Labor Relations & Wages Hours Update
November 2014
Hot Topics in LABOR LAW:
President withdraws Block nomination to NLRB; submits McFerran instead
On November 12, President Obama sent the Senate notice that he was withdrawing the
nomination Sharon Block to be a Member of the National Labor Relations Board, which
he had last submitted to the Senate on July 14, 2014. In her place the president submitted
the nomination of Lauren McGarity McFerran to serve the same five-year term expiring
December 16, 2019. McFerran is currently chief labor counsel for the Senate Committee
on Health, Education, Labor, and Pensions.
Politico first reported that the controversial nomination was being withdrawn,
and Littler’s Michael Lotito posted about it as well. On Wednesday, September 17, the
Senate HELP Committee had given a thumbs-up to Block’s nomination to the Board, and
although at the time, Chair Tom Harkin (D-Iowa) noted that the nominee had advanced
with bipartisan support, Ranking Committee Member Lamar Alexander (R-Tenn.)
pointedly did not support Block’s nomination. Obama’s re-nomination of Block in July
resulted in considerable 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.
In voting against Block’s nomination, Senator Alexander had said: “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.”
The HELP Committee quickly slated a hearing on McFerran for next Thursday,
November 20 at 10:00 AM (ET). The Committee is also scheduled to hold a hearing on
Thursday, November 13 at 3:30 PM (ET) to discuss the nominations of P. David Lopez
to serve as General Counsel of the Equal Employment Opportunity Commission, and
Charlotte Burrows to serve as an EEOC Commissioner.
Franchise association wants details on general counsel’s “joint employer”
determination
Seeking to get to the bottom of NLRB General Counsel Richard Griffin’s recent decision
to pursue unfair labor practice complaints against franchisors, the International Franchise
Association (IFA) will file a Freedom of Information Act (FOIA) request with the NLRB,
the trade group announced in a Thursday, October 30, press conference.
According to Steve Caldeira, the IFA’s president and CEO, complaints against
franchisors and franchisees have proliferated at the NLRB since Griffin authorized 43
complaints to be issued against McDonald’s USA and a variety of its franchisees,
asserting that the entities could be considered joint employers. In Caldeira’s view, the
general counsel’s decision to do so was “deeply-flawed and terribly misguided,” adding,
“[i]t ignores decades of established law governing joint employment and franchising,
including the recent California Supreme Court decision, Patterson v. Domino’s Pizza.”
Since July, according to the IFA, 61 new complaints have been filed against franchisors
— not just against McDonald’s USA, but against 27 other franchise brands in the travel
and lodging and hospitality management industries, as well as full-service restaurants and
operational service and maintenance industry franchises.
“We fear that the floodgates have opened because of the general counsel’s opinion. And
given the lack of transparency on the rationale behind the decision, it is creating a huge
amount of uncertainty in the franchising community,” Caldeira said. “This needs to stop.”
Given the prospect of more “joint employer” complaints, Caldeira said his trade group
would set up a hotline and an informational website to give members advice about the
general counsel’s actions and how to address the ongoing issue. In addition, IFA sent a
letter to Griffin asking that he immediately disclose his advice memorandum in the
original McDonald’s cases.
“Believe it or not, his [Griffin’s] reasoning, which has the potential to disrupt a huge
segment of our economy, has never been made public,” Caldeira said. “That is
unacceptable to us.”
The IFA is not alone. More than 129 members of Congress have demanded that Griffin
supply “written reasoning and any relevant data supporting” his July 29 determination,
the IFA noted, citing the threat to small business franchises in their districts.
Joining Caldeira on the IFA’s call-in press conference last week were the CEO of
franchisor FASTSIGNS (an IFA board member); one of FASTSIGNS’ franchisees; and
2
Littler Mendelson’s Michael Lotito, co-chair of the management firm’s Workplace Policy
Institute.
New contract in the bag for New Mexico Kroger workers
Employees of the Kroger Co.’s Smith’s division, working in the national grocery
retailer’s New Mexico stores, have ratified a new bargaining agreement, the company
announced. The contract covers more than 2,200 employees represented by Local 1564 of
the United Food and Commercial Workers in 25 stores in the state.
According to a press statement issued by Jay Cummins, president of the Smith’s division,
the new contract boosts employees’ wages, provides affordable health care, and “invests
in our associates' pension fund to support their retirement.”
Kroger employs more than 375,000 workers in 2,638 supermarkets and multi-department
stores in 34 states and the District of Columbia under two dozen local banner names. The
company also operates 785 convenience stores, 1,275 supermarket fuel centers, 37 food
processing plants, and other retail stores in the United States.
Teamsters union makes further inroads at FedEx Freight
A group of 113 drivers at FedEx Freight's South Brunswick, New Jersey, terminal have
voted to join Teamsters Local 701, the union announced on Friday, October 31. The vote
was 66 to 42. The union’s victory follows another at FedEx Freight in Croydon,
Pennsylvania, where 47 of the courier’s drivers voted to join Local 107 in Philadelphia
earlier last month.
“Once again, this victory shows that drivers are fed up with FedEx Freight,” boasted
Teamsters general president Jim Hoffa. "The campaign is building momentum and we
will work hard to win these workers the fairness, respect and dignity they deserve." Other
campaigns at FedEx Freight and at Con-way Freight are under way across the country,
the union said.
“The workers came to us looking for fairness after years of being mistreated and
disrespected," according to Ernie Soehl, president of Local 701 and freight coordinator
for the union’s Eastern region.
According to the Teamsters, efforts to organize the national freight company have
already paid off for FedEx Freight workers. Days after Local 107 filed for a
representation election, the company announced an 80-cent-per-hour pay hike and
eliminated its “driver scorecard,” an “overly punitive” practice that gives drivers
infraction points for errors, according to the union. And after organizing got underway at
Con-way, the company announced it would increase truck driver pay by $60 million in
2015 and other improvements, the union said.
“The companies are offering pay raises and other improvements at the same time we are
organizing, but the workers know that these things can be taken away just as quickly
without a legally binding contract," said Tyson Johnson, director of the Teamsters
3
national freight division. "The unfulfilled promises that have been made to drivers and
dockworkers over the past decade are coming back to haunt management."
For its part, Fed Ex Freight emphasized in a statement on its website that “no other
drivers at our more than 360 service centers are impacted” by the union vote, noting it
was “business as usual” at the company. FedEx Freight also announced it was weighing
its options, including a possible appeal of last week’s vote. And it took care to point out
that the Teamsters withdrew an election petition last week at a North Harrisburg FedEx
Freight facility in Pennsylvania, noting that “[t]he union would only have taken this
action if it recognized it would not win the election.”
Company, union agree to modify leave policy incorporated in CBA
The EEOC and Chicago-area marshmallow manufacturer Doumak, Inc., have reached an
agreement to resolve a disability discrimination lawsuit challenging a policy that capped
the duration of employee leaves of absence — but not before getting the union involved,
since the policy was incorporated into the CBAs. In addition to modifying the policy and
the CBAs, the company will pay $85,000 to former employees who the EEOC said were
adversely impacted by the policy’s application.
Doumak ran afoul of the ADA when it capped the duration of leaves of absence at its Elk
Grove Village and Bensenville, Illinois, manufacturing facilities, without making
appropriate exceptions for people with disabilities, the EEOC asserted in a complaint
filed in September. Teamsters Local 703 was joined as a party to the action for relief
purposes, since the leave policies at issue were codified in the CBAs between Doumak
and the union, the EEOC said in a November 4 statement.
The company and the union agreed to resolve the suit without further litigation, and a
consent decree was entered on Wednesday, November 4. The decree provides that
Doumak and the union will not enforce the provisions of their CBAs in any manner that
would deny a qualified individual with a disability additional leave when it is needed as a
reasonable accommodation. The company will also negotiate with the union to amend the
relevant provisions of the CBAs. Doumak has in addition agreed to pay a total of $85,000
to five individuals who were purportedly affected by the prior policies, and it will
conduct training about the ADA for current employees.
“Federal law requires employers to be reasonable and flexible in applying their
workplace policies to people with disabilities,” remarked EEOC Regional Attorney John
Hendrickson. “We are pleased that Doumak and the union will be taking steps that will
enable more individuals with disabilities to continue to earn a living. Ultimately, that
benefits everybody.”
The EEOC brought its lawsuit in Northern District of Illinois, Eastern Division; the case
number is 14-cv-7492.
4
Restructuring plan reshuffles territorial coverage in NLRB Regions 3 and 6
By Pamela Wolf, J.D.
The NLRB has approved a plan to restructure the territorial coverage for Regional
Offices in Buffalo, New York (Region 3), and Pittsburgh, Pennsylvania (Region 6). The
Board’s General, Counsel Richard F. Griffin, Jr., also announced the appointment of a
career agency attorney to the job of Resident Officer of the Agency’s Miami Resident
Office.
Restructuring plan. Under the approved restructuring plan, Regions 3 and 6 will retain
their full regional status, according to a November 7 Board release. In reaching the
decision, the NLRB said it evaluated feedback from the public, members of Congress,
and agency staff. The approved plan reflects the Board’s “need to balance its practical
operational concerns with the need for the NLRB to enter its 80th year servicing this
country as the strong and accessible presence envisioned when it was created.”
The agency found there were a number of counties that were more accessible to Regions
3 and 6 than to the Regions to which they were currently assigned. Consistent with its
ongoing effort to explore ways to enhance efficiencies, streamline its operations, and
rationalize the size of Regions in a manner not detrimental to the public or NLRB staff,
the Board is shifting these counties to Regions 3 and 6 while still maintaining each as a
separate Regional Office.
Changes in coverage. The changes made by the restructuring plan affect certain counties
in four states. In Vermont, the counties of Addison, Bennington, Chittenden, Franklin,
Grand Isle, Lamoille, Orange, Rutland, Washington, Windham, and Windsor are shifted
to Buffalo (Region 3), serviced through the Albany Resident Office. In West Virginia, the
counties of Clay, Fayette, Grant, Hardy, Mineral, Nicholas, Pendleton, Raleigh, and
Wyoming are shifted to Pittsburgh (Region 6). Maryland counties of Garret and Allegany
are also shifted to Pittsburgh (Region 6), along with the Virginia county of Highland.
RNs plan strikes to demand tougher Ebola safety standards
According to National Nurses United, strikes and picketing are planned by registered
nurses in more than a dozen states, plus D.C., to demand tougher Ebola safety
precautions in the nation's hospitals. National Nurses United, the largest U.S.
organization of nurses, announced plans for actions in the District of Columbia, Florida,
Georgia, Illinois, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New
York, North Carolina, Ohio, Tennessee, and Texas.
California is ground zero for the planned actions, with a planned two-day strike by
18,000 RNs and nurse practitioners at 86 Kaiser Permanente hospitals and clinics, as well
as some 600 RNs at two other California hospitals, Sutter Tracy and Watsonville General
Hospital. In addition to the strikes, nurses will be picketing a number of hospitals (in
California, for example, picketing is planned at University of California, Dignity Health,
and Sutter hospitals) as well as rallies at federal offices and other settings.
5
The two-day California strikes begin Tuesday morning, NNU said, while the rest of the
planned activity is to take place Wednesday, November 12.
In a press conference announcing the actions, NNU Executive Director Rose Ann
DeMoro noted that NNU is seeking the optimal personal protective equipment for nurses
and other caregivers who interact with Ebola patients. That means full-body hazmat suits
that meet the American Society for Testing and Materials F1670 standard for blood
penetration, F1671 standard for viral penetration, and that leave no skin exposed or
unprotected, and National Institute for Occupational Safety and Health-approved
powered air purifying respirators with an assigned protection factor of at least 50. The
union also wants all facilities to provide continuous, rigorous interactive training for RNs
and other health workers who might encounter an Ebola patient, including practice
putting on and taking off the hazmat suits where some of the greatest risk of infection can
occur.
NNU has also repeatedly called on the White House and Congress to mandate all
hospitals to meet these standards. "We know from years of experience that these hospitals
will meet the cheapest standards, not the most effective precautions," DeMoro said.
Both sides say ordinary contract principles should determine M&G Polymers case
By Pamela Wolf, J.D.
At oral arguments on Monday, November 10, the attorney for M&G Polymers quickly
found herself having to convince the Justices of a major premise in the question
presented: that the CBA between the employer and its employees actually was silent
about the duration of retiree health-care benefits. Argument on the petition for cert, in
M&G Polymers v Tackett USA, LLC, centered around the interpretation of a CBA that
did not directly state exactly how long contribution-free health-care benefits would
continue for retirees. But in the end, both Allison N. Ho and attorney Julia P. Clark, who
argued on behalf of the respondent, Hobart Tackett, said the same thing — that their
respective clients would win under ordinary contract principles.
Below, the Sixth Circuit affirmed a district court’s permanent injunction requiring M&G
Polymers to provide lifetime, contribution-free health care benefits for certain retirees.
The appeals court found no error in the lower court’s determination that certain letters
between the employer and union were not part of the CBA and so did not overcome
language in the CBA indicating that the parties intended to vest lifetime health care
benefits.
In her opening comments on behalf of M&G Polymers, Ho, said: “A promise of
unalterable, costly healthcare benefits should be negotiated at the bargaining table, not
imposed at the courthouse. In a series of cases, the Sixth Circuit has required courts to
infer from contractual silence a promise of vested benefits.”
Justice Ginsburg, however, quickly interposed, “we're dealing with a case where there
isn't silence. … for example, this collective bargaining agreement says that the employees
6
will receive a full company contribution toward the cost of health benefits. That's not
silent.”
The question is a sticky one because, as Justice Kagan said, and Ho agreed, “Congress
has said, yes, in pension benefits, there's vesting. And in health care benefits we leave it
to the parties….” Vesting in this case means to remain binding even after the CBA
expires.
The case presents this question to the Justices: Whether, when construing CBAs in
LMRA cases, courts should (1) presume that silence about the duration of retiree healthcare benefits means the parties intended those benefits to vest, as the Sixth Circuit holds;
or (2) require a clear statement that health-care benefits are intended to survive the
termination of the CBA, as the Third Circuit holds; or (3) require at least some language
in the agreement that can reasonably support an interpretation that health-care benefits
should continue indefinitely, as the Second and Seventh Circuits hold.
Clark, apparently agreeing to some extent with Ho (who had urged the Justices to apply
ordinary contract interpretation), said: “As the Court has so aptly noted, this is a contract
dispute, and our argument is simply that contract disputes relating to retiree health
benefits should be decided like every other dispute under a collective bargaining
agreement. To determine what the parties intended without applying any presumptions ...
.”
Both sides not only indicated that they believed normal principals of contract
interpretation should be applied, they also both welcomed a remand to ensure that the
judgment below is based on such principles.
Volkswagen announces new Chattanooga policy on employee organization
‘engagement’
By Joy P. Waltemath, J.D.
Volkswagen Group of America has announced a community organization engagement
policy that would allow certain employee organizations that represent “a significant
percentage” of employees to engage in constructive dialog with management at its
Chattanooga, Tennessee, operations. The Chattanooga plant has long been billed as the
place where German-style “work councils” would be introduced to the United States.
UAW defeat. In February, after a campaign fought fiercely by all sides (including
reported third-party maneuvering by local and national politicians and outside interests)
the UAW lost its bid to represent workers at the Volkswagen plant by a vote of 712-626.
In response, the UAW later announced the formation of another entity in order to
accomplish that goal—UAW Local 42. Local 42 will represent any interested employees
who join the local as members, but no employee will be required to join.
Pundits believe that part of the problem in the union representation battle was the
apparent commitment in advance by Volkswagen and the UAW to work together to
address workplace issues, a deal under which the company not only did not oppose
7
unionization, but encouraged it. Those who opposed the unionization push saw that
arrangement as unlawful, or at the very least as depriving workers of their voice on the
representation issue. Volkswagen was cleared of those charges, however.
Eligible community organizations. According to the newly announced Volkswagen
policy, to be eligible to engage with the company, an organization must “exist for the
primary purpose of representing employees and their interests to employers consistent
with the National Labor Relations Act.” Organizations also must agree to comply with
this policy. Volkswagen said it retained the right to define and determine eligibility
consistent with the NLRA. Significantly, organizations must not only represent a
significant percentage of employees in the “relevant employee group,” but their members
also must support the organization’s interaction with Volkswagen.
Access based on levels of support. Access to management depends upon levels of
employee support for the organization. For example, organizations with greater than 15percent support of employees in the relevant employee group may use employer-provided
space once each month for internal employee meetings on nonwork time; may post
announcements in company-designated locations; and employee-only organizational
representatives may meet monthly with VW Human Resources “to present topics that are
of general interest to their membership.”
Organizations with greater than 30-percent support of employees in the relevant
employee group may do all of the above, plus increase their meeting times on the
employer’s premises to once per week; invite external representatives to meet on-site
(again on nonwork time) once monthly; post materials on a “branded” or dedicated
posting location; and meet quarterly with a member of the Chattanooga Executive
Committee.
The access or engagement opportunities are cumulative, so organizations with greater
than 45-percent support of employees in the relevant employee group may additionally
meet on-site (on nonwork time) “as reasonably needed;” and meet biweekly with Human
Resources and monthly with the Chattanooga Executive Committee.
Not exclusive. The policy contains details on how to determine if an organization has
met the employee support thresholds, which will be verified by an external auditor and
not by the company itself. It also expressly reiterates that “the policy may not be used by
any group or organization to claim or request recognition as the exclusive representative
of any group of employees for the purposes of collective bargaining.” Notably,
Volkswagen’s recent experiences with U.S. labor relations are evident from this
statement of policy: “Nothing in this policy is intended or should be interpreted to restrict
or interfere with employees’ protected rights under the NLRA.”
UAW response. Gary Casteel, secretary-treasurer of the UAW, said in response to
Volkwagen’s announcement that the union appreciated the company’s efforts to articulate
a policy on engaging with Local 42 and its members. He said, “We have questions about
this policy, which we'll work through in discussions with management. But this is a step
forward in building stronger relations between management and employees.”
8
Casteel went on to stress that the union will work with Volkswagen “so the company can
verify our substantial membership level, which now is in excess of a majority of workers
at the plant. When that verification has been completed, we will take advantage of the
company's offer to establish regular meetings with Volkswagen Human Resources and
the Volkswagen Chattanooga Executive Committee. In the first conversations that will
occur, we will remind them of the mutually agreed-upon commitments that were made by
Volkswagen and the UAW last spring in Germany.
“Among those commitments: Volkswagen will recognize the UAW as the representative
of our members. We believe Volkswagen made this commitment in good faith and we
believe the company will honor this commitment. Additionally, we will present the
Chattanooga plant management with the September letter of intent in which the
influential Volkswagen Global Group Works Council expressed its desire for the
Chattanooga plant to be a 'UAW-represented facility.”
Casteel also reiterated that the “members of UAW Local 42 are excited about the future
and stand ready to roll up their sleeves and make Chattanooga a continued success for
Volkswagen.”
Transit service to pay employees $655,000 in lost benefits
More than 600 employees and former employees of Travis Transit Management Inc., a
wholly owned subsidiary of McDonald Transit Associates, Inc., will receive $655,000 as
compensation for losses of retirement contributions, health insurance premiums, out-ofpocket health expenses, and other pay and benefits pursuant to a settlement resolving
unfair labor practice charges before the NLRB. The Board announced the settlement with
the employer, which provides fixed route bus service to Capital Metro in Austin, Texas,
on Monday, November 17.
The NLRB’s Region 16 office in Fort Worth agreed with the Amalgamated Transit
Union, Local 1091, that the company violated the NLRA when it unilaterally
implemented changes to its health insurance benefits and retirement plan contributions
when it began operations for Capital Metro in 2012.
The employer and union entered into a Board settlement on November 7 resolving the
dispute, which was approved by an administrative law judge. The employer also agreed
to post a notice in its workplace that addressed the alleged violations and advised
employees of their rights under the Act.
EEOC, NLRB officials talk social media at Dilworth Paxson seminar
By Lisa Milam-Perez, J.D.
A recurring theme emerged at Dilworth Paxson’s recent seminar, Social Media @Work:
The #BalancingAct Between Employer and Employee: When it comes to social media in
the workplace—a topic of ever-growing interest to labor and employment law
practitioners—what’s old is new again. Social media isn’t breaking any new legal
ground; it simply calls for an application of long-standing legal principles to the novel
setting of cyberspace.
9
“As is frequently the case in the social media context, we address a fact pattern that
essentially has very apt analogies in pre-existing law and apply it in a technologically
different context,” said Richard F. Griffin, Jr., NLRB General Counsel.
“It’s not that the law is any different than what you or your clients have been applying,”
EEOC Commissioner Chai R. Feldblum added. “It’s just in a different, technological
context.”
The seminar, held at the National Constitution Center in Philadelphia on November 12,
also featured NLRB Member Harry I. Johnson, III. Eric B. Meyer, Dilworth Paxson
partner and chair of the firm’s just-launched social media practice group, questioned the
panel of federal agency officials about how they address the thorny legal issues that have
arisen in the age of Facebook.
Far-reaching impact. Social media “has widespread implications” with regard to the
National Labor Relations Act, noted Johnson. “A good 10 to 20 percent of our case load
has a social media component right now—and that’s just going to increase.”
As Meyer observed, “most of the cases that have cropped up under the NLRA involve
nonunion employers.” It’s long been recognized that the reach of the statute is broader
than the unionized setting, but the Board of late has increasingly flexed its enforcement
muscle outside the union environment, much to the consternation of employers. A source
of particular frustration is the agency’s close scrutiny of employer social media policies,
some of which the Board has found to be unlawfully broad.
Social media policies. Indeed, there have been a number of cases involving employer
rules as to “what employees can say and do on social media platforms,” Griffin
acknowledged. “We could spend quite a bit of time on this topic.” But he summed it up
with a nod to black-letter law. Essentially, when it comes to advising employers—union
and nonunion alike—on the legality of a social media policy under the NLRA, the
relevant question is whether an employee would reasonably construe such a rule as
prohibiting employees from engaging in statutorily protected conduct. If so, “then the
rule is bad.” That’s the key prong from Lutheran Heritage Village-Livonia, the NLRB
decision that laid out the standard, he noted.
