.
Attorneys: Pamela Bollweg (Johnson & Heidepriem) for Larry Alexander, M.D.. Reed
Alan Rasmussen (Siegel & Barnett) for Avera St. Luke's Hospital.
9th Cir.: Class cert affirmed for 800 Allstate employees; individual damages to be
resolved later
By Lorene D. Park, J.D.
Affirming the certification of a class of 800 employees claiming that Allstate had a
practice of requiring claims adjusters to work unpaid overtime, a Ninth Circuit panel
concluded that a district court did not abuse its discretion in applying Rule 23’s
commonality requirement because the common questions it identified would drive
answers to the elements of an off-the-clock claim under California law. Nor did the lower
court violate Allstate’s due process rights by approving statistical modeling because it did
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so for purposes of liability only, reserving the individualized issue of damages for
separate individual treatment. The appeals court noted that Allstate would have the
opportunity to raise any individualized defenses at the damages phase (Jimenez v Allstate
Insurance Co, September 3, 2014, Gould, R).
Allstate has 13 local offices in California that are individually managed but under
centralized leadership. At those offices, it has five categories of claims adjusters, some of
whom spend most of their day in a particular office while others are assigned to one
office but spend most of their time in the field. The amount and type of work, as well as
level and quality of claims adjusters’ interactions with managers varies between offices
and between categories of adjusters.
In 2005, Allstate shifted its California-based claims adjusters from exempt positions to
hourly status. Before then, claims adjusters often worked more than eight hours per day
or 40 hours per week. After the reclassification, their workload stayed the same and their
compensation was still called an annual salary. Claims adjusters do not keep time
records; rather, each office manager has the power to file a timekeeping “exception” or
“deviation” from the default expectation of eight hours a day and 40 hours a week. The
adjustment happens when a claims adjuster’s request for overtime or early leave is
approved.
One claims adjuster filed a class action alleging Allstate failed to pay overtime to
California-based claims adjusters in violation of California Labor Code Secs. 5510 and
1198, and failed to pay for missed meal breaks in violation of Secs. 226.7 and 512(a). He
also brought derivative claims that Allstate had not timely paid wages upon termination
in violation of Secs. 201 and 202, issued noncompliant wage statements in violation of
Sec. 226(a), and engaged in unfair competition under California Business and Professions
Code Sec. 17200.
Common questions. The district court certified the class as to the unpaid overtime,
timely payment, and unfair competition claims, finding sufficient evidence of common
questions under Rule 23(a)(2), including (1) whether class members generally worked
uncompensated overtime due to Allstate’s unofficial policy of discouraging overtime
reporting, failing to reduce their workload after the reclassification, and treating their pay
as salaries for which overtime was an “exception;” (2) whether Allstate knew or should
have known class members worked overtime without compensation; and (3) whether it
nonetheless stood idly by without compensating them.
Under Rule 23(b)(3), the district court found that the common question on an “unofficial
policy” predominated over individualized issues concerning the specific damages each
class member could prove. It further held that class treatment was a superior method of
adjudication because statistical sampling of class members could accurately and
efficiently resolve the issue of liability while leaving individual damage assessments for a
later day.
Commonality. On interlocutory appeal, Allstate first challenged the class certification
order by arguing that it did not comply with Rule 23 because the common questions
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identified would not resolve class-wide liability issues. Disagreeing, the appeals court
noted that the “analysis does not turn on the number of common questions, but on their
relevance to the factual and legal issues at the core of the purported class’ claims.” As
Wal-Mart Stores, Inc. v. Dukes made clear, a class meets the commonality requirement
when common questions are “apt to drive the resolution of the litigation,” no matter their
number. Whether a question will drive the resolution of the litigation depends on the
nature of the underlying legal claims.
In this case, each of the common questions identified by the district court would drive the
answer to one of the elements of an off-the-clock claim under California law. The
elements include: (1) the plaintiff did work for which he was not compensated; (2) the
defendant knew or should have known the plaintiff did so; but (3) stood idly by. To the
appeals court, the close connection between the common questions noted by the lower
court and this legal test meant these were “precisely the kind of common questions that
Rule 23(a)(2) and Dukes require.”
Due process. Allstate also challenged class certification by arguing that the district
court’s class certification order violated its due process rights by limiting its ability to
raise affirmative defenses and by approving the use of statistical modeling among class
members to determine liability, contrary to the holding in Dukes. Disagreeing, the
appeals court noted that the certification order here presented none of the problems
identified by Dukes, which involved an employer’s entitlement to individualized
determinations of eligibility for back pay.
The Ninth Circuit panel went on to explain that after Dukes and Comcast Corp. v
Behrend, which expanded on the notion of individualized determinations and due
process, circuit courts have consistently held that “statistical sampling and representative
testimony are acceptable ways to determine liability so long as the use of these
techniques is not expanded into the realm of damages.” Indeed, as Judge Posner of the
Seventh Circuit has pointed out, it “would drive a stake through the heart of the class
action device . . . to require that every member of the class have identical damages.” The
existence of a central, common issue of liability is sufficient to support class certification
and the individualized issue of damages may be reserved for separate, individual
treatment.
In this case, the district court crafted the class certification order in such a way as to
carefully preserve Allstate’s opportunity to raise any individualized defense it might have
at the damages phase of the proceedings. It rejected the plaintiffs’ motion to use
representative testimony and sampling at the damages phase and bifurcated the
proceedings. This split preserved both Allstate’s due process right to present
individualized defenses to damages claims and the plaintiffs’ ability to pursue class
certification on liability issues based on common questions concerning California labor
law. The lower court also carefully analyzed the specific statistical methods proposed by
the plaintiffs, striking some expert testimony due to insufficient empirical support. In
sum, there was no abuse of discretion by the district court in entering the class
certification order and the order was affirmed.
