Labor Relations & Wages Hours Update
March 2014
Hot Topics in LABOR LAW:
President’s FY 2015 budget request gives DOL $11.8 billion in discretionary
funding
President Barack Obama’s fiscal year (FY) 2015 budget request for the DOL includes
$11.8 billion in discretionary funding, along with new, dedicated mandatory funds — a
significant decrease from the $12.1 billion in discretionary authority requested in FY
2014.
Labor Secretary Thomas E. Perez said that the FY 2015 proposed budget includes
funding and reforms that will better prepare workers for jobs; protect their wages,
working conditions and safety; provide a safety net for those who lose their jobs or are
hurt on the job; and promotes secure retirements. The budget adheres to the spending
levels agreed to in the Bipartisan Budget Act of 2013, but at the same time also illustrates
the president’s vision for an economy that promotes opportunity for all Americans with
the Opportunity, Growth, and Security Initiative that is fully paid, according to Perez.
Among other things, the budget request creates additional jobs and careers by catalyzing
new partnerships between community colleges and employers. The Opportunity, Growth,
and Security Initiative includes $1.5 billion in 2015 to support a four-year, $6 billion
Community College Job-Driven Training Fund to launch new training programs and
apprenticeships that will prepare participants for in-demand jobs and careers. From each
year’s funding, $500 million will be set aside for grants to create new apprenticeships and
to increase participation in existing apprenticeship programs. This four-year investment
will support doubling the number of apprenticeships in America over the next five years.
The proposed budget also makes substantial investments in the DOL’s worker protection
agencies to bolster enforcement of laws that protect the health, safety, wages, working
conditions and retirement security of American workers, including:
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An increase of more than $41 million for the Wage and Hour Division to ensure
workers receive appropriate wages and overtime pay, as well the right to take jobprotected leave for family and medical leave purposes.
Nearly $14 million to combat the misclassification of workers as independent
contractors, which deprives them of benefits and protections to which they are
legally entitled and disadvantages employers who comply with the law.
$5 million for the creation of a State Paid Leave Fund to assist workers who need
to take time off to care for a child or other family member, with another $100
million proposed as part of the Opportunity, Growth and Security Initiative.
Substantial investments in worker safety, including $565 million for OSHA to
foster employer compliance with safety and health regulations and inspect
hazardous workplaces, and strengthen its protection of whistleblowers against
retaliation for reporting unsafe and unscrupulous practices, as well as $377
million for the Mine Safety and Health Administration.
$107 million for the OFCCP, which enforces equal employment opportunity at
federal contractors. The budget includes $1.1 million to strengthen efforts to
eliminate pay discrimination affecting women who earn significantly less than
their male counterparts for comparable work and to secure equal treatment for all
workers.
The requested budget includes an initiative — estimated to save $20 billion over the next
decade — that would encourage companies to fully fund their pension benefits by
authorizing the Board of the PBGC to adjust premiums and take into account the risks
that different retirement plan sponsors pose to their retirees.
Another reform would act on longstanding Government Accountability Office and
Inspector General recommendations to improve and update the Federal Employees
Compensation Act program.
Union files NLRB charge against Baystate Health after it demands nurses drop
wage and hour suit
The Massachusetts Nurses Association/National Nurses United (MNA/NNU) announced
that it has filed a NLRB charge against Baystate Health for bargaining in bad faith in
negotiations for a new contract. The union said it filed the charge on behalf of the
registered nurses of the Baystate Visiting Nurses Association & Hospice (BVNA&H) —
the latest in a series of complaints filed against Baystate Health for its dealings during
negotiations at the BVNA&H and at Baystate Franklin Medical Center.
The union filed the charge after a recent negotiating session during which Baystate
Health purportedly stipulated that any contract settlement with the nurses must also
include a commitment by the nurses to withdraw a wage and hour lawsuit filed in
Hampden Superior Court in December 2013. The class action lawsuit was filed to recover
lost wages for unpaid hours worked by the nurses over the course of several years. The
MNA/NNU said that Baystate's effort to link the withdrawal of the lawsuit to a settlement
of their current contract negotiations violates federal labor law.
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In the wake of a positive contract settlement with the Baystate Franklin Medical Center
nurses earlier in February, the BVNA&H nurses had hoped that Baystate would want to
reach a settlement with the visiting nurses since they have been in negotiations for more
than three years, with more than 35 negotiating sessions to date, according to the
MNA/NNU. But instead, “Baystate came to the bargaining table and insisted that the
nurses withdraw the wage and hour lawsuit.” Despite the union negotiator’s explanation
that the lawsuit had nothing to do with ongoing negotiations — that it was a last effort to
recoup unpaid wages for nurses who had worked countless hours beyond their shift but
had not been paid for their work — Baystate, the union said, still insisted that the nurses
drop the suit order to settle the contract. Talks broke down when Bayside purportedly
demanded that the lawsuit be dropped.
The NLRB intervened earlier in the negotiations, the MNA/NNU pointed out, when
Baystate management unlawfully declared an impasse in negotiations with the nurses at
BVNA&H. Because of the NLRB's intervention, Baystate rescinded its declaration of
impasse and returned to negotiations.
Negotiations are scheduled to resume on March 6 in Springfield.
GAO points to high educational costs, low entry-level wages for airline pilots
By Pamela Wolf, J.D
A report issued by the Government Accountability Office (GAO) points to high
educational costs compared to low entry-level wages as fueling what is at least a
perceived shortage of airline pilots in the United States. According to at least two unions,
the report confirms that low starting wages has kept qualified pilots away and
discouraged others from even entering the field.
Although regional airlines have reported difficulties finding sufficient numbers of
qualified pilots over the past year, the GAO report found mixed evidence about the extent
of the shortage.
Looking at broad economic indicators, airline pilots have experienced a low
unemployment rate, which the GAO said was the most direct measure of a labor shortage.
However, both employment and earnings have decreased since 2000, suggesting that
demand for these occupations has not outstripped supply.
Industry forecasts and the Bureau of Labor Statistics' employment projections for the
future suggest the need for pilots to be between roughly 1,900 and 4,500 pilots per year,
on average, over the next decade — a projection that is consistent with airlines' reported
expectations for hiring over this period. Yet studies examining whether the future supply
of pilots will be sufficient to meet this need reached varying conclusions.
The GAO noted that two studies point to the large number of qualified pilots that exists,
but who may be working abroad, in the military, or in another occupation, as evidence
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that there is an adequate supply. But whether these pilots want to seek employment with
U.S. airlines depends on the extent to which pilot job opportunities arise, and the wages
and benefits offered by U.S. airlines.
Another study, the GAO observed, concludes that future supply will be insufficient,
absent any actions taken, largely as a result of the accelerating costs of pilot education
and training. Such costs deter individuals from pursuing a pilot career. Pilot schools that
GAO interviewed reported fewer students entering their programs because of concerns
over the high costs of education and low entry-level pay at regional airlines. As airlines
have recently begun hiring, nearly all of the regional airlines interviewed by the GAO
reported having difficulty finding enough qualified entry-level first officers. But mainline
airlines, because they hire from the ranks of experienced pilots, have not reported similar
concerns, although some mainline airlines expressed concerns that entry-level hiring
problems could affect their regional airline partners' ability to provide service to some
locations, according to the GAO.
In order to attract and retain qualified commercial airline pilots, some airlines that the
GAO interviewed have increased recruiting efforts and developed partnerships with
schools to provide incentives and clearer career paths for new pilots. Some regional
airlines have offered new first officers signing bonuses or tuition reimbursement to attract
more pilots. Yet these actions have been found insufficient by some airlines to attract
more pilots, and some actions, such as raising wages, have associated costs that have
implications for the industry.
Airline representatives and pilot schools suggested that the FAA could do more to give
credit for various kinds of flight experience in order to meet the higher flight-hour
requirement, and could consider developing alternative pathways to becoming an airline
pilot. Stakeholders also raised concerns that the financial assistance available may not be
enough, given the high costs of pilot training and relatively low entry-level wages.
Unions respond. The GAO made no recommendations in its report, but a pair of unions
had a few things to say. The Air Line Pilots Association International (ALPA) issued this
statement: “The GAO report supports the points ALPA has made for several years
concerning whether there is, or will be, a genuine shortage of airline pilots. To put it very
simply, currently there is no shortage of qualified pilots. There is, however, a shortage of
qualified pilots willing to fly for substandard wages and inadequate benefits. The recent
increases in experience required to enter the airline pilot profession, which were crafted
with input from industry, labor and government, were made to ensure that the United
States airline industry remains the safest in the world.”
Teamsters Airline Division Director Capt. David Bourne said: “I’m pleased that the GAO
has confirmed what we in the airline industry have known for years – the starting wage
structure in the regional airline industry has not only kept qualified pilots away, it has
deterred many from entering the field.
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“In a field that requires not only an extremely high level of training and professionalism
and, unlike others, requires semi-annual proficiency checks and medical evaluations –
with a failure of either potentially ending a pilot’s career – the current levels of pay for
many in the regional industry are inexcusable.
“The issue causing the shortage is not a lack of skill, it is the inability for many pilots to
survive on wages below the poverty level. When faced with that reality and the
investment of the money and time required to enter the industry, there is no incentive for
them to make the commitment. It is time for the industry to recognize pilots for the
professionals they are and compensate them accordingly. When we see pilots paid in a
manner commensurate with their skills, training and professionalism, we will see the
shortage abate.”
Congressional Black Caucus presses Kellogg to end the lockout at Memphis cereal
plant
By Pamela Wolf, J.D.
The Congressional Black Caucus (CBC) has formally joined the ranks of those calling on
Kellogg Company to end its nearly five-month-old lockout of more than 220 workers at
its Memphis, Tennessee, cereal plant. Represented by the Bakery, Confectionery,
Tobacco Workers and Grain Millers (BCTGM) union in Memphis, the workers contend
that the giant cereal manufacturer wants to destroy middle class jobs and replace them
with a cheaper workforce, while the company contends that it must cut costs to be
competitive. The ongoing battle has sparked national attention.
On February 27, CBC Chair Representative Marcia L. Fudge (D-Ohio) sent a letter to
Kellogg CEO John Bryant. Describing the circumstances of the lockout, she wrote: “On
October 22, 2013, more than 226 hard-working men and women were locked out from
their jobs after not agreeing to your company’s proposal to introduce alternative work
schedules and replace middle-class, full-time jobs with part-time labor. Many of the
affected workers are second and third generation employees from predominately minority
communities, averaging more than 20 years of service to Kellogg. Locking employees
out of their jobs, cutting off their health insurance, denying them payment of earned
vacation, and subjecting them to months without income are not actions the CBC believes
are reflective of the Kellogg company vision and purpose.”
The Congresswoman urged Bryant to “immediately end the lockout that is inflicting pain
on your workforce, their families and the entire Memphis community” and “to work with
the BCTGM Local 252G, AFL-CIO to find a mutually agreeable solution that will keep
your production facility functional and ensure your employees have the ability to provide
for themselves and their families.”
The Congressional Progressive Caucus previously sent a letter to Kellogg, likewise
pressing for a settlement of the dispute, noting that over 80 percent of the locked-out
workers have at least 10 years of experience. “Middle class jobs like these are economic
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and social linchpins in their community. Preserving and expanding a fairly paid,
equitably managed workforce is in the interest of all parties, including Kellogg, the
workforce and the community of Memphis. The potential for the workers to lose their
livelihoods permanently because they seek better wages and fairer working conditions
has drawn notice beyond the Memphis area,” the letter pointed out.
On February 20, DeMaurice Smith, Executive Director of the NFL Players Association,
sent a similar letter to the Kellogg CEO, pressing him “to immediately end the Memphis
lockout and allow these hard-working men and women to resume their jobs so that they
can provide for their families and continue to contribute to Kellogg’s success.”
The lockout was the impetus for the formation of The Coalition for the Organizational
Protection of People and Equal Rights (COPPER), a community coalition organization.
The Memphis Chapter of the National Action Network and Memphis Chapter of the
Southern Christian Leadership Council have also called for an end to the lockout.
Costs and competitiveness. For its part, Kellogg has pointed to cost and competitiveness
issues. The company began negotiations with the union on September 17, 2013, to
finalize a supplemental contract for Memphis plant and its hourly employees. After
negotiations stalled, the contract expired on October 20, 2013.
“After weeks at the bargaining table, the Union, regrettably, indicated they were not
willing to agree to the Company’s key proposals – which would protect the wages and
benefits of all current employees, and still offer above-market wages for future hires,”
Kellogg said at the time.
According to the company, a fair and competitive contract is a critical factor in the
sustainability of the Memphis plant. “It is frustrating and disappointing to be in this spot,
but we can’t continue with the current cost model,” said Marty Carroll, Sr. Vice
President, Kellogg North America Supply Chain. “We are operating in a tough cereal
category and the labor costs at our U.S. [Ready-To-Eat-Cereal (RTEC)] plants —
including Memphis — put Kellogg at a competitive disadvantage, making it difficult to
fund critical efforts such as innovation and brand building.”
Kellogg said that its labor costs in the U.S. RTEC network are significantly higher than
that of industry competitors, or even its own manufacturing network.
“Every day that Memphis operates under the old contract widens that competitive gap
and puts our Memphis plant at risk — a risk we aren’t willing to take for our employees,
the Company or the Memphis community,” said Carroll.
Boeing nixes nonunion employee pensions in favor of defined contribution
retirement savings plan
In the latest of a series of steps taken to address challenges created by defined benefit
pension plans, Boeing announced on Wednesday, March 6, its plan to freeze the pensions
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of 68,000 employees, including managers and executives, who participate in the main
Boeing and subsidiary defined benefit pension plans. Under the move, nonunion
employees participating in the company's defined benefit pension plans will be
transitioned in 2016 to a company-funded defined contribution retirement savings plan.
Boeing said that on January 1, 2016, it will begin making cash contributions each pay
period to employees' retirement savings through a new defined contribution component
of the 401(k) plan.
All of the benefits earned in the current traditional pension plan before the transition will
be paid to employees in retirement, the company said, and it will continue to match
employee savings in an existing 401(k) plan. Retirees already receiving pension benefits
will not be affected.
All nonunion employees hired since 2009 and new hires of 28 unions have already been
moved to defined contribution plans, Boeing said, which helps the company better predict
and manage financial risks, while still providing employees with what it called “a marketleading retirement benefit.”
Boeing noted that similar changes were incorporated in contract extensions ratified this
year by members of the International Association of Machinists and Aerospace Workers
(IAM) District 751 in Seattle and IAM District 837 in St. Louis.
The new benefit will supplement employees' defined benefit pensions earned through
December 31, 2015, Boeing said, adding that all pension benefits earned through the end
of 2015 will be retained by employees. The credit-based portion of employees' defined
benefit pension will grow with interest credits until employees begin receiving their
pension benefit.
“Our objective in making this transition is twofold: continue providing an attractive,
market-leading retirement benefit contributing to employees' retirement security, while
also assuring our competitiveness by curbing the unsustainable growth of our long-term
pension liability,” said Tony Parasida, senior vice president of Human Resources and
Administration.
Committee on Education and Workforce examines NLRB’s proposed
Representation-Case Procedures Rule
By Pamela Wolf, J.D.
On March 5, the House Committee on Education and the Workforce held a hearing on the
NLRB’s proposed Representation-Case Procedures Rule, reissued on February 6, after
having drawn considerable controversy. The original proposed rule — dubbed “Quickie
Election Rule” by many — was rescinded after the Board was forced to retreat from its
appeal of a district court decision invalidating the much fought-over revisions due to a
quorum issue. Under a stipulation of voluntary dismissal, the agency’s appeal was
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dismissed by the D.C. Circuit on December 9, 2013. The reissued proposal is
substantively identical to the prior version, according to the NLRB.
The Education and Workforce committee’s hearing was titled, “Culture of Union
Favoritism:
The Return of the NLRB’s Ambush Election Rule.” The Board has characterized the
proposed revisions of the rule as:
 allowing for electronic filing and transmission of election petitions and other
documents;
 ensure that employees, employers, and unions receive and exchange timely
information they need to understand and participate in the representation case
process;
 streamlining pre- and post-election procedures to facilitate agreement and
eliminate unnecessary litigation;
 including telephone numbers and email addresses in voter lists to enable parties to
the election to be able to communicate with voters using modern technology; and
 consolidating all election-related appeals to the Board into a single post-election
appeals process.
The proposed rule would significantly shorten the time between the filing of a union
election petition and the actual election, a committee release pointed out, also noting that
the regulation would give employers just seven days to find legal counsel and prepare for
an election hearing with NLRB officials. According to the committee, the proposal would
also: force employers to raise all concerns before the hearing and basically lose the right
to raise additional concerns during the hearing; delay answers to important questions until
after workers have voted; and jeopardize workers’ privacy by divulging sensitive
information to union organizers.
The committee underscored the testimony of those who opposed the NLRB’s proposed
revisions.
Practicing labor and employment attorney Doreen Davis testified: “The NLRB’s
proposed rule changes are in excess of the board’s rulemaking authority, are
substantively unnecessary, and are contrary to the [National Labor Relations Act].
Moreover, the proposed rules evidence poor public policy and are likely to exacerbate,
rather than alleviate, labor tension between employers and employees.”
LaRosa’s pizzeria Human Resources Director Steven Browne, speaking on behalf of the
Society for Human Resource Management, said that the proposed rule “will
fundamentally and needlessly alter the delicate balance that exists in current law that
provides for the opportunity for an employee to make an educated and informed decision
to form, join or refrain from joining a labor organization.”
According to Browne: “If adopted, the proposed regulation would severely hamper an
employer’s right to exercise free speech during union organizing campaigns and cripple
the ability of employees to learn the employer’s perspective on the impact of collective
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bargaining on the workplace. Finally and equally troubling is that the NLRB is proposing
this regulation absent any evidence that it is needed.”
However, Weinberg, Roger and Rosenfeld Partner Caren P. Sencer offered a different
point of view. She described her law firm as “one of the nation’s largest representing
unions, working people and their institutions, including trust funds and apprenticeship
programs.” Contrary to the committee’s reference to the NLRB’s proposal as the
“Ambush Election Rule,” Sencer pointed out in her written testimony that “in virtually all
the cases where clients have filed election petitions, the employers have been well aware
of the organizing efforts prior to the filing. In many cases, employers have already started
their overt anti-union campaign.”
She noted that after an election petition is filed, federal law provides that “workers’
desire to vote for union recognition should be promptly honored.” When the employer
has not voluntarily recognized the union, the workers should have the chance to vote in a
Board-conducted election in a timely manner. “But too often, employers exploit the
current rules and procedures to delay the election as long as possible or avoid an election
altogether,” she observed.
The proposed rule revisions “are not revolutionary or radically different than the status
quo,” according to Sencer. “They reflect an attempt to standardize some of the best
practices and create consistency between Regions. Many of the proposed changes attempt
to align the Board procedures to procedures used by other agencies, bring the process into
the 21st century and provide clear notice. The proposed rules reduce unnecessary delay,
simplify the procedure and permit the parties to seek Board review after the election at
which time the parties know which, if any, differences of opinion that existed prior to the
election are relevant or determinative. This saves time and money for employers, unions
and the government, and promotes the ability of employees to exercise their right to
vote.”
On April 10 and 11 the NLRB will hold a public meeting on the proposed
Representation-Case Procedures Rule, according to a notice published in the Federal
Register on February 26. The Board indicated that it may add additional meeting days on
April 8 and/or 9.
Pro-union employee reinstated with back pay after court grants Sec. 10(j) injunctive
relief
In the wake of a court order finding reinstatement of a discharged pro-union employee
was appropriate to let a union organizing campaign continue without further employer
interference, Amphenol Griffith Enterprises has agreed to permanently reinstate the
employee with back pay owed, post a notice addressing violations of the NLRA, and
advise employees of their rights under the Act, according to the NLRB.
On February 25, a NLRB regional director was granted a Sec. 10(j) injunction requiring
an Cottonwood, Arizona, manufacturer of electrical support systems for aviation and gas
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pipeline customers to reinstate the terminated employee, who was one of the prime
movers in a unionization effort, in order to return the parties’ situation to the status quo
and allow a union organizing campaign to continue its course. However, the federal
district court in Arizona found that the regional director was unlikely to succeed on
allegations that the employer impermissibly threatened employees, created the impression
that union activities were under surveillance, and solicited grievances by bringing up the
possibility of wage increases, and so denied the remaining relief requested.
The day after the court issued its order, Amphenol Griffith Enterprises agreed to
permanently reinstate the pro-union employee with back pay owed, to post a notice
addressing violations of the NLRA, and to advise employees of their rights under the Act.
Anti-union employees permitted to intervene in union challenge to Volkswagen
representation election
By Pamela Wolf, J.D.
The National Labor Relations Board has granted the motion of five Volkswagen
employees to intervene in the UAW’s challenge to the mid-February no-union vote
rendered by workers at Volkswagen’s Chattanooga, Tennessee plant, according to the
National Right to Work Foundation (NRTWF), which represents the intervening
employees.
The representation election at the VW plant drew national attention due to what union
supporters called unprecedented threats made by government officials that helped defeat
the union. If chosen as the bargaining representative, the UAW likely would ushered in
the European-style works council model of cooperation between management and
workers that is a feature of labor-relations at VW’s overseas locations.
Traditionally, Tennessee has not been favorable to unions, as pointed out by Tennessee
Senator Bo Watson (R-Dist. 11) just prior to the election: “Tennessee is a ‘Right To
Work’ State, the Tennessee Senate has affirmed this many times, and Tennessee has built
its reputation as a pro-business state. I believe the members of the Tennessee Senate will
not view unionization as in the best interest of Tennessee. The Governor, the Department
of Economic and Community Development, as well as the members of this delegation,
will have a difficult time convincing our citizens to support any Volkswagen incentive
package. Our job will be made exponentially more challenging.”
Election results challenged by union. In February, the UAW filed objections with the
NLRB over what the union saw as interference by politicians and outside special interest
groups in the representation election that resulted in a 712-626 rejection of union
representation. The UAW is asking the NLRB to set aside the election results due to
third-party misconduct and to hold a new election.
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According to media reports, Volkswagen opposed the intervention of the five employees
represented by the NRTWF into the election challenge, as well as the efforts of Southern
Momentum and the NRTWF in support of the intervening employees.
The VW election in many ways has become the poster child of labor relations gone bad
in the United States. Those on both sides of the representation issue credit the other with
improper conduct, with NRTWF-represented workers initially filing unfair labor practice
charges against the company and the union that were later resolved as unfounded against
the company by the NLRB and withdrawn against the union. The UAW and VW had
entered into a stipulated election agreement and had purportedly resolved to remain
neutral during the election campaign. Outside forces, however, were very vocal, with the
union now claiming foul as to comments seen as threats that were made by elected
officials.
“The evidence that coercive interference by Republicans lawmakers — reinforced by the
actions of anti-union groups — made a free election impossible in Chattanooga is
overwhelming,” according to John Logan, professor and director of Labor and
Employment Studies at San Francisco State University. “When leaders in the state
legislature stated that the company might lose financial incentives, VW workers had good
reason to expect that they would act on these threats,” Logan said. “This evidence of
coercive third-party interference can be grounds for overturning a flawed representation
election.”
Logan credited the comments of Senator Bob Corker (R-Tenn.), widely covered in the
media and repeated frequently by anti-union organizations, as being the most damaging
to the election process. “On day one of the three-day election Corker stated he had been
‘assured’ that VW would manufacture its new mid-size SUV in Chattanooga if workers
voted against unionization.
Volkswagen’s U.S. chief executive immediately refuted his remarks but in response
Corker suggested that his information came from executives in Germany. Corker’s
cynical and calculated comments almost certainly caused widespread fear and confusion
among the workers and pressured them to vote ‘no.’”
Voice of anti-union workers. Those on the other side of the issue have argued that VW
and the union entered into a neutrality agreement that prevented the workers from getting
other points of view that might otherwise have been offered by managers and supervisors.
Moreover, those workers who opposed the unionization move should have a voice in the
challenge to the election since VW will not be coming in against the union.
“We are very pleased that, despite attempts by Volkswagen and UAW officials to keep
workers out of this process, the acting Regional Director has ruled that the workers are
entitled to defend their vote to keep the UAW out of their workplace,” NRTWF Vice
President Patrick Semmens said in a statement. “The decision over whether or not to
unionize is supposed to lie with the workers, which makes the attempt by VW and the
UAW to shut them out of this process all the more shameful.”
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“In short, because the UAW and Volkswagen are colluding, no current party to these
proceedings will defend the outcome of the election and the rights and interests of
employees opposed to UAW representation,” according to a brief filed by the NRTWF.
“The Employee-Intervenors must be permitted to intervene to protect their interests and
to ensure that the Board has a complete record to adjudicate the UAW’s objections.”
TSA officers secure gains through interest arbitration decision reached by AFGE
The American Federation of Government Employees (AFGE), the union representing
nearly 45,000 TSA transportation security officers, announced on Monday, March 17 that
it had secured important gains for the agency employees via a “first of its kind” interest
arbitration decision.
The AFGE went to arbitration with the TSA last year after the parties could not reach an
agreement on several provisions of a collective bargaining agreement. After six days of
hearings last year, and months of review by the arbitration panel, the panel’s decision
“comes as a solid victory” for the employees, according to the union, with “a diversity of
groundbreaking provisions impacting the shift-bidding process, employee certifications,
and parking subsidies.”
The arbitration decision “tackles some longstanding issues that have frustrated TSOs for
years,” according to an AFGE release issued Monday. “Since the agency's inception,
many TSA employees have paid steep airport parking rates, receiving only a small
subsidy to offset a portion of the cost. With this decision, AFGE successfully increased
that subsidy by up to 25 percent at the most expensive airports, and will bring others
under the subsidy for the first time. This will give our TSOs a small, but much-needed
dose of financial relief.”
According to the AFGE, the arbitration win is only the latest in a series of victories that it
has secured for TSA employees since the union began organizing them shortly after the
agency's founding. “Before AFGE arrived at TSA, employees had no right to join a
union, bargain collectively over working conditions, or obtain a binding, enforceable
contract. Under their landmark first contract in November of 2012, which was ratified
overwhelmingly by the employees, TSOs saw increases in their uniform allowance, the
introduction of a seniority-based shift bidding system, a shift trading system, airport
transfer rights, and a more employee-friendly leave certification protocol. There are still
more issues to be addressed, but this is now a strong first contract.”
“This is a very important step forward for TSA employees,” said AFGE National
President J. David Cox Sr. The officers voted for AFGE as their bargaining
representative in order “to build a movement strong enough to improve the notoriously
difficult conditions they work under every day,” he said. “There is still much to be done,
but this decision moves us firmly in the right direction.”
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The AFGE is the largest federal employee union, representing 670,000 workers in the
federal government and the government of the District of Columbia.
With National Right to Work Foundation assistance, anti-union employees sue
Volkswagen, UAW
By Lisa Milam-Perez, J.D.
In the latest development in the ongoing effort by the United Auto Workers to represent
workers at a Chattanooga, Tennessee, Volkswagen plant, employees opposed to the
union’s organizing effort have filed a lawsuit contending a labor-management neutrality
agreement between the UAW and Volkswagen Group of America in the lead-up to last
month’s union election violated the LMRA.
Specifically, the employees, in a complaint filed on their behalf by the National Right to
Work Legal Defense Foundation, contend the company unlawfully provided “things of
value” to the union in violation of Sec. 302 of the Act in order to assist the union’s
organizing effort. In an “organizing agreement” with the UAW reached in January,
Volkswagen allegedly agreed to hold a “captive audience” meeting in which it announced
its support for formation of a “works council” at the Tennessee plant and also allowed the
UAW to solicit employees. The deal also granted the union access to company property
for organizing purposes, and the company agreed to remain neutral during the organizing
campaign. The complaint also contends the company and union violated the LMRA by
jointly petitioning the NLRB for an expedited election.
In turn, the union, for its part, allegedly agreed to delegate many of its duties as
bargaining representative to the “works council,” agreed not to strike and to limit its
organizing activities, and agreed that first contract negotiations would be guided by the
company’s goal of “maintaining and where possible enhancing” the cost advantages that
Volkswagen currently enjoys over its competitors.
These exchanged promises were of significant value to both parties, including monetary
value, according to the complaint. And, despite the union’s election loss, the UAW filed
election objections, which keeps the potential for a rerun election in play. The plaintiffs
contend the organizing agreement between the Volkswagen and UAW remains in effect
— creating “an imminent threat that Plaintiffs and their co-workers will become
exclusively represented by the UAW against their will.”
Accordingly, the plaintiffs seek preliminary and permanent injunctive relief barring
Volkswagen and the UAW from enforcing the organizing agreement, prohibiting the
union from seeking organizing assistance from the company, and also restricting
Volkswagen from providing such assistance. The employees also seek a declaration that
the organizing agreement is unlawful and unenforceable and that, in entering into the
deal, both defendants violated Sec. 302.
13
Union response. In a March 13 statement, UAW President Bob King contended the
lawsuit was “baseless,” adding that “The National Right to Work Legal Foundation has a
history of frivolous lawsuits trying to stop workers from joining the UAW.” King also
said the union had already demonstrated its majority status at the Chattanooga plant at the
time it entered into the neutrality agreement, and that the agreement would have been
lawful at any rate, “just like many other neutrality agreements the UAW and other unions
have negotiated with employers throughout the United States.”
The complaint, Burton v United Auto Workers, was filed in a federal district court in
Tennessee.
School district workers approve new contract, Las Vegas hotel employees have
tentative deal
By Pamela Wolf, J.D.
On the labor scene, workers for an Illinois school district have approved a new contract
and Las Vegas hotel workers have reach a tentative deal with a casino resort on the Strip.
