Labor Relations & Wages Hours Update
March 2015
Hot Topics in LABOR LAW:
President pulls out a pocket veto to axe resolution blocking union election rule
By Pamela Wolf, J.D. and Joy P. Waltemath, J.D.
As expected, President Obama has signed a memorandum disapproving the controversial
joint resolution targeted to the National Labor Relation Board’s revised representation
election rule, alternately dubbed the “quickie election” or “ambush election” rule. But
instead of a using his regular veto authority, the president has issued a so-called pocket
veto, which means that a new bill will have to be introduced, passed, and presented for
his signature.
The NLRB issued the final rule on December 15, 2014. According to the Board, it
streamlines and modernizes union election procedures. But there is a sharp divide as to
whether the rule unfairly tips the scales against employers and for unions, or finally
levels the playing field for employees who want to get to an up-down vote on union
representation.
In a move to block the rule from being implemented, lawmakers used a provision of the
Congressional Review Act, 5 U.S. Code Sec. 8, which permits Congress to disapprove of
a regulation to prevent it from taking effect. However, that disapproval is subject to a
presidential veto that may be overridden by a two-thirds majority in both Houses of
Congress.
In this case, Obama has opted not to sign the legislation and to send a memorandum of
disapproval to Congress. Because he did so within 10 days of the date on which the
measure was presented to him for approval, and Congress is not now in session, the
rejection is considered a pocket veto. And the president makes clear in his memorandum
that he is asserting his pocket veto authority. As a result, instead of overriding the
president’s objections to the resolution by a two-thirds vote, Congress must start over
again. In any event, garnering a two-thirds majority to approve the resolution and
override a regular veto would have been tough, despite Republican control of the
Legislature.
“Workers need a strong voice in the workplace and the economy to protect and grow our
Nation's middle class,” President Obama wrote in his memorandum. “Unions have played
a vital role in giving workers that voice, allowing workers to organize together for higher
wages, better working conditions, and the benefits and protections that most workers take
for granted today. Workers deserve a level playing field that lets them freely choose to
make their voices heard, and this requires fair and streamlined procedures for
determining whether to have unions as their bargaining representative. Because this
resolution seeks to undermine a streamlined democratic process that allows American
workers to freely choose to make their voices heard, I cannot support it.”
In his remarks before signing the memorandum, Obama also noted that unions
“historically have been at the forefront of establishing things like the 40-hour work week,
the weekend, elimination of child labor laws, establishing fair benefits and decent
wages.”
In addition, the president announced that the White House will be hosting a summit next
fall on increasing the voice and the rights of U.S. workers. “We’ve had a terrific
economic recovery,” he said. “We’re got more work to do. We’re finally seeing wages
being to tick up after many consecutive years of job growth. Nevertheless, what’s true is
that we’ve got record corporate profits. Folks at the very top are doing very well. Middleclass families and folks trying to work their way into the middle class still have some big
difficulties.
“And part of what we want to do is to make sure that we give workers the capacity to
have their voices heard, to have some influence in the workplace, to make sure that
they’re partners in building up the U.S. economy, and that growth is broad-based, and
that everybody is benefitting just as everybody is contributing.”
The summit will provide a wide range of voices, including those from the business
community, small businesses, workers in a wide range of fields, academics, and
organizers, the president explained.
Republican response. Also as expected, Republican members of Congress lost no time
denouncing the president’s pocket veto. Senate Majority Leader Mitch McConnell (RKy.), Speaker of the House John Boehner (R-Ohio), Sen. Lamar Alexander (R-Tenn.),
Sen. Mike Enzi (R-Wyo.), Rep. John Kline (R-Minn.) and Rep. Phil Roe (R-Tenn.)
denounced President Obama’s veto today of their Congressional Review Act joint
resolution to stop the National Labor Relations Board (NLRB) from implementing its
“ambush election” rule.
“President Obama has decided to stand with his powerful friends in Big Labor, rather
than America’s workers and job creators,” said Kline, chairman of the House Education
and the Workforce Committee. “With his veto, the president has endorsed an ambush
election rule that will stifle employer free speech, cripple worker free choice, and
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jeopardize the privacy of working families. This fight isn’t over. Congress will continue
to oppose this radical assault on workers and employers, and we will continue to demand
a fair union election process.”
“With this veto, President Obama has further proved his administration is more
concerned with supporting union bosses than ensuring a fair and impartial process that
respects workers’ privacy and right to make decisions that are best for them,” said Roe,
chairman of the House Subcommittee on Health, Employment, Labor and Pensions. “For
far too long, we’ve seen the Obama administration’s activist NLRB—which should
ensure fair and transparent union elections—put the interests of labor unions before those
of job creators and American workers. This latest rule is nothing more than an attempt to
speed up union elections, violating the rights of workers to make an informed decision
and employers to communicate openly with their employees during a union organizing
campaign.”
Compass Transportation shuttle drivers vote for Teamsters representation
Compass Transportation drivers—who transport employees for six big Silicon Valley
companies—have voted 104-38 in favor of representation by Teamsters Local 853 in San
Leandro, California. The 158 full and part-time drivers shuttle Apple, Yahoo, eBay,
Zynga, Genentech, and Amtrak workers to and from work and home. Compass
Transportation drivers are among a growing group of workers in Silicon Valley who are
organizing to improve their working conditions by joining the Teamsters, the union said
in a February 27 release.
“This is another step, in addition to the Facebook drivers, for the workers who support
the tech industry to move forward toward decent wages, affordable health care, and a
pension for the future,” said Rome Aloise, International Vice President and SecretaryTreasurer of Teamsters Local 853. “As we continue to be contacted by drivers for other
companies, we call on Apple, eBay, Zynga, Genentech, Yahoo and Amtrak to encourage
their contractor to agree to the same economics that the Facebook drivers will enjoy.”
The Teamsters Union pointed out that in November 2014, 87 shuttle bus drivers for
Facebook contractor Loop Transportation voted to join Local 853. On February 21, the
drivers voted unanimously in favor of a contract that includes significant wage increases,
paid health care, retirement, guaranteed hours, and improved working conditions, among
other gains. With the new contract, the average pay for workers at Loop will be $24.50 an
hour, up from $18 an hour, according to the union.
There is a growing movement of labor, faith, and community-based organizations and
workers, including the Teamsters Union, that says it is challenging income inequality in
Silicon Valley through an innovative partnership called Silicon Valley Rising.
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GC updates procedures for addressing immigration issues during NLRB
proceedings
By Lisa Milam-Perez, J.D.
Noting it is “well-settled” that all statutory employees are protected under the NLRA
without regard to their immigration status, NLRB General Counsel Richard Griffin, Jr.
acknowledged nonetheless that a worker’s immigration status may raise obstacles to
enforcement of the Act, and affect the remedies available to him or her. Thus, in a GC
memorandum issued on February 27, he directed the regional offices to immediately
contact the Board’s Division of Operations-Management “as soon as they become aware,
in any stage of a case, that immigration status issues may impact our ability to remedy or
litigate a potential unfair labor practice violation.” Once notified, the OperationsManagement will provide technical assistance; discuss with the region whether to submit
to the Division of Advice the question of whether certain additional remedies should be
sought; decide whether “interagency engagement” is appropriate; and coordinate the
agency’s response to the issues.
Immigration status not relevant at merit stage. Griffin instructed the regions to
continue the current practice of explaining to witnesses, alleged discriminatees, and
parties that one’s immigration status is not relevant to the agency’s investigation into
violations of the NLRA—and to make merit determinations without regard to employees’
immigration status.
When an employer, in defending an unlawful discharge allegation, contends that it was
motivated by the need to comply with immigration laws, “the relevant inquiry at the
merit stage is only whether the charged party’s asserted reason is the motivating cause for
the adverse action,” Griffin wrote. The investigatory focus at this stage is not the
employee’s actual immigration status, he emphasized.
Other agency involvement. When the immigration status of a potential discriminatee or
witness is at issue, Operations-Management will work with the region to discern whether
the individual might be eligible for a U or a T Visa or for deferred action and, if so,
whether the Board should certify or facilitate the process. (T visas and U visas were
created in 2000 by the Victims of Trafficking and Violence Protection Act. T visas are
available to individuals who are present in the United States because of trafficking; U
visas are available to an individual who is the victim of one of several “qualifying
crimes.”)
In addition, Operations-Management will decide whether to refer the case to the DOJ’s
Office of Special Counsel for Immigration-Related Unfair Employment Practices,
pursuant to a memorandum of understanding between the agencies, and also will consider
whether to engage with the Department of Homeland Security regarding its enforcement
operations.
Seeking alternative remedies. When immigration status impinges on the agency’s
ability to remedy or litigate potential unfair labor practices, additional remedies may be
sought in order to address any limitations on backpay and reinstatement at the
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compliance stage. Griffin directed the regions to explore alternative remedies (perhaps as
advanced by charging parties) that might be appropriate under the circumstances and to
bring them to the attention of Operations-Management or the Division of Advice. Such
remedies might include:

Notice reading;

Publication of the notice in newspapers and other forums;

Training for employees on their rights under the NLRA;

Training for supervisors and managers on complying with the Act;

A Gissel bargaining order;

Union access to employee contact information;

Reimbursement of organizing or negotiating expenses;

Consequential damages;

Instatement of a qualified candidate.
Formal settlement encouraged. In its 2002 decision in Hoffman Plastic Compounds v.
NLRB, the Supreme Court emphasized that, even in cases where reinstatement or backpay
are unavailable to a discriminatee because of his or her immigration status, the NLRB
may use the contempt power of the federal courts to ensure compliance with the NLRA
and to defer future violations of the Act. Accordingly, Griffin directed the regions to seek
a formal settlement in cases where immigration status may impact the Board’s ability to
litigate unfair labor practice allegations or remedy a violation.
Prior directives. The current memorandum (GC-15-03) supplements GC 02-06,
“Procedures and Remedies for Discriminatees Who May Be Undocumented Aliens after
Hoffman Plastic Compounds, Inc”; OM Memorandum 11-62, “Updated Procedures in
Addressing Immigration Status Issues that Arise During NLRB Proceedings”; and OM
Memorandum 12-55, “Case Handling Instructions for Compliance Cases after Flaum
Appetizing Corp.”
Ozburn-Hessey Logistics reinstates nine discharged employees
In compliance with a court order, Ozburn-Hessey Logistics has taken action to reinstate
nine wrongfully discharged employees and cease anti-union activities. A federal judge in
the Western District of Tennessee found cause to believe the transportation, warehousing,
and logistics services company had engaged in a series of unfair labor practices and
granted the Board’s request for relief in order to prevent irreparable harm to the
terminated employees and continued misconduct by the employer, according to an
agency release on February 27.
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The NLRB’s Region 15 Office in New Orleans issued a complaint alleging that OzburnHessey, which is headquartered in Memphis, had violated the NLRA by discriminatorily
discharging nine employees, taking disciplinary action against several union supporters,
engaging in threats and surveillance, and performing drug and alcohol testing on
employees because of their union activity.
In addition to offering reinstatement to the nine discharged employees, the company has
agreed to take interim measures to assure employees that surveillance, threats, and other
retaliatory actions in response to union activities have ended.
Republican lawmakers continue to push back against NLRB’s joint-employer vision
By Pamela Wolf, J.D.
Republican lawmakers continue to press the National Labor Relations Board about the
agency’s consideration of whether its longstanding joint-employer standard is still
relevant or should be revised to reflect current business models. On Thursday, March 5,
Senators Lamar Alexander (R-Tenn.), chairman of the Senate labor committee, and Ron
Johnson (R-Wis.), chairman of the Senate homeland security and governmental affairs
committee, and Rep. John Kline (R-Minn.), chairman of the House Education and
Workforce Committee, called on NLRB General Counsel Richard Griffin to explain his
recent comments about the pursuit of labor violation cases against franchisors as joint
employers under the NLRA, despite his purported admission that the legal grounds for
doing so may be “flawed.”
Last September, as controversy continued to build over the NLRB’s re-examination of
the standard, a House Education and the Workforce Subcommittee held a hearing on the
Board’s action—a move that Subcommittee Chair Phil Roe (R-Tenn) called a “radical
effort [that] is detached from reality.” Later that same month, Republican lawmakers
asked Griffin to produce documents and other information regarding what they called
“his effort to rewrite the joint-employer standard under the National Labor Relations
Act.” Kline and Roe sent a letter at that time to Griffin that purported to seek insight into
his reasoning for considering a broader standard for determining joint-employer status
under the NLRB.
In this latest effort, the Republican lawmakers cite a statement Griffin made about the
joint-employer standard at an October 2014 labor conference: “‘in that area we have a
problem, legally, for our theory’ to hold franchisors as joint employers.” Griffin
nonetheless issued complaints against a franchisor as a joint employer on December 19:
This earlier admission, according to the lawmakers, doesn’t square up with his action a
couple of months later.
The lawmakers are referring to the stack of complaints issued against McDonald’s USA,
LLC, as a “putative joint employer” with several franchisees. According to the
complaints, McDonald’s and the franchisees violated employees’ rights by, among other
things, making statements and taking actions against them for engaging in activities
aimed at improving their wages and working conditions—including their participation in
nationwide fast food worker protests during the past two years. An updated NLRB fact
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sheet tracks the charges that have been filed against McDonalds and various franchisees.
Thirteen complaints were initially filed in December 2014, with six more filed in
February 2015.
To better understand Griffin’s comments and whether he is appropriately pursuing joint
employer cases, the lawmakers have asked the General Counsel to answer some inquiries
and provide certain information by March 19: Whether any developments occurred in the
law between his comments at the labor conference and the filing of the complaints in
December that named a franchisor as a joint employer; if not, an explanation for his labor
conference comments; all documents and communications between the Office of General
Counsel and the Board referring or relating to the joint-employer standard from
November 4, 2013, to present; and all documents and communications between the
Office of General Counsel and any other federal agency about the joint-employer
standard from November 4, 2013, to present.
Number of federal labor lawsuits rise while employment suits decline
By Pamela Wolf, J.D.
Statistics released by the Administrative Office of the U.S. Courts show that on the
whole, the number of cases commenced in federal district courts under the federal labor
laws has increased, with FLSA and FMLA claims markedly up from fiscal year 2013. On
the other hand, the number of employment discrimination cases filed under federal civil
rights laws declined in FY 2014.
Labor suits. The number of suits commenced in district courts in FY 2014 (which ended
September 30) asserting federal labor law violations increased 3.5 percent over FY 2013
(18,673 vs. 18,043), according to statistics tracking the nature of suits filed. Other
statistics show that the United States filed 414 labor suits in FY 2014, while 18,259
private labor suits were commenced. The greatest number of suits brought by the
government were filed in district courts located in the Second Circuit (113), which
encompasses Connecticut, New York, and Vermont. The greatest concentration of private
suits were brought in the Eleventh Circuit (3,256), which includes Alabama, Florida, and
Georgia. And, the Middle and Southern Districts of Florida logged the greatest number of
labor suits in that circuit (1,032 and 1,433, respectively).

Notably, the number of FMLA suits commenced in FY 2014 soared 26.3 percent
over last year (1,108 vs. 877). In FY 2012, only 277 FMLA suits were
commenced. Since the federal courts only started tracking FMLA cases in
October 2011, statistic prior to FY 2012 are not available.

FLSA litigation climbed a substantial 8.8 percent in FY 2014 as compared to FY
2013 (8,160 vs. 7,500), returning to the FY 2012 level (8,152).

On the other hand, the number of ERISA suits commenced in FY 2014 declined
5.4 percent from the number of such suits filed in FY 2013 (7,191 vs. 7,599). The
statistics show a steady, marked decline from the number of ERISA suits filed in
FY 2010 (9,216).
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
The number of suits asserting LMRA violations also declined by 8.0 percent in
FY 2014, from 883 to 812. The number of such suits has been declining since FY
2011, when 1,173 such suits were commenced.
Employment cases. The number of employment civil rights suits filed in FY 2014
declined a notable 10.4 percent from FY 2013 (11,937 vs. 13,322). Statistics are not
provided based on the particular federal civil rights law allegedly violated, other than for
the ADA. Employment suits filed under the ADA dropped 2.6 percent from the prior
fiscal year (1,894 vs.1,944), a continuing decline from the number of such cases filed in
2012 (1,958).
Union could refuse untimely request to revoke dues checkoff despite new right-towork law, Division of Advice says
By Lisa Milam-Perez, J.D.
The Teamsters union did not violate NLRA Section 8(b)(1)(A) when it refused to honor a
member’s request to revoke her dues checkoff authorization, made outside the applicable
revocation window but after enactment of Michigan’s right-to-work law, according to a
February 19 Advice Memorandum released by the General Counsel’s Office Division of
Advice on March 6. The member’s request came outside her window for revoking dues
checkoff. And, because she had chosen to become a union member when she executed
her dues checkoff authorization, Michigan’s new right-to-work law eliminating any
mandatory union security obligations had no effect on her.
CBA. The union had a bargaining agreement in place with Pioneer Resources, which
provides transportation for individuals with disabilities. Their 2011-2014 CBA had a
union-security clause requiring employees to become union members or, at minimum,
“financial core” members as a condition of employment. The contract also contained a
mandatory dues checkoff provision.
New employee willingly signed on. Under the terms of Michigan’s right-to-work law,
which took effect on March 28, 2013, a union-security clause continued to be enforceable
until the contract expired; such a provision became inoperative and unenforceable if
entered into after the date of the law’s enactment. That meant the union-security clause
here remained in effect through March 31, 2014. Thus, when the employer hired the
charging party here in September 2013, the clause remained operative. At that time, the
new employee willingly signed her union membership application, which clearly stated
that she had the right not to join. She also signed the dues checkoff authorization, which
also expressly stated that it was entered into voluntarily and “not conditioned on my
present or future membership in the Union.”
By its terms, the checkoff authorization was irrevocable either for one year or the term of
the CBA, “whichever is the lesser,” and was subject to automatic renewal unless written
notice was given to the union by certified mail “at least sixty days and not more than
seventy-five days before any periodic renewal date.” As such, her revocation window
period to revoke at contract expiration ran from January 15 through January 30, 2014; her
window period for her checkoff anniversary date ran from July 3 through July 18, 2014.
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Revocation bid denied. With the new, post-right-to-work CBA that took effect April 1,
2014, employees no longer had union security obligations; thus, the charging party wrote
the union seeking to resign her membership and to revoke her dues checkoff
authorization. The union accepted her resignation but would not let her revoke her dues
checkoff since it was outside the revocation window. Her second attempt was similarly
rebuffed.
No NLRB violation. Because the charging party had elected to become a union member
when she executed her dues checkoff authorization, she was still obligated to abide by the
terms of that authorization regardless of the new right-to-work law eliminating any
union-security obligations, the Division of Advice stated, citing NLRA Section 302(c)(4).
While the Board has recognized “certain limited circumstances” in which a union
member must honor an untimely revocation of a dues checkoff authorization, none of
those circumstances were present here. The employee in this case voluntarily chose to
join the union when she completed her dues checkoff authorization, having been duly
informed of her right not to join. Further, the dues checkoff card that she signed “created
an obligation apart from membership.” She didn’t execute that authorization solely
because there was a union-security clause in place; she chose to become a union member
regardless of the union-security clause. Consequently, “it makes no difference that the
new right-to-work law eliminated the union-security obligation.” The new Michigan law
didn’t allow the union member to revoke her dues checkoff authorization outside her
revocation window. Therefore, the union didn’t violate the Act by refusing to allow her to
do so.
Bottom line. The employee will have to wait for the next revocation window period to
properly revoke her checkoff authorization, the Division of Advice said. And the region
was directed to dismiss the charge against the union, absent withdrawal.
USW-Shell Oil dispute spawns tentative deal as pattern agreement
The United Steelworkers (USW) has reached a tentative deal on a new four-year contract
with Shell Oil as a pattern agreement for the rest of the industry. Among other things, the
proposed agreement resolves safety concerns and calls for yearly wage increases, as well
as maintaining the current health care plan cost-sharing ratio. The proposal accomplishes
the major goals laid out by the USW’s oil conference last year and has been approved by
the union’s lead negotiators and National Oil Bargaining Policy Committee, according to
a union announcement on Thursday, March 12.
Safety issues were central to the negotiations, the union said. The proposed agreement
calls for the immediate review of staffing and workload assessments, with USW safety
personnel involved at every facility. Daily maintenance and repair work in the plants was
also a critical issue addressed in the tentative deal.
“The new agreement calls for joint review on the local level of future, craft worker
staffing- needs,” said USW International Vice President Tom Conway. “Included are
hiring plans to be developed in conjunction with recruitment and training programs.”
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“Preserving ‘retrogression’ clauses in our agreements was also an objective established
by our policy conference and we accomplished that, too,” remarked USW International
Vice President Gary Beevers, who oversees the union’s oil sector. “There was no way we
could turn our backs to the accomplishments of prior contract negotiations.”
The next step in the bargaining process is for the company to put the terms of the
settlement agreement on all of the Shell and Motiva bargaining tables, according to the
USW, which expects that other employers will offer the same terms at their local
bargaining tables. The local unions will then review the employers’ proposals with Vice
President Beevers. Approved settlement agreements are then submitted to the local
membership for explanation and ratification votes.
GC Memo digs even deeper into employee handbook rules
Noting that the law does not allow even well-intentioned rules that would inhibit
employees from engaging in activities protected by the NLRA, Richard F. Griffin, Jr.,
NLRB General Counsel issued a new memorandum March 18 (Memorandum GC 15-04)
detailing the Board’s evolving views on lawful and unlawful employee handbook rules.
Although the memo will not answer every issue employers confront, it does shed further
light on the Board’s interpretation of whether employees would reasonably construe
employer rules to prohibit Section 7 activity.
The report is divided in two parts. The first addresses specific types of employee
handbook provisions, including:

Confidentiality

Conduct towards the company and supervisors

Conduct towards fellow employees

Employee interaction with third parties

Restricting use of company logos, copyrights, and trademarks

Restricting photography and recording

Restricting employees from leaving work

Employer conflict-of-interest rules
Multiple examples of rules found unlawful by the Board and those found lawful, with
explanations as to the Board’s reasoning, are included.
The second part of the report traces an informal, bilateral Board settlement agreement
with Wendy’s International, LLC, in which the Board originally charged that many of the
company’s handbook rules were unlawfully overbroad. The report explains the rules
found overbroad and the Board’s reasoning, followed by the agreed-upon replacement
rules.
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Republican lawmakers reintroduce bill to end NLRB-created ‘micro unions’
By Pamela Wolf, J.D.
Republican Senators have renewed efforts to blunt actions taken by the National Labor
Relations Board, this time by reintroducing legislation aimed to counter the Board’s
NLRB’s Specialty Healthcare decision, which split from prior precedent to permit unions
to form smaller bargaining units—so-called micro-units or “micro-unions.” On Thursday,
March 19, Sen. Johnny Isakson (R-Ga.), Chair of the Subcommittee on Employment and
Workplace Safety, reintroduced the Representation Fairness Restoration Act (S. 801).
The measure, first introduced by Isakson in 2011, would prohibit unions from forming
“micro unions,” individual bargaining units within the same company that may have as
few as two or three workers.
In Specialty Healthcare, the Board held that in certain instances in which the inclusion of
additional employees to a proposed unit is disputed, the employees should not be added
to the unit without a showing of an overwhelming community of interest with the
proposed unit. In the wake of that decision, the NLRB now permits unions to target small
numbers of employees within a company in hopes of “micro unions” that “fragment the
workplace and make it nearly impossible for employers to manage,” according to Isakson
and others who oppose the ruling.
New bargaining unit standard. The proposed legislation seeks to reinstate the 77-yearold standard for determining which groups of employees should constitute an appropriate
bargaining unit, Isakson explained. The reintroduced 2015 bill is not yet available, but
the June 2013 version, introduced in the 2013-2014 Congress (the latest available at the
time of press), sets out an eight-part test for determining the appropriate unit for
collective bargaining purposes, which must consist of “employees that share a sufficient
community of interest.” To determine whether employees share a sufficient community
of interest, the Board would be required to consider:

similarity of wages, benefits, and working conditions;

similarity of skills and training;

centrality of management and common supervision;

extent of interchange and frequency of contact between employees;

integration of the work flow and interrelationship of the production process;

the consistency of the unit with the employer’s organizational structure;

similarity of job functions and work; and

the bargaining history in the particular unit and the industry.
The proposal further provides that “to avoid the proliferation or fragmentation of
bargaining units,” employees would not be excluded from the unit “unless the interests of
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the group seeking a separate unit are sufficiently distinct from those of other employees
to warrant the establishment of a separate unit.” Whether additional employees should be
included in a proposed unit would be determined “based on whether such additional
employees and proposed unit members share a sufficient community of interest.”
There is an exception for “proposed accretions to an existing unit.” In those cases the
inclusion of additional employees would be “based on whether such additional
employees and existing unit members share an overwhelming community of interest and
the additional employees have little or no separate identity’’ (emphasis added).
What’s wrong the current standard? The Senator pointed to an example of how the
current standard can lead to problems, in his view: In a single grocery store, “cashiers
could form one ‘micro union,’ the baggers could form another, the produce stockers
could form yet another, and so on,” he said. “Since the labor board’s 2011 decision,
micro unions have begun to form in multiple retail stores and manufacturing sites across
the country, making it nearly impossible for employers to manage such fragmentation of
the workforce.”
“When the National Labor Relations Board decided to allow micro unions, they tipped
the scales dramatically in favor of unions and neglected 77 years’ worth of precedent in
collective bargaining,” said Isakson, chairman of the Senate subcommittee that oversees
labor issues. “The Representation Fairness Restoration Act reinstates the traditional
standard for determining appropriate bargaining units. By allowing employers and
managers to focus on consistency and fairness in a workplace instead of trying to
negotiate separately with each faction of their workforce, they are better able to meet the
needs of both customers and workers alike. I have introduced this legislation every year
since this rule was made and will continue to fight this administration’s unfair and
partisan decision-making.”
The reintroduced Representation Fairness Restoration Act is supported by 13 original cosponsors in the Senate, including Sens. Lamar Alexander (R-Tenn.), Kelly Ayotte (RN.H.), John Boozman (R-Ark.), Dan Coats (R-Ind.), Bob Corker (R-Tenn.), John Cornyn
(R-Texas), Orrin Hatch (R-Utah), Mitch McConnell (R-Ky.), David Perdue (R-Ga.), Pat
Roberts (R-Kan.), Jeff Sessions (R-Ala.), Tim Scott (R-S.C.), and John Thune (R-S.D).
IFA will appeal to stop Seattle from enforcing minimum wage law against
franchisees
By Linda O’Brien, J.D., LL.M.
International Franchise Association (IFA), the world’s largest organization representing
franchise owners, will appeal a recent federal court decision that allows the City of
Seattle to enforce its 2014 minimum wage law against small franchised businesses, the
association announced on March 20.
In 2014, the City of Seattle increased the minimum hourly wage from $9.47 to $15. The
increase goes into effect April 1, 2015, with a faster phase-in over three years applicable
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to large businesses — defined as those with 500 or more employees nationwide — and a
slower phase-in over seven years applicable to small businesses.
Seattle’s franchisees— who own 1,700 franchise locations and employ 19,000 workers
—were considered large businesses based on their franchise networks collectively having
more than 500 employees nationwide. Thus, they were held subject to the faster, threeyear phase-in schedule.
IFA filed suit against the City, arguing that the categorization of franchisees as large
businesses was discriminatory and seeking to enjoin application of the discriminatory
provisions against small franchised businesses (International Franchise Association, Inc.
v. City of Seattle, Dkt. No. C14-848-RAJ).
On March 18, the federal district court in Seattle denied IFA’s motion for preliminary
injunction, finding that it was unlikely that the IFA would prevail on the merits of its
claims against the City. The IFA and five Seattle franchisees gave notice that they will
appeal the decision to the United States Court of Appeals for the Ninth Circuit.
“Franchisees deserve fairness under the law and we will continue to aggressively
advocate on their behalf in federal circuit court,” IFA President & CEO Steve Caldeira
said. “We are not seeking to prevent Seattle’s minimum wage increase from going into
effect. Our appeal will be focused on the blatant discriminatory mistreatment of
franchisees under Seattle’s new law and the City’s improper motivation to discriminate
against interstate commerce.”
“Franchisees compete for the same customers as non-franchised businesses in Seattle,
and they face the same challenges other small businesses face and this regulation puts
them at a severe economic disadvantage,” Caldeira stated. “Therefore, we believe they
should be properly categorized as such. Put simply, a small local franchise owner with 10
employees is the same as the small non-franchise business owner.”
NLRB Chairman, General Counsel grilled at budget hearing, joint-employer
proposal explained
By Pamela Wolf, J.D.
At a budget hearing on Tuesday, March 24, NLRB Chairman Mark Pearce and General
Counsel Richard F. Griffin Jr. were grilled about some of the Board’s recent actions in
addition to the more usual budget issues. “I look forward to discussing NLRB’s fiscal
year 2016 budget and some recent Board decisions and regulations that I find particularly
troubling,” said Rep. Tom Cole (R-Okla.), Chair of the Labor, Health and Human
Services, Education, and Related Agencies Subcommittee of the House Committee on
Appropriations.
In his opening remarks to the hearing, Cole pointed to the particular decisions and
regulations that have drawn his concern:

The Board’s attempt to assert jurisdiction over Indian tribes;
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
The NLRB regulation on case-representation procedures;

The Specialty Healthcare decision, which changed what constitutes a bargaining
unit, permitting so-called micro-units or “micro unions”; and

The Board’s reconsideration of the joint-employer standard.
In prepared testimony, Pearce observed: “Regardless of political tides, this Agency’s job
under 13 Presidents has been to serve as the independent enforcer of one this Nation’s
most fundamental labor laws.”
The NLRB in FY 2014. Among other things, Pearce noted that the NLRB issued 248
decisions in contested cases in FY 2014. The Board decided 205 unfair labor practice
cases and 43 representation cases. During the first quarter of FY 2015, the Board has
issued decisions in 119 cases. If the Board continues on this course, it will have one of its
most productive years on record, according to Pearce.
In the wake of the Supreme Court’s Noel Canning ruling, 103 cases were returned to the
Board for decision, Pearce said. The Board has issued new decisions in 73 of those cases;
27 cases remain pending and four have been otherwise resolved.
According to Pearce, the agency has also instituted, among other efficiency efforts, an
“enhanced alternative dispute resolution process,” which is led by the Office of the
Executive Secretary. The initiative will help to minimize unnecessary and protracted
litigation, which Pearce expects to help improve efficient case processing.Griffin also
pointed out that NLRB’s case intake was exceeded 23,000 cases. Of those, 20,415 were
unfair labor practice cases, 72.3 percent of which were resolved within 120 days of filing,
and the rest were representation cases.
After investigation by the Regions, 64.7 percent of the unfair labor practice charges filed
were found without merit, according to Griffin. For those found meritorious, 93.4 percent
were settled without litigation. The agency won in whole or in part 85 percent of its
litigated unfair labor practice and compliance cases before the NLRB or an
Administrative Law Judge. In the Court of Appeals, 84.6 percent of the agency’s cases
were enforced or affirmed, in whole or in part.
In FY 2014, the NLRB recovered over $44 million, predominantly in back pay on behalf
of employees, and secured offers of reinstatement for more than 3,000 workers, Griffin
noted.
Last fiscal year, the NLRB authorized pursuit of Section 10(j) injunctive relief in 38
cases. All such cases that were litigated in district court were won, in whole or in part,
Griffin said.
Joint-employer standard. Among the several topics addressed during the hearing was
the Board’s reconsideration of the joint-employer standard. The move was announced in
an invitation for amici briefs in Browning-Ferris Industries on the issue of whether the
current joint-employer standard should be changed.
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Griffin explained that from the beginning of the NLRA in 1935 to 1984, the so-called
“traditional” joint-employer standard was applied by the Board. However, in 1984, the
standard was changed to require that from among the factors provided in the “traditional”
test, certain minimum factors must be met—creating the current standard.
Summarizing the current joint-employer test, Griffin explained that essentially, the
putative employer must “have involvement in determining directly substantial terms and
conditions of employment.” He noted that the prior or “traditional” standard permitted
not just direct but also indirect involvement.
Griffin clarified that the agency is not seeking to overturn earlier cases holding that if the
involvement of a franchisor with the franchisee is merely for the purpose of maintaining
uniformity of product or branding, there is not a joint-employer relationship. As a result,
if the standard that Griffin and his colleagues are advocating is enacted, many, many
franchise relationships will remain unaffected.
Under the proposed standard, if the involvement of the franchisor with the franchisee
goes beyond maintaining the independence and quality of the brand or product, however,
the franchisor could be a joint employer with the franchisee.
Griffin also underscored a point that he claimed to have made to many members of
Congress: The NLRB does not at this time have any cases open in the United States
under which the agency relies solely on the standard advocated in Browning Ferris. In
every case, including the McDonald’s cases, the agency is relying on the current standard
and asserting, alternatively, the proposed standard.
Right-work-battle full-steam ahead in Illinois
By Pamela Wolf, J.D.
Illinois has emerged as a major battlefield in the war against unions as the state’s
governor and attorney general spar over so-called “right-to-work” or “fair-share fee”
(depending on your take) measures. Unions, of course are also fully engaged, and right
now, there is no end in sight.
Rauner moves against public unions. On February 9, Illinois’ newly elected Governor
Bruce Rauner launched what appears to be a direct, preemptory attack on public unions.
In a move that has drawn considerable controversy and stirred the ire of Illinois Attorney
General Lisa Madigan, Rauner issued an executive (EO) order instructing the Illinois
Department of Central Management Services (CMS) and all state agencies to stop
enforcing so called “fair share” union contract provisions. Instead, EO 15-13 mandates
that all fair-share deductions be placed into an escrow account for the duration of any
public employee CBA requiring such deductions so that when a court declares fair-share
agreements unconstitutional, the deducted amounts can be returned to the workers.
The provisions targeted by the governor generally require all employees, as a condition of
continued employment, to either join the union or pay a fair share service fee, usually the
same amount as union dues. The governor’s order was effective immediately.
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At the same time, Rauner filed a complaint for declaratory judgment in federal court,
obviously seeing that judicial forum as his most friendly in the wake of a Supreme Court
decision (Harris v Quinn) that questioned the underpinnings of Abood v. Detroit Board of
Education, which held that state employees may be compelled to pay such agency fees to
public-sector unions. In Rauner v. American Federation of State, County and Municipal
Employees Council 31, Rauner wants a federal judge to declare that fair share agreements
violate the First Amendment of the U.S. Constitution and that EO 15-13 is within the
allotted powers of the governor under the Illinois Constitution.
Madigan jumps in. In March, Madigan moved unopposed to intervene in the governor’s
case because it challenges the validity of the Illinois Public Labor Relations Act. As such,
it’s her job to intervene and “provide the court with arguments regarding the law’s
constitutionality.”
She also filed a motion to dismiss or stay Rauner’s declaratory judgment action asserting
that the federal court lacks subject matter jurisdiction in the case under the under the
“well-pleaded complaint” rule because Rauner’s complaint fails to allege a valid federal
law claim. Rather, the complaint seeks “to raise the First Amendment as a preemptive
federal-law defense to anticipated state-law claims contesting his Executive Order.”
Madigan also asserted in her motion and memorandum in support that the federal court
lacks Article III jurisdiction because Rauner is without standing to assert a First
Amendment claim on behalf of other persons—in this case, non-members of unions who
pay fair-share fees and are not before the federal court.
The state’s top lawyer also called the federal case a “forum-shopping tactic in
anticipation of state court litigation concerning the same basic dispute.” She also pointed
out that the governor’s complaint asks the federal court to “rule on unique state-law
issues,” asserting that adjudication of those issues in federal court while the same
controversy is also pending in state court “would result in needless friction between the
two judicial systems.” Moreover, CMS’s entry into the CBAs, according to Madigan,
“may constitute a waiver of any claim that they are unconstitutional,” and under
principles of constitutional avoidance, a waiver finding could prevent the federal court
from ever addressing the First Amendment issue that Rauner wants the court to decide.
Governor doubles down. Not to be deterred, Rauner has sought to overcome the
defendants’ and Madigan’s similar objections to the original complaint by filing an
amended complaint that includes three non-union employees who are each represented
exclusively by one of the unions named in the lawsuit. These workers are being “forced
to pay compulsory union fees as a condition of their employment pursuant to the Illinois
Public Labor Relations Act,” according to the expanded complaint. Moreover, the
employees allege the “this collection of compulsory fees from them violates their rights
under the First Amendment to the United States Constitution.” They are also seeking
declaratory judgment against Illinois and the unions to that effect, as well as injunctive
relief barring the seizing of compulsory fees from them in the future; a declaratory
judgment that the governor’s executive order is constitutional; and damages from the
unions for compulsory fees that were wrongfully seized.
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Rauner has also asked the court to render moot the objections raised in the defendants’
motions to dismiss the original complaint by operation of law since an amended
complaint has been filed. Rauner also contends that the amended complaint addresses
many of the jurisdictional issued raised by the defendants.
Rauner proposes right-to-work zones. On another front, Rauner has aimed a second
punch at unions. He suggested the possibility of “right-to-work zones” established by
voter referendum in the state, which is Democratic enough that a statewide right-to-work
law would be a real uphill battle. Needless to say, this added fuel to the fire.
Chicago Mayor Rahm Emanuel weighed in with his clear opposition to the plan:
“Governor Rauner is continuing his race to the bottom by asking cities like Chicago to
pass ‘Right to Work’ zone resolutions. I will not support—and will oppose every step of
the way—any such resolution in Chicago because I believe it directly threatens our
strategic goal to strengthen Chicago’s middle class, not undermine it,” he said in a
statement.
“Competing against Mississippi and Alabama for low wages is not a strategy to build a
great city,” Emanuel added. “When companies look for a new home or a place to grow,
our competition is the other great cities of the world like New York, London, Beijing, and
Tokyo. By building a stronger local economy with good-paying jobs, Chicago will
continue to be among those great cities and every resident, from every neighborhood, will
benefit.”
Madigan declares RTW zones unlawful. Madigan also rendered an opinion on the
legality of “right-to-work zones” in response to inquiries from state lawmakers. She
concluded that the NLRA permits only state- or territory-wide right-to-work laws.
Therefore, smaller political subdivisions, such as counties, municipalities, and school
districts (regardless whether under home rule) are barred by federal law from enacting
ordinances or resolutions that restrict or limit union security agreements.
At the same time, Madigan issued a second opinion concluding that both home-rule and
non-home-rule units of government must comply with the Illinois Prevailing Wage Act.
The opinion was in response to inquiries from lawmakers as to whether political
subdivisions would be able to opt out of the PWA.
Unions fighting back. Meanwhile, as to be expected, the unions quickly took action
against Rauner when he issued the controversial executive order, filing a complaint for
declaratory judgment of their own in state court. In AFL-CIO v. Rauner, a coalition of
unions asserted that, among other things the governor’s actions ran afoul of the Illinois
Public Labor Relations Act and exceeded his constitutional authority.
The governor tried to remove that case to federal court, but after two federal judges
recused themselves, Judge Staci M. Yandle remanded the case to state court due to a lack
of federal court subject matter jurisdiction.
The court found that a federal question is not necessarily raised in the complaint because
a federal issue is not an essential issue in the unions’ state-law causes of action. That the
17
governor would raise the First Amendment of the U.S. Constitution in defense to the
complaint was not enough to give the federal court jurisdiction—the “well-pleaded
complaint” here raises only state-law questions.
Excess bound volumes of Decisions and Orders available to public
The NLRB announced that because it is moving its headquarters to a smaller location this
summer, it will not be taking all of its bound volumes of NLRB orders and decisions. The
agency plans to retain only a limited number of complete sets of Board Decisions and
Orders, which have been published in bound volumes since the enactment of the National
Labor Relations Act.
Chief Information Officer Bryan Burnett gave public notice on March 26 that, pursuant to
Subchapter B of the Federal Management Regulation, he has determined that all bound
volumes of the Board Decisions and Orders other than those expected to be retained and
moved to the new Headquarters building are excess personal property. In addition, the
estimated cost of continued care and handling of these books will exceed the estimated
proceeds from their potential sale.
Claims for abandoned books. These books, Burnett said, will be abandoned on April 2,
2015. The abandoned books can be claimed on a first-come, first-served basis by anyone,
including members of the public and agency employees, by sending an email to
boardvolumes@nlrb.gov (link sends e-mail) beginning at 7AM (EDT) on Thursday,
April 2. The agency will contact successful claimants by email to schedule an agreedupon time to pick up the books. Anyone who claims books will bear all responsibility for
and expenses of removing and transporting the books.
Bids for books. Bids to purchase full or partial sets of the Decisions and Orders can also
be made by sending an email to boardvolumes@nlrb.gov (link sends e-mail). Burnett
advised that regardless of the number of books bid for, the minimum bid is $47.00—the
cost to the NLRB of processing a sale. Volumes for which a valid bid was submitted
before April 2, will be removed from the list of abandoned books available to be claimed.
All proceeds beyond the costs directly related to the sale will go to the U.S. Treasury,
Burnett said.
NLRB hearings against McDonald’s put updated joint-employer concept to the test
By Pamela Wolf, J.D.
The National Labor Relations Board today began a series of consolidated hearings on
cases that charge McDonald’s USA, LLC, as a joint employer along with multiple
franchisees that are accused of violating workers’ rights by, among other things, making
statements and taking actions against them for engaging in activities aimed at improving
their wages and working conditions—including their participation in nationwide fastfood worker protests during the past two years. The hearings will put the Board’s concept
of an updated joint-employer standard to the test.
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An NLRB fact sheet tracks the charges that have been filed against McDonald’s and
various franchisees. Thirteen complaints were initially filed in December 2014, with six
more filed in February 2015. The McDonald’s cases are front and center in the battle over
whether the NLRB’s joint employer standard should be adjusted to reflect current
business models.
The controversy took center stage in the world of labor when the Board in May 2014
announced its reconsideration of the long-held current standard by soliciting briefs
addressing the standard as raised in Browning-Ferris Industries (No 32-RC-109684). The
question of whether a franchisor can in some cases be considered a joint employer with a
franchisee has become a hot-button issue among stakeholders in the labor law community
ever since.
McDonald’s has denied any joint employer relationship with its franchisees, stating that
the global fast-food giant “serves its 3,000 independent franchisees’ interests by
protecting and promoting the McDonald’s brand and by providing access to resources
related to food quality, customer service, and restaurant management, among other
things, that help them run successful businesses.” This relationship, according to
McDonald’s, does not establish a joint employer relationship under labor law. “This
decision to allow unfair labor practice complaints to allege that McDonald’s is a joint
employer with its franchisees is wrong,” Heather Smedstad, Senior Vice President
Human Resources, McDonald’s USA, said in a statement. She also made it clear that the
corporation intends to contest the allegation.
What’s at stake? The franchise model is one of those current business models that may
necessitate an updated joint-employer test in the view of some stakeholders, but certainly
not those who support the franchise community.
“The lawsuits against McDonald’s are aimed at using government to upend successful
business franchise arrangements that work for so many entrepreneurs and employees,”
according to Competitive Enterprise Institute senior fellow Aloysius Hogan. “It’s not just
McDonald’s on trial—if the lawsuits succeed, workers and consumers will be negatively
impacted, as well. This attempt to designate businesses as joint employers
could transform virtually everyone into an employee of a big conglomerate that, in turn,
faces huge liabilities and expenses and is more easily unionized. The salaries, jobs, and
purchasing power of real people are put at risk by these lawsuits brought by Big Labor.”
But Marquette University Law School professor Paul Secunda sees it differently. “It is
good to see the NLRB finally start the process of synchronizing the common law
definition of ‘employer’ under the National Labor Relations Act (NLRA) with the
definition utilized in other employment statutes, like the FLSA, FMLA, Title VII, and
OSHA,” he told Employment Law Daily. “The Board has a responsibility to engage in
adjudications of industrial disputes in a manner that recognizes the evolving nature of the
21st century workplace. Nowhere is this fact more true than in the fast food and temp
services industries that employ millions of workers in the United States today. Employees
should have the ability to bring all employers who exercise meaningful control over their
workplace to the bargaining table to discuss terms and conditions of employment. This is
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not Board activism, but a common sense approach consistent with the purposes of the
NLRA.”
Hearing schedule. To conserve public and private resources and avoid unnecessary
delay, the NLRB is holding consolidated hearings in three Regional locations in the
Northeast, Midwest, and West to address violations that require remedial relief as soon as
possible. The hearings will take up allegations of unlawful actions committed against
employees at McDonald’s restaurants in the jurisdiction of six Regional Offices.
The hearing begins in Region 2 (Manhattan) to address allegations in the complaints of
Region 2 and Region 4, and then will move to Region 13 (Chicago) to address allegations
in the complaints of Region 13 and Region 25. The hearing will conclude in Region 31
(Los Angeles) to address allegations in the complaints of Region 20 and 31. The Board
expects that hearings involving the allegations in the complaints issued by the other seven
Regional offices will be scheduled after the initial litigation before an Administrative
Law Judge, if those allegations cannot be resolved through settlement.
Democratic lawmakers push for implementation of ‘Fair Pay and Safe Workplaces’
EO
By Pamela Wolf, J.D.
Democratic lawmakers (along with one Independent), have sent a letter to Labor
Secretary Thomas Perez, urging him to implement the Fair Pay and Safe Workplaces
Executive Order announced by President Obama last summer. Signed on July 31, 2014,
the day after House Republicans voted to sue him for taking such actions, Executive
Order 13676 requires federal agencies to consider an employer’s record of providing
workers with a safe workplace and paying workers the money they have earned before
granting and renewing federal contracts. The EO has been characterized as both creating
a “bureaucratic nightmare” and a “straightforward process” by opposing parties.
Widespread violations. The EO was fueled by an investigation by the Senate Health,
Education, Labor, and Pensions (HELP) Committee investigation, which found
widespread labor violations by government contractors that went unnoticed in the
contracting process. The investigative report found that “in 2012 alone, taxpayers
provided more than $80 billion in contracts to companies that had committed significant
violations of our basic labor laws, which are designed to ensure workers are paid fairly
and are safe on the job,” the HELP Committee Chair Tom Harkin (D-Iowa) stressed in
a statement.
On Thursday, March 26, HELP Committee Ranking Member Patty Murray (D-WA) and
19 Senators dispatched a letter to Perez, stating, “Fair Pay and Safe Workplaces will
create a fair and consistent process to better ensure all federal contractors are responsible,
and help ensure taxpayers get the best quality for their money.” They urged Perez to
“issue guidance to agencies as soon as possible to help level the playing field for lawabiding businesses, hold contractors accountable for federal taxpayer dollars they receive,
and protect basic worker rights for the millions of Americans employed by federal
contractors.”
20
The lawmakers pointed to the HELP Committee investigation: “As you know, in 2013
the [HELP Committee] conducted an investigation that found almost 30 percent of the
companies that have received the most severe penalties for worker safety and wage law
violations in the past five years were still federal contractors. Overall, the investigation
found that the contracting companies assessed the highest penalties over the previous five
years were cited for 1,776 separate violations of safety and wage laws and paid $196
million in fines—yet were awarded $81 billion in taxpayer dollars in fiscal year 2012.
Overreach creating “bureaucratic nightmare?” In February 2015, the Republicancontrolled House Subcommittee on Workforce Protections and the Subcommittee on
Health, Employment, Labor, and Pensions jointly held a hearing to examine the effects of
the EO. The joint subcommittee majorities’ opposition to the president’s action was
apparent in the hearing’s title: The Blacklisting Executive Order: Rewriting Federal
Labor Policies Through Executive Fiat. After the hearing, the two committees issued
a release underscoring what they saw as the downside of the EO, pointing to witness and
member discussions that centered on “how the administration’s executive overreach is
not only redundant, but how it will create a bureaucratic nightmare that impedes the
operation of the federal government and results in less efficient services for taxpayers.”
“Straightforward process?” But according to the Democratic lawmakers who wrote to
Perez, the EO creates a “straightforward process.” “Companies that have not violated
federal labor laws will simply be required to check a box to certify legal compliance. And
by allowing companies to improve worker health and safety records without facing the
loss of all contracts, the Executive Order will incentivize improvement in worker
practices while helping to level the playing field for companies with sound policies
already in place.”
The letter was signed by Senators Edward Markey (D-Mass.), Sherrod Brown (D-Ohio),
Bob Casey (D-Pa.), Al Franken (D-Minn.), Richard Blumenthal (D-Conn.), Dick Durbin
(D-Ill), Tammy Baldwin (D-Wis.), Ben Cardin (D-Md.), Jeff Merkley (D-Or.), Jeanne
Shaheen (D-N.H.), Bernie Sanders (I-Vt.), Kirsten Gillibrand (D-N.Y.), Gary Peters (DMich.), Barbara Boxer (D-Calif.), Chuck Schumer (D-N.Y.), Barbara Mikulski (D-Md.),
Chris Coons (D-Del.), Brian Schatz (D-Haw.), and Elizabeth Warren (D-Mass.).
LEADING CASE NEWS:
2d Cir.: Web host not liable for union’s defamatory posts against union member
By Lisa Milam-Perez, J.D.
A web host that published a union local’s false statements about a dissident Teamster was
shielded from liability under the Communications Decency Act of 1996 in a defamation
action against it, the Second Circuit held. Construing the statute’s immunity provisions
for the first time, the appeals court affirmed a district court judgment dismissing the
union member’s claims. “In short, a plaintiff defamed on the internet can sue the original
speaker, but typically ‘cannot sue the messenger,’” the appeals court noted. Here, the
plaintiff couldn’t sue the speaker either—as the claims against the union were time-
21
barred by the NLRA’s six-month statute of limitations (Ricci v. Teamsters Union Local
456, March 18, 2015, per curiam).
“Blackballed.” After a long-term Teamster member refused to endorse the union local’s
president at a union meeting in 2002, he was “blackballed” by the union for the next ten
years and suffered retaliation at the hands of the union leadership—fired from jobs he
should have kept, denied jobs he should have been given, and “generally disfavored,”
even as compared to members with less seniority. In 2012, the union distributed
newsletters that contained defamatory statements about him, as well as his wife and
daughter. The newsletters were also published on a (now defunct) website that was
hosted on web servers owned by GoDaddy.com. He left the union and brought a pro se
action against it and against GoDaddy.
He did not allege that GoDaddy played any role in creating the allegedly defamatory
newsletters; indeed, the complaint clearly asserts that the newsletters were drafted and
distributed by the union local, and that GoDaddy eventually revealed the identity of the
newsletters’ creators. The web host refused to remove the newsletter from its servers,
though, and “completely refused to investigate” his wife’s complaints about the content.
Thus, along with claims against the union for retaliation and breach of the implied duty of
fair representation, the plaintiff sued GoDaddy for defamation.
The district court dismissed all claims against GoDaddy, and all federal claims against
the Teamsters. (It declined to exercise supplemental jurisdiction over any remaining state
law claims.) The Second Circuit affirmed, concluding that GoDaddy was immune from
suit and that the claims against the union were time-barred.
Immunity from suit. Under the Communications Decency Act of 1996, “[n]o provider
or user of an interactive computer service shall be treated as the publisher or speaker of
any information provided by another information content provider,” the appeals court
noted. And service providers are expressly preempted from liability, so GoDaddy was
immune from defamation liability in its capacity as a provider of an “interactive
computer service.” Accordingly, the plaintiffs’ could not hold GoDaddy accountable as a
“publisher or speaker” of the allegedly defamatory statements that were authored by
“another information content provider” (in this case, the union).
While the Second Circuit had not yet construed the immunity provisions of the
Communications Decency Act, “other courts have applied the statute to a growing list of
internet-based service providers,” it noted. “Interactive computer service” is defined
expansively in the text of the statute to encompass “any information service, system, or
access software provider that provides or enables computer access by multiple users to a
computer server.” And the wording has been broadly construed in order to effectuate the
purposes of the Act, which is to protect robust speech in the face of tort-based lawsuits
arising from “the new and burgeoning Internet medium.” The statute represents a policy
choice by Congress that intermediaries ought not to be liable in tort for “injurious”
messages posted by others. Accordingly, even accepting as true the allegations in the
complaint, GoDaddy was immune from suit for defamation.
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Claims against union untimely. As for the federal labor law claims against the
Teamsters local, the final actionable event against the plaintiff at the hands of the union
ostensibly occurred when he left the union in December 2012; his suit, filed the following
July, was too late under the NLRA’s six-month statute of limitations. Accordingly, those
claims were properly dismissed as time-barred.
The case number is 14-1732.
Attorneys: Christopher A. Smith (Trivella & Forte) for Teamsters Union Local 456.
Aaron M. McKown (Ring Bender) for GoDaddy.com, LLC.
2d Cir.: New York Wage Parity Law not preempted or unconstitutional (for the
most part)
By Marjorie Johnson, J.D.
Delivering a significant blow to employers of home care workers in the New York City
metropolitan area, the Second Circuit upheld a district court’s determination that New
York’s Wage Parity Law (WPL) was neither preempted by the NLRA or ERISA (other
than one subdivision that was properly severed), nor was it unconstitutional under the
Due Process and Equal Protection Clauses of the Fourteenth Amendment. The law, which
set the minimum amount of “total compensation” that employers must pay home care
aides in order to receive Medicaid reimbursements for reimbursable care provided in
NYC and three surrounding counties, did not intrude upon the labor-management
bargaining process, nor did it “relate to” any employee benefit plan (Concerned Home
Care Providers, Inc. v. Cuomo, March 27, 2015, Livingston, D.).
Procedural history. The plaintiffs, five licensed home care services agencies and a notfor-profit trade association, sought to enjoin the Commissioner of the New York State
Department of Health from enforcing the WPL. Granting in part and denying in part the
defendant’s motion to dismiss, the district court concluded that the NLRA did not
preempt the WPL and that it did not violate the plaintiffs’ Fourteenth Amendment rights.
However, the lower court determined that subdivision four of the WPL—which excused
grandfathered CBAs that included Taft-Hartley plans from complying with certain
aspects of the law—ran afoul of ERISA’s express preemption provision because it
singled out only one type of ERISA plan for unique treatment. The court then decided
that the subdivision could be excised from the law.
The Wage Parity Law. The WPL, which is a section of the New York Public Health
Law, was enacted as part of a Medicaid reform package. It sets the minimum amount of
“total compensation” that employers must pay home care aides in order to receive
Medicaid reimbursements for reimbursable care provided in NYC and three surrounding
counties. The law was intended to address the inconsistency in wages among home care
workers and thereby improve the recruitment and retention of high-quality home care
aides.
Subdivision three of the law established two minimum rates: one for care furnished in
NYC and the other for care furnished in the surrounding counties. Each minimum rate
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increased gradually over the course of three or four years in relation to the NYC Living
Wage Law. The law also referenced SEIU Local 1199‘s CBA as of January 1, 2011 (the
date the WPL was enacted) to define the “prevailing rate of total compensation” but did
not reference any subsequent changes to that agreement. Additionally, subdivision four of
the WPL, in relevant part, provided that any portion of the “minimum rate of home care
aide total compensation” attributable to benefits or wage supplements would be
superseded in the case of an applicable Taft-Hartley plan by its relevant terms, and such
employers could accordingly compensate their home care aides at a rate below the
minimum prescribed in the WPL.
No NLRA preemption. The district court correctly decided that the WPL was not
preempted by the NLRA. At issue was the form of implied preemption under the NLRA
known as Machinists preemption, which forbids states from intruding upon the (federally
constructed) labor-management bargaining process. This preemption applies to the
process for determining terms and conditions of employment but did not extend to the
particular substantive terms of the bargain that is struck. Thus, states have traditionally
possessed broad authority to regulate the employment relationship and the substantive
labor standards that they enact set a baseline for employment negotiations. These
minimum state labor standards affect union and nonunion employees equally, and neither
encourage nor discourage the collective bargaining processes that are the subject of the
NLRA.
Minimum standards. The WPL was a valid exercise of New York’s authority to set
minimum labor standards, ruled the Second Circuit. States have traditionally sought to
remedy the problem of depressed wages by regulating payment rates and those efforts are
not incompatible with the general goals of the NLRA. The WPL, which stabilized
minimum wages for the hundreds of thousands of home care aides in NYC and the
surrounding counties, was an unexceptional exercise of that traditional power and was
not designed to encourage or discourage employees from collective bargaining. All
affected workers benefited from the WPL, regardless of union membership, and the law
did not treat employers differently based on whether they employed unionized workers.
Moreover, by applying only to Medicaid-reimbursed care, the WPL was limited to funds
over which Congress had granted the state a special measure of discretion.
Subdivision severable. The district court also properly severed subdivision four of the
WPL after determining that it was preempted by ERISA because it singled out TaftHartley plans for special treatment. Significantly, the state legislature’s intent was clear
that if any subdivision of the Act was adjudged invalid, the judgment should not
invalidate the remainder of the law. Moreover, without subdivision four, the WPL still
accomplished the legislative purpose of aligning home care aide compensation in the
NYC metropolitan area.
Not “related to” benefits. Moreover, with the problematic subdivision severed, ERISA
did not preempt the remainder of the WPL. Because ERISA contains an express
provision that preempts any state laws that relate to any employee benefit plan, the U.S.
Supreme Court has determined that a state law is preempted only if it “has a connection
with or reference to” an ERISA plan. To that end, the Second Circuit rejected the
24
plaintiffs’ assertion that the WPL had a “connection with” ERISA plans because
employers would have to reevaluate their benefits packages in order to pay employees the
“applicable minimum rate of home care aide total compensation.” Such an indirect effect
on ERISA plans did not trigger preemption.
Here, the WPL gave employers freedom to select the manner in which they paid the
minimum rate of home care aide total compensation. Under the law, “total compensation”
could consist of “wages and other direct compensation paid to or provided on behalf of
the employee,” including “health, education, or pension benefits, supplements in lieu of
benefits and compensated time off.” The statute was agnostic as to the mix of wages and
benefits, so long as the total amount equals or exceeds the applicable minimum rate.
Constitutionally sound. Finally, the district court properly concluded that the WPL did
not violate the plaintiffs’ Fourteenth Amendment rights. Social and economic legislation,
like the WPL, that does not employ suspect classifications or impinge on fundamental
rights must be upheld against equal protection attack when the legislative means are
“rationally related” to a legitimate governmental purpose. Here, the WPL set the
minimum rate of home care aide total compensation in both NYC and the surrounding
counties as a percentage of NYC’s Living Wage Law. This approach was consistent with
the legislature’s goal of providing “high quality home care services” and easily passed
muster under rational basis review.
The Second Circuit rejected the plaintiffs’ assertion that by relying on a rate set by a
legislative body outside the surrounding counties, the law infringed on the fundamental
right to representation in the legislative process and warranted strict judicial scrutiny.
However, the plaintiffs (corporations and a not-for-profit trade organization) had no right
to equal representation. Thus, the district court correctly refused to subject the WPL to
strict scrutiny.
Due process argument fails. The argument that the WPL violated the plaintiffs’ due
process rights by delegating authority to a private entity—namely, SEIU 1199—fared no
better. The plaintiffs claimed a property right in the future revenues generated by their
business. The WPL, however, applied only to the payment of state Medicaid funds. This
was significant since a Medicaid provider has no property interest in or contract right to
reimbursement at any specific rate or to continued participation in the Medicaid program
at all.
Moreover, the WPL did not delegate decisionmaking authority to SEIU 1199. Although
the statute defined the “prevailing rate of total compensation” in terms of the largest CBA
covering home care aides in NYC, the minimum rate is set only by the prevailing rate of
total compensation as of January 1, 2011. SEIU 1199 had no discretion to make post-hoc
alterations to that agreement, and its future collective bargaining efforts would have no
bearing on the minimum rate of home care aide total compensation. As a result, even if
the plaintiffs did have a property interest in future Medicaid reimbursements, their due
process challenge would fail.
The case number is 13-3790-cv.
25
Attorneys: Philip Evan Rosenberg (Nixon Peabody) for St. Mary's Healthcare System for
Children. Benjamin Fisher Neidl (Wilson, Elser, Moskowitz, Edelman & Dicker) for
Concerned Home Care Providers, Inc., American Chore Services, Inc., Community
Home Care Referral Service, Inc., Eagle Home Care, LLC, Pella Care, LLC, and
Platinum Home Health Care, Inc. Jeffrey Lang, New York State Office of the Attorney
General, for Andrew M. Cuomo and Nirav R. Shah.
4th Cir.: No breach of arbitration award by firing recently reinstated officers
By Lisa Milam-Perez, J.D.
An interstate agency did not breach an arbitration award ordering reinstatement of two
fired police officers after it fired them a second time because the state of Maryland
refused to recertify them as police officers post-reinstatement, the Fourth Circuit held,
reversing a district court’s order directing the agency to reinstate the officers once again.
