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Unionized workers wishing to rid themselves of continued union representation (and their employers) just got some very good news from the National Labor Relations Board (NLRB or Board) with the issuance of Johnson Controls, Inc., 368 NLRB No. 20 (July 3, 2019).  The issue addressed there was how the NLRB will determine the wishes of employees concerning continued union representation where an employer has evidence that at least fifty percent of bargaining unit employees no longer desire to be represented by an incumbent union and the union possesses evidence that it has reacquired majority status. This is an important case because it revamps existing rules relating to an employer’s “anticipatory” withdrawal of recognition of a union and requires incumbent unions that have lost their majority to reestablish their majority status by way of a secret ballot NLRB election.

Here is how the system worked before Johnson Controls and how this process will work going forward.

The Law Before Johnson Controls — Last In Time Proof Wins

During most of the term of a collective bargaining agreement (CBA) that does not exceed three years in duration, there is an irrebuttable presumption that a union enjoys the support of a majority of the employees in the contractually-covered bargaining unit. During that period, employees are legally barred from raising a question concerning their union’s representative status (QCR) and their employer must recognize and bargain with that union or risk violating Section 8(a)(5) of the National Labor Relations Act (NLRA or Act). However, shortly before a CBA is about to expire, that presumption of majority status becomes rebuttable, meaning that contractually covered employees may raise a QCR. When an employer is presented with untainted, reliable proof that a majority of its employees no longer wishes to be represented by the union, the employer is free to refuse to negotiate a new CBA with the union, and is likewise free to announce its intention to withdraw recognition from the union after the CBA expires.  Because that announced intention to withdraw is in anticipation of the contract’s expiration, it is commonly referred to as an “anticipatory” withdrawal of recognition.  However, the employer could not act on that intention and actually withdraw recognition from the union until the parties’ CBA expired. Further, this anticipatory withdraw was only permitted if the employer’s otherwise lawful proof was the most recent word on the union’s majority status.

Unfortunately, an employer’s actual withdrawal in this scenario was not entirely free from legal risk. For example, between the time of an employer’s anticipatory withdrawal and a contract’s expiration, unions often mounted “re-organizing” campaigns, usually in the form of getting new union authorization cards signed, allowing the union to claim that it had reestablished its majority support. According to pre-Johnson Controls Board law, the union’s “last in time” proof of majority status superseded the employer’s prior proof, rendering the employer’s post contract expiration withdrawal unlawful and a violation of Section 8(a)(5), its earlier lawful anticipatory withdrawal notwithstanding. The remedy for such violations is a bargaining order that required an employer to re-recognize and bargain with a union and that again estopped workers wanting out of the union from raising a QCR during a “recognition” bar period of up to one year. Likewise, if during that recognition bar period, the employer and union agree on a new CBA, that new contract would again bar workers from ousting the union for a period of up to another three years, depending upon the duration of the new CBA. Accordingly, the Board’s prior treatment of an employer’s anticipatory withdrawal and a union’s ability to trump workers’ earlier proof of disaffection has proven to be a major obstacle to union workers wanting to go non-union.

The Board Recognizes Serious Defects In The Existing Law

The Johnson Controls Board reversed this existing law and established a new approach for dealing with anticipatory withdrawals for the following four reasons:

 First, it observed that giving preemptive effect to the union’s “last in time” proof of majority support did not properly safeguard employee free choice because it automatically invalidated a worker’s prior recent indication of disaffection and because employees who signed both a petition of disaffection and a union card (dual signers) might not understand that when they signed a subsequent union card, they were effectively revoking their prior signature on a disaffection petition.

 Second, the Board concluded the existing law failed to promote stable labor relations because a union was under no obligation to disclose to an employer that it had reacquired majority status prior to the employer’s actual withdrawal. Oftentimes, this lack of notice meant the employer would actually withdraw recognition in the honest belief that there was a valid QCR and that it was doing so lawfully, only to later find out that the union had gamed the system by regaining its majority status and allowed the employer to unwittingly violate the law and incur bargaining order liability.

Third, the existing law’s reliance on “last in time” proof and its treatment of dual signers was analytically unsound because an employer could act only on the evidence of the union’s loss of majority support it had while the union could (and oftentimes would) challenge the employer’s proof with after-acquired evidence which the employer did not possess. Moreover, the existing law created an unwarranted asymmetry in the treatment accorded proof of union support as compared with evidence of union disaffection because an employee’s union authorization card “cannot be effectively revoked in the absence of notification to the union prior to [a union’s] demand for recognition”, while, under existing law, an employee’s signature on a disaffection petition is effectively revoked by a pro-union counter signature in the absence of notification to the employer prior to withdrawal of recognition.

Finally, the Johnson Controls Board observed that the existing “last in time” law and its treatment of dual signers had been questioned by the D.C. Circuit and, in part, denied enforcement in a recent case, Scomas of Sausalito v. NLRB, 849 F.3d 1147 (D.C. Cir. 2017). In Scomas, the employer was unaware that a union had reacquired majority status by obtaining signed authorization cards from dual signers three days before recognition was withdrawn. Recognizing the fundamental inequities at play, a panel member questioned whether an employer violates the Act at all “when, in good faith, it withdraws recognition from a union as a result of the union’s intentional nondisclosure of its restored majority status.” Moreover, the entire panel refused to enforce the Board’s bargaining order, citing the unintentional nature of the employer’s violation and the union having purposely withheld the evidence of its restored majority status, and further indicated that in these circumstances, a QCR existed warranting resolution through a secret-ballot election and not an unfair labor practice proceeding (as the current law requires).

