April 2011
This week NLRB Acting General Counsel Lafe E. Solomon tipped his hand by updating the list of categories of cases that must be submitted to the agency’s Division of Advice. GC Memorandum 11-11, issued April 12, provides insight into issues the General Counsel finds of particular interest, situations where the law is in a state of flux, particularly difficult or rare issues, or where there is an absence of precedent. The list, which has not been updated since 2007, also includes many issues that had been identified in the 2007 and earlier versions of the document.
Of particular interest to employers may be those cases the GC identified because they involve “identified policy priorities,” like extraordinary remedies in organization campaigns such as: (1) access to employer electronic communications systems, (2) access to nonwork areas, and (3) equal time to respond to captive audience speeches. Similarly identified in the memorandum are first contract bargaining cases where reimbursement of bargaining expenses or of litigation expenses might be appropriate.
The memorandum also seeks heightened scrutiny of cases involving employer rules prohibiting or disciplining employees for protected, concerted activity conducted through use of social media, such as Facebook or Twitter. Further, any aspect of a “neutrality” or card check agreement or other pre-recognition agreement that is not answered by the Board’s decision in Dana Corp has made the list.
Meanwhile, the supervisory status of rotating supervisors in the healthcare industry is another category that remains of interest to the GC, as do what factors “other than the training or skills of the healthcare provider and the acuity of the patient” demonstrate the use of independent judgment by a charge nurse.
NLRB Acting General Counsel Lafe Solomon issued a complaint, on Wednesday, April 20, against the Boeing Company for alleged violations of federal law. The acting general counsel has charged that Boeing transferred a second production line to a non-union facility as retaliation for strikes by Boeing employees represented by the International Association of Machinists and Aerospace Workers.
According to the Solomon, the airline giant initially announced that it would assemble seven 787 airplanes per month near Puget Sound, Washington. Sometime later, Boeing announced that, due to production demands, it would create a second production line to assemble three additional planes per month. However, in October, 2009, Boeing informed the IAM that the second line would be located at a non-union facility. The Acting General Counsel contends that repeated statements by Boeing executives said that past strike activity by the unionized employees and the possibility for further work actions were the main factors for the decision. The IAM filed unfair labor practice charges in response to the decision.
The NLRB launched an investigation of the transfer of second line work in response to charges filed by the Machinists union and found reasonable cause to believe that Boeing had violated Secs. 8(a)(1) and (3) of the Act. The Board found reasonable cause to believe that the statements regarding the motivation behind the placement of the line were intended to coerce its unionized employees in the exercise of their rights under the Act. Furthermore, the Solomon found reason to believe that Boeing’s actions were motivated by a desire to retaliate for past strikes and chill future strike activity. He is asking the Board for an order requiring Boeing to maintain a second line in Washington State, but will not ask the Board either to shut down the non-union line, nor to stop using it for airplane manufacturing. Barring a settlement between the parties, an NLRB ALJ will conduct a hearing on June 14.
The decision, announced last week by NLRB Acting General Counsel Lafe Solomon, to issue a complaint against Boeing Company over its decision to place a production line in a non-union facility continues to draw fire. Representative John Kline (R-Minn) the Chairman of the House Committee on Education and the Workforce Chairman blasted the decision, accusing an “activist” Board of being more concerned with “protecting certain special interests than the rights of all workers to compete for jobs.” Kline insisted that the complaint, which accuses Boeing of placing the line in South Carolina instead of Washington State as retaliation for work actions initiated by the union representing Boeing workers in Washington, will harm the economy.
“This action will have a chilling effect on businesses looking to expand operations, create jobs, and hire employees here in the United States,” said Kline. “This kind of federal overreach helps demonstrate why so many workplaces have closed their doors and moved overseas, and is an unprecedented attack on the American workforce.”
Although Kline did acknowledge that “the facts of the case are still in dispute,” his attack is in keeping with his overall approach to the NLRB. Kline’s committee had already investigated the “trends” at the current NLRB and, after Solomon and NLRB Chairman Wilma Liebman decried proposed budget cuts, Kline issued them a letter demanding to see their correspondence on the matter. Kline has made little attempt to disguise his antipathy towards the Board and the Boeing complaint has given him more ammunition.
He is getting more support in his battle against the Obama NLRB. The HR Policy Association has sent a letter to Congress, urging relevant committees to demand that Solomon explain himself. The General Counsel for the Association, David V. Yager, attacked the decision as falling afoul of the NLRA. He argued that the conversations between the union and Boeing, in which Boeing allegedly acknowledged that it was moving the line because of the union’s work actions, should be protected by the Act.
“If anything, the NLRB should seek to ensure that employers and unions are able to speak freely with each other, consistent with their rights under Section 8(c) of the National Labor Relations Act,” said Yager. “Any failure by the Board to protect those rights can only further harm the larger economic interests of all Americans.”
Nine state attorneys general have sent a letter to the NLRB contending that the complaint recently issued against Boeing Company lacks a legal and factual foundation and warning that the complaint “seeks to destroy our citizens’ right to work.”
Last week, the Board issued a complaint against the airline manufacturer for moving a production line for its 787 Dreamliner airplane from Washington state to South Carolina. The complaint alleges that the move was in retaliation for work actions instigated by the union representing Boeing employees in Washington last year in response to an increase in demand. The letter from the attorneys general—all of whom are from right-to-work states—contends that the complaint ignored that increased demand for the planes led to the expansion of the line. In fact, the complaint specifically mentioned that increased demand fueled the need for a second line.
Moreover, the letter contends that the complaint lacks a legal foundation. The letter insists that comments by Boeing executives that work actions led to the removal of the line were protected speech under U.S. Supreme Court precedent. The letter states that employers have the right to express views on labor policies, but the NLRB complaint alleged that Boeing did more than express views. The complaint alleged that the company acted on those views in retaliation for protected activity by the union.
The attorneys general letter argues that the complaint is nothing more than attack, on behalf of the unions, on right to work states. “The NLRB, through this single proceeding,” the letter says, “attempts to sound the death knell of the right to work.” The letter also warns that the complaint will cause international companies to reconsider locating their plants in the United States, “where the federal government interferes in industry without cause or justification.” The repercussions of the complaint, the attorneys general warn, will “impair” the economic recovery.
According to a recent article in the New York Times, the NLRB has informed the attorneys general of Arizona and South Dakota that it plans to file lawsuits against them over recently enacted state constitutional amendments that bar employers from voluntarily recognizing unions through the card-check procedure. The Times article states that the Board sent a letter on Friday to those officials, informing them that it will rely upon the Supremacy Clause of the US Constitution in arguing that the amendments are pre-empted by federal labor law; the NLRB allows employers to voluntarily recognize unions.
The battle began in January, when Acting General Counsel Lafe Solomon advised the Attorneys General of Arizona, South Carolina, South Dakota and Utah that the NLRA preempted their respective legislative attempts to mandate that secret ballots be used in all union representation elections. The states argued that the amendments, in fact, supported the NLRA, but failed to reconcile the ban on voluntary recognition with the NLRA’s allowance of that procedure.
The threatened litigation led several witnesses at a February 11 hearing of the House Committee on Education and the Workforce to suggest that Congress should pass the Secret Ballot Protection Act, thus rendering the current alleged conflict moot. The SBPA, recently reintroduced by Senator Jim DeMint (R-SC) and Representative Phil Roe (R-Tenn) would mandate the use of secret ballot elections in federal union representation proceedings. Roe’s version was introduced to the Committee on Education and the Workforce, where it would likely win any future vote to proceed to the full House. DeMint’s bill is unlikely to ever be brought to the floor of the Senate.
LEADING CASE NEWS
In a consumer case with broad implications for the arbitration of employment disputes, the U.S. Supreme Court today ruled that the Federal Arbitration Act preempts states from prohibiting enforcement of arbitration agreements that bar classwide arbitration of disputes (AT&T Mobility LLC v Concepcion, Dkt No. 09-893, April 27, 2011, Scalia, A). In a 5-4 decision, the Court reversed a Ninth Circuit holding that a class action arbitration waiver in AT&T Mobility’s wireless service agreement was unconscionable and unenforceable under California law. In a majority opinion authored by Justice Scalia, the Court held that California’s law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” in enacting the FAA. In so ruling, the Supreme Court potentially redefined the parameters in which employers may impose mandatory arbitration of employment-related disputes. But the majority went further: not only did it uphold the enforceability of arbitration agreements on equal footing with other contracts, it expressly disfavored classwide arbitration itself as inconsistent with the FAA.
Justice Breyer filed a dissenting opinion, in which Justices Ginsburg, Sotomayor, and Kagan joined. Justice Thomas filed a concurring opinion.