While the agency’s police chief might have been overly eager about turning over
negative information about the reasons for the officers’ initial discharge, that didn’t
change the fact that the state of Maryland made an independent decision to terminate the
officers, unrelated to their earlier firings, and unconsidered by the arbitration board when
it issued the award (Fraternal Order of Police Metro Transit Police Labor Committee,
Inc. v. Washington Metropolitan Area Transit Authority, March 10, 2015, Motz, D.).
Terminations. The Washington Metropolitan Area Transit Authority (WMATA), an
interstate agency, operates the Metrorail and Metrobus systems in Washington, D.C.,
Maryland, and Virginia. WMATA has its own police force, the Metro Transit Police
Department (MTPD), whose officers are represented by the Fraternal Order of Police
(FOP). The parties’ CBA includes a just-cause discharge provision and a four-step
grievance procedure, culminating in arbitration.
When WMATA fired two police officers—one for allegedly striking a passenger with his
baton and lying about it during an investigation; the other for a physical altercation with a
female companion, and lying about it—the FOP grieved their terminations. An arbitration
board overturned both discharges, concluding the WMATA had legitimate grounds for
discipline but finding suspension was sufficient in lieu of termination. Thus, the board
ordered the officers’ reinstatement following their suspensions.
However, due to their initial terminations, the grievants lost their certification to serve as
police officers in Maryland, which requires by law that a police officer be certified in
order to exercise law enforcement powers. Officers who lose their certification must
apply for recertification from the Maryland Police Training Commission (MPTC) in
order to resume law enforcement activities for WMATA. Consequently, WMATA placed
the officers on administrative leave while they pursued recertification.
Meanwhile, the MTPD’s police chief wrote letters stating “in no uncertain terms” that the
MPATA was not in favor of recertifying the officers. He did so pursuant to another
provision of Maryland law, which requires the MTPD to notify the MPTC of “any
derogatory information discovered during the investigation” that led to the initial firings.
(Apparently it was the first time that the MTPD had ever affirmatively lobbied against
26
recertification following an arbitration award ordering reinstatement.) The MPTC
subsequently denied both officers’ applications for recertification. As a result, WMATA
discharged the officers once again.
The FOP grieved the second terminations; the grievances went through the first three
stages of the grievance procedure but the FOP did not request arbitration; instead, the
union filed the underlying action asserting that the WMATA violated the earlier
arbitration award. The lower court granted the FOP’s motion for summary judgment and
once again ordered reinstatement with back pay and benefits. The Fourth Circuit
reversed.
Compliance with arbitration award. The FOP had conceded that WMATA initially
complied with the arbitration awards; in dispute was whether the officers’ second
discharge after the state denied recertification amounted to noncompliance. Although it’s
the first time the Fourth Circuit has tackled the issue, the Third and Seventh Circuits have
decided cases with similar fact: where an employee has been terminated, ordered
reinstated by an arbitrator, and then terminated again for an independent reason. In each
of those cases, the appeals court held the employee cannot challenge the second
termination through an action seeking enforcement of the arbitration award.
Here, as in those cases, WMATA relied on independent reasons for discharge—grounds
that were never before the arbitrators when they terminated the officers a second time.
The MPTC’s denial of their request for recertification was a “new and independent basis”
for determining that the officers could no longer serve with the MTPD, the appeals court
noted, pointing out that “[f]iring a police officer for a disciplinary infraction is distinct
from firing an officer for failing to obtain recertification.” And there was nothing in the
record to suggest that the arbitration board had considered, or even knew it was possible,
that the MPTC would deny recertification. As such, the second discharges did not violate
the earlier arbitration awards.
It was true that WMATA actively sought to influence the MPTC’s decision by “strongly
discouraging” the officers’ recertification; indeed, the district court had noted that the
“strong, negative rhetoric” used by the police chief was a first for the agency, and was
strong evidence of WMATA’s intent not to comply with the arbitration award. Still, the
appeals court reasoned, “whatever WMATA’s intentions, nothing in the record permits a
holding that WMATA’s actions violated the terms of the arbitration awards.” The agency
was legally obligated to turn over “any derogatory information” about the discharges to
the MPTC, after all. The MTPD chief was “particularly zealous in carrying out that duty
in this instance—maybe to a fault,” the appeals court acknowledged. Still, the decision
whether to recertify the officers belonged to the MPTC alone. The decision was by no
means a rubber stamp, either; the relevant hearing transcripts reflect the use of
“independent and considered judgment” on the matter; two decision-makers in fact voted
in favor of the officers’ recertification. In the end, the appeals court would not conclude
that WMATA “exceeded the bounds of permissible behavior under the arbitration
awards.”
27
Follow the grievance procedure. Concluding there was no violation of the arbitration
agreement, the appeals court noted that the FOP, at best, was questioning whether the
second terminations were for just cause. But federal court wasn’t the proper forum for
that, the appeals court noted, agreeing with WMATA that the FOP needed to use the
contractual grievance procedure to challenge the second terminations. “Although we hold
that there were independent grounds for terminating the [o]fficers a second time, and thus
that the second terminations did not violate the arbitration awards, we do not decide
whether those grounds were adequate under the collective bargaining agreement,” the
appeals court said. “Nor could we; such a decision would be beyond our jurisdiction.”
The appeals court was careful to note that it didn’t necessarily sanction WMATA’s
behavior; it was “troubled by evidence that WMATA handled these cases in a markedly
different fashion from previous employment disputes.” Nonetheless, it wrote, “our view
of WMATA’s tactics does not alter our conclusion that we lack authority to decide
whether these actions by WMATA breached the collective bargaining agreement.”
The case number is 14-1332.
Attorneys: Gerard J. Stief, Washington Metropolitan Area Transit Authority, for
Washington Metropolitan Area Transit Authority. Jonathan G. Axelrod (Beins, Axelrod)
for Fraternal Order of Police Metro Transit Police Labor Committee, Inc.
9th Cir.: Employer failed to make reasonable efforts to end dispute, strike
injunction vacated
By Ronald Miller, J.D.
In an en banc decision, the Ninth Circuit reversed a district court’s grant of a preliminary
injunction under the Railway Labor Act against a strike by aircraft fuelers. Section 8 of
the Norris-LaGuardia Act strips district courts of jurisdiction to enter such an injunction
unless the party seeking relief has made “every reasonable effort to settle such dispute
either by negotiation or with the aid of any available governmental machinery of
mediation or voluntary arbitration.” Because the district court failed to consider whether
the employer satisfied this provision and the record lacks any evidence that it did so, the
lower court judgment was reversed. Judge Berzon, joined by judges Paez and Graber,
filed a separate concurring opinion. Judge Kleinfeld, joined by judges O’Scannlain,
Silverman, and Tallman, filed a separate dissenting opinion (Aircraft Service
International, Inc. v. International Brotherhood of Teamsters, AFL-CIO, Local 117,
March 10, 2015, Owens, J.).
“A group response.” In October 2012, Aircraft Service International (ASI) sought and
obtained a preliminary injunction from the district court prohibiting certain employees
from striking at Seattle-Tacoma International Airport. ASI provides aircraft services,
including refueling airplanes. On September 14, 2012, it suspended one of its employees,
allegedly for screaming obscenities at his supervisor. However, the employee and
coworkers countered that he was suspended in retaliation for his leadership on workplace
safety issues. (The employee had testified at a Seattle Port Commission hearing just two
days prior to his suspension.) After his suspension, coworkers decided to organize “a
28
group response” to advocate for his reinstatement. Following two weeks of failed efforts
toward that end, his coworkers decided to strike for up to eight hours on some future date.
After a community coalition announced the employees’ decision to strike at a press
conference, ASI immediately filed a complaint in the district court seeking to enjoin the
strike as unlawful under the RLA. The district court issued a TRO prohibiting the strike
and seeking to maintain the status quo pending the outcome of a hearing. After a full
hearing, the court concluded that preliminary injunctive relief was proper, applying the
factors in Winter v. Natural Resources Defense Counsel. The district court relied on both
the RLA’s stated purpose of avoiding interruptions to commerce and its prohibition on
“strike-first tactics” in concluding that the Act prohibited the defendants’ proposed strike.
With respect to the employee’s argument that the district court had “no authority to issue
an injunction because the NLGA forbids it from doing so,” the district court concluded
that the RLA trumped the NLGA, without analyzing or citing Sec. 8 of the NLGA.
Divestiture of court jurisdiction. The NLGA generally divests federal courts of
jurisdiction to “issue any restraining order or temporary or permanent injunction in a case
involving or growing out of a labor dispute, except in a strict conformity with the
provisions of [the NLGA].” Under Sec. 4, “in any case involving or growing out of any
labor dispute,” federal courts are prohibited from issuing an injunction to prohibit any
person from “[c]easing or refusing to perform any work”—that is striking. Under Sec. 8,
federal courts are prohibited from issuing injunctive relief to “any complainant who has
failed to comply with any obligation imposed by law which is involved in the labor
dispute in question, or who has failed to make every reasonable effort to settle such
dispute either by negotiation or with the aid of any available governmental machinery of
mediation or voluntary arbitration.”
Interplay between RLA and NLGA. The parties did not dispute that this case involved
a “labor dispute” for purposes of the NLGA. Accordingly, the district court lacked
jurisdiction to issue a preliminary injunction unless it could overcome the restrictions of
Sections 4 and 8. Although Section 4 of the NLGA is phrased in absolute language, the
Supreme Court consistently has held that the “competing demands of the RLA and the
Norris-LaGuardia Act” must be “accommodate[d].” In practice, this means that the RLA
has been read as creating an exception to the NLGA. However, the boundaries of this
exception are narrow. “[E]ven when a violation of a specific mandate of the RLA is
shown,” courts should “hesitate” to grant an injunction “unless that remedy alone can
effectively guard the plaintiff’s right.”
The district court concluded that the RLA applied to this dispute, and that this meant that
no provision of the NLGA could apply—thus allowing the district court to issue the
preliminary injunction without considering whether Section 8 of the NLGA was satisfied.
However, the vast majority of courts to consider this question have applied Section 8 to
disputes that the RLA governs. This approach to the relationship between the RLA and
Section 8 is consistent with the Supreme Court’s past efforts to “accommodate” the RLA
and Section 4 of the NLGA. Only in a case of “irreconcilable conflict between” the RLA
and the NLGA is it necessary to choose between the RLA and the NLGA.
29
However, Section 8 does not conflict with any provision of the RLA. Strict enforcement
of Section 8 does “not trammel, but . . . rather further[s] the effectuation of that Railway
Labor Act, for it ensures compliance by complainant carrier or union which cannot seek
an injunction until and unless it has discharged the obligations imposed by the Railway
Labor Act.” “The policy of the Railway Labor Act was to encourage use of the
nonjudicial processes of negotiation, mediation and arbitration for the adjustment of labor
disputes. The over-all policy of the Norris-LaGuardia Act was the same. . . . It is
dominant and explicit in Section 8.” Consequently, the Ninth Circuit reaffirmed that a
party seeking an injunction under the RLA is not relieved of its obligation to comply with
the provisions of Section 8 of the NLGA.
Application of Section 8. To comply with the requirements of Section 8, “certain
minimum steps” that are usually required: Unfair surprise should be avoided whenever
possible. The representatives of management should meet with those of labor. Each side
should listen to the contentions of the other side and each side should explain its position
clearly and honestly, but not for as long a time as is customary in full-scale bargaining.
The record in this case did not permit the Ninth Circuit to hold that ASI satisfied Section
8’s “reasonable effort” requirement.
The record revealed that ASI sought an injunction from the district court without first
attempting to settle the dispute. Even if the employees lacked an identified union
representative, that fact did not relieve the employer of its obligations under Section 8 to
make “every reasonable effort” to resolve the disagreement before seeking the injunction.
Because ASI’s failure to make any efforts to settle the dispute fell short of what Section 8
requires, the district court erred by entering the injunction.
Concurrence. Judge Berzon agreed with the majority that the district court erred in
granting an injunction because ASI had not complied with its duty under Section 8 of the
NLGA to make “every reasonable effort to settle its dispute” with the fuelers before
seeking an injunction prohibiting the planned work stoppage. But in his view, even if ASI
had complied with its duty under Section 8, it still would not have been entitled to an
injunction. Judge Berzon concluded that the fuelers “do not need to find a particular
provision in the RLA to justify [striking]. [Rather,] [t]he affected [carrier] must find a
specific mandate of the RLA that prohibits the [strike]” to be entitled to an injunction.
Dissent. In a separate dissenting opinion, Judge Kleinfeld argued that the district court
and the original panel got it right, and that the grant of the injunction should be affirmed.
The dissent argued that the district court had jurisdiction and properly exercised it by
enjoining the strike until the parties proceeded through the RLA’s dispute resolution
process. Kleinfeld observed that keeping a major American airport open is too important
to allow an evasion of that process by a rump group of employees or a spokesman that
the employees never authorized to speak for them. He argued that Congress passed the
RLA to protect against the harm that such a strike would impose on uninvolved people all
over North America.
The case number is 12-36026.
30
Attorneys: Dmitri Iglitzin (Schwerin Campbell Barnard Iglitzin & Lavitt) for
International Brotherhood of Teamsters Local 117. David P. Dean (James & Hoffman)
for Working Washington. Douglas W. Hall (FordHarrison) for Aircraft Service
International, Inc.
11th Cir.: Union’s motion to compel arbitration of grievances revived on appeal
By Brandi O. Brown, J.D.
A district court erred in determining that it lacked subject-matter jurisdiction in a suit
brought by the Teamsters union seeking to compel arbitration of certain employee
grievances, the Eleventh Circuit held in an unpublished opinion, reversing and remanding
the case. The union had pled undisputed facts sufficient to demonstrate its right to
arbitrate the procedural question of whether it had given proper notice of its intent to
proceed to arbitration on certain grievances, the appeals court determined. Moreover, the
lower court erred in determining that it lacked jurisdiction to compel arbitration of
grievances related to the employer’s operations in Trinidad (International Brotherhood of
Teamsters v. Amerijet International, Inc., March 23, 2015, Rothstein, B.).
The union represented pilots and flight engineers employed by Amerijet, an air carrier
subject to the terms of the Railway Labor Act. Two collective bargaining agreements
governed the relationship between the union and the employer. Those CBAs contained
grievance procedures applicable to dispute resolution, with a process that started with an
informal procedure and progressed to an appeal to a Systems Board of Adjustments. If
the board was unable to agree to a finding, the union could then appeal the grievance to
arbitration within 30 calendar days of notification of “deadlock.”
Nine “deadlocked” grievances. In 2011, nine grievances were deemed “deadlocked.”
The union’s representative on the board sent an email on April 6 entitled “System Board
Decision—March 2011” and addressed to several individuals, including the employer’s
board representative, the vice president of human resources, and two union
representatives. It listed the deadlocked grievances and after each included the notation
“deadlocked-proceed to arbitration.” Some questions followed regarding the email and
the role of the system board members with regards to directing that a case proceed to
arbitration, but on the same day the business agent for the union, who had been copied on
the email, responded to everyone and asked the human resources vice president when
they could expect filing for arbitration on the cases.
On June 2, both the former and new business agents for the union sent emails to the
human resources vice president, noting that the employer had failed to advance the cases
to arbitration and that they had not yet received arbitration panels for the deadlocked
cases, and also noting the April 6 email. The vice president responded that the union had
not timely appealed any of the grievances to arbitration, contending that the April 6 email
was not sufficient because the board could not act on behalf of the union. The union filed
suit seeking to have the district court compel arbitration of the grievances.
Port of Spain grievances. The union also sought to compel arbitration of a second set of
grievances filed by union members who were temporarily assigned to work in Port of
31
Spain (in Trinidad). The workers, who were permanently domiciled in Miami, were
assigned to work out of Trinidad on 10 out of 28 days. They did not necessarily work
there in every 28-day period, however. In 2010 the union had filed grievances related to
operations in that location, which deadlocked later that year. In April 2011 the employer
informed the union that it considered the Port of Spain facility to be a “permanent foreign
base” that was outside of the scope of the CBAs and refused to advance the related
grievances to arbitration.
The employer filed a motion to dismiss the claims, arguing that the district court lacked
subject-matter jurisdiction and authority to compel the arbitration. Alternatively, the
employer also made a Rule 12(b)(6) motion for failure to state a claim. And, assuming
that the court had jurisdiction to compel arbitration, it also moved for Rule 56 summary
judgment. Determining that it did not have jurisdiction because the notice issue was a
“minor dispute subject to the dispute resolution procedures set out in the CBAs,” the
district court granted the motion to dismiss. The union appealed.
Court’s authority under the RLA. The Eleventh Circuit had not yet considered whether
a district court had authority under the RLA to compel arbitration when an employer
refuses to arbitrate based on “an alleged procedural failure on the part of a union or
aggrieved party.” Thus, the appeals court looked to Supreme Court decisions for
guidance. The question of whether the union provided proper notice echoed one
addressed in a 1964 case, John Wiley & Sons, Inc. v. Livingston, in which the High Court
affirmed an order compelling arbitration, noting that where the subject matter of the
underlying dispute was arbitrable, then the “procedural” questions that grew out of it and
had bearing on its disposition should also be left to the arbitrator. The appeals court
concluded that the instruction of that decision was “clear,” i.e., where an employer
refuses to arbitrate a minor dispute based on such an alleged failure, “the district court
ordinarily should compel arbitration of the dispute, with the procedural issue to be
considered by the arbitrator.”
A review of the text of the RLA, as well as the case law, indicated that federal courts
“maintain the authority to compel arbitration of minor disputes.” While it was correct that
the RLA prohibited those courts from reaching the merits of those disputes, that
prohibition did “not leave the courts completely powerless.” Those courts still “maintain
jurisdiction to enter orders required to ensure compliance with the procedures prescribed
by the RLA for settling such disputes.” Such a conclusion also accorded with precedent
regarding “major disputes” under the Act. Furthermore, the court explained, recognizing
such an authority furthered a stated purpose of the Act: to ensure “the prompt and orderly
settlement of all disputes growing out of grievances.” Therefore, the district court erred in
granting the employer’s motion with regards to the nine deadlocked complaints.
Port of Spain grievances. Likewise, the lower court erred in finding that it lacked
jurisdiction over the Trinidad grievances. The employer contended that those grievances
were outside of the reach of the RLA and the CBAs because they were on behalf of
employees temporarily domiciled in a foreign jurisdiction, dealt with “purely foreign
flying,” and concerned matters at “permanent foreign bases” that were expressly
excluded from coverage under the contracts.
32
The appeals court disagreed with the finding below that the “question of extraterritoriality
was an issue of subject-matter jurisdiction” in the first place, a conclusion at odds with
the Supreme Court’s 2010 decision in Morrison v. National Australia Bank Ltd.
However, considering the issue on its merits, it determined that the employer, and the
court below, had considered the wrong question. The question was not whether the RLA
had extraterritorial application, but whether it would amount to extraterritorial application
to compel arbitration of the grievances in question here. It would not, the court
concluded.
Here, the union’s complaint sought to compel arbitration based on a requirement found in
the CBA. The employer cited no statutory provision within the RLA that mandated
arbitration of deadlocked grievances, “or even that air carriers must enter into a collective
bargaining agreement that requires arbitration.” Rather, the arbitration at issue in this case
“stems from” the CBAs, which “were executed in the United States between an American
employer and an American union” representing employees who were domiciled in the
United States and spent “the vast majority of their work time engaged in flights from or
to United States destinations.”
The employer admitted that the crewmembers were permanently domiciled in Miami and
that the crews were temporarily assigned to the Trinidad location for short durations. In
fact, crew members did not necessarily work there during every “roster period,” and
might spend only ten days there in a period of two to three months. Thus, ordering
arbitration would not result in the RLA’s extraterritorial application. An arbitrator would
be the one to decide if the CBA provisions applied.
The appeals court also noted that the union was not attempting to have the court “apply
substantive rights created by a federal statute to employees’ work overseas,” but instead
was simply asking the court to compel arbitration in order to determine whether the
employer violated the CBA.
As for the Rule 12(b)(6) and alternative summary judgment motion, the appeals court
also considered and rejected the possibility that the lower court’s order could be affirmed
on that ground. It would be up to the arbitrator to determine the applicability of the CBA
provisions regarding “purely foreign flying,” and whether facilities were permanent
foreign bases.
The case number is 14-12237.
Attorneys: Noah Scott Warman (Sugarman & Susskind) for International Brotherhood of
Teamsters. Joan M. Canny for Amerijet International, Inc.
NLRB: Supervisor’s reference to ‘bunch of backstabbers’ unlawful
By Kathleen Kapusta, J.D.
Contrary to an administrative law judge’s determination, a three-member panel of the
NLRB found that a company dispatcher’s reference to drivers as “a bunch of
backstabbers” in response to an employee’s invitation to join him and other drivers for an
33
after work social event that was intended to reduce ongoing tension between pro-union
and antiunion employees violated Section 8(a)(1) of the NLRA. In addition, the Board
found that the employer unlawfully changed the start time of an active union supporter by
an hour in order to further isolate him from other drivers (Corliss Resources, Inc.,
February 27, 2015).
Backstabbers. The union was certified to represent a unit of dump truck drivers. The
employee, one of two unit members elected to the union’s first bargaining team, went to
the dispatch office and invited the dispatcher, an undisputed supervisor, to join him and
the other drivers for the after work event. In response, the dispatcher purportedly stated,
“Why the fu*k would I want to go to drink with a bunch of backstabbers?” When asked
by the employee to whom he was referring, the dispatcher initially replied “everyone.”
Ultimately, however, he called the employee a backstabber because the employee told an
antiunion employee that the dispatcher had wrongly accused the union of outing another
worker as a union supporter. The dispatcher then allegedly told the employee that “[w]e
have the numbers and we’re going to get all of you guys out” and to “get the fu*k out” of
his office.
While the judge correctly found that the dispatcher’s statement that “we’re going to get
all of you guys out” was an unlawful threat, the Board disagreed with his finding that the
“backstabber” comment referred solely to the employee and the dispatcher’s being
personally upset because he called him a liar. Contrary to the judge’s determination, the
Board found that the employer unlawfully called its employees backstabbers. Noting that
in determining whether a supervisor’s statement is unlawfully coercive, the question is
not the supervisor’s motive for making the statement, but whether the employee would
reasonably be coerced by it, the Board pointed out that in light of the dispatcher’s parting
unlawful threat to “get all you guys out,” his initial reference to “a bunch of
backstabbers” would reasonably have been understood to characterize all supporters of
the union as disloyal and to threaten them with retaliation.
Second comment. The next morning, the dispatcher made a similar comment that was
broadcast to all unit drivers over the company’s CB radio system after another driver
pointed out that the dispatcher let two antiunion drivers pull out ahead of the employee,
who was senior to both of them. According to that driver, the dispatcher stated, “You
guys are a bunch of whiners and you’re a backstabbing piece of shit.” Because the union
was not mentioned in the exchange and the driver was not, at the time, known to be a
strong supporter of the union, the judge found that the dispatcher’s comments would
“more reasonably” be interpreted simply as “pique” that the driver, a former dispatcher,
“question[ed] his dispatch decisions.”
No prior expressed union support. Disagreeing, the Board found that the dispatcher’s
labeling of the other driver as “a backstabbing piece of shit,” immediately followed his
broadcast comment that “[y]ou guys are a bunch of whiners,” which was made in direct
response to the driver’s remark in support of seniority. In those circumstances, the Board
found that employees would reasonably interpret the “backstabbers” statement to refer to
employees’ concerted activity regarding a term of employment. As such, it was irrelevant
whether the driver previously had expressed support for the union. The dispatcher’s
34
accusation of “backstabbing” by the driver, as with the employee, was unlawfully
coercive, determined the Board.
Changing start time. Finally, the Board disagreed with the judge’s determination that
moving up the start time of a known union supporter from 6 a.m. to 5 a.m. the day after
he agreed to an assignment as a “belly” truck driver was not unlawful because there had
been such a practice in the past, even though the company’s 12-month history
immediately preceding the change did not support this practice. Here, the Board found
that the employer’s earlier practice of imposing a 5 a.m. start time for the “belly trucks”
at some indeterminate time “in the past” did not negate the significance of the actual start
time having been 6 a.m. during the 12 months immediately preceding the employee’s
assignment.
Pointing out that an arbitrary departure from a past practice may support an inference of
unlawful motive, the Board noted that in this case, that inference was further supported
by the timing of the change only one day after the driver agreed to drive a “belly” truck;
the fact that one of the company’s owners earlier discussed his intent to implement a
“secret squirrel job” to isolate the driver from other employees; and the owner
subsequently confirmed to another employee his intent to “keep the assholes [who were
driving one or more “belly” trucks] away from the new people.”
Pawn. The fact that another “belly” truck driver who opposed the union also had to start
an hour earlier carried little weight in light of evidence that the employer had an ongoing
agenda of isolating the driver, the Board noted. “Where an employer takes an adverse
action against an employee who is not a union supporter because the employer could not
otherwise justify taking the same action against a union supporter, the former employee is
being used as a ‘pawn in an unlawful design’ and the actions against both employees are
unlawful,” the Board wrote, finding that the “busy” season was a convenient pretext for
further implementing the employer’s established plan to prevent the driver from
communicating with other drivers about the union by advancing the start time for “belly”
trucks; thus, this action was also unlawful.
The slip number is 362 NLRB No. 21.
Attorneys: Selena C. Smith (Davis, Grimm, Payne & Marra) for Corliss Resources.
Danielle Franco-Malone (Schwerin, Campbell, Barnard, Iglitzin & Lavitt) for Teamsters
Local 174 Union.
NLRB: Arb award finding workers breached `no strike’ clause by displaying signs
in cars was `clearly repugnant’
By Lisa Milam-Perez, J.D.
Concluding that an arbitration panel’s finding that Verizon workers violated a CBA’s nostrike clause by placing informational picket signs in their personal vehicles was “clearly
repugnant” to the NLRA, a 2-1 NLRB panel refused to defer to the arbitration award.
(The Board applied its Olin Corp. deferral standard here, having decided it would not
apply its new Babcock & Wilcox Construction Co. in pending cases.) Also, the employer
35
violated Sec. 8(a)(1) of the Act when company supervisors told employees that they
couldn’t display the signs in their cars parked on company property, the majority held.
Member Johnson dissented (Verizon New England, Inc., March 9, 2015).
“Honor Our Contract.” Verizon New England has had a longstanding bargaining
relationship with the Electrical Workers union. Since 1977, the parties have included the
same no-strike provision in their contracts, which states that the union and its members
won’t take part in any strike or picketing “of any of the Company’s premises.” Despite
this clause, the union had an entrenched practice of conducting ambulatory information
picketing near Verizon’s facilities as their contracts were about to expire. In keeping with
this practice, the union distributed 28 x 22-inch picket signs urging Verizon to “Honor
Our Contract,” and workers began displaying the signs in their car windows while at
work.
Company supervisors told the workers to remove the signs, and they did so. No one was
disciplined as a result, and there was no evident disruption in operations. But the union
filed a grievance, asserting that Verizon violated the contract by calling for the removal
of the signs. A three-member arbitration panel, in a 2-1 vote, denied the grievance,
finding that it was the union that breached the contract, as the display of signs amounted
to picketing. By agreeing to the limitations on “picketing” in the contract, the union
waived its right to post signs in the windows of unattended vehicles, the panel reasoned.
The union then filed unfair labor practice charges, contending that Verizon violated the
workers Section 7 rights, but a law judge deferred to the arbitration award and dismissed
the complaint. The union and General Counsel filed objections.
Picketing? The arbitration award was “devoid of any reasoning” to support a finding that
the employees’ conduct amounted to picketing, the Board majority noted. Other than a
“terse statement” that picketing “inform[s] the public of the Union’s concerns” and “does
not have to be a sign on a stick,” the panel quoted an 1897 book on picketing and a labor
dictionary from 1949. But it lacked any recognition that, according to well-established
Board law, picketing includes a “confrontational element,” which was not evident in the
employees’ conduct here.
“To be sure, the Board has found that picketing is not confined to a ‘sign on a stick’ and,
in certain circumstances, has held that stationary signs can constitute picketing,” the
Board wrote. “But in finding that picketing occurred in such cases, the Board has relied
on the presence of individuals in the area where the signs were stationed. In other words,
a necessary element of picketing is personal confrontation.”
No proof in CBA or past practice. Moreover, the arbitration panel cited nothing in the
parties’ bargaining history or extrinsic evidence to indicate that the parties had intended
the no-strike clause to cover the conduct at issue here. While the panel referenced two
clauses from the CBA, neither of these provisions “even remotely addresses the right of
employees to display signs in their personal vehicles,” the majority said. The arbitration
panel nevertheless concluded that the parties understood “picketing” to encompass the
displaying of signs in personal vehicles, but offered nothing to support that presumption.
36
If anything, the fact that the union had a long-established practice of conducting
informational picketing pre-contract expiration demonstrates that the parties instead
interpreted the no-picketing provision quite narrowly.
Dissent. “Our deferral precedent holds that, if an arbitrator’s interpretation is allowable
under the Act, our inquiry must end. So it was here,” Member Johnson wrote in dissent.
He rejected the majority’s finding that deferral was inappropriate in this instance,
Pointing out that “even recent Board precedent holds that the display of placards in
employees’ cars parked on the employer’s premises is susceptible to being interpreted as
picketing,” Johnson said the majority may have reasonably disagreed with the arbitration
panel’s conclusion, but noted too that “a disagreement over an arguable contract or legal
interpretation is not enough to set aside the result from the parties’ chosen dispute
resolution mechanism of arbitration.”
Johnson also would find that the union had clearly and unmistakably waived the right of
employees to engage in picketing and, again, that the display of placards in employees’
vehicles on company premises can be defined as picketing under the Act. And “no Board
or judicial precedent requires reference to some extrinsic evidence of the parties’
negotiations and understanding before the Board will find waiver.”
The slip opinion number is 362 NLRB No 24.
Attorneys: Alfred Gordon (Pyle Rome Ehrenberg) for International Brotherhood of
Electrical Workers. Arthur Telegen (Seyfarth Shaw) for Verizon, Inc.
NLRB: Bargaining unit improperly clarified to include historically excluded
delivery employees
By Ronald Miller, J.D.
An NLRB regional director erred in granting a union’s request to clarify a bargaining unit
at its Grand Rapids, Michigan facility to include four delivery and install employees after
these employees were assigned, for reasons of convenience, to pick up their loads at the
Grand Rapids parking lot instead of the employer’s Flint, Michigan facility, ruled a threemember panel of the NLRB. The four employees could not properly be clarified into the
existing contractual unit at the Grand Rapids facility because they had been historically
excluded from the unit and do not share an overwhelming community of interest with the
Grand Rapids service technicians (Bottling Group LLC dba Pepsi Beverage Co., March
12, 2015).
The delivery and install employees delivered new, refurbished, or repaired vending,
cooler and fountain equipment to customers, installed the equipment, and picked up other
equipment from customers. On the other hand, field service technicians repaired
equipment at customer locations when customers reported malfunctions, provided
preventive maintenance, and educated customers on basic equipment repair and upkeep.
There was also a group of “shop techs” who repaired equipment that was picked up from
a customer for repair or refurbishing at an employer facility. The employer’s Flint facility
was the only facility in Michigan with the shop equipment to do such repairs.
37
Centralization of operations. Prior to 1997, the Grand Rapids facility had a fully
functioning shop which serviced customers in the Grand Rapids area. Those employees
were represented by the union and covered by a collective bargaining agreement. At that
time, all Grand Rapids employees were classified as field service technicians, and were
supervised by a supervisor who worked at the Grand Rapids facility. Beginning in 1997,
the employer centralized its delivery and install functions, and relocated employees
performing that work to a new center in Lansing, Michigan. The delivery and install
employees in Lansing were not represented by a union. Thereafter, the only function that
remained at Grand Rapids was field repair service at customer sites.
To ensure that delivery and install work was separate from field service technician work