The Board’s New Standard Establishes That A QCR Is Created By A Lawful Anticipatory Withdrawal That Must Be Accepted By A Union Unless The Union Can Establish Its Majority Status By Way Of A Secret-Ballot Election

In Johnson Controls, the Board reaffirmed the settled doctrine that if, within a reasonable time before an existing CBA expires, an employer receives evidence that the union has lost majority status, the employer may inform the union that (a) it will withdraw recognition when the contract expires and (b) it may refuse to bargain or suspend bargaining for a new CBA. Likewise, as before, assuming that it has grounds to do so, a union may still answer and oppose an employer’s anticipatory withdrawal with an unfair labor practice charge alleging that the employer initiated or unlawfully assisted a union-disaffection petition, that the petition failed to make the employees representational wishes sufficiently clear, or that the petition was tainted by serious unremedied unfair labor practices or that the number of valid signatures on the disaffection petition failed to establish a loss of majority status. Critically, however, the Board determined it would no longer consider, in an unfair labor practice case, whether a union has reacquired majority status as of the time that recognition was actually withdrawn. Instead, picking up on the D.C. Circuit’s suggestion in Scomas and recognizing that a union’s alleged reacquisition gives rise to a QCR, a union wishing to retain its representational rights could do so only by filing an election petition to determine whether a majority of unit employees wished the union to continue as their bargaining representative after the existing contract expires. Thus, aside from eliminating reacquired majority status as the proper basis for an unfair labor practice proceeding, the Board modified the “anticipatory withdrawal of recognition” doctrine in two respects:

First, it defined the “reasonable time” before contract expiration within which anticipatory withdrawal may be effected as no more than 90 days before a labor contract expires. This bright line change removes any uncertainty as to what constitutes the “reasonable” time before contract expiration within which employees may create a QCR and aligns the start of anticipatory withdrawal period with the usual start of the 30 day open period during which decertification and rival union petitions may be filed.

And second, it provides that if an incumbent union wishes to re-establish its majority status following an anticipatory withdrawal of recognition and avoid actual withdrawal, it must file an election petition within 45 days from the date the employer announces its anticipatory withdrawal. If no post-anticipatory withdrawal election petition is timely filed (and assuming that the disaffection proof received by an employer is untainted and legally sufficient to rebut the union’s presumptive majority status), the employer may rely on that disaffection evidence and terminate its relationship with the union at the end of the CBA.

TAKE AWAYS:

Johnson Controls is good news for workers and their employers because it levels the playing field that exists among disaffected workers, their employer and a union, “de-games” and “de-risks” the anticipatory withdrawal process, thereby safeguarding workers’ rights.

Even though employers on the receiving end of proof that a majority of its workers no longer wish to be represented by their union may refuse to bargain further with that union and announce an intention to pull its recognition of the union at the current contract’s end without incurring liability when it later actually withdraws recognition at the CBA’s end, that proof of majority loss must still be clear and unequivocal and legally sufficient to establish a union’s loss of majority status. Moreover, that proof must be free of unlawful taint (e.g., supervisors encouraging employees to decertify).

Even though Johnson Controls is welcome news, anticipatory withdrawal is not a “one size fits all” approach to de-unionization. Indeed, de-unionization may not be right for all workplaces. Whether, when and how an employer avails itself of anticipatory withdrawal is a critical strategic decision that needs to be carefully thought through with an eye towards the parties’ bargaining posture and a possible election. Therefore, it should be discussed with experienced labor counsel before it is used.

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On June 4, 2019, the Court of Appeal, Third Appellate District issued an unpublished opinion in Krista Townley v. BJ’s Restaurants, Inc. holding that BJ’s Restaurants was not required to reimburse its employees for the cost of black, slip-resistant, closed-toe shoes that BJ’s required its restaurant employees to wear. Due to the lack of California case law addressing the issue, BJ’s requested the opinion be published in the Official Reports. On July 5, 2019, the Court of Appeal granted BJ’s request and ordered the opinion certified for publication. This is the first published opinion in California to adopt the Division of Labor Standards Enforcement’s (“DLSE”) interpretation of a “uniform” and to hold that an employer is not required to reimburse employees for the cost of “non-uniform” work clothing. Matthew Sonne and Jason Guyser of Sheppard Mullin represented BJ’s Restaurants in this matter.

Background

To avoid slip and fall accidents, BJ’s required its restaurant employees to wear black, slip-resistant, closed-toe shoes. Employees were not required to wear a specific brand, style or design of shoes. Employees were permitted to wear their shoes outside of work. During her employment, plaintiff purchased a pair of shoes in compliance with BJ’s policy. Pursuant to its policy and practice, BJ’s did not reimburse plaintiff for the cost of the shoes.

In April 2014, plaintiff filed a class and representative action against BJ’s seeking reimbursement for the cost of the shoes as well as penalties under the Private Attorneys General Act (“PAGA”). In October 2015, Plaintiff amended her complaint, removing the class claims, and solely sought PAGA penalties based on BJ’s failure to reimburse for the cost of the shoes. Plaintiff alleged BJ’s was required to reimburse employees for the cost of a required safety item under Labor Code sections 6401 and 6403. Plaintiff also alleged BJ’s was required to reimburse employees under Labor Code section 2802 because the shoes were a necessary business expense.

BJ’s filed a motion for summary judgment on the grounds that it was not required to reimburse employees for the costs of such shoes under the Labor Code. In opposing the motion, plaintiff abandoned her theory that she was entitled to reimbursement under Labor Code sections 6401 and 6403 and solely argued that she was entitled to reimbursement as a business expense under Labor Code section 2802. BJ’s argued that it was not required to reimburse employees for the costs of non-uniform work clothing under California law. The trial court granted BJ’s motion for summary judgment. The Court of Appeal affirmed the order, concluding that the shoes were not a “necessary expenditure” within the meaning of Labor Code section 2802. The shoes were not part of a “uniform” as that term is defined under California law and were generally usable in the restaurant occupation. Accordingly, the Court of Appeal ruled BJ’s was not required to pay for the costs of such shoes.