Amboy Community School District 272. The Teamsters announced on Monday, March
17, that secretaries, aides, cooks, and custodians working for Amboy Community School
District 272 in central Illinois have ratified a new three-year contract as members of
Teamsters Local 722. The new deal includes wage increases each year of the agreement
for all members, as well as extra paid holidays and benefits improved upon from the
previous contract. The agreement also features stronger contract language further
defining the Teamsters’ grievance procedure and the disciplinary protections for Local
722 members.
“Our members at Amboy negotiated strongly for additional benefits they’ve worked hard
for, and Local 722 is proud of their efforts to secure a fair contract,” said Steve Mongan,
President of Local 722. “To have so many different types of positions throughout the
school district under one contract means a lot to our members. It’s a tremendous
achievement to stand together and make sure all of your co-workers get a piece of the
pie.”
LVH — Las Vegas Hotel & Casino. The Culinary and Bartenders Unions’ negotiating
committee reached a tentative agreement for a new five-year contract with the LVH —
Las Vegas Hotel & Casino on Wednesday, March 19, according to UNITE HERE. This
agreement brings to an end the unions’ contract negotiations with all Las Vegas Strip
casino resorts whose contracts expired on June 1 last year. However, negotiations
continue with other companies where contracts have expired.
The tentative agreement with the LVH follows settlements with MGM Resorts, Caesars
Entertainment, Riviera, Tropicana, Treasure Island, and the Stratosphere.
14
“We are not done because the thousands of workers downtown and in the laundries do
not have new contracts yet,” said Geoconda Arguello-Kline, Secretary-Treasurer of the
Culinary Union.
“We hope we can reach a fair settlement with the remaining unsettled houses very soon.”
The remaining unsettled properties are: Margaritaville, Fremont, Main Street Station,
Four Queens, Binion’s, Plaza, Las Vegas Club, The D, Golden Nugget, El Cortez,
Golden Gate, and Brady Linen Services. A strike authorization vote is scheduled for
Thursday, March 27, according to UNITE HERE. If the vote passes, the union may call a
strike against any of the companies without a contract at any time.
PRO and PSRA reach agreement on first CBA; referees back on the soccer field
By Pamela Wolf, J.D.
The Professional Referee Organization (PRO) on Thursday, March 20, reached its first
ever agreement with the Professional Soccer Referees Association (PSRA). The end of
the labor dispute followed the PRO’s announcement earlier this month that it had filed
unfair labor practice charges against the PSRA and a work stoppage that began almost
two weeks ago. With the five-year CBA ratified by the PSRA and approved by the PRO
Executive Board, PSRA referees began officiating Major League Soccer games over the
weekend.
“First contracts sometimes pose difficult challenges as the parties seek to define the
parameters of a new formal relationship,” remarked Acting Federal Mediation and
Conciliation Service Director Scot L. Beckenbaugh. “The leadership of both
organizations and their representatives at the bargaining table deserve praise for their
patience and willingness to focus on mutually acceptable solutions. I can assure soccer
fans everywhere that both parties remained committed and focused upon their shared goal
of contributing to the continuous improvement and growth of professional soccer in
North America.”
Beckenbaugh also said that the representatives from the PRO and PSRA “showed
professionalism and perseverance by choosing to manage their differences in a positive
and productive way. As a result, the credit for this positive outcome belongs to them.
Having made difficult choices together, ultimately, their perseverance was rewarded with
this new agreement.”
The new agreement will provide important benefits to our referees while ensuring that
PRO will be able to achieve its goal of developing and employing world-class referees
for the competitions we serve,” said PRO General Manager Peter Walton.”
New Regional Directors named to Regions 5 and 8
The NLRB has named Charles L. Posner to fill the Regional Director slot in the agency’s
Region 5, and Allen Binstock to serve as Regional Director of Region 8. NLRB
15
Chairman Mark Gaston Pearce and General Counsel Richard F. Griffin, Jr., announced
the selections on Monday, March 24.
Region 5. Posner will serve at the Region 5 office in Baltimore, Maryland, which
includes a resident office in Washington, D.C. He will be responsible for enforcement of
the nation’s primary labor law covering private sector employees in Maryland, the
District of Columbia, and parts of Delaware, Virginia, West Virginia and Pennsylvania.
Posner joined the NLRB in 1977 as a staff counsel to Chairman John Fanning. He served
in that capacity until 1981, when he transferred to the Regional Office in San Francisco
(Region 20) as a Field Attorney. The following year, he transferred to the Washington,
D.C. Resident Office of Region 5, and in 1989, received a promotion to the position of
Supervisory Attorney. In 1997, Posner was promoted to Deputy Assistant General
Counsel in the Division of Operations-Management and, in January 2011, he was
promoted to his most recent position of Assistant General Counsel in that Division.
Posner received a B.A. degree in Political Science in 1971 from the University of
California, Berkeley. In 1976 he earned a J.D. degree from Loyola University School of
Law in Los Angeles.
Region 8. Binstock will serve at the Region 8 office in Cleveland, Ohio. He will be
responsible for most of Northern Ohio. Binstock has spent his entire career at the
Cleveland office, beginning as a Field Attorney in 1979. He was promoted to the
positions of Supervisory Attorney in 2005, Deputy Regional Attorney in 2007, and
Regional Attorney in 2012.
The new Regional Director obtained his undergraduate degree in 1969 from Case
Western Reserve University where he earned an A.B. degree in history and received Phi
Beta Kappa honors. In 1971, he received a Master’s degree in history from the University
of Wisconsin. He earned a J.D. degree from the University of Connecticut Law School in
1979.
President establishes second emergency board to help resolve Long Island Rail
Road Company labor dispute
By Pamela Wolf, J.D.
President Obama has issued Executive Order (EO) 13663 establishing a second
presidential emergency board to investigate the ongoing dispute between the Long Island
Rail Road Company and employees represented by seven different unions. A prior
emergency board, established by EO in November 2013, terminated upon issuance of its
report, and its recommendations were not accepted by the parties.
The Long Island Rail Road, which is owned by the Metropolitan Transportation
Authority, serves the length of Long Island, New York. It claims to be the busiest
16
commuter railroad in the United States and the oldest railroad still operating under its
original name.
Pursuant to a party request, the president has authority under Sec. 9A of the Railway
Labor Act to appoint a second emergency board to investigate and report on the dispute.
President Obama exercised that authority on March 20. He appointed the following
individuals to the three-member board:
 Joshua M. Javits as Chair: Javits is a self-employed mediator and arbitrator for
labor-management, pension, commercial, contract, and a variety of other disputes.
He served on presidential emergency boards in 2007 and in 2009.
 Elizabeth C. Wesman as Member: Wesman has been a full-time labor and
employment arbitrator since 2000 and has practiced arbitration/mediation since
1981. She has arbitrated disputes in a wide array of industries, including railroads,
aerospace, police and fire departments, and public and private universities.
 M. David Vaughn as Member: Vaughn has been a full-time neutral arbitrator and
mediator specializing in labor and employment disputes since 1984. He has
served on three previous railroad industry presidential emergency boards. He has
been handling railroad cases since 1984 and has issued hundreds of awards.
The emergency board was established effective March 22. Within 30 days, the parties to
the labor dispute are required to submit their final offers of settlement to the emergency
board. Within 30 days of these submissions, the emergency board must submit a report to
the president laying out its selection of the most reasonable offer.
The parties to the dispute are now required to maintain the status quo, except for changes
to the conditions made by agreement of the parties, until 60 days after the second
emergency board submits its report to the president. As a result, any labor stoppage will
be headed off until July or later.
President Obama said, “I appreciate that these dedicated individuals have agreed to
devote their talent and years of experience working on labor-management disputes to
help reach a swift and smooth resolution of this issue.”
The unions involved in the dispute are Brotherhood of Railroad Signalmen; Independent
Railway Supervisors Association International; International Association of Machinists &
Aerospace Workers; National Conference of Firemen & Oilers/Service Employees
International Union; International Brotherhood of Electrical Workers; Transportation
Communications International Union; and International Association of Sheet Metal, Air,
Rail and Transportation Workers.
Republican leaders move to undercut NLRB’s proposed “quickie election” rule
By Pamela Wolf, J.D.
On Thursday, March 27, Republican Congressional leaders introduced legislation that
they hope will roll back the NLRB’s proposedRepresentation-Case Procedures Rule,
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reissued on February 6, 2014. The legislative response was implemented by House
Education and the Workforce Committee Chairman John Kline (R-Minn), Senate
Committee on Health, Education, Labor, and Pensions Ranking Member Lamar
Alexander (R-Tenn), and Health, Employment, Labor, and Pensions Subcommittee
Chairman Phil Roe (R-Tenn). The Republican leaders pointed to the so-called “quickie
election” rule’s “sweeping changes to long-standing labor policies in an attempt to speed
up union elections.”
Under the proposed rule, employers would have only seven days to find legal counsel and
appear before an NLRB regional officer at a pre-election hearing, according to the
lawmakers. “During those seven days, employers will have to identify every legal
concern or basically forfeit the ability to raise additional concerns during the course of
the hearing,” they cautioned in a release. They also objected to the proposed rule’s
purported delay of answers to important questions, such as voter eligibility, until after the
election has occurred. The lawmakers also said that worker privacy would be jeopardized
because employees’ names, home and email addresses, work schedules, phone numbers,
and other personal information would be provided to union organizers.
“As a result of these changes, union elections could occur in as few as 10 days, providing
employers no time to communicate with their employees and undermining the ability of
workers to make an informed decision, and worker privacy will be compromised,”
according to the Republican leaders.
Some welcome the proposed rule. At a hearing held by the House Committee on
Education and the Workforce on March 5, however, Weinberg, Roger and Rosenfeld
Partner Caren P. Sencer offered a different point of view. Contrary to the committee’s
reference to the NLRB’s proposal as the “Ambush Election Rule,” Sencer pointed out in
her written testimony that “in virtually all the cases where clients have filed election
petitions, the employers have been well aware of the organizing efforts prior to the filing.
In many cases, employers have already started their overt anti-union campaign.”
She noted that after an election petition is filed, federal law provides that “workers’
desire to vote for union recognition should be promptly honored.” When the employer
has not voluntarily recognized the union, the workers should have the chance to vote in a
Board-conducted election in a timely manner. “But too often, employers exploit the
current rules and procedures to delay the election as long as possible or avoid an election
altogether,” she observed.
The proposed rule revisions “are not revolutionary or radically different than the status
quo,” according to Sencer. “They reflect an attempt to standardize some of the best
practices and create consistency between Regions. Many of the proposed changes attempt
to align the Board procedures to procedures used by other agencies, bring the process into
the 21st century and provide clear notice. The proposed rules reduce unnecessary delay,
simplify the procedure and permit the parties to seek Board review after the election at
which time the parties know which, if any, differences of opinion that existed prior to the
election are relevant or determinative. This saves time and money for employers, unions
18
and the government, and promotes the ability of employees to exercise their right to
vote.”
Republican legislative response. The legislative response proposed by Chairman Kline,
Senator Alexander, and Representative Roe included the introduction of two new bills in
the House: The Workforce Democracy and Fairness Act (H.R. 4320) and The Employee
Privacy Protection Act (H.R. 4321). According to the three lawmakers, the combined
legislative response would:
 Guarantee workers have time to gather all the facts to make a fully informed
decision in a union election. No union election will be held in less than 35 days.
 Ensure employers are able to participate in a fair union election process. The bill
provides employers at least 14 days to prepare their case to present before a
NLRB election officer and protects their right to raise additional concerns
throughout the pre-election hearing.
 Reasserts the Board’s responsibility to address critical issues before a union is
allowed to represent workers. The Board must determine the appropriate group of
employees to include in the union before the union is certified, as well as address
any questions of voter eligibility.
 Empower workers to control the disclosure of their personal information.
Employers would have seven days to provide a list of employee names and one
additional piece of contact information chosen by each individual employee.
Public meetings. The NLRB will hold public hearings on the proposed rule on April 10
and 11, as well as additional days, if necessary, according to a to a notice published in the
Federal Register.
Unfair labor practices complaint issued against Kellogg in five-month lockout at
Memphis plant
By Pamela Wolf, J.D.
The NLRB has issued a complaint against Kellogg Company based on charges filed by
the union in the continuing lockout of more than 220 employees at a Memphis,
Tennessee, ready-to-eat cereal plant that began in October 2013. Represented by the
Bakery, Confectionery, Tobacco Workers and Grain Millers Union (BCTGM) Local
252G, the workers contend that the giant cereal manufacturer wants to destroy middleclass jobs and replace them with a cheaper workforce, while the company insists that it
must cut costs to be competitive.
The high-profile labor dispute has prompted the Congressional Black Caucus, the
Congressional Progressive Caucus, and the Executive Director of the NFL Players
Association to send letters to the employer calling for an end to the lockout. It was also
the impetus for the formation of The Coalition for the Organizational Protection of
People and Equal Rights (COPPER), a community organization. The Memphis chapters
of the National Action Network and the Southern Christian Leadership Conference have
also called for an end to the lockout.
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NLRB Region 15 issued the complaint, which, according to an agency release, alleges
that Kellogg violated the NLRA during bargaining with BCTGM Local 252G over a
supplemental local agreement at the Memphis food processing and packaging facility.
The company purportedly violated the Act “by insisting to impasse on bargaining
proposals that would constitute midterm modifications to the wage and benefit provisions
of the Master Agreement between Kellogg and the Union, by locking out approximately
225 Memphis unit employees in furtherance of its bad-faith bargaining position, and by
failing to provide requested information that would assist the Union in its representational
capacity and in assessing Kellogg’s bargaining proposals,” the NLRB said.
Union commends the action. The BCTGM, which welcomed the development, quickly
commented. “Today’s action by the Board’s General Counsel is the first step in
validating all that the BCTGM and our locked out members have consistently said since
the beginning of this tragic lockout — that the company violated the law by demanding
to negotiate on subjects that are not legally proper for the Memphis negotiations,” said
BCTGM International Union President David B. Durkee.
“This decision also exposes the disingenuous and misleading public relations campaign
Kellogg has been waging for the past five months in which it called on the Union to
return to the bargaining table for negotiations. As today’s Complaint alleges, Kellogg had
broken the very law that governs the negotiations the company wanted the local union to
resume.”
Costs and competitiveness at issue. Kellogg offered a different take on the lockout:
“After weeks at the bargaining table, the Union, regrettably, indicated they were not
willing to agree to the Company’s key proposals — which would protect the wages and
benefits of all current employees, and still offer above-market wages for future hires,
Kellogg said at the time.
According to the company, a fair and competitive contract is a critical factor in the
sustainability of the Memphis plant. “It is frustrating and disappointing to be in this spot,
but we can’t continue with the current cost model,” said Marty Carroll, Sr. Vice
President, Kellogg North America Supply Chain. “We are operating in a tough cereal
category and the labor costs at our U.S. [Ready-To-Eat-Cereal (RTEC)] plants —
including Memphis — put Kellogg at a competitive disadvantage, making it difficult to
fund critical efforts such as innovation and brand building.”
A hearing before an NLRB administrative law judge is scheduled for May 5 at the NLRB
regional office in Memphis.
LEADING CASE NEWS:
1st Cir.: District court didn’t abuse discretion by sharp reduction in lodestar
amount for recovery of attorneys’ fees
By Ronald Miller, J.D.
20
Following a bench trial in which a union pension fund was awarded a money judgment
against an employer for contributions due under a collective bargaining agreement, a
district court’s award of attorneys’ fees fell within the district judge’s discretion, ruled the
First Circuit in affirming the award. The appeals court determined that the district court’s
use of proportionality as a factor in setting the amount of the fee award was within its
discretion. Moreover, the district court acted appropriately in considering the relatively
modest size of the damage award, and the huge disparity between the amount of damages
sought and the much smaller amount of damages recovered in reducing the lodestar
(Central Pension Fund of the International Union of Operating Engineers and
Participating Employers v Ray Haluch Gravel Co, March 11, 2014, Selya, B).
Based on an audit to determine whether the employer was meeting its obligations under
the CBA, the fund demanded additional contributions. The employer refused and the fund
filed a lawsuit alleging that the employer failed to make required contributions in
violation of ERISA and the LMRA. The fund sued the employer seeking to recover
unpaid employee-related remittances allegedly due under the CBA. It also sought
attorneys’ fees and auditor’s fees and costs. A bench trial ensued and the district court
awarded the fund damages. In a separate ruling, the judge also awarded the fund $18,000
in attorneys’ fees, with expenses of $16,688. The award represented a steep reduction
from the sum sought by the fund.
The fund appealed both the merits ruling and the fee award. For its part, the employer
cross-appealed, asserting that the fee award was overly generous. On appeal, the First
Circuit held that the district court committed reversible error with respect to its
formulation of damages. However, the Supreme Court reversed, holding that the appeals
court lacked jurisdiction to review the damage judgment because the fund’s notice of
appeal was untimely. In the wake of the Supreme Court’s remand order, the appeal of the
damage judgment was dismissed and the cross-appeals challenging the fees and costs
reinstated.
Right to attorneys’ fees. Here, the First Circuit reviewed the amount of the award of
attorneys’ fees for abuse of discretion. Noting that this standard is highly deferential, the
appeals court explained that it would “set aside a fee award only if it clearly appears that
the trial court ignored a factor deserving significant weight, relied upon an improper
factor, or evaluated all the proper factors (and no improper ones), but made a serious
mistake in weighing them.” The fund’s entitlement to attorneys’ fees rested on two
independent grounds: the CBA’s language, and ERISA's fee-shifting provision. Since
neither party argued that the fund’s right to attorneys’ fees under the CBA differed in any
material respect from its corresponding right under ERISA, the court discussed the appeal
in terms of ERISA.
ERISA provides that a district court shall award “reasonable attorney’s fees and costs” to
an employee benefit plan when the plan succeeds in securing a judgment for a violation
of 29 U.S.C. Sec. 1145 (as the Fund did here). The calculation of shifted attorneys’ fees
generally requires courts to follow the lodestar approach. In this case, the district court
21
identified reasonable rates for the legal and paralegal services provided. It then examined
the claimed hours and, based on a finding that some hours were excessive and/or
unnecessary, reduced them by one-third across the board. These computations yielded a
lodestar of $84,656.50. The fund mounted no challenge to this aspect of the district
court’s ruling.
Thereafter, the district court adjusted the lodestar value to $18,000 based largely on two
considerations: the amount of damages recovered was far less than the claimed damages
and the fund had not recovered on a crucial claim that employer contributions were due
unidentified employees; and the initial lodestar calculation dwarfed the damage award
($216,897.41).
Proportionality standard. In challenging the district court’s attorneys’ fees award, the
fund argued that it was too focused on proportionality, and that this emphasis on
proportionality constituted an abuse of discretion. The appeals court agreed that in a
lodestar case, refusing to require that fee awards be strictly proportionate to damage
awards made good sense. Nevertheless, none of the cases cited by the fund held that a
fee-setting court is forbidden, in appropriate circumstances, from considering
proportionality as one factor among many in determining the amount of fees. The law of
the First Circuit recognizes that a fee-setting court can take the amount of damages
recovered into account.
In the case at hand, the district court plainly understood that a proportionality standard
should not be mechanically applied. It concluded that proportionality was a particularly
relevant factor here. The appeals court determined that this use of proportionality as a
factor (but not the exclusive factor) in setting the amount of the fee award was within the
court’s discretion.
Adjustment of lodestar. Still, the appeals court observed that the award reflected an
unusually large adjustment of the lodestar. However, taking into account the totality of
the circumstances, it concluded that the modest lodestar value formulated by the district
court did not constitute an abuse of discretion. In this instance, the district court factored
into the fee-shifting calculus not only the relatively modest size of the damage award, but
also the huge disparity between the amount of damages sought (nearly $200,000) and the
much smaller amount of damages actually recovered ($26,897.41). The district court also
considered that the fund had been unsuccessful in pursuing a major part of its case. A feesetting court has broad latitude to disallow attorneys’ fees with respect to time spent on
unsuccessful claims.
Travel-related expenses. Next, the appeals court turned to the employer’s cross-appeal
which derived from the travel the fund’s lawyers incurred to attend court sessions. The
district court regarded the travel as reasonably necessary, and ordered reimbursement of
travel-related expenses that included mileage, meals, and kindred charges. The employer
argued that the attorney hours spent in transit were not properly identified and were not
billed at a discounted rate. However, the First Circuit noted that it is well-settled that an
attorney’s travel time may be reimbursed in a fee award. Similarly, reasonable costs
22
associated with attorney travel may be reimbursed. While travel time is frequently
reimbursed at reduced hourly rates, “there is no hard-and-fast rule” requiring such a
discount.
Here, the district court judge made an across-the-board one-third reduction to billed hours
to account for a multitude of factors, including “excessive or unnecessary charges.” After
making this across-the-board cut, the judge settled upon the lodestar. He then arrived at a
final fee by slashing the lodestar by more than 75 percent. Although the judge treated the
fund’s fee application globally instead of going item-by item, the parties did not
challenge this approach, and the judge’s decision not to single out travel for special
attention nor to tinker with claimed travel expenses went hand-in-glove with his acrossthe-board approach. Thus, the appeals court concluded that the district court judge did not
abuse his discretion with his treatment of travel time and expenses. Consequently, the
court rejected both appeals and affirmed the district court’s order.
The case numbers are: 11-1944 and 11-1970.
Attorneys: Kenneth L. Wagner (Blitman & King) for Central Pension Fund of the
International Union of Operating Engineers and Participating Employers. Jose A. Aguiar
(Doherty, Wallace, Pillsbury and Murphy) for Ray Haluch Gravel Co.
3d Cir.: Circuit court had jurisdiction to review Virgin Islands Supreme Court
proceeding, but union’s cert petition moot
By Lisa Milam-Perez, J.D.
The Third Circuit continued to have jurisdiction over a Virgin Islands Supreme Court
decision arising from a dispute that originated prior to enactment of legislation in 2012
that provided for direct U.S. Supreme Court review of such proceedings, the appeals
court held. Nonetheless, a union’s petition for review of that court’s holding was denied
as moot because the employee on whose behalf it petitioned had since passed away, the
appeals court further held, rejecting the union’s contention that it was the real party in
interest (United Industrial, Service, Transportation, Professional and Government
Workers v Government of Virgin Islands, March 19, 2014, Cowen, R).
Discharged attorney. The underlying lawsuit arose from a grievance filed on behalf of
an assistant attorney general by his union after his suspension and subsequent discharge.
An arbitrator concluded the governor lacked just cause to remove the employee and
awarded immediate reinstatement. The Virgin Islands government sued to vacate the
award, seeking as well a declaratory judgment that it was not required to reinstate the
employee, and the union filed a cross-complaint seeking to confirm the arbitrator’s
decision.
After the cases were consolidated, a lower court held the arbitrator exceeded his authority
by granting relief based on a July 1, 2010 letter of termination (or the employee’s
suspension one month earlier) because the union had withdrawn its grievance over the
23
termination letter and never filed a grievance over the earlier suspension. Thus, it vacated
the arbitration award to the extent it granted relief prior to July 23, 2010, but otherwise
confirmed, ordering reinstatement and backpay to that date. The Virgin Islands Supreme
Court reversed the reinstatement, prompting the union to petition the Third Circuit for
review.
Jurisdictional issue. The union also moved to dismiss the government’s appeal,
contending the Virgin Islands Supreme Court lacked appellate jurisdiction. Because
neither the Virgin Islands superior court nor the arbitrator ever established the amount of
back pay owed to the reinstated employee, the union contended the absence of a clear
monetary judgment rendered the opinion and judgment non-final and not ripe for review.
For its part, the government invoked the practical finality rule and, alternatively, asserted
that there was appellate jurisdiction anyhow based on the reinstatement mandate, which
amounted to an “appealable injunction” under the Virgin Islands Code. The Virgin
Islands Supreme Court agreed with the latter argument in favor of jurisdiction, but
declined to take up any issues outside of reinstatement. The union then filed a motion
with that court to stay enforcement of the judgment pending the union’s writ of certiorari
to the Third Circuit.
Also, on December 28, 2012, H.R. 6116 was signed, eliminating the appeals courts’
certiorari jurisdiction over final decisions of the Virgin Islands Supreme Court; instead,
the legislation allowed for direct review of such decisions by the U.S. Supreme Court.
Meanwhile, the discharged employee at the center of the ongoing dispute passed away,
leaving the appeals court to consider: (1) whether it maintained certiorari jurisdiction
over proceedings filed in the Virgin Islands courts before the date of enactment of H.R.
6116 and, if so, (2) whether the employee’s death mooted the current certiorari
proceeding anyhow.
Jurisdiction retained. The Third Circuit concluded that it continued to retain jurisdiction
over proceedings filed with Virgin Islands courts prior to enactment of the legislation,
including the case at hand. If Congress had meant to strip the appeals court of certiorari
jurisdiction over proceedings already filed in the Virgin Islands courts before the
enactment date of the legislation, it “could have done so far more clearly,” the appeals
court reasoned, “by simply omitting any reference to an effective date.” That’s what
Congress did with respect to the Ninth Circuit’s jurisdiction over the Guam Supreme
Court. Also, the court noted, when Congress stripped the First Circuit of its jurisdiction
over the Puerto Rico Supreme Court, it expressly stated that “such repeal shall not
deprive the Court of Appeals of jurisdiction to hear and determine appeals taken to that
court from the Supreme Court of Puerto Rico before the effective date of this Act.”
Accordingly, the Third Circuit was confident that Congress intended it to exercise
jurisdiction here.
Petition moot. Nonetheless, the union’s certiorari petition was moot in light of the
employee’s subsequent death, the appeals court held, finding it could not award
meaningful relief in light of the changed circumstances and rejecting the notion that the
“capable of repetition yet evading review” doctrine applied here. “A statute stripping a
24
federal circuit court of certiorari jurisdiction over final decisions of the highest court of a
territory (and vesting the United States Supreme Court with certiorari jurisdiction at least
with respect to questions of federal law) does not appear to represent the type of
occurrence that could implicate this doctrine.” In any event, the appeals court noted, it
already found it retained certiorari jurisdiction with respect to proceedings filed in the
Virgin Islands courts before H.R. 6116’s enactment, including the proceedings filed in
this case, in 2011.
Furthermore, it was the employee’s death that mooted the current certiorari proceeding,
“and this unfortunate and seemingly unexpected occurrence does not render this case
capable of repetition yet evading review.”
The union vigorously argued that it was the real party in interest, and the appeals court
conceded that a union’s interest could extend beyond merely protecting the rights of an
aggrieved employee such that it “may have a right to advocate on behalf of other
similarly situated members as well as the collective bargaining unit as a whole.” But the
current proceeding presented a unique set of circumstances, it observed: the Virgin
Islands Supreme Court’s order was premised entirely on the employee’s reinstatement; it
dismissed the appeal with respect to all other issues since it concluded that the ongoing
disagreement as to the calculation of back pay precluded its exercise of jurisdiction over
those matters. The dispute over reinstatement, then, was the “hook” on which the
certiorari proceeding rested. Because the employee’s death obviously mooted any
reinstatement claim on his behalf, the parties lacked a legally cognizable interest in the
outcome of the certiorari proceeding itself.
The case number is: 13-1247.
Attorneys: Namosha Boykin (Law Offices of Pedro K. Williams) for United Industrial,
Service, Transportation, Professional and Gov't Workers of North America Seafarers Int'l
Union. Joss N. Springette for Gov't of the Virgin Islands.
5th Cir.: Confidentiality rule prohibiting employees from discussing wages and
working conditions with persons outside company overly broad
By Ronald Miller, J.D.
An employer unlawfully maintained an overly broad confidentiality rule that reasonably
tended to chill employees in the exercise of their rights under Sec.7 of the NLRA, ruled
the Fifth Circuit. The appeals court concluded that where the employer’s confidentiality
rule was likely to have a chilling effect on employees, the Board may conclude that its
maintenance was an unfair labor practice, even absent evidence of enforcement (Flex
Frac Logistics, LLC v NLRB, March 24, 2014, Stewart, C).
The employer was a non-union trucking company, relying on employees as well as
independent contractors. Each employee was required to sign a document that included a
confidentiality clause. A discharged employee filed a charge with the NLRB, and the
25
Board subsequently issued a complaint that the employer promulgated and maintained a
rule prohibiting employees from discussing employee wages. An administrative law
judge found that although there was no reference to wages or other specific terms and
conditions of employment in the confidentiality clause, because it was overly broad and
contained language employees could reasonably interpret as restricting exercise of Sec. 7
rights, it violated Sec. 8(a)(1) of the NLRA. In a split decision, the Board upheld the
ALJ’s decision. The employer petitioned for review and the NLRB filed a cross-petition
for enforcement.
Constitutional challenge. As an initial matter, the Fifth Circuit addressed a
constitutional challenge raised by the employer regarding the NLRB’s authority to render
the decision under review. Specifically, the employer argued that the NLRB’s decision
was invalid because the President’s appointment of two members of the panel was
unconstitutional. According to the employer, the President lacked the authority to make
putative recess appointments when the U.S. Senate was not in recess and the vacancies
did not occur during an intersession recess. Because two members of the three-member
panel were not validly appointed, the employer contended that the NLRB did not have
the quorum necessary to issue its decision.
The Fifth Circuit declined to address the merits of the employer’s constitutional
argument, and instead held that it waived its constitutional challenge by failing to raise it
in its initial brief. Moreover, the court noted that appellate courts shall not consider
objections that have not been raised before the NLRB “unless the failure or neglect to
urge such objection shall be excused because of extraordinary circumstances.” Further, in
D.R. Horton, Inc v NLRB, another panel of the Fifth Circuit faced a similar issue and
concluded that the constitutionality of the President’s authority to make recess
appointments was not a jurisdictional issue it must consider, especially considering that
the challenge was not raised during the parties’ initial briefing.
Restriction of Section 7 activities. Next, the employer argued that the NLRB’s order
should be set aside because it was unreasonable, not supported by substantial evidence,
and inconsistent with precedent. However, the appeals court observed that a “workplace
rule that forb[ids] the discussion of confidential wage information between employees . . .
patently violate[s] section 8(a)(1).” Even if the restriction is not explicit, the rule violates
Section 8(a)(1) when it falls within one of the following categories: “(1) employees
would reasonably construe the language to prohibit Section 7 activity; (2) the rule was
promulgated in response to union activity; or (3) the rule has been applied to restrict the
exercise of Section 7 rights.”