after the Lansing facility opened, the employer designed separate assignment procedures.
All but four delivery and install employees started their workdays at the Lansing facility.
The four exceptions were the delivery and install employees who were home-based and
started their workdays at a
“drop and hook” location. However, in 2009, the employer closed the Lansing facility
and moved the work to Flint, which is 113 miles from the Grand Rapids facility. This
meant greater traveling distances for the delivery and install employees who served
western Michigan. To reduce driving time, the employer established a second “drop and
hook” location in Grand Rapids.
“Drop and hook” operation. The employer posted openings for four delivery and install
employees for the Grand Rapids drop and hook operation. The four successful bidders
became home-based employees who began their workdays at the parking lot of the Grand
Rapids facility, where they picked up their vehicles and equipment. The establishment of
the Grand Rapids drop and hook location was the only change in operations as a result of
the relocation from Lansing to Flint. Otherwise, the four disputed Grand Rapids drop and
hook employees continued to be a part of the employer’s Flint-based statewide delivery
and installation operations, continued to be directed and supervised by Flint personnel,
and performed work that had been centralized on a statewide basis for 12 years.
Community of interest. The delivery and install employees reported to a different
supervisor from than the Grand Rapids field service technicians and they had a different
HR manager. All current employees covered by the Grand Rapids CBA were classified as
field service technicians and were paid the journeyman mechanic rate. Delivery and
install employees who installed fountains earned 40 cents an hour more than service
technicians, while those installing vending machines and coolers were paid 20 cents an
hour more. Benefits paid to the delivery and install employees were the same as all other
Flint employees. All Flint employees operated under a single seniority system that was
separate from that of the Grand Rapids service technicians. The delivery and install
employees worked four 10-hour days per week and serviced a larger area than the Grand
Rapids service technicians. Additionally, there was little contact and virtually no
interchange between the two groups.
The regional director acknowledged that this case did not involve “the placement of
employees at a new facility who perform work that was never performed by employees in
38
the existing bargaining unit,” so a traditional accretion analysis was not warranted.
Instead, he found that the delivery and install employees performed the same basic
delivery and install functions that historically have been performed by unit employees at
the Grand Rapids facility. He further found that the unit description in the Grand Rapids
CBA had never been altered and continued to encompass the work assigned to the
delivery and install employees. Thus, he found that the delivery and install employees
continued to share a sufficient community of interest with the field service technicians.
Contrary to the regional director, the Board did not find that the delivery and install
employees belonged in the contractual unit. It observed that for 12 years, the delivery and
install employees had been part of the centralized operation now based in Flint. Because
the delivery and install employees have been historically excluded from the Grand Rapids
CBA for this 12-year period, accretion is not appropriate. Further, the evidence failed to
establish that the delivery and install employees shared an overwhelming community of
interest with the field service technicians. Grand Rapids field service technicians have not
performed delivery and install work since 1997. Under these circumstances, these homebased drop and hook delivery and install employees did not become part of the Grand
Rapids operation when they were assigned to pick up their loads at the Grand Rapids
parking lot.
Historical exclusion. Even if the delivery and install work was now being performed at
the Grand Rapids facility, this work had historically been excluded from the bargaining
unit, observed the Board. The Board will not entertain a unit clarification petition seeking
to accrete a historically excluded classification into the unit unless the classification has
undergone recent and substantial changes. Here, the record showed that the work of
delivery and install employees and field service technicians was completely separate.
Although the employer did not eliminate the delivery and install functions and
employees, it centralized these operations and removed them from the Grand Rapids
facility for 12 years, and they remained separate even after the delivery and install
employees began picking up their loads at the Grand Rapids parking lot.
Accretion analysis. Finally, the Board determined that accretion was not warranted in
this case under a traditional accretion analysis. “The Board has found a valid accretion
only when the additional employees have little or no separate group identity and thus
cannot be considered to be a separate appropriate unit and when the additional employees
share an overwhelming community of interest with the preexisting unit to which they are
accreted,” it noted. Here, the evidence did not show that the delivery and install
employees had little or no separate group identity and shared an overwhelming
community of interest with the preexisting unit. On the contrary, they retained a separate
identity by virtue of their 12-year, ongoing connection to the Flint operation, their
separate seniority and bidding rights for jobs and overtime, differences in their wages and
benefits, and their larger geographic service area, as well as separate supervisors. Thus,
the delivery and install employees were improperly included in the Grand Rapids
bargaining unit.
The slip opinion number is 362 NLRB No. 25.
39
Attorneys: Fillipe Iorio (Kalniz, Iorio & Feldstein, Company) and Patrick Szymanski for
International Brotherhood of Teamsters. Richard Boisseau (Kilpatrick Stockton) for
Bottling Group LLC, Pepsi Bottling Group, and Pepsi Beverage Co.
NLRB: Employer’s belated change to duties of tugboat mates untimely, didn’t
defeat bargaining unit certification
By Ronald Miller, J.D.
The NLRB found no merit to an employer’s contention that it should be permitted to
present evidence regarding the changes it made to the duties of its tugboat mates in 2010
because those changes occurred after the Board granted its request for review of a
regional director’s second supplemental decision but before the Board’s original decision
on review issued, ruled a divided three-member panel. The Board found the employer’s
attempt to raise asserted changes in the mates’ duties in this proceeding untimely.
Member Johnson filed a separate dissenting opinion in which he disputed the Board’s
finding that the mates were not supervisors (Brusco Tug & Barge, Inc., March 18, 2015).
At the time the NLRB issued its original opinion on May 20, 2013, the Board included
two persons whose appointments had been challenged as constitutionally infirm. On June
26, 2014, the United States Supreme Court issued its decision in NLRB v. Noel Canning,
holding that the challenged appointments to the Board were not valid. Thereafter, the
Board set aside its earlier decision and retained this case for further action. It further ruled
that the May 20, 2013 decision did not preclude the employer from litigating any
representation issues. Accordingly, the Board considered the representation issues that
the employer raised in this proceeding.
Validity of certification. In this instance, the employer admitted that it refused to
bargain, but contested the validity of the certification of a bargaining unit on the basis
that the mates in the unit were supervisors under Sec. 2(11) of the NLRA and that the
bargaining unit was therefore inappropriate. The employer also argued that the complaint
was not validly issued because the Acting General Counsel was not a proper recess
appointee.
According to the employer, in response to a notice of show cause issued by an NLRB
regional director, it changed the duties of its mates in 2010, after the Board granted the
employer’s request for review of the regional director’s second supplemental decision but
before the Board’s original decision on review issued. The employer asserted that these
changes could not have been litigated in the prior representation proceeding because they
occurred after 2006, which was the last opportunity afforded by the regional director to
submit evidence, and that it should now be permitted to present these facts at a hearing.
Failure to act promptly. The Board pointed out that the asserted changes occurred in
2010, when the employer’s request for review before the NLRB. At that time, the
employer could have filed a motion to reopen the record, but failed to do so until 2013, in
response to the Board’s February 13, 2013 Notice of Show Cause. Because the employer
failed to act “promptly on discovery of the evidence it sought to be adduced,” and having
failed to provide good cause for that failure, the Board rejected that proffer.
40
With respect to the employer’s argument that the certified bargaining unit was not
appropriate because the mates in the unit are statutory supervisors, the Board agreed with
the regional director’s finding that the employer failed to meet its burden of establishing
that the tugboat mates are statutory supervisors based on the statutory criteria of
assignment and responsible direction. Accordingly, the Board rejected the employer’s
challenge to the composition of the bargaining unit, and reaffirmed the union as the
exclusive bargaining representative of employees, including the mates.
Dissent. Finding that the mates on the employer’s tugboats were supervisors, Member
Johnson concluded that the employer’s request for a new hearing was not untimely.
According to Member Johnson, the majority’s ruling would result in there being no
supervision for a good half of each 30-day sea voyage when the mates control the
operation of the vessel and are vested with the authority of the captain. The dissent
argued that the result reached by the majority could not be reconciled the evidence, the
standard the Board clarified in Oakwood Healthcare, Inc., or the cumulative weight of 50
years of Board and court precedent establishing the supervisory status of pilots and mates
on river- and sea-going vessels who have essentially the same authority as the mates here.
The slip opinion number is: 362 NLRB No. 28.
Attorneys: Gabriel Terrasa (Terrasa & Stair) for International Organization of Masters
Mates & Pilots. Michael Garone (Schwabe, Williamson & Wyatt) for Brusco Tug &
Barge, Inc.
NLRB: Unilateral change to leave policy unlawful, although rescinded
By Lisa Milam-Perez, J.D.
A Massachusetts daycare chain violated the NLRA when it failed to apply the terms of a
bargaining agreement to its substitute employees, who worked on a long-term basis for
more than 10 hours a week, the NLRB held. While the Board adopted a law judge’s
finding that this conduct violated Section 8(d), it reversed, on due process grounds, an
additional determination that these actions ran afoul of Section 8(a)(5) as well, since the
theory had not been litigated. The employer did, however, violate this provision when it
made a unilateral change to its vacation and leave policy, a finding from which Member
Johnson dissented. Although the employer eventually rescinded the unilateral change, it
failed to effectively repudiate it, in accordance with the Board’s controlling Passavant
standards (Springfield Day Nursery aka Square One, March 19, 2015).
Part-timers and substitutes. The employer, a local daycare chain that provides pickup
and drop-off to and from its facilities, has had a collective bargaining relationship with
the union since the 1980s. The union represents both child care staff and transportation
employees. The parties’ most recent CBA has a provision defining “regular part-time
employees” as employees who work at least 10 hours but less than 35 hours per week.
Another contract clause grants the employer unfettered discretion to employ “substitute”
employees, defined as workers who are “hired on a day-to-day basis to fill a vacancy, or
to replace an Employee who is on assignment.” While regular part-time employees are
covered under the contract, substitute employees are not.
41
Every classroom at the day care centers is staffed by three employees and, from 2003
through 2009, they were generally staffed with a lead teacher, a teacher, and a part-time
teacher—all bargaining-unit employees, all in jobs requiring state certification. However,
since then, the employer has struggled to staff the positions with certified teachers and
has increasingly resorted to substitutes, who regularly work more than 10 hours per week.
Moreover, since 2011, the employer began to rely on substitutes to fill van driver
vacancies; the substitute drivers also work over 10 hours per week.
The union had long challenged the employer’s regular use of substitutes to fill the
classroom vacancies. During contract negotiations as early as 2003, the union raised the
issue of the classification of substitutes and their right to join the bargaining unit. It also
filed a grievance contending that a number of employees were misclassified as substitute
non-unit employees (instead of temporary unit employees) because they filled vacancies,
had regular long-term schedules, and should have become unit employees after 60 days.
The parties resolved the grievance in 2004, but the union stated at the time its ongoing
concern over “the long-term use of substitutes who may not be qualified as teachers.”
Another grievance over the issue was settled in 2010.
Section 8(a)(5) charge not at issue. A Board complaint alleged that the employer
improperly modified the contract, in violation of NLRA, Sec. 8(d), by failing to apply the
contract terms to the substitute employees. The law judge found the employer violated
this provision, but also concluded that the failure to classify the substitute employees as
part-time teachers and van drivers constituted a unilateral change, in violation of Section
8(a)(5) as well. But an 8(a)(5) violation hadn’t been alleged or litigated by the parties, or
addressed in the General Counsel’s post-hearing brief; only an 8(d) allegation was at
issue. Thus, on due process grounds, the Board reversed the independent 8(a)(5) finding.
“We recognize that the Board may find and remedy a violation even in the absence of a
specific allegation in the complaint if the issue is closely connected to the subject matter
of the complaint and has been fully litigated,” the panel noted. But the Sec. 8(a)(5) charge
had not been fully litigated in this case. “Under these circumstances, we find that the
Respondent did not have fair notice of the unilateral change theory.”
Section 8(d) violation upheld in part. The panel upheld in part the ALJ’s finding of an
8(d) violation, concluding the employer’s failure to provide contract benefits to the van
drivers constituted an unlawful contract modification. As to the substitute teachers,
though, the allegation was time-barred under Section 10(b), a 2-1 panel majority held
(with Chairman Pearce dissenting). Here, the union “had clear and unequivocal notice
outside the 10(b) limitations period that the Respondent was not applying the collectivebargaining agreement to substitute teachers who were not hired on a day-to-day basis,”
the Board noted, looking at the bargaining history, the record of grievances filed, the
course of communications between the parties, and that the employer “consistently
refused” all the while to apply the contract to the workers in question. “The Union’s
position and complaints in those earlier conflicts echo the allegations now before the
Board.” Moreover, the employer’s conduct outside the 10(b) period could not be treated
as a continuing violation, the Board concluded.
42
Change in leave policy. The CBA also provided that employees accrue up to 12 paid
leave days per year, to be used “for an Employee’s illness or medical needs, or illness in
an Employee’s family, or for personal reasons.” The paid leave provision also allows a
supervisor who has “a reasonable belief that an employee is misusing sick time” to
request a doctor’s note. In June 2011 the employer’s transportation director issued
“transportation guidelines,” an addendum to the transportation operations manual, which
included substantive provisions on employee use of sick and vacation leave. Specifically,
it stated: “If you are out of work using paid time off for sick time of 3 days or more, you
must have a doctor’s note prior to returning to work. If a letter from a doctor is not
provided, these dates will be marked on your record as unexcused absences. If excessive
(three times or more) unexcused absences occur, it will result in a disciplinary action.
If you need time off for a planned appointment or vacation, it must be approved by your
supervisor at least one week in advance. This request must be submitted in writing on a
Time Adjustment Form.”
An employee brought these guidelines to the union’s attention, and the union rep raised
his concerns about the policy changes to the employer in a meeting to discuss another
matter. The employer’s vice president of operations then notified the drivers at a meeting
the same day that the new rule was rescinded. The employer’s senior HR administrator
also read aloud to the drivers the applicable leave provisions from the contract, and
distributed a copy of those provisions to the drivers.
Concluding that the new guidelines constituted a material and substantial change in the
contractual leave policy, a divided Board panel adopted the law judge’s finding that the
employer violated Sec. 8(a)(5) by unilaterally changing its vacation and sick leave policy.
“The rules not only mandated requirements contrary to the parties’ negotiated agreement,
but also expressly imposed discipline in the event of noncompliance with those
requirements,” the Board observed. “Regardless of whether employees complied with the
new policy, they were officially subject to its requirements and it had the potential to
impact their willingness to use sick leave.”
Moreover, the employer did not effectively repudiate the unilateral change. The
guidelines had been a part of the employer’s work rules for as long as three months
before the union was finally made aware of it. And, by merely notifying employees of the
rescission and reading aloud the applicable contract provision, the employer failed to
satisfy Passavant standards for repudiating an unlawful unilateral change. The employer
didn’t explain that the rescission was the result of its bargaining obligation with the
union, it made no admission of wrongdoing, and it offer no evidence that it removed the
improper guidelines from the operations manual or apprised employees that it would
bargain with the union over any such changes in the future, as required under the Act.
Consequently, “the rescission failed to remedy the harm to the union as a bargaining
representative and to the employees’ relationship with it.”
Dissent. Member Johnson dissented on this finding, unconvinced that the policy change
was “material, substantial, and significant.” He did not, therefore, consider whether the
employer effectively repudiated the unilateral change.
43
The slip opinion number is 362 NLRB No. 30.
Attorneys: James Channing (Sullivan, Hayes & Quinn) for Springfield Day Nursery.
NLRB: Union steward unlawfully threatened with suspension for Weingarten
meeting conduct
By Lisa Milam-Perez, J.D.
An employer unlawfully threatened a union steward with discipline for using notes while
representing an employee during an investigatory interview, a divided NLRB panel held,
reversing a law judge’s dismissal of an NLRA, Section 8(a)(1) charge in a supplemental
decision and order. Member Miscimarra dissented (Howard Industries Inc, Transformer
Division, March 23, 2015).
Procedural lapse. When a union-represented employee failed to use a “breakdown pad”
in order to prevent the transformer components he was working on from getting dented,
he was summoned to human resources for an investigatory interview. He asked for his
union steward to be present, pursuant to his Weingarten rights, and met with the steward
in advance. The steward took notes of their discussion, and wrote in his notebook the
employee’s comment: “I never was actually trained to do that job. I only filled in when
he needed me. Im am (sic) actually a pay rate 17 – painter.”
The notebook. During the interview, the steward tapped on his notebook to draw the
employee’s attention to it and pointed to the written comment about the employee’s
asserted lack of training; the employee read aloud what was written. The HR official
conducting the interview directed the steward to close the notebook, but he refused,
saying he was using the notebook “as a tool” to represent the employee. At that point, the
HR official admonished the steward to “get the notebook out of there before I suspend
you,” and he complied. The HR official spoke to the steward after the meeting and
assured him that, while using the notebook isn’t a problem, letting an employee “use it as
a script” was frowned upon. (The steward had used a notebook freely during other
investigatory interviews, prior to and since the incident in question.)
Assistance and counsel. Contrary to the law judge, the Board found the HR official’s
threat to suspend the steward violated Sec. 8(a)(1). Under Weingarten, an employer has
the right to investigate apparent misconduct without any interference from a union
official, and is entitled to insist upon hearing the employee’s own account of what
transpired. However, the role of a union rep during an investigatory interview “includes
providing assistance and counsel to employees who may lack the ability to express
themselves or who may be ‘too fearful or inarticulate . . . to raise extenuating factors.”
Quoting Board precedent, the majority noted, “the union representative need not ‘sit
silently like a mere observer’; he is entitled to give ‘active assistance’ to the employee.”
Protected activity. Serving as an employee’s Weingarten rep is protected union activity
and, as the Board has previously held, “a representative’s conduct remains protected even
when he interrupts the employer’s questioning to ask clarifying questions or advises the
employee to refrain from answering certain questions until clarification is given.” Here,
44
the steward’s use of the notebook gave “clarification and counsel” to the employee by
reminding him that, in his defense, he hadn’t received the proper training from the
company. And the employee was entitled to be reminded by his steward of this defense.
Moreover, there was no evidence the steward undermined the integrity of the
investigatory interview or in any way exceeded the permissible bounds of his Weingarten
role, the majority found. Thus, the threat of discipline violated the Act.
Dissent. Member Miscimarra would have affirmed the law judge’s decision, concluding
that the employer was lawfully exercising its right to insist upon “hearing the employee’s
own account of the matter under investigation,” rather than what the HR official
“reasonably concluded” was a scripted version in the steward’s notebook, when the HR
official demanded that he put the notebook down. He also pointed out that the HR official
didn’t preclude the steward from presenting extenuating factors on the employee’s behalf.
Moreover, the HR official expressly told the steward after the interview that he was free
to use his notebook in Weingarten meetings—but not to use it to provide employees with
a script during the interview. By doing so, the steward exceeded the scope of his
protected role.
“Although Weingarten meetings lack the formality of Board hearings and other legal
proceedings, it is clear that no factfinder or adjudicator would ever permit a
representative to ‘assist’ a witness by holding a notebook from which the witness would
read aloud his or her description of relevant events,” Miscimarra argued. And the
Supreme Court would itself denounce the steward’s actions, he reasoned, noting that the
High Court had stated that an employer is entitled to “‘insist that he is only interested . . .
in hearing the employee’s own account of the matter under investigation.’”
The Supreme Court in Weingarten “struck a careful balance,” he noted, “between the
right of an employer to investigate the conduct of its employees at a personal interview,
and the role to be played by the union representative present at such an interview.” In the
dissent’s view, the law judge struck the proper balance; the majority did not.
The slip opinion number is 362 NLRB No 35.
Attorneys: Elmer White (The Kullman Firm) for Howard Industries, Inc. Roger K.
Doolittle (Law Office of Roger K. Doolittle) for International Brotherhood of Electrical
Workers, Local 1317.
NLRB: Discharge of employee who led ‘walk-in’ unlawful
By Kathleen Kapusta, J.D.
The discharge of an employee who led a group of workers into an administrator’s office
to present complaints about working conditions violated the NLRA, a three-member
panel of the NLRB ruled in adopting the findings of an administrative law judge.
Applying the factors set forth in Atlantic Steel Co., the Board found that the employee’s
conduct was not so egregious as to lose the protections of the Act (HealthBridge
Management, LLC, March 24, 2015).
45
The employee, a shop steward, organized a protest in which he and a group of
approximately 15 other employees walked into an administrator’s office after the
discharge of another worker, who claimed he did not know why he had been suspended.
During the “walk-in,” the other workers stood silently by as employee spoke to the
administrator, who was seated at her desk. In addition to telling her that they were there
to address concerns about employees being suspended unfairly, the employee also told
her they had lost confidence in her leadership.
While talking, the employee held a grievance in his right hand and touched his left palm
with it; purportedly as a gesture indicating emphasis (although the administrator alleged
that she felt threatened by the employee’s actions). After a short period of time, the
administrator left her office, stating that she felt uncomfortable with the situation. She did
not return. Shortly thereafter, the workers also left. As they were leaving, the employee
saw the administrator and said “No justice, no peace.” He was subsequently discharged.
Atlantic Steel. In agreeing that the employee’s discharge was unlawful, the Board first
noted that there was no one who testified on behalf of the employer who could offer
admissible testimony that contradicted the testimony of the employee and the other
workers regarding the events during the walk-in. In finding the employee’s discharge
unlawful, the Board agreed with the administrative law judge that Atlantic Steel Co.
provided the proper framework for analyzing the conduct for which he was discharged.
Under Atlantic Steel, the Board considers four factors to determine whether an
employee’s conduct is so egregious as to lose the Act’s protection: (1) the place of the
discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s
outburst; and (4) whether the outburst was provoked by the employer’s unfair labor
practices. As to the first factor, which weighed in favor of finding the employee’s
conduct remained protected, the Board observed that the walk-in took place in the
administrator’s office, away from any patient care area, and there was no evidence that
the conversation was overheard by patients or visitors, or that it disturbed the employer’s
operations.
Protected, concerted activity. The second factor also weighed in favor of the employee
as, the Board pointed out, he was clearly engaged in protected concerted activity when he
informed the administrator of employees’ concerns regarding recent disciplinary actions
and other terms of employment.
Likewise, the third factor also weighed in his favor as the credited evidence showed that
the walk-in was similar to previous walk-ins. Here, the Board noted that the employee’s
remarks were extremely mild, merely informing the administrator that the group was
there to discuss concerns about employees being suspended unfairly and that they had
lost confidence in her leadership. Although he touched his left palm with the grievance
that he held in his right hand, the Board found that this was a gesture indicating emphasis,
he did not refuse an order to leave the administrator’s office, and he did not attempt to
prevent her from leaving. In short, the Board stated, there was no credited evidence that
he engaged in any menacing or abusive behavior of the kind that would weigh against the
continued protection of the Act.
46
As to the fourth factor, the Board found there was no evidence the employee’s conduct
was provoked by any unfair labor practice. Although this weighed against finding his
conduct retained the Act’s protection, it was outweighed by the other three Atlantic Steel
factors. Accordingly, the Board found that his discharge violated the NLRA.
The slip opinion number is 362 NLRB No. 33.
Attorneys: George W. Loveland, II (Littler Mendelson) for HealthBridge Management,
LLC, and 710 Long Ridge Road Operating Company II LLC. Farah Z. Qureshi, National
Labor Relations Board, for New England Health Care Employees Union.
Hot Topics in WAGES HOURS & FMLA:
U.S.: DOL’s interpretive rule reversal on loan officers’ exempt status OK without
notice and comment
By Lisa Milam-Perez, J.D.
A DOL Wage and Hour Division “Administrator Interpretation” that reversed the
agency’s stance on whether the FLSA’s administrative exemption applied to mortgage
loan officers was a valid agency interpretation, notwithstanding the fact it was issued
without undertaking notice-and-comment procedures, the Supreme Court has ruled, in
one of the most significant cases in decades for federal regulatory agencies. In a
unanimous decision, the High Court rejected the Mortgage Bankers Association’s (MBA)
challenge to the DOL’s about-face under the Administrative Procedure Act. Concluding
that the plain text of the APA does not require federal agencies to undertake notice-andcomment rulemaking when merely promulgating “interpretive rules” such as the DOL
issuance in dispute here, the Court reversed the D.C. Circuit’s grant of summary
judgment in the industry trade group’s favor (Perez v. Mortgage Bankers Association,
March 9, 2015, Sotomayor, S.).
In so ruling, the High Court resoundingly overturned the D.C. Circuit’s decision in
Paralyzed Veterans of Am. v. D.C. Arena L.P., concluding that the circuit court’s 1997
ruling was contrary to the plain text of the APA and imposed procedural obligations on
the agencies that went beyond what the APA requires. The majority opinion was authored
by Justice Sotomayor; separate concurring opinions were issued by Justices Alito
(concurring in the judgment), Scalia, and Thomas.
DOL flip-flops. The Wage and Hour Division had issued two opinion letters—one in
1999, another in 2001—asserting that mortgage loan officers were not exempt from
overtime under the FLSA’s administrative exemption. In 2004, though, the DOL revised
the FLSA white-collar regulations, adding a section that set forth examples of employees
who fall within the exemption. Among them: employees “in the financial service
industry,” provided they satisfy the exemption’s duties requirement. Yet at the end of this
example, the agency cautioned that “an employee whose primary duty is selling financial
products does not qualify for the administrative exemption.”
47
The MBA asked the DOL for a revised interpretation of the loan officers’ status under the
new regs. Thus, in 2006, the agency issued another opinion letter, now finding that, under
the regs as revised in 2004, the loan officers were exempt. But in 2010 (eschewing the
use of opinion letters and issuing instead a broader “Administrator Interpretation”), the
agency altered its position, concluding that loan officers’ primary duty is making sales
and thus, they did not fall within the administrative exemption; thus, it withdrew its 2006
opinion letter. As with its previous opinion letter issuances, the agency did so without
offering formal notice or an opportunity for comment.
Legal challenge. Contending that the DOL’s latest iteration was inconsistent with the
2004 rule revision that it was purporting to interpret—and, as such, was arbitrary and
capricious—the MBA filed suit. Backed by a flood of amicus briefs from the regulated
community, the MBA urged that the APA requires the DOL (indeed, all federal agencies)
to engage in notice-and-comment procedures whenever they seek to issue a new
interpretation of a regulation “that deviates sharply from a previously adopted
interpretation.” The DOL’s Administrator Interpretation was also invalid under the
Paralyzed Veterans doctrine, the plaintiffs asserted, which stood for the notion that if
“‘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 APA ‘without notice and comment.’”
The district court rejected the MBA’s challenge, unconvinced that the trade group had
actually relied on the contrary 2006 interpretation of the agency rule, and finding too that
the 2010 interpretation was consistent with the text of the 2004 FLSA rules. As such, the
agency action did not run afoul of Paralyzed Veterans. Rejecting the government’s plea
that it abandon the Paralyzed Veterans doctrine altogether, the D.C. Circuit reversed. It
stood fast on its precedential holding and concluded that, under Paralyzed Veterans, the
MBA was not required to show its reliance on the prior interpretation in order to state a
claim.
Paralyzed Veterans undone. “The Paralyzed Veterans doctrine is contrary to the clear
text of the APA’s rulemaking provisions, and it improperly imposes on agencies an
obligation beyond the ‘maximum procedural requirements’ specified in the APA,” the
Supreme Court wrote, reversing.
Conflating the APA’s provisions. Section 4 of the APA prescribes a three-step
procedure for notice-and-comment rulemaking. However, not all agency rules require the
use of the notice-and-comment procedure. Specifically, APA Section 4(b)(A) states that,
unless another statute provides otherwise, the rulemaking procedure is inapplicable to
“‘interpretive rules, general statements of policy, or rules of agency organization,
procedure, or practice,’” the Court noted, quoting the text of the statute. “This exemption
of interpretive rules from the notice-and-comment process is categorical, and it is fatal to
the rule announced in Paralyzed Veterans.”
In that case, the D.C. Circuit looked to the definition of “rulemaking” in APA Section 1,
which encompasses not only the issuance of new regulatory provisions, but also agency
actions to repeal or amend existing rules. With its sights set on this broad construction,
48
the appeals court had reasoned that the same notice-and-comment obligations would
apply to subsequent agency actions to amend or repeal a rule as were required in the first
instance. It would “undermine the APA’s procedural framework” to let an agency so
fundamentally alter an interpretation of a substantive rule without notice and comment, it
concluded. But that’s where the D.C. Circuit went astray, the Supreme Court explained:
By focusing on Sec. 1 and giving short shrift to Sec. 4(b)(A) of the Act, as well as
conflating the statutory purposes behind these two provisions. Section 1 describes what
rulemaking is, but Sec. 4 describes the procedures that an agency is to undertake when
engaging in rulemaking—and that provision “specifically exempts interpretive rules from
the notice-and-comment requirements that apply to legislative rules [i.e., those that,
unlike interpretive rules, have ‘the force and effect of law”].”
The bottom line, the Court stated: “Because an agency is not required to use notice-andcomment procedures to issue an initial interpretive rule, it is also not required to use those
procedures when it amends or repeals that interpretive rule.”
Vermont Yankee controls. Trumping Paralyzed Veterans, then, is Vermont Yankee
Nuclear Power Corp. v. Natural Resources Defense Council, Inc., the Supreme Court’s
1978 administrative law decision. There, the High Court stated that courts lack authority
to impose their own notions of which procedures are “best” (beyond the APA’s basic
procedural requirements, of course) citing “the very basic tenet of administrative law that
agencies should be free to fashion their own rules of procedure.”
In APA Sec. 4, Congress set forth the “maximum procedural requirements” that courts
would be allowed to impose upon federal agencies in carrying out their rulemaking
procedures. And Paralyzed Veterans violated this principle; the circuit court imposed an
obligation on the administrative agencies that only Congress may mandate.
“Interpreting” is not “amending.” The Court was not persuaded by the MBA’s own
attempt at conflation by muddying the terms “amend” and “interpret.” MBA argued that
an agency effectively amends a regulation when it issues an interpretive rule that changes
the manner in which the regulation is interpreted. The act of “amending” and the act of
“interpreting” are separate and distinct, though, both in common parlance and in legal
usage, the Court pointed out; just as a court isn’t “amending” a statute when it interprets
it, an agency may well “interpret” a regulation without amending it. And the MBA’s
assertion to the contrary could not be reconciled with “the longstanding recognition that
interpretive rules do not have the force and effect of law,” the Court said.
Appeals to pragmatism fail. Nor was the High Court swayed by the MBA’s contention
that the Paralyzed Veterans doctrine satisfies the more “functional” approach that the
Court had taken to interpreting the APA and its attempt to justify the doctrine’s use on
pragmatic or policy grounds. The MBA also contended to no avail that the doctrine
furthers the goal of “procedural fairness” in that it curtails agency attempts to alter their
interpretations of the regulations in a unilateral and unexpected fashion.
Other recourse. But the High Court noted that the regulated community has other
options at its disposal on those occasions when an agency issues an interpretive rule in
49
order to evade notice-and-comment rulemaking. “The APA contains a variety of
constraints on agency decision making—the arbitrary and capricious standard being
among the most notable” and which mandates that agencies provide more substantial
rationale when a new interpretation or rule “rests upon factual findings that contradict
those which underlay its prior policy; or when its prior policy has engendered serious
reliance interests that must be taken into account. It would be arbitrary and capricious to
ignore such matters,” the Court wrote, here quoting its 2009 decision in FCC v. Fox