Context is everything. But reference to that 2004 Board ruling alone isn’t enough. “You
have to stay current with the decisions, and look at the individual cases,” Johnson
interjected, alluding to the Board’s growing body of case law on the issue, “because
context is everything” when determining whether an employer’s rule is overly restrictive
under the standard. The social media rule in question has to be considered within the
larger factual circumstances, as a look at the Board’s disparate holdings to this point will
attest. (In a dissenting NLRB opinion from July, Johnson specifically urged consideration
of “the other rules or language immediately surrounding the disputed rule, the kind of
work environment in which the disputed rule operates, and the disputed rule itself.”)
Discipline over online behavior. In addition to rulings scrutinizing employers’ social
media policies, the Board has resolved cases involving discipline or discharge of
10
employees for discussions on Facebook or other social media “where they are critical of
the employer in a way that the employer finds problematic,” Griffin said. The key
inquiry, he explained, is “whether there is some aspect of the way the employee’s
communications were made that will cause that individual to lose the protection of the
Act.”
The NLRB has deliberated at length over what standard should be applied in these cases.
Some Board members argued that the Atlantic Steel precedent should apply. But that
case, and the legal standard that it set forth, was in the context of an on-site workplace
dispute in which an employee threatened someone, used foul language, and “crossed the
line and lost the Act’s protection.” But in cases where the conduct takes place online,
“you don’t have the same production concerns and issues about undermining authority,”
Griffin said. Consequently, in Triple Play Sports Bar and Grill, the Board rejected the
Atlantic Steel framework for social media cases and looked to a different standard—a
“libel kind of analysis”—as more appropriate for deciding whether an employee’s online
activity loses protection.
Right to be critical. “Frequently if comments are negative the company’s view is, this is
disparagement; this is problematic,” Griffin said. “But very few people engage in
protected and concerted activity regarding terms and conditions of employment in order
to praise them,” he said. “If you’re going to say people can’t be critical, you’re going to
run afoul of people’s right to be critical.”
Employers “can’t make employees chant ‘Everything is awesome’ like in The Lego
Movie, added Johnson. In fact, in the Triple Play case, the employee had posted a
Facebook update calling a manager an “asshole,” and the Board found his post did not
forfeit the protection of the Act. “The disparagement that you can act on as an employer
really comes down to malice: stating a knowing falsehood, or saying something with
reckless disregard as to whether true or untrue. And that is a very high standard to meet.”
The proof is in the posting. It’s not that comments on social media are held to a lower
prima facie standard, Johnson clarified, citing the Board’s World Color (USA) Corp
decision as a case in point. It’s just that social media “makes a lot of these ‘he said, she
said’ cases much easier because you have a transcript of what everybody said. Social
media is not Las Vegas,” he added, “in that what happens there doesn’t stay there.’
Using an analogy to underscore his colleague’s point, Griffin added, “It used to be ‘he
said, she said’ if a supervisor felt somebody was under the influence. But if you have
testing, you have evidence in a way that you don’t when you’re going under the
supervisor’s impression. In the same way, a conversation at a bar involves making
credibility determinations, but if you have the transcript—someone prints out a screen
shot and says ‘look at this,’— it’s a different type of proof.”
A higher standard for employers. Some employers enter the cyberspace fray
themselves. But as Johnson warns, “as the employer, you have the power of hiring and
firing. So you will be looked at differently than as having a conversation among equals.
You’re not on the same footing as an employee when you’re participating out there.”
11
By way of illustration, Johnson cited the recent case in which a Jimmy John’s manager
encouraged employees’ online haranguing of a union supporter. In MikLin Enterprises,
Inc, dba Jimmy John’s, an assistant manager at the sandwich shop encouraged employees
and other managers to publicly disparage the union supporter via posts on an antiunion
Facebook page set up by company employees. The offending manager posted the target’s
phone number and urged employees to call him. And antiunion employees and managers
posted crude, disparaging, and profane comments about his organizing activities. While
most of this banter, although distasteful, was fair game given the “vituperative speech”
tolerated in the heat of labor conflict, the Board said the assistant manager crossed the
line by encouraging harassment that “went beyond the bounds of mere opinion or
exuberance during the heat of a labor campaign.” Postings by two Jimmy John’s
supervisors were unlawful as well, including a post encouraging employees to
disseminate a doctored-up photo of the union supporter with an excrement theme. (The
supervisor had actually placed excrement in the union supporter’s coat pocket several
months earlier.)
“In MikLin you’re telling employees to go harass the union supporter. That ruling
[against the employer] went 3-0 across party lines,” noted Johnson, one of two
Republicans on the Board.
Social media in hiring. “What issues arise when employers use social media to attract
new talent or vet job applicants?” Meyer asked the panel. “What happens if I’m screening
applicants and someone is critical of a prior employer? Or they see pro-union information
on their Facebook page?”
“This is not a new phenomenon,” Johnson said, likening the situation to the union
movement’s “long-used tactic” of salting. “These issues have been around for a long
time. The same principles would apply.” Like salting, in which an employer violates the
NLRA if it refuses to hire an applicant whom it knows to be a union organizer, once an
employer has knowledge of an applicant’s online protected activity, an adverse hiring
decision can become suspect. “If you don’t hire the person, there has to be a legitimate
business justification. You’ll be stuck in a classic mixed-motive kind of defense.”
The EEOC’s Feldblum had much to say on this point, too—given that social media can
reveal much more than just an applicant’s union proclivities. “It’s hard not to troll social
media!” she conceded. Yet she cautioned that an employer can discover information
about prospective employees that it is not permitted to use as the basis for an employment
decision. “You can’t ask in a job interview: ‘Are you planning to get pregnant in the next
six months?’” But that information can become known to a prospective employer via
Facebook. And if the applicant can obtain evidence that you had such knowledge about
her that you can’t legally act upon, “that’s almost concrete information of a problem.”
Best practices. Meyer recommended some best practices that employers could adopt to
help alleviate the risk. “One way is to have the hiring decision-maker not do the trolling,
and have the other person sanitize the information [obtained through social media] and
hand the decision-maker a clean sheet to ensure that the hiring decision is made on
legitimate business reasons.” Still, the approach is hardly fail-safe, he warned. And
12
Johnson advised, “under the NLRA, there is a pretty liberal ‘imputation of knowledge’
standard. You have to be very cautious if you take that approach. You have to make sure
it’s fairly hermetically sealed.”
Social media recruiting. Federal antidiscrimination laws are also implicated when an
employer uses targeted social media recruiting. “Apparently on Facebook you can target
to a particular subgroup,” Feldblum said. “Facebook captures all these demographics and
advertisers can capture what it is they’re interested in. And when folks buy ads on
Facebook, they can target, say women between the ages 18 and 30. Is that a problem?
Well, you know you couldn’t put out a job ad saying only those women should apply. So
if you’re only using social media to recruit, that could be a problem. And some
companies have shifted only to social media.”
In one EEOC case involving the National Park Service, which advertises on social media,
a job applicant contended that older individuals don’t use Facebook or computers as
much as younger applicants do and, therefore, the agency’s use of online advertising had
a disparate impact. But the Commission (which adjudicates cases in the federal sector
workforce) found the agency was using a number of other recruiting methods too, and
found the agency’s social media recruiting practices were lawful.
“The more interesting question comes when an organization or business feels that it isn’t
getting a sufficiently diverse applicant pool, so it uses targeted social media to diversify,”
Feldblum said. “That’s got a benign purpose, but it can be a problem.”
Online surveillance. Just as employers can’t undertake surveillance of employees’
protected activities in the brick-and-mortar workplace, surveilling employees’ online
activities—or creating the impression that you’re doing so—is a violation of the NLRA.
“You cannot spy on your employees,” Johnson stressed. Granted, he noted, it’s a bit more
complicated with respect to social media because such activity “usually involves some
invitation to connect at some point. But even if it’s a voluntary connection [between
employer and employee], it’s good to proceed with caution. If you start dropping hints to
them that you’re watching what you’re doing online in terms of conversations, that
becomes a trickier issue.”
However, “there is a difference between monitoring for a business purpose and
surveillance,” Griffin interjected. Once again using an analogy from existing law, he
explained: “If you have a camera set up for security purposes, generally speaking, that’s
not going to be a problem. But if you train the camera ahead of time to focus on a
meeting going on in the parking lot where you know employees are going to meet to sign
[union authorization] cards, that is going to be a problem. Similarly, if you want to
surveil social media activity in order to gauge productivity that’s not a problem. But to
target protected online activity is a different issue.”
Scoping out cyber-harassment. On the other hand, an employer can’t simply close its
eyes to employees’ social media activity altogether, as Feldblum stressed. And just
because an employee is posting while off duty doesn’t mean the employer can wash its
hands of the whole affair. “Social media is a 24-7 world,” Feldblum said. “And when it
13
comes to the workplace, is there ever such a thing as purely ‘off the clock’ social media?
If I post a sexually harassing message at 9 o’clock at night about a coworker, an
employer can’t just say ‘I don’t have to worry about that—it happened at 9 o’clock at
night.’”
“For the younger generation specifically, they are using social media all the time and they
might not think about privacy issues and realize that an employer can follow up on
something that occurred outside the workplace. But if an employee posts a sexually
harassing post, that can affect the workplace. It can contribute to a sexually harassing
environment inside the workplace. As an employer, once you are told about harassment,
you have to take reasonably quick efforts to stop that harassment. You do have a
responsibility to track down those facts and do something about it. You may have
employees asking, ‘what do you mean you want me to show you what I posted on
Facebook?,’ but you do.”
“Again, this is about the basic law. You cannot post a sexually harassing cartoon in the
cafeteria that clearly identifies a coworker. Nor can you post it on your private Facebook
page if it’s then going to affect your workplace.”
Training and other takeaways. Feldblum urged employers to “develop clear and
consistent policies and articulate those policies to employees,” adding “I think that’s a
good best practice for the EEOC as well: to articulate in guidance the positions of the
EEOC on hot topics. I’m constantly pushing for more guidance.”
Aside from a few EEOC federal sector decisions (such as the NPS case discussed by
Feldblum) and written responses to letters from stakeholders inquiring about particular
technologies, the Commission has yet to issue a formal guidance or informal discussion
letter on the use of social media. It sought input from stakeholders in a March 2014
meeting on social media in the workplace, though—presumably with an eye to
articulating a formal position on the issue. In contrast, the NLRB, particularly under
former acting general counsel Lafe Solomon, has been quite proactive in articulating the
agency’s evolving position on these questions, issuing a series of reports on the social
media cases coming through the agency’s doors.
As Feldblum sees it, the rise of social media gives employers an opening to retrain their
managers and employees about the basic rules of employment discrimination and
harassment. She urged employers to use the explosion of social media as a chance to
reinforce longstanding legal principles.
Johnson reiterated this sentiment. Asked to offer some “best practices” for addressing the
interplay between social media and the NLRA, he said that “training is a big part.” In
particular: “training on the background principles of what the Board has found lawful or
unlawful.”
Black Friday strikes are on the Thanksgiving menu for Walmart
By Pamela Wolf, J.D.
14
Walmart workers will be striking across the country the day after Thanksgiving,
according to OUR Walmart (Organization United for Respect at Walmart). The Black
Friday event is designed to call attention to what OUR Walmart calls “the company’s
illegal silencing of workers who are standing up for better jobs.” Last Thursday,
November 13, workers in Southern California staged a sit-in protest in advance of the
planned Black Friday event, which, according to OUR Walmart, will include some 1600
protests nationwide. The event is aimed to pressure Walmart’s owners to raising wages to
a minimum of $15 an hour and to provide consistent, full-time work.
OUR Walmart has the support of the United Food and Commercial Workers Union
(UFCW). Both groups disclaim any intention to have Walmart recognize or bargain with
UFCW or OUR Walmart as the representative of its employees, however.
The ramped-up Black Friday mobilization comes as an increasing number of Americans
and Walmart workers have purportedly credited OUR Walmart with making significant
changes at the retail giant. The alt-labor group credits itself for Walmart’s recent
commitment to raise wages for its lowest paid workers and its new scheduling system
that lets workers sign up for open shifts.
OUR Walmart also pointed out that workers at 2,100-plus Walmart stores have signed a
petition calling on Walmart and its owners to publicly commit to paying $15 an hour and
providing consistent, full-time hours.
“A broad group of Americans who plan to protest on Black Friday, including tens of
thousands of teachers, voters, members of the clergy, elected officials, civil rights leaders
and women’s rights activists say America’s largest employer and richest family are
driving the income inequality problems that are holding the country back,” OUR
Walmart said in a statement on November 14. Washington residents plan to protest at all
60 Walmart stores in their state, according to the alt-labor group. In other states, flash
mobs, marches and prayer vigils are planned to support striking Walmart workers and
call on the company to improve jobs.
Sit-in last week. Last Thursday, workers staged what OUR Walmart described as the
“first-ever sit down strikes in company history.” Workers sat down in two Los Angeles
Walmart stores — the Crenshaw and Pico Rivera stores. OUR Walmart said that 23
people were arrested. Los Angeles is where the very first strikes at Walmart were
conducted, according to the group. Last Thursday, the striking workers, who are
employed at stores throughout California, put tape over their mouths to signify what they
considered the company’s illegal efforts to silence workers who are calling for better
jobs. They also held signs similar to those of the first retail sit-down strike at Woolworth
in 1937, when retail workers at the then-largest retailer in the country called for the
company to increase pay, provide a 40-hour work week and stop the retaliation against
workers who spoke out.
“While today, the disparity of wealth and poverty in the U.S. is just as outrageous as it
was during the Great Depression, Walmart is far larger and more global than
Woolworth’s ever was, and thus even more dangerous,” remarked labor historian Dana
15
Frank. “Like the Woolworth’s women in 1937, the workers in OUR Walmart are
challenging a mass retailer with tentacles all over the world to treat its employees with
respect, and inspiring a growing national movement against inequality and for the just
treatment of all working people.”
The other side of the story. Walmart tells a different story about what it’s like to work
for the company. According to its website, the company offers competitive pay, health
care and benefits, as well as bonus opportunities, merchandise discounts, and an
opportunity to move up. About 75 percent of Walmart’s store management teams began
as hourly associates and now earn between $50,000 and $170,000 a year, in line with
what firefighters, accountants, and even doctors make, the company states.
Moreover, the company says that full- and part-time associates are eligible for quarterly
bonuses based on store performance. Last year, associates earned some $500 million in
bonuses. Associates can also earn college credit for work experience, the company
pointed out.
Walmart maintains a fact-check website aimed at rebutting many of OUR Walmart’s
claims.
Board is closing Jacksonville, Florida, Resident Office
The NLRB is closing its Jacksonville, Florida, Resident Office, located in Region 12, but
geographically, the Region will not change. The area formerly serviced by the Florida
Resident Office will now be served by agents working from other locations, according to
a notice scheduled for publication in the Federal Register on Thursday, November 20.
The agency is revising its Statement of Organization and Functions to reflect this change,
which is effective December 1.
The reason for the move is that closing the office and serving the area with agents
working at other locations will result in significant savings while continuing to
effectively serve the area, according to the notice. After examining the staffing,
caseloads, and rental and operating costs for the Jacksonville office, which has been
occupied by only one employee for more than two years, the NLRB decided to make the
change. Due to declining intake in the area, the agency did not expect that additional
employees would be added to the Jacksonville office in the foreseeable future.
The employee who has been working in the Jacksonville office will be converted to a
Resident Agent and will continue to perform the same work, except the employee will
not work from an Agency office. When necessary, this employee will be assisted by
agents from the Tampa office. The NLRB said that the revision is merely procedural in
nature and it expects no adverse impact on the quality of case handling as a result of the
office closure.
16
New contract, informational picketing, union election defeat last week
By Pamela Wolf, J.D.
Last week several labor relations developments came to light, including a new contract
for workers at a beverage-can manufacturing plant, informational picketing by airline
pilots, and a union election defeat at a freight company.
Crown Cork & Seal USA, Inc. Crown Holdings, Inc. announced November 13 that its
affiliate, Crown Cork & Seal USA, Inc., has reached a new three-year labor agreement
with the International Association of Sheet Metal, Air, Rail & Transportation Workers
(SMART) Local 450. The deal, which commenced on November 3, covers the
company’s beverage can manufacturing facility in Kankakee, Illinois.
“Crown is pleased to have reached a mutually beneficial agreement with the International
Association of Sheet Metal, Air, Rail & Transportation Workers, the second largest union
with which Crown works in North America,” remarked Timothy Lorge, President of
Crown North American Beverage Packaging. “We remain committed to the long-term
success and well-being of our workforce and our stakeholders. We are confident this new
agreement will help Crown deliver the innovation, quality and service our customers
expect.”
“We appreciate the willingness of Crown's senior leadership team to work with our union
to bring these negotiations to a successful resolution with the new three-year agreement,”
commented Timothy Hintze, International Organizer for SMART.
Philadelphia, Pennsylvania-based Crown Holdings, Inc., through its subsidiaries, is a
leading supplier of packaging products to consumer marketing companies around the
world.
United Parcel Service. Represented by the Independent Pilots Association (IPA), UPS
Pilots conducted an informational picket on November 13 at the 2014 UPS Investor
Conference held at the Grand Hyatt New York to express their frustration over failing
contract negotiations. The IPA represents the 2,600 pilots who fly globally for UPS.
The union said that UPS and IPA have been following the Railway Labor Act process for
the last 39 months: direct negotiations for 29 months and mediated talks for the past 10
months. Direct negotiations began in September 2011 and continued through January
2014. In early 2014, UPS and IPA jointly requested federal mediation. The National
Mediation Board docketed the case in February 2014 and assigned a staff mediator to
oversee further negotiations. The parties have been in mediated talks since February
2014.
“We conducted this picket to inform the investment community that UPS has neglected
its airline operations by failing to finalize the pilot contract,” said IPA President, Captain
Robert Travis. “We prefer to reach a negotiated agreement with UPS, but with our talks
now entering a fourth year, we question whether UPS is equally committed to a
resolution.”
17
“UPS pilots have reaffirmed our intention to fly this Christmas by not seeking a release
from the National Mediation Board. This holiday season, we remain committed to safe
and reliable delivery,” Travis said. A request for release, if granted by the NMB, could
lead to a 30-day countdown to a strike, or lockout.
Con-way Freight. The Teamsters lost a union representation election on November 13
that was conducted by the National Labor Relations Board at Con-way Freight's
Manchester, New Hampshire, facility. Con-way Freight’s employees voted against
Teamsters representation by 29-15 vote.
Con-way Freight currently does not have a contract with the Teamsters union at any of its
locations. The Manchester election has no effect on other locations of Con-way Freight
and will not affect the company's overall ability to continue delivering reliable, highquality service to customers.
“We were gratified that our Manchester employees, after having the opportunity to
review all the facts and make an informed choice, rejected the Teamsters union and
clearly communicated their intention to remain union-free,” remarked Con-way Freight
President Greg Lehmkuhl.
“We continue to believe that our company can best meet the needs of our employees by
maintaining an open, respectful and direct relationship with them, without the
interference of a union,” he added.
Workforce Committee cements leadership for coming session
Republicans and Democrats on the House Education and the Workforce Committee have
selected their respective party leaders for the 114th Congress. Rep. John Kline (R-Minn),
current chair, has been selected once again to head up the committee. “I am humbled by
the opportunity to continue leading this great committee,” he said, adding, “If the
president is willing to engage and the Senate is willing to act, we can advance reforms
that will make a difference in the lives of students and working families. I am eager to
help lead that effort and look forward to the work that lies ahead.”
The Democrats, who had to replace retiring Rep. George Miller (D-Calif) as the
Workforce Committee’s Ranking Member, tapped Rep. Robert C. “Bobby” Scott (D-Va)
for the post. Miller praised his successor, noting that, “for the entirety of his 22-year
career in Congress, Rep. Scott has served admirably on the committee, fighting for
students and workers nationwide.” He added, “ I am confident that under Rep. Scott’s
strong leadership, the committee’s Democratic members will continue our fight to
strengthen the middle class and improve the lives of millions of Americans.”
Facebook drivers join Teamsters; Southwest pilots seek mediation
Facebook drivers (Loop Transportation). Drivers who shuttle Facebook employees to
and from the company headquarters in Menlo Park, California, have voted in favor of
representation by Teamsters Local 853. The vote comes after Local 853 reached out to
Facebook CEO and founder Mark Zuckerberg by letter as part its drive to represent the
18
bus drivers who get employees to work on the Facebook campus; the drivers actually
work for Loop Transportation.
The union says the 87 drivers organized to improve their working conditions, including
low pay and a split-shift schedule, which may require them to wait as much as six hours
in between picking up and dropping off Facebook employees—all unpaid. The drivers
often start work at 6 a.m. and end the day at 9:45 p.m., according to the union.
In an October 2 letter to Facebook CEO Mark Zuckerberg, Rome Aloise, International
Vice President and Secretary-Treasurer of Teamsters Local 853, wrote, "This is
reminiscent of a time when noblemen were driven around in their coaches by their
servants. Frankly, little has changed; except the noblemen are your employees, and the
servants are the bus drivers who carry them back and forth each day."
The letter to Zuckerberg and a letter to the company (as well as the stories of drivers) can
be seen at http://teamster.org/facebook-drivers-deserve-union.
Loop Transportation is one of a number of operators that Silicon Valley companies
contract with to provide transportation for their employees. The company calls itself “the
premier provider of shuttle management and private transportation operations for many
of the Bay Area's best known companies.” At press time, the company had not released a
statement in response to the union’s contentions, but various media outlets report that
company representatives say Loop’s drivers make between $17 and $25 an hour,
assertedly among the highest in the commuter bus industry.
Teamsters, along with community, political and religious leaders, held a rally November
20 outside Facebook's campus in Menlo Park. where they demanded that Facebook
respect the rights of its bus drivers to organize a union without interference. According to
the union, the delegation delivered a petition calling on Facebook to stop condoning
“anti-worker, anti-union” behavior by Loop Transportation, but the union says Facebook
refused to accept the petition when it was delivered.