In this instance, the ALJ found that the workplace rule did not explicitly restrict Sec. 7
activities, nor was the rule promulgated in response to union activity. Thus, the appeals
court examined whether employees would reasonably construe the confidentiality
provision to prohibit Sec. 7 activities. Here, the court rejected the employer’s contention
that the NLRB’s interpretation of the confidentiality clause was unreasonable. The list of
confidential information encompassed by the rule included “financial information,”
including costs, which necessarily included wages and thereby reinforced the likely
26
inference that the rule proscribed wage discussions with outsiders. The confidentiality
clause gave no indication that some personnel information, such as wages, was not
included within its scope.
Further, the employer’s contention that the NLRB’s decision was not supported by
substantial evidence also failed. By its express terms, the confidentiality clause prevented
discussion of personnel information outside the company, and the employer presented no
evidence that its non-management employees discussed their wages with non-employees.
Rather, the employer pointed to evidence that its employees discussed wages amongst
themselves and its management and recruiters discussed wage information with current
and prospective employees. However, the appeals court concluded that the employer’s
evidence did not support its argument that employees were free to discuss terms and
conditions of employment, including wages, outside the company.
Finally, the employer’s argument that its employees did not interpret the confidentiality
provision to restrict their Sec. 7 rights also failed. The appeals court observed that the
actual practice of the employees was not determinative. “The Board is merely required to
determine whether employees would reasonably construe the [disputed] language to
prohibit Section 7 activity and not whether employees have thus construed the rule.”
Moreover, “the Board need not rely on evidence of employee interpretation consistent
with its own to determine that a company rule violates section 8 of the Act.” Nor is the
employer’s enforcement of the rule determinative. Rather, the appropriate inquiry is
whether the rule would reasonably tend to chill employees in the exercise of their Sec. 7
rights.
The case number is: 12-60752.
Attorneys: Linda Dreeben for NLRB. Scott Edmund Hayes (Vincent Lopez Serafino
Jenevein) for Flex Frac Logistics, LLC.
6th Cir.: Retirees can’t be compelled to arbitrate claims over termination of
healthcare benefits under “Plant Closing Agreement”
By Ronald Miller, J.D.
An employer was properly denied its motion to compel retirees to arbitrate, under the
provisions of a “Plant Closing Agreement” (PCA), their claims that the company
impermissible announced its intention to terminate its participation in a retiree healthcare
plan. Employees who retired prior to the employer and union entering the PCA were no
longer members of the union and could not be compelled to arbitrate under the provisions
of that agreement, ruled the Sixth Circuit in an unpublished opinion (International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) v
Kelsey-Hayes Co, March 3, 2014, Donald, B).
General arbitration provision. In 1998, the employer entered a collective bargaining
agreement with the UAW, which represented bargaining unit employees. The CBA
27
provided for comprehensive healthcare coverage to retirees and surviving spouses. It also
specified that healthcare-related disputes would be exempt from the arbitration provisions
of the CBA. In 2001, the employer closed its plant and negotiated the PCA with the
union. The PCA released the employer from most of its obligations under earlier CBAs.
However, healthcare benefits that had been negotiated under the 1998 CBA remained
intact, and incorporated by reference into the PCA. The PCA included a general
arbitration provision of broad applicability, providing that any disputes arising with the
union would be resolved through arbitration.
Following the execution of the PCA, the employer continued to provide health care
benefits in compliance with the terms of the 1998 CBA for approximately 10 years.
However, in September 2011, the employer announced to retirees that the company
planned to terminate participation in the retiree healthcare plan and require them to
purchase individual plans for Medicare supplemental insurance. The retirees filed suit
claiming that the employer’s plan breached the terms of the PCA and the 1998 CBA.
Relying on the PCA’s general arbitration clause, the employer moved to compel
arbitration. The retirees countered that healthcare disputes were explicitly removed from
arbitration under the 1998 CBA’s anti-arbitration provision.
Rights not extinguished. Initially, a district court granted the motion to compel
arbitration, finding that the 2001 PCA “extinguished” the 1998 CBA’s anti-arbitration
clauses. However, on reconsideration, the district court reversed itself in part, finding that
not all of the retirees’ rights were governed by the PCA. Specifically, the district court
concluded that a subset of retirees — those who retired prior to the plant closing — could
not be bound by the terms of the PCA because their rights had vested under the 1998
CBA.
On appeal, the Sixth Circuit agreed with the determination of the district court. The
appeals court first observed that it is well-established that parties cannot be compelled to
arbitrate a dispute unless they are contractually bound to do so by a valid and enforceable
prior agreement. Moreover, a dispute is not arbitrable if the parties’ agreement
“specifically excludes” the subject matter of that dispute from arbitration.
Here, employees who retired prior to the 2001 PCA were no longer members of the union
at the time of the plant closing and were not represented by the union in the negotiation
or execution of the agreement. It is well established that when a union negotiates with an
employer, the union represents only active employees and it does not represent the
interests of retirees absent their consent, explained the court. The employees who retired
prior to the 2001 PCA thus did not consent to the terms of the agreement and could not be
compelled to arbitrate under provisions contained in that agreement. Accordingly, the
Sixth Circuit affirmed the decision of the district court.
The case number is: 12-1824.
Attorneys: Gregory Valentin Mersol (Baker & Hostetler) for Kelsey-Hayes Co. John G.
Adam (Legghio & Israel) for UAW.
28
6th Cir.: Employer bound by arbitration award even though it refused to
participate in proceedings
By Ronald Miller, J.D.
An employer that declined to participate in a grievance before a joint grievance
committee constituted under the provisions of a master agreement because it felt that the
particular grievance could only be properly addressed under the grievance procedures of
the parties’ local agreement was bound by the committee’s award in favor of a union,
ruled the Sixth Circuit in an unpublished decision. Because the employer did not formally
contest the committee’s authority but simply chose not to participate, it could not
collaterally attack that procedure on grounds not raised before the arbitrator. As a result,
the appeals court reversed the ruling of the district court vacating the award and ordered
its enforcement (Local 1982, International Longshoremen’s Association v Midwest
Terminals of Toledo, International, Inc, March 26, 2014, Boggs, D).
The employer operated a port on the Great Lakes and was a member of a multiemployer
bargaining group. Local 1982 was the collective bargaining representative for the
employer’s stevedores; it was affiliated with the Great Lakes District Council (GLDC), a
subordinate body of the Longshoremen’s union. The union and employer were parties to
a collective bargaining agreement consisting of a master agreement between the
multiemployer group and GLDC and a local agreement between the employer and Local
1982. Both the master and local agreements contained elaborate grievance-procedure
provisions that the employer and union were required to invoke to resolve disputes
between them.
Union grievance. In December 2011, the union submitted a draft grievance to the
employer concerning its failure to contribute to a required employer pension and welfare
plan. When the dispute remained unresolved, the union filed a grievance for a violation of
a provision of the master agreement, under the grievance procedures provided by the
master agreement. However, the employer asserted that the grievance was procedurally
invalid because it did not comply with the disputes clause of the local agreement. It also
maintained that the grievance was time-barred.
Nonetheless, the union referred the matter to a joint grievance committee. Insisting that
the grievance was more appropriately resolved under the grievance procedures of the
local agreement, the employer did not participate in the master agreement grievance
process.
At the hearing, the union contended that the employer failed to establish a pension fund
as required by the master agreement and instead maintained its pension and welfare
contributions in its general treasury. The committee ruled against the employer, finding
that it had had ample time to establish trust funds that met minimum ERISA standards.
Following employer objections to the validity of the committee’s ruling, the union filed
suit seeking to enforce the award. The district court granted the employer’s competing
29
motion to vacate the award, finding that the master agreement expressly excluded the
union’s grievance from the master agreement grievance procedures.
Applicable grievance procedures. Recognizing that the presumption in favor of
arbitration applies with particular force in labor disputes, the Sixth Circuit reversed the
district court’s ruling. The parties disputed whether the union’s grievance was subject to
the master agreement’s or the local agreement’s grievance and arbitration procedures.
The union’s grievance related to provisions of both agreements and the master agreement
was ambiguous on this point. The district court resolved this ambiguity by interpreting
the master agreement language. It ruled that the union’s grievance was not subject to the
master procedures because of the “express provision excluding” the grievance. However,
the appeals court determined that the district court overstepped its role in resolving the
ambiguity itself.
The threshold questions about how to interpret this ambiguity and how to proceed in the
face of it were for the arbitrator to decide, concluded the Sixth Circuit. In this instance,
the employer responded to the union’s lawsuit to enforce the grievance award by asking
the district court to vacate the award. However, judicial review of an arbitration award is
“one of the narrowest standards of judicial relief in all of American jurisprudence,”
observed the appeals court. While the district court stated that it recognized this principle,
even “when an arbitrator resolves disputes regarding application of a contract,” errors “do
not provide a basis for a reviewing court to refuse to enforce the award.”
Here, the employer contended that the grievance committee acted outside its authority by
resolving a dispute not committed to arbitration. However, the district court recognized
that there was no dispute that the parties were bound to arbitrate the grievance. Thus, the
only question was which procedure to apply. Answering that question required resolving
contractual ambiguity, and the underlying question of contract interpretation was for the
arbitrator. The CBA in this case was silent about how to proceed with a grievance that
relates to both the master and local agreements. Against the backdrop of a federal policy
supporting a presumption of arbitrability in the labor-law context, it was difficult to
support the district court’s conclusion.
Nothing in the record supported the employer’s claim that the union’s grievance was one
arising purely under the local agreement. The employer was formally notified by the joint
committee that the union had filed a grievance against it under the master agreement. The
employer chose to ignore this communication and to presume, in its communication with
the union, that the local agreement procedures were underway. Because the employer did
not formally contest the joint committee’s authority, it could not collaterally attack that
procedure on grounds that were not raised before the arbitrator. As a result, the appeals
court reversed and remanded the case and directed the district court to enter an order
enforcing the arbitration award.
The case number is: 13-3654.
30
Attorneys: Ronald L. Mason (Mason Law Firm) for Midwest Terminals of Toledo,
International, Inc. Joseph Carl Hoffman (Faulkner, Hoffman & Phillips) for International
Longshoremen's Association, Local 1982.
7th Cir.: Dispute over railroad’s reliance on expert’s reports at disciplinary
investigations subject to exclusive jurisdiction of RLA arbitrators
By Kathleen Kapusta, J.D.
Affirming a district court’s refusal to exercise jurisdiction over a dispute between a union
and a railroad regarding the railroad’s use of accident reconstruction reports in employee
disciplinary investigations, the Seventh Circuit found that the union’s lawsuit was a
“quintessential” minor dispute that grew out of the parties’ collective bargaining
agreement and that the railroad met its burden of proving that its use of the reports was
justified by a contractual right (Brotherhood of Maintenance of Way Employees
Division/IBT v Norfolk Southern Railway Co, March 11, 2014, Bauer, W).
Expert’s reports. The railroad fired four employees after disciplinary hearings
concluded that they each made false statements related to their claims of on-duty injuries.
In each case, the railroad submitted an accident reconstruction report by a consulting
engineer who reenacted each accident. In his reports, the expert concluded that it was
unlikely that the employees’ injuries occurred as they described. Although his reports
were submitted as evidence, the expert never testified at any of the investigations.
Discipline rule. The investigations were held pursuant to an amendment of the parties’
CBA. The amendment, called the System Discipline Rule (discipline rule), outlined the
procedures the railroad was required to follow when disciplining union members.
Pursuant to the rule, the railroad was not allowed to discipline, dismiss, or place an
unfavorable mark on an employee’s record without first conducting a “fair and impartial
investigation.” The parties referred to the disciplinary hearing as an “investigation.”
At an investigation, both parties could call witnesses to testify and employees were
entitled to the assistance of authorized representatives throughout the process. The
discipline rule did not require an external investigator to conduct the investigation. After
the investigation, the hearing officer determined whether the employee should be
dismissed. An employee could then appeal the results of the investigation to a higher
officer at the railroad. If an employee was still unsatisfied, he could petition the Special
Board of Adjustment (SBA) for a final adjudication on the matter.
Injunction sought. In the instant case, the union sought a permanent injunction
preventing the railroad from using the engineer’s reports, or any expert witness
testimony, in employee investigations, unless the railroad followed new court-imposed
procedures. It requested a court order mandating the railroad to: (1) disclose expert
witnesses to the union and accused employees before investigations; (2) provide copies of
expert reports to the union and accused employees before investigations; (3) present
experts for cross-examination at investigations; (4) allow the union time to hire its own
31
experts; and (5) qualify experts under specified standards. Finding that suit was a minor
dispute under the RLA, the district court declined to exercise jurisdiction.
On appeal, the union argued that the court had jurisdiction over the lawsuit because it
raised a federal question: whether the railroad violated a provision of the RLA requiring
that carriers exercise every reasonable effort to make and maintain agreements. The
union contended that the railroad breached its duty to “maintain agreements” by not
providing its members a fair and impartial investigation as mandated by the discipline
rule. The railroad disagreed, however, contending that the rule justified its use of the
reports. Therefore, it argued, the matter was subject to the exclusive jurisdiction of the
RLA arbitrators.
Light burden. The court first pointed out that a party seeking to establish that a dispute
is minor and under the exclusive arbitral jurisdiction of an RLA Adjustment Board faces
a “relatively light burden.” To be considered minor, an employer’s action only needs to
be “arguably justified” by a contractual right under the terms of the CBA. Only if the
employer’s assertion of a contractual right is “frivolous or obviously insubstantial” will
the dispute be construed as major.
Minor dispute. Agreeing that the dispute here was minor, the court noted that while the
discipline rule required the railroad to provide union members with a fair and impartial
investigation, it did not provide extensive procedural requirements or evidentiary rules on
how to meet that requirement. Nor did it explicitly address pre-investigation disclosures,
the admissibility of hearsay testimony, or the role of expert witnesses.
Union’s conduct. Moreover, the court pointed out, in one of the four cases highlighted
by the union, it submitted an affidavit from an individual regarding the tether straps
installed on the driver’s seat of the employee’ truck but did not qualify the individual as
an expert or make him available for cross-examination. Here, the court noted that while
the discipline rule did not contain an express provision permitting the union action, the
union submitted the affidavit anyway. Both parties enjoyed latitude to introduce
testimony and evidence in the four disciplinary proceedings, the court observed.
In addition, in previous disciplinary actions, the union introduced expert testimony
without offering the expert for cross-examination. Thus, noted the court, the use of
hearsay reports by lay persons and experts has played a consistent role in the disciplinary
hearings of union members. Accordingly, based on the parties’ past practices, the
railroad’s use of the engineer’s reports in the investigations was arguably justified by the
implied contractual terms of the parties’ CBA.
Other practical remedies. Noting that federal courts should issue injunctions when it is
the only practical remedy capable of enforcing unions’ and railroads’ duty to make and
maintain agreements, the appeals court pointed out that in this case, other practical
remedies were available to the union. It could renegotiate the terms of its CBA with the
railroad under formal procedures or seek an interpretation of the discipline rule before an
RLA Adjustment Board.
32
Further observing that policy reasons led it to decline jurisdiction, the court noted that
“‘[r]eferring arbitrable matters to the Board will help to ‘maintain agreements,’ by
assuring that collective-bargaining contracts are enforced by arbitrators who are experts
in ‘the common law of [the] particular industry.’”
Concluding that the union was not asking the court to interpret a federal statute but rather
to interpret its collective bargaining agreement — specifically, what constitutes a “fair
and impartial hearing” — a function exclusively reserved for an RLA Adjustment Board,
the court affirmed the lower court’s refusal to assert jurisdiction over the dispute.
The case number is: 12-3415.
Attorneys: Harry W. Zanville for Brotherhood of Maintenance of Way Employees
Division/IBT. James S. Whitehead (Sidley Austin) for Norfolk Southern Railway Co.
7th Cir.: Court without jurisdiction to review NLRB order setting aside election
results; but it could find employer unlawfully withdrew recognition of union
By Ronald Miller, J.D.
Because the results of a decertification election had not been vindicated by proof that a
union lost the support of a majority of bargaining unit members, and because a new
election had not been held, the Board’s refusal to decertify the union and instead order a
re-run election was outside an appeals court’s jurisdiction, ruled the Seventh Circuit.
Thus, the appeals court determined that it lacked jurisdiction to review an NLRB order
setting aside the results of a decertification election. However, the court had jurisdiction
to adjudicate the parties’ dispute over whether the employer committed an unfair labor
practice in refusing to recognize a union when the union had not yet been decertified after
an election. Here, the appeals court concluded that the employer had committed an unfair
labor practice when it withdrew recognition before the potentially decisive ballot in the
election had been opened (Heartland Human Services v NLRB, March 14, 2014, Posner,
R).
In August 2011, just days after the latest collective bargaining agreement between the
employer and union expired, a bargaining unit employee asked the NLRB to conduct a
decertification election on the ground that many unit members no longer wanted to be
represented by the union. An election was conducted and the union prevailed by one vote,
but there was one challenged ballot. After rejecting the union’s challenge to the disputed
ballot, it was opened and the vote was against the union, which meant that the election
ended in a tie. However, the union challenged the result of the election arguing that the
employer had used “objectionable conduct” to turn the employees against the union,
including that an anonymous letter was sent to a member of the bargaining unit
threatening her with jail if she voted for the union.
The Board agreed with three of the union’s charges and ordered a new election. Before
then, however, shortly after the decertification election, the employer announced that it
33
would no longer cooperate with the union as the collective bargaining representative
because the election proved that it had lost support of a majority of the unit. In effect, it
rescinded its recognition of the union. This was premature, since the challenged ballot
had not yet been opened. Until a union is decertified following an election, the
employer’s obligations are the same as before the election. Thus, the union was on solid
ground in responding to the employer’s withdrawal of recognition by filing an unfair
labor practice complaint. The Board upheld the complaint and ordered the employer to
recognize and bargain with it. The NLRB asked the appeals court to enforce that order.
The NLRB issued the unfair labor practice order in March 2013, some nine months after
the election. The Board had ordered a new election in September 2012, 20 months after
the first election, but it has not yet been held because of the unresolved unfair labor
practice proceeding (owing to the pendency of this judicial review). Such a delay
undermines the rationale for a re-run election, the Seventh Circuit observed. In the space
of 20 months the unit membership may have changed. The company or the union may
have tried with some success to alter the size or composition of the unit so that its
opponents would be less likely to prevail. New employees would be unfamiliar with the
union; some old ones may have forgotten it; and the company could have used the period
to accustom the employees to the union’s absence.
Nevertheless, although judicial review of a Board order confirming or setting aside an
election was postponed, it was not eliminated. “Errors committed in the electoral process
must be corrigible on judicial review for certification and decertification to be acceptable
as reliable determinations,” the court observed. In this instance, the employer jumped the
gun by refusing to recognize the union before the new election was conducted and its
results certified. Had the employer not withdrawn recognition after the decertification
election, the union would have had no grounds for filing an unfair labor practice
complaint and the new election would have been conducted promptly.
While the NLRB’s procedure for dealing with election challenges is unquestionably
cumbersome because of its refusal to conduct a new election while an unfair labor
practice is pending, the procedure suggested by the employer would be even more
cumbersome. For until the new election is held, there is no jurisdiction to review the
Board’s refusal to decertify the union, and so the reviewing court can’t adjudicate the
dispute between the company and the Board (and union) over whether the irregularities in
the original election justified the Board’s refusal to accept the results of that election.
Employers may not withdraw recognition merely because they harbor uncertainty or even
disbelief concerning a union’s majority status. As a result, because the employer was
without justification in withdrawing recognition from the union, it remained certified and
the employer was required to continue to recognize it until it was decertified. The
Board’s unfair labor practice order based on the employer’s premature withdrawal of
recognition from the union was enforced.
The case numbers are: 13-1954 and 13-2079.
34
Attorneys: Linda Dreeben for NLRB. John L. Gilbert (Sandberg, Phoenix & Von
Gontard) for Heartland Human Services.
7th Cir.: Because CBA did not require compensation for donning and doffing time
at meal breaks, time noncompensable under state and federal law
By Ronald Miller, J.D.
A poultry processor was entitled to summary judgment against claims by poultry workers
that it violated the overtime provision of the FLSA and a class action claim for alleged
violations of the Illinois Minimum Wage Law (IMWL), where a collective bargaining
agreement specifically excluded such time from compensable working time, ruled a
divided Seventh Circuit. The majority observed that amicable labor-management
relations are impaired by reading broadly statutes and regulations that remove wage and
hour issues from the scope of collective bargaining. Here, the employer and union had
agreed not to count the tiny donning and doffing times as compensable work, and the
plaintiffs were trying to upend the deal struck by their own union. Chief Judge Diane
Wood dissented (Mitchell v JCG Industries, Inc, March 18, 2014, Posner, R).
“Changing” time. The line workers were represented by a union that had a collective
bargaining agreement with the employer. Because of the nature of the work, “rigid
sanitation requirements must be met.” So before beginning their work shifts, the line
workers were required to put on a sterilized jacket, plastic apron, cut-resistant gloves,
plastic sleeves, earplugs, and a hairnet. They were also required to remove this sanitary
gear at the start of their half-hour lunch break and put it back on before returning to work.
The principal issue in the case was whether the time spent in changing during the lunch
break was working time that must be compensated. The time the workers spent changing
before and after eating lunch was time taken out of their lunch break rather than out of
the four-hour shifts that preceded and followed it.
The employees conceded that the meal break was a bona fide meal break under 29 C.F.R.
Sec. 785.19(a), so it was not time the employer was required to compensate them for. At
any rate, the CBA between the employer and union did not require such compensation.
Rather, the employees argued that federal and state law required that this changing time
be compensated at the overtime rate. The FLSA, 29 U.S.C. Sec. 203(o), excludes from
compensable time “any time spent in changing clothes at the beginning or end of each
workday which was excluded from measured working time … by the express terms of or
by custom or practice under a bona fide collective-bargaining agreement applicable to the
particular employee.” Here, the bone of contention was that the lunch break did not occur
at the beginning or end of the shift, so that the employees contended that only that period
was the “workday.”
Workday defined. As an initial matter, the court expressed doubt about whether the
interpretation of “workday” proposed by the employees could possibly be correct given
that many workers work at night. These workers have a “workday,” but it begins or ends
at night (sometimes both). Workers given a half-hour lunch or other meal break from
35
work are in effect working two four-hour workdays in an eight-and-a-half-hour period.
As a result, the court concluded that it made no practical sense to draw the distinction
urged by the employees. Since changing time is not working time, a union may decide
not to press the employer to pay workers for that time. That forbearance would be
mutually attractive because it avoids the bother of tracking how long changing takes.
Hence the optional exemption in Sec. 203(o).
As a consequence, the Seventh Circuit concluded that the “workday” includes night work
and it may include four-hour shifts separated by meal breaks. The applicable regulation
defines “workday” to mean “in general, the period between the commencement and
completion on the same workday of an employee’s principal activity or activities,” 29
C.F.R. Sec. 790.6(b). The qualifying phrase “in general” allows room for an exception;
and the court found a compelling reason to recognize an exception in this case. Observing
that the FLSA does not require that employers provide meal breaks, the court found that
this was another reason to interpret “workday” in this manner. Moreover, the Supreme
Court recently pointed out in Sandifer v U.S. Steel Corp, that Sec. 203(o) provides that
the compensability of time spent changing clothes or washing is a subject appropriately
committed to collective bargaining.
De minimis doctrine. The Seventh Circuit majority also concluded in the alternative that
the de minimis doctrine was applicable to this case, since the “vast majority of the time”
spent by the poultry workers during their lunch breaks was not devoted to donning and
doffing. Citing its opinion in Sandifer, the appeals court observed “it is only when an
employee is required to give up a substantial measure of his time and effort that
compensable working time is involved.” In this instance, the parties disputed how long it
took the employees to change out and then back into their protective clothing. While the
employees estimated 10-15 minutes, the employer said 2-3 minutes. Here, the majority
found it inconceivable that “a substantial measure” of the poultry workers’ “time and
effort” was consumed in changing during the lunch break. It concluded that it was
possible to give the text of Sec. 203(o) a meaning that avoided relatively inconsequential
judicial involvement in a morass of difficult, fact-specific determinations. Thus, the
majority determined that no reasonable jury could find that workers spent half their lunch
break taking off and putting on a lab coat, an apron, a hairnet, plastic sleeves, ear plugs,
and gloves.
State law claim. Next, the court turned to the employees’ claims based on Illinois’s
minimum wage statute. Here, the majority observed that the Director of the Illinois
Department of Labor had promulgated regulations defining “hours worked” to mean all
the time an employee is required to be on duty, or on the employer’s premises, or at other
prescribed places of work, and any additional time he or she is required or permitted to
work for the employer.” The majority noted that, standing alone, this broad definition
would encompass time spent changing during a meal break. However, a 1995 addition to
the regulation stated that “an employee’s meal periods … are compensable hours worked
when such time is spent predominantly for the benefit of the employer, rather than for the
employee.”
36
The question under Illinois law was whether the time spent during the half-hour meal
break in changing clothes was de minimis. The majority observed that the employer did
not provide a meal break so that the employees could don and doff protective clothes and
equipment, but so that they don’t have to work eight hours straight without food. Thus, it
concluded that the meal break was for the employees’ benefit and that changing clothes
was incidental to the employees eating lunch.
Dissent. Judge Wood, in dissent, argued that there was no justification for the majority’s
holding that the employees were not entitled to be compensated for the time they spent
putting on and taking off protective gear, plus associated washing up time. The dissent
concluded that the FLSA independently protected their right to compensation for the
lunch-break time. Moreover, the dissent argued that under its reading of the Illinois
Minimum Wage Law, the employees were entitled to compensation for their donning,
doffing and washing up time both at the beginning and end of the workday and during
their lunch breaks.
The case number is: 13-2115.
Attorneys: Stephen Novack (Novack & Macey) for JCG Industries, Inc. James B. Zouras
(Law Office of Stephan Zouras) for Rochell Mitchell.
8th Cir.: Sara Lee did not breach requirement to make subcontractor comply with
CBA
By Lorene D. Park, J.D.
A paragraph in a collective bargaining agreement (CBA) obligating Sara Lee to require
transportation contractors to conform to the then current labor agreement never took
effect because it was only triggered if Sara Lee “changes subconstractors,” which it did
not do, concluded an Eighth Circuit panel, affirming summary judgment against unions
asserting a breach of contract claim (Allied Sales Drivers and Warehousemen, Local No.
289, International Brotherhood of Teamsters v Sara Lee Bakery Group, March 19, 2014,
Riley, W).
Sara Lee and the unions entered a CBA covering sales employees, mechanics, and
transport drivers at Sara Lee’s location in Fergus Falls, Minnesota, and running from
October 14, 2007, through October 9, 2010. In March 2008, the parties entered an
outsourcing agreement allowing Sara Lee to outsource the transport/mechanic function at
that location without the unions’ objection if certain requirements were met, including
that the contracted company would fill its employment needs from Sara Lee’s displaced
employees. If Sara Lee decided to outsource and “subsequently changes subcontractors,”
the outsourcing agreement also required that Sara Lee ensure the new contract company
conform to “the then current labor agreement” for that agreement’s “remaining term.”
On July 19, 2010, UPS proposed that Sara Lee outsource it transportation management
and labor through a service package provided by UPS. Because providing labor was
37
outside UPS’s business model, the proposal was revised August 5, 2010, to provide two
outsourcing options, each with a different labor provider: (1) a contract with UPS under
which IMSCO would provide the transport labor, or (2) a contract with UPS under which
Transport Drivers, Inc. (TDI) would provide the transport labor. Sara Lee agreed,
choosing TDI as the labor provider.
TDI refuses to accept CBA. Thereafter, the unions were informed that TDI would take
over as transport labor provider. TDI began negotiating a CBA with the unions but it
refused to accept the precise obligations in Sara Lee’s existing CBA. With the issue
unresolved, TDI offered jobs to the displaced transport drivers. Absent a CBA, TDI
offered to match the drivers’ existing wages and enroll them in TDI benefits. All of the
outsourced drivers accepted, ending employment with Sara Lee on October 9 and
becoming TDI employees on October 10. A union rep sent Sara Lee a letter explaining
that TDI had refused to comply with the terms of the outsourcing agreement and asking
that Sara Lee “suspend all action” on the “outsourcing of bargaining unit work to TDI.”
Sara Lee responded that it was complying with the agreement.
New CBA. Meanwhile, Sara Lee and the unions began negotiating a new CBA to replace
the old CBA upon its expiration on October 9. To facilitate continued negotiations, the
parties agreed to an extension agreement, which provided that the CBA set to expire on
October 9 would be extended until December 31, 2010, and that Sara Lee agreed to
incorporate a retroactive application of items negotiated during the extension period. A
new CBA was signed over a year later. It stated that its term was from October 10, 2010,
to October 12, 2013, and that it did not cover the outsourced transport drivers.
Lawsuit over outsourcing agreement. The unions filed suit against Sara Lee under
LMRA Sec. 301, alleging it breached the outsourcing agreement by failing to ensure
TDI’s compliance with the old CBA as to the transport drivers. Granting summary
judgment for Sara Lee, the district court found that the old CBA had no remaining term
on the date of outsourcing. It originally expired October 9, 2010, and though the
extension agreement purported to “extend” the old CBA to December 31, 2010, the new
CBA’s retroactive October 10, 2010, start date seemed to prevent the old CBA’s term
from having ended any later than its original October 9 date. To the district court, the new
CBA’s retroactive term overrode any expansion of the old CBA’s term.