Television Stations, Inc.
The Court also cited safe-harbor provisions, which serve to protect the reliance interests
that can be undermined when agencies flip-flop in the manner challenged here. While not
a feature of every piece of legislation, the FLSA (as amended by the Portal to Portal Act)
has one, and it shields an employer from liability for violations based on an act or
omission that was carried out in good faith, in conformity with a DOL issuance, even
when that guidance is later modified or even rescinded.
No changing legal theory end-stream. The Court declined to entertain the MBA’s
alternative argument that the disfavored 2010 Administrator Interpretation should be
deemed a legislative rule, not an interpretive rule, and thus subject to notice-andcomment requirements even if Paralyzed Veterans were to fall. The parties had taken the
stance from the onset that the DOL issuance was an interpretive rule. “Indeed, if MBA
did not think the Administrator Interpretation was an interpretive rule, then its decision to
invoke the Paralyzed Veterans doctrine in attacking the rule is passing strange,” the
Court remarked.
Alito balks. While he concurred in the majority holding, Justice Alito was not so quick to
pile judicial invective on the Paralyzed Veterans decision. He conceded that the D.C.
Circuit’s holding was incompatible with the APA, but he put the decision in its context: a
reaction to concerns about “the aggrandizement of the power of administrative agencies
as a result of the combined effect of (1) the effective delegation to agencies by Congress
of huge swaths of lawmaking authority, (2) the exploitation by agencies of the uncertain
boundary between legislative and interpretive rules, and (3) this Court’s cases holding
that courts must ordinarily defer to an agency’s interpretation of its own ambiguous
regulations.” Nonetheless, the Paralyzed Veterans doctrine “is not a viable cure for these
problems,” he wrote, then passed the baton to his concurring colleagues to flesh out the
argument for an alternative solution.
Scalia: These rules have force of law. Justice Scalia, concurring too, noted that the
APA’s exemption of interpretive rules from the notice-and-comment mandate was
“meant to be more modest in its effects than it is today,” and he argued that the courts
have a more of a hands-on role to play in scrutinizing such agency action than the
majority opinion suggests. “Heedless of the original design of the APA, we have
developed an elaborate law of deference to agencies’ interpretations of statutes and
regulations,” Scalia wrote, and have allowed agencies to “authoritatively resolve
ambiguities in regulations.” And by a grant of deference to interpretive rules, agencies
have used them “not just to advise the public, but also to bind them.” As such, these rules
50
do have the force of law, he argued; “The Court’s reasons for resisting this obvious point
would not withstand a gentle breeze.”
With free rein to engage in interpretive rulemaking without notice or comment, agencies
need only “write substantive rules more broadly and vaguely” to expand this domain,
“leaving plenty of gaps to be filled in later, using interpretive rules unchecked by notice
and comment,” Scalia lamented. “The APA does not remotely contemplate this regime.”
Like Alito, he saw Paralyzed Veterans as an unworkable (in fact, “brazen,” in his view)
solution to a real problem. His solution to the problem (short of uprooting Chevron)? To
abandon Auer v. Robbins, in which the High Court held “that agencies may
authoritatively resolve ambiguities in regulations.”
“The agency is free to interpret its own regulations with or without notice and comment;
but courts will decide—with no deference to the agency—whether that interpretation is
correct.”
Thomas cites constitutional concerns. Chagrined by what he characterized as “a
transfer of the judicial power to an executive agency” and the constitutional concerns
therein, Justice Thomas warned that such deference to agency administrative
interpretations “undermines our obligation to provide a judicial check on the other
branches, and it subjects regulated parties to precisely the abuses that the Framers sought
to prevent.”
Thomas traced the historical underpinnings of this “steady march toward deference” to
Bowles v. Seminole Rock & Sand Co., a 1945 Supreme Court decision that predates the
APA. The doctrine of deference was “constitutionally suspect from the start,” he argued,
in that, instead of judges using recognized tools of interpretation to determine the best
meaning of an agency regulation, courts must accord “controlling weight” to the agency’s
interpretation (save only for those interpretations that are “plainly erroneous or
inconsistent with the regulation.”) This is problematic because the agencies lack the
“structural protections for independent judgment adopted by the Framers,” such as life
tenure. “Because the agency is thus not properly constituted to exercise the judicial power
under the Constitution, the transfer of interpretive judgment raises serious separation-ofpowers concerns,” he argued. Agency deference, as originated in Seminole Rock, also
undermines the judicial check on the executive branch.
Fast-forward to Paralyzed Veterans—a decision that, “though legally erroneous,” was
“practically sound,” in Thomas’ view. To regulated parties, whether an interpretative
reversal of the sort effectuated by the DOL here is technically an amendment or an
interpretation, “the new interpretation might as well be a new regulation,” and it “turns on
its head the principle that the United States is ‘a government of laws, and not of men.’”
“By my best lights, the entire line of precedent beginning with Seminole Rock raises
serious constitutional questions,” Thomas urged, “and should be reconsidered in an
appropriate case.” The case at hand, however, is not the one.
51
A broader war? “In winning this battle against the D.C. Circuit's efforts to rein in
agency flip-flopping, DOL and the Executive Branch may have inadvertently triggered a
broader war regarding deference to agency interpretations,” Paul DeCamp, a shareholder
in the Washington, D.C., office of Jackson Lewis and head of the firm’s Wage and Hour
Practice Group, told Employment Law Daily. (DeCamp is a former DOL Wage and Hour
Administrator.) He notes that the three concurring opinions are “all but begging for
someone to bring the Court a good case for revisiting the 1945 Seminole Rock decision,
which gave rise to the rule of deference to an agency's interpretation of its own
ambiguous regulations. The concurrences identify Seminole Rock and its progeny as the
root cause of the type of agency mischief that the D.C. Circuit sought to address through
its Paralyzed Veterans line of cases. Although the Court has now rejected Paralyzed
Veterans, there is much more litigation to be had over the ongoing viability of Seminole
Rock,” DeCamp predicts.
No surprise here? Today’s decision is “not all that surprising,” DeCamp continued,
“insofar as the Administrative Procedure Act specifically addresses the process required
in an agency’s use of “interpretive rules.” In this case, that ruling seems to flow mainly
from the MBA's choice to concede in the lower courts that the Administrator
Interpretation was interpretive rather than substantive.”
“At first glance, you might think a 9-0 decision from the Supreme Court in an
employment case would be a complete outlier,” noted Eric B. Meyer, a partner in the
Philadelphia office of Dilworth Paxson LLP and a member of the Employment Law
Daily Advisory Board. “But Integrity Staffing Solutions, Inc. v. Busk, an FLSA case that
was decided in December 2014, was also 9-0. Going back a year before that, the Supreme
Court decided another FLSA case, Sandifer v. United States Steel Corp., unanimously.”
Such accord is in fact not so rare of late.
All bets are off. “Serendipitously, employers may wonder how today’s decision will
affect the President’s directive to the Secretary of Labor to ‘modernize and streamline the
existing overtime regulation’” Meyer added. “If these changes take the form of
‘legislative rules,’ then there will be opportunity for notice and comment. If, instead, the
Secretary of Labor issues ‘interpretive rules’ as he did in Perez v. Mortgage Bankers
Assn. (or like the EEOC did recently with its policy guidance on pregnancy
discrimination), then the law does not require notice-and-comment rulemaking.”
“The White House and Federal agencies won the day—and many more to come,” said
Keith Watts, a shareholder in the Costa Mesa, California, office of Ogletree Deakins (also
an ELD Advisory Board member). As Citizens United threw off the shackles of fiscal
regulation and forever altered the course of campaign finance, this unanimous decision
heralds an unfettered “golden age” for regulators, no longer constrained by “notice and
comment” periods.
Each administration now appears to “stand on its own,” Watts continued. “If the NLRB
and its broad brush approach to implementing and interpreting regulations is a harbinger,
employers can count on less certainty across all Federal agencies, including the DOL and
52
EEOC. Unconstrained by previous administrations’ prior interpretative rulings means “all
bets are off.”
The case number is 13-1041.
Attorneys: Donald B. Verrilli, Jr., Solicitor General, U.S. Department of Justice, for
Thomas E. Perez. Allyson N. Ho (Morgan, Lewis & Bockius) for Mortgage Bankers
Association.
N.D. Tex.: Awaiting SCOTUS action on state marriage definitions, court enjoins
implementation of amended DOL FMLA regs
By Cynthia L. Hackerott, J.D.
Because the issue of conflicts between state and federal definitions of marriage is
currently pending before the U.S. Supreme Court as well as many lower federal courts, a
federal district court in Texas issued a preliminary injunction staying the implementation
of the DOL’s recent amendments to its FMLA regulations. In the revisions at issue, the
DOL amended the definition of “spouse” to include employees in same-sex marriages.
“Without a doubt, the questions involved in this action are serious and must be resolved
by the proper authority,” the district court wrote, adding, “the Supreme Court will soon
address these issues and provide much needed clarity for the lower courts” (Texas v.
United States of America, March 26, 2015, O’Connor, R.).
Previous rules. The FMLA defines “spouse” as “a husband or wife, as the case may be.”
In 1993, a DOL interim final rule was published which defined “spouse” as “a husband or
wife as defined or recognized under state law for purposes of marriage in states where it
is recognized.” The DOL’s 1995 final rule clarified that the law of the state where the
employee resides would control for the purpose of determining eligibility for FMLA
spousal leave.
Windsor and DOMA. In 2012, the U.S. Supreme Court held, in United States v Windsor,
that Section 3 of the Defense of Marriage Act (DOMA)–which defined “marriage” as
“only a legal union between one man and one woman as husband and wife”–was
unconstitutional. However, Section 2 of DOMA was not at issue in Windsor and, to date,
remains in effect, the district court noted. Known as the “Full Faith and Credit Statute,”
Section 2 provides:
No State, territory, or possession of the United States, or Indian tribe, shall be required to
give effect to any public act, record, or judicial proceeding of any other State, territory,
possession, or tribe respecting a relationship between persons of the same sex that is
treated as a marriage under the laws of such other State, territory, possession, or tribe, or
a right or claim arising from such relationship.
Spousal rule. Announced by the DOL on February 23, 2015, the final rule at issue was
published in the Federal Register on February 25 (80 FR 9989-10001). In light of
Windsor, the rule amends the Wage and Hour Division’s regulations at 29 CFR Part 825
to define “spouse” so that an eligible employee in a legal same-sex marriage may take
53
FMLA leave for his or her spouse regardless of the state in which the employee resides.
Under the new rule, eligibility for federal FMLA protections is based on the law of the
place in which the marriage took place. This “place of celebration” provision was
designed to allow all legally married couples, whether opposite-sex or same-sex, to have
consistent federal family leave rights regardless of whether the state in which they
currently reside recognizes such marriages.
The state of Texas filed the instant action against the federal government and the DOL; it
was later joined in the action by the states of Arkansas, Louisiana, and Nebraska. The
states sought a temporary restraining order and a preliminary injunction to enjoin and
stay the application of this final rule, scheduled to take effect March 27, 2015.
Likelihood of success on the merits. First, the court found that the states demonstrated a
likelihood of success on the merits of both their arguments: that the rule at issue is invalid
under the Administrative Procedure Act (APA) because the DOL exceeded its authority
under the FMLA, and because it conflicts with the Full Faith and Credit Statute (FFCS)
(Section 2 of DOMA). The states also demonstrated a likelihood of success on their
claims that the final rule was invalid because it conflicts with state laws regarding
marriage, which was not the intent of Congress.
Standing and ripeness. To begin with, the court rejected the federal government’s
arguments that the states could not establish standing or ripeness because they had not
alleged any immediate plan to deny a request for spousal leave on the basis of the sex of a
marital partner.
The states established standing, the court ruled, by demonstrating that the final rule will
require them to violate their own laws by granting leave requests and by changing agency
FMLA policies, which is itself an injury-in-fact, sufficiently showing an immediate threat
of harm given that the rule was scheduled to take effect on March 27, 2015 (the day after
the preliminary injunction was issued). For the same reasons, the harm to the states was
sufficiently concrete and the issues in the case were justiciable so as to establish ripeness.
FMLA authority. Agreeing with the states, the court found that the final rule was invalid
under the APA because the DOL exceeded its statutory authority under the FMLA in
promulgating it. Applying the Chevron analysis, the court determined that the final rule’s
definition of marriage conflicts with the statutory definition given in the FMLA. When
the FMLA was enacted in 1993, no state had yet legalized same-sex marriage; as such,
the definition of “spouse” would not, at that time, have been interpreted to include marital
partners of the same sex. Three years later, Congress enacted DOMA. It was clear that
Congress intended to give marriage “its traditional, complementarian meaning,” the court
wrote, and Congress further intended to preserve a state’s ability to define marriage in
this way without being obligated under the laws of another jurisdiction that may define it
differently. Therefore, it was unlikely that Congress intended to delegate to the DOL the
right to regulate spousal benefits in a manner that conflicted with the Full Faith and
Credit Statute.
54
Power to define marriage. Nevertheless, the court noted that it court must disregard
Congress’ intentions to the extent such intentions exceed Congress’ authority under the
Constitution. While Windsor held that Congress’ power to define marriage was limited,
the federal circuits are currently split regarding whether principles of individual rights or
of federalism ground the Windsor opinion, and this very question is currently pending
before the Supreme Court in Obergefell v Hodges (Dkt No 14-556). “At a minimum, it is
clear from Windsor that Congress does not have unlimited power to impose its definition
of marriage on the states,” the district court noted.
Moreover, Congress cannot delegate power that it does not possess, such as the power to
unilaterally impose its definition of marriage upon the states. Accordingly, “under both
Windsor and the Full Faith and Credit Statute, as they stand today, Congress has not
delegated to the Department the power to force states defining marriages traditionally to
afford benefits in accordance with the marriage laws of states defining marriage to
include same-sex marriages,” the court concluded. Thus, absent clear direction to the
contrary by the Supreme Court or Fifth Circuit Court, the court said it must conclude that
the final rule exceeded the authority Congress delegated to the DOL.
Conflict with FFCS. The states also claimed that the rule was invalid under the APA
because it directly conflicts with federal law, specifically the FFCS. According to the
states, the FFCS clearly forbids the situation at issue here in which a state, through its
agencies, is required to give effect to a federal regulation that confers a right or claim
arising from same-sex marriages from other jurisdictions. The federal government
countered that the final rule does not transgress the FFCS because it requires states to act
only in their capacity as employers, and not in their official capacity.
Finding the state’s argument more persuasive, the court determined that the states were
likely to show that the language of the FFCS was clear and expansive, and its context did
not indicate the presence of such a distinction or exception to the statute’s prohibition that
was suggested by the federal defendants. Given that the FFCS is currently still valid, the
states are likely to succeed on the merits of their assertion that rule runs afoul of the APA
by conflicting with federal law.
Preemption of state law. Rejecting the federal defendants’ assertion that the court did
not have subject matter jurisdiction to address the issue, the court also found that the rule
was invalid because it conflicts with state laws regarding marriage, and Congressional
intent to preempt the states’ definitions of marriage was lacking. The federal defendants
claimed that there was no conflict and that the rule did not purport to displace the states’
laws regarding marriage. Unlike the previous WHD rules defining “spouse” according to
the employee’s state of residency, the rule challenged here is based upon the jurisdiction
in which the marriage was celebrated and is not neutral towards states holding different
marriage policies. Having already determined that the final rule exceeded the scope of
congressionally delegated authority, the court further found that the DOL’s action
improperly preempts state law forbidding the recognition of same-sex marriages for the
purpose of state-given benefits.
55
Other factors in preliminary injunction test. Since it found that the states
demonstrated a likelihood of success on the merits, the court turned to the remaining
three preliminary injunction test factors. States would suffer irreparable harm if the rule
were implemented against them because state officials would be forced to choose
between violating a federal rule to comply with state law or vice versa. The federal
defendants’ assertion that the rule merely affects the states in their capacity as employers
does not take into account the clear and expansive language of the text, the court stated.
State harm outweighed impact on federal defendants. Second, the states demonstrated
that their threatened injury outweighed the threatened harm to the federal defendants.
Pointing out that the issue of conflicts between state and federal definitions of marriage is
currently pending in both the U.S. Supreme Court and the Fifth Circuit (Obergefel and
De Leon v Abbott (5thCir dkt no 14-50196)), the court here, noting it was following the
lead of other lower courts, found the interest in the stability and consistency of the law to
outweigh the parties’ immediate interests. The final rule not only implicates federalism
concerns, but also implicates the question of whether a federal agency may require state
actors to violate state laws through this act of rulemaking. Therefore, the balance of
interests weighed in favor of the states.
Public interest. Finally, the court turned to the public interest factor. Recognizing the
burden that individuals requesting spousal leave encounter, the court noted that its order
did not prohibit employers from granting leave to those who request leave to care for a
loved one. However, a preliminary injunction was necessary to prevent the DOL from
mandating enforcement of its final rule against the states. “The public maintains an
abiding interest in preserving the rule of law and enforcing the states’ duly enacted laws
from federal encroachment,” the court wrote.
Accordingly, the court granted the preliminary injunction and ordered the DOL to stay
the application of the final rule pending a full determination of the matter on the merits. It
also set a $100 bond, and, if requested by a party, a hearing on April 13, 2015.
The case number is: 7:15-cv-00056-O.
Attorneys: William T. Deane, Office of the Texas Attorney General, for State of Texas,
State of Arkansas, State of Louisiana, and State of Nebraska. James C. Luh, U.S.
Department of Justice, for United States.
Justices will not resolve question of who decides permissibility of class arbitration
By Pamela Wolf, J.D.
The Supreme Court will not take up the question of who decides whether class or
“group” arbitration is permissible—the court or the arbitrator— in the absence of express
language referring to class arbitration in an agreement. Had the petition for cert been
granted, the Justices would have reviewed the Third Circuit’s ruling, in Opalinski v.
Robert Half International Inc, that unless the parties “unmistakably provide otherwise,”
the determination of class arbitrability is for the court, not the arbitrator.
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Arbitrator decided the question below. Below, two employees filed a putative
collective action contending they were erroneously classified as exempt by their
employer and improperly denied overtime pay. However, both employees had signed
employment agreements that contained arbitration clauses, and those provisions did not
mention classwide arbitration. The employer moved to compel individual arbitration and
the district court granted the motion in part, but it held that whether arbitration should
proceed as a class or individually would be determined by the arbitrator. Instead of
appealing that order, the employer went to arbitration.
When the arbitrator concluded that the employment agreements allowed for classwide
arbitration and issued a partial award to that effect, the employer once again sought
recourse in the district court, asking the court to vacate the arbitrator’s award. The district
court denied the employer’s motion to vacate the award, prompting the employer to
appeal.
Third Circuit appeal. The Third Circuit ruled that unless the parties “unmistakably
provide otherwise,” whether an arbitration agreement allows for classwide arbitration is a
substantive “question of arbitrability” to be decided by a district court, not an arbitrator.
The appeals court remanded the case to the district court to decide in the first instance
whether the parties contemplated classwide arbitration of a putative overtime collective
action.
Circuit divide. The employees had urged the Supreme Court to take up the question
because, among other things, the Third Circuit’s ruling had widened an existing circuit
divide. The First and Seventh Circuits have found that an arbitrator, and not a court,
should determine the availability of consolidated or associational arbitration (which is
similar to classwide arbitration), and the Second and Eleventh Circuits have approved
arbitrators’ awards construing agreements to provide for classwide arbitration (thus
implicitly finding the question properly before the arbitrator, and not a question of
arbitrability for the courts), according to the petition for cert.
Congressional Democrats throw weight behind DOL’s revised home care rules
A group of 50 Democratic lawmakers has signed onto an amicus brief supporting the
Department of Labor in its appellate challenge to a district court ruling invalidating the
agency’s revised domestic worker regulations. U.S. Senator Patty Murray (D-Wash.) and
Representative Bobby Scott (D-Va.) led a bicameral group of Congressional Democrats
in filing an amicus brief seeking to overturn a decision of the District of Columbia
District Court, which enjoined the DOL from implementing rule changes that would
eliminate the FLSA’s exemption from overtime and minimum wage for companionship
services workers.
“Home care workers, including tens of thousands in my home state of Washington, have
demanding jobs that provide families in need with critical, deeply personal support,” said
Murray, in a press statement issued on Friday, February 27. “These professionals, ninety
percent of whom are women, deserve to have the economic security that comes with a
basic minimum wage and overtime protections. I’m proud to be joined by Democrats in
both houses of Congress to challenge the court’s misguided decision.”
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“For too long, home care workers have been denied bedrock minimum wage and
overtime protections,” said Congressman Scott. “As this workforce grows, these workers
deserve to be recognized as the professionals they are. I hope that the D.C. Circuit Court
will overturn this misguided decision and extend Fair Labor Standards Act protections to
the nearly 2 million workers who would benefit from the Department of Labor’s rule.”
The companionship services exemption, enacted in 1974, “was originally intended to
apply to elder sitting, similar to casual babysitting, and had been broadly interpreted to
include home care workers,” the amicus drafters note. “However, the role of home care
workers has changed dramatically since this exemption was first enacted, and today,
these workers provide critical professional services to millions of older Americans and
individuals with disabilities.” They say their amicus brief gives “an authoritative account
of legislative intent in the FLSA, which clearly allows DOL to determine rules and
regulations that define the companionship services exemption.”
The home care workforce is projected to skyrocket over the next decade to nearly 3.2
million workers in 2020. The home care industry is booming, with over $90 billion in
annual revenue and 30-40 percent gross margins. Still, home care workers under current
law do not enjoy basic FLSA protections—a problem the DOL sought to correct in 2013
by enacting a final rule to extend overtime and minimum wage protections to these
workers. In January, a court overturned the rulemaking, “despite a unanimous Supreme
Court decision in Long Island Care Services vs. Evelyn Coke in 2007, which affirmed
DOL’s authority to issue regulations defining ‘companionship services.’”
Fifteen members of the Senate have signed on to the amicus brief; 35 House members
have signed.
WHD finds ‘rampant’ labor violations in Dallas-area hotel industry
According to a DOL Wage and Hour Division enforcement initiative in the Dallas area,
the practice of working off the clock is widespread in the hotel industry, where staffing
agencies often provide the workers and labor law violations are what the agency called
“rampant.” Housekeepers, cooks, maintenance workers, front-desk clerks, and event
managers are among the 639 employees in the Dallas area and in Abilene, Texas, who
have received more than $180,000 in back wages following the agency initiative, the
DOL said in a March 3 statement.
The Dallas-area initiative has included more than 30 investigations by the WHD’s Dallas
District Office of motels, hotels, and hotel managing and staffing agencies in Arlington,
Dallas, Garland, Grapevine, Irving, Plano, and Abilene. The investigations found FLSA
violations that included not paying the federal minimum wage and worker overtime;
failing to include bonuses and commissions when computing worker’s overtime rates of
pay; and not keeping accurate records of the hours employees work. Some employees
also were purportedly misclassified as independent contractors.
The WHD identified Dallas-based SNA Staffing Inc., dba S & A Staffing, as a major
violator. The firm provides workers to clients in the hospitality market, mainly in the
Dallas-Fort Worth area. S & A Staffing purportedly failed to combine hours when
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employees worked at more than one client during the workweek, which led to employees
working beyond 40 hours in a workweek and then failing to receive time and one-half in
overtime pay. The DOL said that the company paid $113,795 in overtime back wages to
390 employees.
“We are taking a hard look at the hotel industry where employment practices, such as
subcontracting, franchising, and third-party management, can put downward pressure on
costs—often at the expense of wages,” said WHD Regional Administrator Cynthia
Watson. “We will continue to use every enforcement tool available to ensure
industrywide compliance with the law.”
Paid family and medical leave proposal reintroduced
Representative Rosa DeLauro (D-CT) and Senator Kirsten Gillibrand (D-NY) have
reintroduced a measure that would create paid family and medical leave. The proposal
would establish a national paid family and medical leave insurance program with the aim
of “ensuring that American workers would no longer have to choose between a paycheck
and caring for themselves or a family member.”
The lawmakers noted that the current Family and Medical Leave Act provides unpaid,
job-protected leave for serious health related events. However, only about half the
workforce qualifies for this unpaid leave, and many more simply cannot afford to take it
because it is unpaid.
The Family and Medical Insurance Leave (FAMILY) Act (H.R. 1439: S. 786) would
create an independent trust fund within the Social Security Administration to collect fees
and provide benefits. The proposal would fund the trust by employee and employer
contributions of 0.2 percent of wages each, creating a self-sufficient program that would
not increase the federal budget. The FAMILY Act would make leave available to every
person, no matter the size of his or her current employer and regardless of whether the
person is currently employed by an employer, self-employed, or unemployed, so long as
the person has sufficient earnings and work history. The proposal, which was first
introduced in December 2013, has 82 original cosponsors. “In 1986, when I was Chief of
Staff to Senator Chris Dodd, I was diagnosed with ovarian cancer. It was an experience I
would not wish on anybody,” remarked DeLauro. “But in one sense I was lucky; my
employer offered paid medical leave. Paid leave helped me get through that difficult time
in my life, but many families are not as fortunate. Access to paid family and medical
leave should be a fundamental right for all Americans, not a lottery based on where you
happen to find work. Helping families who work hard keep their jobs and hang on to their
paychecks during a tough period in their lives will boost our economy. There is no reason
not to pass the FAMILY Act.” “When a young parent needs time to care for a newborn
child—it should never come down to an outdated policy that lets her boss decide how
long it will take—and decide the fate of her career and her future along with it,”
Gillibrand said. “When any one of us—man or woman—needs time to care for a dying
parent—we should not have to sacrifice our job and risk our future to do the right thing
for our family. Choosing between your loved ones and your career and your future is a
choice no New Yorker should have to make.”
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Labor Secretary’s comments on budget proposal map out DOL enforcement
strategies
By Pamela Wolf, J.D.
Secretary of Labor Thomas E. Perez, in testimony before the House Education and the
Workforce Committee on Wednesday, March 18, to justify the President’s budget
proposal for the DOL, pointed to the need to raise the minimum wage and combat
overtime wage violations, among other things, and outlined the DOL’s new approach to
enforcing wage and hour laws. His comments, particularly in the wage-and-hour arena,
put certain employers on notice of stepped-up compliance enforcement efforts,
particularly those at “the top of the chain.”
Economic recovery. Perez began his testimony by reminding lawmakers that we are now
in a climate of economic recovery: “We've come a long way in the last six years. In the
few months before President Obama took office, the economy was in free fall—we had
lost roughly two million jobs. Today, we have had five years—60 consecutive
uninterrupted months—of private sector job growth, to the tune of 12 million new jobs
over that time. That's the longest such streak on record, and 2014 was the best year for
job creation in the United States since 1999.
“The wind is clearly at our back. The economic indicators are promising across the board.
The current unemployment rate is 5.5 percent, down from 10 percent in the fall of 2009.
2014 was the first year in 30 years that the unemployment rate declined in every state in
the nation. Consumer confidence is near a seven-year high. The deficit hasn't fallen this
fast since the end of World War II. We're exporting more in American goods and services
than ever before. The auto industry was almost left for dead in 2008, but today sales are
high again. All of these factors are leading finally to a strengthening labor market—
coming out of the Great Recession, there were nearly seven job seekers for each available
position; today that ratio is less than two-to-one.”
But according to Perez, it’s not yet time to celebrate, but rather to “find the common
ground to do even better” and “ensure that the fruits of this recovery are enjoyed by more
people and more working families.”
Raising the minimum wage. Perez also noted that the impressive economic recovery has
not “reversed a decades-long trend in wage stagnation among middle- and low-income
families.” He said “we have to help more people increase their incomes and make their
paychecks go further,” suggesting that it should begin with “a long-overdue increase” in
the minimum wage, including for tipped workers. “The President first called on Congress
to take this step more than two years ago, because he believes that no one who works
full-time in the wealthiest nation on earth should have to raise their family in poverty.”
The Labor Secretary talked about the many low-wage workers who “need SNAP
(formerly known as food stamps) or other forms of public assistance to get by. Often,
they are one setback away from complete desperation. For you or me, car trouble and a
trip to the repair shop are inconvenient; for many of them, it's a financial catastrophe,” he
observed.
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Perez also applauded what he called “forward-looking employers” that are paying higher
wages even though not required to do so, “as a matter of enlightened self-interest,”
including Costco, the Gap, Shake Shack, and Ace Hardware. “They recognize that it
translates into improved morale and greater productivity. It increases retention rates, thus
cutting turnover and training costs. Besides, many of them recognize that in an economy
driven by consumer demand, better paid workers mean more people with more money in
their pockets to spend on all kinds of goods and services, which leads to stronger business
growth and more jobs—a virtuous cycle.”
But not all employers will “do the right thing,” according to Perez, “we know that there
are some who will try any way they can to raise their profits at the expense of their
workers.”
Sketching out the growing wage-hike trend among the states, Perez observed: “Over the
last two years, 17 states plus the District of Columbia have raised their own minimum
wages, thus benefitting a total of seven million workers nationwide. On Election Day last
November, Nebraska, South Dakota, Alaska, and Arkansas all passed ballot measures to
increase their states' minimum wage.”
Nonetheless, Perez urged that the federal minimum wage should be raised “because
whether a full time job lifts you out of poverty shouldn't depend on whether you've won
the geographic lottery or not.”
Overtime pay. In addition to the Obama administration’s efforts to make headway on the
wages front through the president’s executive order mandating a $10.10 minimum wage
for workers on new federal construction and service contracts, Perez pointed to the Labor
Department’s move “to modernize the nation's rules on overtime pay, which have not
kept up with inflation or with changes in the economy.” Those rules have not been
updated since 1975.
“The basic premise of the overtime law that Congress enacted more than 75 years ago is
pretty straightforward: If you work more, you should get paid more. But that basic
principle is undermined in too many cases,” Perez said. “The assistant manager at a fast
food restaurant who puts in 60-70 hours a week for $455 and spends almost all of their
time performing the same work as the employees they supervise and who does not get
overtime is getting a raw deal. We are updating the rule to prevent this situation.” In
doing so, the DOL has “conducted unprecedented levels of outreach, holding multiple
listening sessions with employers and workers in a wide array of industries,” he asserted.
The new wage-law enforcement approach. Perhaps the most instructive of Perez’s
comments pertained to wage-hour law enforcement, which matters, he said “because the
laws that you pass, and the regulations that we promulgate to implement those laws, are
only as good and as meaningful as our ability to make those words on a page a reality for
American workers,” and enforcement “also levels the playing field for employers who
play by the rules.”
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The Wage and Hour Division’s investigation force has been increased by more than onethird, Perez noted, also clarifying that the increase only brings staffing back to 1970s
levels when the labor force was significantly smaller. The president’s fiscal year 2016
budget calls for more staffing increases, requesting $277 million overall for the WHD,
including a $31.7-million increase for additional enforcement staff and support.
How has the WHD changed its approach to enforcement? “We have equipped our
investigators with the modern tools they need to do their work. We've used data and
evidence-based strategies to deploy them strategically,” the Labor Secretary explained.
“And we've also shifted the focus of our enforcement efforts. Instead of a purely reactive
approach where we respond to incoming complaints, we have targeted investigations in
industries where we know workers are vulnerable, and where they are often reluctant to
raise their voices and exercise their rights.” According to Perez, strategic enforcement
yields “very real results for working families” and is also “a more efficient use of
resources.”
According to Perez, the WHD has directed its resources to:

where the data and evidence show wage violations are most likely to occur,

where emerging business models lend themselves to such violations, and

where workers are least likely to exercise their rights.
And Perez made clear that the WHD’s continued efforts will focus on industries with
low-wage workers: “[W]age violations are pervasive, especially for low-wage workers,
and so we must continue to step up our efforts and take our enforcement to the next level.
We want and need to create ripple effects that impact compliance far beyond the
workplaces where we are actually on the ground investigating.”
The WHD’s efforts will be targeted to employers at the top of the supply chain. “One
way to leverage our enforcement resources is to identify the supply chain,” the Labor
Secretary explained. “The idea is to cause those at the top of the chain to evaluate the
compliance practices of those below them; and to get them to think twice about whether
it is worth the risk to their good name, and possibly their bottom line, to do business with
a supplier or subcontractor who skirts the law.”
Employers that fit the profile described by the Labor Secretary should consider
themselves on notice of stepped-up compliance enforcement.
Wal-Mart takes due process aspect of ‘trial by formula’ to Justices
By Pamela Wolf, J.D.
Wal-Mart is asking the Supreme Court to take the landmark Wal-Mart Stores, Inc. v.
Dukes ruling even further and hold that the Due Process Clause of the 14th Amendment
prohibits a state court from using “trial by formula” in determining liability in class
actions. The Dukes decision disapproved of trial by formula as a violation of the Rules
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Enabling Act, but it did not reach the question of whether such novel methods that
remove the need for individualized determinations run afoul of due process rights. In a
pair of recently filed petitions for cert, the giant retailer asks the Justices to answer that
open question.
In Wal-Mart Stores, Inc. v. Braun (Dkt Nos. 14-1123 and 14-1124), the company is
asking the High Court to review various decisions by Pennsylvania courts in two
consolidated cases under which Wal-Mart was ultimately found liable for $150 million to
a class of 187,000 employees who alleged the company denied them paid rest breaks and
forced them to work off the clock. The rub is that only six employees actually testified,
and the rest of the plaintiffs’ case relied on extrapolated evidence by class experts who
purportedly applied evidence relating to a small subset of class members and only part of
the relevant time period to all of the class members for the entire eight-year period at
issue, according to the petitions. The 187,000 class members had worked among 139
different stores in the state.
Below, the Pennsylvania courts rejected Wal-Mart’s federal due process challenges to
class certification and classwide judgment. This case, the retailer asserted, “provides the
Court with the rare opportunity to resolve a deepening conflict on the ‘important
question’ of the ‘extent to which class treatment may constitutionally reduce the normal
requirements of due process.”
The specific question the petitions ask the Justices to answer is this: “Whether the Due
Process Clause of the Fourteenth Amendment prohibits a state court from certifying a
class action, and entering a monetary judgment in favor of the class, where the court
permits the use of extrapolation to relieve individual class members of their burden of
proof and forecloses the defendants from presenting individualized defenses to class
members’ claims.”
WHD gas station initiative yields $5.5 million for New Jersey workers
More than 1,100 attendants at Shell, Exxon, BP, and other leading brand gas stations in
New Jersey have received $5.5 million in back wages and damages recovered in a
multiyear enforcement initiative conducted by the DOL’s Wage and Hour Division. Over
the past five years, these workers have been denied the minimum wage and, in some
cases, overtime pay, according to the WHD. The division plans to continue its focus on
this particular industry during 2015.
“Our investigations of the New Jersey gas station industry found widespread violations of
the federal Fair Labor Standards Act's minimum wage, overtime and record-keeping
provisions,” explained WHD Regional Administrator Mark Watson. “To combat these
violations, we are engaged in strategic enforcement and outreach efforts with employer
organizations and employee advocacy groups to educate all parties on their rights and
responsibilities. Our efforts are having an impact on the industry.”
In fiscal year 2014, the WHD recovered almost $300,000 in back wages and damages for
nearly 100 employees—about $3,000 per worker, according to an agency release on
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March 26. Although still a significant amount of recovery, it has dropped to its lowest
point since the initiative began in 2010.
WHD investigators reported that some gas stations hired more employees to avoid
overtime violations; purchased time clocks to track hours worked; and contacted the
division for help in providing intensive training for managers on overtime and minimum
wage laws. The WHD said it will continue to monitor this industry for continued
compliance in FY 2015.
Since 2009, the WHD’s investigations have resulted in the recovery of more than $1.3
billion dollars in back wages for more than 1.5 million workers, according to the DOL.
“The wages recovered for these low-wage workers will help them pay rent and put food
on the table for their families,” remarked Secretary of Labor Thomas E. Perez. “These
wages will also fuel the local economy.”
Microsoft gives a little push to the paid leave movement
By Pamela Wolf, J.D.
It’s no secret that President Obama has guaranteed paid leave benefits for U.S. workers
on his radar. And many states, in the absence of Congressional action, have increasingly
enacted new paid leave laws or expanded existing protections. Now, one of the nation’s
forward-looking technology companies has given additional momentum to the trend.
Microsoft is taking action to guarantee paid leave to U.S. workers, even if the company’s
reach extends only as far as their suppliers. “We believe paid time off is an important
benefit for workers in our economy,” wrote Brad Smith, General Counsel & Executive
Vice President, Legal and Corporate Affairs, in a March 26 blog posting. Over the next
year, the company plans to make changes that will “ensure that a wide variety of
suppliers that do business with Microsoft in the U.S. provide their employees who handle
our work with at least 15 days of paid leave each year.”
Paid leave benefit. Specifically, Microsoft is working to ensure a minimum of 15 days of
annual paid time off for the eligible employees at its suppliers, either through 10 days of
paid vacation and five days of paid sick leave, or through 15 days of unrestricted paid
time off.
Which suppliers and workers will be affected? Suppliers with 50 or more U. S.
employees will be expected to meet the new benefits minimum. Eligible benefit
recipients will be U.S. employees who have worked for those suppliers for more than
nine months (1500 hours) and who perform substantial work for Microsoft. The company
recognizes that this approach will not reach all employees at all of its suppliers, but it will
apply to a great many.
“We want to be clear. Many of our suppliers already offer strong benefits packages for
their employees, including paid time off,” said Smith. “We don’t currently have data on
how many do and how many do not provide paid time off, but our new policy will ensure
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that every supplier with 50 or more employees will do so for employees doing substantial
work for Microsoft.”
Phased implementation. Because Microsoft understands its policy may increase costs
for some of its suppliers, the company plans to work with those suppliers to implement
these changes over the next 12 months. “We appreciate that this may ultimately result in
increased costs for Microsoft, and we’ll put a process in place for addressing these issues
with our suppliers,” Smith wrote.
Microsoft believes its approach is novel among large employers and thus wants “to be
thoughtful and well-informed about our implementation of this step,” according to Smith.
The company wants to make sure it’s not making changes that undermine the breadth and
diversity of its suppliers. Women/minority-owned businesses account for over $2 billion
of Microsoft’s supplier services in the United States, and so it wants to “be sensitive to
the needs of small businesses,” Smith said. As a result, Microsoft will be launching “a
broad consultation process” with its suppliers to solicit feedback and learn about the best
way to phase in the specific details. “We’re committed to the direction that we’ve set, but
focused on learning as much as we can about how to implement this effectively,” Smith
explained.
Why is Microsoft launching this new policy? “Over the past year there has been
increasing debate about income inequality and the challenges facing working people and
families,” explained Smith. “While this is often discussed as a general topic, at times
individuals have raised pertinent questions for companies in the tech sector, including
Microsoft. This has led us to step back and think anew about the types of benefits policies
we want to have with our suppliers.”
After studying the issue, Microsoft has reached these conclusions:

Paid time off benefits both employers and employees by contributing to a happier
and more productive workforce. “Research shows paid time off contributes to the
health and well-being of workers and their families, strengthens family ties,
increases productivity, improves retention, and lowers health-care costs,” Smith
said. He also pointed to a University of Pittsburgh study concluding that paid sick
leave contributes to the health of an employee’s colleagues. The study found,
according to Smith, that “one flu day reduced on-the-job transmission by 25
percent, while two flu days reduced such transmissions by 39 percent.”