Southwest pilots. To get their contract negotiations moving, on November 20 the
Southwest Airlines Pilots' Association (SWAPA) officially filed for mediation with the
National Mediation Board. After two-plus years of negotiations, both sides are currently
too far apart to realistically expect an agreement outside of a mediated process, the pilots’
union believes.
"This is certainly not a step either side wants to take during negotiations, and certainly
not a typical step in the pilot and management relationship at Southwest Airlines," said
Mark Richardson, SWAPA President. "But times have certainly changed."
SWAPA has focused their negotiations on improvements in areas that address the
airline's flat fleet growth, stagnant career advancement, and compensation. Over the past
four years, says the union, the pilots have sacrificed when the company asked, which
helped Southwest reach its financial goals, including exceeding a stated goal of 15
percent ROIC. The union says Southwest Airlines is on pace to enjoy almost $2.5 billion
in operating profit for 2014.
19
The union said it is seeking “marginal improvements in their schedule, pay, and
especially retirement –an area where Southwest pilots lag significantly compared to our
peers at other airlines," continued Richardson. “Filing for mediation is the next step in the
process toward a new contract. We are trying to avoid the destructive and combative
relationships that have plagued our industry.”
SWAPA becomes the third Southwest Airlines labor group to request national mediation
in order to finalize a new contract in this current round of negotiations.
Airline trade group files suit over ‘labor peace’ mandate at LAX
Airlines for America, a trade group representing major airlines and air carriers, filed a
lawsuit against Los Angeles International Airport on Thursday, November 21, hoping to
enjoin a new rule that would require third-party vendors that provide cleaning and
baggage handling services for their airplanes to negotiate no-strike clauses and
mandatory arbitration agreements with the unions in those industries as a condition of
operating at the airport—regardless of whether the workers are union members.
Their beef, specifically, is with Section 25 of the 2014 Certified Service Provider License
Agreement, enacted by the City of Los Angeles (and its department Los Angeles World
Airports, another named defendant) for all entities providing airline services at Los
Angeles International Airport (LAX). Under this provision, the vendors would have to
enter into “labor peace” agreements—including mandatory arbitration of disputes and
other terms typically found only in collective bargaining agreements. Section 25 states
that the provision should not be read to require union recognition or bargaining, but, as
their complaint contends, “it cannot reasonably be implemented without doing precisely
that.” Such a mandate is preempted by federal labor law, Airlines for America argues,
and is constitutionally infirm. It’s seeking a preliminary injunction to prevent the city
from enforcing the provision, as well as declaratory relief.
The trade group earlier this month filed suit against the Port of Seattle, hoping to block
the first of two wage hikes for some 3,500 employees at the Seattle-Tacoma airport after
Seattle voters last summer passed a substantial minimum wage increase. (The minimum
wage will jump to $11.22 per hour in January 2015, and $13.00 per hour in 2017.)
The lawsuit, Airline Service Providers Association v. Los Angeles World Airports, No.
14-cv-08977, was brought in the Central District of California.
Doyle named to key post in Division of Operations-Management
NLRB General Counsel Richard F. Griffin, Jr. has appointed Deputy Regional Attorney
John D. Doyle, Jr., as Deputy Assistant General Counsel in the Division of OperationsManagement within the General Counsel’s office. Doyle will assist the General Counsel
in managing the Board’s 26 Regional Offices and provide programmatic support for the
enforcement and administration of the NLRA nationwide.
Doyle earned his law degree from Fordham University School of Law in 1995. Following
law school, he joined the NLRB’s Region 10 Offices, working first in the Atlanta
Regional Office and later in the Birmingham, Alabama, Resident Office. He was
20
promoted in 2011 to Deputy Regional Attorney in the NLRB’s Region 5 Office in
Baltimore, Maryland.
Health workers demand nationwide protection standards for Ebola virus
By Lisa A. Weder
The National Nurses United (NNU) stormed Washington on November 18, 2014, to
demand unified protection standards from OSHA and other states regarding the Ebola
virus. The NNU wants nationwide implementation of the recently established California
protective mandates that resulted from nursing strikes calling for the protection of nurses,
other health workers, and the public from the threat of the deadly virus.
Background. The Centers for Disease Control and Prevention (CDC) issued suggested
guidelines in October 2014 that were considered not stringent enough and too late after
Thomas Eric Duncan arrived in September at a Texas hospital from West Africa with
Ebola symptoms. Duncan was initially sent home with antibiotics and aspirin. After
Duncan returned to the hospital, health workers found themselves unprepared to handle
his symptoms. Duncan passed away from the disease. Days later, the CDC guidelines
were issued. Because one of Duncan’s nurses exhibited a fever slightly lower than the
guidelines’ established temperature benchmark, but was found to have contracted the
disease, the CDC issued another set of revised guidelines in November.
In the same month, 18,000 Californian nurses working for Kaiser Permanente (Kaiser)
held a two-day strike against underdeveloped health care standards for Ebola. The nurses
reported that the hospital refused to address inadequate Ebola safety protocols and
protective equipment training and refused to answer questions by the registered nurses
(RNs). The strike against Kaiser reportedly impacted 21 hospitals and 35 clinics and
helped bring forth the issue of health workers’ rights in the face of public health
emergencies.
After other strikes by the NNU and the California Nurses Association RNs (CNA)
ensued, California state officials released updated Ebola standards for all California
hospitals requiring an optimal level of personal protective equipment (PPE),
comprehensive training procedures, and other protocols reflecting the standards the NNU
and CNA represented. The California regulations, unlike those of the CDC, are
mandatory.
Mandatory standards. California’s Ebola standards were structured according to the
existing California Occupational Safety and Health Administration (Cal/OSHA)
regulations outlining proper steps to safely provide care for suspected or confirmed Ebola
patients. CNA will be responsible for monitoring hospital compliance; those hospitals
that don’t comply will face civil penalties.
CNA Executive Director RoseAnn DeMoro noted that in response to Ebola, NNU has
advocated the precautionary principle “that absent scientific consensus that a particular
risk is not harmful, especially one that can have catastrophic consequences, the highest
21
level of safeguards must be adopted, and a sharp contrast to the profit principle that has
guided the response of most hospitals.”
Representative of some of the California Ebola regulations are:

The requirement of hospitals to provide to all hospital staff caring for a suspected
or confirmed Ebola patient full-body protective suits that meet the American
Society for Testing and Materials (ASTM) F1670 standard for blood penetration
and the ASTM F1671 standard for viral penetration and that leave no skin
exposed or unprotected. The protective suits must be available to employees who
clean contaminated areas and to staff assisting other employees with the removal
of contaminated protective gear;

The provision of air-purifying respirators (PAPRs) with a full cowl or hood for
optimal protection for the head, face, and neck of any RN or other staff who
provide care for a suspected or confirmed Ebola patient; and

Whistleblower protection for employees who report hospitals that violate the
regulations.
While California’s regulations may become the national benchmark for Ebola
preparedness, David Gevertz, Vice Chair of Baker Donelson's Labor & Employment
Group, in an interview with Wolters Kluwer, pointed out that the current OSHA
standards “offer limited protections to employees who refuse to perform a job if they
believe in good faith that they are exposed to an imminent danger. The level of exposure
necessary to qualify as an ‘imminent danger’ has not yet been defined.”
LEADING CASE NEWS:
2d Cir.: Some claims under franchise law untimely, but drivers get second chance at
contract claims
By Brandi O. Brown, J.D.
Responding to cross-appeals in a long-lived lawsuit brought by delivery drivers alleging a
variety of labor law and contract-related claims against the corporations that employed
them, the Second Circuit reversed judgment in favor of several of the drivers under the
state New York Franchise Sales Act (FSA), ruling that those claims were barred by the
applicable statute of limitations. However, the appeals court also concluded that the lower
court erred when it ruled that the statute of frauds barred the drivers’ breach of contract
and state labor law claims for unpaid commissions and vacated the grant of summary
judgment for the defendants on those claims, giving the drivers a renewed opportunity to
pursue them (Kroshnyi v US Pack Courier Services, Inc, November 4, 2014, Carney, S)
After years of working brutal schedules delivering packages for the defendants,
purportedly as franchisees, a group of drivers filed suit against several corporations and
their owner, whom they named individually. They asserted a variety of claims under the
FLSA, New York Labor Law, the FSA, and the Federal Insurance Contribution Act.
22
They also asserted various contract-related claims. Specifically, they alleged that the
defendants had undercompensated them in a systematic manner, claiming to treat them as
franchisees and, at the same time, “reaping disproportionate profits” at their expense.
They contended that they were actually the defendants’ employees because the
defendants had controlled the manner in which they performed the work. The defendants
were corporations owned and operated by a single person, also a defendant, who served
as president of those corporations.
Subscriber agreements. Many years before the suit, the owner began broadening his
business. In1996 the employer filed a franchise offering prospectus, as required under
state law and began engaging franchise drivers. And, although the employer failed to file
another prospectus after the registration expired in 1998, it continued to sell franchises.
Franchisees signed subscription agreements, which required them to pay a $15,000
“subscription fee” in order to receive delivery assignments and collect accumulated
commissions. The fee could be paid in installments, with interest, and most of the drivers
paid the franchise fee in that way. The drivers were also charged a variety of other fees
and were responsible for several operational expenses, including the purchase or rental of
a cargo van, insurance premiums, vehicle registration fees and taxes, and gasoline.
Promised commissions. Each of the plaintiffs, almost all of whom were recent
immigrants with limited English language proficiency, began working for the employer
between 1987 and 2000. Although most acknowledged in deposition having signed some
sort of written agreement, some denied that they had signed the subscription agreement
and some testified that they had not been given time to review the documents they signed
or obtain copies. The parties agreed that the drivers were paid a fee for completed
deliveries. The drivers contended that they were promised orally that the fee would be 60
percent of the commission on each delivery and that when they became suspicious that
they may not be getting that full amount, the owner reaffirmed that rate of pay. However,
the employer contended that there was no such agreement.
Summary judgment and jury trial. In the years following the filing of the lawsuit in
2001, the issues narrowed. In 2007, the lower court granted the employer’s motion for
summary judgment on the federal claims, under the “Motor Carrier Exemption.” Because
the court had already presided over the case for six years, it elected to exercise
supplemental jurisdiction over the residual state-law claims. It then granted summary
judgment on the breach of contract and state labor law claims, concluding that they were
barred by the statute of frauds. Remaining FSA claims of eight of the plaintiffs proceeded
to trial before a jury, which found the employer liable on all except one claim and
awarded damages. The district court mostly denied a motion for judgment as a matter of
law, although it did modify the damages award. The district court awarded attorneys’ fees
to the plaintiffs who had prevailed. Both parties appealed.
Although it had not objected when the district court initially decided to exercise
supplemental jurisdiction over the state law claims, on appeal the employer argued that
the court should not have done so. However, the appeals court concluded that the district
court’s decision had not amounted to an abuse of discretion. The lower court’s
“familiarity” with the case and its issues, in combination with “the likely hardship” both
23
parties would have faced if the employees had had to re-filed in state court, “weighed in
favor” of that exercise. By that point, the case had been before the court for six years,
discovery was complete, and dispositive motions had been submitted to the court. Nor
were the state-law issues “so groundbreaking as to preclude the exercise of jurisdiction,”
the court explained, even if the district court had erred in some of its interpretations of
state law. Thus, the lower court’s decision was affirmed.
Statute of limitations. Although the court agreed with the lower court’s exercise of
jurisdiction, it also agreed with employer that the lower court wrongly entered judgment
on several of the employee’s FSA claims. With regard to the two drivers who could still
maintain FSA claims, the court rejected the employer’s contention that they were barred
from recovering damages. The claims of several of the other plaintiffs, however, were
barred by the statute’s three year statute of limitations. The court found that the threeyear period commenced when the franchise agreement was purchased. Because six of the
employees purchased those agreements before 1998, those claims were untimely. The
appeals court rejected the employees’ argument that the limitations period began anew
when the franchise was transferred to a successor corporation. There was a statement in
the transfer agreement that nothing in that agreement was “intended to alter” the
subscription agreement with the prior corporation. Moreover, testimony supported the
claim that there was no change in day-to-day operations or relationships.
Additionally, the appeals court rejected the employees’ contention that because most of
the drivers had not paid the franchise fee in a lump sum, but instead were paying it
through weekly deductions, that a paycheck within the three-year time period resulted in
a timely claim. Although the question had not been considered in a precedential opinion,
the court noted that at least one of the district courts in the Second Circuit, which the
court had affirmed by summary order, had rejected application of the continuous
violation theory to the FSA. The employees failed to point to any New York authority
that supported a different interpretation and the appeals court saw no reason to “depart
from” the holding in the previous district court decision. That outcome was “congruent”
with the “language and purpose of the FSA,” which did not seek to regulate ongoing
operations of franchises, but only set requirements at the outset of an offer or sale.
Contract breach and state labor law claims. The news was not all bad for the drivers,
however. Responding to their cross-appeal regarding the lower court’s decision that their
breach of contract and New York Labor Law claims were barred by the statute of frauds,
the appeals court agreed that the lower court had erred. Although the court rejected the
employees’ argument that they had suffered significant prejudice when the employer had
been able to amend their answer to assert a statute of frauds defense four months after the
close of discovery, it agreed that, on the merits, the statute of frauds was inapplicable
because the agreements were part of an at-will employment agreement.
Under New York law, unless an agreement existed establishing a fixed duration for an
employment relationship, such relationships were presumed to be at will. Such
agreements were not covered by the statute of frauds under New York law. The lower
court had erred in relying on a 1989 case from the Second Circuit, which “arose from a
very different set of facts” involving an alleged lifetime employment agreement. That
24
decision, Burke v Bevona, did “not purport to overrule the long line of New York cases”
supporting the appeals court’s decision here.
The appeals court also rejected an argument by the employer that, by not complaining
about the commissions received, the employees had waived any claim that they were paid
less than the 60 percent commission they alleged they were promised. The employees’
testimony did not necessarily support the employer’s argument that they knew they were
not receiving that amount — a jury could conclude that they were unaware. Nor did that
testimony establish that they had voluntarily and intentionally abandoned that right;
negligence was not enough.
The case number is: 11-2789-cv and 11-4368-cv.
Attorneys: Robert Wisniewski (Law Office of Robert Wisniewski) for Jaroslav Kroshnyi.
Richard G. Kass (Bond, Schoeneck & King) for U.S. Pack Courier Services, Inc., U.S.
Pack Express, Ltd., and U.S. Pack Network Corp.
D.C. Cir.: Employer challenge to NLRB member’s recess appointment quashed
By Ronald Miller, J.D.
A challenge raised by an employer regarding the recess appointment of an NLRB
member was rejected by the D.C. Circuit based on the Supreme Court’s decision in NLRB
v Noel Canning. The Supreme Court’s opinion in Noel Canning established that a recess
appointment of ten or more days suffices under the Recess Appointments Clause.
Because the President’s recess appointment of NLRB member Becker occurred during a
17-day Senate recess, it was constitutionally valid (Mathew Enterprise, Inc dba Stevens
Creek Chrysler Jeep Dodge v NLRB, November 7, 2014, Kavanaugh, B).
By statute, the NLRB consists of five members. The Board members must be appointed
by the President with the advice and consent of the Senate, or appointed by the President
alone during “the Recess” of the Senate. To exercise authority in a given case, a Board
panel must include at least three validly appointed members. A panel of three Board
members decided a case involving the employer, but it argues that one of those Board
members was appointed by the President without either Senate consent or compliance
with the Recess Appointments Clause.
Appointment of Becker. President Obama appointed Member Becker by recess
appointment on March 27, 2010, during an intra-session Senate recess of 17 days. The
employer contends that the 17-day recess was too short to permit a recess appointment.
Based on the Supreme Court’s decision in Noel Canning, the appeals court concluded
that the President’s recess appointment of Member Becker was constitutionally valid.
As interpreted by the Supreme Court in Noel Canning, the Recess Appointments Clause
permits the President to “fill any existing vacancy during any recess — intra-session or
inter-session — of sufficient length.” Thus, the fact that Member Becker’s recess
appointment occurred during an intra-session (rather than inter-session) Senate recess
does not affect the validity of the appointment. Moreover, the fact that the vacancy arose
25
before (rather than during) the recess in which the President appointed Member Becker
did not affect the validity of the appointment.
In Noel Canning, the Supreme Court observed that recess appointments during recesses
of 10 or more days have been very common historically. Importantly, Noel Canning did
not place any new limits or conditions on the President’s authority to make recess
appointments during a recess of 10 or more days, so the D.C. Circuit declined to impose
new limits that would be inconsistent with the historical precedents relied on by the
Supreme Court. Moreover, the lawfulness of a recess appointment depends on the
ultimate length of the recess in which the appointment occurred, not the number of days
from the start of the recess to the appointment. Therefore, the fact that the Becker
appointment occurred on the first day of what turned out to be a 17-day recess did not
affect the validity of the appointment.
The case numbers are 11-1310 and 11-1406.
Attorneys: Linda Dreeben, for National Labor Relations Board. David A. Rosenfeld for
International Association of Machinists & Aerospace Workers, Local Lodge 1101. Daniel
T. Berkley for Mathew Enterprise, Inc dba Stevens Creek Chrysler Jeep Dodge.
NLRB: Team leaders lacked independent judgment, not statutory supervisors
By Lisa Milam-Perez, J.D.
The Teamsters union failed to establish that “team leaders” at a radiology imaging
facility were supervisors within the meaning of NLRA, Section 2(11), a three-member
NLRB panel held, overruling the union’s challenges to the election ballots and directing
the regional director to open and count them. While the team leaders nominally
reassigned work and evaluated their subordinates’ performance, there was little proof
they exercised independent judgment in doing so, the Board found (Modesto Radiology
Imaging, Inc, October 31, 2014).
Challenged ballots. A Teamsters election at the facility resulted in 33 ballots for the
union and 31 against, with 5 challenged ballots. The challenged ballots belonged to team
leaders who oversaw various departments and reported directly to the highest-level
manager at the facility. An NLRB hearing officer found these individuals were statutory
supervisors because they created and adjusted employee work schedules using
independent judgment, effectively recommended pay increases through their role in the
performance evaluation process, and granted time off. Moreover, two of the team leaders
had authority to assign overtime and could reassign employees to specific work duties.
On these findings, the hearing officer recommended that the Board sustain the union’s
challenges to the team leaders’ ballots and exclude them from the bargaining unit.
The Board rejected the hearing officer’s determination, concluding the record evidence
did not support a finding of supervisory status.
Adjusting schedules. There was no dispute that all five team leaders had authority to
create and adjust work schedules and, under Oakwood Healthcare, such authority
26
constituted the authority to assign — a key indicator of supervisory status. But for four of
the five team leaders, there was no evidence as to how they created or adjusted work
schedules, or what information they considered in doing so. Thus, the union couldn’t
establish that the team leaders used independent judgment in carrying out this role, as
Oakwood requires. As for the fifth team leader, she merely assigned work using a
rotational system, which wasn’t enough to show supervisory status, particularly without
any evidence of the frequency of these adjustments, how they were carried out, or that
she used independent judgment in effectuating them.
Performance evaluations. The team leaders prepared performance evaluations of the
employees in their respective departments each year based on daily observations of their
performance. Employees had earned merit increases over the past two years based in part
on the results of those evaluations. The hearing officer had acknowledged that the record
was insufficient to establish the precise role that these evaluations played in determining
the pay increases, but she nonetheless credited testimony that the evaluations played
“some role.” The hearing officer also relied on testimony that the higher-level manager
did not independently review the employees’ performance before awarding the pay hikes,
and concluded, accordingly, that the team leaders effectively recommended pay raises.
However, the Board agreed with the employer’s contention that, without evidence as to
the precise role that these evaluations played in the process, there wasn’t enough to
support a finding of supervisory status. “There must be a direct correlation between the
employees’ evaluation and their wage increases and/or job status,” the Board pointed out
— a principle that the hearing officer failed to heed.
Approving overtime. As for one team leader’s power to assign overtime, the Board
observed that overtime had been given “blanket approval” from above when the extra
hours were necessary to complete a customer service function, and this was the case in
those few instances when the team leader granted overtime approval. Thus, she simply
acted in a routine manner, without any exercise of independent judgment, the Board
concluded. A single additional incident, in which the team leader had counseled an
employee who had refused to work overtime, was not enough to establish the regular
(rather than merely sporadic) exercise of supervisory authority to mandate overtime.
Reassigning duties. Two of the team leaders ostensibly were empowered to reassign
employees to specific duties within their departments, and one team leader assigned
employees to cover each other’s work when someone was out of the office. Contrary to
the hearing officer, the Board did not find these actions sufficient to demonstrate
supervisory responsibility. While the team leader moved employees around to various
machines, she did not evaluate employees’ relative skills and training before determining
whether to move them. Here, the employees were all equally familiar with the various
machines — it was the employer’s standard practice to rotate employees to accomplish
that very end. Therefore, no independent judgment was involved in this occasional
shifting of tasks.
27
As for shifting assignments to cover absent employees, there was no evidence as to the
factors taken into account by the team leaders when doing so, leaving the Board
unconvinced that this function involved the exercise of independent judgment either.
The slip opinion number is 361 NLRB No 84.
Attorneys: Gordon Letter (Littler Mendelson) for Modesto Radiology Imaging, Inc.
David Rosenfeld (Weinberg, Roger & Rosenfeld) for Teamster Union Local 386.
NLRB: On remand post-Noel Canning, Board has change of heart on Sodexo noaccess policy
By Lisa Milam-Perez, J.D.
There was much consternation among employers when a divided NLRB, in a 2012
decision, invalidated an employer’s policy regarding off-duty employee access. The
Board had found the access rule, promulgated by a hospital and Sodexo, the hospital’s
food service contractor, was unlawful because it didn’t uniformly bar access to off-duty
employees—it provided an exception for employees conducting “hospital-related
business.” Reconsidering that now-vacated holding de novo following the U.S. Supreme
Court’s Noel Canning decision, a different three-member Board panel has upheld the
policy, dismissing the unfair labor practice complaint (Sodexo America LLC, November
19, 2014).
