On Monday, the NLRB unanimously vacated its December 2017 Hy-Brand Industrial Contractors decision, marking yet another abrupt reversal in the method for determining whether two employers can be held jointly liable for violations of labor and employment laws committed by either employer. In doing so, the Board effectively reinstated its 2015 Browning-Ferris Industries (“BFI”) decision, meaning that two businesses are joint employers when one has “indirect” or “reserved’ control over the other’s workers. Click here to read the full client alert.
Last week the National Labor Relations Board (“NLRB” or the “Board”) continued to correct its course to a more even balance between union and employer interests. It overturned four controversial decisions that had created a great deal of consternation and uncertainty in the employer community. Click here to read the full client alert.
Fresh off his Senate confirmation two weeks ago, new National Labor Relations Board (NLRB) General Counsel Peter Robb has issued guidance that may portend welcomed changes for employers regarding controversial Obama-era pro-labor decisions.
The guidance comes in the form of a memorandum to the Regional Offices, dated December 1, 2017, in which Mr. Robb introduces what is essentially the General Counsel’s office’s new enforcement agenda. This memo emphasizes the General Counsel’s efforts to address several pro-labor Board decisions that were issued in the past eight past years and that concern key issues for employers. Such issues include:
- the expanded scope of protected concerted activity,
- unlawful handbook rules,
- use of the employer’s e-mail system for organizing purposes,
- joint employer status,
- conflicts between the NLRA and other statutes (such as Title VII).
To be sure, these decisions cannot be changed by the General Counsel or the Regional Offices alone—but only by contrary Board decisions. The General Counsel’s promise to provide the Board with the Agency’s “best analysis” of these issues, however, may help facilitate changes down the road.
On a more immediate note, the memo also rescinds several prior General Counsel Memoranda interpreting various Board precedents in a pro-labor manner. These rescissions include prior General Counsel Memoranda concerning, among other things:
- unlawful handbook rules (again),
- inclusion of front pay in Board settlements,
- pre-arbitral deferral guidelines, and
- intermittent and partial strikes.
These rescissions are effective immediately. And while no replacement guidance has been issued yet, the rescissions likely signal the issuance of more employer-friendly guidance from the General Counsel in the future.
As the summary above suggests, any practical relief for employers will likely come about only with new cases that give the Board and the General Counsel the opportunity to address these issues. This will take time. Meanwhile, the memo is quick to point out that, with regard to current and pending cases, the General Counsel will continue to apply existing Board precedent in making determinations as to whether to issue complaints. Obviously, it will be up to the new Board to make a determination as to whether that Board precedent will remain or should be overturned yet again. Nevertheless, this memo is perhaps the clearest indication yet that changes to the Obama Board’s pro-union labor policies are headed employers’ way, after all.
President Obama’s National Labor Relations Board (NLRB) faced intense criticism for issuing significantly more precedent-changing pro-labor rulings than any previous Board. During President Trump’s first 200 days, employers have been waiting for Board nominees to be confirmed to two open slots, giving Republicans a 3-2 majority and shifting NLRB decisions towards individual employee and management rights.
One of Trump’s nominees, Marvin Kaplan, a former Occupational Safety and Health Review Commission lawyer, was confirmed (50-48) to fill one of the two open Board seats on Wednesday, August 2. Kaplan will serve a five-year term expiring August 27, 2020. Trump’s second nominee, William Emanuel, a management-side employment attorney, has been approved by the Senate Committee on Health, Education, Labor, and Pensions. A full Senate vote has not yet been scheduled, but is expected after the August recess. If he is confirmed, the Board will have a Republican majority for the first time since 2007.
The General Counsel position, currently held by Democrat Richard Griffin, Jr., will become vacant in November 2017. The Administration is considering Peter Robb, a management-side labor attorney, as a potential General Counsel nominee. The General Counsel controls which cases the NLRB prioritizes and pursues. Consequently, whomever Trump chooses will have the opportunity to begin the process of reversing many of the pro-labor rulings issued by the Obama Board.