Significance

Prior to this case, there was not a single California case addressing expense reimbursement under Labor Code section 2802 for employer-mandated work clothing. In concluding that BJ’s was not required to reimburse its employees for the costs of slip-resistant shoes that it requires its employees to wear, the Court of Appeal relied on an unpublished opinion by the Ninth Circuit Court of Appeals (Lemus v. Denny’s (9th Cir. 2015) 617 Fed.Appx. 701) and California’s DLSE opinion letters.

Labor Code section 2802’s general indemnification provision broadly provides that “[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”

In issuing the Wage Orders, the DLSE has established guidelines for uniforms required by an employer. “When uniforms are required by the employer to be worn by the employee as a condition of employment, such uniforms shall be provided and maintained by the employer.” (8 CCR § 11050 9(A).) “The term ‘uniform’ includes wearing apparel and accessories of distinctive design or color.” (8 CCR § 11050 9(A).)

Prior to this case, there was no published California case interpreting this critical section of the Wage Order regarding uniforms. Prior to Lemus, supra, the only interpretive guidance came from DLSE opinion letters. The DLSE interpreted the Wage Order as allowing an “employer to specify basic wardrobe items which are usual and generally usable in the occupation, such as white shirts, dark pants and black shoes and belts, all of unspecified design, without requiring the employer to furnish such items.” (Cal. Office of the State Labor Comm’r, Div. of Labor Standards Enforcement, Dep’t of Indus. Relations, Opinion Letter No. 1990.09.181 (1990) (emphasis in original).) While helpful as an interpretive tool, the DLSE’s opinion letters are not binding on courts or litigants.

In Lemus, the Ninth Circuit was compelled to rely solely on DLSE opinion letters due to the lack of a single California case addressing the issue. The Ninth Circuit adopted the DLSE’s interpretive guidance and held that an employer “must only pay for its employees’ work clothing if the clothing is a ‘uniform’ or if the clothing qualifies as certain protective apparel regulated by CAL/OSHA or OSHA.” (Lemus, supra, 617 Fed.Appx. at p. 703.) While Lemus is persuasive, it is not citable as precedential authority in California state court.

The BJ’s Restaurants case is the first California case to adopt the DLSE’s interpretation regarding the definition of a “uniform” and an employer’s expense reimbursement obligations regarding non-uniform work clothing. The Court of Appeal’s decision to publish the opinion is critically important because it finally provides California employers with some clarity regarding the interplay between Labor Code section 2802’s broad general indemnification provision and the limits the “uniform” provision within the Wage Order imposes.

For now, numerous California employers who require their employees to wear slip-resistant shoes have solid footing for not reimbursing their employees for the cost of such shoes.

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On June 26, 2019, Southern District of New York Judge Denise Cote granted a motion to compel arbitration of a plaintiff’s sexual harassment claims finding that the New York State prohibition on mandatory arbitration of sexual harassment claims is preempted by the Federal Arbitration Act (“FAA”). As we mentioned in our blog upon this law’s enactment, the United States Supreme Court has routinely held that state laws expressly identifying a category of non-arbitrable state law claims are preempted by the FAA. In Latif v. Morgan Stanley & Co., the Southern District followed the Supreme Court and found the New York ban on mandatory arbitration of sexual harassment claims unenforceable.

New York Law & Latif v. Morgan Stanley

New York first enacted its ban on mandatory arbitration of sexual harassment claims in 2018 as part of the 2019 State Budget. The statute amended the New York Civil Practice Law and Rules (“CPLR”) to prohibit contracts requiring the submission of sexual harassment claims to mandatory binding arbitration. In June, New York expanded this prohibition to mandatory arbitration of all harassment claims (see our previous blog).

Plaintiff Mahmoud Latif signed an agreement providing that “statutory discrimination, harassment, and retaliation claims” would be resolved in “final and binding arbitration.” Latif alleges that he was subjected to sexual harassment and was eventually terminated in retaliation for complaining about the alleged harassment. Latif relied on CPLR § 7515 in his opposition to the defendant’s motion to compel arbitration of his sexual harassment claims.

New York Law Preempted by the FAA

The Supreme Court has routinely held that state laws expressly identifying a category of state law claims as non-arbitrable are preempted by the FAA. Judge Cote applied the analysis laid out by the Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011) (“When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”). Thus, the court held that CPLR § 7515 was “inconsistent with the FAA” because it specifically prohibited arbitration of sexual harassment claims.

 Latif argued that CPLR § 7515 was intended to provide general protection for victims of sexual harassment rather than to single out arbitration. However, the court found these arguments “unavailing.” The court rejected the arguments that CPLR § 7515 created a “generally applicable contract defense,” which can be permitted under the FAA, because the plain text of the law singled out arbitration agreements.

The court also rejected Latif’s arguments based on New York’s interest in addressing workplace harassment and thus CPLR § 7515 is a ground in equity for the revocation of a contract. Again, finding that CPLR § 7515 presented no generally applicable contract defense, the court held that the statute was preempted by the FAA.

In a footnote, Judge Cote also mentioned that the mandatory arbitration ban passed in June is also preempted by the FAA for similar reasons.

We expect federal courts to continue to apply the Supreme Court’s FAA jurisprudence consistently. However, we will continue to monitor this case and provide updates if needed.

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UberX and UberBLACK Drivers Are Not Employees for Purposes of the NLRA

According to the NLRB General Counsel’s Division of Advice (GC), Uber’s UberX and UberBLACK drivers are independent contractors exempt from the rights and protections of the National Labor Relations Act (NLRA), including the right to form and join unions.  Advice Memo, dated April 16 2019, Uber Technologies, Inc., Case Nos. 13-CA-163062, 14-CA-158833 and 29-CA-177483. Applying the National Labor Relations Board’s (Board or NLRB) traditional multi-factored common law agency test used to determine whether workers are employees or independent contractors and after considering all of the common law factors through the “prism of entrepreneurial opportunity” as mandated by the Board’s recent decision in Supershuttle DFW, Inc., 367 NLRB No. 75 (January 25, 2019), the GC has found that the drivers were independent contractors and not employees within the meaning of the NLRA.