Off-duty access policy. The hospital, which subcontracted its cafeteria and food services
operations to Sodexo, maintained a no-access policy covering off-duty employees,
including employees of its contractors. Both the hospital and Sodexo posted the rule. It
provided that off-duty employees—i.e., those who have completed their assigned shifts—
may not enter the hospital’s interior, or any exterior work area outside the hospital,
except to visit a patient, to receive medical care themselves, or to “conduct hospitalrelated business,” defined as an employee’s normal work duties, “or duties as specifically
directed by management.”
The policy also required off-duty employees, when visiting patients or seeking treatment,
to follow the same protocol as other non-employee visitors: enter through public
entrances, honor visiting hours, sign in at visitor’s desks, obtain and display visitor’s
badges, and confine their presence to the locations needed to accomplish their visit.
However, off-duty employees entering the facility to conduct “hospital-related business”
were to do so as if they were on-duty, using employee entrances and badges.
Prior Board ruling. Under Tri-County Medical Center, an employer’s rule barring offduty access to a facility is valid only if it: (1) limits access solely to the interior of the
facility; (2) is clearly disseminated to all employees; and (3) applies to off-duty access for
all purposes, not just union activity. It was the third prong that troubled the Board
majority (Members Pearce and Griffin) in the previous decision: Because the no-access
policy did not deny access for all purposes, the Board had found the policy was unlawful.
Specifically, the “hospital-related business” exception provided management with
unfettered discretion to permit off-duty employees to enter its facility “as specifically
28
directed by management,” the majority concluded. Then-Member Hayes dissented in
part, arguing that under the majority’s rationale, a hospital cannot maintain a valid offduty access rule if it allows employees to engage in innocuous activities such as picking
up paychecks or completing employment-related paperwork.
On the other hand, the full panel rejected the Acting General Counsel’s contention that
the policy’s exception for off-duty employees visiting patients or seeking medical
treatment was unlawful. In these scenarios, individuals were simply seeking access as
members of the public, not as employees, so this provision didn’t run afoul of the TriCounty standard.
With the Sodexo ruling, the Board had “continued its trend of diluting employers’ right to
limit access to their property,” lamented Chris Bourgeacq, AT&T General Attorney,
Labor/HR for the former Southwestern Bell region and member of the Employment Law
Daily Advisory Board. After the Board handed down its decision, Bourgeacq cautioned
that, as a result, “an employer will need to bar all off-duty employees from access to its
property with essentially no exception, or else risk having to allow union organizers onto
their property.”
A matter of policy. Reconsidering the case after its earlier holding was vacated and
remanded by the D.C. Circuit, a three-member panel (comprised of current Members
Hirozawa, Johnson, and Schiffer) upheld the no-access rule. It agreed with the previous
panel that the provisions regarding off-duty employees visiting patients or receiving
medical treatment were lawful under Tri-County, observing that they were entering the
hospital for purposes unrelated to their employment. “We decline as a matter of policy to
require that health care employers limit their employees’ access to medical care, or to
friends and family members receiving medical care, in order to comply with the TriCounty requirements,” the Board said.
A clarification, not an exception. Parting ways, though, with the earlier decision, the
Board held the “exception” for hospital-related business didn’t render the policy unlawful
either. The policy defined hospital-related business quite narrowly, which was crucial, in
the Board’s view. In fact, this provision wasn’t really an “exception” at all, it reasoned—
rather, it was a “clarification that employees who are not on their regular shifts, but are
nevertheless performing their duties as employees under the direction of management,
may access the facility.” As such, the employees in such instances are “on duty” within
the normal meaning of the term, so Tri-County’s standard regarding off-duty access rules
wasn’t implicated.
Discouraging off-the-clock work. While the General Counsel argued that the employer
would have defined “off duty” differently if, in fact, it had intended the meaning
construed by the Board, the record showed that the hospital carefully crafted the policy to
ensure that employees weren’t working after their shifts had ended. It did so in an effort
to ensure that employees weren’t performing unauthorized off-the-clock work—seeking
to avoid liability under California wage and hour laws. “In our view, the policy as written
is a reasonable attempt to address those concerns without violating the requirements of
Tri-County.”
29
The Board also vacated a separate supplemental decision finding the employer had
unlawfully disciplined four employees for violating the no-access provision.
The slip opinion number is 361 NLRB No 97.
Attorneys: Ellen Gross (Baker & Hostetler), Harry Zinn (Young Zinn & Bate), and Mark
Bennett (Marks, Finch, Thornton & Baird) for Sodexo America LLC and USC University
Hospital. Manuel Boigues (Weinberg, Roger & Rosenfeld) for National Union of
Healthcare Workers and Service Workers United.
NLRB: Discipline for shop-floor exchange unlawful, work rule overly broad
By Lisa Milam-Perez, J.D.
Conagra Foods unlawfully issued a verbal warning to a union supporter for a productionfloor conversation that took mere seconds, and during which no union authorization cards
changed hands, a divided NLRB panel ruled. The employer also imposed an overly broad
work rule by posting a letter reminding employees that its (lawful) nonsolicitation policy
applied to union discussions on work time. Through its conduct, the employer breached a
settlement agreement previously entered into with a union, automatically prompting entry
of a default judgment in the General Counsel’s favor on the union’s unfair labor practice
allegations. Member Miscimarra dissented (Conagra Foods, Inc., November 21, 2014).
As the United Food and Commercial Workers unions ought to organize a Conagra food
processing plant, an open union supporter encountered two coworkers in the restroom
and asked them to sign authorization cards. The coworkers said they would, gave the
employee their shared locker number, and told her to place the cards in their locker. A
few days later, as the employee passed the coworkers on the production floor, she told
them she had done so. In all, the shop floor conversation lasted a few seconds (although
one of the workers did briefly stop cleaning during the short exchange). Still, the
employee was issued a verbal warning for violating the company’s nonsolicitation policy.
Conversation, not solicitation. The Board majority held the employee’s conduct did not
amount to solicitation and that Conagra’s nonsolicitation policy, while itself lawful, was
improperly applied here. According to longstanding Board precedent, union solicitation
involves actually asking an employee to sign his or her name to an authorization card.
Drawing the line there makes sense, the Board noted, because that act prompts an
immediate, affirmative response from the individual being solicited, “and therefore
presents a greater potential for interference” with productivity during work time. Viewed
through this lens, the employee’s passing statement to her coworkers that she put the
union cards in their locker wasn’t solicitation. There were no cards presented for their
signature, no request to take action, and no reasonable risk of interference with
productivity.
Unlawful policy. Also, although Conagra’s nonsolicitation policy itself was lawful, the
Board held the company ran afoul of the Act by promulgating an additional work rule, in
the form of a posted letter, regarding “discussions about unions.” The rule served to
remind employees that union discussions were covered by the (lawful) solicitation policy,
30
which states that solicitation “must be limited to nonworking times.” Because the letter
singled out union-related conversations, it would be reasonably construed by employees
as prohibiting all talk of unions during working time. “Some discussions about unions,
indeed, most discussions about unions, are just that—discussions, not solicitations,” the
Board reasoned, and the letter failed to acknowledge this. Moreover, it pointed out,
Conagra lets employees discuss other nonwork-related matters during working time. “At
the very least,” the letter led to ambiguity as to the relationship between the
nonsolicitation policy and union-related discussions—an ambiguity that was to be
construed against the employer.
Post-settlement violations. Previously, Conagra had reached a settlement with the union,
in which it agreed to refrain from enforcing its solicitation policy in an overly broad
manner and to stop telling employees that they can’t discuss union-related issues during
work time. The settlement agreement contained a provision that, in the event of noncompliance, the NLRB Regional Director would issue the unfair labor practice complaint
on the allegations, and the General Counsel could file a motion for default judgment. The
union thereafter filed separate charges against Conagra alleging noncompliance with the
settlement, and the Regional Director encouraged the employer to remedy the
noncompliance by entering into a second proposed settlement—lest a default judgment
be issued. Conagra failed to respond, but now opposed the motion for default judgment,
contending that the complained-of conduct was no basis to find a violation of the
underlying settlement.
Having found the disciplinary warning unlawful, though, the Board disagreed. Refusing
to quibble over whether the conduct specifically violated the settlement’s prohibition of
disciplining employees for soliciting coworkers “during non-work time,” the Board noted
that the settlement also included a broader provision in which the employer agreed not to
in any like manner violate employees’ Sec. 7 rights. The discipline imposed by the
employer here surely fit that bill, the majority found, and granted the General Counsel’s
default judgment motion.
Dissent. Member Miscimarra dissented in part. He noted that the majority had found
Conagra’s nonsolicitation policy lawful yet “effectively invalidate[d] any enforcement of
the policy unless an employee displays or presents a union authorization card.”
Contending that “decades of Board and court cases uphold no-solicitation policies like
the one applied in this case,” he also wrote that, by adopting “fact-specific exceptions and
qualifications” to the enforcement of nonsolicitation policies—a fact-specific inquiry,
incidentally, that the law generally prohibits employers from undertaking—the majority
took what had been one of the “clearest and most workable rules-of-the-road” and
rendered it impossible to determine what type of no-solicitation rule would pass Board
muster. (To prove his point, he offered a number of hypotheticals for good measure.)
In addition, Miscimarra would come to “the commonsense conclusion” that the employee
had engaged in solicitation on the shop floor and was lawfully disciplined for doing so,
citing conflicting testimony that the law judge did not acknowledge when making
credibility determinations. Moreover, he would hold, the verbal warning issued here, “the
31
least onerous form of discipline commonly imposed by employers,” was lawful—and
default judgment should therefore be denied.
According to Miscimarra, the Eighth Circuit in Wal-Mart Stores Inc v NLRB rejected the
majority’s interpretation of “solicitation” and its bright-line rule that, unless a union card
is in hand, no solicitation occurs—a contention that the majority disputed. “There is no
support—in case law or in logic—for the dissent’s view that merely providing
information to coworkers constitutes solicitation,” the majority responded. And while
Miscimarra argued that its holding “injects uncertainty into a settled area of law,” the
majority was “puzzled” by this assertion, noting that its decision was in keeping with
well-established precedent. At any rate, it argued, “drawing the line at the actual making
of a request” to sign a union card allowed for much greater certainty than the dissent’s
approach.
Miscimarra also parted ways with the majority on its holding that Conagra’s letter about
union discussions was overly broad, finding that an employer doesn’t violate Sec. 8(a)(1)
merely by posting a letter reminding employees about a lawful nonsolicitation policy. In
his view, nothing about the content of the letter would cause employees to reasonably
construe an intended infringement on their protected rights.
The slip opinion number is 361 NLRB No 113.
Attorneys: Ruth Horvatich (Mcgrath North Mullin & Kratz) for Conagra Foods, Inc. John
Roca (Gallon, Takacs, Boissoneault, Schaffer) for United Food and Commercial Workers
International Union CLC, Local 75.
Ind. S. Ct.: State high court upholds Indiana Right to Work law
By Lisa Milam-Perez, J.D.
Dealing a considerable blow to organized labor in Indiana, the state’s high court has
upheld the Right to Work Act, reversing a trial court’s finding that the legislation violated
the Indiana Constitution. Rejecting the notion that the statute was an impermissible
“demand” by the state that unions provide free services to nonmembers (as it must,
pursuant to its federal duty of fair representation), the high court reasoned that “[a]ny
compulsion to provide services does not constitute a demand made by the State of
Indiana.” The International Union of Operating Engineers Local 150 had mounted a twopronged legal challenge to the statute in federal and state court. Both efforts have proved
unavailing (Zoeller v Sweeney, November 6, 2014, Dickson, B).
Right to Work Act. Under Indiana’s Right to Work Act (IC 22-6-6-8), passed in 2012,
an employee may not be compelled, as a condition of employment, 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 in lieu of dues. IC 22-6-6-10 makes it a criminal misdemeanor to
knowingly or intentionally violate this provision. The union sought to invalidate the
statute on both federal and state constitutional grounds.
32
Federal suit fizzled. The federal lawsuit contended that the Right to Work Act violated
the Contracts Clause of the U.S. Constitution in that it impaired the union’s ability to
enter into contractual relationships. The union also raised an equal protection argument:
because the law required it to represent employees who refused to pay dues, dues-paying
members unfairly bore the whole cost of providing representation, it argued. Moreover, it
claimed the state law was preempted by the NLRA. The federal district court dismissed
their claims, and a divided Seventh Circuit affirmed, finding no constitutional infirmities.
Nor did the statute conflict with federal labor law, the appeals court found. Compelling to
the court was the fact that state right-to-work laws were in effect in 1947 when TaftHartley was passed. In fact, of the 12 state right-to-work statutes in effect at the time,
more than half included language similar to Indiana’s challenged law, the court noted.
Currently, 24 states have some form of right-to-work law, and the overwhelming majority
of jurisdictions have adopted language substantially identical to the Indiana provision. As
the Seventh Circuit saw it, the longevity of many of these statutes, with not a whiff of
disapproval from the U.S. Supreme Court, suggested that Indiana’s statute fell squarely
within the bounds of acceptable law.
After the Seventh Circuit issued its decision in September, the Local 150 signaled it
might seek rehearing or appeal to the U.S. Supreme Court. Meanwhile, the union took its
case to the Indiana high court.
State constitutional challenge. The union had sought a declaratory judgment that two
provisions of the Indiana Right to Work Law in particular, IC 22-6-6-8 and 22-6-6-10,
violated Article 1, Section 21 of the Indiana Constitution, which prohibits the state from
making a demand for “particular services… without just compensation.” The union had
scored an early win after an Indiana trial court ruled that the right-to-work measure was
at odds with the constitutional provision. The right-to-work law made it illegal for unions
to collect fees for the services they are required to provide all bargaining unit employees
— union members or not — under federal law, such as processing grievances and
negotiating on their behalf. Traditionally, unions are compensated for these services by
member dues, and federal law ensures that nonunion members who obtain the benefits of
union representation can be required to pay for them in the form of “fair share” fees. The
trial court agreed with Local 150 that the right-to-work law impermissibly demanded that
the union provide its federally-mandated services for free to non-dues payers.
High court reversal. But that theory fell flat in the state’s high court. The union urged
that, under the Right to Work Act, its services are indirectly demanded by the state
because the state is “charged with the knowledge of the existence of the federal law
which requires unions to represent every individual employee fairly.” On the face of the
statute, though, there is no state demand for services, the supreme court concluded; the
law “merely prohibits employers from requiring union membership or the payment of
monies as a condition of employment.”
The Indiana Constitution was meant to protect the liberty of the state’s citizens from the
reaches of their state government, the high court emphasized, and Article 21 “requires
just compensation when the state demands particular services, not when the federal
33
government does so.” Absent the federal law, a union could freely refuse to provide
services to nonmembers without incurring criminal liability under IC 22-6-6-10, the court
reasoned.
Members-only unions? In any event, the union can choose not to be an “exclusiveagency” union and become a “members only” union, the Indiana Supreme Court
suggested. Then there would be no demand for uncompensated services by anyone. And
while the union responded that the NLRA forbids it — the NLRB will not process a
representation petition seeking a “members only” bargaining unit, and a union has no
recourse if the employer refuses to bargain — that was of no concern to the state high
court. “The Union's federal obligation to represent all employees in a bargaining unit is
optional,” the court wrote; “it occurs only when the union elects to be the exclusive
bargaining agent, for which it is justly compensated by the right to bargain exclusively
with the employer.”
Concurrence. Writing separately, Justice Rucker observed that, while the parties
“vigorously dispute[d]” whether it was possible for a union to lawfully avoid the costs of
its federal duty of fair representation by operating in a members-only capacity, the union
made no serious attempt to demonstrate that the Right to Work Law operated in such a
way as to have actually eliminated or reduced its compensation from dues or “fair share”
payments. Rather, the union endeavored to invalidate the statute on its face, not “as
applied.”
The union made no effort to demonstrate that, under the particular circumstances
presented here, it was deprived of such compensation by operation of the Right to Work
law. Nor did the union show that, upon expiration of a valid union security agreement, it
was unable to operate in a manner that would allow it to charge all of its members for
services provided. Pondered Rucker: “There may very well exist a set of facts and
circumstances that if properly presented and proven could demonstrate that a union has
actually been deprived of compensation for particular services by application of the Right
to Work Law. And thus as to that union the statute would be unconstitutional as applied.
However, this is not that case.”
Reaction. “Any time a new law is passed and then challenged, the parties directly
impacted by the law are left to operate in a legal state of limbo,” noted Chuck Baldwin
and Todd Nierman of Ogletree Deakins. (They had filed an amicus brief to the Indiana
Supreme Court in support of the Indiana law on behalf of the Indiana Legal Foundation.)
“Labor management relations cannot be put on hold. Unions and employers have
continued to have to bargain collectively for new agreements during the pendency of the
litigation over the constitutionality of the law. This has made for some difficult and at
times impossible negotiations. With this issue now settled, unions and employers can
come to the bargaining table with a common understanding of the law under which they
are negotiating,” they noted. “That is a good thing regardless of one’s perspective on the
right to work debate.”
The case number is 45S00-1309-PL-596.
34
Attorneys: Jeffrey S. Wrage (Blachly, Tabor, Bozik, & Hartman) for Operating Engineers
Local 150. Thomas M. Fisher, Solicitor General, State of Indiana, for Gregory F. Zoeller.
Charles B. Baldwin, Todd M. Nierman (Ogletree Deakins) for the Indiana Legal
Foundation.
Pa. Sup. Ct.: Closure of 26 Pennsylvania public health centers enjoined
By Harold M. Bishop, J.D.
The Pennsylvania Supreme Court has ordered a preliminary injunction preventing the
Commonwealth of Pennsylvania from closing 26 state health centers and furloughing the
26 nurse consultants employed by those centers. The Supreme Court reversed the
Commonwealth Court’s denial of injunctive relief because the unambiguous language of
a state statute makes it clear that if a radical restructuring of public health services is to
occur in the Commonwealth, the General Assembly, and not the Executive Branch must
make the necessary changes (SEIU Healthcare Pennsylvania v. Commonwealth of
Pennsylvania, November 21, 2014, Baer, M.).
Community health nurses. The Pennsylvania Department of Health (DOH) oversees the
administration of public health services to residents of Pennsylvania’s 67 counties
through a system of 60 centers located throughout the Commonwealth. The centers
employ approximately 61 nurse consultants, who provide coordination and consultation
for the community health nurses who administer care at the centers.
In 2013, the DOH announced that, pursuant to an extensive reorganization of public
health services by Governor Tom Corbett’s 2013-2014 budget, 26 centers would be
closed and approximately 26 nurse consultants would be furloughed. In response, a
lawsuit was filed in Commonwealth Court by SEIU Healthcare Pennsylvania, an
unincorporated labor organization, five nurses employed by the centers and represented
by SEIU, and five Pennsylvania state legislators (collectively “SEIU”). The lawsuit,
brought against the Commonwealth of Pennsylvania, Governor Corbett, the DOH, and
DOH Secretary, Michael Wolf (collectively the “Executive Branch”) sought to stop the
closures and furloughs.
In the lawsuit, SEIU contended that the plan to eliminate 26 centers and furlough 26
nurse consultants constituted an unequivocal violation of the express terms of the 71 P.S.
Sec. 1403(c)(1). The Executive Branch argued that Sec. 1403(c)(1) was exclusively
designed to prevent closure of the centers through privatization and that it was not
privatizing health services, but altering its methodology for delivering health services so
that the services could be continued in a more cost-effective and efficient manner.
After the Commonwealth Court denied SEIU’s request for injunctive relief, finding that
SEIU was unlikely to succeed on the merits of it claim, the union appealed directly to the
Pennsylvania Supreme Court.
Supreme Court’s analysis. The Pennsylvania Supreme Court found that it could only
reverse the lower court if it found that all of the six prerequisites for a preliminary
injunction had been satisfied by SEIU. These prerequisites are: (1) a clear right to relief;
35
(2) immediate and irreparable harm; (3) greater harm would occur from refusing the
injunction; (4) restoration of the status quo; (5) the relief requested is reasonably suited to
abating the offending activity; and (6) the relief is not contrary to the public interest.
In determining that the six prerequisites for a preliminary injunction were satisfied by
SEIU, the Court found that the unambiguous language of section 1403(c)(1) prohibited
the offending conduct of closing 26 centers and furloughing 26 nurse consultants. The
statute made clear that if a radical restructuring of the provision of public health services
is to occur in the Commonwealth, the General Assembly, and not the Executive Branch,
must make the necessary changes. Accordingly, the Court concluded that the
Commonwealth Court’s interpretation of Sec. 1403(c)(1) was erroneous as a matter of
law, thereby invalidating its holding that SEIU was unlikely to succeed on the merits of
its underlying action.
Injunction issued. The Supreme Court reversed the Commonwealth Court’s denial and
issued a preliminary injunction, instructing the Executive Branch to cease reducing the
number of centers, reestablish the centers in counties in which they have been unlawfully
closed, cease reducing the level of public health services, and restore the level of public
health services to that which previously existed.
The case number is: 38 MAP 2013.
Attorneys: Irwin William Aronson (Willig, Williams & Davidson) for SEIU Healthcare
PA. James David Schultz, Pennsylvania Office of General Counsel, and Audrey F.
Miner, Pennsylvania Department of Health, for Commonwealth of Pennsylvania,
Governor Thomas Corbett, The Pennsylvania Department of Health, and Michael Wolf.
Hot Topics in WAGES HOURS & FMLA:
Private sector donning and doffing compensation requirements remain open
question
By Pamela Wolf, J.D.
The Supreme Court will not take up a series of questions to resolve the unsettled issue of
exactly when donning and doffing activities in the nonunion work environment are
compensable as “principal activities” under the FLSA “because of the nature of the
work.” In an order entered on Monday, November 3, the Justices (absent Justice Alito,
who took no part in the decision) declined to grant a petition for cert filed by
Thyssenkrupp Waupaca, Inc, which does business as Waupaca Foundry, Inc. The case
would have given the Justices a chance to shed some light on donning and doffing
compensation requirements in the nonunion sector, much as they did for the union
landscape in Court’s January 2014 decision in Sandifer v. U.S. Steel Corp.