Background. AT&T’s arbitration clause requires customers to resolve their disputes with the wireless telecommunications provider in individual arbitration and expressly prohibits arbitrators from conducting classwide arbitration. Despite signing the agreement, the respondents, two California consumers, filed a class action claim against AT&T alleging that its offer of a “free” phone to anyone who signed up for its service was fraudulent because the company charged a new subscriber sales tax on the retail value of each “free” phone. California law, as set out in the California Supreme Court’s interpretation of Discover Bank v Superior Court, provides that some (though not all) class action waivers in consumer contracts are unconscionable and should not be enforced. Applying California law in October 2009, the Ninth Circuit ruled that AT&T’s class action waiver was unconscionable and unenforceable because the agreement was a contract of adhesion, the dispute involved predictably small amounts of damages ($30.22 for the sales tax charged on cell phones), and the respondents alleged that AT&T carried out the scheme deliberately to cheat large numbers of customers out of small sums of money. The circuit court also rejected AT&T’s assertion that the FAA preempts California’s law finding class action waivers unconscionable.
AT&T contended that “California (with an assist from the Ninth Circuit)” has thwarted the policies of the FAA and trumped the laws of the 25 states and the District of Columbia that enforce contracts prohibiting classwide arbitration as long as consumers can vindicate their rights in individual arbitration. According to AT&T, California’s rule, and the Ninth Circuit’s rejection of its preemption challenge, cannot be reconciled with the FAA’s policy of promoting arbitration. The Court granted certiorari to decide whether the FAA preempts states from conditioning the enforcement of an arbitration agreement on the availability of particular procedures – in this instance, classwide arbitration – when those procedures are not essential to ensure that parties are able to vindicate their claims. In its petition for certiorari, AT&T argued that the case presented a recurring issue of extraordinary importance to the continued viability of tens of millions of arbitration agreements in California and throughout the country.
An obstacle to the FAA. California’s Discover Bank rule stands as an obstacle to the accomplishment of the federal law’s objective, the majority held. It increases the complexity of arbitration and, thereby, discourages parties from entering into agreements to arbitrate. As such, the rule discriminates in practice against arbitration, and so undermines the intent of the FAA, which is “to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings,” according to the majority. “Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”
Classwide arbitration “sacrifices the principal advantage of arbitration — its informality — and makes the process slower, more costly, and more likely to generate procedural morass than final judgment,” held the Court. The majority noted that class arbitration, like judicial class actions, requires procedural formality by its very nature. Class arbitration includes absent parties, necessitating additional and different procedures, and arbitrators do not typically have knowledge of the procedural aspects of class certification. “The conclusion follows that class arbitration, to the extent it is manufactured by Discover Bank rather than consensual, is inconsistent with the FAA.”
The majority also found that class arbitration “greatly increases risks to defendants.” The absence of “multilayer review” increases the potential for errors to go uncorrected — a cost that defendants are willing to swallow when the potential impact is limited to potential liability incurred from individual disputes, and is offset by having avoided litigation costs. But when alleged damages are aggregated by thousands of plaintiffs, the risk of error becomes unacceptable, and defendants will, therefore, be pressured into settling questionable claims, the majority reasoned. “We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision.”
At stake is more than simply the enforcement of agreements to arbitrate, in the majority’s view. It would not be enough to say that parties sometimes agree to class arbitration, the Court noted. Just as parties might agree to arbitrate pursuant to the Federal Rules, or to conduct discovery that mirrors litigation, what the parties would have agreed to in such instances “is not arbitration as envisioned by the FAA,” and, therefore, may not be required by state law.
Dissent. Arguing that California’s law is not inconsistent with the FAA’s language and primary objective, nor does it stand as an obstacle to the Act’s execution, Justice Breyer dissented from the Court’s holding that the FAA preempts the Discover Bank rule. In Breyer’s view, “California is free to define unconscionability as it sees fit, and its common law is of no federal concern so long as the State does not adopt a special rule that disfavors arbitration.”
The California rule applies equally to class action litigation waivers in contracts that do not have arbitration agreements and class action waivers in contracts with arbitration agreements. As such, the rule falls directly within the FAA’s exception permitting courts to refuse to enforce arbitration agreements on grounds that exist for any other contract. “We should think more than twice before invalidating a state law that does just what [FAA] Sec. 2 requires, namely, puts agreements to arbitrate and agreements to litigate `upon the same footing,’” Breyer wrote.
Breyer rejected the notion that class arbitration is inconsistent with the very use of arbitration. “Where does the majority get its contrary idea — that individual, rather than class, arbitration is a `fundamental attribut[e]’ of arbitration? The majority does not explain.” The dissent also responded to the majority’s assertion that, were states to be allowed to require classwide arbitration, “there is little incentive for lawyers to arbitrate on behalf of individuals when they may do so for a class and reap far higher fees in the process.” Breyer countered: “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?”
A boon for employers. “From a litigant’s perspective, we are obviously pleased with today’s Supreme Court’s ruling,” said Chris Bourgeacq, a labor and employment attorney for AT&T Services, Inc, and member of the CCH Employment Law Daily Advisory Board. “The majority’s decision not only reiterates the Court’s longstanding endorsement of bilateral or traditional arbitration as an effective means of dispute resolution, but at the same time affords protection against the growing abuse of class actions. Irrespective of their merits, class and collective actions raise the specter of huge expenses to businesses, large and small alike. And as the Court noted, the lack of meaningful appeals and other procedural safeguards renders arbitration “poorly suited to the higher stakes of class litigation.”
“Affirming the broad preemptive scope of the FAA, the Court’s decision will no doubt reach beyond just consumer disputes,” Bourgeacq predicted. “With courts approving arbitration of virtually any employment-related dispute, employers should immediately revisit their arbitration policies and agreements to determine whether they wish to carve out arbitration of consolidated and class claims. Doing so could possibly insulate an employer against a class action in any forum.”
“Arbitration of employment disputes has produced mixed results and reviews from employers in recent years,” Bourgeacq noted. “Today’s decision, however, may warrant a second look from employers who now have a new way to mitigate their exposure to future class and collective actions.”
Rejecting the Secretary of Labor’s challenge to a transit union local’s officer election procedures, the Eighth Circuit affirmed a district court’s holding that the local did not violate the LMRDA’s “adequate safeguards” provision by failing to expressly state in its written postings of its officer election criteria that a meeting attendance requirement for members seeking to run for union office was no longer in effect (Solis v Amalgamated Transit Union, Local 1005, April 26, 2011, Gruender, R).
Local 1005 originally represented only public employee transit workers, and thus it was outside the enforcement reach of the LMRDA, which does not apply to unions that represent public employees. However, when the union was certified as the bargaining representative of a private bus line in 2007, the local and its bylaws became subject to the federal Act’s provisions. Article 30 of Local 1005’s bylaws imposed a meeting attendance requirement for members seeking an elected union office. Specifically, a member was not eligible unless he or she attended at least six union meetings each year during the last two years. The requirement had been well-known among the membership and was regularly enforced by the local. However, the union constitution provided that the meeting requirement applied only to those elections that were not covered by the LMRDA and that, once its elections became subject to the Act, the local could not enforce this bylaw provision, which was inconsistent with the Act and no longer enforceable.
In advance of the nomination meeting leading up to its 2008 officer elections, Local 1005 posted written notice of its officer eligibility requirements. The notice stated solely that any office seeker must have been a union member for two years prior to the nominations meeting (a requirement that was consistent with the union constitution and the LMRDA, and was not at issue here). However, the notice made no reference to the meeting attendance requirement that no longer applied. When several members inquired about the meeting requirement, they were correctly informed that it no longer applied. After the election, a union member filed a complaint with the local’s executive board, citing widespread confusion about whether the meeting attendance requirement was in effect or not. After exhausting his intraunion remedies, the member filed a complaint with the Secretary of Labor, who investigated and filed suit pursuant to the LMRDA’s provision requiring “adequate safeguards” for union elections.
Affirming the district court’s grant of summary judgment to the union, the Eighth Circuit concluded that the district court correctly found that Local 1005 did not have to provide any more safeguards than it did. It was undisputed that the local did not enforce the improper meeting attendance requirement in the 2008 election. The local’s written notices accurately reflected the proper election requirements, and were posted 29 days in advance of the nomination meeting — three weeks earlier than required under the bylaws.
The Eighth Circuit rejected the Secretary’s contention that the written notices posted by the union were insufficient to constitute “adequate safeguards” because they did not expressly state that the meeting attendance requirement no longer applied. As the appeals court noted, the written notices did not suggest that the meeting attendance requirement did apply. Moreover, members who were confused about the applicable election criteria could have simply consulted a union steward or officer; in fact, several members did so, and it was undisputed that those members were accurately informed that the meeting requirement no longer applied. Members also could have attended one of the officer nomination meetings, during which the union accurately announced that the membership requirement was the sole criteria for elected office, the appeals court pointed out. Thus, it affirmed summary judgment to Local 1005 on the Secretary’s LMRDA claim.
8thCir: NLRB order requiring employer to restore prior CBA and bargain to valid impasse enforced
The NLRB was granted enforcement of an order requiring that an employer restore a previous collective bargaining agreement and bargain until the parties reached a new agreement or reached a valid impasse (NLRB v Whitesell Corp, April 22, 2011, Shephard, B). Substantial evidence supported NLRB findings that the employer failed to negotiate to a valid impasse, concluded the Eighth Circuit, where it imposed an arbitrary deadline on negotiations.