No subsequent change in subcontractors. Affirming, the Eighth Circuit found it
unnecessary to address the extension agreement’s impact on the old CBA’s term because
the proposition that Sara Lee never “subsequently change[d] subcontractors” provided a
clear basis upon which to affirm. The requirement in the outsourcing agreement that Sara
Lee “require any new subcontractor to accept the then current labor agreement for the
remaining term of that agreement” only applied if Sara Lee made a decision to outsource
and subsequently changed subcontractors for the transportation function. The appeals
court found “the parties’ use of the word ‘change’ both unambiguous and decisive”
because it could only mean the replacement of one subcontractor with another.
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The context of the language also supported this reading of the agreement because the
paragraphs before and after the paragraph at issue started with “The parties agree that in
the event a decision is made regarding the outsourcing . . .” But the paragraph at issue
broke from this pattern by adding the words “and subsequently changes subcontractors . .
..” Based on this, the appeals court concluded that the paragraph unambiguously applied
only to a company that replaced the role of a prior contract company as the provider of
Sara Lee’s transportation function.
Here, the evidence showed that the displaced transport drivers’ employment with Sara
Lee was severed as of midnight on October 9, 2010, and the next day each began to work
for TDI. There was no evidence indicating that UPS ever employed any of the drivers and
no evidence as to any other third-party contractor before TDI. As a consequence, Sara
Lee had no obligation under the provision at issue to require TDI to conform to the old
CBA.
The case number is: 12-3585.
Attorneys: Patrick Robert Martin (Ogletree & Deakins) for Sara Lee Bakery Group.
James Theodore Hansing (Hansing Law Office) for Allied Sales Drivers and
Warehousemen, Local No. 289.
8th Cir.: Record of union hearing didn’t support existence of “some evidence”
supporting expulsion of member from union
By Ronald Miller, J.D.
A district court finding that there was “some evidence” presented at a union hearing to
expel a union member for allegedly threatening a union business agent was revered by
the Eighth Circuit in a unpublished opinion. The appeals court determined that the
employee had not received a full and fair hearing. On remand it required that the district
court determine on an adequate fact record whether there was “some evidence”
supporting the decision to expel the employee from union membership (Rudish v
International Union of Operating Engineers, Local 234, March 21, 2014, per curiam).
The employee was expelled from the union following a union proceeding on charges
brought against him by another union member. Afterward, the employee bought suit
against the union alleging violations of Sec. 101(a)(5) of the Labor-Management
Reporting and Disclosure Act (LMRDA), which forbids labor organizations from
expelling or disciplining a member without (1) service of written specific charges, (2) a
reasonable time to prepare a defense, and (3) a full and fair hearing. The employee
claimed that the charges were not sufficiently specific or supported by enough evidence
and that his union hearing was held before a related criminal charge against him had been
resolved, which prejudiced him and violated his constitutional rights.
The district court granted summary judgment in favor of the union on all his claims.
Specifically, it concluded that the record revealed no issues for a jury on whether the
39
employee had received a full and fair hearing because the record showed that the adverse
disciplinary decision was supported by “some evidence.”
On appeal, the Eighth Circuit observed that the union offered nothing to show what
evidence had been presented at the union proceeding. The only indication in the record as
to what evidence was presented at the union proceeding was in a one-page copy of the
minutes of the hearing attached to the employee’s complaint. According to the minutes
of the union proceeding, each side was given five minutes to present its case. The
member who had brought the union charges against the employee explained why he
brought the charges, noting an order of protection brought against the employee. The
employee questioned a retired union business agent whether he had ever gone to his
house or called in the evening. The retired business agent responded in the affirmative.
Thereafter, the employee played a recording of the voice of the business agent he
allegedly threatened telling him not to call his house at night.
Here, the appeals court determined that there was no evidence presented that was directly
probative of the charges brought against the employee. The evidence merely consisted of
statements or testimony on (1) the existence of an order of protection against the
employee, (2) how he had behaved towards a retired business agent, and (3) how the
business agent he allegedly threatened had once asked the employee not to call his house
at night. The appeals court declined to agree with the district court that this presentation
constituted “some evidence” that the employee had threatened a union business agent.
The case number is: 13-1629.
Attorneys: Thomas David McMillian for International Union of Operating Engineers,
Local 234. John Rudish, pro se.
8th Cir.: Arbitrator’s award drew its essence from parties’ CBA, as ascertained
through bargaining history, past practice
By Lisa Milam-Perez, J.D.
An arbitrator’s award against a union and in favor of a local car dealership association
drew its essence from the parties’ contract, the Eighth Circuit held, and the district court
did not err in affirming it. The underlying dispute, over a dealership’s unilateral
termination of an incentive pay practice, required the arbitrator to look outside the four
corners of the ambiguous CBA terms to the parties’ negotiations and daily practices. The
district court correctly found the arbitrator was right to do so and dismissed the union’s
challenge to the award (Garage Maintenance, Machine Warehousemen, Repairmen,
Inside Men and Helpers and Plastic Employees, Local 974 v Greater Metropolitan
Automobile Dealers Association of Minnesota, Inc, March 26, 2014, Kelly, J).
Above-scale time allowances. The union representing auto technicians had entered into a
series of bargaining agreements with MADA, a local association of auto dealerships. A
dispute arose as to the “above-scale time allowances” that a dealership had provided for
40
work on the Toyota Prius. Since the model was first introduced in 2001, technicians
working on hybrid cars had received this incentive pay under the contract with the
dealership. Because this work was particularly difficult and dangerous, one hour spent
working on a hybrid was counted as one-and-a-half to two hours in the technician’s
weekly productivity, depending on the specific task at hand. The auto dealerships had
been paying union technicians an above-scale time allowance on various tasks since the
1970s; only one of the dealerships applied the incentive pay to hybrid work, though. It
had implemented the allowance on hybrid work unilaterally, without bargaining with the
union.
When negotiating a new three-year contract in 2006, MADA sought to eliminate all
above-scale time allowances, a proposal the union rejected. However, the union agreed to
reduce the allowances for new hires. The 2006 contract was extended through April 15,
2010, and then extended again through April 17 (a joint decision, averting a strike), and
the union members approved the new contract in the interim.
The incentive pay language appearing in both the 2006 and 2010 agreement was
identical, with the exception being the relevant dates. The 2010 CBA noted that if, “on
April 15, 2010 an Employer was paying a higher time allowance to technicians for any
operation than the factory flat rate manual allows, that allowance will not be reduced. The
Employer shall not be precluded from reducing any such higher time allowance with
respect to those employees that were hired on or after April 16, 2006.” Both contracts had
a maintenance-of-standards provision as well.
On April 15, the dealership that was giving incentive pay for hybrid work informed the
union by letter that it would cease doing so, prompting the union to file a grievance
contending the dealership breached the CBA and unlawfully refused to bargain. The
April 15 letter was not a lawful way to terminate the allowances, the union argued;
instead, such changes should have been done through the usual CBA negotiation process.
But MADA countered that, since new hires were expressly not entitled to the above-scale
allowances, the maintenance of standards requirement on which the union hung its hat
was not absolute — and did not require that the allowances be continued from one
contract term to the next. Even so, MADA argued further, the requirement would only
apply to those allowances in effect on the data that the 2010 contract was signed, April
16, 2010, and the above-scale allowance was discontinued on April 15.
Arbitration award. The arbitrator concluded that the maintenance of standards provision
protected those conditions of employment that were in effect at the time of signing of the
agreement, which took place on April 16; thus, any conditions lawfully eliminated on
April 15 were not protected going into the new contract term. Since the CBA language
did not address how the above-scale time allowances could be legitimately terminated,
the arbitrator found a latent ambiguity in the contract, so he looked to the parties’
bargaining history and daily practices with respect to the time allowances in order to
construe their intent. Because neither contract provision cited by the parties addressed
how the incentive pay may be changed — by mutual agreement, whether memorialized in
41
a new CBA, or by some other means — the Eighth Circuit found the arbitrator was
warranted in doing so.
Moreover, the arbitrator reasonably relied upon the extrinsic evidence. MADA’s attorney
testified that during the 2006 negotiations, the union secretary had proposed a specific
mechanism for terminating above-scale time allowances that some of the dealerships
already were using: send a letter to the union “prior to contract expiration putting the
union on notice that it was the dealer’s intention to eliminate those above-scale time
allowances, and that going forward they would no longer exist.” The attorney also noted
that, other than the instant dispute, the union had never objected to the use of that
procedure at the end of a contract term. Finally, the attorney said he had discussed with
the union secretary the very scenario at issue here: what would happen if one of the
dealerships wanted to terminate the incentive pay going into the 2010 CBA term, in light
of the repeated extensions of the 2006 CBA? When the attorney asked whether it would
be OK for dealerships to terminate the practice as of April 15 even though the agreement
was extended two days, the union secretary said he “had no problem with that
whatsoever.” The arbitrator also took note of other examples of dealerships that had
attempted to end the above-scale allowances by letter to the union, in response to which
the union secretary did not contest the ability to change the incentive pay unilaterally or
the method of communicating the change.
Having been based on the attorney’s unrebutted testimony and the documented evidence
of other dealerships’ conduct in terminating the allowances to help interpret the parties’
past practice in light of the ambiguous CBA language at hand, the arbitrator’s award
drew its essence from the contract. Accordingly, the appeals court found no basis for
overturning the award.
The case number is: 13-1565.
Attorneys: Daniel Robert Kelly (Felhaber Larson) for Greater Metropolitan Automobile
Dealers Association of Minnesota, Inc. Fred R. Jacobberger (Jacobberger & Micallef) for
Garage Maintenance, Machine Warehousemen, Repairmen, Inside Men and Helpers and
Plastic Employees.
9th Cir.: Federal district court lacked subject matter jurisdiction over PAGA suit
under CAFA; PAGA actions not class actions
By Lisa Milam-Perez, J.D.
A California Labor Code Private Attorney General Act (PAGA) suit is not a “class
action” as defined under the Class Action Fairness Act (CAFA), a Ninth Circuit panel
held, ruling on an interlocutory appeal in a state law wage suit brought under the PAGA
by a Chase financial advisor. The district court could not exercise jurisdiction over this
removed PAGA action because such suits are not sufficiently similar to Rule 23 class
actions to establish original federal court jurisdiction under CAFA. And, because the
employee’s portion of the recovery would be less than $75,000, there was also no federal
42
diversity jurisdiction under CAFA, so the employee’s motion to remand the wage suit to
state court should have been granted (Baumann v Chase Investment Services Corp,
March 13, 2014, Hurwitz, A).
Labor Code claims. A Chase financial advisor sued the employer under the PAGA
alleging that the financial services company failed to pay him (and other “aggrieved
parties”) overtime, provide meal breaks, allow rest periods, or timely reimburse their
expenses. (The PAGA authorizes aggrieved employees, acting as private attorneys
general, to recover civil penalties from their employers for violations of the Labor Code.)
His complaint sought statutory civil penalties for each alleged violation and asserted that
his potential share of any penalties recovered and attorneys’ fees would be less than
$75,000.
Chase filed a notice of removal, invoking diversity jurisdiction and alleging that the
amount in controversy exceeded $75,000 if all potential statutory penalties and attorney
fee awards were aggregated. The notice of removal also invoked CAFA jurisdiction,
alleging minimal diversity, a class of more than 100 members, and an amount in
controversy exceeding $5 million. The district court denied the employee’s motion to
remand, aggregating the potential claims against Chase and finding subject matter
jurisdiction under 28 U.S.C. Sec. 1332(a). Consequently, the court declined to address
CAFA jurisdiction.
CAFA jurisdiction. CAFA confers original jurisdiction to the federal district courts “of
any civil action in which the matter in controversy exceeds the sum or value of
$5,000,000, exclusive of interest and costs, and is a class action in which — any member
of the class of plaintiffs is a citizen of a State different from any defendant.” Under
CAFA, the claims of class members may be aggregated to determine whether the amount
in controversy requirement has been satisfied. A “class action” is defined as “any civil
action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute
or rule of judicial procedure authorizing an action to be brought by 1 or more
representative persons as a class action.”
The case at hand, having commenced in state court, was not filed pursuant to Rule 23.
The question, then, was whether the action was “filed under” a state statute or rule of
procedure “similar” to Rule 23 that authorizes a class action.
PAGA actions not class actions. The employee’s complaint did not invoke California’s
class action statute, but PAGA. And while the Labor Code is silent as to whether a PAGA
action is a “class action,” the California Supreme Court has held that PAGA actions are
not class actions under state law; such actions are “fundamentally different from class
actions,” the state high court concluded, ‘chiefly because the statutory suits are
essentially law enforcement actions.” But that did not resolve the matter before the Ninth
Circuit, which also had to consider whether, while not filed under a state class action
statute, the case was, alternatively, brought under a statute or procedural rule similar to
Rule 23. Under CAFA, a state statute or rule is “similar” to a Rule 23 procedure “if it
closely resembles Rule 23 or is like Rule 23 in substance or in essentials.”
43
Guiding the Ninth Circuit’s analysis was its previously holding that “parens patriae suits
filed by state Attorneys General may not be removed to federal court because the suits
are not ‘class actions’ within the plain meaning of CAFA.” In that decision, the appeals
court concluded such suits lacked the “defining attributes of true class actions” such as
statutory requirements for numerosity, commonality, typicality, or adequacy of
representation, or a certification procedure. Therefore, they weren’t sufficiently “similar”
to actions brought under Rule 23.
Applying this rubric, the appeals court concluded that PAGA actions are likewise too
dissimilar to Rule 23 class actions to trigger CAFA jurisdiction. They have no notice
requirements for unnamed aggrieved employees, nor may such employees opt out of a
PAGA action. The court in such cases doesn’t inquire into the named plaintiff’s and class
counsel’s ability to fairly and adequately represent unnamed employees; PAGA contains
no requirements of numerosity, commonality, or typicality. Moreover, the finality of
PAGA judgments differs distinctly from class action judgments: members of a Rule 23
class who receive notice and decline to opt out are bound by a judgment, and class action
judgments are also preclusive as to all claims the class could have brought. PAGA, in
contrast, expressly provides that employees retain all rights “to pursue or recover other
remedies available under state or federal law, either separately or concurrently with an
action taken under this part.”
Central nature of PAGA. The differences from Rule 23, the appeals court observed,
“stem from the central nature of PAGA.” PAGA plaintiffs are private attorneys general
who step into the shoes of the state labor agency and bring claims on its behalf. “Because
an identical suit brought by the state agency itself would plainly not qualify as a CAFA
class action, no different result should obtain when a private attorney general is the
nominal plaintiff,” the court noted.
PAGA penalties are markedly different than Rule 23 damages, too. “In class actions,
damages are typically restitution for wrongs done to class members,” wrote the court.
“But PAGA actions instead primarily seek to vindicate the public interest in enforcement
of California’s labor law.”
As such, the bulk of any recovery typically goes to the state agency, not to aggrieved
employees. And, the 25 percent portion of the penalty awarded to the aggrieved
employee does not reduce any other claim that the employee may have against the
defendant employer. As such, the employee’s recovery under PAGA serves as an
incentive to perform a service to the state, not restitution for wrongs done to members of
the class.
“In the end, Rule 23 and PAGA are more dissimilar than alike. A PAGA action is at heart
a civil enforcement action filed on behalf of and for the benefit of the state, not a claim
for class relief.”
44
Shady Grove inapplicable. Chase argued nonetheless that PAGA actions were “class
actions” under CAFA because PAGA is a state procedural law that would be displaced by
Rule 23 in federal court under the reasoning in Shady Grove Orthopedic Associates, P.A.
v. Allstate Insurance Co., a 2010 Supreme Court decision. But Shady Grove was of no
help here. In that case, the Supreme Court considered whether a New York law that
precluded suits seeking recovery of penalties from proceeding as class actions deprived a
federal district court of jurisdiction over a diversity suit proposed as a Rule 23 class
action. The High Court held the New York law conflicted with Rule 23.
In contrast, the issue before the Ninth Circuit boiled down to statutory construction —
whether the action sought to be removed was “filed under” a state statute “similar” to
Rule 23. “We do not today decide whether a federal court may allow a PAGA action
otherwise within its original jurisdiction to proceed under Rule 23 as a class action. We
hold only that PAGA is not sufficiently similar to Rule 23 to establish the original
jurisdiction of a federal court under CAFA.”
No federal court jurisdiction. The Ninth Circuit held last year, in Urbino v Orkin
Services, that a defendant could not aggregate potential PAGA penalties in order to meet
the minimum amount in controversy requirement for CAFA jurisdiction. (In a separate
concurrence in the instant case, Judge Thomas stressed his prior disagreement with that
holding.) Given that the federal district court lacked jurisdiction over the PAGA action
based on the amount in controversy and also lacked original jurisdiction over the action,
as the appeals court now found, there was no basis for federal court jurisdiction over the
employee’s California Labor Code claims, and the court should have granted his motion
to remand the action to state court.
The case number is: 12-55644.
Attorneys: Glenn A. Danas (Initiative Legal Group) for Joseph Baumann. Carrie A.
Gonell (Morgan Lewis & Bockius) for Chase Investment Service Corp.
NLRB Regional director finds Northwestern scholarship football players are
employees
By Ronald Miller, J.D.
In a closely watched case that may open the door for college athletes to form unions, on
March 26, 2014, the NLRB regional director for Region 13 ruled that scholarship football
players at Northwestern University (NU) are statutory employees under the NLRA, and
directed a representation election to take place. The regional director concluded that
scholarship players who perform football-related services for the university under a
contract for hire in return for compensation are subject to the employer’s control and are
therefore employees within the meaning of the Act.
NU maintains an intercollegiate athletic program and is a member of the NCAA, which is
responsible for formulating and enforcing rules governing intercollegiate sports for
45
participating colleges. The university is also a member of the Big Ten Conference and its
students compete against the other conference schools (as well as non-conference
opponents) in various sports. NU football players petitioned the NLRB for representation
by the College Athletic Players Association (CAPA).
Players’ duties, compensation. The football team is comprised of about 112 players, 85
of whom receive football grant-in-aid scholarships. Scholarships pay for tuition, fees,
room, board, and books. Tuition monies are not provided directly to the players in the
form of a stipend. Football team members are required to live on campus during their first
two years in a dorm room. Upperclassmen can elect to live off campus, and scholarship
players are provided a monthly stipend totaling between $1,200 and $1,600 to cover their
living expenses. Under current NCAA regulations, the university is prohibited from
offering the players additional compensation for playing football, except for certain
specific expenses. No FICA taxes are withheld from scholarship monies and the players
do not receive W-2 tax forms.
Football players make a substantial commitment in time to their sport, including training
camps, practices and meetings, as well as games. When the season is done, the players
engage in winter workouts, as well as other workouts that transition to spring football.
Student athletes are also subject to special rules that are detailed in a student-athlete
handbook provided by the university that covers player academics.
More importantly, the football team generates significant revenues for the university —
approximately $235 million during the nine-year period between 2003-2012.
University employees. The record demonstrated that players receiving scholarships to
perform football-related services for the university under a contract for hire in return for
compensation are subject to the university’s control and are therefore employees within
the meaning of the Act, the regional director determined. Clearly the players perform
valuable services for the university, given the revenues generated by the football
program, he found. Less quantifiable, but also of great benefit to the university, is the
immeasurable positive impact of a winning football time on NU’s reputation, alumni
giving, and an increased number of applicants for enrollment at the university.
It is clear that the scholarships the players receive is compensation for the athletic
services they perform for the university throughout the calendar year, but especially
during the regular season and post-season. That the scholarships are a transfer of
economic value is evident from the fact that the university pays for the players’ tuition,
fees, room, board, and books for up to five years. While it is true that the players do not
receive a paycheck in the traditional sense, they nevertheless receive a substantial
economic benefit for playing football. Those players who elect to live off-campus receive
part of their scholarship in the form of a monthly stipend well over $1,000 that can be
used to pay their living expenses. The fact that the university does not treat these
scholarships or stipends as taxable income was not dispositive of whether it was
compensation, concluded the regional director.
46
The record also established that the players who receive scholarships are under strict and
exacting control by the university throughout the entire year. The players spend 50 to 60
hours per week engaging in football-related activities during training camp. Even when
the season begins, the players are still able to devote 40 to 50 hours per week on footballrelated activities. Further, the games themselves represent a large time commitment for
the players regardless of whether they are home or away games. In addition, the location,
duration, and manner in which the players carry out their football duties are all within the
control of the football team’s coaches.
As a result, the regional director found that NU’s scholarship football players fall
squarely within the NLRA’s broad definition of “employee.”
The case number is 13-RC-121359.
NLRB: Objection to class grievance didn’t excuse duty to furnish information,
employer violated Sec. 8(a)(5) by failing to respond to union’s request
By Lisa Milam-Perez, J.D.
An employer violated NLRA, Sec. 8(a)(5) by refusing to furnish information requested
by a union pursuant to a class grievance, the NLRB held, and by waiting three months to
respond to a related information request. The employer’s insistence that class grievances
were not permitted under the parties’ bargaining agreement did not excuse it from
furnishing the requested information, the Board found, noting it is well-established that
“an employer is required to provide relevant requested information regardless of the
potential merits of the grievance.” (Endo Painting Service, Inc, February 28, 2014).
Pay dispute. The union filed a class grievance alleging the employer violated the parties’
CBA by refusing to pay employees for overtime, altering their timesheets to reflect fewer
hours than employees actually worked, paying employees in cash, and requiring
employees to use their personal vehicles to transport workers and materials. To facilitate
the grievance, the union asked the employer to furnish the names and pay rates of
employees working at particular jobsites and copies of their timesheets; the names and
amounts of cash paid to employees who were paid in cash; the identification for all
vehicles owned by the company; the names of employees who were permitted to use a
company credit card to put gas into their personal vehicles; and a copy of the employer’s
organizational chart. The employer did not challenge the relevance of the information
sought, but it failed to furnish the information. Its only response was to inform the union
three months later that it did not maintain an organizational chart.
Employer violated Act. An administrative law judge found the employer’s failure to
furnish the requested information was unlawful, as was the employer’s delayed response
to the request for the organizational chart. The Board panel agreed. The request for a
copy of an organizational chart was not a “complex” request, the Board observed, yet it
took the employer three months to respond, by finally informing the union that it did not
maintain such a chart. It never informed the union that it was having trouble determining
47
whether it had such a document, or otherwise give an explanation for its delay in
responding. In these circumstances, the delay was unreasonable.
Objection to class grievance. Objecting to the law judge’s finding that it had unlawfully
failed to furnish the requested information, the employer had asserted that it didn’t have
to provide the information because the grievance was a class grievance, which was not
permitted under the parties’ bargaining agreement. But that did not excuse the employer
of its obligation to provide the information, the Board said; such a duty exists without
regard to the merits of a union’s grievance. Thus, “[r]egardless of whether the CBA
permitted the filing of a class grievance, the employer violated the Act by refusing to
provide the requested information.”
Consequently, the Board said, it was unnecessary to determine (as the ALJ had below)
whether the CBA in fact allowed for class action grievances. In a footnote, the Board
noted too that the employer had previously arbitrated a class grievance, the resulting
arbitration award was enforced in state court, and the employer had failed to comply with
it.
Arbitration not required. The employer also contended to no avail that the dispute over
the information request must be submitted to arbitration. In a footnote, Member
Miscimarra pointed out that the Board’s policy is not to defer information-request
disputes to arbitration. He noted that “deferral to arbitration could be appropriate where
either (1) the scope of an information request would be significantly affected by the
merits of a particular grievance pending arbitration, and/or (2) nondeferral would result in
duplicative litigation that undermines the role played by arbitration as the method agreed
upon by the parties for the final adjustment of disputes involving interpretation of
collective-bargaining agreements.” Such circumstances were not present here, though.
And no other evidence warranted a finding that arbitration would be a preferable means
of resolving the instant dispute over the information requests.
The slip opinion is: 360 NLRB No 61.
Attorneys: Cid Inouye (O’Connor Playdon Guben) for Endo Painting Service, Inc.
Davina Lam (Takahashi & Covert) for Int'l Union of Painters and Allied Trades, Painters
Local Union 1791.
NLRB: Employer comments prior to unlawful termination were independently
unlawful, separate findings not duplicative
By Lisa Milam-Perez, J.D.
Rejecting a law judge’s reasoning that it would be duplicative to tack a finding of
unlawful interrogation and surveillance onto a determination that an employer, in related
incidents, unlawfully discharged employees for planning a work stoppage, the NLRB
considered these additional unfair labor practice allegations on the merits and determined
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the employer further violated the NLRA. The Board ordered the employer to reinstate the
unlawfully discharged workers (Greater Omaha Packing Co, Inc, March 12, 2014).
Duplicative? An administrative law judge had dismissed allegations that an employer
unlawfully interrogated an employee about his protected activities and unlawfully created
an impression that employees’ protected activities were under surveillance. The
employer’s statements giving rise to both allegations were made immediately before the
employees were informed of their terminations; as such, they were integral to those
terminations. Because the discharges were themselves deemed unlawful, any additional
findings of violations based on the statements would be duplicative, the law judge had
reasoned.
The Board disagreed, concluding the conduct at issue in these separate allegations
warranted independent consideration on the merits. If found unlawful, the conduct would
warrant separate remedial provisions, the Board noted. Moreover, “to summarily
disregard independently coercive statements made immediately before or after an
unlawful discharge would effectively privilege unlawful statements solely on the basis of
their temporal proximity to another unlawful act.” Rejecting this approach, the Board
considered the conduct on the merits and held they independently violated the Act.
Coercive statements. “What is it that you want?” the employer’s plant manager asked
one of the dissatisfied employees, who had been called into his office after word got out
of the planned work stoppage. The plant manager then repeated the question for good
measure. When the employee responded that he wanted “an increase,” he was
immediately told he was discharged.
The General Counsel asserted that the statement amounted to unlawful interrogation
about the employee’s protected activity. According to the Board, regardless of whether
they constituted interrogation, the comments were coercive nonetheless, as they conveyed
displeasure with the employee’s protected conduct. As such, they violated the Act.
“Indeed, the Board has found that even a rhetorical question to an employee can be
coercive, and therefore violative of Section 8(a)(1), if made in a context that conveys the
employer’s displeasure with the employee’s protected conduct,” the Board explained.
The circumstances here fit the bill: the statements were made just minutes before the
planned work stoppage was set to begin, and were immediately followed by the
employee’s discharge.
It gave the Board no pause that the General Counsel’s complaint did not allege the
statements were generally coercive, but rather had amounted to unlawful interrogation.
Citing the Board’s 1989 ruling in Pergament United Sales, the Board noted it was wellsettled that it could find and remedy an unfair labor practice violation “even in the
absence of a specified allegation in the complaint if the issue is closely connected to the
subject matter of the complaint and has been fully litigated.” Such was the case here.
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Allegations that the employer had also unlawfully created an impression of surveillance
of employees’ protected activities stemmed from a manager’s comments to two other
employees (again, shortly before terminating them) that “someone” had told him that
they were the ringleaders of the planned work stoppage, as well as a comment from the
plant manager accusing them of organizing the work stoppage. These comments would
lead employees to reasonably believe that the employer was monitoring their protected
conduct. As such, the comments also violated Section 8(a)(1) of the Act.
In addition, the Board agreed with the ALJ’s determination that the employer unlawfully
discharged the employees for their protected activity. The employees had walked off the
production line to protest the speed of the line and other working conditions. When the
employer learned that yet another work stoppage was in the works, three employees were
separately called into the office and dismissed. Affirming the finding of unlawful
discharge, the Board ordered the employer to reinstate the employees with backpay.
The slip opinion is: 360 NLRB No. 62.
Attorneys: Roger Miller (McGrath North Mullin & Kratz) for Greater Omaha Packing
Co., Inc.
NLRB: Documents arising from criminal indictment admissible in NLRB
proceeding as “reliable” hearsay
By Ronald Miller, J.D.
An administrative law judge’s decision to admit documents arising from the criminal
indictment of an employer’s officers and managers as evidence that the employer waived
its privilege regarding audit information requested by unions representing its employees
was adopted by a three-member panel of the NLRB. Moreover, because the employer did
not challenge the ALJ’s findings that those documents were admissible as “reliable”
hearsay, and that once admitted, demonstrated that the employer had waived the privilege
regarding the audit information, the Board did not address those unchallenged findings
(Ralphs Grocery Co, March 13, 2014).
The employer contended that these documents should not have been admitted because
they were not in existence at the time of the original hearing in this matter. However, the
ALJ noted that this case, including the waiver issue, was still pending before the NLRB
when the documents were filed in the criminal proceeding. The Board observed that
under its precedent, waiver of a privilege is effective in a Board proceeding where it
occurred after the initial hearing but while the case, including the privilege issue, was still
pending.
In this instance, the audit information existed, and the union requested that the employer
provide it, prior to the initial hearing in this matter, but the employer refused to provide it
based on claimed privilege. However, in light of the criminal proceedings, the employer
waived its privilege while the case was still an ongoing matter. Moreover, the employer
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did not respond to the union’s motion to reopen and supplement the record or its motion
for reconsideration, both seeking to admit the criminal documents as evidence of the
employer’s waiver of its asserted privilege. Both motions were filed while the case
remained pending before the NLRB. In addition, the employer failed to respond to the
Board’s show cause order why the motion for reconsideration should not be granted. Nor
did it seek reconsideration of the Board’s order granting that motion and directing the
ALJ to hold a reopened hearing on the matters raised by the motion.
Further, the employer did not separately challenge the law judge’s additional findings
that the documents from the criminal proceedings were admissible as “reliable” hearsay
and that, once admitted, demonstrated that the employer waived its privilege regarding
the audit information.
The slip opinion is: 360 NLRB No. 65.
Attorneys: Timothy Ryan (Morrison & Foerster) for Ralphs Grocery Co. Lawrence F.
Steinsapir (Schwartz, Steinsapir, Dohrmann & Sommers) for United Food and
Commercial Workers International Union.
NLRB: Suspension of employee for conduct while acting as union representative at
investigative interview unlawful
By Ronald Miller, J.D.