The GC also considered and then discounted certain factors often relied upon to establish a worker’s employee status, finding them not dispositive indicators of employee status.  For instance, in the GC’s view, the fact that Uber received a percentage of a driver’s fare instead of charging a driver a flat fee for their use of the Company’s ride sharing platform did not support a finding of employee status because the fundamental features of the Uber system including Uber’s reliance on customer reviews to maintain quality and insure repeat business without the need for company control overcame any inference of employer control or the diminution of a driver’s entrepreneurial opportunity.  Likewise, the fact that no special skills or experience were required to qualify a driver to use the Uber platform and that the driver’s work was integral to Uber’s business did not mandate a finding of employee status, citing prior Board decisions in which individuals were held to be independent contractors, even though their services were integral to the business of the company that engaged them, given the entrepreneurial opportunity afforded them. 

Company’s Gig Workers Are Not Employees for Purposes of the FLSA

Likewise, in a recent opinion letter, dated April 29, 2019, the Acting Administrator of the U.S. Department of Labor’s Wage and Hour Division (WHD) has concluded that service providers referred by a virtual marketplace company (VMC) to end-market consumers to provide a wide variety of services (including transportation, delivery, shopping, moving, cleaning, plumbing, painting and household services) were also independent contractors not covered by the Fair Labor Standards Act (FLSA). According to this opinion letter, the touchstone of employee versus independent contractor status has long been a worker’s “economic dependence” on their putative employer.  Further, whether a worker is economically dependent on a potential employer is a fact-specific inquiry that is individualized to each worker applying six factors derived from Supreme Court precedent including 1) the nature/degree of the potential employer’s control; 2) the permanency of the worker’s relationship with the potential employer; 3) the amount of the worker’s investment in facilities, equipment and helpers; 4) the amount of skill, initiative, judgment or foresight required for the worker’s services; 5) the worker’s opportunities for profit or loss; and 6) the extent of integration of the worker’s services into the potential employer’s business.  Applying the facts relating to the VMC and the service providers to these six factors, the WHD concluded that the facts demonstrated economic independence in the relationship between the VMC and the service providers and that the service providers were, therefore, independent contractors and not employees within the meaning and coverage of the FLSA.

Apparent Conflict Between Federal and State Law

In seemingly direct conflict with these federal pronouncements are state cases like Dynamex v. Superior Court, 4 Cal. 5th 903 (2018) where California’s Supreme Court recently abandoned the state’s traditional reliance on a common law agency test not unlike the one currently used by the NLRB, see, Borello v. State Department Of Industrial Relations, 48 Cal 3d 341 (1989), and devised a new employee-independent contractor test based upon giving a state law its widest possible effect consistent with its statutory purpose.  In Dynamex, the workers who served as delivery drivers making pickups from and deliveries to the customers of a large nationwide package and document delivery company claimed to be employees covered and protected by the state’s Industrial Welfare Commission (IWC) Order No. 9 applicable to the transportation industry.  Dynamex, their putative employer, denied their employee status and claimed the drivers to be independent contractors who fell outside the IWC’s Orders.  Accordingly, at issue was the standard to be applied when determining the employee/independent contractor status under the state’s IWC Orders

For some time, Dynamex classified its California drivers as employees and compensated them pursuant to the state’s wage and hour laws.  However, in 2004, Dynamex converted all of its drivers to independent contractors after management concluded that such a conversion would generate economic savings for the company.  Like Uber’s drivers, under this new arrangement, all Dynamex drivers were required to provide their own vehicles and to pay all of their transportation expenses as well as all taxes and workers’ compensation insurance.  Additionally, drivers were free to set their own work schedules, to reject deliveries assigned to them and to choose the sequence in which they would make deliveries as well as the routes that they would take.  Drivers were also permitted to hire other persons to make deliveries assigned by Dynamex and, when not making pickups or deliveries for Dynamex, drivers were permitted to make deliveries for other delivery companies as well as to conduct their own personal delivery business.  Those drivers assigned to a ”dedicated” fleet or a scheduled company route were paid a flat fee or an amount based on a percentage of the delivery fee Dynamex received from the customer, while drivers doing ”on demand” deliveries, were paid either a percentage of the delivery fee paid by the customer on a per delivery basis or a flat fee basis per item delivered.

For the purpose of giving the IWC order its widest possible effect and the drivers’ the greatest protection, the Dynamex court opted to use a simpler, less fact intensive standard that presumes a worker to be an employee unless and until their putative employer proves them to be an independent contractor under a standard known as the “ABC” test.  Utilized in other jurisdictions and in varying contexts to distinguish employees from independent contractors, under the ABC test, a worker will be considered an employee unless a ”hiring entity establishes: (A) that the worker is free from control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that that worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

This patch quilt of varying standards is likely to lead to anomalous results and create serious compliance challenges where a worker is found to be an independent contractor for some purposes, while for other purposes and in differing contexts, that same worker is likely to be found an employee.  For example, in the case of the Uber drivers, they were found to be independent contractors for NLRA purposes, even though their driving was considered to be integral to Uber’s regular business.  However, because they may not perform work outside the usual course of Uber’s business as required by prong B of Dynamex and/or because a person driving an app-based car may not be engaged in an independently established trade, occupation or business under prong C of Dynamex, plaintiffs may argue that Uber drivers are employees for state wage and hour law purposes even though by contract and in fact, the Uber driver is free from Uber’s control and direction in connection with the performance of their work.

