For the Week of February 8, 2010

KEY CASES

1stCir: Employer repudiated CBA’s arbitration provisions; LMRA claim proceeds

In a labor dispute over seniority rights between two groups of employees, the First Circuit ruled that one group of employees could proceed on a claim that their employer breached the arbitration provisions of a bargaining agreement when it fraudulently procured an arbitration award granting seniority rights to the other employees. The plaintiff employees alleged the employer improperly entered into a side agreement with the other group of employees without the involvement of the union or the plaintiffs. They filed an LMRA suit for breach of contract, challenging the process by which the arbitrator reached his decision as contrary to the remedial procedures outlined in the bargaining agreement. The district court granted the employer’s motion to dismiss for failure to exhaust contractual remedies. The appeals court reversed. Since the employer allegedly repudiated the contract’s arbitration provisions by entering into the side agreement, the plaintiffs need not exhaust their bargaining agreement remedies before filing suit, the appeals court held. “An employer who by its conduct repudiates a promise to arbitrate a dispute consistent with the terms of the CBA has no subsequent right to insist on arbitration,” wrote the court. Given the factual allegations raised, “the issue of whether the integrity of the process has been so impugned as to call into question the validity of the arbitration award remains for judicial resolution.” Consequently, the lower court’s order granting dismissal was reversed and remanded (Ramirez-LeBron v Int’l Shipping Agency, January 29, 2010).

2ndCir: Workplace sabotage, punitive scheduling may constitute retaliation

Claims of workplace sabotage and punitive scheduling were sufficient to survive summary judgment in a suit filed by three employees who alleged a supervisor threatened to retaliate against them, and then did so, after they cooperated in an investigation of race discrimination against a coworker, the Second Circuit held. In one incident, the supervisor left a window up in a computer room with the door locked so that the employees could not set a facility alarm, which led to reprimand. Also, the supervisor intentionally adjusted shift times, break times, work locations, and work assignments, which disrupted the employees’ off-duty time and forced them to work shifts alone, placing them in potentially hazardous situations. These allegations satisfied the employees’ burden of showing an adverse employment action under Burlington Northern. A reasonable employee may be dissuaded from participating in an investigation or proceeding if he knew that in retaliation, he would be disciplined for failing to arm a security system or that his work schedule would be changed so that he would have to work alone in a more dangerous facility, concluded the court. Other incidents cited by the employees as constituting retaliation were properly rejected by a trial court, however (Hicks v Baines, February 2, 2010).

3rdCir: Pharmaceutical sales rep was exempt administrative employee

A sales rep for a pharmaceutical sales company was an exempt administrative employee, ruled the Third Circuit, in yet another overtime case filed by a pharmaceutical representative challenging exempt status under the FLSA. (In a footnote, the appeals court noted that similar cases were pending in sister circuits. It also made clear that its opinion here was based on the very specific facts in this case and that it might reach a different result on these issues under a different set of facts.) Among the employee’s duties was a requirement that she formulate a strategic plan to maximize sales in her territory, a function that involved a high level of planning and foresight. The strategic plan guided the execution of the employee’s remaining duties. As such, her duties were directly related to the management or general business operations of the employer, satisfying this element of the administrative exemption. In addition, the employee executed nearly all of her duties without direct oversight. The employee described herself as the manager of her own business who could run her own territory as she saw fit, and the court declined to dismiss such statements as “mere puffery.” Thus, the appeals court concluded she exercised discretion and independent judgment with respect to matters of significance, another prong in the administrative exemption analysis. Summary judgment to the employer was affirmed (Smith v Johnson and Johnson, February 2, 2010).

5thCir: City ordinances impermissibly interfered with strike activities

A union was only partially successful in its challenge to three city ordinances that the union claimed impermissibly interfered with its First Amendment rights. In this instance, the union sought permits from the city for parades and rallies in support of a strike. When the city gave only partial approval, the union filed suit, claiming the ordinances under which the permits were processed violated the First Amendment. The Fifth Circuit concluded the ordinance in question was narrowly tailored to satisfy the city’s interest in protecting the public from excessive noise. The ordinance made reasonable distinctions in the level of disruption caused by noise that required a permit and noises that come from exempted sources. However, that portion of the sound ordinance that placed a limit of two permits per location per 30-day period was not narrowly tailored and so was unconstitutional. The appeals court also determined that a portion of a parade ordinance that confined downtown weekday parades to two one-hour windows was invalid. The city’s claim that the time limits furthered traffic safety was rejected as an overly restrictive approach to traffic safety. Finally, the court rejected the city’s parks ordinance, which regulated gatherings in parks, because of its failure to define “public gathering” in a reasonable manner or to identify discrete areas of the parks that required permits for public gatherings (SEIU, Local 5 v City of Houston, January 28, 2010).