As the petition for cert pointed out, the High Court’s Sandifer ruling did not address any
important donning and doffing questions for the 90 percent of the U.S. workforce that is
nonunion. For now, at least, those questions will remain open. The Waupaca Foundry
dispute centered on the personal protective equipment that employees were required by
36
their employer to wear and the uncompensated time they spent putting it on and taking it
off and showering at the end of their shifts.
A district court held that an employee’s activity constituted compensable “work” under
the FLSA if such activities are required by law, by the employer, or by the “nature of the
work.” It thereafter granted summary judgment in favor of the employer, ruling that
showering and changing clothes at the plant was not compensable because OSHA had
responsibility for promulgating and enforcing occupational safety and health standards,
and it had not mandated that workers in foundries shower and change clothes on-site.
According to the district court, “nature of the work” was “not a question that either a
court or a jury was well-equipped to answer.” Therefore, a determination of what
practices and procedures should be mandated to protect worker health and safety in the
workplace should be made on an industry-wide basis. Thus, the district court concluded,
“the fact that OSHA has promulgated a standard for [hazardous material] exposure that
does not mandate changing clothes and showering after work requires the conclusion that
such activities are not required by the nature of the work.”
But the Seventh Circuit saw it differently. OSHA’s failure to promulgate a rule requiring
that foundry employees shower and changes clothes on-site did not bar the employees
from presenting evidence as to the compensability of such activities under the FLSA,
ruled a divided appeals court in DeKeyser v Thyssenkrupp Waupaca, Inc dba Waupaca
Foundry, Inc., an October 30, 2013 decision. Here, the appeals court majority determined
that the district court erred when it ignored the “sharp dispute” in the evidence as to the
health effects of chemical exposure at the foundry and the impact, if any, that showering
and changing clothes would have on the workers.
Unanswered questions. The questions that the High-Court declined to take up are these:
(1) In light of the OSH Act’s enactment and the creation of OSHA, does the “required by
the nature of the work” prong of the tripartite test still exist when matters of workplace
health and safety are in issue, or are such issues subsumed by the “required by law”
prong of the test, and decided by OSHA?
(2) What legal standard should be applied to determine if the “required by the nature of
the work” prong of the tripartite test has been met?
(3) If an employee is not required to perform donning, doffing, and showering activities
at his/her place of employment, and the employee has the option and ability to change
clothes and shower at home (or elsewhere), does that fact alone render these activities
noncompensable under the FLSA?
Citibank to pay $4.65M to resolve loan specialists’ overtime claims
Citibank will dole out up to $4.65 million to resolve FLSA and state-law overtime claims
brought by a class of home loan specialists who contended they were misclassified as
exempt employees and, consequently, denied the overtime pay they say they were due.
The parties reached a settlement in the suit, first launched in 2011, and filed a motion last
37
week seeking the court’s approval of their agreement and certification of the proposed
class for settlement purposes.
Background. In 2011, a federal district court in New York granted conditional
certification to a nationwide collective action brought by Citigroup “home lending
specialists” and loan consultants who claimed they were improperly classified as exempt.
The employees had since been reclassified as nonexempt, but they contended they were
still shorted overtime pay because they had been discouraged from reporting the overtime
hours they worked and thus performed uncompensated off-the-clock work. They also said
they were entitled to pay for missed meal and rest breaks and to be compensated for other
infractions. The district court found the employees were similarly situated (in part by
virtue of the fact that identical claims had been raised by a loan consultant in a Florida
action). In all, 96 employees opted in to the suit.
The district court had also denied the company’s motion to compel arbitration of the
wage dispute. But in a 2013 summary order, the Second Circuit reversed, ordering the
employees to arbitrate their claims pursuant to their binding arbitration agreements and
the dictates of the FAA. The ruling was significant — and heavy hitters weighed in as
amici — in that it affirmed the application of the Supreme Court’s American Express Co
v Italian Colors Restaurant holding in the context of FLSA claims. Subsequently, the
parties asked that the employees’ petition for rehearing en banc be held in abeyance
while they tried to resolve the dispute through mediation, resulting in a settlement
agreement.
Settlement agreement. According to their joint motion for preliminary approval,
Citigroup will pay up to $4.65 million, including payouts to class members (individuals
who worked as home loan specialists for the company over varied class periods,
depending upon the state in which they worked). The settlement fund will also cover
attorneys’ fees and costs, administrative costs, and service payments to named plaintiffs.
Risks of proceeding. In urging the court to approve the agreement, the parties noted the
risk to plaintiffs if the case were pursued to trial, including the possibility that some of
the class members might ultimately be found to fall under the “highly compensated” or
“outside sales” exemptions, among other exemptions that could apply, or the prospect
that the loan specialists would be found to have worked less hours than alleged. They also
faced the risk of decertification of the class — only after expensive discovery and motion
practice ensued.
Moreover, the fact that Citigroup could withstand a much larger judgment didn’t weigh
against settlement approval, they argued further, because the settlement was reasonable
given the attendant risks of further litigating the claims, and it represented a fair value to
the class members.
WHD zeroed in on Southern California garment industry
The DOL has found widespread labor violations by employers in the Southern California
garment industry that the agency says are costing workers millions of dollars a year in
unpaid wages. During fiscal year 2014, the Wage and Hour Division conducted 221
38
investigations of employers in that industry, mostly in and around Los Angeles. Those
investigations revealed $3,004,085 in unpaid wages for 1,549 workers — an average of
$1,900 per worker, which is five times the amount a typical sewing machine operator
earns in a week, according to the WHD.
Pointing to statistics on back wages for workers in low-wage industries, the WHD noted
that minimum wage and overtime violations historically have been high in the garment
industry. Investigators have found violations in 89 percent of more than 1,600 cases in
Southern California since 2009, leading to more than $15 million in recovered back
wages for nearly 12,000 workers. Because the apparel industry typically employs large
populations of immigrants with limited English language proficiency who are unaware of
their rights or are reluctant to speak up, these workers are particularly vulnerable to labor
violations, the division observed.
Recent WHD cases in the garment industry included an investigation of Roger Garments
in Montebello that yielded more than $93,000 in overtime and minimum wage back
wages that were paid to 44 workers. Roger Garments was contracted by Santa Ana-based
Lunar Mode, an apparel manufacturer, for nearly half of its goods, the agency said.
Investigators also cited Lunar Mode for nearly $7,000 in back wages. Products in this
case were sold to Macy’s and other women’s fashion retailers.
In another case, an investigation of Los Angeles-based garment contractor EVE LA Inc.
found that 37 employees were due nearly $87,000 in unpaid minimum wage and overtime
compensation. Apparel workers utilized as checkers, trimmers, and pressers were paid
flat weekly salaries of $270 for an average of 50 hours a week, according to the
investigation. They were producing women’s clothing for manufacturers Dan Bee Inc.
and Lovely Day Fashion, the WHD said. Dan Bee sells to retailers Must Have and
Potter’s Pot. And Lovely Day Fashion sells apparel through online retailer Nasty Gal.
A third case cited by the WHD resulted in more than $28,000 in minimum wage and
overtime back wages being recovered for 13 employees at Lucky Stars, a garment
contractor in South El Monte. Lucky Stars sold product to retailers such as Macy’s, JC
Penney, and Kohl’s.
Stepping up enforcement. According to WHD Administrator Dr. David Weil, due to the
fierce competition in the garment industry, many contract shops lower the cost of their
services, often at the expense of workers’ wages. Weil said the division is engaging in
strategic enforcement efforts, such as directed investigations and identifying supply
chains, to combat what he calls a “race-to-the-bottom culture” that imposes an
unnecessary hardship on people trying to support themselves and their families.
“We are committed to strong enforcement and providing educational workshops for
employers, yet we continue to find significant problems in this industry,” said WHD
Regional Administrator Ruben Rosalez. The WHD has stepped up surveillance of
establishments and deployed more multilingual investigators in the last several years. The
agency is also working with the department’s Office of the Solicitor to obtain liquidated
damages as a remedy for workers. The WHD may also assess civil money penalties when
39
employers are found to be repeat or willful offenders. In addition, the agency is
addressing supply chains by using agreements to ensure compliance with minimum wage
and overtime rules by having manufacturers monitor their contractors.
Washington Legal Foundation urges Justices to require notice and comment for
federal agency interpretations
By Jim Hamilton, J.D., LL.M.
In a case with possible seminal consequences for federal regulatory agencies, the U.S.
Supreme Court was urged to affirm a D.C. Circuit ruling that when an agency has given
its regulation a definitive interpretation, and later significantly revises that interpretation,
the agency has in effect amended its rule, something it may not accomplish under the
Administrative Procedure Act (APA) without public notice and comment. In an amicus
brief filed with the Court, the Washington Legal Foundation strongly supported the
public’s right to participate in the revision process, participation that not only is
consistent with the tradition of open government but also ensures that all potential
revisions are well-considered. The Allied Educational Foundation was also on the brief.
The case, Perez v. Mortgage Bankers Association (Dkt No 13-1041), which is set for oral
argument on December 1, centers around the DOL’s flip-flop on the status of mortgage
loan officers as exempt versus nonexempt under the FLSA.
When an agency issues a definitive interpretation of a regulation soon after issuing the
regulation itself, reasoned amici, the general public has good cause to conclude that the
interpretation reflects the agency’s actual thinking at the time that it adopted the
regulation. Thus, when the agency later issues a new rule that directly contradicts the
prior interpretation without asserting any basis for the change other than disagreement
with the interpretation’s analysis, the new rule can legitimately be deemed substantive in
nature. The opportunity to comment ensures that the interests of the general public are
fully considered before a rule is reversed, according to the Washington Legal Foundation.
In reply brief, DOL stands firm on right to flip-flop
On December 1, the U.S. Supreme Court will hear oral argument in Perez v. Mortgage
Bankers Association (Dkt No. 13-1041), a case which calls into question the Department
of Labor’s flip-flop on the question of whether mortgage loan officers fall within the
FLSA’s administrative exemption from overtime. The D.C. Circuit had reversed a district
court’s dismissal of a challenge to a 2010 Wage and Hour Division “Administrator
Interpretation” that declared mortgage loan officers nonexempt employees. According to
the appeals court, since the DOL’s most recent interpretation was at odds with its earlier
interpretations, the agency had to engage in notice-and-comment rulemaking—a position
that the banking industry and other amicus have lined up to support in briefs before the
High Court.
In a reply brief submitted earlier this week, though, the DOL stood firm in its contention
that notice-and-comment rulemaking wasn’t needed when, as here, the agency was
merely revising an interpretative rule—which, it noted, lacks “the force and effect of
law.” The DOL rejected the notion that a subsequent interpretative rule that runs counter
40
to a prior agency interpretation has the effect of amending the underlying legislative
regulation that is being interpreted.
The DOL challenged the respondents’ policy arguments that notice-and-comment
rulemaking in this context makes for “good government.” As the agency replied,
“Congress’s creation of an express and unqualified exemption from notice-and-comment
rulemaking for interpretive rules reflects the balance that Congress struck between
agency flexibility and mandatory procedural devices for such rulemaking.” While
imposing the additional procedural requirement might mean more public involvement in
the rulemaking process, such a mandate would come “at a significant cost to agency time
and resources and the prompt correction of erroneous interpretations.”
Moreover, the agency urged, “Congress was not unmindful of the potential impact of
agency interpretive changes in the FLSA minimum-wage and overtime context,” having
made clear that an employer will not be liable for any minimum wage or overtime
liability if it acts “in good faith in conformity with and in reliance on” a written
administrative interpretation that has been “modified or rescinded.”
More workers in Northeast had access to paid sick leave than in Midwest
The Bureau of Labor Statistics (BLS) found that in March 2014, 76 percent of workers in
private industry had access to paid holidays. Another 61 percent had access to paid sick
leave, and 77 percent had access to paid vacation days. The BLS defines “paid leave” to
mean that the employee is able to use the benefit. However, as reported on November 6
in The Economics Daily, the availability of different types of paid leave varies across
geographic regions.
Geographic differences. Sixty-five percent of workers in the Northeast had access to
paid sick leave, while only 57 percent of workers in the Midwest had paid sick leave
available. Access to paid vacation days ranged from 73 percent in the West to 78 percent
in both the South and Midwest, according to the BLS.
The BLS also reported on paid personal leave, which may be used for any general
purpose that an employee chooses, and these reasons may or may not be covered by other
types of paid leave. Among all private-industry workers, 38 percent had access to paid
personal leave in March 2014. In the Northeast, 51 percent of workers had access to paid
personal leave, a rate that was much higher than that of the other three regions.
Other types of leave, including paid funeral leave, paid jury duty leave, and paid military
leave, were examined by the BLSA. Overall, 61 percent of private-industry workers had
access to paid jury duty leave. In the West, only 48 percent of workers were offered this
benefit, while 71 percent of workers in the Northeast had access to paid jury leave. Paid
military leave, according to the BLS, was available to 32 percent of all private-industry
workers. Workers in the Northeast and South had slightly higher access rates to this
benefit, at 38 percent and 35 percent, respectively.
41
The data reported comes from the National Compensation Survey - Benefits program.
Further information is available in the BLS data tables for paid time-off benefits in March
2014.
Conde Nast to pay $5.85M to resolve interns’ wage claims
Media company Conde Nast will pay up to $5.85 million to settle a class and collective
action wage suit brought by former unpaid interns who contended they should have been
compensated as employees for their work at the New Yorker and W magazine. On
Thursday, November 13, the interns filed a motion for preliminary approval of the
proposed settlement resolving their claims.
The recovery is a significant win for the interns — and for plaintiffs’ firm Outten &
Golden — in the ongoing wave of intern wage suits against large media companies in
particular. Similar claims have been levied against Hearst Corp, NBC Universal, Fox
Searchlight, and Gawker Media, among other entities. “This case is about the
fundamental principle that if you work, you must be paid,” said Outten & Golden’s Juno
Turner, one of the attorneys representing the Conde Nast interns, earlier in the litigation.
“Our clients seek to end the wage theft endemic in the media industry.”
The plaintiffs brought FLSA and New York Labor Law claims against Conde Nast in
New York on behalf of all interns who worked for the publisher during the class period
on an unpaid basis (or received a modest stipend). The settlement covers two partially
overlapping groups of class members: an FLSA settlement collective and a New York
Rule 23 class. According to their memorandum in support of the motion for preliminary
approval, the proposed settlement provides participating class members with individual
payouts ranging from $700 to $1,900, amounting to more than 60 percent of the unpaid
wages, according to the plaintiffs’ estimate. While recovery would likely be greater if the
interns were to prevail at trial, that amount “represents substantial value given the
attendant risks of litigation,” the plaintiffs told the court.
In urging the court to sign off on the deal, the plaintiffs noted the difficulty of
maintaining the class through trial and that litigating the case would be complex, costly,
and long—and would likely be dragged out further by appeal. They also cited the
inherent risk to the plaintiffs given the ongoing uncertainty within the Second Circuit as
to the applicable legal test to use in deciding whether an intern is an employee under the
FLSA. Two courts in the circuit have adopted two different tests in similar intern cases
brought against Hearst Corp and Fox Searchlight, resulting in conflicting outcomes. The
unresolved issue is currently pending before the court of appeals. “The proposed
settlement alleviates this uncertainty,” the plaintiffs said, and weighs in favor of court
approval.
In addition to the payouts to class members, the settlement covers attorneys’ fees of
$650,000 (11 percent of the settlement fund) and $10,000 in costs, as well as $10,000 in
service payments to the two named plaintiffs.
The case, Ballinger v Advance Magazine Publishers Inc dba Condé Nast Publications,
No. 1:13-cv-04036, was brought in the Southern District of New York.
42
Proposal on president’s mandated FLSA updates may come in February
By Pamela Wolf, J.D.
The Department of Labor expects to issue a proposed regulation in February 2015 that
will reflect President Obama’s directive to modernize and streamline FLSA regulations
for executive, administrative, and professional employees, according the DOL’s Fall
2014 Agency Rule List. Among other things, the agency also expects to finalize its rule
on the FMLA’s definition of “spouse” by the end of March 2015, and by the end of July
2015, to publish a final rule narrowing the advice exemption in persuader agreement
reporting requirements.
Regulatory revisions to FLSA exemptions. The DOL said that it expects to publish a
proposed rule by the end of February 2015 titled, Defining and Delimiting the
Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer
Employees. In Sec. 13(a)(1), the FLSA provides a minimum wage and overtime
exemption for employees who are employed in a bona fide executive, administrative, or
professional capacity, or in the capacity of an outside salesperson. In a March 13, 2014
memorandum, President Obama directed the Secretary of Labor to modernize and
streamline existing overtime regulations for executive, administrative, and professional
employees. These regulations were last updated in 2004.
FMLA definition of “spouse.” The agency’s regulation on the Family and Medical
Leave Act of 1993, as amended, will be finalized by the end of March 2015. The
comment period on the proposed regulation ended on November 14. The FMLA entitles
eligible employees of covered employers to take unpaid, job-protected leave for specified
family and medical reasons with continuation of group health insurance coverage under
the same terms and conditions as if the employee had taken leave. Leave may be taken,
among other reasons, to care for the employee's spouse who has a serious health
condition. The DOL has proposed to revise the definition of “spouse” in light of United
States v. Windsor, which struck down the provision in the Definition of Marriage Act that
limited the definition of “marriage” to a man-woman union.
Minimum wage for federal contractors. Consistent with a final rule published by the
DOL on October 7 and effective December 8, workers on certain new federal contracts
with be entitled to a minimum wage of $10.10 an hour. Executive Order 13658 makes
that minimum wage increase and indexes the wage rate to inflation thereafter. Consistent
with the Executive Order, the DOL has issued implementing regulations.
Persuader agreements. The DOL said that it expects to issue a final rule by the end of
July 2015 that revises its interpretation of Sec. 203(c) of the Labor-Management
Reporting and Disclosure Act (LMRDA). An extended comment period on the proposed
rule ended on September 21, 2011. Section 203(c) creates an “advice” exemption from
reporting requirements that apply to employers and other persons related to persuasion of
employees about their rights to organize and bargain collectively. The revised
interpretation would narrow the scope of the advice exemption.
43
The DOL also hopes to issue in July 2015 a notice and comment rulemaking that would
make electronic filing mandatory for the Consultant Form LM-21, Receipts and
Disbursements Report, which is required under Sec. 203(b) of LMRDA. The agency also
intends to review the layout of the Form LM-21 and its instructions, including the detail
required to be reported.
Both of these persuader agreement-related proposals were previously slated for action in
December 2014.
Labor organization annual reports. Another DOL proposal rule slated for release in
November 2015 would make electronic filing mandatory for the Form LM-3 and LM-4
Labor Organization Annual Reports. This action was previously scheduled for December
2014. Labor organizations covered by the LMRDA and similar statutes must file annual
financial disclosure reports with the DOL’s Office of Labor-Management Standards
(OLMS). Currently, the largest labor organizations (with $250,000 or more in total
annual receipts) file the Form LM-2, which requires filers to submit the report
electronically. The proposed rule would require smaller labor organizations, which file
either the Form LM-3 or LM-4 Labor Organization Annual Reports, to also submit their
reports electronically.
LEADING CASE NEWS:
1st Cir.: Stipend satisfied salary basis test; no OT for highly compensated employees
By Lisa Milam-Perez, J.D.
Project managers for a political consulting firm who earned well over $100,000 a year
were “highly compensated employees” within the meaning of the FLSA’s white-collar
exemptions and thus were not covered by the statute’s overtime protections, the First
Circuit held. Rejecting the employees’ contention that their employer’s compensation
scheme, in which they were entitled to at least a minimum weekly stipend of $1,000,
didn’t satisfy the salary basis requirement of the white-collar exemption rules, the appeals
court affirmed summary judgment to the employer on their overtime claims (Litz v The
Saint Consulting Group, Inc, November 4, 2014, Kayatta, W).
The project managers filed an overtime collective action and were granted conditional
certification of their claims in the district court below. None of the firm’s 36 other project
managers joined the suit, though, after receiving notice of their opt-in rights. And an
Illinois plaintiff whose suit they joined had settled her claims with the employer —
leaving only the two sole party plaintiffs to appeal summary judgment in the employer’s
favor on their FLSA claims.
Pay scheme. The project managers’ earnings equaled the number of hours they billed to
clients multiplied by an hourly rate between $40 and $60. They typically received $2,500
to $4,000 per week in gross pay, meaning they usually worked more than 40 hours per
week. Under the firm’s compensation plan, though, they were guaranteed a minimum
weekly “stipend” of $1,000 whether they billed any hours or not. For example, if a
project manager billed 10 hours at a $50 hourly rate, or $500, she would still receive
44
$1,000 in pay for that week. It was undisputed that the project managers always received
at least the $1,000 weekly stipend.
Although the project managers conceded that they satisfied the “duties” requirements of
the FLSA’s white-collar exemptions and met the “highly compensated employee”
provision’s annual pay floor, they contended nonetheless that they were not exempt under
these provisions because they weren’t paid on a salary basis. At issue was whether their
“stipend” amounted to a “salary” within the meaning of the white-collar regulations. It
did, the First Circuit held.
Salary basis. Under C.F.R. Sec. 541.602(a), an employee is paid on a “salary basis” if he
or she receives (1) "a predetermined amount," (2) "constituting all or part of the
employee's compensation," and (3) "not subject to reduction because of variations in the
quality or quantity of the work performed." The stipend in question was a predetermined
amount, but the employees argued that the latter two criteria were not satisfied. In support
of their assertion, they pointed to two communications from their employer indicating
that their stipend was subject to reduction based on variations in the amount of work they
performed.
The first document was a lengthy email from the founder/CEO and the president
instructing managers to document those instances in which a project manager refuses
assignments or available billable hours outside of their geographic division. But the
appeals court took particular note of an excerpt in which the employer noted, “We need
to do everything we can to insure each and every project manager is getting as many
hours as they want, at least up to 45 or 50 a week.” It thus construed the email as an
attempt to ensure that project managers who wanted to make more than $100,000 per
year were given enough assignments in order to do so — not as implying that the
company would reduce their stipends. In fact, the appeals court also made note of another
statement within the email that project managers had a minimum fixed cost to the
employer of “$72,000 a year ($1,000 a week minimum and benefits)," suggesting that the
employer didn’t even consider the possibility of reducing the project managers’ $52,000
per year in weekly stipend payments.