Background. The employer purchased a manufacturing facility whose employees were represented by a union. The employer agreed to abide by the terms of the existing collective bargaining agreement. Prior to the expiration of the existing agreement, the parties began negotiations on a new agreement. After meeting for eight sessions, the employer declared an impasse and ultimately implemented its final offer. The union filed unfair labor practice charges, and an administrative complaint was filed, charging the employer had prematurely declared impasse.
As an initial matter, the Eighth Circuit concluded that its prior opinion denying the NLRB’s application for enforcement did not preclude the NLRB from reconsidering this action. Although many courts have vacated Board decisions and remanded for further consideration in light of New Process Steel LP v NLRB, the Eighth Circuit concluded that since it had yet to determine whether the employer had violated the NLRA, the prior denial did not preclude the court from considering this matter anew and issuing its first valid decision.
Declaration of impasse. Turning to the merits, the Eighth Circuit concluded that substantial evidence supported findings that the employer failed to negotiate to a valid impasse where it imposed an arbitrary deadline on negotiations by stating that it intended to present its final offer by a specific date and engaged in only a limited number of bargaining sessions before declaring impasse. The employer’s negotiator informed the union that it had no intention to bargain beyond the expiration of the contract. Further, the employer acknowledged that it desired to implement substantial changes to the existing CBA. The employer presented its proposal to replace the system of annual wage increases with a merit-based system at the third of eight meetings. Moreover, the employer claimed an impasse even though the parties had agreed upon 30 issues and were continuing to come to agreement on other important issues.
The employer’s claim that the parties were deadlocked over wages was belied by the fact that the union had already reduced its wages demands. Rather, disagreements over disciplinary action and overtime were the only issues over which the parties were clearly deadlocked, while progress had been made over retirement, wages, vacations, performance evaluations, seniority, leaves of absence and sick leave provisions. Moreover, the employer’s argument that the parties had reached a good-faith impasse was undermined by the NLRB’s finding that it failed to provide information about vacation plans as required by NLRA Sec. 8(a)(5). Thus, disagreement was prolonged by the employer’s failure to provide the information requested by the union. Finally, the employer cancelled a voluntary supplemental accident fund without bargaining over the issue. Consequently, the employer failed to bargain in good faith when it terminated the existing contract without reaching a valid impasse.
Sec. 10(j) injunction inappropriate. In a companion case, a separate panel of the Eighth Circuit vacated a Sec. 10(j) injunction that had been granted to the NLRB requiring the employer to rescind changes in made in working conditions after it declared an impasse in bargaining (Osthus v Whitesell Corp, April 22, 2011, Benton, W). A district court failed to make specific factual findings regarding actions in the bargaining process, and the facts underlying each element of the four-factor injunction test, ruled the majority. Judge Colloton filed a separate concurring opinion, while Chief Judge Riley agreed that the district court failed to make sufficient factual findings, but disagreed that the General Counsel possessed power to petition for a Sec. 10(j) injunction.
The employer purchased a manufacturing facility whose employees were represented by a union. The employer agreed to abide by the terms of the existing collective bargaining agreement. Prior to the expiration of the existing agreement, the parties began negotiations on a new agreement. After meeting for eight sessions, the employer declared an impasse and ultimately implemented its final offer. The union filed unfair labor practice charges, and an administrative complaint was filed, charging the employer had prematurely declared impasse. The regional director was authorized to injunction against the employer’s unfair labor practices until the NLRB could resolve the complaint. A district court issued an injunction requiring the employer to rescind the implemented terms and to bargain in good faith.
The parties continued to bargain unsuccessfully for two years. In April 2009, the employer again implemented its final offer. The regional director filed three more complaints against the employer alleging bad faith bargaining, and a second Sec. 10(j) injunction was issued. The employee appeals this injunction.
As an initial matter, the court rejected the employer’s contention that the NLRB may not delegate Sec 10(j) authority to the General Counsel. Rather, the Eighth Circuit noted that for more than 60 years, district courts have upheld such delegation, and that it would adhere to this long-established interpretation of the LMRA. Moreover, the Eighth Circuit held that this delegation did not lapse when the Board lost its quorum. Agreeing with the Fifth Circuit, the Eighth Circuit concluded that the General Counsel retained the Sec. 10(j) power, despite fluctuations in the membership of the Board. Thus, the district court had subject matter jurisdiction of the case.
Turning to the merits, the Eighth Circuit concluded that the minimal requirements for issuance of a Sec 10(j) injunction were not met in this instance. The district court did not specifically find facts or explain how the regional director met the requirements for an injunction. Consequently, the appeals court remanded the case with instructions for the district court to make factual findings detailing specific actions in the bargaining process and the facts underlying each element of the four-factor injunction test.
Hot topics in WAGES HOURS – FMLA
Fresh off a decisive Supreme Court victory in Kasten v Saint-Gobain Performance Plastics Corp, attorney Jim Kaster, a partner in the Minneapolis office of Nichols Kaster, talked to Employment Law Daily about the impact of the High Court’s recent decision and the standard that the majority set forth for determining whether oral complaints are protected activity under the Fair Labor Standards Act’s anti-retaliation provision.
In Kasten, the Supreme Court held an oral wage complaint is protected as long as it provides the employer with fair notice that an employee is evoking his statutory rights. (Employment Law Daily’s detailed summary of the High Court’s March 22 ruling can be found here.) “This opinion recognizes that the voice of employees is heard by the Supreme Court, whether that voice is uttered orally or in writing,” Kaster noted. The Kasten opinion affirms that “the anti-retaliation provision of the statute actually has meaning,” he said. In light of the Supreme Court’s strong affirmation, he urged plaintiffs’ lawyers that they “better make sure that workers who make a report are not subject to retaliation.”
In the majority opinion authored by Justice Breyer, the Court devised a test for deciding whether an employer was given fair notice: an employee’s complaint must be “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.” Will this standard be useful in assessing whether an oral complaint has put an employer on notice that an employee is asserting his FLSA rights?
“The fair notice test is a workable one,” Kaster replied; “both sensible and understandable.” Responding to management attorneys’ concerns that the Kasten test will make it more difficult for lower courts to dispose of cases on summary judgment, Kaster agreed with their analysis. But, he noted, “I regard that as a good thing.”
Kaster rejected the notion that a standard allowing for employers to be put on notice of protected FLSA activity by verbal complaints alone is problematic because, as management-side lawyers point out, oral complaints are more likely to invite fact disputes. “Any concern about verbal complaints being the subject of retaliation claims make this kind of case no different than any other,” he pointed out. “That happens all the time.”
Kaster also found something to like in the Kasten dissent. Justice Scalia noted that the majority glossed over what, in his view, was the predicate question of whether internal wage complaints — be they oral or written — are even protected under the FLSA’s anti-retaliation provisions. “While claiming that it remains an open question,” an irked Scalia wrote, “the opinion adopts a test… that assumes a ‘yes’ answer — and that makes no sense otherwise.” Kaster agreed with Scalia’s conclusion that, after Kasten, any uncertainty over whether internal complaints are protected activity was effectively put to bed.
As reported in the March 31 issue of Employment Law Daily, a federal court in Texas, in Palmer v PSC Indus Outsourcing, LP, already has applied the Kasten test in an FLSA retaliation case and found the employee’s oral complaints gave fair notice to her employer. Given the sheer volume of wage-hour litigation, the implications of the ruling will likely be profound. Yet, the reach of Kasten may ultimately extend well beyond the FLSA, Kaster anticipates. “The impact that this case may have beyond FLSA litigation is significant,” he said. “There are some 20 statutes that have anti-retaliation provisions that use the same language.”
James H. Kaster (Nichols Kaster, PLLP) argued the case before the Supreme Court. Nichols Kaster attorney Adrianna Shannon, with assistance from Prof. Eric Schnapper (Univ. of Washington School of Law), was the primary authority of the plaintiff’s brief in the case.
The Government Accountability Office (GAO) has issued a new report recommending changes to the manner in which the DOL determines Davis-Bacon prevailing wage rates on federally funded construction projects. The GAO cited the use of inaccurate data in determining the wage rates as the impetus for the report.
The report found that recent efforts to improve the Davis-Bacon wage survey failed to address key issues dealing with timeliness, representativeness, and the utility of using the county as the basis for the wage calculation. The report pointed out flaws in how the DOL has been collecting this information. According to the report, the DOL has failed to consult survey design experts in crafting its Davis-Bacon survey. Furthermore, in fashioning its current survey, the GAO found that the DOL failed to address criticisms of the survey and wage determination process, including the representativeness and sufficiency of the data collected. The GAO specified that, because it does not currently calculate response rates or analyze survey nonrespondents, the DOL is unable to determine whether its wage determinations accurately reflect prevailing wages.