An employer unlawfully suspended an employee because of his conduct in representing a
coworker at an investigative interview, ruled a three member panel of the NLRB. The
Board found that at all times during the interview the union rep’s conduct remained
within the bounds of protected Weingarten representation. Additionally, the employer
acted unlawfully when it unilaterally implemented a policy requiring employees to sign
the notes of investigative interviews to attest to veracity of those notes. Contrary to the
employer’s contention that it was privileged to implement the signature requirement
under the management rights clause in the parties’ collective bargaining agreement, the
Board observed that the management rights clause was “couched in general terms and
does not clearly cover” the new signature policy (Murtis Taylor Human Services Systems,
March 25, 2014).
For nearly all of his 15 years working for a nursing care facility, an employee served as a
union delegate. As a delegate, he represented coworkers in disciplinary proceedings,
participated in administrative investigations, filed grievances, and served as a member of
the union’s contract bargaining team. On July 22, 2011, the employer held a predisciplinary investigative interview of a unit employee as part of its investigation into her
Medicaid billing and possible theft of time by her use of paid sick leave while performing
functions for another employer. The employee served as union representative at the
interview. Neither employee was advised about the subject of the investigation.
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Investigative interview. During the interview, the union rep inquired about the purpose
of the employer’s questioning. The HR director responded that the employer was
investigating a possible “conflict of interest,” but did not elaborate. The union rep
repeatedly asked about the nature of the purported “conflict of interest,” and told the HR
director that the employee would cooperate if he described the alleged conflict. He
advised the employee not to answer certain questions until the employer provided
clarification about the purported conflict of interest. For example, when the HR director
asked the employee if she was employed by another entity, the union rep told the
employee “That’s none of his business what you do on your time.”
At the end of the interview, after the employee persisted in refusing to answer the
question, the HR director confiscated her badge and keys and placed her on suspension.
Thereafter, she resigned. The HR director never explained that the purported “conflict of
interest” involved a possible theft of time or Medicaid billing problems. At no time
during the interview did the union rep attempt to prevent the employee from answering
questions, although he advised her not to incriminate herself. Although the union rep
used a loud voice at times, he did not prevent the employer from asking questions and did
not prevent the employee from answering questions.
Suspension for misconduct. Several weeks later, the employer suspended the union rep
for ten days without pay. The disciplinary notice stated that he “obstructed an
investigation by advising Dr. Zeh to refuse to obey her superior’s orders to answer
questions and cooperate with the investigation.” Under the employer’s progressive
discipline system, the suspension also constituted a final warning.
An administrative law judge found that the employer unlawfully suspended the union rep
for his conduct during the investigative interview. Applying the standard set forth in
Atlantic Steel Co, the ALJ concluded that the union rep did not engage in conduct so
opprobrious or extreme as to lose the protection of the NLRA. In its exception, the
employer contended that the law judge erred by failing to define the permissible limits of
a Weingarten representative’s behavior more narrowly. The employer asserted that the
union rep exceeded those limits and so lost the Act’s protection against discipline for his
conduct.
Protected union activity. The NLRB found that the union rep did not lose the Act’s
protections. As an initial matter, the Board noted that serving as an employee’s
Weingarten representative is protected union activity. The role of the union
representative is to provide assistance and counsel to the employee being interrogated.
This assistance includes attempts “by the union representative . . . to clarify the issues”
being investigated. In this instance, the interruptions and objections voiced by the rep
were mainly attempts to clarify the issues being investigated.
Throughout the interview, the rep repeatedly asked the HR director to clarify the nature
of the alleged conflict of interest, but no explanation was ever forthcoming. Moreover,
the rep’s advice to the unit employee to refrain from answering certain questions did not
fall outside the permissible scope of representative activity.
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Further, the Board determined that the employer’s contention that the union rep impeded
the investigation was not supported by the record. The HR director was able to ask all of
his questions and the unit employee had an opportunity to respond to every question if
she chose to do so.
Signature requirement. In a subsequent investigative interview of another unit
employee conducted by the HR director, two managers who were present at the interview
took notes. At the conclusion of the interview, the HR director reviewed the notes and
then presented them to the employee. The employee was directed to review the notes,
make any necessary changes, and then sign the document. The employee refused to sign
the notes because he did not think they were accurate or complete. The employee was
then presented with a second document and told that his refusal to sign the notes “rises to
the level of insubordination.” Ultimately, the employee was told that he could not return
to the work until he signed the document. Thereafter, the HR director collected the
employee’s badge and keys.
This was the first time that the employer required an employee to attest to the veracity of
investigative interview notes. The employer did not notify the employee’s union prior to
the interview, that it would be implementing such a requirement. The law judge found
that the employer acted unlawfully by unilaterally implementing a requirement that
employees sign the notes of administrative interviews to attest to the notes’ veracity.
Moreover, the ALJ concluded that a management rights clause in a CBA did not privilege
the employer to implement the signature requirement without any prior notice to the
union.
On review, the employer argued that any purported failure to provide notice to the union
was, at most, a violation of the CBA, but not a violation of the Act. It asserted that by
agreeing to the management rights clause, the union waived its statutory right to bargain
over the change.
However, the NLRB found that the employer’s contentions were without merit. Rather, it
noted that a separate notice provision in the CBA required all new or revised policies and
procedures to relating to bargaining unit employees shall be distributed through executive
board members not less than 30 days prior to implementation. Considering the
implementation of the new signature requirement in light of this provision, the Board
found that the union had not waived its right to bargain over this change.
The slip opinion is: 360 NLRB No. 66.
Attorneys: Brian S. Carroll (Burdzinski & Partners) for Murtis Taylor Human Services
Systems. Cathy Kaufmann for Service Employees International Union District 1199.
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Hot Topics in WAGES HOURS & FMLA:
Justices to determine whether FLSA requires that employees be compensated for
time spent in employer security checks
By Pamela Wolf, J.D.
The Supreme Court has agreed to consider a question that will no doubt impact the rising
number of employers potentially exposed to lawsuits over unpaid wages for the time
employees spend standing in line and going through security screenings, such as bag
checks, before, after and during their workday. The question of “whether time spent in
security screenings is compensable under the FLSA, as amended by the Portal-to-Portal
Act,” is presented to the Court in a petition for certiorari granted on Monday, March 3.
The petition, Integrity Staffing Solutions, Inc. v. Busk (Dkt No 13-422), was filed by an
employer that was sued by warehouse workers seeking back pay, overtime, and double
damages under the FLSA for time spent in security screenings after the end of their work
shifts. The employees purportedly were not compensated for up to 25 minutes spent at
the end of their workday waiting to be searched and passed through metal detectors. The
petitioner, Integrity Staffing, provides warehouse space and staffing for clients such as
Amazon.com.
The district court initially dismissed the warehouse workers’ claims on the grounds that
such activities were not compensable under the FLSA. However, the Ninth Circuit
reversed. The appeals court found that as alleged, the security clearances were necessary
to the employees’ primary work as warehouse employees and done for Integrity’s benefit.
Consequently, the employees stated a plausible claim for relief.
Integrity asserts, however, that the Ninth Circuit’s ruling “squarely conflicts with
decisions from the Second and Eleventh Circuits holding that time spent in security
screenings is not subject to the FLSA because it is not ‘integral and indispensable’ to
employees’ principal job activities.”
The same question is implicated in a pair of class lawsuits filed against Apple, Inc. This
first suit was filed federal court in California in June 2013. The second case was filed in
the Northern District of California last fall. Both suits also include state law claims. Also,
in October 2010, Best Buy settled a case seeking unpaid wages under Pennsylvania law
for time employees spent in security checks after they had clocked out. The company
paid $907,566 to resolve the allegations, with up to $300,000 going to attorneys’ fees.
China Town Super Buffet restaurants will pay nearly $200,000 to resolve charges of
FLSA violations
China Town Super Buffet has agreed to pay 53 workers at locations in Kansas City,
Kansas, and Independence and Blue Springs, Missouri, a total of $196,971 in unpaid
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wages as a result of an investigation conducted by the DOL’s Wage and Hour Division
(WHD) that found FLSA minimum wage, overtime and recordkeeping violations.
WHD investigators determined that the company paid kitchen workers a fixed salary that
fell short of minimum wage for all hours worked. The restaurant also purportedly failed
to pay the workers overtime at the rate of one and a-half times their hourly wage for
hours worked beyond 40 in a workweek. Additionally, investigators found the company
failed to maintain accurate and complete records of hours worked by kitchen employees,
as well as failing to record payments made to employees accurately.
Three corporations were involved in the investigation: China Town Super Buffet Inc. of
Independence; China Town Café Inc. of Blue Springs; and C.T. Mancilla of Kansas City,
all doing business as China Town Super Buffet. China Town Inc. signed a settlement
agreement with the DOL.
The WHD said the company also has agreed to pay employees on a biweekly basis; track
all hours on timecards; provide all employees information in their native language on
their rights under the FLSA; provide a pay stub on each pay date that shows the total
hours worked, total hours paid, and deductions; provide employees with the phone
number to the local Wage and Hour office; post the FLSA poster in a conspicuous
location; and train managers in the provisions of the FLSA and terms of the settlement
agreement.
“Through investigations like this one, the Wage and Hour Division continues to combat
widespread minimum wage and overtime violations among restaurants,” said WHD
District Director Patricia Preston. “The restaurant industry employs some of our
country’s most vulnerable workers who, especially during hard economic times, are at
risk for exploitation. We will continue our effort to promote awareness and improve
compliance in this industry.”
Dayton-area cell phone retailers sued for unpaid wages, damages for 83 workers
The Department of Labor has filed suit to recover back wages and liquidated damages for
83 workers at Dayton, Ohio-area cellular phone retailers owned by Zam LLC, Reham
LLC, and Mohammed Rihan. An investigation by the Wage and Hour Division found
violations of the FLSA’s minimum wage, overtime and recordkeeping provisions at 14
retail stores operating as Zam Cricket and World Wireless.
The investigation determined that the company owes $226,905 in back wages to its
workers, according to an agency release issued March 5. Investigators found the company
violated minimum wage laws by failing to compensate retail store workers for mandatory
meetings, time spent working before the store opened or after closing, and travel time
between stores. The company also failed to pay workers at one and one-half times their
hourly rate for hours worked over 40 in a workweek and to maintain accurate records of
hours worked and of cash payments to employees.
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In addition to back wages and damages, the suit also seeks a court order permanently
enjoining the defendants from violating the FLSA in the future.
“Through investigations like this one, the Wage and Hour Division continues to combat
widespread labor violations,” said George Victory, district director for the Wage and
Hour Division in Columbus.
House Democrat Miller questions fast food companies’ labor policies, franchise
agreements
“Fast food workers already struggling to survive on the industry’s low wages are also
victims of an alarmingly widespread pattern of illegal pay practices,” according to
George Miller (D-Calif), leading Democrat on the House Education and the Workforce
Committee. In a March 6 press release, Miller announced that senior Democratic
members of the Committee have requested detailed information about the business model
and labor practices at five of the nation’s largest fast-food companies in an effort to learn
more about the policies behind this reported abuse.
Citing numerous reports of wage theft and the large percentage of fast food employees
who must rely on public assistance, Miller, along with Joe Courtney (D-Conn), ranking
member on the Subcommittee on Workforce Protections, sent letters to the CEOs of
McDonald’s, Yum! Brands, Burger King, Papa John’s, and Wendy’s. The letters seek to
gain insight into the companies’ “labor policies and practices vis-à-vis” their “franchise
relationships nationwide.”
“These letters are a result of our growing concern about labor practices that can drive up
income inequality; stymie economic growth; and strain local, state, and federal finances,”
said Miller and Courtney. “In the past year, we have seen workers across the country
protesting for higher wages. We already know that people working in fast food jobs are
more likely to live in poverty, so we wanted to examine the business and labor practices
that leave full-time workers in need of public assistance programs to get by.”
Recent studies have detailed the extent of the wage and hour law violations in New York
City, Los Angeles, and Chicago, the Democrats noted, and press reports highlight fast
food workers across the country who allege that they have been denied their rightful
wages by their employers. Miller and Courtney say they want to look into how those
issues are addressed in the companies’ franchise agreements.
Miller’s press statement provides the content of one of the five (nearly identical) letters
sent to the fast-food employers on March 6. The letters request that the companies turn
over:

A copy of the corporation’s standard franchise agreement, including any
attachments, manuals, or policies provided to franchisees which reference wages,
hours, and other labor standards;
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





A copy of training materials and guidance: (1) provided to managers of corporateowned restaurants and franchise owners or their managers regarding shift
management and labor costs, including instructions on how to record hours and
payroll; and (2) provided to franchise owners, employees at franchisee
restaurants, or employees at corporate-owned restaurants, regarding compliance
with wage and hour laws, including employee handbooks;
A detailed explanation of how the corporation oversees its franchisees, especially
franchisee wage, hours, and other labor practices;
A detailed explanation of how the corporation addresses noncompliance with
franchise agreements, especially with respect to any wage, hour, or other labor
standards;
A detailed explanation of the steps taken, if any, to prevent wage and hour
violations of local, state, and federal laws at both franchisee restaurants and
corporate-owned restaurants;
A detailed explanation of how the corporation handles violations of wage and
hour laws by franchisees, including whether the corporation keeps track of the
number of wage and hour violations committed by franchisee restaurants and
whether the corporation terminates or otherwise disciplines franchisees for such
violations; and
The number and location of alleged violations of local, state or federal wage and
hour laws that have been committed by franchisees and corporate restaurants from
January 1, 2009, to present, and how those allegations have been resolved.
Massachusetts contract labor provider will pay more than $1 million to resolve
FLSA violations
Pursuant to a consent judgment obtained by the DOL, Ward’s Cleaning Service Inc. and
its owner/president will pay $1,033,877 in unpaid wages and liquidated damages to 149
low-wage employees of the Peabody, Massachusetts, contract labor provider, as well as
$163,900 in civil money penalties. The company provides night cleaning crews,
housekeepers, and dishwashers to about 85 hotels and restaurants in the Boston area.
Wage and Hour Division (WHD) investigators found that from July 2009 through
December 2012, the defendants violated FLSA overtime and record-keeping
requirements. Specifically, the company failed to pay overtime to employees who worked
more than 40 hours in a workweek and concealed nonpayment of overtime through
practices such as directing employees to use multiple timecards with different names,
altering timecards, paying employees with checks made out to false names and paying
employees in cash, according to the WHD.
The terms of the judgment require the company and its owner/president to hire a qualified
independent consultant with specific knowledge of the FLSA to create a payroll system
that will ensure that the company’s payroll and recordkeeping practices comply with the
law. The defendants will also submit quarterly reports to the WHD addressing all pay and
recordkeeping problems found and the actions taken to correct those problems. The
judgment also bars the defendants from committing future FLSA violations and forbids
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them from soliciting repayment of the wages and damages from any of the affected
employees.
“These vulnerable employees were denied their rightfully earned wages through the use
of sophisticated schemes to reduce or eliminate the company’s overtime obligations. This
was not the first time; a 1993 Wage and Hour Division investigation of this company
found similar violations, which led to workers receiving $172,000 in back wages then,”
said Michael Felsen, the DOL’s Regional Solicitor of Labor for New England. “To
prevent this from happening again, the judgment calls for payment to employees of back
wages and an equal amount in liquidated damages, as well as significant penalties. It also
requires Ward’s to develop and use a payroll system that complies with federal wage law,
and that will be closely scrutinized.”
DOL to use 2011 Wage Rule as starting point for new proposal on the proper wage
methodology for the H-2B program
By Pamela Wolf, J.D.
The DOL’s Employment and Training Administration (ETA) has issued a notice
regarding the status of its previously beleaguered Wage Methodology for the Temporary
Non-agricultural Employment H-2B Program final rule, published on January 19, 2011
(2011 Wage Rule). According to the status notice slated for publication in the Federal
Register on Friday, March 14, the DOL intends to issue a new rulemaking proposal on
the proper wage methodology for the H-2B program, working off of the 2011 Wage Rule
as a starting point.
Until the DOL is able to finalize a new wage methodology, the current wage
methodology contained in 20 CFR 655.10(b), as set by the interim final rule of April 24,
2013 (Wage Methodology for the Temporary Non-Agricultural Employment H-2B
Program, Part 2; 78 FR 24047) will remain unchanged and continue in effect, according
to the status notice. The DOL will consolidate its current review of comments on the
interim final rule with review of comments received on the new notice of proposed
rulemaking, and will then issue a final rule accordingly.
2011 Wage Rule indefinitely delayed. On August 30, 2013, the DOL indefinitely
delayed the 2011 Wage Rule in order to comply with recurrent legislation barring the
agency from using any funds to implement it and to allow further consideration of
comments sought in conjunction with the interim final rule. The 2011 Wage Rule revised
the methodology by which the DOL calculates the prevailing wages to be paid to H-2B
workers and U.S. workers recruited in connection with a temporary labor certification for
use in petitioning the Department of Homeland Security to employ a nonimmigrant
worker in H-2B status. The 2011 Wage Rule was originally scheduled to become
effective on January 1, 2012, and the effective date was extended a number of times.
Interim rule. The interim final rule was issued in response to a March 21 order by a
federal district court in Pennsylvania in Comité de Apoyo a los Trabajadores Agricolas v
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Soli, which vacated portions of DOL’s current prevailing wage rate regulation, and to
ensure there is no question that the rule is effective nationwide in light of other
outstanding litigation. The rule also contains revisions to DHS’ H-2B rule to clarify that
DHS is the Executive Branch agency charged with making determinations regarding
eligibility for H-2B classification, after consulting with DOL for its advice about matters
with which DOL has expertise, particularly, in this case, questions about the
methodology for setting the prevailing wage in the H-2B program.
Rulemaking path cleared. On January 17, 2014, the Consolidated Appropriations Act,
2014 was enacted. For the first time in over two years, the DOL’s appropriations did not
prohibit the implementation or enforcement of the 2011 Wage Rule. Additionally, on
February 5, 2014, the Third Circuit Court of Appeals held that “DOL has authority to
promulgate rules concerning the temporary labor certification process in the context of
the H-2B program, and that the 2011 Wage Rule was validly promulgated pursuant to
that authority” (Louisiana Forestry Association Inc v Secretary, U.S. Department of
Labor, February 5, 2014, Vanaskie, T). The circuit court also found that the DOL did not
act in contravention of the procedural requirements of the APA in issuing the 2011 Wage
Rule, and that the Immigration Nationality Act’s requirement of the four wage tiers in the
H-1B program (8 U.S.C. 1182(p)(4)) applies only to that program and is not mandated in
the H-2B program. Thus, the DOL said it is now “free to take any steps deemed
necessary to implement, administer and enforce the regulations.”
The DOL intends to engage in further notice and comment rulemaking in order to move
toward implementing the 2011 Wage Rule, subject to modifications based on the notice
and comment. With the appropriations rider pertaining to the 2011 Wage Rule lifted, the
agency has begun the process of determining how to implement that rule, keeping in
mind the overlap between that rule and the comments submitted in connection with the
2013 interim final rule.
According to the DOL, recent developments in the H-2B program require consideration
of the comments submitted in connection with the interim final rule, and further notice
and comment is appropriate. The DOL will continue to implement the H-2B wage
methodology using the Occupational Employment Statistics mean wage rate as the proper
baseline for setting prevailing wage rates. The agency said it continues to evaluate other
policy choices, including the possible use of Davis-Bacon Act and McNamara-O’Hara
Service Contract Act wage rates and private surveys, in light of additional public input
and program experience. After receiving and reviewing this information, the DOL
intends to exercise its rulemaking authority to implement a regulation governing the wage
methodology in the H-2B program, modified as necessary to accommodate these
developments and considerations.
President directs Labor Secretary to revise and strengthen overtime regs, citing
outdated “white collar” exemption
By Pamela Wolf, J.D.
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In the wake of widespread media reports foreshadowing the move, the Obama
Administration confirmed that the president is directing Secretary of Labor Thomas E.
Perez to take action to strengthen federal overtime protections — in a manner that
presumably will expand the workforce segments entitled to overtime wages. The White
House cited the erosion of overtime protections as an impetus for the Memorandum that
President Obama has issued to Perez.
Despite progress creating jobs and rebuilding the economy after the five-year economic
downturn dubbed the “Great Recession,” and due “to shifts that have taken hold over
more than three decades, too many Americans are working harder than ever just to get
by, let alone to get ahead,” according to a White House Fact Sheet. As part of his
“Opportunity for All” initiative, the president has “pledged to make 2014 a year of action,
working with Congress where they’re willing, but using his phone and his pen wherever
he can to build real, lasting economic security for the middle class and those working
hard to become a part of the middle class.”
Thus, the chief executive on March 13 is “directing the Secretary of Labor to begin the
process of addressing overtime pay protections to help make sure millions of workers are
paid a fair wage for a hard day's work and rules are simplified for employers and workers
alike,” according to the fact sheet.
“White collar” exemption at issue. In support of the move, the fact sheet noted the
Department of Labor’s authority to define through regulation exceptions to the minimum
wage and overtime rules set by the Fair Labor Standards Act. Both the White House fact
sheet and the Memorandum point specifically to the commonly used “executive,
administrative and professional” employees, the so-called “white collar” exemption.
White collar workers — those who perform executive, professional or administrative
duties — are not entitled to overtime pay unless they earn less than a threshold salary per
week. “That threshold has failed to keep up with inflation, only being updated twice in
the last 40 years and leaving millions of low-paid, salaried workers without these basic
protections,” according to the fact sheet.
In 1975, the white collar exemption threshold was set at $250 per week. In 2004 it was
set at $455 per week (about $561 in today's dollars) — a level that the White House said
is below today’s poverty line for a worker supporting a family of four, and well below
1975 levels in inflation adjusted terms.
To underscore the problem, the White House observed that a convenience store manager
or a fast food shift supervisor or an office worker may be required to work 50 or 60 hours
a week or more and yet make barely enough to keep a family out of poverty, receiving
not a dime or overtime pay. “It’s even possible for employers to pay workers less than the
minimum wage per hour.”
The White House made these additional points:
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
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

Today, only 12 percent of salaried workers fall below the threshold that would
guarantee them overtime and minimum wage protections (compared with 18
percent in 2004 and 65 percent in 1975).
Many of the remaining 88 percent of salaried workers are ineligible for these
protections because they fall within the white collar exemptions.
It is recognized by many that these regulations are outdated; accordingly, states
like New York and California have set higher salary thresholds.
Both employers and workers have had difficulty navigating the existing
regulations, and many recognize that the rules should be modernized to better fit
today’s economy.
Regulatory revisions. The president’s Memorandum directs Secretary Perez “to propose
revisions to modernize and streamline the existing overtime regulations,” taking into
consideration how the regulations could be revised to:
 update existing protections consistent with the intent of the FLSA;
 address the changing nature of the workplace; and
 simplify the regulations to make them easier for both workers and businesses to
understand and apply.
Reactions. Even prior to the White House’s confirmation of the Presidential
Memorandum on overtime protections, there were strong reactions to the anticipated
move, with some media outlets reporting there were strong negative reactions by
Republican members of Congress.
AFL-CIO President Richard Trumka issued a statement on March 12: “President
Obama’s anticipated proposal to expand overtime protection for hard-working families is
an important step towards raising wages, creating jobs and lifting the economic tide for
millions. This will help to build an economy that honors work, not one that steals from
workers. This is the leadership working people expect and deserve.”
CATO Institute senior fellow and tax reform expert Daniel J. Mitchell said in a radio
interview that if companies know that they have to pay certain workers more, they may in
turn cut pay or lay off workers.
Multiple class action suits against McDonald’s contend fast-food chain, franchisees
violate federal, state wage laws
By Lisa Milam-Perez, J.D.
McDonald’s employees in three states filed class-action lawsuits last week against the
fast-food chain and several of its franchise owners, contending the employers have been
shaving work hours, denying meal and rest breaks, failing to pay overtime, compelling
employees to work off the clock, and forcing them to pay for their own uniform cleaning
— effectively dropping their hourly rate below the minimum wage. The lawsuits seek to
hold McDonalds liable for wage violations by the franchisees as a joint employer, in
addition to the claims against company-owned restaurants.
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The complaints, which allege McDonald’s “is systemically stealing employee’s wages,”
were filed in California, Michigan and New York. They contend the company violates
state and federal minimum wage laws as well as other state labor laws.
Three lawsuits in California were filed against both McDonald’s and its franchise
owners; a fourth suit asserts similar claims on behalf of a statewide class of workers in
McDonald’s corporate-owned restaurants, adding claims for unpaid wages, penalties, and
other relief to an already pending action. (One of the California complaints is found
here.)
“We’ve uncovered several unlawful schemes, but they all share a common purpose — to
drive labor costs down by stealing wages from McDonald’s workers,” said Michael
Rubin of Altshuler Berzon, who filed the California suits. Rubin said more McDonald’s
employees in California have since come forward with similar wage theft allegations.
A suit filed in New York alleges that McDonald’s forces workers to incur the time and
cost of maintaining their own work uniforms, driving their wages below the legal
minimum. “With $28 billion in revenue in 2013 alone, McDonald’s can certainly afford
to provide its minimum-wage workers with this money to clean their uniforms, as
required by law, instead of making them pay for the privilege of wearing McDonald’s
advertising,” said Jim Reif, of Gladstein, Reif and Meginniss, who filed the New York
suit.
In two Michigan suits against McDonald’s and Detroit-area franchisees, workers assert as
well that they are regularly forced to show up for work but then required to wait without
pay until enough customers show up. According to one complaint, the franchisees use
McDonald’s-provided software to monitor the ratio of labor costs to revenues; when it
exceeds a corporate-set target, workers are told, upon arriving for work, to wait for up to
an hour to clock in. Managers will also direct workers who have already clocked in for
their shifts to clock out for extended breaks until the target ratio is again achieved.
“Workers are not paid for the wait times, and McDonald’s Corporation knowingly
tolerates this practice, in violation of federal labor law,” according to a press statement
announcing the lawsuits.
“As these cases show, it’s a persistent problem in too many low-wage industries like fast
food, which is why the U.S. Department of Labor has named restaurants and fast food as
one of its priority industries for strategic enforcement,” said Catherine Ruckelshaus,
general counsel at the National Employment Law Project. “These violations can run into
the millions of dollars quite quickly, and as one of the largest low-wage employers in the
country, McDonalds should be setting standards, not undermining them.”
McDonald’s response. “McDonald’s and our independent owner-operators share a
concern and commitment to the well-being and fair treatment of all people who work in
McDonald’s restaurants,” said Heidi Barker Sa Shekhem, McDonald’s Global External
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Communication, in response to the lawsuits, noting the company was currently reviewing
the allegations. “McDonald’s and our independent owner-operators are each committed
to undertaking a comprehensive investigation of the allegations and will take any
necessary actions as they apply to our respective organizations.
Democrats seek information. In related news, earlier this month George Miller (DCalif), the leading Democrat on the House Education and the Workforce Committee,
requested detailed information from five of the nation’s largest fast-food companies
about their business model and labor practices, particularly with respect to their
franchisees. Citing numerous reports of wage theft and the large percentage of fast food
employees who turn to public assistance, Miller, along with Joe Courtney (D-Conn),
ranking member on the Subcommittee on Workforce Protections, sent letters to the CEOs
of McDonald’s, Yum! Brands, Burger King, Papa John’s, and Wendy’s, in an effort to
gain insight into the companies’ “labor policies and practices vis-à-vis” their “franchise
relationships nationwide.”
Miller asked the companies to turn over copies of their standard franchise agreements;
training materials, policies, and guidance to managers of both corporate-owned
restaurants and franchise owners about wages, hours, labor standards, and compliance
with relevant labor laws; an explanation of how the companies oversee their franchisees
with respect to labor and wage practices, including an explanation of how they address
noncompliance and their efforts to deter such violations; information on how the
company tracks — and responds to — wage-hour violations by franchisees; and
information about alleged violations of local, state or federal wage laws by franchisees
and corporate restaurants since 2009.
“Fast food workers already struggling to survive on the industry’s low wages are also
victims of an alarmingly widespread pattern of illegal pay practices,” Miller said. “We
already know that people working in fast food jobs are more likely to live in poverty, so
we wanted to examine the business and labor practices that leave full-time workers in
need of public assistance programs to get by.”
Settlement with NY attorney general. On Tuesday, March 18, New York Attorney
General Eric T. Schneiderman announced that the state reached a $500,000 settlement
with seven New York City McDonald's franchises for failing to pay legally required
laundry allowances, for uncompensated work time, and for unlawful wage deductions
that resulted when cashiers were required to cover cash register shortfalls from their own
pockets. Other violations included failure to pay workers an extra hour of pay at
minimum wage when they worked more than 10 hours in a day, as required by New York
law.
The settlement money will go to more than 1,600 workers “who were shortchanged by
these franchises,” according to Schneiderman’s press statement announcing the
settlement — the second to have come out of ongoing investigations of fast food
employers by the attorney general’s labor bureau.
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Attorneys: Jim Reif (Gladstein, Reif and Meginniss); Catherine Ruckelshaus (National
Employment Law Project); Michael Rubin (Altshuler Berzon); Cohen Milstein Sellers &
Toll; Matern Law Group; Edgar N. James (James & Hoffman)
Nursery agrees to pay back wages to workers not paid overtime due to incorrect
application of FLSA exemption
A settlement announced by the DOL’s Wage and Hour Division (WHD) underscores a
FLSA exemption that applies to nursery employers — but not when workers handle plant
material that is grown elsewhere.
Harmony Gardens Inc. will pay 72 employees $127,301 in back wages following a DOL
Wage and Hour Division (WHD) investigation that found FLSA overtime and
recordkeeping violations. The WHD said the firm incorrectly claimed an exemption when
it paid its workers straight time for all hours worked and did not pay the additional
overtime premium for hours worked over 40 in a workweek. The investigation also found
the company failed to maintain accurate time and payroll records, according to a WHD
announcement on March 19.