No “actual practice” of deductions. The second document, another email from the
president, did introduce the possibility of not paying out the stipend. The message
instructed managers that the stipend “is not to be used like vacation time” and that if there
was an assignment available to a project manager to bill and the employee opted not to do
the work, they were to use vacation time instead. “We will not pay the stipend in that
situation,” the email threatened.
However, there was no instance where the employer actually reduced or did not pay the
stipend. Without any evidence, then, that it had an actual practice of reducing the $1,000
stipend for any project manager, this single email was not enough to show that the
employees’ pay was actually subject to improper deductions. And even if the firm did
require project managers to use vacation time when they rejected available hours, “this
would only show that the project managers' vacation time, and not their salary, was
subject to deduction,” the appeals court reasoned.
45
Paystub argument unavailing. The employees also staked their claim on paystubs
generated by the firm’s payroll company, which showed hours times hourly rate, with no
express reference to hourly pay. That is, if an employee earning $50 per hour works 21
hours, the paystub reflects $50 times 21 as equaling gross pay of $1,050. As the
employees saw it, for the salary basis to be satisfied, the paystub should reflect something
like $1,000 + (number of hours -20)($50), and that their “stipend” does not exist except
when hours times hourly rate falls below $1,000.
But this assertion “elevates form over substance,” the court said, and ignored “the
economic reality of the guarantee.” Under the paystub formula, as backed by the
undisputed minimum stipend guarantee, “every single project manager in every single
possible situation would receive exactly the same pay as under the more complicated
formula” that the plaintiffs contend should have been used. The fact that employees’
weekly pay was usually (but not always) high enough to render the guaranteed stipend
unnecessary “hardly means that the guarantee was not ‘part of the employee's
compensation,’” the appeals court reasoned.
Since the stipend was both a predetermined amount and not subject to reduction based on
variations in the amount of work performed, it clearly qualified as payment on a salary
basis, the appeals court held. And, because it was undisputed that the project managers
received more than $100,000 per year for performing the duties of an exempt
professional employee, they were not entitled to overtime pay.
The case number is 13-2437.
Attorneys: Shannon Liss-Riordan (Lichten & Liss-Riordan) and Ryan F. Stephan
(Stephan Zouras) for Crystal Litz. Sean P. O’Conner (Morgan, Brown & Joy) for The
Saint Consulting Group.
3rd Cir.: Decisionmakers didn’t know of FMLA inquiry; reprisal claim fails
By Marjorie Johnson, J.D.
Although an employee was fired soon after HR referred his inquiry about FMLA leave to
a third-party leave administrator, he could not advance his FMLA reprisal claim because
there was no evidence that decisionmakers knew of his FMLA activity or that their
purported reason for the discharge (his alleged harassment of a male coworker) was
pretextual. He was also unable to pursue his claim that the employer breached his
contractual right to a peer review since the employee handbook contained a clear
disclaimer. Accordingly, in an unpublished opinion, the Third Circuit affirmed the district
court’s grant of summary judgment against him (McElroy v. Sands Casino, November
21, 2014, Rendell, M.).
FMLA inquiry. The employee contacted an HR representative in the fall of 2011 to
inquire about FMLA leave. The HR rep referred him to the company’s third-party leave
administrator. In accordance with her typical practice, she did not tell anyone about his
inquiry. On December 15, the leave administrator advised the employee that his form was
incomplete.
46
Altercation with coworker. A few days later he was fired after an incident with a male
coworker. Specifically, while he and the coworker entered an elevator together, the
employee allegedly grabbed the coworker’s shoulder with one hand and prodded him in
the waist or lower back with the other hand, pushing him onto the elevator. Although the
coworker angrily told him not to touch him again, the employee did so when they exited
the elevator. After investigating, the employer terminated the employee on December 19.
Peer review request denied. The employee requested a peer review pursuant to a section
in the employee handbook that described a peer review procedure for appealing
terminations. The employer denied his request since it categorized his termination as
having involved sexual harassment, which was excluded from peer review. The
handbook also stated that it did not create a contract for employment or benefits.
District court proceedings. The district court granted summary judgment against the
employee on his FMLA reprisal and breach of contract claims. First, it ruled that
although his FMLA inquiry and termination were temporally close, there could be no
causal connection because there was no evidence that the decisionmakers had any
knowledge of his FMLA request. Rather, the only person who knew about it was the HR
rep with whom he originally spoke, and she undisputedly did not tell anyone else.
Moreover, his breach of contract claim failed because there was no contract and the
handbook did not show any intent to supplant the at-will rule.
No causal connection. Affirming dismissal of the employee’s FMLA claim on summary
judgment, the Third Circuit rejected his assertion that management must have known
about his FMLA inquiry either directly or constructively and/or that the timing between
his FMLA request and his termination was obviously suggestive. Rather, he could not
show a causal connection because there was no evidence indicating that the individuals
who investigated the elevator incident and decided to terminate him knew about his
FMLA inquiry.
No pretext. Furthermore, even if the employee could show causation, there was no
evidence that would allow a reasonable jury to disbelieve the employer’s proffered reason
for his discharge. Notably, he did not dispute that the elevator incident occurred.
Moreover, the record revealed that the employer concluded that his behavior warranted
termination after investigating the incident and there was no evidence that the
decisionmakers knew about his FMLA inquiry. Accordingly, no reasonable jury could
conclude that the employer’s decision was retaliatory.
Effective disclaimer. Finally, summary judgment was also warranted on the employee’s
breach of contract claim since the employee handbook expressly disclaimed that it
established a contractual right. Thus, his argument that the elevator incident was not
sexual harassment was immaterial since he did not have any contractual right to peer
review. Furthermore, even if the elevator incident was not sexual harassment, the
handbook specified that the employer had the right to change its policies and benefits
without prior notice and that it may make exceptions, at its discretion, to the policies.
The case number is 14-1325.
47
Attorneys: Donald P. Russo (Law Office of Donald P. Russo) for Darryl Mcelroy.
Michael A. Curley (Curley, Hessinger & Johnsrud) for Sands Casino.
4th Cir.: State hospital supervisors immune under FLSA; denial of overtime tied to
official duties
By Lorene D. Park, J.D.
Although a state hospital employee carefully crafted her complaint to avoid sovereign
immunity, the Fourth Circuit found that the substance of her complaint indicated that her
supervisors’ actions in denying her overtime were “inextricably tied” to their official
duties at the hospital and the Commonwealth of Virginia was the real party in interest.
Sovereign immunity therefore barred her FLSA claims and the case was remanded with
instructions to dismiss (Martin v Wood, November 18, 2014, Niemeyer, P).
The employee worked as a nurse at Eastern State Hospital and was paid on an hourly
basis. Because of transitional duties during shift changes, she claimed that she often
began performing her duties 20 minutes or more before her shift started and continued
working 30 to 90 minutes after her shift. She also alleged that she often worked through
her 30-minute lunch break. Even though this often resulted in her working more than 40
hours each week, she was compensated for only 40 hours. The nurse coordinator to
whom the employee complained about not being paid overtime allegedly attributed her
extra time to “inefficiency” and refused to take action. The employee also asserted that
the CEO of the hospital “willfully and deliberately refused to correct” the failure to pay
her overtime.
Lawsuit against supervisors. Filing suit under the FLSA, the employee named only the
nurse coordinator and CEO as defendants. She claimed that in failing to authorize
overtime pay, they “acted directly and indirectly in the interest of Eastern State Hospital
in relation to the hours of work and payment of wages to Eastern State Hospital
employees,” including her. The complaint demanded damages from the two defendants in
their individual capacities in the form of “overtime compensation” and “liquidated
damages in an equal amount,” along with interest.
Moving to dismiss, the defendants asserted that they had the same sovereign immunity as
the hospital, an agency of the Commonwealth of Virginia, because their conduct was
“tied inextricably to their official duties.” The complaint, they noted, centered on their
official authority to control employees as to hours and wages and that the complaint did
not allege that they acted in an ultra vires manner against the employee or that they acted
to serve any personal interest. The district court denied the motion, explaining that the
complaint alleged “significant intentional misconduct” by the defendants and that it was
directed against them in their individual capacities. This interlocutory appeal followed.
Employee’s justification. The employee conceded that the hospital was an agency of the
Commonwealth of Virginia, which has sovereign immunity from FLSA claims through
the Eleventh Amendment. She also conceded that this sovereign immunity extended to
“state officers acting in their official capacity” and that immunity had not been waived.
However, she justified the court’s jurisdiction on the fact that sovereign immunity does
48
not extend to suits against state officials in their individual capacities. Indeed, she
carefully crafted her complaint to sue the supervisors in their individual capacities.
Virginia was real party in interest. Reversing, the appeals court pointed out that “the
Supreme Court has cautioned that allowing an action to proceed simply because the
complaint names a state official in his or her individual capacity ‘would be to adhere to
an empty formalism and to undermine the principle . . . that Eleventh Amendment
immunity represents a real limitation on a federal court’s federal-question jurisdiction.’”
To identify the real party in interest, said the court, required an examination of the
substance of the claims to determine whether: the officials’ allegedly unlawful actions
were “tied inextricably to their official duties;” the burden of providing the desired relief
at the outset would have been borne by the state; a judgment against the officials would
operate against the state; the officials’ actions furthered personal interests; and the
officials’ actions were ultra vires.
With that in mind, the appeals court looked beyond the form of the complaint and found
that it effectively asserted a claim against the Commonwealth itself, which was the “real,
substantial party in interest.” The complaint alleged that the hospital failed to pay for
overtime because the two defendants refused to approve such compensation. It further
claimed that the supervisors exercised authority to control the employee’s hours, refused
to include overtime hours in her weekly wages in violation of the FLSA, and, in doing so,
“acted directly and indirectly in the interest of Eastern State Hospital.” There was no
allegation that they acted in an ultra vires manner or attempted to serve personal interests
distinct from the hospital’s interests, noted the court.
Thus, examining the complaint in light of the factors to be considered, the court found
virtually every factor indicated that the supervisors were being sued in their official
capacities. The complaint alleged that they had authority to authorize overtime and, if
they had done so, the state hospital would have paid. In the court’s view, the inevitable
conclusion was that the supervisors’ actions were “inextricably tied” to their official
duties at the hospital, which was the real party in interest. The case was therefore
remanded with instructions to dismiss the complaint on grounds of sovereign immunity.
The case number is: 13-2283.
Attorneys: Sidney Edmund Rab, Office of the Attorney General of Virginia, for Jack Lee
Wood. Raymond Lee Hogge, Jr. (Hogge Law) for Laura Lynn Martin.
5th Cir.: Tankermens’ duties crucial to operation of vessel; exempt from FLSA as
seamen
By Ronald Miller, J.D.
A federal district court erred in denying an employer’s motion for summary judgment on
the issue of whether vessel-based tankermen were exempt from FLSA overtime as
seamen, ruled the Fifth Circuit. Because the undisputed evidence established that these
vessel-based tankermen performed their loading and unloading duties with an eye toward
49
navigation and were required to perform such duties safely so that the vessel could safely
operate on inland and oceanic waterways, the appeals court held that the loading and
unloading duties, along with any related duties, constituted seaman work when performed
by the vessel-based tankermen (Coffin v. Blessey Marine Services, Inc., November 13,
2014, Jolly, E.).
Loading and unloading barges. The employer’s business primarily consisted of
shipping liquid cargo along inland and oceanic waterways, using two tank barges
connected to a towboat. “Tankermen” have gained deckhand experience, and have
received required training in the loading and unloading of liquid cargo from a barge. In
addition, the tankermen ensured that proper documentation was on board; performed
maintenance on the boat; and handled lines and rigging during tow building, locking, and
docking activities. According to the employer, the tankermen also pumped out bilge
water, fueled the vessels, added lube oil, and performed deckhand duties such as
cleaning, standing watch, making locks, and putting out mooring lights. The parties
agreed that most of these tasks were seaman work.
It was the loading and unloading of barges, along with other tasks related to the loading
and unloading process that the tankermen argued was nonseaman work. The plaintiffs
typically worked as seamen aboard a vessel for approximately 84 hours during a sevenday period and were paid a “day rate,” or a flat daily sum. They were not paid overtime
for any work, as is customary and lawful with respect to seamen.
Seaman work. Here, the district court concluded that the Fifth Circuit’s decision in
Owens v. SeaRiver Maritime, Inc., established that loading and unloading a vessel is
always nonseaman work. However, the appeals court concluded that this reading of
Owens was wrong. It observed, that in contrast to the plaintiff in Owens, the tankermen in
the instant case were members of a unit tow crew, were assigned to particular vessels for
a voyage, and were expected to perform work on barges that were towed by the
employer’s boats and crews. Although Department of Labor regulations, 29 C.F.R. Sec.
783.32, suggest that in many cases loading and unloading duties are nonseaman work, the
Fifth Circuit has recognized that such a rule cannot be categorical in light of the DOL’s
crucial qualification that the application of the seaman exemption “depends upon the
character of the work an employee actually performs.
In Owens, the Fifth Circuit recognized that the character of loading and unloading duties
might change when a member of a vessel-based crew performs such duties. Here, the
appeals court rejected the employees’ contention that the employer could not rely on
evidence connecting loading and unloading duties to the navigational integrity of the unit
tow. Although the evidence in Owens was insufficient to suggest that loading and
unloading assisted the vessel’s operation, the appeals court did not categorically reject the
relevance of such evidence in other cases, particularly when the work in question is
performed by a member of the vessel’s crew.
Consequently, the Fifth Circuit concluded that the district court erred when it determined
that Owens required it to hold that loading and unloading duties performed by vesselbased tankermen were nonseaman duties as a matter of law.
50
Regulatory criteria. Rather, the appeals court concluded that loading and unloading was
seaman work when done by these vessel-based plaintiffs. Turning to the regulations, the
court noted that Sec. 783.31 provides that an employee is a seaman if two criteria are
met: (1) the employee is “subject to the authority, direction, and control of the master;”
and (2) the employee’s service is primarily offered to aid the “vessel as a means of
transportation,” provided that the employee does not perform a substantial amount of
different work. Here, both parties agreed that the plaintiffs were subject to the master’s
control. As to the second prong, this provision simply means that the employee must be a
(more or less) full-time member of the marine crew.
Pointing to Gale v. Union Bag & Paper Corp., the Fifth Circuit noted that it had early-on
recognized that vessel-based barge tenders who maintain and service a barge are exempt
seamen under the FLSA. It concluded that Gale controlled this case. Finding that it was
undisputed that the plaintiffs ate, slept, lived, and worked aboard the employer’s
towboats, that they were members of the crew and worked at the direction of the captain,
and in view of testimony that safe loading and unloading contributed to the efficient
movement of the barge, the appeals court concluded that the tankermen were seamen
while loading and unloading the vessel because these duties were integrated within their
many other duties.
The case number is 13-20144.
Attorneys: Mark Joseph Oberti (Oberti Sullivan) for Keith Coffin. Steven Franklin
Griffith, Jr. (Baker, Donelson, Bearman, Caldwell & Berkowitz) for Blessey Marine
Services, Inc.
6th Cir.: Memphis firefighters not entitled to overtime pay for paramedic training
time
By Ronald Miller, J.D.
Memphis firefighters were not entitled to overtime pay for the time they spent training as
paramedics, ruled the Sixth Circuit. Finding that the city satisfied an exception in 29
C.F.R. Sec. 553.226(b)(1), to the general rule that training programs are generally
considered compensable, the appeal court affirmed the lower court’s grant of summary
judgment. Noting that the city’s program met the exception in Sec. 553.226(b)(1),
because it was required by state law when considering the employees’ actual duties and
not just their titles, the appeals court found that they, in fact, devoted half of their time as
paramedics after they obtained their certification (Misewicz v. City of Memphis,
Tennessee, November 14, 2014, Moore, K.).
Statutory framework. Under the FLSA, “time spent attending employer sponsored
lectures, meetings, and training programs is generally considered compensable.”
However, Department of Labor regulations implementing the FLSA provide two
exceptions to this general rule. First, 29 C.F.R. Sec. 785.27 provides that “attendance at
lectures, meetings, training programs and similar activities need not be counted as
working time,” and therefore does not need to be compensated, if four criteria are met:
(a) Attendance is outside of the employee’s regular working hours; (b) Attendance is in
51
fact voluntary; (c) The course, lecture, or meeting is not directly related to the employee’s
job; and (d) The employee does not perform any productive work during such attendance.
Second, Sec. 553.226(b)(1) provides that training time for employees of local
government is non-compensable if the training is required for certification by law of a
higher level of government, such as the state of Tennessee.
Required training. Memphis firefighters sought overtime compensation for training they
were required to complete for certification as paramedics. The city maintained 33
ambulances, staffed by paramedics who provided advanced life support services. Those
services were not mandated by the state. Firefighters hired after October 2007 rotate
between providing firefighting activities and paramedic activities. They perform
paramedic duties only after they have obtained certification from the state. The city has
adopted a 28-day FLSA work period, meaning firefighters are scheduled to work
approximately 214 hours every 28 days. Firefighters receive an additional half-time
compensation for hours worked above the FLSA threshold of 212. Firefighters also
receive time-and-a-half for overtime hours worked outside the normal schedule.
The city requires firefighters to obtain emergency medical technician (EMT) certification
within one year of hire. The fire department provides an EMT training course, and
firefighters receive compensation for the time spent attending EMT training. In October
2007, the city began requiring firefighters hired after that date to obtain certification as
paramedics within three years of employment. The state set minimum requirements
necessary for paramedic certification, but it did not require such certification for
municipal firefighters. Similar to the EMT program, the city offered its own paramedic
training program at the fire academy, though employees could elect to take the program
through a community college. The city did not charge employees tuition to attend the
paramedic course, but it also did not compensate employees for the time spent in training
through its program. The firefighters sought overtime compensation for the training time
required to complete certification as paramedics.
Training program met exception. The district court granted the city’s motion for
summary judgment, holding that it needed to meet only one of the two exceptions, and
holding as a matter of law the paramedic training program fell within the exception
provided in Sec. 553.226(b)(1), that the training is required for certification by law of a
higher level of government. The firefighters appealed the district court decision.
On appeal, the firefighters argued that the district court erred in: (1) declining to hold that
the paramedic training program must meet both exceptions to escape liability; (2) holding
that the training program met the requirements of Sec. 553.226(b)(1); and (3) declining to
consider and find that the training program failed to meet the exception in Sec. 785.27.
New ground broken. As an initial matter, the Sixth Circuit observed that it had never
interpreted Sec. 553.226, and, to its knowledge, no other court had considered how to
construe Sec. 553.226(a) in conjunction with Sec. 553.226(b). Here, it held that the plain
text of Sec. 553.226, its legislative and regulatory history, and DOL Opinion Letters on
Sec. 553.226 all indicate that the city can escape liability by proving only that an
exception in Sec. 553.226(b) is met.
52
The appeals court noted that the plain text of Sec. 553.226 appeared to create an
unqualified exception to the general rule that employers must compensate employees for
time spent in training. This section did not state that an exception under “the general
rules” referenced in
Sec. 553.226(a) must also be satisfied. Moreover, the rules of statutory construction also
supported the city’s interpretation of Sec. 553.226, explained the court. “It is a basic rule
of statutory construction that a specific statute controls over a general statute.” Section
553.226(b) clearly addresses a more specific situation—state and local government
employees—than the “general rules” outlined in Sec. 785.27.
Stand-alone exception. Further, under the city’s reading of Sec. 553.226, subsection (a)
is not “meaningless.” Its inclusion makes clear that, if training required by a public-sector
employer does not meet an exception in Sec. 553.226(b), the employer must prove that it
falls under a general exception in Secs.785.27–32 if it wishes not to compensate its
employees for training. Thus, the appeals court concluded that the plain text of Sec.
553.226, its legislative and regulatory history, and DOL Opinion Letters on Sec. 553.226
all indicate that this section provides a stand-alone exception to the general rule that
training time is compensable. As a result, the city did not need to compensate the
firefighters for training that satisfied an exception in Sec. 553.226(b).
Did city satisfy exception? To top off its analysis, the Sixth Circuit agreed with the
district court that under the facts presented, the city satisfied the exception in Sec.
553.226(b)(1). First, “Tennessee law required Plaintiffs, much like any public or private
sector employee performing paramedic-level care, to obtain paramedic certification by
attending the training mandated for paramedics under Tennessee law.” While there was
no Tennessee law requiring firefighters to take paramedic training, it was undisputed that
the city did not hire the plaintiffs to simply perform as firefighters but to perform as both
firefighters and paramedics. In fact, the plaintiffs spend half their time as firefighters and
half their time as paramedics after having obtained paramedic certification.
Duties performed. The key dispute was whether, under Sec. 553.226(b)(1), determining
that training is “required by law for certification” should focus on the job description
provided to an employee at the time of hiring, and whether those duties require
certification under state law, or whether the dispositive issue was whether the employer
actually requires the employee regularly to perform duties after training that require state
certification. From the face of the regulation, it did not appear that it is dispositive
whether employees are informed when they are hired of all of the duties that they will be
expected to perform that require state certification. However, the relevant Tennessee laws
and regulations defining who must undergo training to be certified as a paramedic did so
by focusing on the duties performed.
Therefore, under Sec. 553.226(b), the determination of whether training is “required by
law for certification” should focus on whether the employer actually hired the employee
to perform duties that require state certification, as judged by whether the employee is
asked regularly to perform those duties after training. Here, it was undisputed that all
plaintiffs were hired after the fire department implemented the policy requiring
53
firefighters to become certified paramedics, and all signed the paramedic agreement.
Moreover, after becoming certified, they were asked to spend half of their time
performing paramedic duties. Consequently, the city’s paramedic certification program
met the exception in Sec. 553.226(b)(1), and the district court properly granted the city
summary judgment.
The case number is 14-5053.
Attorneys: Thomas A. Woodley (Woodley & McGillivary) for Jon Misewicz. Robert D.
Meyers (Glankler Brown) for City of Memphis, Tennessee.
6th Cir.: Lower court dropped the ball on attorneys’ fees in wage suit resolved
through offers of judgment
By Lisa Milam-Perez, J.D.