Lack of paid time off disproportionately impacts low-wage earners. Smith said
that although estimates vary, the overall trend is clear. He cited a study that found
that “only 49 percent of those in the bottom fourth of earners get paid time off,
compared with almost 90 percent among the top quarter of earners.” Smith also
noted that “lack of paid time off also has a disproportionate impact on minorities
at a time when the tech sector needs to do a better job of promoting diversity.”
Microsoft employee benefits. The company considered these conclusions in the context
of its own benefit policies for full-time employees. What do those employees get?
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According to Smith, full-time Microsoft employees get comprehensive health and
wellness programs for families, child care support, paid annual leave, paid sick leave, and
paid time off for new moms and dads.
Senate passes budget with paid sick day, pregnancy discrimination amendments
By Pamela Wolf, J.D.
Early on Friday, March 27, the Senate passed its version of the budget by a vote of 52 to
46. The final package included some labor and employment-related provisions that, while
gaining enough support to be included, still face a tough sell during reconciliation, when
the two Chambers work out their budget differences. The House passed its version two
days earlier, on March 25. Among the 54 amendments put to a vote, those of interest to
employers cover paid sick days, pregnancy discrimination, state minimum wage
measures, and same-sex marriage for Social Security purposes.
Paid sick days. Among the measure that made it through is Amendment 798, offered by
Sen. Patty Murray (D-Wash.), which would expand access to paid sick days. Similar to
the Healthy Families Act (H.R. 932, S. 497), introduced in February in the Senate by
Murray and in the House by Rep. Rosa DeLauro (D-Conn.), the amendment would allow
workers to earn up to seven paid sick days yearly. The amendment cleared the Senate
with a strong bipartisan vote of 61-39.
“Paid sick days boost productivity,” Murray said on the Senate floor. “And in cities and
states that already have paid sick leave laws, many employers say the policy hasn’t
affected their revenue. Allowing workers to earn paid sick days would take us a step
closer to an economy that works for all families, not just the wealthiest few.”
Pregnancy Discrimination. Another amendment that enjoyed bipartisan support—
complete support—is a measure that would move the dial forward on doing away with
pregnancy discrimination in the workplace. Passing by a 100-0 ballot, Amendment 632,
submitted by Robert P. Casey, Jr. (D-Pa.), would create a deficit-neutral reserve fund to
support efforts to prevent employment discrimination against pregnant workers. It would
also require reasonable accommodation of pregnant workers, according to Casey, who
pointed to the Supreme Court’s Young v. UPS decision earlier in the week. “Peggy
Young was victorious, but the result is that there is no predictable standard for pregnant
workers in the workplace,” he said. “We need a standard so employees know what their
rights are and so employers can follow the law.”
Michal B. Enzi (R-Wyo.) indicated the support on the other side of the isle for the
amendment: “I want to declare that Republicans are committed to fair and equal
treatment of pregnant women as well. Congress passed the Pregnancy Discrimination Act
in 1978 and passed the Family and Medical Leave Act in 1993. Congress may need to
enact this specific legislation through committee in order to address this issue. This
amendment does confirm the ability of the committee of jurisdiction to draft legislation.”
State minimum wages. Amendment 1038, offered after a minimum wage hike
amendment submitted by Sen. Bernie Sanders (I-Vt.) failed, “would affirm the ability of
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the individual States to raise the minimum wage above the Federal level, but only if they
choose to do so at their own volition,” according to Sen. John Cornyn (R-Texas),
speaking on behalf of Sen. Mark Kirk (R-Ill.), who submitted the measure. “It also calls
for policies that will result in higher wages for all Americans, pro-growth tax relief, and
the elimination of burdensome mandates such as Obamacare,” Cornyn said.
Sanders had a few words to say about the measure: “Frankly, I don't quite understand this
amendment. This is what it says: ‘This amendment would “establish a deficit-neutral
reserve fund” to reaffirm that States can raise minimum wage while providing tax relief
and eliminating excessive government mandates.’”
“States do not need permission from the Federal Government to raise the minimum wage.
In fact, 29 States have already raised the minimum wage. And in the last election, when
that question was on the ballot in four States, all four of those States voted to raise the
minimum wage.”
Nonetheless, the amendment cleared by a 57-43 vote.
Same-sex spouses. An amendment that would establish a deficit-neutral reserve fund to
ensure that all legally married same-sex spouses have equal access to the Social Security
and veterans benefits they have earned and receive equal treatment under the law
pursuant to the U.S. Constitution also passed by a vote of 57-43.
Do they matter? Of course there is the question of whether any of these measures
matter. To the extent that they indicate the level of support for the proposals they
embrace, they do matter. But as several pundits have pointed out, measures such as these
are often submitted to force lawmakers to put their positions on the record or to give
sponsors the opportunity to talk to constituents about the legislative proposal they
support.
LEADING CASE NEWS:
3d Cir.: Armored car driver hauls in the cash, not subject to motor carrier
exemption from overtime
By Ronald Miller, J.D.
An armored car driver fell within a carveout from the motor carrier exemption, ruled the
Third Circuit in affirming the judgment of a federal district court that she was entitled to
overtime compensation for hours worked in excess of 40 in a workweek. Because the
employee served as the driver or guard in vehicles that weighed less than 10,000 pounds
on nearly half of her trips, her daily route included interstate trips on public roadways,
and none of the vehicles were designed to transport eight or more passengers or were
used to transport hazardous materials, she fell squarely within the Corrections Act’s
definition of a “covered employee” (McMaster v. Eastern Armored Services, Inc., March
11, 2015, Fuentes, J.).
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The employee worked for an armored courier company, which operated a fleet of
armored vehicles across several states in the Mid-Atlantic region. She served as a driver
and/or guard, which meant that some days she was assigned to drive an armored vehicle,
while other days she rode as a passenger to ensure safety and security. She spent 51
percent of her total days working on vehicles rated heavier than 10,000 pounds, and 49
percent of her total days working on vehicles rated lighter than 10,000 pounds. She was
paid by the hour, and she frequently worked more than 40 hours in a work week. For all
hours worked, she was paid at her regular rate—no overtime compensation.
Motor carrier exemption. After she left the employer, the employee filed suit claiming
that the employer was required to pay her for overtime wages when she worked more
than 40 hours in a week. The suit was granted conditional certification. Thereafter, the
parties cross-moved for summary judgment. Their dispute centered on whether the
employer was exempt from paying FLSA overtime pursuant to the Motor Carrier Act
(MCA) exemption. According to the employer, the employee fell within the exemption
and was thus not entitled to overtime. On the other hand, the employee contended that
she fell within an exception to the exemption enacted by Congress prior to her
employment. The district court granted the employee’s motion, and ordered that she was
eligible to be paid overtime wages for all hours she worked over 40 in a given workweek.
On appeal, the employer renewed its contention that the employee was ineligible for
overtime because of the MCA exemption. The MCA exemption provides that overtime
pay is not required for “any employee with respect to whom the Secretary of
Transportation has power to establish qualifications and maximum hours of service.”
Congress elaborated upon the MCA exemption with the enactment of the Corrections Act
of 2008. Section 306(a) of the Corrections Act provides that “Section 7 of the Fair Labor
Standards Act . . . shall apply to a covered employee notwithstanding section 13(b)(1) of
that Act.” Section 306(c) of the Corrections Act defines the term “covered employee” to
mean an employee of a motor carrier whose job, “in whole or in part,” affects the safe
operation of vehicles lighter than 10,000 pounds, except vehicles designed to transport
hazardous materials or large numbers of passengers.
“Covered employee.” The employee’s job placed her squarely within the Corrections
Act’s definition of a “covered employee,” concluded the Third Circuit. She was a driver
and guard of commercial armored vehicles, and approximately half of her trips were on
vehicles undisputedly lighter than 10,000 pounds. Her daily routes included interstate
trips on public roadways, and none of the vehicles were designed to transport eight or
more passengers or used to transport hazardous materials.
The relevant language of the Corrections Act is that, as of June 6, 2008, “Section 7 of the
Fair Labor Standards Act of 1938 . . . shall apply to a covered employee notwithstanding
section 13(b)(1) of that Act.” This is a plain statement that a “covered employee” is to
receive overtime even where section 13(b)(1)—the Motor Carrier Act Exemption—
would ordinarily create an exemption, explained the court. Moreover, it observed that
district courts considering the plain language of the Corrections Act have reached the
same conclusion, as has the Department of Labor in a post-Corrections Act field bulletin.
While sister courts of appeals had yet to weigh in squarely on whether a Corrections Act
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“covered employee” is entitled to overtime, the Fifth and Eighth Circuits have noted the
plain language of the Act.
Further, the appeals court rejected the employer’s reliance on a series of district court
cases holding that the MCA exemption remains absolute after the Corrections Act. Each
of those cases relied on a policy statement of the Seventh Circuit in 2009 that “[d]ividing
jurisdiction over the same drivers, with the result that their employer would be regulated
under the Motor Carrier Act when they were driving the big trucks and under the Fair
Labor Standards Act when they were driving trucks that might weigh only a pound less,
would require burdensome record-keeping, create confusion, and give rise to mistakes
and disputes.” However, the Third Circuit pointed out that its jurisprudence has
historically seen the MCA exemption as establishing a strict separation between the
Secretary of Transportation’s jurisdiction and the ambit of the FLSA’s overtime
guarantee.
Because the employee met the criteria of a “covered employee,” she was entitled to
overtime. Thus, the matter was remanded for an assessment of wages owed to her.
The case number is 14-1010.
Attorneys: Peter D. Winebrake (Winebrake & Santillo) for Ashley McMaster. Christina
Vassilou Harvey (Lomurro, Davison, Eastman & Munoz) for Eastern Armored Services,
Inc.
5th Cir.: State agency, supervisor entitled to immunity on discharged employee’s
FMLA claims
By Kathleen Kapusta, J.D.
Finding that the Texas Department of Aging and Disability Services was entitled to
sovereign immunity on a discharged employee’s interference and retaliation claims under
the FMLA’s self-care provision, and that her supervisor was entitled to qualified
immunity on her interference claims, the Fifth Circuit reversed the district court’s denial
of the defendants’ motion for summary judgment and remanded the case to the court
below (Bryant v. Texas Department of Aging and Disability Services, March 25, 2015,
Southwick, L.).
First leave. Hired by the department in 2008 to serve as an assistant resident director in a
state supported living center, the employee was promoted to the residence director
position in 2010. In October of that year, she took FMLA leave to care for her ailing
husband. During this leave, she claimed that her supervisor called her several times at
home to discuss work-related matters and upon her return from leave retaliated against
her by issuing negative reviews and reprimands and reassigning her to another unit.
Second leave. Soon thereafter, she purportedly suffered a mini-stroke and as a result,
missed multiple days of work, for which she received a counseling letter. Sometime in
February, she started suffering from severe depression and panic attacks. Although her
doctor purportedly recommended that she take two months off from work, his FMLA
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paperwork stated that she would only be off for one month. Believing this to be a
mistake, the employee altered her return- to-work date to reflect a two-month leave.
OIG investigation. When the doctor faxed the original paperwork with the unaltered
return-to-work date, the employee’s supervisor referred the case to the Texas Health and
Human Service Commission’s Office of the Inspector General (OIG) for further review.
Although the OIG instructed the supervisor to schedule an interview, the employee
refused to come into work. She also refused to talk to the OIG investigator that went to
her house. The issue was eventually referred to the district attorney.
District court proceedings. A few weeks after the employee returned to work, she was
disciplined for her continued failure to obey work rules and ultimately terminated. She
then sued the department and her supervisor, alleging that they interfered with her leave
by reassigning her when she returned from leave, calling her at home with work-related
issues, and sending an investigator to her home to threaten criminal prosecution, while
was on protected FMLA leave. She also claimed that the defendants unlawfully retaliated
against her for taking leave. Granting summary judgment to the defendants, the district
court held that a fact issue existed concerning the reason for her discipline and
termination. It further held that the supervisor was not entitled to qualified immunity and
that sovereign immunity did not apply because “the plaintiff seeks reinstatement, relief
that escapes Eleventh Amendment preclusion.” Finally, it held that her interference claim
“does not require resolution at this time” but noted that the “evidence of interference . . .
reaches the threshold for a separate basis of recovery . . . .”
Sovereign immunity for department. On appeal, the court first noted that while
Congress has validly abrogated states’ sovereign immunity with respect to the FMLA’s
family-care provision, it has not done so with respect to the statute’s self-care provision;
thus states may still assert an Eleventh Amendment immunity defense against claims
based on that provision. Despite this, the appeals court noted that the district court
determined that sovereign immunity did not bar the self-care claim when a plaintiff seeks
“reinstatement, relief that escapes Eleventh Amendment preclusion.”
Here, the employee argued that her claim for reinstatement was an acceptable form of
prospective relief against the state that was not barred by the Eleventh Amendment. The
Fifth Circuit, however, disagreed, finding that the Ex parte Young exception on which she
relied did not apply to suits against state agencies; rather, this narrow exception was
limited to certain claims against state employees acting in their official capacities. Thus,
the court found that her self-care claims against the department were barred by sovereign
immunity and the district court did not have jurisdiction over either her interference or
retaliation claims to the extent they related to her self-care leave.
Qualified immunity for supervisor. The defendants next argued that the employee’s
supervisor was entitled to qualified immunity on her interference claims. As to her claim
that her reassignment amounted to interference, the court noted that she was reassigned
approximately six weeks after returning from family-care leave and that she took all the
family-care leave to which she was entitled. Observing that she did not show that the
reassignment interfered with, restrained, or denied her exercise or attempt to exercise her
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FMLA rights, the court found she failed to show the reassignment violated a clearly
established right; thus, the supervisor was entitled to qualified immunity on this claim.
Further, her claim that her supervisor interfered with her FMLA rights by sending an OIG
investigator to her house was also insufficient as the supervisor did not have any control
over the OIG investigation or the OIG’s independent actions. Thus, she was also entitled
to qualified immunity with respect to this claim.
As to her claim that her supervisor interfered with her leave by calling her with workrelated matters during both leave periods, the court found that she failed to cite to single
judicial opinion holding that employees on FMLA leave have a right to be free from
phone calls. Accordingly, the supervisor was entitled to qualified immunity on this
interference claim as well.
Sovereign immunity for supervisor. Finally, the court turned to the department’s
argument that because sovereign immunity barred the employee’s self-care claims against
it, the self-care claims against the supervisor were similarly barred. Here, the defendants
contended that the appeals court issued two conflicting opinions addressing this issue,
pointing out that in the first, Kazmier v. Widmann, it stated in a footnote that sovereign
immunity precluded a personal-capacity damages claim filed against state officials.
However, they asserted, the appeals court later limited Kazmier to its facts and said that
in some circumstances, sovereign immunity would not bar relief against officials.
While they argued that these decisions could not be reconciled and that the court was
bound by the earlier Kazmier decision, the court noted that they raised the possibility of
sovereign immunity as a bar to the claims against the supervisor for violations of selfcare rights for the first time on appeal. Because the district court did not have an
opportunity to rule on the defense, the appeals court declined to exercise its discretion to
address this argument, leaving it for the district court to address on remand.
The case number is 14-20278.
Attorneys: David J. Manley (Law Office of David J. Manley) for Tammy Bryant.
Douglas D. Geyser, Office of the Solicitor General, for Texas Department of Aging and
Disability Services.
6th Cir.: Jury should decide if satellite installer was independent contractor
By Brandi O. Brown, J.D.
Vacating summary judgment in favor of an alleged employer in an FLSA suit by a
technician who installed Internet satellites, a Sixth Circuit majority concluded that there
were genuine issues of fact on whether the installer was an independent contractor rather
than an employee. Judge Norris dissented (Keller v. Miri Microsystems LLC, March 26,
2015, Moore, K.).
Miri Microsystems LLC was a middle man in the satellite Internet installation chain,
connecting certified installment technicians with orders that customers placed with a
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nationwide Internet service provider, HughesNet. Miri assigned jobs based on each
technician’s geographic location and availability. Miri was paid by the job type by
Hughes and, in turn, paid technicians by the job, rather than by the hour. The plaintiff, a
technician who had previously worked for Miri, was paid $110 per installation and could
complete two to four installations per day. He typically worked six days per week, from 5
a.m. to midnight. He filed suit against Miri, alleging that its payment system violated the
FLSA and that he had not received overtime pay.
Miri filed a motion for summary judgment against the technician, arguing that he was an
independent contractor and thus not entitled to overtime compensation. The district court
granted that motion, holding that the plaintiff was an independent contractor and not an
employee. The technician appealed. Noting that the question of whether or not the
plaintiff was an employee under the FLSA was a mixed question of law and fact, the
appeals court found fact disputes that should have foreclosed summary judgment.
Factors to consider. Although the FLSA was passed with “broad remedial intent,” the
court noted that independent contractors do not enjoy its protections. The employer’s
label was not dispositive—the court still examines whether or not a plaintiff was in fact
an independent contractor by applying an economic-reality test. Six factors that are
usually considered include: (1) the permanency of the relationship between the worker
and purported employer; (2) the degree of skill necessary for the job; (3) the worker’s
capital investment; (4) the worker’s opportunity to profit or lose money; (5) the degree of
control the purported employer rendered over the manner in which the work was
performed; and (6) whether the work in question was an “integral part” of the purported
employer’s business. Although no factor alone was dispositive, one central consideration
was how economically dependent the worker was on the purported employer’s business.
Exclusivity and permanency. With regard to the first factor, the appeals court found fact
disputes on whether the parties had an “exclusive, permanent relationship in practice.”
The fact that they did not have a contract was inconsequential, because the FLSA was
“designed to defeat rather than implement contractual arrangements.” The fact that the
relationship was not an exclusive one and that the technician could work for other
companies was a factor for consideration, but it was one among many in determining his
economic dependence. The technician worked for Miri for almost 20 months and treated
the company “as his permanent employer,” never refusing an assignment and operating
under the belief that he could be fired. On the other hand, he was never prohibited from
working for other companies and, had he so chosen, could have worked fewer days for
Miri. However, on the days he did work, there were many factors outside of his control,
such as how long the installation would take and the travel time needed. “Even the most
efficient technician could not finish four jobs in a day under eight hours,” the court
explained, “suggesting that technicians have slim control over their working hours and
little ability to work for other companies.” Thus, this factor was inconclusive.
Skill needed and acquired. Also uncertain was the amount of skill needed. While there
was “ample evidence” to support a conclusion that technicians were skilled workers,
based on required certification by the nationwide service provider and the need for
computer and equipment-related skills, as well as knowledge of electrical code
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provisions, it was unclear if the acquisition of that skill was through a sufficiently
rigorous process to differentiate it from that provided to an employee. Miri provided
training for the certification required by HughesNet, which consisted of an online class
and a one-day, in-person class. Otherwise, the work was not such that it “rises or falls on
the worker’s special skill,” such as that of a carpenter. And the record did not suggest that
the technicians were selected on any basis besides location and availability.
Capital investments. As for capital investments, the waters were equally muddy. The
court agreed with the plaintiff that the parties’ investments should be compared, but noted
that such comparison had to occur while considering a broader question: whether the
investment was “evidence of economic independence.” Therefore, while having a vehicle
for the job might be an investment, the impact of that investment could be diluted by
personal use of that vehicle. The same was true for computer equipment and basic tools.
Here, the plaintiff drove his wife’s van for work, held auto insurance on it, and generally
paid for gas. He used his own tools and his own smart phone, printer, and digital camera.
He also provided some materials, but Miri provided dishes, transmitters, and similar
items. Miri also “made significant capital investments in its business,” including renting
office space. Again, the trier of fact should be the one to decide how these investments
compared and whether they demonstrated the technician’s economic independence.
Profit, loss, and control. Although the district court concluded that the profit or loss
factor weighed in favor of finding that the technician was an independent contractor, the
appeals court concluded that a reasonable jury could find that it pointed in the opposite
direction. Although the technician may have controlled the size of his geographic
territory and how many jobs he accepted, the appeals court could not see how he could
have earned greater profits by expanding that territory or working somewhere else. As for
hiring assistants or becoming a subcontractor, the impact of having a helper would be
slight, as demonstrated by evidence regarding occasional help he received from his wife
and a paid worker. And nothing compelled the conclusion that he could be more efficient
on a daily basis with such help. Moreover, that help came at a cost of its own, while the
payment he received from Miri did not change.
Schedule control. The court considered the amount of control the parties exercised over
the technician’s schedule. Based on the way Miri made assignments and scheduled
installations, a reasonable jury could find that it made it impossible for the technician to
provide services for other companies. Moreover, it exerted some control over how he
performed the job—requiring certification, providing instruction for certification,
monitoring the quality of installations through photographs and customer feedback, and
controlling the amount customers paid to the technician. On the other hand, the plaintiff
could change up the route he took or rearrange his schedule without objection. Miri
stated, however, that it could sever ties with the technician if he was routinely late or
missed appointments. And there was a genuine dispute about discipline generally.
Finally, the court noted that a reasonable jury could conclude that technicians are integral
to Miri’s business. A jury could also find that the technician did not hold himself out as
an independent contractor, but instead as an employee. He did not carry a business card
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or register for a Federal Employer Identification number. Because there were many issues
of fact and reasonable inferences to be drawn, summary judgment was not appropriate.
As to the employer’s alternative argument that the plaintiff did not introduce evidence
showing he actually worked more than 40 hours per week, even without the technician’s
testimony, the court concluded that the employer’s testimony was sufficient evidence
from which a jury could conclude that he worked more than 40 hours per week. It
confirmed that the plaintiff worked six days per week and completed four jobs per day, a
number that could easily take him outside of the 8-hour-day confines.
Dissent. Judge Norris dissented, finding that the district court’s decision was rightly
decided based on the individual circumstances in the record. In particular, Judge Norris
argued that the control exerted by the technician over his working relationship, based on
his ability to reject jobs, rendered him an independent contractor, as did the skill level he
was required to possess. Judge Norris was also unpersuaded that the technician’s use of
the van and other items for personal use was of any importance to the capital investment
analysis. After pointing out problems with the majority’s analysis of the other factors,
Judge Norris encouraged a “common sense approach” and a more comprehensive view,
concluding that it was “abundantly clear that both” the technician and Miri, an LLC with
a single member, “intended” for the technician “to be an independent contractor and
conducted themselves accordingly.”
The case number is 14-1430.
Attorneys: David A. Hardesty (Gold Star Law) for Michael E Keller. Aaron D. Graves
(Bodman) for Miri Microsystems LLC.
8th Cir.: Former servers lack standing to stop pizzeria from serving up fresh
arbitration policy to current servers
By Brandi O. Brown, J.D.
Counsel’s inability to get current employees to opt-in to a collective action FLSA suit
proved fatal to the class’s ability to obtain injunctive relief when the employer served up
a new arbitration policy to its employees, explicitly noting that one effect of the new
agreement would be that the employee would be prevented from joining the collective
action. Without any current employees who had opted in to the lawsuit, the Eighth Circuit
explained, the class lacked standing to seek an injunction regarding the new agreement
affecting current servers. The district court’s order was vacated (Conners v. Gusano’s
Chicago Style Pizzeria, March 9, 2015, Riley, W.).
Arbitration agreement served up, admitted effect on lawsuit. One month after a
former server at one of the named restaurants filed a collective action on behalf of herself
and former and current servers alleging illegal tip pooling violations of the FLSA, the
restaurants implemented a new arbitration policy. The policy allowed employees to opt
out of the agreement and specifically noted the effect the agreement would have on the
employees’ ability to pursue relief in court, including the impact of the agreement on the
collective action filed by the former employee. The plaintiffs, all former employees, filed
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an emergency motion with the court seeking to prohibit “improper communications with
putative class members.” They also filed a motion for class certification. They asked the
district court to invalidate the arbitration agreement as it applied to the claims being
pursued in the lawsuit and to prohibit the employers from communicating with putative
class members regarding the subject matter of the lawsuit.
The district court initially denied the motions but did not rule definitively. Instead the
court scheduled a hearing at which it expressed concern about the downsides of the
approach taken by the employer, particularly the “disincentive” it would offer to
plaintiffs’ attorneys in bringing such lawsuits. Ultimately, the court granted the
employees’ motion for a temporary injunction. The employer filed an interlocutory
appeal.
Appeals court has jurisdiction. The appeals court determined that it had jurisdiction
under Section 1292(a)(1). It recognized, but rejected, the employees’ contention that the
order was not an “injunction” but instead was an attempt to control “the conduct and
progress of litigation before the court” and therefore was not immediately appealable. In
this case, the court explained, the district court’s order had an “injunctive effect” because
it prevented the employer from “using its agreement with current employees to relocate a
dispute to an arbitral forum.” The effect of granting such an injunction, which would
deny arbitration, without allowing for immediate appeal would be that the advantages
offered by arbitration would be lost permanently, because the employer would not be able
to appeal until entry of a final judgment.
Former employees lacked standing. That determination made, the appeals court
considered whether the former employees who were pursuing the claims had standing to
seek the injunction. They did not, the court concluded. The former employees claimed
that their “legally cognizable interest in” pursuing their claim as a collective action was
“curtailed” by the employer’s arbitration agreement, resulting in a “concrete and
particularized injury,” which gave them standing to pursue the injunctive relief sought.
However, the appeals court explained, it could “assess standing in view only of the facts
that existed at the time the former employees challenged the enforceability of the
arbitration agreement.” And at the time of the “crucial motion,” no current employees
had opted in to the collective action. Worse yet, there was no evidence that circumstance
would change in the near future based on the record, and speculation would not suffice.
On that record, Article III was not satisfied and the former employees failed to meet their
“burden of proving a non-conjectural threat of harm.” There was no indication that the
agreement had had a chilling effect, and no plaintiffs against whom it could be enforced.
Former employees can’t assert rights of current employees. Moreover, the former
employees could not “step into the shoes of current employees who are putative
plaintiffs.” Here the court relied upon the U.S. Supreme Court decision in Genesis
Healthcare Corp. v. Symczyk, in which that court “rejected the argument that the plaintiff
held a personal stake in the “case based on a statutorily created collective-action interest
in representing other similarly situated employees” under the FLSA. Thus, the former
employees could not “gain standing” in this case “by defending the rights of current
75
employees, not yet joined in the action.” In this way, the court noted, FLSA collective
actions were different from Rule 23 class actions.
The district court’s injunction order was vacated and the case was remanded. The lower
court lacked jurisdiction to enjoin enforcement of the agreement because the former
employees were without standing to challenge it.
The case number is: 14-1829.
Attorneys: Matthew Michael Ford (Holleman & Associates) for Jacqueline L. Conners.
James Matthew Gary (Kutak & Rock) for Gusano's Chicago Style Pizzeria, Catfish Pies
Inc., Crazy Pies Inc., Fayetteville Pies Inc., and Gusano's Chicago Style Pizzeria of Bella
Vista Inc.
8th Cir.: Cashing settlement checks for back wages didn’t bar employees from
pursuing additional remuneration
By Ronald Miller, J.D.
In an issue of first impression, the Eighth Circuit ruled that the fact that employees who
had been improperly classified as exempt from the overtime protections of the FLSA
cashed settlement checks issued as a result of a Department of Labor (DOL) investigation
did not bar them from seeking additional remuneration. An employer’s disclaimer
indicating that the checks represented “full payment” of wages earned, including
minimum wage and overtime, up to the date of the check, was insufficient to notify
employees of the consequences of cashing the checks (Beauford v. ActionLink, LLC,
March 20, 2015, Melloy, M.).
In this instance, the employer provided marketing services for electronic and appliance
manufacturers. The employees were “brand advocates” who visited retail stores to train
retail salespersons on how products worked, and convince them to recommend the
manufacturer’s products. Brand advocates did not sell directly to customers or to retail
stores. They were also prohibited from negotiating prices, making marketing decisions,