Harmony Gardens works with suppliers nationwide to bring in a wide range of plant
material, which they do not grow themselves, for customers. Therefore, according to the
WHD, the exemption from the overtime requirements does not apply.
Under the agreement, Harmony Gardens will comply with all applicable FLSA
provisions in the future. The payment of back wages is ongoing, the WHD said.
“Employers are responsible for learning about the laws that apply to their businesses,”
said WHD Regional Administrator Cynthia Watson. “Not paying legally required
overtime hurts workers, their families and their communities. Nursery employees who
handle only products grown at the nursery are generally exempt from FLSA overtime
requirements. However, nursery employees who handle agricultural products grown
elsewhere are generally entitled to overtime compensation at time and one-half their
regular rates for hours worked beyond 40 in a workweek.”
New fact sheet touts the benefits of proposed minimum wage increase, but not
everyone thinks that’s the route to take
By Pamela Wolf, J.D.
President Obama is once again pushing for an increase in the minimum wage, this time
with the release of a fact sheet. According to the White House, 28 million workers would
benefit from the Harkin-Miller proposal to increase the minimum wage to $10.10 an
hour. But not everyone believes that raising the minimum wage will solve the problems
of struggling low-wage workers and their families.
Obama has already signed an Executive Order to raise the minimum wage to $10.10 for
new federal contract workers. And he is pressing Congress to do the same for other
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workers by passing the Harkin/Miller bill that would raise incomes for millions of
Americans in every state and reduce poverty. The White House says that the minimum
wage “is a critical tool for ensuring that hard work is rewarded with fair pay, but its real
value has been allowed to erode substantially despite decades of economic growth.”
The fact sheet points out some statistics that show the minimum wage is worth less today
than it was at the beginning of 1950. Since 1950, real per capita gross domestic product
(GDP) has increased 246 percent, and labor productivity has grown 278 e minimum wage
peaked in 1968 at 54 percent; it fell to merely 35 percent in February 2014. percent, but
the minimum wage’s real value has fallen. Moreover, relative to the mean wage, th
The decline will continue, according to the White House, if no action is taken. In 2014,
the minimum wage is projected to lose 1.7 percent of its value — for a full-time worker,
that means nearly $250. Over the next five years, the real value of the minimum wage is
projected to decline by 10 percent — more than $1,400 dollars of purchasing power for a
full-time worker.
Increasing the purchasing power of minimum wage workers helps stimulate the economy,
according to the White House. These workers spend the additional income they receive
when the minimum wage is increased.
Who would benefit? The fact sheet states that more than 28 million workers would
benefit from the Harkin-Miller proposal to increase the minimum wage to $10.10 an
hour, with women (55 percent) and individuals with family income below $35,000 (46
percent) making up substantial shares of the beneficiaries. The White House says that a
quarter of the potential beneficiaries of the wage boost are caring for children. Despite
claims to the contrary, the vast majority of workers whose wages would increase are
adults in the prime of their working years — not teenagers. Just 12 percent of
beneficiaries would be under 20 years old, according to the fact sheet.
If the proposed $10.10 minimum wage were implemented, some 12 million people living
in poverty would see their families’ incomes increase — 2 million of these would be
purportedly be lifted out of poverty.
The White House also points out that at least 30,000 workers in every state would benefit
from raising the minimum wage to $10.10, with more than a million workers benefiting
in Florida, Illinois, New York, North Carolina, Ohio, and Pennsylvania. In California, a
reported 2,161,300 workers would benefit, only to be topped by Texas, where 2,982,100
workers would receive better wages.
Not everyone thinks raising the minimum wage is a good idea. The U.S. Chamber of
Commerce has come out against Obama administration efforts to raise the minimum
raise. In a blog posting, J.D. Foster, the Chamber’s Deputy Chief Economist, wrote: “The
minimum wage debate is misplaced as part of the income inequality debate simply
because raising the minimum wage by $1 an hour, for example, adds about $2,000 to the
pre-tax income of those few full-time minimum wage adult workers. (Most minimum
wage earners are either teenagers or are working part-time). A $2,000 increase would
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make a difference to the worker, assuming he or she still has a job, but it doesn’t do much
for income inequality when stacked against the incomes of those at the very top of the
income scale.
“In addition to the standard and correct arguments against a minimum wage hike — hurts
small businesses and raises unemployment especially among marginal workers and
teenagers — policy makers should consider two other facets of the minimum wage
issue.”
Those facets, said Foster, are first, that 21 states plus the District of Columbia, including
five of the seven most populous states, have already raised the minimum wage above the
federal minimum of $7.25 an hour. Thirteen of these states raised the minimum wage at
the start of 2014. The 29 other states have chosen not to raise their minimum wage rates
above the federal rate. The White House effort to raise the federal minimum wage “is
really about compelling these other 29 states to get with the progressive program,” Foster
wrote. However, these states’ governors and legislatures have decided for their own
reasons not to suffer the downsides of a higher minimum wage.
Second, according to Foster, policymakers have two routes that can be used to quickly
force up the incomes of low-wage workers. Raising the minimum wage is one way, but
“businesses with minimum wage workers are then involuntarily compelled to act as
agents of the federal government in executing and bearing the direct costs of a socioeconomic policy.” This is obviously unfair, Foster said.
The other route would be reforming the safety net to give some low-income workers and
their families more cash — an “understandable desire” in light of the poorly performing
economy and its impact on struggling families — which would mean that “we as a nation
should bear that cost, not pass it off onto businesses,” Foster urged, pointing out that in
1975, this “more correct approach gave rise to the Earned Income Credit (EIC).”
“The EIC provides a direct cash benefit rising with the worker’s income, up to $5,236 in
cash for a full-time minimum wage worker with two children in 2013. That’s equal to a
$2.61 cent an hour higher wage. Coupled with other benefits like the refundable
Additional Child Tax Credit, these direct tax benefits are key components of the federal
safety net.” Foster noted, though, that such a worker without children would earn too
much to receive EIC benefits.
WHD doubles down on employer retaliation in the Southwest
The DOL’s Wage and Hour Division (WHD) is doubling down on employer retaliation
against employees who assert their FLSA rights in the Southwest United States. The
WHD announced on March 20 that it has increased its focus on identifying and resolving
instances of employer retaliation against workers in the area, noting that while in fiscal
year (FY) 2012, the division concluded seven cases where employers were accused of
retaliating against workers, that number jumped to 40 in FY 2013.
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Based on its enforcement experience, the WHD’s Southwest Region implemented a
regional anti-retaliation enforcement training program under which four recent case
settlements required employers to pay lost wages and liquidated and compensatory
damages to affected workers. The employers are also required to train managers on FLSA
requirements and provide proof of the training to the WHD, provide neutral job
references for affected employees, and conspicuously post a fact sheet outlining the
prohibition of retaliation against employees who exercise their rights under the act.
Workers in those cases were terminated, pressured to kick back recovered wages, or
otherwise intimidated by their employers, according to the WHD, which also offered
these details of the cases:
 Pacific Plus International in Farmers Branch, Texas, fired a janitor when he
refused to sign a statement that falsely asserted he had received back wages found
due in a separate FLSA investigation, even though no such payments were made.
Following an investigation by WHD officials, the employer agreed to pay the
affected worker lost wages of $4,329, an equal amount in liquidated damages, and
$1,446 in additional damages to total $10,104.
 DMBC Restaurants LLC, dba Santa Fe Cattle Co., in Lawton, Oklahoma, fired
a server after a manager overheard her talking to coworkers about the restaurant’s
practice of requiring employees to continue working after they had clocked out.
The WHD found that the company’s stated reasons for the termination were not
valid. The employer paid $3,599 in lost wages, plus an equal amount in liquidated
damages, to total $7,198. The Baton Rouge, Louisiana-based enterprise has
locations in Ada, Broken Arrow, Midwest City, and Shawnee, Oklahoma, as well
as various locations in Alabama, Louisiana, Mississippi and Texas.
 Papa Poblano’s of Oklahoma Inc. of Broken Bow, Oklahoma, fired a former
employee shortly after she raised questions regarding the company’s tip-pooling
practices in a staff meeting, according to a WHD determination. The employer
agreed to pay the affected worker $3,270 in lost wages, and an equal amount in
liquidated damages, to total $6,540. The owners also operate a Papa’s Mexican
Café restaurant in Mena, Arkansas; Papa Poblano’s restaurants in Hot Springs, De
Queen, and El Dorado, Arkansas; Nashville; and Idabel, Oklahoma.
 Bengal Mart Inc., dba the convenience store Gulf Gas in Houston, Texas,
purportedly paid a homeless employee only $18 per day and fired him when it
learned that he had cooperated with an ongoing WHD investigation. The
employer paid the affected worker $1,065 in lost wages and liquidated damages.
The WHD also pointed to two cases in which the DOL took action after employers
refused to resolve what the Department said were valid retaliation cases. In the first, the
DOL filed a lawsuit in November 2012 against Utah-based Diamond Tree Experts and its
owners alleging the company fired two employees when they refused to kick back wages
the employer owed to them as a result of a previous WHD investigation. That case was
resolved through a consent judgment and injunction that included an order to pay $22,000
in back wages and $22,000 in liquidated damages. In the second case, a currently pending
lawsuit was filed in April 2013 against El Paso A.R.C. Electric, Inc., based out of El
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Paso, Texas, alleging the company and two of its officers fired two employees for talking
with WH investigators.
“Workplace intimidation, such as firing, threatening to fire or physically harm an
employee who exercises his rights under the FLSA, or demanding kickbacks, is
unacceptable,” said WHD Regional Director Cynthia Watson. “We have stepped up our
anti-retaliation enforcement effort, and we will use every tool available to protect
workers and hold employers accountable.”
TRO, preliminary injunction sought to halt threats against workers who cooperate
in WHD investigation
The DOL is seeking a seeking a temporary restraining order and preliminary injunction
from a federal court in McAllen, Texas, to protect workers from retaliation and threats of
retaliation from officials of ISPE Produce Inc., which is currently under investigation by
the Wage and Hour Division (WHD) for purported FLSA minimum wage, overtime,
recordkeeping and anti-retaliation violations.
ISPE Produce required workers to leave the job site when investigators arrived to conduct
interviews, according to the WHD. Company officials allegedly threatened workers with
termination and deportation for cooperating with the DOL. The federal agency is asking
the court to enjoin the owner and two company officials from continuing threatening and
retaliatory conduct aimed at employees who cooperate in the WHD investigation.
The DOL said it is also seeking an order: (1) requiring the owner or a DOL employee to
read aloud a statement to all employees informing them of their right to speak with WHD
investigators without fear of retaliation; (2) requiring the company to post a copy of the
statement at all ISPE Produce work sites; and (3) prohibiting the owner and named
officials from speaking directly to employees about the WHD investigation.
“Employee intimidation and coercion will not be tolerated,” said WHD Regional
Administrator Cynthia Watson. “Employers are prohibited from retaliating against any
employee who files a complaint or cooperates in a Wage and Hour investigation. We will
leverage any resources necessary to ensure that a fair investigation is conducted and
workers are protected.”
Women make up more than half of those who would benefit from a minimum wage
boost, WH report says
By Pamela Wolf, J.D.
The White House has released a report on the impact that raising the minimum wage
would have on women, as well as the importance of ensuring a “robust” tipped minimum
wage. According to the report, which was prepared by the National Economic Council,
the Council of Economic Advisers, the Domestic Policy Council, and the Department of
Labor, the minimum wage boost is especially important for women because they are
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more highly concentrated in in low-wage sectors such as personal care and healthcare
support occupations. Moreover, women account for more than half (55 percent) of all
workers who would benefit if the minimum wage were increased to $10.10.
The tipped minimum wage under federal law is $2.13 an hour so long as the workers’ tips
plus the tipped minimum wage meet or exceed $7.25 per hour — a rate that has been in
place for 20 years. According to the report:
 Women account for 72 percent of all workers in predominantly tipped
occupations – such as restaurant servers, bartenders, and hairstylists.
 Average hourly wages for workers in predominantly tipped occupations are nearly
40 percent lower than overall average hourly wages.
 Workers in predominantly tipped occupations are twice as likely as other workers
to experience poverty, and servers are almost three times as likely to be in
poverty.
 About half of all workers in predominantly tipped occupations would see their
earnings increase as a result of the President’s proposal.
Among the other points raised in the report, is the contention that raising the minimum
wage as well as the tipped minimum wage would work to reduce poverty among women
and their families. It would also make headway toward closing the gender pay gap.
Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and
Pensions (HELP) Committee, released a statement in response to the report, noting:
“Every day, millions of hardworking Americans are struggling to put food on the table
and make ends meet. And now that women are the breadwinners or co-breadwinners for
two-thirds of American families, they are shouldering more and more of this burden.”
“Taking action to ensure that every woman receives a fair day’s pay for a hard day’s
work is a common-sense economic policy that everyone can support,” Harkin said. He
also pointed to the Harkin-Miller bill, which would raise the minimum wage in three
steps to $10.10 and thereafter provide automatic, annual increases linked to changes in
the cost of living.
$23M proposal would resolve consolidated California wage and hour class litigation
against Walgreens
By Pamela Wolf, J.D.
Walgreens Co. will pay $23 million to settle nine wage and hour class lawsuits filed on
behalf several categories of the company’s workers in California, according to a proposed
settlement filed on Tuesday, March 25. The agreement, if approved by the court, would
head off years of litigation and subsequent appeals.
The first of the consolidated actions was filed in May 2011 and removed to federal court
the following month by Walgreens. Eight other actions were filed on behalf of various
classes of Walgreens workers through California in state and federal courts. They were
consolidated in the Central District of California in July 2013. A settlement in principal
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was reached after two all-day mediation sessions and additional negotiations. After seven
months of contentious negotiations, the details of the $23 million settlement were finally
worked out, and a motion for preliminary approval of the deal was filed with the court on
Tuesday, March 25.
The motion seeks conditional certification under Rule 23 of an estimated 40,000 class
members consisting of non-exempt and store manager retail employees, including
pharmacists, pharmacy staff, and other staff. The company purportedly had a uniform
policy requiring pharmacists and others to execute on-duty meal period agreements as a
condition of employment. Walgreens also purportedly required class members to submit
to bag checks performed during off-duty times without compensation. Class members
were additionally required to travel for company meetings, bank runs, and inter-store
transfers, according to the plaintiffs, without reimbursement for mileage or compensation
when performed during off-duty times.
Walgreen’s alleged liability in the nine consolidated actions stems from four primary
claims rooted in the company’s uniform policies and procedures: (1) off-the-clock
claims; (2) meal and rest break claims; (3) overtime claims; and (4) expense
reimbursement claims.
The gross settlement amount of $23 million will be reduced by court-approved attorneys’
fees and costs, Service Enhancement Payments to the Class Representatives, claims
administration expenses, a payment to the Labor and Workforce Development Agency of
$22,500 for the release of Labor Code Private Attorneys General Act claims, and legally
required withholding and employer taxes on the settlement payments. The Settlement
also establishes a $1.5 million fund to pay claims under California Labor Code section
2802, which will be deducted from the net settlement amount. Walgreens would pay at
least 50 percent of the net settlement amount less the Labor Code Sec. 2802 Fund.
$6.4 million is carved out for attorneys’ fees (28 percent of the gross settlement amount),
and Walgreens has agreed not to oppose costs of up to $75,000.
Administrator's interpretation applies FLSA protections to home care services
providing shared living arrangements
By David Stephanides, J.D.
In a new Wage and Hour Division Administrator's interpretation, the WHD provides
additional guidance on the applicability of the FLSA to home care services providing
shared living arrangements. In the course of promulgating a final rule issued September
17, 2013, Application of the Fair Labor Standards Act to Domestic Service, 78 FR
60454, the Division received comments regarding "shared living" and "adult foster care"
arrangements. As the Division began its outreach, state representatives who administer
Medicaid-funded and other home care programs questioned the rule's applicability to
innovative shared living programs. To that end, the interpretation discusses how
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longstanding FLSA principles apply to the particular facts of shared living arrangements
(W&H Interpretation 2014-1, March 27, 2014, Portman L).
Types of arrangements. The WHD first set out the types of arrangements the
interpretation addresses – those in which a consumer and provider share a home in order
to allow the consumer to remain in his home and community. The shared home may be
the preexisting residence of the consumer (typically called a “paid roommate” situation)
or of the provider (typically called “adult foster care” or a “host home”), or it may be a
new, joint residence. Shared living arrangements may also occur in the family home of
the consumer with a family member serving as the provider.
Whether the FLSA’s requirements apply to a given work situation calls for making
several determinations about the particular circumstances at issue. First, the FLSA
applies if there is (1) an employment relationship between (2) a covered employer and (3)
a nonexempt employee.
Relevant exemptions. Even if an employment relationship exists and the employer is
covered, the WHD Administrator noted that the FLSA creates certain exemptions. While
many exemptions are inapplicable to home care work, two exemptions are relevant to
certain home care providers whose work constitutes domestic service employment, i.e.,
occurs in or about the private home of the individual receiving services. Specifically,
domestic service employees performing “companionship services” need not be paid in
compliance with minimum wage and overtime protections, and domestic service
employees who reside in the households in which they work need not be paid in
compliance with the Act’s overtime requirement. Importantly, under the final rule, only a
consumer, or the consumer’s family or household, may claim these exemptions; any third
party employer may not even if the exemptions would otherwise be applicable.
Whether a provider employed solely by a consumer in a shared living arrangement that
occurs in the consumer’s private home is entitled to FLSA protections will depend on the
tasks he or she performs for the consumer. A provider who helps a consumer bathe and
dress each morning, prepares the consumer’s meals, and assists the consumer with
preparing for bed in the evening and does not provide other services is not providing
companionship services and therefore is performing domestic service
employment subject to FLSA protections, the WHD concluded. As to live-in domestics,
the WHD stated that in most circumstances, the provider will permanently reside in the
home of the consumer because he or she has no other home. A provider who resides in
the consumer’s private home is a live-in domestic service employee, and if he or she is
not an employee of a third party, he or she need not be paid overtime compensation for
any hours she works over 40 in a workweek, the WHD opined.
Chicago cabbies bring class action for misclassification as independent contractors,
unjust enrichment of taxi companies
By Pamela Wolf, J.D.
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Current and former taxi drivers have filed a class action against four Chicago cab
companies that they say have misclassified drivers as “independent contractors” and were
unjustly enriched as a result. According to the complaint filed on Wednesday, March 26,
against Chicago Carriage Cab Co., Yellow Cab Affiliation, Inc., Flash Cab Co., and
Dispatch Taxi Affiliation, Inc., the cab drivers are actually “employees” under Illinois
wage law. The plaintiffs have filed suit on behalf of themselves and other similarly
situated taxi drivers over the last 10 years.
“As a result of this misclassification, these drivers have had to pay for their jobs, in the
form of fees that they are charged in order to work” — daily or weekly fees they are
required to pay in order to drive a cab, the plaintiffs contend. In Chicago, the vast
majority of taxi drivers do not own their cabs or have the “medallion” licensing required
to drive a cab. The plaintiffs also assert that other unlawful deductions have been taken
from the plaintiffs’ wages and that the taxi companies and their affiliates have been
“unjustly enriched” via the drivers’ improper classification as independent contractors.
According to the complaint, the daily fees run $100-$125 or more and the weekly fees are
approximately $500-$800 or more. The only source of the drivers’ income is what they
are able to make in fares and tips because they receive no wages. Their income is further
reduced when a customer pays by credit card.
In addition to what the cabbies must pay to drive a taxi, they are also required to pay all
the expenses necessary to operate the cab, the complaint alleges, including fuel, airport
taxes, upkeep, and often insurance payments. “As a result of this arrangement, taxi
drivers in Chicago who pay companies in order to drive a taxi often receive less than
minimum wage from what remains of their fares and tips, and for some shifts they pay
more in fees and expenses than they receive from fares and tips,” according to the
plaintiffs. “In other words, drivers may actually lose money for working a shift.”
The plaintiffs point to a 2008 study by the University of Illinois School of Labor and
Employment Relations which found that the average wage of taxi drivers in Chicago was
less than $5.00 an hour after all fees and expenses were paid — the wage was close to
$4.00 an hour for those who paid daily shift fees.
In addition, according to the complaint, the vast majority of taxi drivers in Chicago work
at least 12 hours a day, often six days a week, without being paid time-and-a-half for
hours over 40 in a workweek.
Historically, taxi drivers in Chicago were classified as “employees,” the plaintiffs say,
but over the last 10 years, the four cab companies they sued have classified them as
“independent contractors.” “The plaintiff taxi drivers and the class they seek to represent
are not engaged in an independently established trade, occupation, profession or business.
Instead, they are entirely dependent upon the defendant companies and their affiliates and
owners because, without a ‘medallion’, the drivers cannot operate a taxi.”
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Thousands of drivers would be included in the Rule 23 class the plaintiffs seek to
represent. The complaint asserts misclassification, failure to reimburse, minimum wage
and overtime claims, among others, under the Illinois Wage Payment and Collection Act.
Janitorial services company pays $277,565 in back wages due to worker
misclassification
The DOL’s Wage and Hour Division (WHD) announced that Empire Janitorial Sales and
Services Inc. has paid $277,565 in overtime back wages to 233 current and former
janitorial service workers employed by Acadian Payroll Services LLC who were
misclassified as independent contractors. Some of the affected workers were employed at
the New Orleans Convention Center. The move followed a WHD investigation that found
FLSA overtime and recordkeeping violations.
Employees were wrongfully classified as independent contractors, according to the
investigation, and were paid an hourly wage with no overtime at the rate of one-half their
regular rate of pay for hours worked over 40 in a workweek. Acadian Payroll Services
also purportedly did not establish a seven-day workweek and failed to maintain proper
records of weekly hours worked by its employees. Empire Janitorial Sales and Services
and Acadian Payroll Services shared joint employer responsibilities, the WHD said.
Both companies have agreed to future compliance with the FLSA. Full payment of back
wages, however, was made by Metairie, Louisiana-based Empire Janitorial Sales and
Services, which cooperated with the investigation.
The DOL and the IRS, through an interagency memorandum of understanding (MOU),
are working together and sharing general information to reduce the incidence of
misclassification of employees, reduce the tax gap, and improve compliance with federal
labor laws, the WHD advised. MOUs with the IRS and state government agencies arose
as part of the DOL’s Misclassification Initiative, with the aim of preventing, detecting,
and remedying employee misclassification. Under the terms of the information-sharing
agreement, the DOL may share specific case information with the IRS. This case is
typical of those the DOL may refer to the IRS.
LEADING CASE NEWS:
2d Cir.: Collective, class action settlement bars opt-out plaintiffs from amending
original complaint
By Sheryl Allenson, J.D.
Giving the nod to a district court’s decision, the Second Circuit, in an unpublished
opinion, said that two opt-out plaintiffs to a collective action and a class action under the
FLSA and New York Labor Law, respectively, were not entitled to amend the original
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complaint to add their individual claims after the action had been settled (Morris v
Affinity Health Plan, Inc, March 10, 2014, per curiam).
Initially, a hybrid complaint asserting a class action under the NYLL and a collective
action under the FLSA was filed. At some point, there was a settlement agreement
specifically resolving the NYLL claims, but in addition, providing that it also settled the
FLSA claims under one agreement.
Opt-out of NYLL claims. The plaintiffs opted out of the settlement, but claimed that
they exercised that right only in relation to the NYLL claims. Previously, they had opted
into the FLSA collective action, and claimed that they did not opt-out of the FLSA
collective action, noting that the opt-out “mechanism” was only a feature of Rule 23 class
actions. The district court disagreed with the plaintiffs’ assessment, ruling that they could
not amend the initial complaint based on the joint stipulation of settlement and release in
place.
Turing to the settlement document itself, the Second Circuit considered the plaintiffs’
motion to amend the original complaint, and affirmed the district court’s decision. That
document supported the conclusion that the parties intended to resolve both the FLSA
and NYLL claims, the appeals court said. Among other things, there was a provision
stating that, under certain circumstances, employees could receive a payment from a class
and collective action settlement.
Rejecting the plaintiffs’ arguments that they lacked notice, the appeals court noted that
the settlement, like the complaint, was a hybrid. The named plaintiffs had the authority
to, and in this case opted to, settle both claims in one agreement, which ended the lawsuit,
the appeals court explained.
Logical considerations. In support of their appeal, the plaintiffs argued that they only
exercised their opt-out rights related to the NYLL class claims, not to the FLSA
collective action claims, in which they had previously opted in. However, those FLSA
collective action opt-in claims were included in the settlement; thus, when it was
approved, the case was “appropriately dismissed in its entirety,” and there was no FLSA
collection action remaining for the plaintiffs’ pursuit. Reviewing the logic of the
plaintiffs’ argument regarding opt-out from the settlement, the appeals court decided that
their decision to out-out of the settlement could only be reasonably construed as a
decision to opt-out of both the collective action and class actions.
While the Second Circuit affirmed the district court’s decision denying the plaintiffs’
motion to amend the dismissed complaint, it noted the lower court’s acknowledgement
that they could file a new lawsuit.
The case number is: 13-1265-cv.
Attorneys: Robert Wisniewski (Robert Wisniewski & Associates) for Kim Morris.
Jonathan M. Kozak (Jackson Lewis) for Affinity Health Plan, Inc.
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2d Cir.: Although complaint referenced FLSA, wrongful discharge and related tort
claims did not involve substantial federal issue, district court lacked jurisdiction
By Brandi O. Brown, J.D.
A federal district court lacked subject matter jurisdiction over employees’ state common
law claims against their former bank employer for wrongful termination in violation of
public policy and breach of the covenant of good faith and fair dealing, the Second
Circuit ruled in a per curiam decision. Although the claims referenced the FLSA for the
underlying public policy, the claims did not involve a substantial federal issue. The action
was remanded with instructions to remand the case to the state superior court (Fracasse v
People’s United Bank, March 27, 2014, per curiam).
Former salaried employees of People’s United Bank filed two lawsuits against the bank.
One suit was brought in state court and included claims of wrongful termination and
breach of the covenant of good faith and fair dealing. The other suit was brought in
federal court and asserted direct violation of the FLSA and the state minimum wage act.
The first employee alleged that she worked as a fixed-salary employee from 2006 to
2012, when she resigned due to increased stress and anxiety. She alleged that the bank
did not pay her for overtime hours. The other plaintiff alleged that she was initially hired
as a temporary employee and paid an hourly wage, but became a permanent employee in
2010 and was paid a fixed salary. She claimed that she did not receive additional pay for
the hours she worked in excess of 40 hours each week. She also asserted that the stress
and inadequate compensation resulted in her being placed on medical leave and her
constructive discharge.
Removed, dismissed. The bank removed the state court action to federal court on the
basis that federal jurisdiction existed under 28 U.S.C. Sec. 1331 because the claims
involved were related to federal law. The plaintiffs did not move to remand the action to
state court and the district court did not discuss subject matter jurisdiction. Rather, it
dismissed the plaintiffs’ complaint for failure to state a claim, holding that the FLSA
preempted their common law claims. Upon appeal by the plaintiffs, the Second Circuit
requested that the parties provide supplemental briefing on the issue of subject matter
jurisdiction.
The plaintiffs had cited the FLSA in their complaint. For the wrongful termination claim,
the complaint referenced the FLSA as evidence of a public policy related to wage
payments and, particularly, the provisions prohibiting employees from working more
than 40 hours per week without compensation at time and a half for the excess hours. For
their breach cause of action, they referenced the FLSA as a basis for their reasonable
expectations regarding the employer’s contractual obligations. The Second Circuit was
not persuaded by the bank’s argument that the plaintiffs’ claims arose under the FLSA.
Exceptions. Only three situations exist in which a complaint that does not allege a
federal cause of action can nevertheless arise under federal law, the appeals court
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observed. The only plausible exception applicable here would have been the exception
allowing for federal jurisdiction in cases where “vindication of a state law right
necessarily turns on a question of federal law.” That particular exception had been
recently discussed by the U.S. Supreme Court in Gunn v. Minton, a 2013 decision, the
appeals court noted, and this case did not meet the requirements set forth by the High
Court.
The “federal issue” arising in the two state law claims was not “substantial,” as required
by Gunn. To demonstrate such substantiality, the Court in Gunn held, the issue had to be
important to the “federal system as a whole.” However, even if the court here were “to
assume” that the “state common law claims could raise a federal issue as pled,” that issue
was “at best insubstantial.” There was no “pressing interest” in “ensuring” the availability
of a federal forum for defendants in tort suits that included only “passing references” to
federal statutes “cited only as an articulation of public policy.” The federal courts would
not “cede an opportunity to establish binding precedent affecting the interpretation of the
FLSA” under these circumstances. Gunn required “something more” than the “de
minimis” federal interest involved in this case, where the tort claims were only “linked
tangentially” to the public policy underlying a federal statute.
Indeed, the appeals court noted that if it found an exception in this case, “then every state
law clam that adverts in any part to a proposition of federal law would satisfy the
‘substantiality’ requirement and that would “fly in the face of the Supreme Court’s test in
Gunn.”
The case number is: 13-266-cv.
Attorneys: Kevin C. Shea (Clendenen & Shea) for Tracy Fracasse. Paul DeCamp
(Jackson Lewis) for People's United Bank.
3d Cir.: Intervening nonprotected STD leave breaks causation, defeating retaliation
claims arising from prior protected FMLA leave
By Joy P. Waltemath, J.D.
Alleged harassment and ostracism that followed an employee’s return to work after nonFMLA protected STD leave, which itself occurred just three months after she exhausted
her FMLA-protected leave, did not establish temporal proximity to infer that the
treatment was retaliation for the employee’s FMLA leave, the Third Circuit ruled in an
unpublished opinion. And, where her formal complaints were not made until after she
quit work, it was impossible to show that the allegedly adverse treatment was retaliation
for making those complaints (Karaffa v Township of Montgomery, March 19, 2014,
Rendell, M).