Risk of Antitrust Compliance

But looking beyond the immediate confusion caused by a less than unified definition of independent contractor, uncertainty as to a worker’s status is sure to trigger larger controversies outside the employment arena.  Take, for example, the effect that such uncertainty and ambiguity is likely to have in the area of antitrust compliance where workers band together and act collectively to improve their wages and working conditions.  If the workers qualify as employees for NLRA purposes, then that conduct is protected by law and probably immune to the constraints of federal and state antitrust laws.  However, if they are deemed independent contractors, then their collective action may constitute a conspiracy to restrain trade in violation of the Sherman Antitrust Act, “which prohibits every contract, combination in the form of trust or otherwise, or conspiracy, in the restraint of trade or commerce.”

Moreover, insofar as state and local governments pass legislation in an attempt to treat independent contractors as if they are employees within the meaning of the NLRA and to accord them NLRA-like rights, that too may raise significant issues of antitrust compliance.  For example, the Ninth Circuit recently reversed a dismissal of a challenge under federal antitrust law by the U.S. Chamber of Commerce to Seattle Ordinance 124968. In Chamber of Commerce v. City of Seattle, Case No. 17-35640 (9th Cir. May 11, 2018), Seattle enacted an ordinance that created a collective bargaining process between ridesharing companies and drivers in order to negotiate the rate of pay and amount withheld by the companies.  In opposition to the ordinance, the U.S. Chamber of Commerce argued it was preempted by multiple federal laws, including the Sherman Antitrust Act. After the district court dismissed the claims, the Ninth Circuit reversed, in part, holding that the ordinance did not meet the requirements for state-action immunity from federal antitrust law and without reaching the merits of the question, that the ordinance authorizes a per se antitrust violation. Accordingly, it is still an open question in the Ninth Circuit and other circuits whether cities and states may lawfully enact ordinances allowing app-based, ride-hailing drivers to bargain collectively over wages, hours and other working conditions.

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A unionized employer must bargain with its employees’ union before making any unilateral changes in employees’ wages, hours, working conditions or other terms and conditions of employment.  Such changes are commonly referred to as mandatory bargaining subjects.  In Alan Ritchey, 359 NLRB 396 (2012) and later in Total Security Management, 364 NLRB No. 106 (2016), the Obama NLRB held that the discretionary discharge or suspension of a union employee was a mandatory bargaining subject — even when that discipline was carried out pursuant to an established company employment practice or policy.  Therefore, according to these two controversial Obama Board decisions and absent a collective bargaining agreement provision covering the discipline or some other overriding extenuating circumstance, an employer breached its duty to bargain and violated Section 8(a)(5) of the Act when it discharged or suspended a worker without first notifying the worker’s union of the employer’s intention to discharge or suspend the employee and without first affording that union a reasonable opportunity to meet and bargain with the employer.  However, a recent Trump Board decision, Oberthur Technologies, 368 NLRB No. 5, issued on June 17, signals a probable change in the Board’s governing case law on this issue.  

In Oberthur, a union narrowly won an election but was not certified as the employer’s employees’ representative until 35 months later.  During that lengthy interval, the employer discharged four employees — all pursuant to well established company polices predating the election — and all without putting the union on notice of the employer’s decision to take adverse action or affording the union the opportunity to bargain with the employer over these adverse decisions.  Thereafter, the NLRB’s General Counsel issued a complaint against the employer based on the Alan Ritchey doctrine and received an administrative law judge’s decision finding Oberthur’s four discharges to be unlawful and in violation of Section 8(a)(5).  However, the current Board reversed the administrative law judge’s decision, citing and applying the Board’s decision in Fresno Bee, 337 NLRB 1161 (2002), a case actually rejected and presumably overruled by the Obama Board in Alan Ritchey, which held that an employer did not cause a change in working conditions requiring pre-discipline bargaining when it disciplined workers pursuant to its pre-existing disciplinary policies even if that disciplinary action involved the exercise of some discretion.  Based on Fresno Bee, the current Board dismissed the charges against Oberthur, holding that the Company did not make a change in working conditions when it carried out its disciplinary actions without prior notice to and/or bargaining with the union.  Further, consistent with Fresno Bee, the current Board noted that Oberthur would have been under a post-discipline obligation to bargain with the union if the union had requested to bargain.  However, since the union never requested to bargain about any of the discipline, the Board also found the company’s failure to bargain after the discipline lawful.

TAKEAWAYS:

Newly organized employers without collective bargaining agreements and unionized employers with expired contracts are likely free to discipline their union workers in accordance with the company’s existing employment policies and practices without first having to notify and bargain with its employee’s union.

Employers should inventory their existing employment policies and practices including their expired CBA provisions and, to the extent possible, impose adverse action against unionized workers pursuant to and in accordance with those extant policies and practices and expired provisions.

Where a union requests bargaining over an adverse action that has been taken, the employer should recognize its post-discipline duty to bargain and grant the union’s after the fact bargaining request.

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Many California employees received a raise on January 1, 2019 when the state increased the minimum wage to $12 per hour for large employers (26 employees or more) and $11 per hour for small employers (25 employees or fewer). Effective July 1, 2019, several counties and municipalities in California are adding to these minimum wage increases. The amount of the increase varies by city and county, and some local governments make a distinction between large and small employers. Hotel workers in places like Long Beach, the County and City of Los Angeles, and Oakland are entitled to wages significantly higher than the minimum wage for other types of employees. The following chart summarizes these changes.