10thCir: Union unlawfully induced termination of employee for delinquent dues

Substantial evidence supported an NLRB determination that a union unlawfully persuaded an employer to discharge an employee for failing to pay his union dues, where the union failed to provide the employee with legally sufficient notice about his delinquent dues or a reasonable opportunity to cure the delinquency before it sought his discharge, ruled the Tenth Circuit. Before invoking a union-security clause against an employee, a union must provide the employee with actual notice of the amount due; explain how it computed the amount due; give the employee a reasonable deadline for payment; and explain that failure to pay will result in discharge. A union must provide an employee notice that satisfies all four of these requirements before threatening an adverse employment action. In this case, by issuing a letter to the employer demanding the employee’s immediate dismissal without first explaining how it calculated his delinquency or offering him a reasonable period of time to cure the delinquency, the union violated Section 8(b)(1)(A) of the NLRA. Moreover, the union violated Section 8(b)(2) of the Act when, after agreeing to a payment plan with the employee, it secured his discharge just two days before his final payment was due (Laborers’ Int’l Union of North America, Local 578 v NLRB, February 2, 2010).

DAriz: Court declines to follow DOL’s position in amicus brief on exempt status

A federal district court in Arizona expressly declined to defer to the Department of Labor’s position in an amicus brief asserting that because pharmaceutical sales reps did not make “actual sales,” the outside sales exemption did not apply. The DOL took the position that a “sale” for purposes of the outside sales exemption “requires a consummated transaction directly involving the employee for whom the exemption is sought.” However, this language was inconsistent with the statutory definition, which provided that “sale” includes not only a “sale” as that term is traditionally defined, but also “other disposition.” The court noted that the regulations largely repeated the statutory language, and so gave little or no instruction on the central issue in the case—the definition of sales. Thus, the DOL did not acquire special authority to interpret its own words when, instead of using its expertise and experience in formulating a regulation, it merely paraphrased the statutory language. Further, the DOL’s interpretation was not subject to the rigors of the Administrative Procedure Act or otherwise promulgated in the exercise of the agency’s rulemaking authority. Consequently, the court determined that the position taken by the DOL in its amicus brief was not entitled to controlling deference, and the court denied an employee’s motion to alter a prior judgment by the court that the pharmaceutical sales rep came within the outside sales exemption (Christopher v SmithKline Beecham Corp, January 29, 2010).

MDFla: 12-month anniversary occurred while on leave; employee FMLA-protected

The 2009 amendments to the FMLA regulations were a clarification of existing law rather than an entirely new rule, concluded a federal district court in Florida, applying the amended rule to events that took place in 2006 and 2007. Just eleven months after beginning his employment, an employee was diagnosed with an abdominal hernia that required immediate surgery. The employee went on leave for ten weeks, first using his sick days and then his employer’s short-term disability benefits. He passed his one-year anniversary with the company during his leave and thus became FMLA-eligible. At no time was the employee advised of his FMLA rights, however, because the employer reasoned that he still had not worked long enough to qualify. Prior to the 2009 amendments, courts have variably interpreted 29 CFR §825.110(d) to conclude either that FMLA eligibility is determined on the date that leave for a qualifying event commences and that determination applies for the duration of the leave, or that an employee on authorized leave may “transform” his leave into FMLA leave upon attaining eligibility. The DOL amended this provision in light of these varying interpretations and the ambiguities that resulted. The 2009 amendment provides that if an employee is on non-FMLA leave at the time he or she meets the eligibility requirements, any portion of leave taken for an FMLA-qualifying reason, once eligible, is deemed FMLA leave. Thus, because the employee was employed on the date of his anniversary, he was eligible for FMLA protection for qualifying leave taken after that date (Porcillo v Vistar Corp, February 1, 2010).

EDPa: Insurance agent was independent contractor; no Title VII, ADEA protection

A federal district court in Pennsylvania granted an insurance company’s summary judgment motion against a sales agent’s claim that she was discriminated against based on her age and gender after the court determined the agent was not an employee for purposes of Title VII and the ADEA, a threshold issue that the court had to resolve before turning to the merits of the agent’s discrimination claim. The parties had a written agreement that outlined their rights. It explicitly stated that it did not create an employer-employee relationship between the company and the agent. While the agent was required to follow certain company rules and regulations, the terms of the agreement reflected the parties’ clear intent to establish the plaintiff as an independent contractor, not an employee. The agent was responsible for maintaining her licenses, provided her own supplies and equipment, chose her clients, set her own working hours, and was responsible for hiring and firing her own administrative staff. Her pay was 100 percent commission. Thus, she was an independent contractor and was not entitled to protection under the federal antidiscrimination statutes (Kravis v Karr Barth Associates, January 26, 2010).