Vacating an attorney’s fee award in an FLSA suit that was ultimately resolved through
offers of judgment following a ruling that plaintiffs could arbitrate their claims
collectively, the Sixth Circuit found the district court’s “minimal explanation for the
substantial award” was insufficient. The court below had failed to acknowledge the
prevailing legal standard in the circuit for determining the reasonable hourly rate for the
local market, it did not evaluate the reasonableness of the attorney hours expended, and it
didn’t address most of the employer’s objections. While the Supreme Court has noted
that an attorneys’ fee request “should not result in a second major litigation,” and the
lower court rightly noted that fee and cost awards are within the court’s discretion, it still
had to offer a “concise but clear explanation” for granting the fee award. Because it failed
to do so, the appeals court, in an unpublished opinion, remanded for further consideration
(Smith v. Service Master Corp., November 14, 2014, White, H.).
Wage claims. Terminix service technicians who provided cleaning and pest control
services filed suit alleging the employer failed to compensate technicians for overtime
and other hours worked. According to their complaint, the number of appointments that
the technicians were assigned to complete each day required them to work more than
eight hours, and they weren’t paid for the overtime. They also alleged the timekeeping
device that they used in the field didn’t accurately record their work hours. (Two
plaintiffs added later also contended that they were wrongly classified as exempt from
overtime; and in their amended complaint, they added meal break claims as well.)
Collective arbitration OK. Seeking to represent similarly situated technicians, the
employees moved to certify a collective action. However, the court never decided the
issue; instead, it granted the employer’s motion to compel arbitration pursuant to the
technicians’ employment agreements. An arbitrator then concluded that the arbitration
agreement did not preclude the employees from arbitrating on behalf of a class, and ruled
that the employees could proceed collectively in arbitration on their FLSA claims.
Offers of judgment. After the court rejected the employer’s motion to vacate the award
and to order the plaintiffs to arbitrate their claims individually, the employer made Rule
68 offers of judgment to the five named plaintiffs. After the plaintiffs accepted the offer,
54
the district court entered judgment on each individual’s FLSA claim in various amounts,
for a total combined recovery of $82,342. Plaintiffs’ counsel then sought attorneys’ fees
of nearly $516,900 and $19,000 in costs, which the court awarded in full. The Sixth
Circuit vacated, noting that the employer’s objections were only superficially addressed
below, and finding remand was necessary because no clear explanation for the fee award
had been given.
Local rates applied. The employer contended that the fee award was based on
compensation for law clerks and associates that exceeded the forum’s local rates of the
forum. Specifically, the plaintiffs requested hourly rates of $300, $375, and $450 for
associates, and $175 and $225 for law clerks. Noting that plaintiffs’ counsel were based
in San Francisco, and that the case was litigated against a national corporation, the district
court found the rates were reasonable. In the Sixth Circuit, though, trial courts are to
initially assess “the prevailing market rate in the relevant community” as the starting
point; the award is then adjusted as the court finds necessary under the circumstances.
Granted, there is Sixth Circuit authority that “the relevant market need not be local to the
venue,” the appeals court noted, adding that its holding here “is not to be interpreted as
requiring district courts to always base the fees awarded non-private attorneys on local
rates.” Rather, courts may look to the national market, an area of specialization market,
“or any other market they believe appropriate to fairly compensate particular attorneys in
individual cases.” But the Tennessee Rate Report showed that the local rates for
associates range from $190 to $335—well below the rates charged in this case—and the
court failed to explain why it departed from the local rate, or discuss the governing
criteria for doing so. Thus, remand was in order.
Unsuccessful claims and defenses. The employer also wanted the award reduced by the
amount of time spent on the plaintiffs’ failed defense of the motion to compel arbitration,
their unsuccessful motion to compel discovery of class information, and the empty
pursuit of a collective action. As for the latter, the Sixth Circuit has held that attorney’s
fees related to a failed effort to pursue collective action can be recovered if “these
expenses benefitted the . . . plaintiffs’ individual claims.” But the court below made no
findings on that point—or on the propriety of fees for work relating to the other
unsuccessful claims and defenses. Because there was no discussion of whether and to
what extent the attorney hours were related to the successful claims, the appeals court
remanded for a determination of whether the award should be reduced accordingly, and if
so, by how much.
Time entry descriptions. The district court erred by awarding fees based on time entries
that lacked sufficient detail and impermissibly block-billed the time charged, the
employer also argued. Again, the district court failed to make any findings regarding the
sufficiency of the explanations provided by plaintiffs’ counsel. As for block-billing, the
Sixth Circuit has held that so long as the description of the work performed is adequate,
block-billing can be sufficient. But here, too, it was for the district court to assess this
objection in light of its reconsideration of the other issues.
Duplicative entries. The employer pointed to several instances in which plaintiffs’
counsel sought fees for two attorneys to perform the same task. For example, on several
55
occasions, more than one attorney billed for meetings, calls, and depositions in which all
billing lawyers participated. However, the employer cited no relevant authority from the
circuit stating that when multiple attorneys work on a task, only one attorney can bill his
or her time. To the contrary, the Sixth Circuit has held that in “complicated cases,
involving many lawyers,” an “arbitrary but essentially fair approach” could be utilized”
of simply deducting a small percentage of the total hours to eliminate duplication of
services.” The appeals court remanded to allow the district to determine if the duplicative
entries were warranted.
Electronic research: a circuit split. The employer also argued that costs incurred
performing electronic legal research on Westlaw and PACER are not recoverable, and
that even if it is recoverable, the charges were not set forth in sufficient detail. Sixth
Circuit law is unsettled on whether costs for electronic research are properly awarded, the
court noted, or whether the costs should be factored into the overhead included in the
attorney’s hourly fee. On this point, there is a split within the district courts in the circuit,
and a circuit split as well: some circuits consider electronic research costs to be
incorporated in the attorney’s billing rate and thus not separately compensable; other
circuits routinely award electronic research as separate costs.
“We see no reason for an absolute rule that the cost of computer research is or is not
recoverable,” the appeals court said. But “any recovery should be for the actual cost of
the online access or service. If the lawyer or firm pays a blanket access fee, rather than
per search, there is no reason to distinguish the on-line research cost from the cost of the
books that at one time lined the walls of legal offices, which was treated as overhead. If
distinct charges are incurred for specific research directly relating to the case, and the
general practice in the local legal community is to pass those charges on to the client, we
see no reason why such properly documented charges should not be included in the
recoverable expenses.”
In the case at hand, there was no record developed below as to the local practice
regarding computer research charges. And the plaintiffs’ record of the charges was
inadequate; their entries did not establish that each charge was reasonably related to the
issues raised. Thus, the appeals court called for further development of the record and
reconsideration of this portion of the award by the court below.
Travel time. Finally, while the employer argued that the court should not have awarded
the plaintiffs’ counsel for travel time without evidence that the attorneys were working
while traveling, the Sixth Circuit noted that it has “often found travel time to be
compensable if determined by the district courts to be the local practice regarding
payment for travel time.” Here again, no pertinent findings were made as to the local
practice on this issue, or on whether the attorneys were performing legal services while
traveling. Thus, the appeals court remanded this issue as well.
The case number is 14-5481.
56
Attorneys: Lori Erin Andrus (Andrus Anderson) for William G. Craig, Jr. Paul E. Prather
(Littler Mendelson) for ServiceMaster Holding Corp., The ServiceMaster Co., Inc., The
Terminix International Co., LP, and Terminix International, Inc.
8th Cir.: Without proof of excess hours worked, overtime claim flounders on appeal
By Ronald Miller, J.D.
A field service engineer who traveled to customers’ facilities to install and service
printers failed in his attempt to revive his claim for unpaid overtime under the FLSA,
ruled the Eighth Circuit in a brief opinion. Finding that the employee did not come
forward with “sufficient evidence to show the amount and extent of [overtime] work”
which would allow a fact-finder to find overtime hours “as a matter of just and
reasonable inference,” the appeals court affirmed the judgment of the district court
(Holaway v Stratasys, Inc, November 6, 2014, Bye, K).
The field service engineer (FSE) filed suit against his employer for unpaid overtime
compensation. At the time of his employment, the employer categorized its FSEs as
exempt from the overtime provisions of the FLSA. As an FSE, the employee installed
and serviced three-dimensional printers manufactured and distributed by the employer.
He worked independently out of his home and was on duty during the work week waiting
for assignments. When a client requested installation or servicing, a supervisor would
inform the employee and he would travel to the client’s location and install or service the
printer. As a salaried employee, he did not receive overtime if he worked over 40 hours in
any given week.
In February 2012, the employee sent an email to other FSEs complaining about the lack
of overtime compensation. Thereafter, the employer terminated him for violating the
company’s online protocol. The employee commenced this lawsuit in federal court
alleging that the employer violated the FLSA. He sought damages based on his
approximation that he worked 60 hours per week, every week of his employment.
Following discovery, the employer moved for summary judgment. The district court
granted the motion, finding that the employee failed to put forth evidence sufficient to
show that he worked more than 40 hours a week. This appeal ensued.
Evidence of overtime hours. The parties contested whether the employee was properly
classified as an exempt employee. However, the appeals court concluded that it need not
determine whether the employee was improperly classified because, even assuming he
was subject to the overtime requirements of the FLSA, he failed to put forth evidence
sufficient to demonstrate he ever worked for more than 40 hours per week.
Because the employer classified the employee as exempt from the FLSA’s overtime
requirements, it did not keep precise records regarding the hours he worked. If an
employer has failed to keep records, employees are not denied recovery under the FLSA
simply because they cannot prove the precise extent of their uncompensated work.
Rather, “employees are to be awarded compensation based on the most accurate basis
possible.” Under this relaxed standard of proof, “once the employee has shown work
performed for which the employee was not compensated, and ‘sufficient evidence to
57
show the amount and extent of that work as a matter of just and reasonable inference,’ the
burden then shifts to the employer to produce evidence to dispute the reasonableness of
the inference.”
The employee need not put forth “the precise extent of uncompensated work.” Still, he
failed to meet even this relaxed standard because he failed to put forward any evidence of
the amount and extent of his work in excess of 40 hours a week for any week worked for
the employer, let alone evidence of excess hours worked every week of his employment.
Rather, he put forth contradictory and bare assertions of his overtime hours worked. He
also failed to provide a meaningful explanation of how he arrived at his final estimate of
60 hours a week, every week, of his employment. Accordingly, the judgment of the
district court was affirmed.
The case number is 14-1146.
Attorneys: Jarvis C. Jones (Jones & Satre) for Greg Holaway. Gregory L. Peters (Seaton
& Peters) for Stratasys, Inc.
9th Cir.: Employee’s failure to allege overtime denied in specific workweek dooms
claim
By Kathleen Kapusta, J.D.
In an issue of first impression and mindful of the Supreme Court’s admonition that the
pleading of detailed facts is not required under Rule 8, the Ninth Circuit joined the First,
Second, and Third Circuits in holding that in order to survive a motion to dismiss postTwombly and Iqbal, a plaintiff asserting an overtime claim must allege that he worked
more than 40 hours in a given workweek without being compensated for the overtime
hours worked during that workweek. Also agreeing that the plausibility of a claim is
“context-specific,” the appeals court explained that a plaintiff may establish a plausible
claim by estimating the length of his average workweek during the applicable period and
the average rate at which he was paid, the amount of overtime wages allegedly owed, or
any other facts that will permit a court to find plausibility. Applying that standard to the
pleadings at issue here, the Ninth Circuit found that an employee failed to state a claim
for unpaid minimum wages and overtime where his complaint did not allege facts
showing that there was a specific week in which he was entitled to but was denied
minimum or overtime wages. Accordingly, the dismissal of his complaint was affirmed
(Landers v. Quality Communications, Inc, November 12, 2014, Rawlinson, J.).
The employee, a cable services installer, sued his employer alleging that it failed to pay
him, and other similarly situated individuals, minimum wages and overtime in violation
of the FLSA. He claimed he was subjected to a “piecework no overtime” wage system
whereby he worked in excess of 40 hours per week without being compensated for his
overtime. In the alternative, the employee alleged that even if he were paid some measure
of overtime, the overtime payment was less than that required by the FLSA.
Lower court proceedings. Granting the employer’s motion to dismiss, the district court
found that the complaint did “not make any factual allegations providing an
58
approximation of the overtime hours worked, plaintiff’s hourly wage, or the amount of
unpaid overtime wages. . . .” Given these deficiencies, the lower court concluded that the
employee’s allegations were “merely consistent” with the employer’s liability, but fell
“short of the line between possibility and plausibility of entitlement to relief,” under Rule
8, as construed in Twombly and Iqbal.
The post-Twombly and Iqbal landscape. Pointing out that post-Twombly and Iqbal, it
has not addressed the degree of specificity required to state a claim for failure to pay
minimum wages or overtime under the FLSA, the Ninth Circuit noted that the district
courts that have considered this question are split. While some have required plaintiffs to
approximate the overtime hours worked or the amount of overtime wages owed, others
have forgone such a requirement. And while no circuit court has interpreted Rule 8 as
requiring FLSA plaintiffs to plead in detail the number of hours worked, their wages, or
the amount of overtime owed to state a claim for unpaid minimum wages or overtime
wages, the Ninth Circuit noted that while the circuit courts are in harmony on what is not
required by Twombly and Iqbal, there is no consensus on what facts must be affirmatively
pleaded to state a viable FLSA claim post-Twombly and Iqbal.
Surveying the decisions from its sister Circuits, the Ninth Circuit found it was persuaded
by the reasoning of the First, Second, and Third Circuits. Specifically, it agreed with their
rationale that in order to survive a motion to dismiss, a plaintiff asserting a claim to
overtime payments must allege that he or she worked more than 40 hours in a given
workweek without being compensated for the overtime hours worked during that
workweek. Like the other Circuits, it also declined to make the approximation of
overtime hours the sine qua non of plausibility for FLSA claims, explaining that “most (if
not all) of the detailed information concerning a plaintiff-employee’s compensation and
schedule is in the control of the defendants.”
Applying the standard. The Ninth Circuit, also in agreement with the other Circuits,
further found that at a minimum, a plaintiff asserting an FLSA overtime violation must
allege that he or she worked more than 40 hours in a given workweek without being
compensated for the hours worked in excess of 40 during that week. Applying that
standard to the employee’s pleadings, the court found that he failed to allege facts
showing there was a specific week in which he was entitled to but was denied minimum
or overtime wages. Instead, the employee presented generalized allegations asserting
violations of the FLSA’s minimum wage and overtime provisions.
Specifically, the employee alleged that his employer implemented a “de facto piecework
no overtime” system and/or failed to pay minimum wages and/or overtime for hours he
worked. He also alleged that his employer falsified payroll records to conceal its failure
to pay required wages. Notably absent, explained the court, was any detail regarding a
specific workweek in which the employee worked in excess of 40 hours and was not paid
overtime for that specific workweek and/or was not paid minimum wages.
“Although plaintiffs in these types of cases cannot be expected to allege ‘with
mathematical precision,’ the amount of overtime compensation owed by the employer,
the court explained that “they should be able to specify at least one workweek in which
59
they worked in excess of forty hours and were not paid overtime wages.” Here, the
employee’s allegations failed to provide “‘sufficient detail about the length and frequency
of [his] unpaid work to support a reasonable inference that [he] worked more than forty
hours in a given week.’” While his allegations raised the possibility of under
compensation in violation of the FLSA, “a possibility is not the same as a plausibility,”
the court stated, finding that he failed to state a plausible claim under Rule 8.
The case number is: 12-15890.
Attorneys: Christian James Gabroy (Gabroy Law Offices) and Leon Greenburg (Law
Offices of Leon Greenburg) for Greg Landers. Malani L. Kotchka (Lionel, Sawyer &
Collins) for Quality Communications, Inc.
10th Cir.: Sheriff’s employees failed to show overtime rate lower than required
FLSA rate
By Ronald Miller, J.D.
Sheriff department employees failed on their collective action alleging that they were
paid overtime at a lower rate than required by the FLSA over a three-year period, ruled
the Tenth Circuit. Finding that the employees’ regular rate under the FLSA was the
“actual rate” received by the employees in their paychecks and not an alleged “promised
rate” which they never received, the appeals court determined that the employees failed
to state a claim for relief unpaid overtime. Moreover, the appeals court concluded that
any error made by the district court in considering the county’s regular rate argument was
harmless. Additionally, the district court did not abuse its discretion when it denied the
employees leave to amend their Third Amended Complaint (Alber v. The Board of
County Commissioners of Jefferson County, Colorado, November 13, 2014, McHugh,
C.).
Employees of a sheriff’s department brought a collective action under the FLSA, alleging
they were paid overtime at a lower rate than required by the statute during a three year
period. This wage dispute stemmed from a disagreement about the proper calculation of
overtime pay rates. According to the employees, the hourly wage rate (actual rate) from
which the county calculated their overtime rate did not correspond to the higher hourly
wage rates promised by the county in posted salary schedules (promised rate). The
employees sued the county for the difference between the overtime payments they
actually received and the overtime they would have received if it had been calculated
based on the promised rate.
Regular rate. In moving to dismiss the complaint, the county first argued that the
employees failed to allege that their “regular rates” of pay for purposes of the FLSA were
the promised rate. Additionally, it argued that the employees failed to allege it had
approved a budget incorporating the promised rate or facts demonstrating the existence of
an enforceable promise to pay those rates. The district court granted the employer’s
motion to dismiss the complaint, and the employees filed a timely appeal.
60
On the merits, the Tenth Circuit held that the employees failed to state a claim upon
which relief could be granted for unpaid overtime because, as a matter of law, their
regular wage rate under the FLSA was the actual rate they received in their paychecks
and not the promised rate. The employees claimed that their “regular rates” for the
purposes of the FLSA were the promised rates, not the actual rates they received in their
paychecks. Overtime work must be compensated “at a rate not less than one and one-half
times the regular rate at which the employee is employed.” As a result, the proper
determination of that regular rate is of prime importance in calculating the amount of
overtime wages due.
Bargained-for pay rate. Here, the employees relied heavily on the Tenth Circuit’s
decision in Chavez v. City of Albuquerque for the proposition that an employee’s regular
rate can be based on a bargained-for rate of pay, even when it was never paid to the
employee. However, the appeals court found that reliance misplaced. Chavez considered
the interaction between the terms of a collective bargaining agreement and the FLSA’s
overtime provisions. The CBA in Chavez set forth a base pay rate and provided for
certain add-on payments. The appeals court found nothing in Chavez to support the
employee’s assertion that parties can contractually designate which payments will be
counted toward an employee’s regular rate for the purposes of the FLSA’s overtime
provisions, even if those payments are not actually made to the employee.
In this case, the employees alleged they were entitled under the FLSA to overtime pay
calculated from the higher promised rate they never received. This position is contrary to
law. The FLSA provides a specific remedy based on the failure to pay overtime
calculated from the employee’s regular rate—the amount the employer actually paid the
employee for non-overtime work. Because the facts alleged indicated that the county
calculated overtime rates consistent with the requirements of the FLSA, the decision of
the district court was affirmed.
The case number is 14-1050.
Attorneys: Reid Jason Elkus (Elkus Sisson & Rosenstein), and Todd J. McNamara
(McNamara Roseman & Kazmierski) for Andrew Sivetts. Patricia W. Gilbert, Jefferson
County Attorney’s Office, for The Board of County Commissioners of Jefferson County,
Colorado.
11th Cir.: Alabama school districts not immune from suits under FLSA and
USERRA
By Ronald Miller, J.D.
In consolidated appeals, the Eleventh Circuit ruled that school boards in Alabama are not
arms of the state and therefore are not entitled to Eleventh Amendment immunity.
Finding that Stewart v Baldwin Cnty. Bd. of Educ. has not been overruled or abrogated
and therefore remained binding precedent, the appeals court determined that one school
district was not immune from suit under the FLSA by employees challenging the method
used to obtain their hourly and overtime rates. Moreover, the plaintiff in the second case
could pursue his claim that another school district violated USERRA by reducing his
61
responsibilities and salary after he returned from active duty (Walker v Jefferson County
Board of Education and Weaver v Madison City Board of Education, November 4, 2014,
Jordan, A).
In Walker, so-called “240-day” employees sued the school board alleging that its practice
of dividing their annual salaries by 260 days to obtain their hourly and overtime rates
violated the FLSA. The Walker plaintiffs sought to recover wrongfully calculated wages,
withheld wages, unpaid wages, overtime compensation, and liquidated damages. The
district court granted the school board’s motion to dismiss.
The plaintiff in Weaver, a member of the U.S. Army Reserve, sued a school district
alleging that after his nearly two-year tour of duty in Afghanistan, it refused to reinstate
him to his prior position. He claimed that, by reducing his responsibilities, status, and
salary upon his return from active duty service, the school district violated USERRA. The
district court in Weaver denied the school district’s motion to dismiss on Eleventh
Amendment grounds.
Eleventh Amendment immunity. The school districts contended that they were entitled
to Eleventh Amendment immunity as arms of the state of Alabama, and insisted that the
Eleventh Circuit’s 1990 decision in Stewart was no longer good law. On the merits of
Stewart, the appeals court applied a three-factor test to determine whether a school board
enjoyed Eleventh Amendment immunity: “(1) how the state law defines the entity; (2) the
degree of state control over the entity; and (3) the entity’s fiscal autonomy — i.e., where
the entity derives its funds and who is responsible for judgments against the entity.” That
test led the Eleventh Circuit to conclude in Stewart that the school board could not assert
Eleventh Amendment immunity.
Once a panel of the court decides an issue, its holding on that issue is binding on all
subsequent panels “unless and until it is overruled or undermined to the point of
abrogation by the Supreme Court or by this court sitting en banc.” The Supreme Court
has not decided any cases that abrogate Stewart, and its one decision on Eleventh
Amendment immunity of a local school board found no such immunity and continues to
be cited favorably. Moreover, the Eleventh Circuit has not overruled Stewart through an
en banc decision.