Finally, Phillip Miscimarra, Chairman of the NLRB and the only Republican remaining from Obama’s Board, announced on August 8 that he would no longer serve on the Board when his term expires in December 2017. Miscimarra made this decision in order to spend more time with his family. Miscimarra dissented from nearly every major precedent change from 2013 to the present. The Administration will need to make a prompt nomination of a qualified Republican to Miscimarra’s seat to avoid 2-2 deadlocked decisions of the full Board (if Emanuel is confirmed) or having cases decided by three member panels with 2-1 Democrat majorities. The Senate already has a full legislative schedule through the remainder of 2017, so confirming a Board nominee before Chairman Miscimarra leaves his seat will be more difficult the longer the President takes to make his selection.
Recently, House Republicans renewed efforts to rein in expansion of two federal labor laws’ joint employer definition by introducing the Save Local Business Act (“SLRA”) (H.R. 3441). The SLRA limits how affiliated companies are considered joint employers for collective bargaining liability purposes and within wage and hour laws.
The SLRA represents an expanded effort to reverse the National Labor Relations Board’s (“NLRB”) Browning-Ferris Industries of California Inc., 362 NLRB No. 186 (Aug. 27, 2015) decision. In Browning-Ferris, the NLRB reversed a 30-year old standard for determining joint employer status under the National Labor Relations Act (“NLRA”). According to Browning-Ferris, affiliated companies are joint employers if they 1) “are both employers within the meaning of the common law” and 2) “share or co-determine” matters governing the essential terms and conditions of employment. Under the first prong, the NLRB focuses on a company’s “right to control” employees and does not consider whether the company exercises that right. For example, a company may create a common law employer relationship if it reserves ultimate discharge authority over temporary workers but does not exercise that right. For the second prong, the NLRB defines “essential terms and conditions” to include wages, hours, hiring, firing, and supervision. Evidence of controlling these “essential terms and conditions” may include dictating the number of contingent workers supplied and controlling schedules or overtime.
The SLRA also addresses recent expansion of the joint employer definition by courts under the Fair Labor Standards Act (“FLSA”). For example, in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the federal Fourth Circuit Court of Appeals, covering Maryland, North Carolina, South Carolina, West Virginia, and Virginia, applied an expanded test to conclude that general and subcontractors were joint employers. Under the Salinas-applied test, joint employment exists when 1) two companies “share, agree to allocate responsibility for, or otherwise codetermine – formally or informally, directly or indirectly – the essential terms and conditions of a worker’s employment” and 2) the companies’ combined influence “over the terms and conditions of the worker’s employment” renders the person an employee instead of an independent contractor. This determination has significant implications because, as joint employers, both companies must comply with the FLSA as it relates to an individual’s entire employment for a workweek. In other words, a company must add the hours worked for both employers to determine whether and to what extent the individual earned overtime pay.
The SLRA rolls back these expanded definitions by redefining joint employer in both the NLRA and FLSA. Specifically, under the Act:
A person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment (including hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, and administering employee discipline).
Ultimately, the bill seeks to reinstate the traditional joint employer standard and restore some semblance of predictability that the NLRB eviscerated in the Browning-Ferris decision. Although the House is on recess, the bill will almost assuredly proceed within Education and Workforce Committee upon Congress’s September return. In addition, the bill could quickly move to the House floor for consideration and, with sufficient support, advance to the Senate. Frantz Ward will keep close track of the bill and provide updates on the SLRA’s progress.
Last week, the U.S. Department of Justice (DOJ) made a significant reversal in its position regarding the critical class action waiver cases pending before the Supreme Court. In January, the Supreme Court granted certiorari in three consolidated cases: NLRB v. Murphy Oil USA, Inc.; Epic Systems Corp. v. Lewis; and Ernst & Young LLP v. Morris. The cases address whether employer arbitration agreements prohibiting employees from bringing or participating in class action litigation violate the National Labor Relations Act (NLRA). The Supreme Court’s decision will resolve the current circuit split on the issue.