DSC: Liability for FMLA retaliation arises even before FMLA eligibility

In an issue of first impression in the Fourth Circuit, a federal district court in South Carolina denied an employer’s motion to dismiss an employee’s FMLA claim for retaliation where she was terminated prior to becoming eligible for FMLA leave but had declared her intention to take such leave after she became eligible. District courts have been inconsistent in addressing the issue of whether an employer can be liable for retaliation under the FMLA where the employee is not eligible for FMLA leave. The district court here found it was more consistent with the goals of the FMLA, and provided for a more equitable result, to find that an employee may bring a retaliation claim if the employee was terminated prior to becoming eligible for FMLA leave. Moreover, the court reasoned, the FMLA requires that an employee provide the employer with not less than 30 days’ notice of the date leave is to begin where such notice is practicable. Since the FMLA contemplates notice of leave in advance of becoming an eligible employee, the statute necessarily must protect from retaliation those currently non-eligible employees who give such notice of leave to commence once they become eligible (Gleaton v Monumental Life Insurance Co, January 28, 2010).

STATE LAW CASES

CalCtApp: Provision reducing limitations period to six months is unenforceable

A provision in an employment agreement that shortens the statute of limitations on employee claims to six months violated public policy and so was unenforceable, ruled a California appeals court. In this instance, the employment agreement signed by each employee contained a “limitation on claims” clause which provided that no claims against the company would be valid if asserted more than six months after termination and waived any statute of limitations to the contrary. None of the employee plaintiffs here filed their wage claims within six months of their employment ending; thus, citing the agreement, the employer argued their claims were barred. Under certain circumstances, California law permits parties to agree to a provision shortening the statute of limitations, depending on the reasonableness of the period fixed and the types of claims and rights affected by the provision. The appeals court concluded, however, that claims for violations of wage and hour laws were based on unwaivable and fundamental statutory rights under Section 219 of the Labor Code. Moreover, the applicable three-year statute of limitations for employee claims was much longer than the six-month period imposed by the contract, thus, enforcement of this agreement would unlawfully restrict the employees’ ability to vindicate his or her statutory rights (Pellegrino v Robert Half Int’l, Inc, January 28, 2010).

IllSCt: Workers’ comp benefits payable despite discharge for unrelated conduct

In a case of first impression, the Illinois supreme court ruled that an employer remained obligated to pay temporary total disability (TTD) workers’ compensation benefits to an employee who was injured in the course of employment, even after the employee was discharged for conduct unrelated to his injury. After the employee was injured on the job he received TTD benefits for the time when he couldn’t work and maintenance benefits for the period in which he performed light-duty work. The employee was terminated following a confrontation with a company official over his failure to report an overpayment on a paycheck. The state high court concluded that, despite his discharge, the employer’s obligation to pay TTD benefits continued until the employee’s medical condition stabilized and he reached maximum medical improvement. Nothing in the Workers’ Compensation Act supported a finding that TTD benefits may be denied to an employee who remains injured yet has been discharged for conduct unrelated to his injury, the supreme court reasoned. An employer’s obligation to pay TTD benefits to an injured employee does not cease because the employee is discharged, regardless of whether the discharge was for cause (Interstate Scaffolding Inc v Illinois Workers’ Compensation Comm, January 22, 2010).

MinnSCt: Limitations period on state law claim tolled while federal action pending

The tolling provision of a federal law, 28 USC §1367(d), suspended the running of the limitations period on a state law claim during the time that the claim was pending in federal court and for 30 days after its dismissal, ruled the Minnesota supreme court. In the underlying case, an employee brought suit in state court asserting claims that his employer violated the FMLA and state employment laws. The action was removed to federal court and eventually dismissed. A state court dismissed the employee’s subsequently refiled state law claim as time-barred. Based on the plain language of section 1367(d), however, the state high court concluded the limitations period on the employee’s state law claim had not expired at the time he refiled his complaint. The time during which the state law claim was pending in federal court and the 30 days post-dismissal were not included when computing how much time remained in the limitations period. Consequently, when the employee refiled his state law claim in state court, the one year limitations period had not expired, thus his claim in state court was timely (Goodman v Best Buy, Inc, February 4, 2010).