State law changes. Next, the school districts argued that Alabama law has changed
significantly with respect to how school boards are characterized and that, as a result,
Stewart is no longer binding. While the Eleventh Circuit had no quarrel with the general
proposition that how state law defines an entity is significant for purposes of the Eleventh
Amendment, it did not see how this proposition helped the school districts. The Alabama
Supreme Court ruled in 2009 in Ex Parte Hale Cnty. Bd. of Educ., and again in 2012 in
Ex Parte Montgomery Cnty. Bd. of Educ., that county school boards enjoy sovereign
immunity, under Sec. 14 of the Alabama Constitution, from suits based on state tort or
contract law. According to the school districts, these decisions required the Eleventh
Circuit to revisit Stewart and overrule that decision to avert an incongruous situation of
having Alabama school boards enjoying sovereign immunity under state law but being
denied Eleventh Amendment immunity under federal law.
62
The Eleventh Circuit rejected the school district’s contention that its 2012 decision in
Versiglio v. Bd. of Dental Exam’rs of Ala. (Versiglio II) can be read as collapsing the
entire Eleventh Amendment multi-factor test into a single dispositive inquiry: whether
the state courts grant state law immunity to the entity for suits based on state law. The
appeals court declined to read Versiglio II in a way that violates its prior panel precedent
rule and creates interpretive problems for panels in the future. Further, at the time the
Eleventh Circuit decided Stewart, Alabama courts had already held that school boards
were state entities entitled to sovereign immunity from tort suits based on state law.
The Alabama Supreme Court’s 2009 decision in Hale County and 2012 decision in
Montgomery County did not constitute new pronouncements of Alabama law on the
question of the state sovereign immunity enjoyed by local school boards, and did not
permit the circuit court’s Versigilio II decision to implicitly overrule prior decision in
Stewart. They likewise did not provide a basis to conclude that Stewart has been
abrogated.
Versiglio II broadside. Even assuming that Versiglio II now required the Eleventh
Circuit to give more weight to how state courts treat the entity in question, the school
districts’ attempt to sink Stewart with a Versiglio II broadside fared no better. The
problem for the school districts is Ex Parte Madison Cnty. Bd. of Educ., a post-Stewart
case in which the Alabama Supreme Court held that a local school board is “not an arm
of the [s]tate for the purposes of Sec. 1983 liability and is not entitled to Eleventh
Amendment immunity.” In coming to this conclusion, the Alabama Supreme Court did
not just defer to the circuit court’s decision in Stewart. Instead, it correctly recognized
that Eleventh Amendment immunity is a question of federal law, and independently
applied the Eleventh Circuit’s three-factor test.
Accordingly, the Jefferson County Board of Education and the Madison City Board of
Education were not immune under the Eleventh Amendment from suits challenging those
decisions under federal law. The district court’s dismissal of the complaint in Walker was
reversed, and the district court’s denial of the motion to dismiss in Weaver was affirmed.
The case numbers are 13-14182 and 13-14927.
Attorneys: John David Saxon, Sr. (John D. Saxon) for Darryl Walker. Whit Colvin
(Bishop Colvin Johnson & Kent) for Jefferson County Board of Education.
11th Cir.: Georgia school district not immune from suits under FMLA and ADA
By Ronald Miller, J.D.
A Georgia school district was not an “arm of the State” immune from suit in federal court
under the Eleventh Amendment, ruled the Eleventh Circuit. Rather, the appeals court
concluded that the school district operated more like a county or similar political
subdivision to which Eleventh Amendment immunity does not extend. Consequently, a
school district employee was not barred from suing the employer for alleged violations of
the FMLA and ADA. However, dismissal of the employee’s ADA retaliation claim was
63
affirmed on other grounds (Lightfoot v. Henry County School District, November 10,
2014, Huck, P.).
Intermittent leave. The employee, an English teacher, suffers from sickle cell anemia,
which causes sporadic pain crises and makes standing and walking difficult. In March
2010, she applied for intermittent leave under the FMLA to take leave on days when the
pain became overwhelming. Her application was approved and she took leave throughout
the school year. She was subsequently approved for an additional period of intermittent
FMLA leave.
In February 2011, the school principal met with the employee to issue a disciplinary
notice. The notice stated that the employee had neglected her duties and violated specific
requirements contained in the school district’s annual teacher evaluation addendum. It
went on to describe instances where the employee failed to work cooperatively with
coworkers and failed to provide substitute lesson plans. The principal stated that the
employee’s medical absences had caused many of the problems cited and suggested that
she transfer to a middle school because the high school’s schedule was not compatible
with her schedule.
The employee subsequently received an “unsatisfactory” performance evaluation for
failing to correct the alleged deficiencies outlined in the disciplinary notice and was
placed on a Professional Development Plan (PDP). A PDP was the most severe form of
discipline a teacher could receive short of being terminated. Around this time, she was
also removed from her position as the school’s cheerleading coach. She filed EEOC
charges of disability discrimination and retaliation.
When the employee returned to school for the following school year, she found that her
classroom had been moved to the other side of the building, requiring her to take a
painful walk to a distant classroom. She requested an accommodation to reduce her
walking, which the principal denied. Ultimately, the employee brought suit alleging
discrimination and retaliation under the ADA and retaliation under the FMLA. After
filing her suit, the employee successfully completed her PDP, but received a second
disciplinary notice for falsifying a student’s grades. Her contract was not renewed and her
employment was terminated.
Immunity defense. Initially, the district court granted the school district’s motion for
summary judgment on the employee’s ADA claims but denied it on her FMLA claim.
Thereafter, the school district moved for reconsideration raising the defense of Eleventh
Amendment immunity. The district court granted the school district’s motion for
reconsideration and found it was entitled to Eleventh Amendment immunity. On appeal,
the employee argued that the school district was not an “arm of the State” of Georgia, and
therefore was not entitled to immunity under the Eleventh Amendment.
Eleventh Amendment immunity. “The Eleventh Amendment largely shields States
from suit in federal courts without their consent . . . .” It does not, however, extend to
counties, municipal corporations, or similar political subdivisions of the state. Thus, the
School District’s immunity under the Eleventh Amendment turned on whether it should
64
be treated as an “arm of the State” of Georgia, or as a county or similar political
subdivision.
To determine whether an entity is an “arm of the state,” the Eleventh Circuit evaluated
four factors outlined in Manders v. Lee: “(1) how state law defines the entity; (2) what
degree of control the State maintains over the entity; (3) where the entity derives its
funds; and (4) who is responsible for judgments against the entity.” The resolution of
these factors depends, in part, on state law that differs from state to state. Still, the court
noted that the Supreme Court and the vast majority of appellate courts that have
considered the issue have found that school districts and school boards are not entitled to
Eleventh Amendment immunity.
How state law defines entity. With respect to how the state defines its school boards, the
appeals court observed that Georgia’s Constitution vests authority in “county and area
boards of education to establish and maintain public schools within their limits” subject
to the authority of the General Assembly. Thus, school districts were not explicitly
defined as being either part of, or distinct from, the state. Nevertheless, Georgia courts
have held that “a county board of education . . . is merely the agency through which the
county, as a subdivision of the State, acts in school matters.” Georgia courts have further
observed that teachers are “county employees” by virtue of “being employees of the
county governing authority through which the county acts in school matters.”
Additionally, in discussing the powers of various government entities, Georgia’s
Constitution often groups school districts together with counties and municipalities,
indicating that those entities are similar to one another, and distinct from the state.
Georgia’s Code likewise groups school districts together with other political
subdivisions. Although not definitive, these provisions suggest that Georgia considers
school districts to be political subdivisions, distinct from the state. Further, the appeals
court rejected the school district’s argument that Georgia courts have deemed school
districts part of the state for purposes of state sovereign immunity. Here, the court
observed that federal law governed whether an entity is immune under the Eleventh
Amendment, so that state law immunity did not control its analysis.
Moreover, it is not sufficient that the school district’s powers and duties were derived
from state law. Thus, the fact that the school district carried out the state’s constitutional
duty to provide public education did not make it an “arm of the State.” Thus, on balance,
the first factor indicated that the school district was not an “arm of the State.”
Degree of state control. Next, the court examined where the state vests control over
school districts. Under Georgia law, school districts are subject to “the control and
management” of county boards of education, which have the authority to “establish and
maintain public schools within their limits” and make “rules to govern the county schools
of their county.” As a result, Georgia school districts are largely under local control. In
addition to being locally operated and controlled, Georgia’s school districts and school
boards have substantial autonomy over their affairs. School districts may sue and be sued.
School boards may purchase property, borrow money, enter contracts, and issue bonds.
65
However, the school district noted that the state establishes the qualifications and duties
of school board members, the manner in which they are elected, their terms of office, and
the basic procedures for their meetings. Moreover, it observed that the governor has the
authority to suspend board members if a school becomes at risk of losing its
accreditation. In addition, the school district correctly asserted that Georgia has enacted
many laws pertaining to the operation of school districts, including funding, core
curriculum, and teacher evaluations. Nevertheless, finding that these laws do not establish
the requisite control for Eleventh Amendment purposes, and that Georgia school districts
exercise broad discretion over the discipline of teachers, the appeals court concluded that
this Manders factor also indicated that the school district was not an “arm of the State.”
School district funding. The third Manders factor examined where the school district
derived its funds. To raise local funds, county school boards may certify property taxes to
be levied by county authorities, borrow money, issue bonds, accept donations, and levy a
sales tax. Still, the school district relied on the state for 65 percent of its budget. Thus, the
school district argued that Georgia exercised strict control over public school funding
such that it should be considered an “arm of the State.” While finding some merit in the
school district’s arguments, the appeals court found them ultimately unavailing. Because
the school district had local fundraising capabilities, this factor favored the employee.
Responsibility for judgments. Finally, the appeals court examined whether the state
would bear ultimate responsibility for an adverse judgment against the school district.
There was no dispute that “there is no obligation for the state to pay any judgment against
the School District.” Nevertheless, the school district argued that because its budget was
comprised largely of state funds, the fourth factor should lean in its favor.
Here, the appeals court observed that the first two factors established that the school
district was a political subdivision with significant local control, and so did not implicate
concerns about the state’s integrity or the “relationship between the State and its
creation.” Thus, the court found that this case was more akin to its decision in Stewart v
Baldwin Cnty. Bd. of Educ., as the school district’s fiscal autonomy means that “it cannot
be said that a judgment against the School District will come from state funds.” As a
result, the fourth factor indicated that the School District was not an “arm of the State.”
The district court judgment was reversed.
The case is No.13-14631.
Attorneys: Cheryl Barnes Legare (The Buckley Law Firm) for Zaneta (Joi) Rainey
Lightfoot. William A. White (Smith Welch Webb & White) for Henry County School
District.
11th Cir.: Statement of claim in support of wage suit didn’t amend overtime claim
out of suit
By Ronald Miller, J.D.
Because the complaint of laborers on a construction project sufficiently set out a basis for
federal jurisdiction of their FLSA overtime claims, the Eleventh Circuit reversed a
66
district court’s decision finding that it lacked subject matter jurisdiction over the case.
After finding that the employees’ complaint alleged a federal claim on its face, the
appeals court went on to conclude that a statement of claim, filed under local practice
rules, which failed to mention an unpaid-overtime-hours claim did not amend the claim
out of the suit (Calderon v. Baker Concrete Construction, Inc., November 14, 2014,
Carnes, E.).
Laborers on a stadium construction project claimed that the contractor who employed
them failed to pay them the overtime wages they were entitled to receive under the
FLSA. The employees’ complaint alleged that the employer violated their rights under
the FLSA in two ways. First, they asserted that the employer failed to compensate them
at the rate of one and one-half times their regular rates of pay for all hours worked in
excess of 40 hours in a workweek. Second, they alleged that the employer violated their
rights under the FLSA by misclassifying them under a county ordinance that, as a matter
of state law, governs wages for county contract workers. After requiring the plaintiffs to
file a supplementary “statement of claim,” which is not mentioned in the FRCP, the
district court dismissed their complaint for lack of subject matter jurisdiction.
While they conceded that they were paid well in excess of the federal minimum wage,
they contended that as a result of being misclassified under the county ordinance their
hourly wages were less than what they should have been. That, in turn, meant that their
overtime pay was lower than it otherwise would have been because when multiplying
two positive factors, reducing the size of one will always reduce the size of the product.
“Unpaid-overtime-hours claim.” Turning first to the employees’ “unpaid-overtimehours claim,” the Eleventh Circuit observed that the district court ordered them to file a
“statement of claim,” and that such a document is not mentioned in the FRCP, but that
the District Court for the Southern District of Florida uses it as a matter of local practice
to help its courts classify and manage the many FLSA cases filed there. The order
required plaintiffs to file a statement “setting forth the amount of alleged unpaid wages,
the calculation of such wages, and the nature of the wages (e.g., overtime or regular).”
The statement of claim filed by the plaintiffs went beyond the allegations of the
complaint to detail the asserted misclassification of each plaintiff. However, the
document did not mention the unpaid-overtime-hours claim.
The employer claimed that by leaving that claim out of the statement of claim document,
the plaintiffs had narrowed the scope of their complaint so that it rested on the
misclassification claim alone. On that basis, the employer moved to dismiss the
complaint for lack of subject matter jurisdiction. However, the district court denied the
motion, concluding that the misclassification claim which is tied to overtime pay did, in
fact, state a federal claim under the FLSA, and that it had subject matter jurisdiction over
the unpaid-overtime-hours claim.
Subsequently, on a motion to reconsider filed by the employer, the district court agreed
with the employer that the unpaid-overtime-hours claim had been amended out of the
complaint, so that it did not have jurisdiction of a labor dispute where the employees
67
were paid in excess of the minimum wage and overtime was paid in compliance with the
FLSA. The employees appealed.
Statement of claim. The unpaid-overtime-hours claim alleged that the employees were
not always paid time-and-a-half for hours beyond 40 worked in a workweek but were
instead paid their regular rate for some overtime hours and nothing at all for others.
Because this was a federal claim alleged on the face of the complaint, the district court
had jurisdiction based on the complaint. However, the question was whether the
statement of claim that the employees filed under the local practice amended that
jurisdictional basis out of the complaint.
The Eleventh Circuit found that it did not. The employees’ failure to reiterate their
unpaid-overtime-hours claim in the statement of claim document was not controlling.
That document was an extra-Rules practice used by the district court for its convenience
and to aid in case management. It did not have the status of a pleading and it was not an
amendment under Rule 15. Therefore, the district court had subject matter jurisdiction.
The case number is: 14-10090.
Attorneys: Alan Lance Lani (Rubenstein Law) for Arle Calderon. Michael Scott
McIntyre (Baker & Hostetler) for Form Works/Baker JV, LLC.
Alaska Sup. Ct.: Pilot didn’t possess specialized academic training for overtime
exemption
By Dan Selcke, J.D.
Because a pilot working for a remote fishing lodge did not require specialized academic
training in order to enter the profession, the Alaska Supreme Court reversed a trial court’s
holding that he was exempt from receiving overtime compensation under the Alaska
Wage and Hour Act (AWHA). In view of the finding that the pilot was not an exempt
employee under the AWHA, the matter was remanded to the trial court for further
proceedings on whether he in fact worked overtime as defined by AS 23.10.060, and
whether he was entitled to recover compensation for unpaid overtime (Moody v. Royal
Wolf Lodge, November 14, 2014, Bolger, J.).
Long hours for pilot. The lodge, which played host to fishing enthusiasts during the
summer months, was located in a remote area that could only be accessed via plane. The
pilot flew clients between the lodge and fishing destinations, flew supplies to the lodge,
and maintained the company’s only airplane. Although he had no college degree and had
never received flight training in a formal academic setting, the pilot had earned several
certifications, including a commercial pilot license, an airline transport pilot license, and
a second class medical certificate. In making his case for overtime pay, the pilot claimed
to have worked over 40 hours per week for the lodge. However, the trial court held that
he was a professional employee and exempt from receiving overtime wages under the
AWHA. The pilot appealed the decision.
68
Pilots not “professional employees.” The Alaska Supreme Court reversed the lower
court decision, finding that the pilot was not a professional employee exempt under the
overtime provisions of the AWHA. Here, the state high court determined that the trial
court misinterpreted a 2005 amendment to the AWHA requiring courts to use the federal
definition of “professional employee.” The federal law defines a professional employee
as an employee whose primary duty is the performance of work requiring knowledge
customarily acquired by a prolonged course of specialized intellectual instruction. That
definition restricted the exemption to professions where specialized academic training
was a standard prerequisite for entrance. While the pilot here may have earned several
certifications, the commercial piloting profession did not require specialized academic
training as a prerequisite. Therefore, the “professional employee” exemption did not
apply to him.
No days off. Next, the high court affirmed the lower court’s finding that the pilot had not
taken any days off during the time periods at issue. The pilot’s yearly employment
contracts with the lodge provided that he be paid a certain amount each month. Each
payment was based on a 30-day period, and the contracts provided for one day off per
week. The pilot’s work records, which were more reliable than the lodge’s own records,
indicated that the pilot had not taken any days off, so the trial court gave him contract
damages to cover his unpaid work on the seventh day of each week and the 31st day of
July and August. The lodge presented evidence that the pilot did not regularly work over
40 hours per week, but did nothing to refute the pilot’s claim that he worked on each day
of the week, regardless of the total hours.
No due process violations. Finally, the Alaska court held that the trial court did not
violate the lodge’s due process rights by awarding contract damages to the pilot. The
lodge argued that it did not have any notice that the pilot might be awarded contract
damages because he had not brought any contract claims. However, the lodge itself had
put the pilot’s employment contracts at issue by raising their interpretation and
application as a defense against the pilot’s AWHA claim. Also, the employer had
previously testified that it would not have litigated the case differently even if it knew
that the pilot could be awarded contract damages. Because the lodge had suffered no
prejudice, the state high court affirmed the trial court’s award.
The case numbers are S-14864/14883.
Attorneys: William M. Bankston (Bankston Gronning O’Hara) for Royal Wolf Lodge,
Linda Branham, and Chris Branham. Kenneth W. Legacki (Law Offices of Ken Legacki)
for Jeff Mo
Nev. Sup.Ct.: Exotic dancers not independent contractors; strip club must pay
minimum wage
By Dan Selcke, J.D.
Exotic dancers had an employee-employer relationship with a strip club where they had
little control over how they performed their own work and performed work integral to the
operation of the club, ruled the Nevada Supreme Court. The fact that dancers could
69
“hustle” for increased tips did not show that they were in business for themselves, since
skill was not necessary to perform the job. Based on the totality of the circumstances of
the working relationship’s economic reality, the club qualified as an employer under NRS
608.011, and the dancers qualified as employees under NRS 608.010 (Terry v
Sapphire/Sapphire Gentlemen’s Club, October 30, 2014, Pickering, J).
The strip club did not pay its dancers any wages. Rather, they made their money through
tips and dancing fees paid by the club’s patrons. Before the trial court, the dancers argued
that they had an employee-employer relationship with the club as defined under NRS
608.010 and 608.011, and were therefore entitled to the minimum wage under NRS
Chapter 608. The trial court disagreed, and granted summary judgment for the club. The
dancers appealed.
Economic realities test. As an initial matter, the Nevada Supreme Court decided to
analyze whether the dancers and the club had an employee-employer relationship using
the economic realities test set out in the FLSA, rather than use a test developed under
Nevada law. Here, the state high court reasoned that the Nevada legislature had long
relied on federal minimum wage law to lay a foundation for its own employment statutes,
and that the Nevada laws defining both “employee” and “employer” were intended to
encompass as many or more entities as the FLSA definitions. In many respects, Nevada’s
minimum wage laws ran parallel to the federal ones, and plenty of other states had
adopted the economic realities test as a way to determine whether employment
relationships existed. Using it in this case would promote uniformity, explained the court.
While it was true that the language of the FLSA differed slightly from that of NRS
608.010 and 608.011, it did not differ enough to disqualify use of the economic realities
test.
Illusion of control. Next, the court applied the economic realities test to determine that
there was an employee-employer relationship between the dancers and the club. First, the
dancers did not have control over the manner in which they performed their work, even if
the club tried to make it seem as such. For example, the dancers were allowed to choose
whether to take the stage or remain on the floor while working their shifts, but if they
remained on the floor they had to pay an “off-stage fee.” Similarly, they could choose to
accept cash from a customer as payment for private dances, but if the customer offered
special “dance dollars,” (of which the club took a cut) instead of cash (which the club did
not touch), the dancer was not allowed to refuse. These “choices” were actually another
way for the club to control the dancers’ behavior while appearing to give them the
freedom to decide how they went about their work.
Hustling for tips. Other factors weighed in favor of finding that the dancers and the club
had an employee-employer relationship. For example, the dancers had little opportunity
to profit off their own managerial abilities. While dancers could “hustle” to increase their
own tips, their ability to profit off that was limited by the club’s rules and the boundaries
of good service. The club still took most of the risks itself — including providing the
money for advertising and to keep the facilities up and running — and reaped most of the
rewards. While the club argued that the dancers’ ability to hustle customers was a special
skill and showed they had the initiative of someone in business for him or herself, they
70
were not interviewed as to their hustling prowess. That ability, while useful, did not
appear to be necessary for the job.
Employee-employer relationship exists. Although the court had held that most of the
factors under the economic realities test weighed in favor of finding that the dancers had
an employee-employer relationship with the club, the fact that they were free to work at
other clubs weighed against it. However, the transitory nature of the dancers’
employment did not carry much weight, since the freedom to work at multiple clubs did
not guarantee economic independence for workers like them, who lacked specialized,
widely demanded skills. Finally, the fact that the exotic dancers’ duties were, obviously,
integral to the operation of an exotic dancing club weighed in favor of finding an
employee-employer relationship. Because that relationship existed, the dancers were due
a minimum wage under Nevada law. Accordingly, the Nevada Supreme Court reversed
the trial court’s grant of summary judgment and remanded the case for further
proceedings.
The case number is 59214.
Attorneys: Thomas Christensen (Christensen Law Offices), Michael J. Rusing (Rusing &
Lopez) and Robert L. Starr (Law Offices of Robert L. Starr) for Zuri-Kinshasa Maria
Terry. Mark E. Ferrario (Greenberg Traurig) for Sapphire/Sapphire Gentlemen’s Club
and Shac, LLC.
71