The GAO report also found fault with the DOL’s issuance of wage rates for job classifications. The DOL is required by law to issue wage rates by the “civil subdivision of the state,” but the GAO report found that it failed to routinely issue them at the county level. The GAO review revealed that the DOL issued only approximately 11 percent of wage rates for key job classifications using data from a single county, while the remaining wage rates were issued on a multi-county or state level. The report also found that over 25 percent of the wage rates were based on six or fewer workers.
Part of the problem for the DOL’s Davis-Bacon reporting is that the DOL provides scant incentive to participate, while offering a lack of transparency in the survey process. The report found that contractors often fail to participate because they may not understand the purpose of the survey, or, more troubling, may not see the point in responding because they believe the prevailing wages issued by Labor are inaccurate. Indeed, the GAO review of four DOL reports conducted by its contracted auditor found that most survey forms verified against payroll data had errors in areas such as number of employees and hourly and fringe benefit rates.
The GAO issued two key recommendations to improve the quality and timeliness of the DOL’s prevailing wage surveys. It recommended that the DOL obtain objective expert advice on its survey design and methodology and that the Department work to improve the transparency of its wage determinations.
The DOL’s Wage and Hour Division has found Maryland’s Prince George’s County Public Schools system in willful violation of the laws governing the H-1B temporary foreign worker visa program. The DOL has assessed the school system $1,740,000 in civil money penalties for the violations.
“All employers, including school systems, are required to follow the law. That includes the legal duty to pay every teacher hired the full wages he or she is owed,” said Nancy J. Leppink, acting administrator of the Wage and Hour Division.
Under the H-1B visa program, employers are required to pay certain fees for using the program. Instead of paying these fees, however, the DOL investigation revealed that the school system forced the foreign teachers to pay them, thereby illegally reducing the teachers’ wages. The H-1B program allows employers to hire foreign professionals for temporary work and ensures that similarly employed U.S. workers are not adversely affected by requiring employers to pay their H-1B workers at least the same wage rates and benefits as those paid to the U.S. workers doing the same job in the same area.
In addition to the financial penalties, the school system may be debarred from filing new H-1B petitions, requests for extensions or requests for permanent residency for foreign workers under any employment-based visa program.
LEADING CASE NEWS
An employee who alleged she was not properly compensated for all hours worked was unable to assert an additional cause of action that the employer, in failing to properly record her compensable hours worked, also violated its recordkeeping obligations under ERISA (Henderson v UPMC, dba Univ of Pittsburgh Med Ctr, April 5, 2011, Sloviter, D). The Third Circuit, in affirming a district court’s dismissal of the employee’s ERISA claim, did not reach the alternative issue raised by the employer of whether retirement plan participants are entitled to bring a separate cause of action for violations of Sec. 209 of the Act.
Under ERISA, Sec. 209, an employer has a duty to keep records sufficient to accurately determine what benefits are due or may be due to plan participants and, as a fiduciary, a duty to ensure that contributions were being properly provided to the plan by the employer. The extent of those duties and the nature of the records to be maintained are determined by looking to the language of the pension plans themselves, which outline the contributions the employer must make and, correspondingly, the benefits the participants are owed. As such, the appeals court turned to the three plants that were relevant here.
Under two of the plans, contributions are linked to a percentage of the employee’s compensation; similarly, under the third, basic retirement plan, retirement credits are based on the employee’s compensation earned while an active plan participant. Further, the retirement plan defines active participant compensation as that which is reportable on the participant’s Form W-2. “Undeniably, this is compensation paid,” the appeals court reasoned — not compensation that arguably should have been paid — because an employee is not required to report or pay taxes on compensation that she never receives. Based on this plan language, then, the court concluded that an employer’s contributions are calculated based on compensation paid to the employees and not based on uncompensated hours worked.
In so holding, the Third Circuit joined several other courts that have determined the scope of the Sec. 209 recordkeeping duty, and its fiduciary corollary, by evaluating how contributions are allocated under the pension plan. The appeals court noted, by contrast, that in instances where courts have held that an employer must keep track of hours worked, the plan language quite explicitly linked contributions to hours worked, unlike the plan at issue in this case. Here, in order to satisfy Sec. 209’s requirements, the plans must keep records only of the compensation actually paid to the employee. Nowhere did the employee allege that the employer failed to keep track of the compensation that it did pay to her (and to her coworkers, in this class action). In fact, given that the employer has an additional payroll tax obligation to keep track of and report employee compensation paid, it is unlikely such a claim could be credibly made under Sec. 209.
Moreover, because the appeals court found the employee failed to state a Sec. 209 claim against the employer, any related claim that the employer failed in its fiduciary obligation, under Sec. 404 of the Act, to investigate and ensure that contributions were being accurately provided to the fund also fails.
The appeals court cautioned, however, that if the employee succeeds on the merits of the wage claim and shows that she was entitled to additional compensation, she is not prevented from bringing a subsequent action pursuant to ERISA Sec. 502(a)(1)(B) to recover benefits associated with any unjustly withheld compensation that she receives as a remedy. (In fact, the employer agreed at oral argument that if the employee is found to have been owed pay for additional hours worked, it would make corresponding contributions to the benefit plans.) Of course, in such an event, the employee would have received reportable W-2 compensation to which plan contributions are linked, the appeals court noted.
The students of a sanitarium were not statutory employees under the FLSA; thus its child labor provisions did not apply to the sanitarium’s operations, the Sixth Circuit ruled, affirming a district court order denying the Secretary of Labor’s bid for prospective injunctive relief against future violations of the Act because the students were not in an economic relationship with the school (Solis v Laurelbrook Sanitarium and Sch Inc, April 28, 2011, Murphy III, S). In so ruling, the appeals court affirmed that the “primary benefit” test, in which the court considers which party derives the primary benefit from their relationship, is the proper approach for determining whether an employment relationship exists in the training or learning context.
Background. Laurelbrook Sanitarium and School is a state-approved, independently accredited educational institution founded by Seventh-Day Adventists. Consistent with the church’s philosophy that children’s education should entail a practical training component to prepare them for missionary work and to instill in them the dignity of manual labor, students of the boarding school (for high-school age students) and elementary school work four hours each day in the kitchen and housekeeping departments of the sanitarium, Laurelbrook’s intermediate care nursing home. Vocational courses are offered in office procedures, agriculture, building arts, mechanical arts, grounds management, plant services, water services, environmental services, child development, and food service. Students over age 16 may participate in a CNA vocational program; after earning their CNA certification, they are assigned to provide medical care to patients in line with their vocational training and the school’s educational philosophy.
The sanitarium is staffed so that if students were not currently in training there, hired staff members could provide the same patient services. (These same adult staff members supervise the students and protect them from hazardous activities.) However, the sanitarium exists for a solely educational purpose—as a training vehicle for students—and Laurelbrook would not operate the sanitarium if the school did not exist. As such, the students do not displace willing adults who would otherwise be employed there. Students are not paid for their duties and are not given jobs there upon graduating. However, Laurelbrook asserts that the students “reap great benefits” from the training and education they receive.
After a seven-day bench trial, the district court denied the Secretary’s motion for a permanent injunction barring Laurelbrook from committing future child labor violations, concluding that the primary benefits of the work performed by the students ran to themselves, and not to the school and sanitarium.
Other tests rejected. While there is no settled test for determining whether a student is an employee under the FLSA, the Secretary argued on appeal that the lower court erred in employing a “primary benefit” test. She argued the court should have applied the Wage and Hour Division’s six-factor test for persons participating in employer-sponsored training programs, as outlined in the agency’s field operations handbook. The appeals court rejected the Secretary’s contention. In fact, the Sixth Circuit went further, noting generally that, “We find the WHD’s test to be a poor method for determining employee status in a training or educational setting.”
Yet the appeals court also declined to sanction Laurelbrook’s alternate approach, dismissing its assertion that no vocational school students can be deemed employees under the FLSA, and that the FLSA categorically does not apply to accredited vocational training programs. “Such an approach bypasses any real consideration of the economic realities of the relationship,” the appeals court wrote, adding that district courts previously have found, in several instances, that students in vocational training programs were statutory employees.
Primary benefit test. The proper approach, the appeals court concluded, was the one adopted by the court below, with its focus on which party received the primary benefit of the work performed by the students. Unlike the alternatives suggested by the parties, this approach is supported by the Supreme Court’s 1947 Walling v Portland Terminal decision. Moreover, the appeals court’s own precedent suggests that “identifying the primary beneficiary of a relationship provides the appropriate framework for determining employee status in the educational context.” Finally, decisions from courts outside the circuit apply the primary benefit test as well, either expressly or implicitly.
A focus on the benefits to each party from the work performed captures the distinction that the FLSA attempts to make between trainees and employees, the appeals court reasoned. Also, this approach helps to identify relationships that place adult employees in competition with minors, which was Congress’ intent in enacting the FLSA’s child labor provisions: If the employer is the primary beneficiary of the working relationship, then the child is likely in competition with adults, whom the employer cannot pay as cheaply, the court reasoned. On the other hand, if the child gains the primary benefit, then it is more harm than benefit to the employer’s operations to have the child present.