10thCir: Oklahoma immigration law's employment provisions are stricken in part

While the courts continue to struggle with the interplay between federal and state immigration laws, the Tenth Circuit affirmed a trial court's preliminary injunction barring enforcement of certain employment verification provisions in Oklahoma's comprehensive Taxpayer and Citizen Protection Act of 2007. A provision that sought to create a new cause of action against Oklahoma employers that discharge a US citizen or legal permanent resident employees while retaining undocumented workers was either expressly or impliedly preempted by federal immigration law, the Tenth Circuit held. It also held federal law preempted the state’s requirement that all Oklahoma businesses obtain documents to verify the work eligibility of their independent contractors or withhold certain taxes from them. However, the appeals court split on the legality of the Act's mandate that all public contractors (and subcontractors) enroll in the federal government's E-Verify program. As a result, the circuit court reversed the district court's grant of a preliminary injunction barring enforcement of the E-Verify mandate (Chamber of Commerce v Edmondson, February 2, 2010).

WisCtApp: Fired at-will employee may be entitled to accrued benefits

A bank cannot avoid paying promised benefits to at-will employee if it fired the employee in order to avoid paying her those benefits, a Wisconsin appeals court ruled. The governing plan conditioned receipt of benefits on an employee’s continued employment. The bank argued that because the employee was at-will and could be fired for any reason, and because the plan required employees to be employed when payment under the plan was due, the employee was not entitled to the benefits because she was fired before payment was due. The employee, however, contended the bank fired her in order to avoid paying her what had accrued but not yet been paid under the plan. Although there is no duty to terminate an at-will employee in good faith, the court nonetheless stated, “the requirement that parties act in ‘good faith’ inheres in every contract and, therefore, an employer must comply in good faith with its ‘contractual obligations.’” Because the bank agreed to pay benefits under the plan as long as employees fulfilled the plan’s prerequisites and were employed when payment was due, the bank could not avoid paying the employee under the plan if it fired her in order to not pay her (Phillips v US Bank, NA, February 2, 2010).

AGENCY DEVELOPMENTS

Patricia Smith confirmed as solicitor of labor

Patricia Smith has been confirmed as solicitor of the Department of Labor, with the full Senate approving her nomination to serve as the agency's third highest-ranking official by a 60-37 party-line vote after a four-month delay. The controversial nominee, who previously served as commissioner of the New York State Department of Labor, had faced staunched Republican opposition. Sen. Tom Harkin (D-Ia), chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, applauded Smith’s confirmation. "Her expertise is needed now more than ever, particularly in this economy when American workers are struggling and deserve a strong advocate," Harkin said. Organized labor reacted favorably to the news as well.

HELP Committee approves Becker's NLRB nomination; Reid files cloture

The Senate HELP Committee approved the nomination of labor lawyer Craig Becker to the NLRB on Thursday, voting 13-10 along party lines to send the nomination to the full Senate following a rare hearing on the nominee earlier in the week. The hearing was called at the behest of business groups and Republicans who have mounted stiff resistance to the nomination, fearing Becker’s pro-labor bias. On Friday, Senate majority leader Harry Reid (D-Nev) filed cloture on the nomination. A cloture vote was scheduled for Monday, but was delayed to Tuesday due to the winter storm that paralyzed the Washington, DC area.

OLMS issues proposed rule rescinding labor union trust report (Form T-1)

The Office of Labor-Management Standards has issued a proposed rule to rescind the Form T-1, Trust Annual Report, implemented under regulations promulgated by the Department of Labor in 2008 under the Bush administration. Notice of the proposed rule was published in the Federal Register on February 2. The Form T-1 is an annual financial disclosure report for labor unions to provide information about certain trusts in which they are interested. The DOL stated the trust reporting required under the 2008 rule is overly broad and that separate trust reporting requirements are unnecessary, in part because the agency also proposes to return "subsidiary organization" reporting to the Form LM-2 reporting requirements, which it believes is necessary to satisfy the purposes of the LMRDA.

EEOC data show progress of women, minorities in private-sector employment

The EEOC posted extensive new data last week on job patterns in the private sector as part of the Obama administration's “Open Government Initiative.” The agency posted 11 new aggregate data sets from the most recent edition of its Job Patterns for Minorities and Women in Private Industry, commonly known as the EEO-1 survey, on its Open Government page, a one-stop location for EEOC statistics and other performance-related materials.

TWITTER UPDATES

UP THIS WEEK...