Just before the police dispatcher returned to work after taking approved FMLA leave for
her daughter’s birth, she learned she was assigned to work only overnight dispatching
shifts. She asked for a different schedule and was given evening shifts with two
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weekends of overnight shifts per month; she returned to work on this schedule. Within a
month, however, she was injured in a car accident, and because she had exhausted FMLA
leave, her new leave was covered under STD. When she returned to work three months
later, she was assigned to new paperwork duties, not her previous dispatcher
responsibilities. She believed she was being ostracized because of these duties, the fact
she was moved away from other dispatchers, and her dispatcher’s certificate was allowed
to expire. After working only a week she was told not to come back until she underwent
an independent medical exam as part of her STD coverage. She never returned to work,
instead complaining to the township about harassment and retaliation for taking FMLA
leave and then formally resigning.
FMLA leave retaliation. To the appeals court, the dispatcher had not suffered an
adverse employment action when she returned from her FMLA-covered maternity leave;
her position and schedule were equivalent to those she enjoyed prior to taking leave. Plus,
it did not seem reasonable to the court that the dispatcher’s overnight work schedule
following her FMLA leave, which the employer changed upon her request for a different
shift, could constitute “antagonism and ostracism” or otherwise be considered an adverse
action.
More importantly, there was no causal connection between her later allegedly adverse
employment actions and that FMLA-protected leave, which was fully exhausted before
the STD leave she took to recover from the subsequent car accident. Those post-caraccident allegedly adverse actions (assigning her filing and shredding paperwork) could
not – by temporal proximity alone (her FMLA leave three and one-half months earlier) –
raise an inference that they were caused by her FMLA leave. Her claim that her employer
was aware she could physically perform the duties of a dispatcher when she returned
from post-car-accident non-FMLA leave also failed to raise any inference that the alleged
adverse assignments were because of FMLA leave taken three and one-half months
earlier. The court agreed that the dispatcher failed to establish a prima facie case of
retaliation for taking FMLA leave.
Retaliation for complaints. To establish a prima facie case of retaliation, the dispatcher
needed evidence to show that her complaint of an FMLA violation caused adverse
employment actions against her, but her first formal complaint concerning FMLA
violations was made at least a month after her last day of work. Obviously, said the court,
she could not show the employer retaliated against her for lodging her complaint when
she made her complaint after the alleged retaliatory acts. Whether informal FMLA
complaints are protected activity is an open question in Third Circuit, but the court found
no reason to answer that question here because none of the dispatcher’s cited
“complaints” made before she left her job actually challenged unlawful action under the
FMLA. For example, her email requesting a scheduling change prior to her return from
the covered FMLA leave was not a complaint challenging unlawful action, nor were any
of her other vague references clear evidence that she opposed certain employment actions
as unlawful under the FMLA. Accordingly, the court affirmed the district court’s finding
that the dispatcher first complained of an FMLA violation only after she quit work,
making any retaliation claim based on such a complaint meritless.
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The case number is: 13-2110.
Attorneys: Brian K. Wiley (The Law Office of Brian K. Wiley) for Patricia Karaffa.
Christopher P. Boyle, Sr. (Marshall, Dennehey, Warner, Coleman & Goggin) for
Township of Montgomery.
4th Cir.: Donning and doffing claims preempted by LMRA; state wage law’s
“notice” provision did not save claims
By Lisa Milam-Perez, J.D.
In resolving a donning and doffing action brought by production employees of a chicken
processing plant, a lower court erred in refusing to dismiss as LMRA-preempted the
employees’ state-law wage claims asserting the company erroneously paid them on a
“line time” rather than “clock time” basis. The dispute, at its core, was a battle over how
to calculate “hours worked” under the CBA, a divided Fourth Circuit panel found, so its
resolution would require interpretation of their union contract. The employees’ plea that
the employer independently violated the state wage law’s “notice” provisions offered
them no recourse (Barton v House of Raeford Farms, Inc dba Columbia Farms, Inc,
March 11, 2014, Niemeyer, P).
The district court also erred in rejecting the employer’s motion for summary judgment on
retaliation claims brought by six employees who asserted they were discharged for
instituting workers’ compensation proceedings, the appeals court found. However, the
workers’ comp retaliation claims of two other employees were properly left standing.
Federal and state wage claims. Current and former production employees of a South
Carolina chicken processor filed three separate actions (now consolidated) against the
company under the FLSA and the South Carolina Payment of Wages Act, contending
they should have been paid for the time spent donning and doffing protective gear,
preparing for work, and for unpaid break time. They asserted too that the S.C. Wages Act
required that they be notified in writing, upon hire, as to the hours they would be
working, and that the employer breached this requirement by failing to notify them that
their hours worked would be calculated on a “line time” basis rather than a “clock time”
basis.
The district court granted the employer’s motion for summary judgment on the plaintiffs’
FLSA claims. As members of a bargaining unit, the employees worked under a collective
bargaining agreement negotiated by the UFCW, and the company had a longstanding
practice under a bona fide CBA of paying employees based on “line time” (rather than
“clock time”); thus, the employees were not entitled to compensation for the time spent
donning and doffing protective gear. As for their break time claims, the CBA noted that
the parties had negotiated a change to the “meal and rest policy” back in 2004 (in
exchange for a one-time 3.1 percent raise) such that employees would receive one
“unpaid meal period and [one] unpaid rest period per day, totaling approximately sixty
78
(60) minutes, [with] the allocation between the meal and rest periods to be allocated by
the Company.”
But the district court refused to dispose of the state-law wage claims asserting that the
employer failed to provide required written notices (among other alleged violations),
sending these claims to a jury. The court rejected the employer’s contention that the state
claims were preempted by LMRA Sec. 301; rather, it held the employees could prevail on
their S.C. Wages Act claims by proving that the employer did not notify them upon
starting employment that they would be paid “line time” and were instead led to believe
that they would be paid “clock time.” According to the lower court, the employees’
theory of recovery under the S.C. Wages Act did not depend on the meaning of the
parties’ CBA but on the alleged breach of separate agreements to pay “clock time.” The
court of appeals reversed.
CBA controlled wage calculation. The employer argued that the S.C. Wages Act
provides for an enforcement mechanism designed to ensure that employees timely
receive all the wages “to which they are entitled under an employment contract,” as such,
entitlement to unpaid wages necessarily turned on the application and construction of the
CBA. Moreover, pursuant to their collective bargaining relationship, the parties had
operated for years under a custom and practice of the CBA that the “hours worked” be
calculated based on “line time.”
The employees, however, contended that their cause of action arose from the employer’s
failure to calculate their hours in accordance with other “employment contracts” —
contracts based on what the company told them when they were hired, and that stood
separate and apart from the CBA. The S.C. Wages Act is a “notice statute,” they
reasoned, so the employer would be required to indicate in writing that employees were
paid based on line time. Because the employer failed to do that, and instead informed
new employees that they would be paid based on when they clocked in and out, the
employees had a contractual agreement to be paid on clock time, regardless of what the
CBA provided or the longstanding custom and practice at the plant. And, because their
claims arose under these separate agreements with the company, they were not preempted
by the LMRA.
But the appeals court found it “far from clear” whether the statute in question required
written notice to employees that their “normal hours” would be measured based on “line
time.” At any rate, the statute specifies that the only remedy for the failure to provide
such notice is a written warning by the director of the Department of Labor, Licensing,
and Regulation for the first offense; a civil penalty of no more than $100 can be assessed
for each subsequent offense. Thus, the notice provision did not offer the employees the
recourse they desired. Nor could they stake their claim on their contention that the notice
provision was incorporated into another clause imposing a duty to timely pay employees,
which does provide for a private cause of action, the court found.
Any wages owed to the employees were necessarily governed by the CBA negotiated
between the union and company. That was the only contract on which their S.C. Wages
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Act claims could be based, the appeals court reasoned, “inasmuch as the CBA provides
that it was to be the exclusive contract of employment.” The CBA specifically provided
that both parties would not enter into any other agreement or contract with employees,
individually or collectively, that would conflict with the CBA’s terms, and the
employees’ claim that they had separate, individual contracts with the company
governing their wage payment could not be reconciled with this provision. “Such a theory
of recovery cannot support their claims because of the CBA’s terms and the supremacy of
federal law that provides for the CBA’s enforcement,” the appeals court said.
“Serious damage” to collective bargaining. At a more fundamental level, the Fourth
Circuit expressed concern that the employees’ theory that they had individual
employment contracts with the company, entered into upon hire, “ultimately undermines
the role of the CBA as the exclusive contract for the payment of wages.”
This approach “cannot be accepted without doing serious damage to the system of
collective bargaining because, at bottom, the plaintiffs seek to displace the CBA that
established the terms and conditions of their employment and to replace it with what they
understood to be [the employers’] individual agreements that compensable hours would
be calculated based solely on when they clocked in and out of work. Obviously, this
theory would inappropriately usurp the CBA’s federally protected role,” observed the
court. Accordingly, their claims under the S.C. Wages Act were preempted by Sec. 301
and should not have been submitted to the jury.
Dissent. Judge King dissented. In his view, resolution of the claims did not require
interpretation of the CBA. Paying employees on a “line time” basis was a practice
permitted by but not elucidated in the bargaining agreement, he noted. And while the
CBA was silent on the “line time” or “clock time” issue, “each and every document
provided to the plaintiffs indicated that their wages would instead be for ‘clock time,’” he
observed. “Simply put, the CBA did not free [the employer] to disseminate misleading
wage-and-hour notices or exempt it from the consequences of doing so.”
The case numbers are: 12-1943, 12-1945 and 12-1946.
Attorneys: James Larry Stine (Wimberly, Lawson, Steckel, Schneider & Stine) for House
of Raeford Farms, Inc. Nancy B. Bloodgood (Foster Law Firm) for Calvin Barton, et al.
6th Cir.: Arbitration clause survives expiration of agreement despite omission from
survival clause; employees must proceed individually, not as class
By Lorene D. Park, J.D.
Addressing an issue of first impression among the circuit courts, the Sixth Circuit ruled
that the strong presumption in favor of arbitration applies after an agreement has expired,
even when the arbitration clause was not listed in the survival clause as being one of the
surviving paragraphs. Because the employees in this FLSA class action were unable to
rebut the presumption based solely on the survival clause and could not otherwise negate
80
the presumption of arbitrability by “clear implication,” the appeals court reversed the
lower court’s decision denying the employer’s motion to compel arbitration. The appeals
court further ruled that because the arbitration clause was silent as to classwide
arbitration, the clause did not authorize it and the employees had to proceed individually
(Huffman v The Hilltop Companies, March 27, 2014 McKeague, D).
The employees worked for Hilltop reviewing mortgage files originated by PNC Bank to
determine if lawful procedures were followed in foreclosure and other proceedings. They
regularly worked in excess of 40 hours per week but were not paid overtime because they
were classified as independent contractors. They filed a class action alleging that Hilltop
misclassified them and that the failure to pay overtime violated the FLSA and Ohio state
law.
Survival clause. Hilltop moved to dismiss and compel arbitration pursuant to a
professional services contract agreement entered by each employee. The agreement
contained 24 clauses in numbered paragraphs, including an arbitration clause requiring
that “any claim arising out of or relating to this Agreement, or the breach thereof, shall be
settled by binding arbitration.” The next paragraph contained a survival clause providing
that certain numbered listed paragraphs “shall survive the expiration or earlier
termination of this Agreement.” The arbitration clause was not included in that list of
numbered paragraphs.
The district court denied Hilltop’s motion, reasoning that the agreement had expired and
the arbitration clause had no post-expiration effect because the “more specific survival
clause that excludes arbitration from survival trumps the more general arbitration clause
in the contract,” and because the employees did not agree that the arbitration provision
would survive. The district court did not reach Hilltop’s second argument that the
employees were required to arbitrate their claims individually because the agreement did
not permit classwide arbitration.
Strong presumption of post-expiration survival. Reversing, the Sixth Circuit first
pointed to the strong federal policy favoring arbitration and to the Supreme Court’s
decision in Litton Business Systems, Inc v NLRB, which recognized a “presumption in
favor of postexpiration arbitration of matters unless negated expressly or by clear
implication [for] matters and disputes arising out of the relation governed by contract.”
The appeals court also noted that the need for an arbitration provision to have postexpiration effect is “intuitive” because otherwise a party could avoid his contractual duty
to arbitrate simply by waiting for the contract to expire and then filing suit over a dispute
that arose while the contract was in effect.
Pointing out that the Litton case found a “presumption of arbitrability” with respect to
broadly worded arbitration clauses, the Sixth Circuit here noted that the arbitration clause
at issue was also broadly worded because it covered any claim arising out of or relating to
the agreement. Based on this, and as further confirmed by controlling precedent, the
appeals court explained that the employees faced a “difficult task in rebutting the strong
81
presumption in favor of arbitration ‘by clear implication’ and with ‘positive assurance.’”
Here, they did not meet that burden.
Presumption favoring arbitration trumps rules of contract interpretation. The
employees argued that because Hilltop drafted the agreement, any ambiguity should be
resolved against it. However, the appeals court explained that the strong presumption in
favor of arbitration applies instead of the doctrine of contra proferentum, under which
courts resolve contractual ambiguities against the drafter.
Also rejected was the employee’s argument that the omission from the survival clause
was tantamount to a clear implication that the parties did not intend the arbitration clause
to have post-expiration effect in light of the doctrine of expressio unius. To the appeals
court, the correct way to determine the parties’ intent was to consider the contract as a
whole, including the survival clause and its relationship to the other clauses. Here, the
parties did not clearly intend for the survival clause to serve as an exhaustive list of the
provisions that would survive expiration of the agreement, noted the court. Indeed, the
noncompete clause was also not included in the survival clause but the noncompete term
extended 12 months beyond the expiration of the agreement, and that invited ambiguity
as to what other provisions the parties believed should survive expiration. Likewise, the
severability and integration clauses were not listed in the survival clause but it would be
illogical to conclude that the parties intended those two clauses to have no further effect
after expiration of the contract. For these reasons, the court found that the employees
failed to rebut the strong presumption favoring arbitration.
No classwide arbitration. As to Hilltop’s argument that the employees had to arbitrate
their claims individually, the Sixth Circuit pointed to its prior decision in Reed Elsevier,
Inc ex rel LexisNexis Div v Crockett, in which it found that “the principal reason to
conclude that this arbitration clause does not authorize classwide arbitration is that the
clause nowhere mentions it.” The parties’ agreement here was silent as to whether an
arbitrator or a court should determine the question of classwide arbitrability, so the
question fell to the court. As in Reed Elsevier, the arbitration clause nowhere mentioned
classwide arbitration. Consequently, the appeals court concluded that the clause did not
authorize classwide arbitration and held that the employees had to proceed individually.
The case number is: 13-3938.
Attorneys: Adam W. Hansen (Nichols Kaster) for Cynthia Huffman. Matthew C.
Blickensderfer (Frost Brown Todd) for The Hilltop Comanies, LLC.
6th Cir.: Employee called “liability” by supervisor after asking for leave due to
heart condition, fired under attendance policy before violating it, revives ADA,
FMLA claims
By Lorene D. Park, J.D.
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Reversing summary judgment for an employer on an employee’s ADA and FMLA
claims, the Sixth Circuit pointed to evidence that the employer was an “integrated
employer” covered by the FMLA, that its reasons for firing the employee had no basis in
fact since he had not yet violated the attendance policy underlying his termination, and
that his supervisor’s remark that he was a “liability” when he asked for FMLA leave,
shortly before firing him, constituted evidence of unlawful animus. The court also
breathed new life into the employee’s FMLA interference claim, finding that although he
received Social Security disability benefits soon after he was terminated, there was still a
dispute regarding his ability to return to work within twelve weeks of his request for
FMLA leave (Demyanovich v Cadon Plating & Coatings, LLC, March 28, 2014, Moore,
K).
The company coats and paints auto parts using a number of production lines and different
coatings or chemicals. The employee, who worked for the company since 1989, had been
trained to run several lines. In late 1998, he began to have health problems, including
cardiomyopathy, and took FMLA leave. He continued to work as an operator and area
leader but took FMLA and short-term disability (STD) leave several times over the next
ten years. He was restricted to lifting no more than 50 pounds and to working no more
than 40 hours per week. His heart condition worsened in November 2009 and he again
took FMLA leave.
Health deteriorates. Due to his health problems, the employee began to have difficulty
performing some aspects of his job. He asked for lighter duty assignments, including a
“sorting” position that could be done while sitting, or a position at the end of the paint
line which did not require him to move as quickly. The requests were denied and he was
scheduled to work overtime. During a February 23, 2010 doctor’s appointment, his
doctor advised him to quit work and apply for Social Security disability benefits. He
requested FMLA leave but the company VP refused, believing there weren’t enough
employees for the Act to apply. The VP also alleged called the employee a “liability” and
fired him soon thereafter.
The employee applied for Social Security benefits and underwent a mental health
assessment. A psychologist concluded that he had some mental impairment. The
employee also reported that he had a number of physical limitations, including that he
struggled with walking very far and with completing chores like shoveling snow or
mowing. Despite his limitations, he looked for other jobs at several restaurants and at a
car wash. After he started receiving Social Security disability benefits, he stopped
looking for alternative employment because he had been determined as disabled.
District court proceedings. Granting summary judgment for the employer on the
employee’s FMLA interference claim, the district court found that he was not an “eligible
employee” because he did not show he would have been able to work at the end of the
FMLA leave period. The court also rejected his claim that the employer should have
accommodated him by changing his schedule or approving leave. Instead, the court found
that he was unable to work in any capacity. Summary judgment was also granted on the
retaliation claim, because the employee failed to show the employer’s reasons for
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terminating him (violation of the attendance policy; permanent inability to work) were
pretextual. The court also concluded that the employee was not a “qualified individual”
for purposes of his ADA discrimination and retaliation claims.
Integrated employer. Reversing, the Sixth Circuit found evidence raising a fact dispute
on whether the company was a covered employer under the FMLA. Although the
employee failed to refute evidence that the employer had fewer than 50 employees during
the relevant time, there was evidence that it was an “integrated employer” with MNP
Corp., an affiliated company with more than 500 employees. The companies shared
several common managers, including the executive VP and the HR manager, who was
MNP’s VP of HR and who provided “some help” in making the termination decision. In
addition, the employer’s office manager regularly consulted with MNP on employee
matters. The operations of the two entities were also interrelated: they maintained the
same registered business address; they jointly obtained quality certifications; they were
engaged in the same business; and orders from MNP comprised half of the employer’s
business. Furthermore, MNP exercised at least some control over the employer’s labor
relations and its VP of human resources represented the employer in negotiating the
collective bargaining agreement. Finally, the same group of investors owned both
companies since 2004. This was enough to create a genuine dispute on whether they
constituted an integrated employer.
FMLA interference. The appeals court also found a question of fact related to whether
the employee could have continued working. While there was ample evidence that he had
difficulty returning within the twelve weeks of his request for FMLA leave, it was not
beyond dispute that he could have done so. His primary physician advised him to quit
work but did not draft a document stating he categorically was unable to continue
working. Moreover, the materials related to his application for Social Security was not
determinative. The vague descriptions of statements he made to the psychologist did not
amount to indisputable admissions that he could not work. The appeals court also pointed
out that many of the employee’s statements indicated he was capable of working as a
machine operator despite his difficulty standing, lifting, and walking, particularly because
other machine operators performed less physically demanding duties. For these reasons,
the employee created a genuine dispute as to whether he was entitled to FMLA benefits
that the employer denied by firing him.
In addition, although the employer asserted he was terminated under its attendance policy
and because he could not return to work at the end of his leave period, the employee
provided evidence that these reasons were pretextual. He did not actually drop to a zeropoint attendance balance so the attendance policy provided no basis in fact for the
termination. While the termination letter stated that the termination was effective on
February 24, after an additional absence would have left him with a negative point
balance, the decisionmaker admitted in deposition that the employee was actually fired
on February 23, before he reached a zero balance. Furthermore, the employee’s purported
inability to return to work could not have actually motivated the February 23 termination
decision because the decisionmaker did not even have access to information on the
employee’s physical limitations at that time. And the employee disputed that he would
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not have been unable to work at the end of the 12-week period. For these reasons,
summary judgment on the FMLA interference claim was reversed.
FMLA retaliation. The Sixth Circuit also reversed summary judgment on the FMLA
retaliation claim, finding that the supervisor’s comments, in connection with the
employee’s FMLA request, that the employee was a “liability” was direct evidence of
prejudice by a decisionmaker with respect to the employee’s health issues. Further, the
employer did not present enough evidence to show it would have fired the employee even
had he not asked about FMLA leave because neither of its purported justifications
actually motivated the decision. The employee also presented enough evidence under the
indirect method because he engaged in protected activity by asking for leave, he was
terminated mere minutes after informing his supervisor of his intent to take leave, and he
presented sufficient evidence that the employer’s justifications for the termination were
pretextual.
Disability discrimination. The employee’s disability discrimination claims under the
ADA and state law were also revived on appeal. The employee was disabled because his
heart condition and his diabetes substantially limited his ability to stand, lift, walk, and
bend. In addition, his disability was a “but for” cause of his termination: he would not
have been fired had he not asked about taking leave to treat his medical conditions. The
remaining disputed point was whether he was “otherwise qualified” to work as a machine
operator at the time he was fired. In the appellate court’s view, the employee presented
sufficient evidence that he was.
The written description of the “line operator” job identified several essential duties,
including loading and unloading equipment, performing quality inspections, but it did not
identify a lifting requirement or any other physical fitness requirement. Furthermore,
while the employee’s supervisor identified several physically exerting activities as
essential, there was no evidence that the employee could not perform those at the time he
was terminated. Indeed, the supervisor admitted that the employee was not fired due to
performance issues and had been performing his job satisfactorily. Thus, the employee
made out a prima facie case. And, as with the FMLA claims, there was evidence that the
employer’s reasons for the termination were pretextual. Consequently, summary
judgment was inappropriate.
The case number is: 13-1015.
Attorneys: Patrice Arend (Jaffe Raitt Heuer & Weiss) for Cadon Plating & Coatings,
LLC. Paul J. Dillon (Dillon & Dillon) for Alan Demyanovich.
8th Cir.: Soliciting input from all staff not enough to show reliance on
recommendations of two employees but third properly found to be exempt executive
By Kathleen Kapusta, J.D.
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Affirming a district court’s decision to reverse a jury verdict in favor of an employer and
award two employees – allegedly incorrectly classified as exempt executives – overtime
pay and attorneys’ fees, the Eighth Circuit found no evidence that their hiring suggestions
were given particular weight. However, because there was evidence regarding a third
employee’s involvement in at least one personnel decision, the appeals court found that
the lower court erred by overturning the jury’s verdict that he was an executive employee
exempt from the FLSA’s overtime pay requirements (Madden v Lumber One Home
Center, Inc, March 17, 2014, Melloy, M).
The three employees, who worked for a small lumberyard in Arkansas, were all hired
prior to the store’s opening. Because the owner intended for them to serve as supervisors
and managers once the store opened, they were salaried, labeled as executives, and
classified as exempt from overtime pay. Prior to the store’s opening, they performed
tasks such as assembling shelves, receiving merchandise, assisting customers, and
loading and unloading trucks. It was undisputed that throughout their employment, they
worked in excess of 40 hours per week.
Jury trial and lower court proceedings. After the employees ended their employment
at the lumberyard, the U.S. Department of Labor investigated allegations of FLSA
violations. When they were subsequently notified that they may have been wrongfully
denied overtime, they sued claiming that they were erroneously classified as exempt
employees. After a two-day trial, the jury found in favor of the employer and against all
three employees. They then moved for judgment as a matter of law and the district court
overturned the jury verdict, finding that the employer failed to prove the fourth element
necessary for the executive employee exemption: that they had the authority to hire or
fire employees or that their recommendations regarding personnel decisions were given
“particular weight” by the decisionmaker. Accordingly, the lower court awarded them
unpaid overtime wages, liquidated damages, and attorneys’ fees.
Input into personnel decisions. On appeal, the Eighth Circuit first addressed what type
and amount of input into personnel decisions was sufficient to satisfy the executive
exemption’s fourth element, noting that decisions from other courts suggested that more
than informal input solicited from all employees was required. Looking at the different
factors considered by the courts, the Eighth Circuit pointed out that they included such
things as offering personnel recommendations that were acted upon by managers,
involvement in screening applicants for interviews, and participation in interviews.
Here, however, the evidence at trial showed that none of the three plaintiffs hired or fired
other workers. Thus, the court pointed out, the employer needed to show that they were
consulted about personnel decisions and that the employer gave each of their opinions
particular weight regarding specific hiring decisions. The owner testified, however, that
prior to hiring a new employee, he generally asked all the staff if they knew the applicant
and could provide information about that person. There was no evidence that the
employees were involved in screening applicants, conducting interviews, checking
references, or anything related to the employer’s hiring process.
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Nor did the employer testify that some employees’ influence had more influence than
others. Pointing out that the owner was not required to use the exact phase “particular
weight,” the appeals court noted that he could have used any number of words to convey
that the gave the plaintiffs’ recommendations special consideration when making hiring
decisions. This was especially true if, like here, that recommendation was the only
evidence relied on for the exemption.
Financial struggles affected hiring. The employer also contended that because the
business was struggling financially when the plaintiffs worked at the lumberyard, it did
not hire many employees; thus, the plaintiffs were simply unable to participate in
personnel decisions because none were being made. Here, the court noted that the Office
of Personnel Management’s regulation, which states that FLSA exemptions are based on
actual job functions, not intended responsibilities, was persuasive. While the owner
estimated that he hired between six and eight workers during the time the plaintiffs were
employed, and that he generally asked all of the staff if they knew any of the applicants,
there was no evidence that the plaintiffs had any sort of involvement in the hiring
process. Specifically, they did not participate in the interviews, review resumes, rank
applicants, or make hiring recommendations outside of informal reference checks.
Although the owner argued that he would have involved the employees more if he had
hired more employees, that required the jury to impermissibly speculate and rely on
intended rather than actual job functions, the court observed.
Individual employees. Turning to the evidence regarding each of the three plaintiffs, the
court noted that the employer admitted that as to two of them, he could not recall either of
them providing a single personnel recommendation or being involved in any hiring
decision.
Moreover, the owner admitted that because the company did not hire anyone while one of
the plaintiffs was employed, she never had the opportunity to participate in the hiring
process. Thus, the court found, there was simply not enough evidence to satisfy the fourth
element of the executive exemption as to these two plaintiffs.
As to the third plaintiff, the employer did present sufficient evidence to allow a jury to
conclude that he provided a recommendation for at least one worker, and the employer
relied on that recommendation when deciding to hire the applicant. Here, the owner
testified that the plaintiff knew the applicant and recommended him. He further testified
that had the plaintiff provided a bad recommendation, he would not have hired the
applicant. This testimony provided sufficient evidence that reasonably could lead a jury
to believe that this plaintiff provided recommendations about the applicant and that the
employer gave particular weight to his recommendation when deciding to hire the truck
driver.
In addition, the plaintiff testified that although he was not hired to supervise workers, the
owner occasionally asked him to direct the truck drivers regarding where to make
deliveries. Thus, because there was evidence regarding his involvement in at least one
personnel decision, the court found that the district court erred by overturning the jury's
verdict that he was an executive employee exempt from FLSA overtime requirements.
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The case number is: 13-2214.
Attorneys: Harold Wayne Young Jr. (Friday & Eldredge) for Lumber One Home Center,
Inc. John T. Holleman (Holleman & Associates) for Terry Madden.
9th Cir.: Dispatchers and aeromedical technicians didn’t engage in “fire
suppression,” were entitled to standard overtime pay
By Ronald Miller, J.D.
Fire department dispatchers and aeromedical technicians were entitled to standard
overtime pay under the FLSA because they did not fall within the exemption for
employees “engaged in fire protection,” ruled the Ninth Circuit in affirming a district
court’s grant of summary judgment in favor of the employees. Applying the standards it
previously outlined in Cleveland v City of Los Angeles, a case involving paramedics, the
appeals court found that the employees were not “engaged in fire protection” under
FLSA Sec. 207(k), which provides a partial exemption from overtime. It also determined
that the city’s conduct in this case was willful, thus entitling the employees to damages
under a three-year statute of limitations period. Finally, the appeals court affirmed the
district court’s grant of liquidated damages after finding that the city showed a lack of
good faith or reasonable grounds because it knew the law from its involvement as a party
in Cleveland (Haro v City of Los Angeles, March 18, 2014, Pregerson, H).
Firefighters employed by the City of Los Angeles do not receive standard overtime pay
— time and a half for all hours worked in excess of 40 in a workweek. Instead, they
receive overtime after working 212 hours in a 28-day period. Because the city classified
fire department dispatchers and aeromedical technicians (paramedics assigned to air
ambulance helicopters) as employees “engaged in fire protection,” they were denied
standard overtime pay as well. In their complaints, the plaintiffs alleged that the city
violated the FLSA by compensating them as “fire protection” employees under Sec.
207(k). However, they asserted that the Ninth Circuit’s decision in Cleveland v City of
Los Angeles, which involved paramedics, should apply with equal force to them.
Additionally, the plaintiffs asserted that the statute of limitations should be extended to
three years based on the city’s willful violation of the FLSA, and that mandatory
liquidated damages should be awarded because of the city’s lack of good faith or
reasonableness in complying with the Act..
Duties of dispatchers. Fire department dispatchers work out of the operations control
division of the fire department, located in city hall. They receive emergency calls and
send a dispatch message to the fire station to be dispatched. Dispatchers are also
responsible for supporting field employees by dispatching additional resources if the
incident commander determines they are needed. If the incident is large enough,
dispatchers are sent to the scene to act as liaisons between the incident commander and
the operations center. However, no dispatcher has worked at a fire scene in ten years.