Test properly applied. Finding the lower court used the correct legal standard, the Sixth Circuit then addressed whether it applied that standard properly to the case at hand. Here, the appeals court concluded the district court properly found the Laurelbrook students were the primary beneficiaries of the work performed. The court considered many of the six factors in the Secretary’s favored test, which the appeals court rejected but nonetheless found instructive.
The lower court cited the benefits that inhere to Laurelbrook, including the payment it receives for services to patients, some of which are provided by the students, and the fact that the students’ work hours contribute to the sanitarium’s licensing requirements. However, the court also found these benefits are offset in various ways, and Laurelbrook did not enjoy an unfair advantage over other institutions by reason of the students’ work. In contrast, the court also found that the students are provided with significant tangible benefits, as the educational aspect of instruction at Laurelbrook is sound. Indeed, the state found the vocational program offered sufficient benefit to students to warrant accreditation, the appeals court noted.
Finally, there was ample evidentiary support for the district court’s finding that the students also gained numerous intangible benefits from their work, such as leadership skills, a work ethic, and an appreciation for the dignity of manual labor in an educational environment that is consistent with their beliefs. While the Secretary discounted the value of these intangible benefits, the appeals court, like the court below, determined they were of significant value — enough to tip the scale of primary benefit in the students’ favor even in instances where a school receives tangible benefits from the students’ labors.
Because the district court properly used the primary benefit test, and applied the test correctly here, the Sixth Circuit affirmed its finding that the FLSA’s child labor provisions did not apply, and its refusal to grant injunctive relief to the Secretary.
Service Corporation International (SCI) successfully prevented the remand of a state law wage suit that it removed to federal court under the Class Action Fairness Act (CAFA), one of several wage actions pending against the national funeral services corporation (Blomberg v Serv Corp Int’l, April 14, 2011, Wood, D). The Seventh Circuit held that the lawsuit satisfied CAFA’s amount-in-controversy requirement and reversed an order remanding the lawsuit to an Illinois state court after concluding that the district court had required more of the defendant than necessary in the way of jurisdictional proof under the Act.
SCI employees filed a proposed class action alleging that the company, in carrying out its national pay policies and practices, failed to compensate employees for all hours worked, in violation of the Illinois Wage Payment and Collection Act and Illinois Minimum Wage Law (among other state law claims). Asserting CAFA jurisdiction, SCI removed the case to federal court, but the district court concluded that it failed to demonstrate by a preponderance of the evidence that the amount in controversy exceeded $5 million, as required to establish original jurisdiction under that statute. SCI appealed.
Value of claims. “We have acknowledged the difficulty a defendant faces when the plaintiffs, who control the allegations of the complaint, do not want to be in federal court and provide little information about the value of their claims,” the Seventh Circuit wrote. “The party seeking removal does not need to establish what damages the plaintiff will recover, but only how much is in controversy between the parties.” If the party opposing federal jurisdiction contests the amount in controversy, the proponent must prove jurisdiction is proper by a preponderance of the evidence, the appeals court noted; however, all this requires is a good-faith estimate, so long as it is plausible and adequately supported by the evidence.
In its attempt to establish the amount in controversy here, SCI set forth several estimates by relying on pleadings from related lawsuits in other jurisdictions and its list of the company’s 538 Illinois employees. SCI cited the depositions of class plaintiffs in an Arizona FLSA suit alleging similar facts, where the plaintiffs asserted that they were denied pay for 2,600 hours of work during a one-year time frame. Using these figures, SCI calculated that, based on the hourly rates of its Illinois employees, the plaintiff class here would need to seek payment for only 552 hours over the entire potential class period of three to five years in order for the CAFA jurisdictional amount to be met.
SCI also compared the case to a similar action pending in Virginia (but dismissed just this week, in a ruling reported in yesterday’s Employment Law Daily). In that suit, the plaintiffs — a potential class of 300 SCI employees — invoked CAFA jurisdiction. If the amount in controversy was satisfied in that action, SCI argued, surely a potential class of 538 employees asserting similar allegations would meet the jurisdictional requirements of the Act. Moreover, the Illinois law permits greater recovery than the Virginia law provides, in the form of an additional two percent for each month the improperly withheld wages remain unpaid. In light of this showing, the Seventh Circuit found the lower court erred in concluding that SCI failed to offer evidence that the potential recovery in these cases was comparable, at least. “It may not be axiomatic in the Euclidean sense of the term,” the appeals court wrote, “but the evidence is useful nonetheless.”
Comparison of suits. Certainly there was more that SCI could have done, the appeals court acknowledged. It could have offered a more compelling comparison of the claims and the potential recovery in the Virginia and Illinois suits. The company also could have estimated the amount of overtime and liquidated damages sought, or the attorneys’ fees and punitive damages recoverable in unpaid wage cases. Moreover, the district court was right to reject SCI’s argument that the proposed class must be estimated to include the more than 10,000 nationwide employees of SCI and its subsidiaries, since the company made no attempt to show that all of its 10,000 employees could recover under the alleged violations of Illinois law.
Nonetheless, the appeals court was satisfied that the defendant provided plausible, good-faith estimates that the stakes in the case at hand exceeded $5 million, and the plaintiffs did not counter with a showing that it was legally impossible for them to recover that amount. Therefore, the appeals court remanded with instructions to the district court to resolve the suit on the merits.
A sales director was not entitled under Iowa law to damages for sales that were “poached” by his employer’s own sales team because his claim was more akin to a discretionary bonus than to regular, monthly compensation, the Eighth Circuit has ruled in affirming the district court’s grant of summary judgment (Kaufmann v Siemens Med Solutions, April 14, 2011, Gruender, R.)
The director worked for the employer supervising a sales force from an outside contractor. Although he supervised and trained the contractor’s sales force, he did not do so for the employer’s direct sales force. Notwithstanding the fact that the employer allegedly told its direct sales force not to sell equipment in the contractor’s assigned territory, the direct sales force did so. The director became concerned that the direct sales team’s “poaching” would reduce his compensation. As a result, he reached an agreement with a vice president of the employer for additional compensation based on the direct sales force’s performance; however, the employer reversed that decision, did not compensate him for those sales, and the director failed to meet various sales incentives. After he filed a state law complaint seeking unpaid wages for 2003-2005, the employer removed the case to federal court. The district court granted summary judgment to the employer for claims relating to the year 2003 because those claims were barred by the Iowa wage law’s statute of limitations. After a jury returned a verdict and liquidated damages for the director on the 2004 claim, the district court granted the employer’s motion for judgment as a matter of law and the instant appeal ensued.
The Eighth Circuit affirmed the district court’s rulings. The 2003 claim was barred by the statute of limitations, the court ruled. The Iowa wage law stated that the statute began running when each wage payment comes due. The employer made its sales commission payments on the last day of the following quarter after the end of the fiscal year, namely December 31, 2003. The director filed his claim on September 7, 2006, more than two years later, but argued that equitable estoppel should apply because the employer had a practice of revising payments beyond the date that payments were due. Iowa law allows for equitable estoppel if the moving party can show that the defendant made a false representation. The appellate court ruled that the employer did not make any such statement because, even if the practice of revising payments did exist, the director failed to show that it was done in order to mislead him. Thus, the court affirmed summary judgment to the employer on the claims relating to 2003.
The court also affirmed summary judgment on the 2004 claim. Iowa law allows employees to bring claims for unpaid commissions and bonuses, and employers who intentionally fail to pay wages are liable for liquidated damages. However, employers who fail to pay bonuses are not liable for liquidated damages, the court concluded. The employer argued that the director’s 2004 claims were more akin to a bonus than to monthly wages because the director was not entitled to commissions based on the direct sales force’s sales. The director contended that the jury decided that issue in his favor, but the appellate court ruled that the jury found only that the employer had intentionally withheld compensation, not whether that compensation was a bonus or a wage. The court further found the employer’s pay plan did not require it to pay the director commissions for sales within his territory made by the direct sales force. Instead, the pay plan states that commission would be given to individuals who were personally and directly responsible for sales within their territory. Because the director had no responsibility for training and oversight over the direct sales force, the Eighth Circuit ruled that he was not entitled to compensation for those sales; therefore, his claim based on those sales was more akin to a discretionary bonus, rather than wages. The court, therefore, affirmed summary judgment to the employer.
8thCir: Applebee’s bid fails to overturn district court’s deference to DOL field handbook interpretation of tip credit 20-percent rule
In a significant ruling for the restaurant industry, in which advocates for both services and restaurant employers weighed in, a district court properly granted deference to the DOL’s interpretation of the FLSA’s tip credit provision and its 20-percent work test as contained in the agency’s Field Operations Handbook, the Eighth Circuit ruled (Fast v Applebee's Int’l, Inc, April 21, 2011, Hansen, D). In this collective action brought by Applebee’s servers and bartenders challenging the restaurant chain’s use of the tip credit when a substantial part of their shift time was spent performing nontipped duties, the appeals court concluded on an interlocutory appeal that the lower court properly denied summary judgment to the employer. The appeals court rejected Applebee’s contention that the field handbook provision was inconsistent with the relevant statutes and the related regulations, which do not specifically place a temporal limitation on the tipped employees’ related nontipped duties.