The National Labor Relations Board (NLRB) in D.R. Horton, Inc., 357 NLRB No. 184 (2012), held that class action waivers violate the NLRA and has consistently adhered to this position, despite setbacks in some Circuits. The Sixth, Seventh, and Ninth Circuits agree with the NLRB’s position, while the Second, Fifth, and Eighth Circuits have upheld the waivers.
Under the Obama Administration, the DOJ filed a petition for a writ of certiorari on behalf of the NLRB defending the Board’s position that class action waivers are unenforceable. After the change in administration, the DOJ stated it has “reconsidered the issue and has reached the opposite conclusion.”
The DOJ’s changed stance combined with the appointment of Justice Gorsuch makes it more likely that the Supreme Court will uphold class action waivers. However, no one will know for sure until a decision is announced in late 2017 or early 2018.
The full amicus brief is available here.
Last week workers across the United States participated in a national protest aimed at President Trump’s immigration policies. Organized by advocacy groups and promoted largely through social media, “A Day Without Immigrants” involved an organized effort to urge workers to stay home in protest of the new administration’s immigration policies and actions, including recent enforcement raids, the proposed border wall, and the high-profile Executive Order on immigration and refugees. Employers’ reactions have ranged from closing their businesses in support of the protests to terminating employees for not coming to work.
This likely is not the end of such protests. On March 8, organizers of last month’s Women’s March on Washington plan to hold “A Day Without a Woman” protest, asking women to stay home from work in support of various issues that impact women. Other less publicized protests by different groups are also planned.
Impacted employers that seek to enforce their attendance rules and other workplace policies must carefully consider potential legal issues when reacting to employees who miss work in support of these protests. For example, the National Labor Relations Act (“NLRA”) protects both unionized and non-unionized workers who engage in protected concerted activity. Typically, this involves two or more workers acting together to improve or protest various terms and conditions of their employment, including protests related to pay, safety, hours of work, and other workplace issues. The discipline or discharge of employees who engage in protected concerted activity can result in charges of unfair labor practices before the National Labor Relations Board and potential liability. However, employee actions or protests that are purely political in nature, with no real connection to the workplace, are unlikely to qualify for protection under the NLRA.
The true objectives behind workers’ absences in supporting these causes can be unclear. The upcoming “A Day Without a Woman” protest identifies a number of diverse concerns, some of which arguably could relate to workplace issues, and some of which clearly do not. The organizers’ website poses the following questions in asking supporters to withhold their labor on March 8:
- Do businesses support our communities, or do they drain our communities?
- Do they strive for gender equity or do they support the policies and leaders that perpetuate oppression?
- Do they align with a sustainable environment or do they profit off destruction and steal the futures of our children?
Employers who choose to discipline or terminate employees who elect to miss work as part of these protests need to consider, on a case-by-case basis, whether an employee’s actions qualify as a protected protest related to workplace conditions, particularly when they can be linked to their own workplace, or are a more generalized expression of support for a political cause. Employees who explicitly tie their absences to issues in the workplace are far more likely to be protected under the NLRA.
Employers also must consider the potential applicability of both state and federal anti-discrimination laws, like Title VII, when reacting to employee absences. Both the “A Day Without Immigrants” and “A Day Without a Woman” protests potentially implicate protected classifications under the anti-discrimination laws – e.g., national origin and gender. Employers that choose to pursue discipline or termination may potentially face allegations of discrimination, either based upon assertions that the employer harbored animus towards a particular protected group (and its causes), and/or that the employer selectively enforced its policies to the detriment of the protected group. Employers should base any disciplinary or discharge actions on previously established and promulgated workplace policies, including attendance rules and no-call/no-show policies. Employers also should ensure that they have acted consistently with respect to past employee absences (like the parade in Cleveland after the Warriors blew a 3-1 lead in the 2016 NBA Finals). A prior, consistent history of discipline or discharge in similar situations will help protect against allegations of discrimination.