During their shifts, the dispatchers are not required to have any fire protective gear with
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them, nor are they required to handle firefighting equipment. They do not go in the field
to physically engage in fire or rescue operations. Nevertheless, dispatchers must have
worked as a firefighter or paramedic for at least four years before becoming a dispatcher.
Aeromedical technician duties. Aeromedical technicians work within the Air
Operations Unit, providing support services for helicopters designated as air ambulances.
They must be certified and have experience as both firefighters and as paramedics.
Aeromedical technicians spend the majority of their flights administering medical care.
Other responsibilities include scene security, rescue operations, and helicopter equipment
maintenance. Aeromedical technicians are not outfitted with the same gear used by
firefighters, but they wear fire-resistant flight suits. These suits are not designed to fight
fires, however.
Air operations helicopters are occasionally used to fight brush fires to drop water and to
map out the fires. If an air ambulance helicopter is used to drop water, aeromedical
technicians will load a hose and fittings onto the helicopter. However, they do not ride in
the helicopter when it drops water on the fire.
Overtime pay. Using the Sec. 207(k) calculation, the city had the option to lower the
number of days in the pay period to 27 days, which lowered the overtime threshold to
204 hours. The plaintiffs regularly worked nine 24-hour shifts every 27-day work period,
totaling 216 hours.
Applying Cleveland, the district court determined that dispatchers and aeromedical
technicians were not “engaged in fire protection” under Sec. 207(k) and Sec. 203(y)
because they were not “responsible for fire suppression.” Like the paramedics in
Cleveland, the plaintiffs did not “actively and physically fight fire.” The district court
also held that the three-year limitations period applied because the city disregarded the
FLSA by failing to inquire about coverage issues, especially after its involvement in
Cleveland. Additionally, the court ruled that the plaintiffs were entitled to liquidated
damages.
Following the lower court’s order, the parties began calculating damages, but reached an
impasse over how to offset the overtime hours the city had already paid the employees.
The district court issued a second order selecting the plaintiffs’ calculation method —
offsets must be applied on a workweek-by-workweek basis. This appeal followed.
Cleveland factors. On appeal, the city argued that because dispatchers and aeromedical
technicians contribute in a direct and vital manner to the department’s suppression of
fires, they met the requirements of Sec. 203(y) and so came within the scope of Sec.
207(k). In Cleveland, the Ninth Circuit held that dual-function paramedics (those trained
as both firefighters and paramedics) were entitled to standard overtime pay because they
are not “engaged in fire protection” under these statutory provisions. In that case, the
appeals court observed that when paramedics arrive at fire scenes, they treat injured
people, stand by for patient care, and take exhausted firefighters to the hospital.
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Applying the factors identified in Cleveland, the appeals court concluded that under the
plain meaning of Sec. 203(y), the dispatchers did not have the “responsibility to engage
in fire suppression.” In Cleveland, the Ninth Circuit associated fire suppression with
actions that occur at the physical scene of the fire itself, and the dispatchers in this case
were even further removed from fire suppression than the paramedics in Cleveland.
While the dispatchers all happen to be trained in fire suppression, that was not a
requirement of the position, since dispatchers who were trained only as paramedics did
the same job and were paid standard overtime for a 40-hour workweek.
Similarly, the aeromedical technicians did not “engage in fire suppression.” Helicopter
support operations consisted mainly of medical duties. The technicians performed none
of the activities normally associated with suppressing fire. Further, similar to the
paramedics in Cleveland, the aeromedical technicians were not required to wear full fire
protective gear, and they never flew when an air ambulance was called upon to drop
water on a fire. Their duties were limited to support activities for the air ambulances, not
fire suppression. As a result, the appeals court affirmed the district court’s holding that
dispatchers and aeromedical technicians do not “engage in fire suppression,” and so
should not be denied standard overtime pay.
The case numbers are: 12-55062 and 12-55310.
Attorneys: David A. Urban (Liebert Cassidy Whitmore) for City of Los Angeles. Thomas
Woodley (Woodley & McGillivary) for Tina R. Haro.
11th Cir.: Farm workers failed to show alleged RICO violations depressed their
wages
By Kathleen Kapusta, J.D.
Two workers at a poultry processing plant, who contended that in the course of
completing I-9 forms for illegal workers, their employer accepted and certified obviously
fake identification documents — which depressed wages paid to all genuinely workauthorized, hourly-paid, unskilled employees at the plant —failed to plausibly establish
two elements of their RICO claims: that the suffered an injury in the form of wage
depression or that their alleged injury was directly and proximately caused by the farm’s
pattern of RICO violations, the Eleventh Circuit ruled. Accordingly, the court affirmed
the dismissal of their putative class action suit (Simpson v Sanderson Farms, Inc, March
7, 2014, Marcus, S).
The employees contended that their employer violated 18 U.S.C. Sec. 1546 when it
accepted and certified fake I.D. documents in order to hire illegal workers and that it used
the vehicle of Sec. 1546 violations to hire “likely more than 300” unskilled, illegal
workers at the plant. In support of their contention, they postulated a market model in
which they contended that to operate the plant, the employer had to employ “over 1,500”
hourly-paid workers at any one time. Rather than hiring from a limited number of legal
candidates, it allegedly selected from a bloated, “mixed status” pool that included both
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legal and illegal workers. They further alleged that, compared to legal workers, illegal
aliens tended to work for lower wages. In order to avail itself of the mixed status labor
supply, they alleged that the employer falsified I-9 forms because it could not employ
such large numbers of illegal workers off the books.
Lower court proceedings. Dismissing their claims, the district court found that the
employees failed to allege sufficient facts to show that the Sec. 1546 violations
proximately caused depressed wages. The lower court reasoned that they could not rely
on pre-Twombly precedent to prove the sufficiency of their pleadings, that actual data was
required to support the wage depression claim, that their but-for causation argument was
wholly conclusory and not supported by any actual data or facts, and, finally, that they
had not shown a direct causal link between injury and injurious conduct.
Wage depression. Observing that federal RICO plaintiffs must prove both an injury to
business or property and proximate cause linking the defendant’s pattern of racketeering
activity with the injury suffered, the appeals court noted that depressed wages could
qualify as such an injury. Turning to the level of factual specificity required to establish
that the wages were actually depressed, the court observed that it has had little occasion
to answer this question since the rulings in Twombly and Iqbal. However, because this
was not a close case, the court found that it did not need to “engage in any creative legal
analysis to conclude that the plaintiffs have not plausibly shown injury.”
Wages actually rose. Although the employee accused the employer of depressing wages,
one of the employees actually received a 34-percent increase over her two years of
employment while the other received a 36-percent increase in her one year of tenure at
the plant. Nor did they show that absent the employer’s misconduct, their wages would
have increased substantially more. Here, the court pointed out, they pleaded injury at only
the highest level of abstraction and with only conclusory assertions.
The employees offered no market data to allow a plausible inference of a gap between the
wages they actually received and the wages they would have received but for the alleged
Sec. 1546 misconduct. Nor did they provide any direct evidence of lost profits by
showing the wages paid by any comparable poultry processing plants in the relevant
market, the state, or even in the region — let alone make any attempt to distinguish
between the wages paid by employers who hired illegal workers and those who did not.
They also failed to state that their wages decreased, or even increased at a slower rate,
after the employer began hiring illegal workers.
No quantifiable market. Instead, the court observed, the employees relied on their
“vague market theory” in which they insisted that there were enough illegal workers in
the mixed-status labor pool to logically infer the depression of wages paid to legal
workers. The problem here was that they failed to describe the relevant market in
quantifiable terms. Not only did the employees fail to estimate the number of unskilled
workers in the market, they failed to state what percentage of the workforce was workauthorized. Moreover, they did not plead the relevant population data even in the smaller
universe of their own processing plant. Without at least some demographic data, the court
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found that it could not plausibly infer whether the presence of illegal workers actually
depressed wages “in a wholly nebulous labor market or in the more limited confines” of
the processing plant.
Nor did the employees identify the relevant geographic market. Stating that it is “not too
much to expect the pleadings to tell us something about the relevant geographic market,”
the court pointed out that anti-trust precedent requires plaintiffs to plead factual support
for all manner of market claims. While the employees were not required to plead all of
the market data in order to make a plausible showing of injury, because their claims
turned peculiarly on assertions about the relevant labor market, they could not plausibly
show injury without pleading any of these market facts or data, the court stated.
Observing that the employees conceded that their own wages actually increased, and that
they offered no facts to establish that they were injured nonetheless, the court found that
their allegations of depressed wages required speculation. Because after Twomblyand
Iqbal, speculation does not state a claim, they failed to allege injury “above the
speculative level.”
Cause if injury. The court next observed that a civil RICO plaintiff must plausibly show
that the alleged injury occurred “by reason of” a defendant’s pattern of racketeering
activity. Because the employees failed to plead even the fact of wage depression, they
failed to show that the employer’s alleged Sec. 1546 violations caused wage depression
in even a “but-for” sense. Even assuming they established injury and but-for cause, they
still failed to adequately plead that their injury occurred “by reason of” the employer’s
alleged misconduct. Here, the court found that the employees effectively conceded that
their theory of proximate cause was just but-for cause repackaged. Specifically, in their
amended complaint, they attempted to establish proximate cause by stating that “the
violations of Sec. 1546 are a direct and substantial cause of the depressed wage rates.”
But, the court stated, they cannot plausibly establish proximate cause merely by tacking a
conclusory allegation onto their high-level market claims.
In this case, the amended complaint did not contain sufficient facts to establish a
plausible direct relation between the remote Sec. 1546 violations and the allegedly
depressed wages. The employees failed to render wage depression the “natural
consequence” of the employer’s alleged Sec. 1546 misconduct. Moreover, they failed to
allege any facts to suggest that the labor market necessarily operated in the manner they
contended.
Without pleading population data, the relevant geographic market, before-and-after wage
rates, or wage data from comparable poultry processing plant employers, the employees
failed to define too many crucial, operative variables in their theory of causation. The
multi-step causal chain they posited was not straightforward, and, at least on the
pleadings, the relationship between injury and injurious conduct was not direct, the
appeals court concluded, finding that the lower court properly dismissed the complaint.
The case number is: 13-10624.
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Attorneys: Walter J. Brand (Watkins & Eager) for Sanderson Farms, Inc. Howard W.
Foster (Law Office of Howard W. Foster) for Melissa Simpson.
11th Cir.: Eleventh Circuit finds arbitration agreement waiving right to bring FLSA
collective action is enforceable
By Lisa Milam-Perez, J.D.
Concluding that an arbitration agreement provision that waives an employee’s ability to
bring a collective action is enforceable under the FAA, the Eleventh Circuit affirmed a
district court’s order dismissing an employee’s putative collective action wage suit and
compelling arbitration. All of the circuits to have addressed the issue thus far have held
that FLSA, Sec. 16(b) does not create a non-waivable, substantive right to bring a
collective action, the appeals court noted; moreover, it found no “contrary congressional
command” within the text of the statute to override the FAA (Walthour v Chipio
Windshield Repair, LLC, March 21, 2014, Hull, F).
Putative collective action. Employees of a windshield repair business filed suit claiming
they were not paid the legally required minimum wage rate and were not compensated for
overtime hours worked. They had signed arbitration agreements soon after they were
hired, though, which provided that they could only bring claims individually, not as class
members. Under its terms, the employees agreed to give up their rights to participate in a
class or other representative action; moreover, an arbitrator was “without authority to
consider a class action by one or more employees or otherwise preside over any form of a
representative or class proceeding.”
Accordingly, the employer moved to dismiss their wage suit and to compel arbitration.
The court below held that, “in the absence of binding precedent holding that such a
[waiver] provision is unenforceable as a matter of law,” the arbitration agreement should
be enforced given the FAA’s strong policy favoring arbitration. Thus, it granted the
employer’s motion.
On appeal, the employees contended that the statutory right to bring a collective action
under FLSA, Sec. 16(b) is substantive and cannot be waived. Moreover, they urged, the
FLSA has overridden the FAA’s requirement that collective action waivers in arbitration
agreements be enforced. The Eleventh Circuit disagreed. The FAA, standing alone,
requires enforcement of arbitration agreements according to their terms; to find instead
that the FLSA overrides the FAA would require a “contrary congressional command” in
the statute, and no such command exists, the court said.
Supreme Court precedents. Turning to Supreme Court precedents that would inform its
decision, the Eleventh Circuit looked first to the High Court’s 2012 decision in
CompuCredit Corp. v. Greenwood, which addressed whether the Credit Repair
Organizations Act precluded enforcement of an arbitration agreement. In doing so, the
High Court looked expressly to the text of the statute, with the majority eschewing any
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analysis of the legislative history of whether there was a conflict between the CROA and
FAA. The decision suggests that the Supreme Court would focus primarily on the
statutory text of the FLSA to determine whether that text precludes a waiver of the
statutory right to bring a collective action, the appeals court reasoned.
The Supreme Court has previously examined the language in FLSA Sec. 16(b) in two
suits brought under the ADEA, which expressly adopts the collective action language of
Sec. 16(b). In Hoffmann-La Roche Inc. v. Sperling, a 1989 decision, the Court observed
that “Congress has stated its policy that ADEA plaintiffs should have the opportunity to
proceed collectively.” Hoffman did not involve an arbitration agreement, though.
On the other hand, Gilmer v. Interstate/Johnson Lane Corp. (1991) did involve the
enforceability of an arbitration agreement, and so was more relevant here. In Gilmer, the
High Court addressed whether an ADEA claim could be subject to compulsory
arbitration pursuant to an arbitration agreement, and found no inherent inconsistency
between enforcing arbitration agreements as to ADEA claims and the important social
policies embodied in that statute. Even assuming that enforcement of the arbitration
agreement in that case would foreclose employees from pursuing a collective action, “the
fact that the ADEA provides for the possibility of bringing a collective action does not
mean that individual attempts at conciliation were intended to be barred,” the Supreme
Court said. (The High Court also observed that an arbitration agreement would not
preclude the EEOC from pursuing classwide relief. So too, such an agreement would not
likely preclude the DOL from filing an FLSA suit on behalf of a class of employees; the
appeals court reasoned here, but refrained to reach the question.)
Subsequently, in Am. Express Co. v. Italian Colors Rest. (2013), the Supreme Court
relied on Gilmer in rejecting the notion that a waiver of class arbitration barred “effective
vindication” of federal statutory rights under the antitrust laws by removing the economic
incentive to bring the antitrust claims. The class action waiver did not eliminate an
individual plaintiff’s right to pursue its own statutory remedies, the High Court noted,
and that was sufficient to vindicate one’s statutory rights. Finally, quoting the Fifth
Circuit from its December 2013 decision rejecting the NLRB’s D.R. Horton ruling,
which invalidated class arbitration waivers under the NLRA, the appeals court observed
here that, indeed, “[i]n every case the Supreme Court has considered involving a statutory
right that does not explicitly preclude arbitration, it has upheld the application of the
FAA.”
The Eleventh Circuit therefore read these High Court decisions to mean that the text of
Sec. 16(b) does not set forth a non-waivable substantive right to pursue a collective
action under the FLSA.
No contrary congressional command. The appeals court discerned no “contrary
congressional command” that precludes enforcement of the arbitration agreements, and
their collective action waivers, here. Parsing the text of Sec. 16(b), it noted the clause
explicitly provides that an employee may bring an action for FLSA violations “for and in
behalf of himself . . . and other employees similarly situated.” But an action brought by a
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plaintiff employee “does not become a ‘collective’ action unless other plaintiffs
affirmatively opt into the class by giving written and filed consent.” And, “the right”
provided by Sec. 16(b) shall terminate if the Secretary of Labor files a complaint to
recover minimum wages or overtime compensation under or seeks injunctive relief.
Finally, the FLSA contains no explicit provision precluding arbitration or a waiver of the
right to a collective action. Accordingly, the FLSA doesn’t override the FAA.
Nor did the legislative history indicate that Congress intended the collective action
provision to be essential to the effective vindication of FLSA rights. Rather, it “supports
only a general congressional intent to aid employees who lacked sufficient bargaining
power to secure for themselves a ‘minimum subsistence wage.’” No contrary
congressional command here. The employees also argued to no avail that it was
“significant” that Congress explicitly provided for the right to bring a collective action in
the FLSA, rather than leaving it to the Federal Rules of Civil Procedure. But the appeals
court rejected the notion that specifically including procedural collective action
provisions in the FLSA could “somehow transform that procedural right into a
substantive right.” In fact, it noted, rather than expand substantive rights, Congress’s
decision to enact the collective action provision actually limited a plaintiff’s existing
procedural rights set forth in Rule 23. “Were it not for Sec. 16(b), a plaintiff could bring a
representative FLSA action even without the prior consent of similarly situated
employees.”
Finally, the appeals court rejected the employees’ reliance on the Supreme Court’s 1945
decision in Brooklyn Savings Bank v. O’Neil, which held that a plaintiff cannot waive her
right to liquidated damages in a FLSA settlement when there is no genuine dispute about
whether she is entitled to them. That decision was distinguishable from the case at hand,
the court said; it addressed the waiver of a substantive right, while here, “we address only
the waiver of a litigation mechanism, i.e., the right to bring a collective action on behalf
of others.”
Concluding the arbitration agreements at hand, with their collective action waivers, were
enforceable under the FAA, the Eleventh Circuit affirmed the district court’s order
compelling arbitration of the employees’ FLSA claims.
The case number is: 13-11309.
Attorneys: Joseph Michael English (Taylor English Duma) for Chipio Windshield
Repair, LLC. Stephen Michael Katz (The Katz Law Group) for Ashley Walthour. Lewis
P. Janowsky (Rynn & Janowsky) for Kingo Promotions, Inc.
11th Cir.: Employee’s vacation request did not qualify for FMLA protection; no
period of incapacity shown
By Ronald Miller, J.D.
Although an employee suffered from depression and anxiety, and a vacation would
doubtlessly prove medically beneficial, his request for vacation time did not qualify for
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protection under the FMLA because he failed to show that he suffered from a period of
incapacity, ruled the Eleventh Circuit. After concluding that the employee did not qualify
for FMLA protection, and that the jury found that his termination was unrelated to his
request for FMLA leave, the appeals court ruled that the employer was entitled to
judgment as a matter of law. Judge Hull filed a specially concurring opinion (Hurley v
Kent of Naples, Inc, March 20, 2013, Cox, E).
Vacation request. The events in this lawsuit began when the employee, the CEO of the
employer’s subsidiary, sent an email to the CEO of the parent company outlining his
vacation schedule. The schedule listed 11 weeks of vacation over a two-year period. The
CEO denied the request and asked the employee to schedule a meeting with him to
discuss the matter further. Dissatisfied with the CEO’s response, the employee replied
that the email was not a request but his upcoming vacation schedule. He also claimed that
he had been advised by his doctor of the need to avail himself of vacation time. The
employee did not mention that he suffered from depression and anxiety. He closed the
letter by accusing the CEO of failing to pay him an overdue bonus and privately
ridiculing his ideas.
The CEO called the employee the next day to discuss the email. While the parties
disputed what happened next, the employee was ultimately terminated for insubordinate
behavior and poor performance. A week after his termination, the employee’s doctor
filled out a FMLA form despite knowing that the employee had already been terminated.
The form noted that the employee suffered from depression and that the doctor could not
determine the duration and frequency of any incapacity. Thereafter, the employee filed
suit alleging that the employer terminated his employment because he exercised his right
to FMLA leave. The employee also asserted a retaliation claim. However, he never
alleged that he was unable to work or was incapacitated. The employer contended that the
employee’s request did not qualify for FMLA protection, and that he was not terminated
because he requested leave.
Jury verdict for employee. Determining that there was a material fact issue, the district
court denied the parties’ cross-motions for summary judgment. It decided that some
evidence existed that the employee suffered from a “chronic serious health condition.”
The case proceeded to trial, where the bulk of the evidence centered on the nature of the
employee’s leave request and whether he would be incapacitated. Although the employee
maintained that he requested leave for medical reasons, he acknowledged that his wife
picked the leave days without any input from a healthcare professional. The jury found
the employee’s leave request did not cause his termination, but awarded him $200,000 in
damages for his termination anyway. The trial court denied the employer’s motion for a
new trial.
On appeal, the employer again asserted that the employee did not qualify for FMLA
leave and that the jury verdict was inconsistent with the damage award. The district court
erred by denying its renewed motion for judgment as a matter of law, the employer
contended, and by entering a judgment for damages.
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Potentially qualifying leave. The appeals court determined that the district court erred
by denying the employer’s motion for judgment as a matter of law on the employee’s
FMLA interference and retaliation claims because his vacation request did not qualify for
leave under the FMLA. The employee had contended that he could bring a claim under
the FMLA without actually qualifying for leave because he provided sufficient notice to
the employer of his intention to take leave and only had to “potentially qualify” for
FMLA leave.
However, the Eleventh Circuit held an employee must actually qualify for FMLA leave
in order to assert an interference or retaliation claim. The appeals court found
unconvincing the employee’s argument that he only needed to provide notice of
potentially qualifying leave. While the evidence supported a finding that the employee
provided sufficient notice for FMLA leave, notice is only relevant to an FMLA claim if
the noticed leave is protected by the FMLA. Giving an employer notice of unqualified
leave does not trigger the FMLA’s protections. Nothing in the FMLA speaks to “potential
rights,” the appeals court noted, and the employee cited no precedent supporting his
“potentially qualifying” standard.
Although the employee had a chronic serious health condition within the meaning of the
applicable regulation, 29 C.F.R. Sec. 825.115, he failed to establish the requisite period
of incapacity. The FMLA does not extend its protections to any leave that is medically
beneficial simply because the employee has a chronic health condition. Here, the
employee had admitted that his leave was not for a period of incapacity. Accordingly, the
employee failed to meet his burden of proving that his leave request qualified for
protection under the FMLA.
Finding the employee’s vacation request did not qualify for FMLA leave as a matter of
law, the Eleventh Circuit did not reach the damages issue.
The case number is: 13-10298.
Attorneys: Frank H. Henry (Bluerock Legal) for Kent of Naples, Inc. Richard Celler
(Morgan & Morgan) for Patrick Hurley.
11th Cir.: Terminating employee for drug-free policy breach not FMLA violation;
using employee’s PHI as defense to non-HIPAA suit not prohibited
By Joy P. Waltemath, J.D.
Using an employee’s personal health information as a defense in a non-HIPAA lawsuit
was not using it for a prohibited employment-related reason, ruled the Eleventh Circuit in
an unpublished decision, noting that the employee never asserted an independent claim
alleging the city’s underlying use of her information violated her HIPAA rights. The city
neither interfered with her FMLA rights nor retaliated against her when, after discovering
she had sought reimbursement for prescription narcotics that she had not disclosed she
was taking as required by the city’s drug-free policy, it confronted her with that violation
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upon her return from unrelated FMLA leave and gave her the option of resigning or being
fired (Bailey v City of Daytona Beach Shores, March 20, 2014, per curiam).
While a city fire inspector was out on FMLA leave, the city clerk, who acted as plan
administrator for the self-insured city’s health insurance plan, saw the inspector’s claim
for reimbursement of prescription narcotics in the process of reviewing all prescription
claims. The city’s drug-free workplace policy required all employees to inform their
supervisors about the use of any prescription drugs that could impair their safety,
performance, or any motor functions.
Investigating further, the clerk learned the prescription also had been filled before and
carried a warning label cautioning against driving while on the medication. When the
inspector returned from leave, the city confronted her with what it believed to be a policy
violation, and the inspector admitted she took the medication and had not disclosed it
under the policy. Given the option to resign or be terminated, she resigned and sued for
FMLA interference and retaliation.
HIPAA violation? On appeal from the district court’s grant of summary judgment to the
city, the employee argued that the city should not have been permitted to rely on her
personal health information (PHI) to defend itself in the lawsuit after the Department of
Health and Human Services notified the city that using PHI for employment-related
decisions would violate her Health Insurance Portability and Accountability Act
(HIPAA) rights. She had moved to strike in the district court to bar the city from using
her PHI in its defense.
HIPAA does prohibit the use and disclosure of PHI in employment-related decisions,
noted the court, but it does not bar a defendant in a non-HIPPA lawsuit from using the
employee’s PHI to defend against that lawsuit. Ruling narrowly, the court said that the
city’s use of her PHI as a defense to suit was not part of an employment-related decision.
Importantly, here the employee never asserted an independent claim alleging the city’s
violation of her HIPAA rights, so the appeals court would not address whether any of the
city’s other actions would have violated HIPAA.
FMLA interference. Although the employee believed she had enough to get to a jury on
her FMLA interference claim, the appeals court was unconvinced because the employer
could show that it refused to restore the employee to her position of employment for a
reason unrelated to her FMLA leave. Upon returning from FMLA leave, the inspector
was given the option to resign or be terminated because she had used prescription
narcotics without reporting that use to the city in violation of policy. It was undisputed
that the city would have taken that same action if she had not taken FMLA leave; its
decision was unrelated to her leave.
FMLA retaliation. Nor could the employee show pretext, said the appeals court. The
city’s evidence was that it gave her the option to resign or be terminated because she had
violated its drug-free workplace policy, and the employee put forth no evidence to
support her allegations of pretext. Because there were no genuine disputed material facts
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and the city was entitled to judgment as a matter of law, the district court decision was
affirmed.
The case number is: 13-11127.
Attorneys: Gail C. Bradford (Dean Ringers Morgan & Lawton) for City of Daytona
Beach Shores. Christine Bailey, pro se.
11th Cir.: Employer can’t compel arbitration of wages claims after coercing class
members into signing arbitration agreements
By Ronald Miller, J.D.
A federal district court did not abuse its discretion in denying an employer’s motion to
compel store managers to arbitrate their wage claims, where the arbitration agreements
were executed after employees had executed a wage suit, ruled the Eleventh Circuit in an
unpublished opinion. The district court’s limited remedial action, by permitting class
members to opt into the wage suit notwithstanding having signed agreements to arbitrate,
was not an abuse of the court’s considerable discretion to manage this collective action.
Further, the district court limited its order to this particular FLSA case (Billingsley v Citi
Trends, Inc, March 25, 2014, Hull, F).
A store manager for clothing retailer Citi Trends filed an FLSA collective action alleging
that the employer improperly designated its store managers as exempt employees and
failed to compensate them for their overtime hours. After the employee filed a motion for
conditional certification of a collective action, the employer responded in opposition and
filed evidentiary materials, including arbitration agreements executed by several dozen
store managers (potential members of the collective action). Citi Trends asserted that the
store managers who had executed the arbitration agreements would be subject to
arbitration and unable to join the collective action.
Back-room meetings. However, the employer had gathered the arbitration agreements
after the district court had set forth the schedule and procedures for the plaintiff’s motion
for conditional certification. In fact, Citi Trends had gathered these documents through
back-room meetings that were “highly coercive” and “interrogation like.” In response,
the plaintiff asked the court for corrective actions, including a motion to strike the
managers’ declarations; a protective order to prohibit Citi Trends from communicating
with potential class members regarding the litigation in a coercive manner; and an order
granting court supervised notice to potential plaintiffs. The court denied the motion to
strike and motion for a protective order, and deferred ruling on a request for corrective
action. Later, the district court granted conditional certification.
With respect to the motion for corrective action, the court noted that after the suit had
been filed, but before the motion for conditional certification, Citi Trends initiated
company-wide in-person meetings with potential class members who were not yet parties
to the lawsuit. At these meetings, Citi Trends had store managers complete fill-in-the-
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blank declarations about their jobs and sign an arbitration agreement that bound them to
arbitrate any claims against the employer.
Based on its “responsibility to see that an employer not engage in coercion or duress to
decrease the size of a collective class and defeat the purpose of the collective action
mechanism of the FLSA,” the district court granted, in part, the plaintiff’s motion for
corrective action. The district court stated that Citi Trends could not compel arbitration of
the store managers’ claims in this action, even if they had signed the arbitration
agreement.
Although the district court granted the employer’s motion for reconsideration, and
scheduled an evidentiary hearing on the motion to compel arbitration, it again denied the
motion to compel. This appeal followed.
Responsibility to oversee FLSA actions. In order to avoid prejudice and impropriety
and to ensure that potential plaintiffs have a fair opportunity to opt-in to a FLSA
collective action, the district court has the discretion to “facilitat[e] notice to potential
plaintiffs” and “broad authority” to exercise control over the collective action and to
govern the conduct of counsel and parties in the collective action. Because of the
potential for abuses in collective actions, such as unapproved, misleading
communications to absent class members, “the court has a managerial responsibility to
oversee the joinder of additional parties to assure that the task is accomplished in an
efficient and proper way.” The district court also has the responsibility to insure that all
parties act fairly while the court decides whether and how the action will move forward
under the FLSA.
Given the “broad authority” that the district court had to manage parties and counsel in an
FLSA collective action, the district court did not abuse its discretion in determining that
Citi Trends’ conduct undermined the court’s authority to manage the collective action.
Nor did the district abuse its discretion in determining that — to correct the effect of Citi
Trends’ misconduct — it would allow putative collective action members to join the
lawsuit notwithstanding their coerced signing of the arbitration agreements.
The Eleventh Circuit found that whatever right Citi Trends may have had to ask its
employees to agree to arbitrate, the district court properly found that its actions were
confusing, misleading, coercive, and clearly designed to thwart unfairly the right of its
store managers to make an informed choice as to whether to participate in the FLSA
collective action. Since the arbitration agreements by their terms would directly affect
this lawsuit, the district court had authority to prevent abuse and to enter appropriate
orders governing the conduct of counsel and the parties.
The appeals court observed that other district courts have taken corrective action refusing
to enforce arbitration agreements acquired through improper means and where the timing
of the execution of those agreements was post-filing, pre-certification. Thus, the district
court did not abuse its discretion in correcting the effects of Citi Trends’ improper
behavior in this case.
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The case number is: 13-12561.
Attorneys: Devand Anthony Sukhdeo (Jackson Lewis) for Citi Trends, Inc. Rocco
Calamusa Jr. (Wiggins Childs Quinn & Pantazis) for Mary Billingsley.
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