Background. A class of current and former Applebee’s servers and bartenders brought suit alleging the restaurant’s use of the tip credit to calculate their wage rate violated the FLSA. The bartenders claimed that, in addition to their tip-producing duties, they were required to perform such tasks as wiping down bottles, cleaning blenders, cutting fruit for garnishes, taking inventory, preparing drink mixers, and cleaning up after closing hours. The servers contended they had to clean bathrooms, sweep, clean and stock serving areas, roll silverware, prepare the restaurant to open, and do general cleaning before and after hours. Because more than 20 percent of class members’ work time was spent performing nontipped duties, the employer was not entitled to use the tip credit in calculating their minimum wage, the employees alleged. Rather, they were entitled to be paid at the full minimum wage rate when they are not engaged in the duties of those tipped occupations
Applebee’s countered that the relevant statutory provision focuses on the occupation, not the specific duties performed in any given shift. Because the servers and bartenders were in tipped occupations, the restaurant asserted, any incidental duties they performed as part of that occupation — regardless of the amount of time spent performing these duties — were subject to the tip credit. Applebee’s was entitled to take the tip credit for the entirety of a tipped employee’s shift as long as the employee received sufficient tips during the shift to make up the difference between $2.13 per hour and the $7.25 per hour minimum wage rate, the employer contended.
The Wage and Hour Division’s Field Operations Handbook provides that if a tipped employee spends a “substantial” amount of time (defined as more than 20 percent) performing related but nontipped work, the employer may not take the tip credit for the amount of time the employee spends performing those duties and must pay the workers the full minimum wage. The district court concluded the interpretation of the FLSA’s “20 percent rule” set forth in the handbook was reasonable, persuasive, and entitled to deference. Because a restaurant violates the FLSA by taking a tip credit when servers and bartenders spend a significant portion of their shift on general preparation and maintenance work and disputed questions of fact remained as to how much of the plaintiffs’ working time was engaged in such work, the court denied summary judgment to Applebee’s on the employees’ minimum wage claim. However, the case was stayed for an interlocutory appeal on the proper standard for applying the tip credit to servers and bartenders.
Parsing the interpretation. Applebee’s argued that neither the FLSA nor the pertinent DOL regulation places a quantitative limit on the amount of time a tipped employee can spend performing duties that are related to his or her tipped occupation but are not themselves tip-producing. The regulation merely provides that an employee in a tipped occupation may, “part of [the] time” and “occasionally,” perform “related duties” that are not themselves tip-producing and still be subject to the tip credit. The regulation does not address the effect on tipped employees who perform related duties more than part of the time or occasionally, however. Nor does the rule define “related duties,” or address the circumstance in which a tipped employee performs duties that are not related to his tipped occupation. The failure to address these questions makes the rule ambiguous, the appeals court noted; given the ambiguity, the agency justifiably sought to further interpret the regulation in its field handbook.
While opinion letters and agency handbooks are not subject to rulemaking and, thus, are not given Chevron deference, under Auer v Robbins, when the rule in question is “a creature of the Secretary’s own regulations,” the agency’s interpretation of its rule is controlling unless plainly erroneous or inconsistent with the regulation. The handbook provision creating the dual jobs test is an agency interpretation of its own regulations; therefore, Auer deference was appropriate here. Looking at the handbook provision itself, the appeals court concluded that it set forth a reasonable interpretation of the regulation and certainly was not “clearly erroneous or inconsistent” with the rule.
The regulation — to which Chevron deference indisputably is due — clearly places a temporal limit on the amount of related nontipped work an employee can do and still be considered to be engaged in a tipped occupation, the appeals court noted. Moreover, the FLSA regulations consistently place temporal limits on the term “occasional,” having defined the term elsewhere as sporadic or “infrequent, irregular, or occurring in scattered instances.” This temporal limitation is also consistent with the majority of cases that address duties related to a tipped occupation, the Eighth Circuit observed. Concluding that the handbook interpretation reasonably placed a quantitative limit on the amount of time a tipped employee can spend performing nontipped duties, the appeals court affirmed the district court’s order denying Applebee’s motion for summary judgment on this issue.
Employees still may be paid the tipped wage rate for performing general preparation and maintenance duties, so long as those duties consume no more than 20 percent of the employees' working time, the appeals court pointed out. Still in dispute here, however, was which specific duties were subject to the 20-percent limit. That issue was beyond the scope of the interlocutory appeal; it was for the district court to determine what duties comprised the tip-producing part of the server or bartender’s tipped occupation.
Burden of proof. The Eighth Circuit rejected the plaintiffs’ challenge on cross-appeal to the district court’s allocation of the burden of proof to them to prove they were not properly compensated. The tip credit is not contained among the FLSA’s affirmative defenses as set forth in Sec. 207(e), with the corresponding shift in the burden of proof to the defendant. The Mt. Clemens standard places the initial burden on the employees to establish that they worked hours for which they were not properly paid, and the district court properly applied that burden of proof here. The employees therefore must establish that they spent a substantial amount of time performing nontip-producing duties, such that they were not performing a tipped occupation for at least portions of their shifts. Under a relaxed standard, if Applebee's did not maintain sufficient records from which the employees can differentiate between when they performed tipped duties and when they performed related but nontip-producing duties, then the employees can instead meet their burden by producing sufficient evidence of the amount and extent of nontip-producing work “as a matter of just and reasonable inference.”
The costs incurred by a grower in providing on-site housing for seasonal farm workers cannot be credited toward their statutory minimum wage under Oregon law, ruled the Ninth Circuit (Bobadilla-German v Bear Creek Orchards, Inc, April 12, 2011, Thomas, S). A federal district court erred in holding that a grower did not violate Oregon law when it credited on-site housing costs toward its employees’ minimum wage, because without the housing, the grower would not have been able to maintain its workforce.
An Oregon grower that operated peach and pear orchards recruited farm workers from Arizona for a month-long harvest. As part of their compensation, the workers were offered optional on-site housing and meals. Charges were deducted from the workers’ paychecks and credited toward their minimum wage. In some instances, if housing costs were not credited toward the minimum wage, their wages would have fallen below the applicable minimum wage. Several workers filed a class action lawsuit alleging violations of the Migrant and Seasonal Agricultural Workers Protection Act (AWPA) and Oregon’s minimum wage laws. A federal district court ruled that because the on-site housing was optional and was provided for the workers’ private benefit, the grower lawfully credited the costs toward the minimum wage. The workers appealed, contending that the trial court misapplied Oregon law.
The district court erred when it concluded that the grower lawfully credited on-site housing costs toward the workers’ minimum wage, concluded the Ninth Circuit. Oregon law permits employers to deduct from a worker’s minimum wage the “fair market valued of lodging, meals, or other facilities or services furnished by the employer for the private benefit of the employee.” Because Oregon has adopted a rule specifically defining when housing confers a “private benefit,” the appeals court determined that it need not examine the federal AWPA in order to give meaning to that term.
In this case, the grower would otherwise not be able to acquire and maintain its needed workforce at the times and locations needed in the absence of on-site housing, as both the grower’s recruiter and labor camp supervisor testified. Indeed, nearly all of the workers lived in on-site housing. In addition to allowing the grower to marshal enough workers, the on-site housing ensured that workers would be ready to pick crops in the morning. Therefore, the record showed that on-site housing primarily benefited the employer, not the workers, and the housing costs thus could not be credited to the farm workers’ minimum wage.
A federal district court did not abuse its discretion in decertifying a class action filed against UPS alleging that the company misclassified certain employees as exempt under California’s Industrial Welfare Commission Wage Order No 9, ruled the Ninth Circuit (Marlo v United Parcel Serv, Inc, April 28, 2011, Smith, Jr., M). While the California Labor Code places the burden on the employer to demonstrate that an employee is exempt from the law’s overtime requirements, FRCP 23 governs the class certification issue, with its corresponding burden on the plaintiff. The district court correctly determined that the employee failed to provide common proof to support a classwide judgment of liability.
Background. For nearly 10 years, the employee worked in various supervisory positions for UPS, in which he oversaw employees and part-time supervisors in the performance of their duties. During that time, he worked more than 40 hours per week on a regular basis without taking meal or rest-period breaks or receiving overtime. UPS classified the employee as an executive and administrative employee under California’s Industrial Welfare Commission Wage Order No. 9, and thus as exempt from the overtime requirements of the California Labor Code.