President Donald Trump has nominated Tenth Circuit Court of Appeals Judge Neil Gorsuch to fill the U.S. Supreme Court vacancy caused by the death of Justice Antonin Scalia nearly one year ago. Known for his classical constructionist approach, Gorsuch is expected to restore the ideological balance that existed before Justice Scalia’s passing, with four conservatives, four liberals and Justice Anthony Kennedy (for whom Judge Gorsuch worked as a law clerk) serving as a swing vote.
If confirmed, Judge Gorsuch’s presence on the High Court will invariably impact the judicial landscape of labor and employment law. More than three dozen petitions are currently pending before the Court, seeking interpretation of laws such as the Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act (ERISA), Title VII of the 1964 Civil Rights Act (Title VII), the NLRA, the ADA and others.
Here are a few issues to watch:
On March 29, 2016, the Supreme Court issued a 4-4 opinion in Friedrichs v. California Teachers Association, in which the Court summarily upheld the Ninth Circuit Court of Appeals’ decision allowing public sector unions to tax employees who decline union membership with “agency” or “fair share” fees similar to the cost of union dues. Justice Scalia, who engaged in lively questioning during oral argument in this case but died before the opinion was issued, was expected to cast the fifth vote in favor of the employees, who argued that the agency fees violated their First Amendment right to freedom of speech and association. But with Scalia’s absence, the Court was deadlocked.
The Friedrichs case was expected to have critical implications on the continued viability of public sector unions. While the plaintiff’s petition for rehearing has been denied, more cases like this are bubbling up through the courts. Changes also have been made through legislative action, with “right to work” laws having been enacted in 27 states and Guam. Under the right to work laws, employees in union shops may maintain employment without having to pay union dues or other fees.
Arbitration Agreements and Class Wide Waivers of NLRB Claims
After several requests, the Supreme Court has agreed to review the ruling in D.R. Horton, Inc., 357 NLRB No. 184 (2012), in which a 3-2 majority of the National Labor Relations Board (NLRB) found that class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act. On January 13, 2017, the Supreme Court granted certiorari in three cases involving the validity of the D.R. Horton rule. One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.
The Supreme Court has historically favored arbitration agreements in other settings, and these concepts have been extended to the employment setting. With certain delineated exceptions, employers are generally able to implement arbitration agreements with class wide waivers to mitigate their litigation risk.
Now that the D.R. Horton issue has been accepted for review, Judge Gorsuch’s confirmation may provide employers with hope that the Court will extend the FAA’s footprint, honoring arbitration agreements in the union setting.
Another recent NLRB ruling set for review this year is the board’s August 2015 decision in Browning-Ferris Industries of California, Inc., in which the Board found that a California waste management company (Browning-Ferris) jointly employed its staffing agency workers. The decision effectively rewrote the NLRB’s test for deciding whether two affiliated companies are joint employers that share bargaining responsibilities when workers organize and legal liability when they file suit. Before the decision, the joint employer standard rested on a business having “direct and immediate” control over terms and conditions of employment. The Browning-Ferris Board revised the standard to include “indirect control,” or even the “ability to exert” such control. When Browning-Ferris thereafter refused to recognize and bargain with the newly elected union, an unfair labor practice charge was filed, and the Board found another violation of the Act.
The Browning-Ferris cases are part of a growing body of litigation over joint employer liability that is anticipated to take a significant toll on employers in coming years. Employees have sought to apply the new joint employer standard outside of the NLRA, including in cases involving alleged violations of OSHA, the FLSA, the FMLA and other statutes.
The Browning-Ferris, currently on review before the D.C Circuit Court of Appeals, warrants close monitoring. Judge Gorsuch’s confirmation would restore hope that employers will regain some clarity into the now amorphous and overly expansive definition of joint employer liability.