and deciding what inventory should be ordered. Brand advocates maintained close
relationships with their supervisors and spoke with them frequently during conference
calls and through emails.
DOL investigation. The employer initially classified its brand advocates as “outside
salesmen” exempt from the FLSA’s overtime requirements. Although brand advocates
worked 50 to 75 hours per week, the employer refused to pay them overtime. However,
in September 2011, the DOL received a complaint that the employer was misclassifying
its brand advocates as exempt. The agency investigated and found that the employer had
intentionally misclassified the brand advocates. Thereafter, the employer reclassified the
brand advocates, calculated the back overtime pay each was due, and sent settlement
checks to those it believed deserved additional wages. The check stub contained a
disclaimer indicating that by cashing the check, the employee was agreeing that he or she
had received full payment for any wages earned. Neither the payments nor the language
was viewed or approved by the DOL investigator.
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A number of brand advocates sued the employer claiming that they did not receive
payments to which they were entitled under the FLSA. The employees fell into two
categories—those who cashed checks from the employer, and those who did not. Both
categories of employees moved for partial summary judgment, asking the district court to
declare that they were nonexempt under the FLSA. The employer also moved for
summary judgment, denying that it had misclassified the employees and requesting that
the district court declare the employees exempt. The district court granted the employees’
motion and declared them nonexempt. Thereafter, the employer moved for summary
judgment against all of the employees who had cashed the back-wages checks, asserting
that these employees had waived their rights for additional remuneration. The district
court granted that motion. This appeal ensued.
Cashed checks. On appeal, the employees argued they were not barred from pursuing
additional claims against the employer because it did not notify them of the consequences
of cashing the settlement checks and because the DOL did not supervise the purported
settlement. For its part, the employer contended that the district court erred by declaring
the employees nonexempt. The Eighth Circuit agreed with the district court that the
employees are nonexempt under the FLSA; however, it concluded that the release
language on the checks was insufficient to notify them of the consequences of cashing the
checks. Therefore, the employees did not waive their FLSA claims by cashing the checks.
Non-exempt status. The Eighth Circuit first addressed the employer’s arguments that the
district court erroneously concluded that the brand advocates were nonexempt employees
under the FLSA. Here, the employer admitted that the brand advocates worked in excess
of 40 hours per week and that they did not receive additional wages for their overtime
work. Thus, the brand advocates were entitled to overtime pay unless an exemption
applied. The employer raised two
affirmative defenses: that the brand advocates were “outside salesmen” and that they fit
the “administrative exemption.”
Outside sales exemption. The court first examined whether the brand advocates fit
within the outside sales exemption. Brand advocates were “customarily and regularly
engaged away from the employer’s place . . . of business.” The dispute here was whether
the brand advocates’ primary duty was “making sales.” “Sale” for purposes of the FLSA
“includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or
other disposition.” Here, the employer conceded that the brand advocates did not make
direct sales. However, it argued that their primary purpose was to drive sales, such that
the term “other disposition” dictated that they were making sales within the statutory
framework. On the other hand, the brand advocates contended that they were simply
nonexempt promotional workers.
In Christopher v. SmithKline Beecham Corporation, the Supreme Court explained that
the definition of “sale” in 29 U.S.C. Sec. 203(k) is broad and encompasses all
“arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a
commodity.” Applying the analysis in Christopher, the Eighth Circuit agreed with the
district court that brand advocates were not outside salesmen for FLSA purposes. It
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pointed out that unlike the pharmaceutical industry discussed in Christopher, the world of
consumer electronics is not subject to a “unique regulatory environment” that requires a
recommendation from a licensed professional to obtain a product.
The appeals court concluded that the activities of brand advocates are better understood
as nonexempt promotional work designed to stimulate sales that will be made by
someone other than the brand advocate. It was up to retail-store employees engaged in
the paradigmatic sale of electronics to convince customers to choose a product and help
that customer pay for it at a cash register. Thus, brand advocates were not outside
salesmen under the FLSA.
Administrative exemption. The employer next contended that brand advocates fall
within the FLSA’s administrative exemption. An administrative employee for purposes
of the FLSA is an employee: (1) compensated on a salary or fee basis at a rate of not less
than $455 per week . . . ; (2) whose primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the
employer or the employer's customers; and
(3) whose primary duty includes the exercise of discretion and independent judgment
with respect to matters of significance, 29 C.F.R. Sec. 541.200. Here, the brand advocates
disputed the second and third elements of the administrative test.
The Eighth Circuit concluded that the brand advocates do not satisfy the third element of
the administrative test—the exercise of discretion and independent judgment with respect
to matters of significance. Brand advocates performed none of the factors that have been
identified in determining whether employees meet this exemption. They simply follow
set scripts and “well established techniques, procedures or specific standards described in
manuals or other sources,” conduct that is insufficient to fall within the administrative
exemption. Brand advocates do not possess a level of independence that permits them to
make an independent choice, free from immediate direction or supervision; they must
seek approval before deviating from their set procedures. Because the brand advocates
had little autonomy, the district court was correct to conclude that they were nonexempt
employees.
Impact of cashing settlement checks. Finally, the Eighth Circuit got to the question of
whether the brand advocates who cashed their settlement checks waived their rights to
pursue additional claims against the employer. The brand advocates claimed that because
their settlement checks did not include sufficient language informing them of the
consequences of cashing the checks, and because the DOL did not authorize this
language, they were not bound by the settlement and were free to pursue additional
damages.
Because FLSA rights are statutory and generally cannot be waived, companies can settle
claims in only two ways. Before employees sue, they can waive their FLSA rights only if
they agree to accept full payment of a settlement offered by their employer, they receive
full payment of that settlement, and the settlement was supervised by the Secretary of
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Labor. After commencing litigation, employees can waive their rights only if the parties
agree on a settlement amount and the district court enters a stipulated judgment.
Waiver claim. Here, the employer contended that the brand advocates waived any
additional claims against it because they agreed to a settlement, they received full
payment, and the settlement was supervised by the DOL. There was no dispute that the
brand advocates received and cashed checks from the employer and that the DOL was
involved in some limited respects with the settlement. However, the brand advocates
contended that they did not waive their FLSA rights because they did not agree to accept
payment as settlement, and the DOL did not sufficiently supervise the settlement because
it did not authorize the release language.
Although the issue of what constitutes a valid settlement is an issue of first impression in
the Eighth Circuit, other circuits have held that the plain language of 29 U.S.C. Sec.
216(c) requires an agreement by the employee to accept a certain amount of back wages
and requires the employer to pay those wages. The Eighth Circuit found the reasoning of
the Ninth, Seventh, and Fifth Circuits persuasive. Simply tendering a check and having
the employee cash that check does not constitute an “agreement” to waive claims; an
agreement must exist independently of payment. This process must also be “supervised”
by the DOL.
In this instance, the DOL investigator did not approve the amounts of the checks until a
month after the checks were distributed. Moreover, the record did not indicate whether
the investigator authorized or approved of the waiver language on the checks. In any
event, he did not do so before the checks were distributed. Importantly, the language of
the waiver included on the checks, alone, did not adequately notify employees of the
rights they were waiving or even suggest that the employees were waiving any statutory
claim. Thus, the appeals court held that the waiver was inadequate. Because the
employer’s purported release fell short of what is required by the FLSA, the appeals court
reversed the district court’s determination that the employees had released their claims.
The case numbers are 13-3265 and 13-3380.
Attorneys: Corena Gamble Larimer (Tucker & Ellis) for ActionLink, LLC. John T.
Holleman (Holleman & Associates) for Jennifer Beauford.
9th Cir.: DOL deference due: FLSA exemption didn’t apply to auto dealer’s service
advisors
By Lisa Milam-Perez, J.D.
An auto dealership’s service advisors did not fall within the FLSA’s exemption for “any
salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles,”
the Ninth Circuit held in a case of first impression. Parting ways with the Fourth and
Fifth Circuits and granting Chevron deference to the DOL’s regulatory definitions in the
face of statutory ambiguity, the appeals court reversed a lower court’s dismissal of the
service advisors’ FLSA and state-law overtime claims. “[There are good arguments
supporting both interpretations of the exemption,” the court wrote. “But where there are
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two reasonable ways to read the statutory text, and the agency has chosen one
interpretation, we must defer to that choice.” (Navarro v. Encino Motorcars, LLC, March
24, 2015, Graber, S.).
Service advisors. The employer, a car dealership that sells and services new and used
Mercedes-Benz automobiles, employed five “service advisors” whose job duties entailed
greeting customers, evaluating their autos’ service or repair needs based upon the
customers’ complaints, and suggesting certain repair services. The advisors also were
“duty bound” to solicit additional services beyond those repairs necessary to resolve the
customer’s initial complaint. The advisors then wrote up an estimate for the repairs and
services for the customer. As required by the employer, the service advisors would often
contact customers while their vehicle was in the mechanic’s hands to suggest other repair
work, at additional cost. For their efforts, they received neither an hourly wage nor a
salary; they were compensated on a commission-only basis.
Overtime suit. The district court dismissed the service advisors’ overtime claims,
concluding that the employees fell within the statutory exemption set forth in FLSA Sec.
213(b)(10(A) for auto salespersons and mechanics. The lower court also dismissed the
employees’ other federal claims (not at issue here) and their state-law claims for lack of
supplemental jurisdiction. The appeals court reversed, agreeing with the employees that
deference was due the DOL’s regulatory interpretation.
Regulatory provision. In its 2011 rulemaking, the DOL explained that the auto
dealership exemption at issue here, 29 C.F.R. Sec. 779.372(c), applied only “to salesmen
who sell vehicles and partsmen and mechanics who service vehicles.” Thus, under the
DOL’s interpretation, the service advisors didn’t meet either of those definitions and thus
were not exempt. But was the DOL’s interpretation controlling? The Ninth Circuit
undertook the two-step Chevron analysis in order to decide—noting out of the gate,
though, that the FLSA is to be read liberally in favor of employees and that,
consequently, exemptions are to be narrowly construed.
Statute was ambiguous. First, the court found that the relevant statutory text was
capable of several different interpretations. “It is plausible to read the term ‘salesman’
broadly and to connect the term to ‘servicing automobiles’; that is, one could consider a
service advisor to be a ‘salesman . . . primarily engaged in . . . servicing automobiles,’”
the court acknowledged. Yet it was at least equally plausible to read these words “in a
more cabined way: a salesman is an employee who sells cars; a partsman is an employee
who requisitions, stocks, and dispenses parts; and a mechanic is an employee who
performs mechanical work on cars.” And the employees here did none of those things;
they sold services for cars, the court said. Did Congress intend to broadly exempt any
sales employees involved in the servicing of cars along with salesmen who actually sell
the cars themselves? If so, it wasn’t clear from the text of the statute. After all, not all car
dealership employees were exempt, the court observed, citing the examples of
(nonexempt) bookkeepers who track auto sales invoices or secretarial employees who
route calls to those salesmen, partsmen, and mechanics. Thus, the court could not readily
find that the service advisors “plainly and unmistakably” fell within the reach of the
exemption.
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No flip-flopping here. In the face of this statutory ambiguity, the appeals court looked to
the DOL regulation and, having been promulgated after notice-and-comment rulemaking,
considered the rule under the Chevron “reasonableness” standard. Noting that the DOL’s
“formal, regulatory position” on the scope of this exemption has been materially
consistent going back to 1970, the court readily disposed of cases cited by the employer
as being off-point. It acknowledged that the DOL had occasionally, in the form of
opinion letters and at least one iteration of the Wage and Hour Division’s Field
Operations Handbook, adopted a broader meaning of the exemption favored by the
employer. It even proposed amending the regulatory provision itself to conform to the
broader construction. Ultimately, though, the agency weighed against doing so,
evidencing, too, that it has given this particular matter considerable thought.
“The Department of Labor’s regulations consistently—for 45 years—have interpreted the
statutory exemption to apply narrowly. The agency reaffirmed that interpretation most
recently in 2011, after thorough consideration of opposing views and after a formal
notice-and-comment process. Under these circumstances, Chevron provides the
appropriate legal standard.”
Deference due anyhow. Yet even if the agency’s 2011 final rule did amount to a change
of position on the reach of the exemption, the appeals court said the DOL would still be
entitled to Chevron-level deference, citing the Supreme Court’s 2009 decision in FCC v.
Fox Television Stations, Inc., and, more recently, the High Court’s holding earlier this
month in Perez v Mortgage Bankers Assoc.
DOL interpretation was reasonable. Moving on to the next step in the Chevron
analysis, the Ninth Circuit held the DOL’s interpretation of the ambiguous statutory
provision was a reasonable one and would not be disturbed. Granted, in so holding, the
appeals court was setting up a conflict with the Fourth and Fifth Circuits on this issue,
along with several district courts and the Supreme Court of Montana. But it simply
disagreed with the conclusion by those courts that the contrary reading of the statute was
the only reasonable one or that the agency’s interpretation was unreasonable.
Parsing the text of the DOL regulation, the appeals court said it was important to note
that the agency’s reading “does not render any [statutory] term meaningless or
superfluous. All three subjects (salesman, partsman, and mechanic) and both verbs
(selling and servicing) retain meaning; it is just that some of the verbs do not apply to
some of the subjects.” Had the agency’s construction rendered one of these words
meaningless, then its interpretation “likely would be unreasonable,” but that wasn’t the
case.
Legislative history inconclusive. Finally, the appeals court reviewed the legislative
history of the FLSA exemption and noted that Congress had introduced numerous bills to
sweepingly exempt “any salesman or mechanic” employed by a car dealership, but those
measures did not pass. Moreover, the final three versions of the exemption added the
qualifier, “primarily engaged in selling or servicing automobiles.” The legislative history
is largely silent on its meaning (save for a lone committee report, which the Fifth Circuit
“quoted selectively” in holding to the contrary). The legislative history, taken as a whole,
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is inconclusive. Accordingly, with no further light shed on an ambiguous statutory
provision, the DOL interpretation prevailed.
The case number is 13-55323.
Attorneys: S. Keven Steinberg (Fink & Steinberg) for Hector Navarro. Todd B. Scherwin
(Fisher & Phillips) for Encino Motorcars, LLC.
10th Cir.: One-time pay deduction was not violation of salary-basis test
By Kathleen Kapusta, J.D.
Affirming summary judgment in favor of J.R.’s Country Stores, the Tenth Circuit ruled
that an exempt store manager failed to show that the one-time deduction from her
salary—because she worked only 40.91 hours of the requisite 50 in that particular
week—established a practice or policy of making inappropriate pay deductions for
salaried employees. Therefore, the appeals court held, the district court properly declined
the employee’s invitation to strip the company of its exemption as to the employee. Nor
did the district court err in concluding that the company was entitled to rely on the
window-of-correction defense. Accordingly, the court affirmed the grant of summary
judgment to the convenience store chain on the employee’s FLSA overtime claim (Ellis
v. J.R.’s Country Stores, Inc., March 9, 2015, Holmes, J.).
The employee, who began working as a manager for one of the company’s stores in
2007, was classified as an exempt salaried employee and paid $600 on a weekly basis,
which increased to $625 in 2011. She also generally worked 50 or more hours a week
consistent with the terms of the company’s pay plan. In April 2012, she received a
paycheck that reflected a deduction of $31.20 because she had only worked 40.1 hours,
rather than the requisite 50, for the pay period in question. This was the only instance
during her tenure with the company that she received less than her typical, predetermined
pay.
Resignation and overtime pay demand. Shortly thereafter, the employee resigned and
sent the company a letter claiming that it owed her more than $42,000 in unpaid
overtime. She contended that when J.R.’s made the one-time deduction, she lost her
exempt status under the FLSA, which entitled her to three years’ worth of retroactive
overtime pay. Although the company denied both that this singular deduction was
improper and that it constituted an actual practice of improper deductions under the
applicable regulatory provisions, it sent her a check for $332.88, which represented the
repayment of the deduction as well as overtime she worked during the time period in
which the deduction occurred.
District court proceedings. The employee then filed a lawsuit against J.R.’s alleging
that her “compensation was reduced when she did not work at least 50 hours” per week,
she was not an exempt employee under the FLSA because she was not paid on a true
salary basis, and the failure to classify her as an hourly employee entitled her to recoup
retroactive overtime pay.
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The company moved for summary judgment and, instead of responding, the employee
moved to conditionally certify a collective action under the FLSA. The court
subsequently granted summary judgment in favor of J.R.’s, finding that its deduction did
not constitute a violation of the salary-basis test. It further found that even if the
employee could demonstrate that the company did not intend to pay her a salary, her
FLSA claim would still fail because J.R.’s was entitled to rely on the protection of the
window-of-correction defense detailed in the FLSA’s implementing regulations.
Intent to pay salary. The employee first argued that the lower court should have
considered her an hourly employee based on the terms of the pay plan’s “hard floor” of
50 hours, a requirement to log the number of hours worked, and an alleged “stated policy
of deducting pay for less than a day’s absence.” Under 29 C.F.R. Section 541.603(a), an
“actual practice of making improper deductions demonstrates that the employer did not
intend to pay employees on a salary basis” and results in the employer’s loss of the
executive exemption for those employees. While the employee argued that the district
court erred in focusing only on the first factor of the salary-basis test—the number of
improper deductions—the appeals court found that the lower court’s ruling could be
fairly read to address all of the salary-basis factors in some appreciable manner. Thus,
because even a brief review of the challenged order belied her assertion that only one
component of the salary-basis test received consideration, this argument failed. “All told,
the district court’s straightforward application of the salary-basis test affords us no legally
cognizable basis to reverse,” wrote the court.
More broadly, the employee contended that she raised a fact issue concerning the
existence of an actual company practice or policy of making improper deductions. Noting
that the district court appropriately invoked the Supreme Court’s Auer decision to support
its view that the company’s one-time improper deduction from her pay, “taken under
unusual circumstances,” would not defeat her salaried status, the appeals court pointed
out that this was “hardly an unusual conclusion in FLSA jurisprudence, and is the correct
result here.”
No actual practice ... Turning to the regulatory language, the court found especially
telling the Secretary’s use of the term deductions (rather than deduction) multiple times
in the text of the FLSA’s implementing regulations. “Our growing body of FLSA caselaw
reflects this understanding of the Secretary’s regulatory focus: we have held that ‘one
change in base hours [producing a deduction] . . . is not the kind of frequent change
necessary to create a factual dispute,’” reasoned the court. Further, the court found it
implausible that subsection (a)’s requirement of a “practice” of such deductions
contemplated isolated conduct. Thus, the court found as a matter of law that the
employee’s failure to identify more than the one deduction precluded a finding of an
“actual practice” by the company of making improper salary deductions.
… or policy. The appeals court next found that the lower court did not err in concluding
that the company had no policy requiring improper deductions. Here, the court noted that
the company’s policy, as set forth in its handbook, stated that “[t]he Company prohibits
deductions from an exempt, salaried employee’s pay except under the circumstances set
forth in the [FLSA] and state law. If you believe that improper [deductions have
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occurred], it will promptly reimburse the employee and ensure the mistake will be
corrected in the future.” Stating that it would be hard-pressed to conclude that this
language evinced a policy that mandates improper deductions, the court found that
“essentially the obverse is true.”
This was so, the court pointed out, because the handbook language tracked the text of the
Secretary’s guidance regarding the salary-basis test, which specifies that an employer will
retain the exemption as long as it maintains “a clearly communicated policy that prohibits
the improper pay deductions specified in [subsection] (a) and includes a complaint
mechanism, reimburses employees for any improper deductions and makes a good faith
commitment to comply in the future.” Thus, the lower court correctly found no evidence
that the company had an actual practice of making improper deduction or of a policy of
making improper deductions, concluded the appeals court.
Evasion of spirit of FLSA. As to the employee’s contention that the lower court should
be reversed based on its “evasion of the spirit of the FLSA,” and specifically that the
district court improperly cited DOL statements and opinion letters in order to avoid
addressing her allegedly “extraordinary” working conditions, the Tenth Circuit noted that
in lodging this argument, she overlooked the deference that it and other courts have
shown to the DOL’s interpretation of its own regulations. “We are not unsympathetic to
the hours of diligent work [the employee] provided to the Company as a store manager.
Nonetheless, it is pellucid that she was aware of this requirement throughout her
employment—indeed, she admits that the Company’s leadership regularly apprised store
managers of the Pay Plan’s position on work hours,” stated the court, finding it critical
that she did not meet her burden of proving that the 50-hour-week minimum or the
directive to track her hours expressly violates the FLSA. Accordingly, the court affirmed
the district court’s judgment insofar as it based its grant of summary judgment on a
finding that the company did not violate the salary-basis test, concluding that it intended
to pay the employee a salary, “which means that she is exempt and may not receive
overtime pay under the FLSA.”
Window-of-correction defense. Nor did the lower court err in concluding that the
company was entitled to rely on the window-of-correction defense in C.F.R. Section
541.603(c), which provides that “[i]mproper deductions that are either isolated or
inadvertent will not result in loss of the exemption for any employees subject to such
improper deductions, if the employer reimburses the employees for such improper
deductions.” The district court noted that the employee identified one improper
deduction, the company reimbursed her for the improper deduction as well as for
overtime worked during the relevant pay period shortly after making the improper
deduction, and that this was an isolated deduction.
Here, the appeals court found that the lower court did not err in concluding that the lone
improper deduction was isolated—even without addressing whether it was also
inadvertent. “Generally speaking,” wrote the court, “we understand statutes containing
disjunctive language to require that only one of the listed requirements must be satisfied.”
While the court noted that the employee “repeatedly argues that the FLSA is a remedial
statute designed to be resolved ‘in favor of employee coverage,” it observed that the “fact
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that one purpose of the FLSA is to ensure overtime pay for non-exempt employees does
not preclude the possibility that an employer may ‘intentionally dock an exempt
employee’s pay and avoid all liability for overtime simply by reimbursing the
employee.’” Such a situation, wrote the court, “does not necessarily abuse the windowof-correction defense or eviscerate the employee’s exempt status—provided, of course,
that the intentional (i.e., not inadvertent) deduction was ‘isolated.’”
And while other circuits have intimated that this defense can only apply when an
employer has made an innocent mistake, the court pointed out that those decisions were
not binding on it. “Our own precedent makes clear that “[t]he ‘window of correction’
provided by [the predecessor version of subsection (c)] allows employers to treat
otherwise eligible employees as salaried, regardless of the employer’s one-time or
unintentional failure to adhere to” the statute’s prohibition on improperly deducting
salaried employees’ pay based on quantity of work performed,” said the court.
Finally, the appeals court found that the district court did not abuse its discretion in
declining to grant the employee additional time to conduct discovery relating to any
improper deductions made from other employees’ salaries. In this regard, it noted that, at
the precise moment the company filed its motion for summary judgment, the scope of the
lawsuit was explicitly limited to one named plaintiff: the employee.
The case number is 13-1346.
Attorneys: Donna E. Dell’Olio (Cornish & Dell’Olio) for Sandra Ellis. Christian D.
Hammond (Dufford & Brown) for J.R.’s Country Stores, Inc.
11th Cir.: District court lacked jurisdiction to vacate ‘interim’ arbitration award
By Ronald Miller, J.D.
Finding that an “interim” arbitration award was not a “final” award under the meaning of
the FAA, the Eleventh Circuit, in an unpublished decision, ruled that a district court was
without jurisdiction to vacate the interim award. The calculation of damages was
necessary to render the arbitral result final, and that was set for a separate hearing.
Because the interim award was not a final arbitral award, it was not properly under
review by the district court. As a consequence, the district court was ordered to lift the
stay and compel the parties to return to prior arbitration (Schatt v. Aventura Limousine &
Transportation Service, Inc. dba Aventura Limousine and Aventura Worldwide, March
16, 2015, per curiam).
Motion to compel arbitration. In July 2010, the plaintiff, a limousine driver, filed a
complaint against Aventura Limousine alleging that it misclassified him as independent
contractor and denied him overtime compensation in violation of the FLSA. A month
later, Aventura filed a motion to compel arbitration and stay the court proceedings until
completion of arbitration pursuant to the parties’ arbitration agreement. Aventura argued
that the district court had no jurisdiction to determine the scope of the issues subject to
arbitration. Ultimately, the company prevailed on this argument and the district court
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granted the motion to compel arbitration and stayed the litigation. The dispute proceeded
to arbitration.
Meanwhile, the plaintiff hired new counsel to represent him in the arbitration. Plaintiff’s
counsel also represented other plaintiffs in related FLSA actions against the company. An
arbitrator conducted a three-day hearing, which both parties and the district court termed
the “final arbitration hearing.” The hearing addressed the central dispute: whether the
plaintiff was an employee as defined by the FLSA rather than an independent contractor.
Motion to disqualify counsel. Following the hearing, and before a determination was
issued, Aventura filed a motion in district court to disqualify plaintiff’s counsel for
misconduct. The company alleged plaintiff’s counsel engaged in an array of
unprofessional and hostile behavior, including engaging in ex parte communications with
the defendant designed to undermine defense counsel. While the disqualification motion
was pending, the arbitrator issued an interim award for the plaintiff, finding that he was
an employee, not an independent contractor, and that he should have been paid overtime
for hours worked over 40 in a workweek. Thereafter, the district court granted Aventura’s
motion to stay arbitration pending resolution of the disqualification motion. In a related
case, the district court found that the gravity of professional misconduct warranted
disqualifying plaintiff’s counsel. As a result, plaintiff’s counsel withdrew, and suggested
that the stay of arbitration may no longer be necessary.
Motion to lift stay. Plaintiff’s new counsel filed a motion to lift the stay of arbitration.
Aventura opposed lifting the stay, and countered by filing a motion for dismissal of the
action and vacatur of the interim award. Aventura argued that the acts of misconduct by
plaintiff’s counsel tainted the arbitration, so the interim award should not be permitted to
stand, or the plaintiff permitted to profit, by reason of that misconduct. Aventura also
argued that if vacatur were granted, the matter should be reassigned to a different
arbitrator.
In response, plaintiff’s counsel argued that the issues raised by the company’s motion
were “subject to determination by the arbitrator” and that, as a result, Aventura’s motion
to dismiss was not properly before the court. Further, the plaintiff argued that Aventura’s
motion for vacatur of the interim award could not be decided by the district court because
the FAA allows review of “final” arbitration awards only.
Interim award vacated. Twenty-two months after the plaintiff sought to lift the stay of
arbitration, and Aventura sought to dismiss the action or vacate the arbitral award, the
district court entered an order denying the plaintiff’s motion to lift and granting
Aventura’s motion to vacate the interim award. This appeal followed.
District court jurisdiction. While it was beyond debate that the district court had initial
subject matter jurisdiction over the FLSA action, the Eleventh Circuit had to determine
whether the district court had jurisdiction to vacate the interim award. Was the interim
award a “final” arbitration award under the meaning of FAA, Section 10? The FAA
allows a district court to vacate an arbitral award under a set of statutorily prescribed
circumstances. Courts interpreting this statutory provision commonly understand this to
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mean that the FAA allows review of final arbitral awards only, but not of interim or
partial rulings.
Here, the interim award on liability clearly established that the arbitrator’s work was not
complete. The order itself states that a separate hearing would be required if the parties
failed to agree on backpay, liquidated damages, and attorney’s fees and costs. The
appeals court agreed with the plaintiff that the issue of backpay, in particular,
demonstrated that the interim award could not be viewed as final. An arbitral hearing on
damages was necessary to determine which hours worked by the plaintiff were
compensable under the FLSA. This calculation of damages was necessary to render the
arbitral result final. Unlike cases relied upon by the district court, the plaintiff’s ongoing
arbitration involved far more remaining work than merely the calculation of attorney’s
fees, explained the appeals court. Thus, the district court was without jurisdiction to
vacate the interim award.
The case number is 14-11549.
Attorneys: Brian Lee Lerner (Kim Vaughan Lerner) for Rodney Schatt. Michael Anthony
Pancier (Law Offices of Michael A. Pancier) for Aventura Limousine & Transportation
Service, Inc.
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