The employee filed suit, and a federal district court initially certified a class comprised of full-time supervisors and appointed the employee as class representative. However, the court later decertified the class on the ground that the employee failed to establish that common issues of law or fact predominated over individual ones. He proceeded on his individual claims, and a jury returned a verdict for the employee, finding that during the periods when the employee served as a hub supervisor and pre-load supervisor, UPS did not satisfy either the executive or the administrative exemption in Wage Order No. 9. The employee was awarded overtime, meal and rest-period wages for the times he worked as a hub and pre-load supervisor. However, the jury found that UPS satisfied each element of the executive exemption for the time that the employee worked as an on-road supervisor. UPS appealed and the employee cross-appealed.
Class action rules. The employee contended that the district court erred in determining that he failed to establish the “predominance” element of FRCP 23(b)(3), resulting in the decertification of the class. However, the Ninth Circuit rejected the employee’s contention that the district court improperly shifted the burden to him in finding that he failed to prove misclassification on a classwide basis. Under California law, UPS bore the burden of proving on the merits that the employee and other class members were not misclassified as exempt. On the other hand, FRCP 23 governs the class certification issue, even if the underlying claim arises under state law. Consequently, as the party seeking class certification, the employee had the burden of demonstrating that the requirements of Rules 23(a) and (b) were met.
The district court’s order decertifying the class recognized this distinction. Because the employee brought a class action challenging UPS’s policy of classifying full-time supervisors as exempt, he was required to demonstrate that misclassification was the rule rather than the exception. Consequently, the district court properly placed the burden on the employee to demonstrate that Rule 23’s class certification requirements had been met. Because there was no proof of misclassification in this case, there was no basis to adjudicate classwide misclassification, so individualized issues predominate over common ones.
In an unpublished ruling also issued today, the Ninth Circuit affirmed the district court’s denial of UPS’s motions for judgment as a matter of law and a new trial, finding the evidence supported the jury’s verdict. The appeals court also upheld the lower court’s grant of the employee’s motion for restitution and prejudgment interest; and an award of attorneys’ fees in his favor.
State employment laws and regulations, wages-hours/labor relations, April update
Colorado Blacklisting
An exception to state law prohibiting blacklisting is added for health care employers who disclose certain information relating to alcohol, drugs, or patient abuse. It will not be considered unlawful or in violation of state blacklisting laws for an employer, when acting in good faith and in response to a request by a current or prospective employer of a health care worker, to disclose information known about any involvement in drug diversion, drug tampering, patient abuse, violation of the employer’s drug or alcohol policies, or crimes of violence by the health care worker who is an employee of the responding employer. Employers who provide such information will be immune from civil liability unless the health care worker can show by a preponderance of the evidence that the information is false and that the employer knew or should have known the information being provided was false. Section 8-2-111.6 is added by H.B. 1148, L. 2011, enacted March 21, 2011, and effective July 1, 2011. CO ¶6-64,003a.
Idaho Child Support
Law relating to wage withholding for payment of child support is amended with respect to requests to terminate such withholding by the obligor. The law provides that an obligor may request a hearing to quash, modify, or terminate withholding by filing a motion requesting relief before the court that issued the income withholding order. Current law requires that a copy of the motion and a notice of hearing must be served upon the obligee at least five days before the date set for the hearing, by personal service or certified mail pursuant to the Idaho rules of civil procedure. This requirement is amended to provide that the copy of the motion and notice of hearing is to be served in the time and in the manner provided by the Idaho Rules of Civil Procedure. Section 32-1215 is amended by Ch. 33 (S.B. 1010), L. 2011, enacted March 3, 2011, and effective July 1, 2011. ID ¶13-47,017.
Idaho Labor Relations
A new provision is added to the state’s “Right-to-Work Law.” The “Fairness in Contract Act” is enacted to promote fairness in bidding and contracting. This law provides that no labor organization may directly or indirectly pay a wage subsidy or rebate to its members to directly or indirectly subsidize a contractor or subcontractor, through wages, dues or assessments collected by or on behalf of members; to prohibit a contractor or subcontractor from receiving labor union wage subsidies or rebates; and to prohibit use of any funds financed by wages collected by or on behalf of a labor organization to subsidize a contractor or subcontractor doing business in Idaho. Section 44-2012 is added by Ch. 32 (S.B. 1007), L. 2011, effective July 1, 2011. ID ¶13-63,044.
Idaho Labor Relations
A new provision is added to the state’s “Right-to-Work Law.” The “Open Access to Work Act” is enacted to provide that, except where federal law requires prevailing wages or minimum wages on projects funded in whole or in part by federal funds, the state or any political subdivision can not require a contractor, subcontractor, material supplier or carrier to provide to its employees a predetermined amount of wages or wage rate or a type, amount or rate of employee benefits on a public works contract. A contractor, subcontractor, material supplier or carrier also can not be required to become a party to a project labor agreement, collective bargaining agreement, prehire agreement or any other agreement with employees, their representatives or any labor organization as a condition of bidding, negotiating, being awarded or performing work on a public works project. Section 44-2013 is added by Ch. 31 (S.B. 1006), L. 2011, effective July 1, 2011. ID ¶13-63,044a.
Illinois Payment and Collection of Wages or Final Compensation
(Wage Payment)
Emergency regulations of the Illinois Department of Labor covering the payment and collection of wages and final compensation are adopted effective February 22, 2011. The emergency rule implements Public Act 96-1407 (S.B. 3568), which became effective January 1, 2011, to enable expedited processing of certain claims of wage theft. Public Act 96-1407 provides for a new adjudicatory process to handle smaller wage cases in which the employer fails to respond via a default hearing, after which the unpaid worker can then go directly to state court, without involving the attorney general, and have the judgment entered on his or her behalf. 56 Ill.Admin Code 300, Various sections from 300.450 to 300.940 and 300.950 to 300.1020 are amended, and sections 300.941 and 300.942 and 300.1030 through 300.1210 are added, 35 Ill. Reg. 3805, effective February 22, 2011. IL ¶14-46,501 through 14-46,549n.
Michigan Labor Relations
Michigan’s Public Employment Relations Act is amended to require certain provisions in public collective bargaining agreements. The amendment requires a new collective bargaining agreement between a public employer and public employees to include a provision allowing an emergency merger to reject, modify, or terminate the agreement; specifies that collective bargaining agreements could be rejected, modified, or terminated pursuant to the Local Government and School District Accountability Act; provides that the Public Employment Relations Act would not confer a right to bargain that would infringe on the exercise of powers under the accountability act; and exempts a local government from collective bargaining requirements during the term of a consent agreement entered into under the accountability act. Michigan Compiled Laws (MCL) Section 423.215 is amended by Act 9 (S.B. 158), L. 2011, effective March 16, 2011. MI ¶23-63,074.
Missouri Prevailing Wages
Rules of the Missouri Department of Labor and Industrial Relations, Division of Labor Standards, relating to prevailing wages on public works projects are amended to revise the work description language of “Bricklayers and Stone Mason” to be the same as that adopted by order of the Labor and Industrial Relations Commission for occupational titles of work descriptions. 8 CSR 30-3.060 is adopted as amended effective February 28, 2011. MO ¶26-50,506.
Montana Minimum Wage
The state’s minimum wage law is amended to update a federal reference in the definition of a person in an outside sales capacity. Exempt from the state’s minimum wage and overtime requirements are those employed in an outside sales capacity pursuant to 29 CFR 541.500. Section 39-3-406 is amended by H.B. 84, L. 2011, enacted March 16, 2011, and effective October 1, 2011. MT ¶27-41,006.
Montana Wage Payment
The state’s wage payment law is amended to provide that the definition of “employee”
does not include an independent contractor. The law is also amended to provide that the deposit of certain wages into the wage collection fund by the commissioner of labor is discretionary rather than mandatory. Section 39-3-201 and 39-3-213 are amended by H.B. 84, L. 2011, enacted March 16, 2011, and effective October 1, 2011. MT ¶27-46,001 and ¶27-46,013.
Nevada Minimum Wage
Effective July 1, 2011, the minimum wage rate for employees of employers who provide qualifying health insurance benefits is $7.25 per hour. Employers who do not provide such benefits will be required to pay employees a minimum wage of at least $8.25 per hour. These rates apply to all employees in the state of Nevada unless otherwise exempt. These rates are unchanged from the July 1, 2010, rates. Section 16 of Article 15 of the Constitution of the State of Nevada provides for cost-of-living increases to the minimum wage based on a percentage increase in the Consumer Price Index as of December 31, as published by the Bureau of Labor Statistics, U.S. Department of Labor or the successor index or federal agency, with no increase being greater than 3%; Such rates are to be published by April 1 of each year announcing the adjusted rates, which take effect the following July 1 (Source: Office of the Labor Commissioner, State of Nevada Minimum Wage 2011 Annual Bulletin, April 1, 2011). See Section 16 of Article 15 of the Constitution of the State of Nevada. NV ¶29-41,001.