Jurisdiction Pre-July 1
Minimum Wage
July 1
Minimum Wage
Alameda $11.00 / $12.00
(small / large employer rate)
$13.50
(all employers)
Berkeley $15.00 $15.59
Emeryville
(56 or more employees)
$15.69 $16.30
Emeryville
(55 or fewer employees)
$15.00

 

$16.30
Freemont
(26 or more employees)
$12.00

 

$13.50
Long Beach
(hotel workers)
$14.64 $14.97
City of Los Angeles
(26 or more employees)
$13.25 $14.25
City of Los Angeles
(25 or fewer employees)
$12.00 $13.25
City of Los Angeles
(hotel workers)
$16.10 $16.63
County of Los Angeles Unincorporated
(26 or more employees)
$13.25 $14.25
County of Los Angeles Unincorporated
(25 or fewer employees)
$12.00 $13.25
Malibu
(26 or more employees)
$13.25 $14.25
Malibu
(25 or fewer employees)
$12.00 $13.25
Milpitas $13.50 $15.00
Oakland
(hotel workers without benefits)
$13.80 $20.00
Oakland
(hotel workers with benefits)
$13.80 $15.00
Pasadena
(26 or more employees)
$13.25 $14.25
Pasadena
(25 or fewer employees)
$12.00 $13.25
San Diego $12.00[1]
San Francisco $15.00 $15.59
San Francisco (government supported employee) $13.27 $13.79
San Leandro $13.00 $14.00
Santa Monica
(26 or more employees)
$13.25 $14.25
Santa Monica
(25 or fewer employees)
$12.00 $13.25
Santa Monica
(hotel workers)
$16.10 $16.63

[1] Effective January 1, 2019, for large and small employers. San Diego does not have a scheduled minimum wage increase for July 1, 2019.

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On June 19th, the New York State Senate and Assembly voted to pass omnibus legislation greatly strengthening protections against sexual harassment. While the bill, SB 6577, is still waiting for the Governor’s signature, Governor Cuomo supported the legislation and plans to sign the bill when it is sent to his desk. The legislation is the product of two legislative hearings that took place early this year, inspired by a group of former legislative staffers who have said they were victims of harassment while working in Albany, NY. The bill includes several provisions directly affecting private employers. These provisions include:

  1. The New York State Human Rights Law (“NYSHRL”) will expand the definition of an “employer” to include all employers in the State, including the State and its political subdivisions, regardless of size. Additionally, the definition of “private employer” will be amended to include any person, company, corporation, or labor organization except the State or any subdivision or agency thereof.
  2. Protections for certain groups in the workplace will also be expanded. While non-employees, such as independent contractors, vendors, and consultants, were previously protected from sexual harassment in an employer’s workplace, they will now be protected from all forms of unlawful discrimination where the employer knew or should have known the non-employee was subjected to unlawful discrimination in the workplace and failed to take immediate and appropriate corrective action. Similarly, harassment of domestic workers will now be prohibited with respect to all protected classes and will be governed under the harassment standard outlined in (3), below.
  3. The burden of proof for harassment claims will be greatly lowered. Any harassment based on a protected class, or for participating in protected activity, will be unlawful “regardless of whether such harassment would be considered severe or pervasive under precedent applied to harassment claims.” Unlawful harassment will include any activity that “subjects an individual to inferior terms, conditions or privileges of employment because of the individual’s membership in one or more of these protected categories.” Also, employees will no longer need to provide comparator evidence to prove a harassment, and, presumably, discrimination claim.
  4. The law will also alter the affirmative defenses available to employers accused of harassment. The Faragher/Ellerth defense, which allowed employers to avoid liability where the employee did not make a workplace complaint, will no longer be available for harassment claims under NYSHRL. However, an affirmative defense will be available where the harassment complained of “does not rise above the level of what a reasonable victim of discrimination with the same protected characteristic would consider petty slights or trivial inconveniences.”
  5. The statute of limitations to file a sexual harassment complaint with the New York State Division of Human Rights (the “Division”) will be lengthened from one year to three years.
  6. The amendments specify that they are to be construed liberally for remedial purposes, regardless of how federal laws have been construed.
  7. Courts and the Division will be required to award attorneys’ fees to all prevailing claimants or plaintiffs for employment discrimination claims and may award punitive damages in employment discrimination cases against private employers. Attorneys’ fees will only be available to a prevailing respondent or defendant if the claims brought against them were frivolous.
  8. Mandatory arbitration clauses will be prohibited for all discrimination claims.
  9. The use of non-disclosure agreements will be severely restricted. Non-disclosure agreements will be prohibited in any settlement for a claim of discrimination, unless: (1) it’s the complainant’s preference; (2) the agreement is provided in plain English and, if applicable, in the complainant’s primary language; (3) the complainant is given 21 days to consider the agreement; (4) if after 21 days, the complainant still prefers to enter into the agreement, such preference must be memorialized in an agreement signed by all parties; and (5) the complainant must be given seven days after execution of such agreement to revoke the agreement. The same rules apply to non-disclosure agreements within any judgment, stipulation, decree, or agreement of discontinuance. Any term or condition in a non-disclosure agreement is void if it prohibits the complainant from initiating or participating in an agency investigation or disclosing facts necessary to receive public benefits. Non-disclosure clauses in employment agreements are void as to future discrimination claims unless the clause notifies the employee that they are not prohibited from disclosure to law enforcement, the EEOC, the Division, any local commission on human rights, or their attorney. All terms and conditions in a non-disclosure agreement must be provided in writing to all parties, in plain English and, if applicable, the primary language of the complainant.
  10. Employers will be required to provide employees with their sexual harassment policies and sexual harassment training materials, in English and in each employee’s primary language, both at the time of hire and during each annual sexual harassment prevention training. Additionally, the Department of Labor and the Division will evaluate the impact of their model sexual harassment prevention policy and training materials every four years starting in 2022 and will update the model materials as needed.

The majority of these changes will take effect 60 days after the legislation is enacted, with the exception of the “employer” definition expansion, which will take effect after 180 days, and the extended statute of limitations, which will take effect after 1 year. In light of these changes, New York employers should alter their practices and policies to conform with these new requirements. We are monitoring this legislation and will provide updates as new information becomes available.