Discrimination Based Upon Sexual Orientation
A final issue poised for review is whether Title VII bars employers from discriminating against employees because of their sexual orientation. Courts have long held that it does not. However, the Seventh Circuit may go against the status quo following a recent en banc rehearing of Hively v. Ivy Tech Community College. In that case, the plaintiff-employee claimed that the employer violated Title VII by failing to award her a full time position because of her sexual orientation. The issue is squarely one of statutory construction, and the en banc court has been tasked with determining whether Title VII can be interpreted as recognizing a discrimination claim based upon sexual orientation as a sub-segment of prohibited gender bias. During the en banc hearing, the Court challenged the notion of strict construction, pointing to other acts, such as the Sherman Act, that are interpreted far differently now than when they first were enacted. If the Seventh Circuit rules in favor of the employee, the resulting split in circuits may signify a need for High Court intervention, provided the legislature doesn’t get there first.
Judge Gorsuch has a reputation as someone who would follow the general judicial philosophy of Justice Scalia, but without some of the more acerbic oral argument commentary for which Justice Scalia was known. For an enlightening insight into Judge Gorsuch’s personal views on Justice Scalia and his legacy, this 2016 Canary Lectureship article by Judge Gorsuch is well worth reading.
Assuming no surprises, it is likely that Judge Gorsuch will be confirmed over strenuous Democratic opposition and will impact the Court for many years.
On August 10, 2016, the Securities and Exchange Commission issued a cease and desist order against BlueLinx Holdings, Inc. that further demonstrates the scrutiny of various federal agencies with respect to severance agreements.
In BlueLinx, the SEC found a provision in a severance agreement that restricted employees from providing information to the SEC without company approval. This finding had a chilling effect on employees reporting suspected fraudulent activity. Such “whistleblowing” is specifically permitted and encouraged under the Dodd-Frank Act, which even offers financial incentives to employees to do so. While the severance agreement in issue did allow severed employees to file a charge with the SEC, it did not allow them to provide information to the SEC without company approval.
The SEC fined BlueLinx $265,000, and also ordered the company to modify its severance agreements to add language that advised employees they were not limited in their ability to file a charge or complaint with the SEC. The SEC did not stop there, however, as it also stated that BlueLinx must advise employees they were not limited in their ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, or any other federal, state or local agency or commission. Additionally, the SEC stated that the severance agreements must inform employees that they were not limited in their ability to communicate with any governmental agency, nor from participating in an investigation or action by such agencies, or from receiving any monies for providing information (i.e., the Dodd-Frank whistleblowing reward).
This last provision is particularly troubling, as the nature of the release is that the employee gives up a claim for potential future monetary recovery in exchange for a current payment. Almost every current, well-drafted release informs an employee that, although he or she may provide information for and assist in government investigations, there is no longer any right to share in monetary recoveries.
This decision parallels some recent decisions and guidance from the U.S. Equal Employment Opportunity Commission and the National Labor Relations Board wherein the agencies have scrutinized severance agreements and found certain language to have a chilling effect on the exercise of statutory rights, and it highlights the need for employers to review carefully the language that is included in severance and separation agreements.
Employers in union settings know that they generally cannot make changes to their employees’ wages, hours and other terms and conditions of employment without first negotiating to impasse with the union. The exception to this rule has historically been that the employers could make changes, as long as they could show that their labor contract had a management rights clause that allowed certain changes to be made without bargaining. A recent decision from the National Labor Relations Board, however, will make it more difficult for employers to show that a management rights clause actually allows these types of changes to be made without bargaining.
The NLRB’s recent decision (Graymont, PA, Inc. and Local Lodge D92, 364 NLRB No. 37) involved a situation that is common in unionized workplaces. The employer and the union had a collective bargaining agreement in place with a management rights clause which provided that the employer:
[R]etains the sole and exclusive rights to manage; to direct its employees; . . . to evaluate performance, . . . to discipline and discharge for just cause, to adopt and enforce rules and regulations and policies and procedures; [and] to set and establish standards of performance for employees…
The employer relied on this clause to announce changes to the work rules and the attendance and progressive discipline policies. The union objected to this move and requested a meeting with the employer. The union also requested that the employer provide information about the changes. The employer met with the union, but took the position that it was not required to bargain over the changes (due to the management rights clause). The employer also took the position that it was not required to respond in any way to the request for information. After a single meeting with the union, the employer implemented the revised policies.
Click here to read the full client alert.