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The case number is: 12-56112.
Attorneys: James M. Harris (Seyfarth Shaw) for Allstate Insurance Company. Alexander
R. Wheeler (R. Rex Parris Law Firm) for Jack Jimenez.
11th Cir.: Mentioning possible surgery not FMLA notice; workers’ comp settlement
dooms retaliation claim
By Marjorie Johnson, J.D.
A factory worker who was discharged after having received several written warnings for
performance issues, but who had also filed a workers’ compensation claim after suffering
an on-the-job ankle injury, could not advance his statutory claim alleging he was
discharged in retaliation for filing a workers’ comp claim since he released said claim in
settling the workers’ comp matter. Moreover, although, he had told his employer that it
was “very possible” he was going to need surgery, his FMLA interference and reprisal
claims failed since his statement did not provide sufficient notice of his intent to seek
FMLA leave. Accordingly, in an unpublished opinion, the Eleventh Circuit affirmed
dismissal of his claims on summary judgment (Sparks v Sunshine Mills, Inc, September
12, 2014, per curiam).
Write-ups. The employee operated a machine at a factor that produced pet food. In
September 2009, he received a write-up for running feed at the wrong density. In April
2010, he received another write-up after he improperly ran feed and failed to make
necessary adjustments. About two months later, on June 7, he twisted his ankle while
sweeping at work. He saw a doctor that day, received an ankle brace and pain medication,
and returned to work a few days later with no restrictions. He subsequently filed a claim
for workers’ compensation benefits.
On July 27, he received another write-up for failing to adjust the feed flow on the trolley.
The next day, his doctor ordered an MRI and a nerve conduction test to determine
whether he needed surgery. Later that day, he told his supervisor that it was looking
“very possible” that he was going to have to have surgery. The following day, he also
told the plant superintendent of his possible need for surgery but did not specifically
request FMLA leave.
The employee received another write-up on August 3 for another incident involving feed
quality, although he argued the incident was not his fault. The next day, he took the day
off to undergo an MRI on his ankle. When he returned to work on August 5, he was
terminated, ostensibly for running bad feed and failing to follow steps he had routinely
taken for years.
Settlement of workers’ comp claim. About a year later, he settled his workers
compensation claim. The agreement provided that he would receive $2,200 “as a full and
final settlement of all claims of the employee for compensation benefits, whether in the
nature of temporary partial or total; permanent partial or total; and or past, present or
future vocational rehabilitation benefits.” The agreement also stated that the settlement
was a “compromise of all claims which [he] may now have or may have in the future as a
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result of this injury.” A judge approved the agreement, noting that it was a settlement of
all “compensation and vocational and rehabilitation benefits” due to him under the
Alabama Worker’s Compensation Act (AWCA).
District court proceedings. The district court granted summary judgment against the
employee on his retaliatory discharge and FMLA claims. First, it ruled that he released
his retaliatory discharge claim, relying upon two Alabama Supreme Court cases holding
that a general release in a workers’ compensation settlement agreement precluded the
employee from subsequently asserting a retaliatory-discharge claim. Moreover, the
retaliatory discharge claim failed on the merits since he could not stablish a prima facie
case. Finally, summary judgment was warranted on his FMLA claims since his statement
that “it was very possible” that he was going to need surgery was insufficient to put the
employer on notice of his intent to take FMLA leave.
Waiver of retaliatory discharge claim. In the Eleventh Circuit’s view, the district court
did not err by finding that the employee’s release in his workers’ comp settlement
extended to his retaliatory-discharge claim. The appeals court rejected his assertion that
the two Alabama Supreme Court cases addressing the issue were inapplicable since the
language in the agreements in those cases provided that the employee was releasing
claims under the AWCA “or otherwise.”
The employee understood his settlement agreement to be “a compromise of all claims
which [he] may now have or may have in the future as a result of [his] injury, and that no
further Worker’s Compensation benefits, vocational rehabilitation or vocational
rehabilitation expenses will be paid as a result of the aforesaid accident and injury.”
Although the release did not contain the “or otherwise” language, the Alabama Supreme
Court cases did not focus on that phrase. Instead, it emphasized language stating the
settlement resolved “any and all claims for compensation benefits due and rehabilitation
or retraining benefits due” and the defendant was “released from all claims.” Here, the
order approving the settlement contained sufficiently similar language.
No FMLA notice. Summary judgment was also properly granted against the employee
on his FMLA interference and retaliation claims since he did not provide notice sufficient
to make the company aware that he needed FMLA leave. Rather, he merely informed his
supervisors that “it was looking like it was very possible [he was] going to have to have
surgery.” He did not request leave or provide any information related to the timing or
duration of any leave. Indeed, at that point, it was possible he would not need surgery and
could continue working with no restrictions.
Therefore, because the employer was unaware that he needed or desired FMLA leave, he
failed to establish it interfered with his rights under the statute by terminating him before
he could take FMLA leave. For the same reason, he failed to establish that it retaliated
against him for engaging in a protected activity under the statute. Because the record
demonstrated that he was terminated based on his poor performance and not in
retaliation, summary judgment was warranted.
The case number is: 13-14922.
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Attorneys: Taffi S. Stewart (Lloyd Gray Whitehead & Monroe) for Sunshine Mills, Inc..
Henry F. Sherrod, III (Law Office of Henry F. Sherrod, III) for David Mac Sparks.
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