*Myles Moran, a Sumer Associate in the New York office, assisted with the drafting of this blog.

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On June 14, 2019, the National Labor Relations Board (NLRB or Board) issued an important decision clarifying whether and when an employer may lawfully exclude union organizers from its privately owned public spaces. Under then extant Board caselaw, where an employer had invited the public to enter or use space on its private property, the employer could not lawfully exclude union organizers from entering and using that same “public space” because that exclusion was considered to be unlawful discrimination in violation of Section 8(a)(1) of the National Labor Relations Act (NLRA or Act). The Board’s decision in UPMC, 368 NLRB No. 2, rejects this generalized “public area” doctrine, redefines what is and isn’t unlawful discrimination for the purposes of determining a union’s right of access to an employer’s public spaces and, broadens employer’s legal options under the NLRA. 

UPMC spawns from a hospital’s ejection of two union organizers from its 11th floor public cafeteria where the organizers were meeting with hospital employees to discuss union organizing. It draws a critical distinction between the mere exclusion of union representatives from such public areas and their exclusion based on the activities they engage in while present in public areas. Citing the Supreme Court’s leading union access case, NLRB v. Babcock & Wilcox Co., 351 U.S. 105 (1956), the Board observed that while the Act required an employer to refrain from interfering, restraining or coercing employees’ exercise of their statutory rights, the Act does not require that an employer permit the use of its facilities for organizing when other means of communication are readily available. Accordingly, the Board found that an employer does not have a duty to allow the use of its facility by nonemployees for promotional or organizing purposes and the fact that a cafeteria located on an employer’s private property is open to the public does not mean that an employer must allow any nonemployee access to that public space for any purpose. To the contrary, since it is on private property, an employer has a right to promulgate and enforce rules and practices regulating conduct to be carried out in that public space as long as they are facially neutral and enforced in an even-handed and consistent fashion. Thus, absent disparate treatment, where by a rule or practice, a property owner bars access by nonemployee union representatives seeking to engage in certain activities, while permitting similar activity in similar relevant circumstances by other nonemployees, an employer may decide what types of activities, if any, it will allow by nonemployees on its property and exclude those nonemployees who elect to engage in such proscribed conduct, even though they are affiliated with a union and on premises to engage in organizational activities.

Following UPMC, an employer’s exclusion of union representatives from public areas on the employer’s private property will not be deemed unlawful unless that exclusion is accompanied by evidence of the “non disruptive” activity the union representatives engaged there and absent further proof that the employer has permitted similar conduct by other nonemployees. Absent such proof, the employer’s exclusion or ejection of a union’s representative(s) from its public areas is not “disparate treatment” and does not constitute discrimination. Accordingly, the mere denial of a union’s access to such public spaces is no longer unlawful or legally sufficient to establish a violation of the Act.

TAKEAWAYS:

  • Employers can and should promulgate facially neutral rules and engage in practices regulating conduct in the public spaces on their private property, including rules prohibiting solicitation by third parties.
  • The employer’s rules/practices should be written in neutral, albeit broadly fashioned terms that are sufficient to reach but not target or single out union or organizing activities.
  • The employer should enforce these rules in a consistent and even-handed fashion as to similar conduct under similar circumstances; to the extent that there is non-enforcement of a rule, that non-enforcement should be documented and earmarked to its specific circumstances so as to render that non-enforcement explainable and distinguishable from subsequent enforcement as to union nonemployee access/on-premises conduct.

AN IMPORTANT CAVEAT: While UPMC is welcomed news to employers, it may be of limited use to employers in states like California where state laws give unions greater access rights than federal law and where the courts and law enforcement are reluctant to enforce an employer’s rights under the NLRA.

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Does an employer automatically engage in unlawful discrimination when it grants an improved benefit to its non-union employees but withholds the improvement from its union employees who are covered by a collective bargaining agreement? In a recent decision, Merck, Sharp & Dohme Corp, 367 NLRB No. 122, issued on May 7, 2019, the National Labor Relations Board (NLRB) said No. This is an important decision because it clearly delineates the difference between mere disparate treatment (which is lawful) and actionable discrimination (unlawful) and brings clarity to an employer’s duty to bargain over changing working conditions during the term of a collective bargaining agreement (CBA).

The case arose when Merck decided to offer a new one-time paid holiday referred to as “Appreciation Day” (the day before Labor Day 2015) to all employees except for those employees covered by a collective bargaining lacking the benefit. In a phone conference, the Company’s Executive Director of U.S. Labor Relations explained the disparate treatment by noting that “the benefit [was] not in the labor contracts ‘and we can’t unilaterally give the day’ ”, adding that “in the previous couple of years . . . the company had made . . . relatively simple changes [for non-CBA employees] and [when the Company] tried to discuss [those minor changes with its unions] outside of contract negotiations . . . the feedback from the union(s) was . . . wait until contract negotiations”. Attendees came away from the call believing and apparently reporting to employees that the Company withheld the “Appreciation Day” paid holiday from union employees because of the union’s past refusal to cooperate in agreeing to minor midterm contract changes and that the Company was not inclined to “just give it to the unions”. Based on these comments, an Administrative Law Judge (ALJ) found that the Company’s exclusion of union workers from the new benefit was motivated by the Unions’ prior refusal to midterm contract modifications and, thus, “a[n admitted] straightforward punishment” of union employees for their Unions’ past protected activity in violation of Sections 8(a)(3) and (1) of the National Labor Relations Act (the “Act” or “NLRA”). The Board, however, disagreed and reversed the ALJ.