Nevada Maximum Hours and Overtime
Effective July 1, 2011, employees who have been made available qualifying health benefits from their employers and are paid less than $10.875 per hour and all other employees who are paid less than $12.375 per hour must be paid daily overtime whenever they work more than eight hours in a workday, unless otherwise exempted. These rates remain unchanged from July 1, 2010 (Source: Office of the Labor Commissioner, State of Nevada Daily Overtime 2011 Annual Bulletin, April 1, 2011). See Section 608.018. NV ¶29-44,012.
New York Work Hour Restrictions, Nurses
(Overtime)
Emergency rules of the Department of Labor, Division of Labor Standards, relating to restrictions on consecutive hours of work for nurses are extended. The rules, which add a new Part 177 to Title 12 of the New York Codes, Rules and Regulations, clarify the emergency circumstances under which an employer may require mandatory overtime for nurses, pursuant to NY Labor Law Section 167, and also require health care employers to implement a Nurse Coverage Plan, taking into account typical patterns of staff absenteeism and reflecting the employer’s typical levels and types of patients served. 12 NYCRR Part 177, Sections 177.1 through 177.7, adopted effective February 25, 2011 (Posted March 16, 2011, NY St. Reg, Vol. XXXIII, Issue 11 [I.D. No. LAB-43-10-000003-E]). NY ¶33-44,551 through 33-44,557.
Rhode Island Maximum Hours and Overtime
Rhode Island’s overtime pay requirements are amended to provide that employers who pay deliver drivers or sales merchandisers an overtime rate of compensation for hours worked in excess of 40 in any one week are not to calculate such overtime rate by the fluctuating workweek method of overtime payment under federal regulation 29 C.F.R. Sec. 778.114. Section 28-12.4-1, as amended by Ch. 254 (H.B. 7323), L. 2010, and by Ch. 257 (S.B. 2037), L. 2010, effective June 1, 2011. RI ¶41-44,006.
South Dakota Minimum Wage
South Dakota’s minimum wage law is revised to exempt certain seasonal employments from minimum wage and tip requirements. The state’s minimum wage requirement of $7.25 per hour does not apply to: certain employees paid an opportunity wage; babysitters; outside salespersons; or, effective as of March 17, to employees employed by an amusement or recreational establishment, an organized camp, or a religious or nonprofit educational conference center if either (1) such establishment does not operate for more than seven months in any calendar year or (2) during the preceding calendar year, the average receipts for such business were not more than 33 1/3 percent of its average receipts for the other six months of the year. Also, the cash wage of $2.13 per hour for tipped employees does not apply to: babysitters; outside salespersons; or, effective March 17, to employees employed by an amusement or recreational establishment, an organized camp, or a religious or nonprofit educational conference center that meets the requirements stated above for minimum wage exemption. Sections 60-11-3 and 60-11-3.1, amended by H.B. 1148, L. 2011, and effective March 17, 2011. SD ¶43-41,001 and ¶43-41,002.
Utah Employment Verification
Utah has revised employment verification requirements. On and after implementation of a new Utah Guestworker Program, an employer is prohibited from knowingly employing an unauthorized alien who does not hold a permit to work in the state of Utah. Private employers with 15 or more employees in 20 or more calendar weeks will be required to verify the employment eligibility of new employees through the E-verify program, if the individual does not hold a guestworker permit, or through the state’s verification procedure, the U-verify program, if the person holds a permit. Effective as of July 1, 2009, public employers must register with and use a Status Verification System to verify the federal employment authorization status of a new employee. Contractors are also required to register and participate in the Status Verification System, and a public employer may not enter into a contract for the physical performance of services within the state unless the contractor registers and participates in the Status Verification System to verify the work eligibility status of the contractor’s new employees. New provisions are added and existing provisions under Title 63G, Chapter 11, are transferred, with amendments, to a new Chapter 12 added to Title 63G of the Utah Code. Existing provisions applicable to private employers under Title 13, Chapter 47, are repealed upon implementation of the Guestworker Program (to be reported). Title 63G, Chapter 12, Sections 63G-12-101 to 63G-12-106 and 63G-12-301 to 63G-12-306 are added by H.B. 116, L. 2011, enacted March 15, 2011, and effective May 10, 2011. UT ¶46-49,001 through 46-49,023.
Utah Military Leave
New law is enacted to authorize military leaves of absence for elected officials and to provide for appointment of temporary replacements to fill the office while the official is on leave. An elected official may take a military leave of absence if the official submits to the political subdivision’s governing body written notice of an intent to take leave and the expected duration of the leave, by the later of 21 days before military leave begins or by the next business day after which the official receives an order from the armed forces calling the elected official to active, full-time duty. Military leave begins the day of military duty and ends the sooner of expiration of the official’s term of office or the day on which the official ends active, full-time duty. If a temporary replacement is to be appointed, the person must meet qualifications to hold the office and be appointed before the official’s leave begins; If no replacement is appointed before military leave begins, no one may exercise the duties and powers of the elected office during such leave. Section 20A-1-513 is added by S.B. 66, L. 2011, enacted March 16, 2011. UT ¶46-58,004.
Utah Labor Relations
Law relating to wage deductions for union dues is amended to require an employer to promptly cease or commence a union dues wage deduction upon the written request of the employee; state that an employee’s request to cease a union dues wage deduction may not be conditioned on the labor organization’s advance notice or consent; state that a labor organization is not liable to an employee for any claim, service, or benefit that is available only to a member of the organization if the employee requests cessation of union dues wage deductions; state that the rights provided for in the law can not be waived; and to make technical corrections. In addition, the law is amended to clarify that an employee may join a labor organization or terminate membership at any time; Restrictions as to when an employee may join or terminate membership can not be imposed. Section 34-32-1 is amended by S.B. 206, L. 2011, enacted March 22, 2011, and effective May 10, 2011. UT ¶46-63,019.
Utah Labor Relations
The Labor Commission Act, which covers regulatory and enforcement duties and authority of the Labor Commission, is amended relating to adjudicative procedures and service of documents. This Act is amended to permit a document to be served, filed or delivered electronically as provided by rule; to add definitions; and to make technical and conforming amendments. Section 34A-1-304 is amended by H.B. 188, L. 2011, L. 2011, enacted March 23, 2011, and effective May 10, 2011. UT ¶46-63,054.
Utah Labor Relations
Law prohibiting the transporting or harboring of illegal aliens into and within Utah is amended to coordinate the law with new laws that provide for guest worker and residency programs. The definition of “alien” is amended to exclude from the definition a person who holds a valid permit under the Guest Worker Program (on and after the Program’s start date). The law is also amended to prohibit encouraging or inducing an alien to come to, enter or reside in Utah in reckless disregard that such is in violation of the law or to engage in any conspiracy, for commercial advantage or private financial gain, to illegally transport or harbor an illegal alien. Further, the law is amended to provide that an individual’s participation in the Utah Pilot Sponsored Resident Immigration Program Act, either as a sponsor or as a resident alien, does not constitute encouraging or inducing an alien to come to, enter, or reside in Utah in violation of this law prohibiting trafficking. Section 76-10-2901 is amended by H.B. 116, H.B. 469 and H.B. 497, Laws 2011, enacted March 15, 2011, and effective May 10, 2011. UT ¶46-63,074.
Utah Labor Relations
New law is enacted to prohibit the use of microchip implants in persons. It is prohibited for anyone, including employers, to require, coerce or compel a person to undergo or submit to the subcutaneous implanting of a radio frequency identification tag (also known as RFID or microchip). Violators are subject to a civil penalty of not more than $10,000 for an initial violation, and no more than $1,000 for each day the violation continues until the electronic ID is removed or disabled. Section 77-23a-4.5 is added by H.B. 224, L. 2011, enacted March 22, 2011, and effective May 10, 2011. UT ¶46-63,079.
Virginia Military Leave
Military leave and reemployment rights provisions are amended to correct a reference to the Virginia Defense Force and reference to the federal Servicemembers Civil Relief Act. Sections 44-93.2, 44-93.3, 44-93.4, 44-98, 44-102.1, and 65.2-103 are amended by H.B. 1852 and S.B. 1334, Laws 2011, enacted March 25, 2011, and effective July 1, 2011. VA ¶48-58,001, ¶48-58,001a, ¶48-58,004, ¶48-58,005, ¶48-58,006, and ¶48-58,010.
West Virginia Military Leave
Law covering military leave and reemployment rights for public officials and employees who are members of the National Guard or armed forces is amended to set the maximum number of hours they are eligible for leave in a calendar year and to limit the applicability of the law to public officials and employees who are permanently employed. Section 15-1F-1 is amended by S.B. 382, L. 2011, enacted March 3, 2011, and effective May 25, 2011. WV ¶51-58,002.
Wyoming Maximum Hours and Overtime
Law relating to the maximum hours of work and overtime for laborers, workmen and mechanics on public works is amended to provide that, effective July 1, violation of the law is a misdemeanor punishable by a fine of not more than $750.00. Currently the fine is no more than $500 and/or imprisonment of no more than 6 months in the county jail. Section 16-6-111 is amended by Act 41 (H.B. 111), L. 2011, enacted March 6, 2011, and effective July 1, 2011. WY ¶53-44,003.