The Board began its analysis by observing that an employer has a right to treat represented and unrepresented employees differently so long as that difference is not motivated by antiunion animus. Accordingly, a mere difference in treatment is not in and of itself unlawful. Instead, the party seeking a finding of unlawful discrimination must prove that the employer harbored antiunion animus and that a union’s or other protected concerted activity was a “substantial or motivating” factor in the employers decision to engage in the disparate treatment of union workers. Absent such proof, a mere difference in treatment is just that — a lawful difference in treatment and not unlawful discrimination.

Then, turning to the evidence upon which the ALJ relied to find Merck’s antiunion animus, the Labor Relations Director’s comments about the unions’ past refusal to agree to midterm contract changes, the Board found said proof to be devoid of animus, noting that the ALJ’s finding of “straightforward punishment” failed to take into consideration the everyday realities of the bargaining process. Indeed, collective bargaining by its very nature is an “annealing process” involving hard negotiations, posturing, brinksmanship and horse trading over a long period of time. In the Board’s view (and contrary to the ALJ), the Labor Relations Director’s statements were neither an admission of unlawful retaliation nor proof of the employer’s antiunion animus. Rather, his comments reflected the parties’ prior bargaining positions, extant contract benefits and the competing forces and counteracting pressures inherent in the bargain process. Thus, in the Board’s view, the message sent by Merck’s action was clear: if the Union was unwilling to entertain proposed midterm modifications and insisted on adhering to the terms of the contract, then Merck, too, would stand firm and the Union was going to have to live with the limitations of their contractual benefits along with their advantages.

Additionally, contrary to the ALJ, the Board found nothing pretextual about Merck’s assertion that its unilateral granting of the Appreciation Day holiday to unionized workers would have been unlawful. To the contrary, the Board found the defense to be consistent with the law, even in the absence of the Employer’s offer to bargain with the unions over the new midterm benefit, because nothing in the Act suggests that a party must bargain over or accept midterm changes. Instead, the NLRA protects every party to a collective bargaining agreement from involuntarily incurring any additional bargaining obligations for the duration of the agreement.

TAKEAWAYS:

Union workers do not have a right to be treated the same as non-union co-workers. Employers are free to treat union and non-union employees differently during a CBA’s term as long as that differential in treatment is not the result of proven antiunion animus or for the proven purpose of retaliating against unionized workers for the protected union or concerted activities. So long as the different treatment is based upon the realities of the bargaining process, it likely will not be found to be unlawful discrimination.

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Resolving a circuit split regarding the jurisdictional nature of Title VII’s charge-filing requirement—the statutory requirement that an employee who alleges that he or she has been subjected to unlawful treatment is required to file a charge with the Equal Employment Opportunity Commission (“EEOC”), or an equivalent state or local agency, prior to bringing suit in court—the United States Supreme Court issued a unanimous opinion on June 3, 2019, penned by Justice Ginsburg, holding that “a rule may be mandatory without being jurisdictional, and Title VII’s charge-filing requirement fits that bill.” This decision—which affirms a recent Fifth Circuit decision, is consistent with rulings from the First, Second, Sixth, Seventh, Eighth, Ninth, and D.C. Circuits, but overrules Fourth and Tenth Circuit precedent—has potentially significant implications for unwary employers when defending themselves in a Title VII lawsuit.

The facts of Fort Bend County v. Davis are straight-forward: During Lois Davis’s employment with Fort Bend County, Texas (the “County”), she filed an intake questionnaire and charge with the Texas Workforce Commission for alleged sexual harassment and retaliation (referred to herein as the “Charge”). While the Charge was pending, Ms. Davis’s employment with the County was terminated after she allegedly failed to report to work on a Sunday due to a church commitment. Instead of amending her Charge, Ms. Davis tried to add her religious discrimination claim through a handwritten update to her intake questionnaire. Soon after doing so, Ms. Davis was notified of her right to sue the County in federal district court and did so in January 2012, alleging discrimination on the basis of religion and retaliation for reporting sexual harassment.

After years of litigation, including a petition of certiorari to the Supreme Court, the case ended up back in the district court on the issue of whether Ms. Davis was discriminated against on the basis of her religion. It was at this point that the County argued for the first time in a motion to dismiss that the court lacked jurisdiction to hear Ms. Davis’s claim because she did not assert religious discrimination in her Charge. The district court granted the County’s motion to dismiss but was later reversed by the Fifth Circuit, which found that the charge-filing requirement was a “prudential prerequisite” that can be forfeited by an employer if not timely asserted—not a jurisdictional requirement.

Agreeing with the Fifth Circuit and a litany of other circuits, the Supreme Court held that the charge-filing requirement is not a “jurisdictional prescription delineating the adjudicatory authority of courts” that can be raised at any stage of a case; rather, it is a mandatory procedural prescription that “must be timely raised to come into play.” Practically, this decision means that employers faced with a Title VII lawsuit need to promptly review the relevant charge to determine whether any allegations in the complaint can be dismissed as a result of the plaintiff’s failure to raise the allegation with the EEOC and vigilantly assert defenses when they become available. Exactly how long an employer can wait before raising this defense without risking forfeiture, or whether the mandatory claim-processing rule can be subject to equitable exceptions, are issues that were not resolved by the Supreme Court, but we anticipate that these issues will be litigated in the lower courts going forward.

Although this issue has significant implications for Title VII jurisprudence, we do not anticipate, for the reasons articulated by Justice Ginsburg, that many plaintiffs will use this ruling as an opportunity to purposefully avoid the charge-filing requirement: “[R]ecognizing that the charge-filing requirement is nonjurisdictional gives plaintiffs scant incentive to skirt the instruction. Defendants, after all, have good reason promptly to raise an objection that may rid them of the lawsuit filed against them. A Title VII complainant would be foolhardy consciously to take the risk that the employer would forgo a potentially dispositive defense.” This decision does, however, clarify the scope of a defense—albeit one that must be timely raised—that should be part of an employer’s arsenal when faced with a Title VII lawsuit.

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