Senate Dems to move jobs bill

Senate Democratic leaders plan to bring a jobs bill to the floor on February 8 that would include targeted small business tax breaks and an extension of unemployment insurance and COBRA benefits. The measure is expected to provide a job creation tax credit for employers adding new employees in 2010 and an expansion of small business expensing rules. The aim is final passage before lawmakers leave for the President's Day recess. However, no Senate Republicans have backed the plan and House Democratic leaders remain wary of the Senate's jobs agenda, which differs in its priorities and involves moving smaller bills over a period of time. (The House narrowly approved a $154 billion jobs package in December.)

SUPREME COURT

High Court review sought in Halliburton assault case

A Halliburton employee was not required to arbitrate personal tort claims arising from a vicious gang rape that allegedly occurred while she was working in Iraq, even though she signed an agreement to arbitrate any and all disputes relating to her employment, the Fifth Circuit ruled last year in Jones v Halliburton. The high-profile case was the impetus behind the Franken amendment to the 2010 Defense Appropriations Act. Now it’s spawned a petition for cert with the Supreme Court. Halliburton asks the High Court to decide whether a court may develop such rules of exclusion that serve to narrow standard, broad arbitration clauses, as the court had done below. “Bad facts make bad law,” the adage goes. This case may well test that theory.

HEALTH CARE REFORM

29 states seek to limit reform

Twenty-nine state legislatures are trying to use the legislative process to seek to limit, alter, or oppose national health care reform, according to a report from the National Conference of State Legislatures. In general, the measures seek to make or keep health insurance optional and allow people to purchase any type of coverage they might choose.

FOCUS: OFCCP

ALJ finds discrimination by Bank of America in long-running case

In a protracted, high-profile case, an ALJ has issued a recommended ruling that Bank of America intentionally discriminated against African-American job applicants for entry-level positions in Charlotte, North Carolina in 1993 and from 2002 to 2005. The case began in 1993 when the OFCCP requested information from the bank, a federal government contractor, as part of a compliance review. Before it could litigate the merits, the OFCCP had to fend off the bank’s challenge to the agency’s authority to conduct the review as a violation of the bank's Fourth Amendment rights.

Budget document cites FY 09 enforcement stats, strategy shift

The OFCCP entered into financial settlements with 94 federal contractors in FY 2009, securing more than $9.3 million in back pay for more than 21,839 American workers, according to an OFCCP FY 2011 budget document, and the agency negotiated settlements that provided 2,249 new job opportunities for affected workers. The OFCCP also referred 20 cases to the Office of the Solicitor for further enforcement and litigation action. The budget document details a shift in enforcement strategy as well: The agency intends to implement “full scale, aggressive enforcement efforts” and “will investigate all discriminatory practices, not just systemic cases.”

CCE issues enforcement report

The OFCCP’s FY 2008 enforcement efforts resulted in $67,518,982 in back pay and annualized salary and benefits for 24,508 American workers, according to an annual report released last week by The Center for Corporate Equality. The CCE analysis provides more detailed information about the OFCCP's enforcement programs than what the agency has released publicly.

OFCCP posts FAQ on Ricci

Federal contractors wishing to avoid a situation like the one faced by the City of New Haven, Connecticut in last year's Supreme Court decision in Ricci v DeStefano should conduct an appropriate job analysis and validate a test or other selection procedure prior to its implementation, according to a new FAQ posted on the OFCCP’s website.

IN OTHER NEWS

January unemployment falls

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the BLS reported Friday. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

Judge’s race, gender matters

A judge's race or gender makes for a dramatic difference in the outcome of cases they hear—at least for cases in which race and gender allegedly play a role in the conduct of the parties, according to two recent studies cited in the ABA Journal.

Report cites union advantage

Unionization is associated with a 15% increase in hourly wages, according to a state-by-state report on unionization by the Center for Economic and Policy Research. CEPR found union members are 19% more likely to have employer-provided health insurance and 24% more likely to have employer-sponsored retirement plans.

Janitors authorize strike

Janitors who clean the majority of commercial office buildings in the Twin Cities voted overwhelmingly to authorize a strike over unfair labor practices if necessary. The SEIU, which represents the janitors, says cleaning contractors are bargaining in bad faith in negotiations for a new contract and retaliating against union members. More than 4,000 janitors have been working without a contract since January 8.

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Editor

Lisa Milam-Perez, JD

About CCH WorkWeek

This weekly newsletter provides corporate counsel and law firm practitioners with need-to-know employment and labor law information in a timely, yet manageable manner. Benefit from news and information in a broader context, with deeper analysis of recent developments and corresponding trends. Delivered to you every Monday, CCH WorkWeek offers timely coverage of breaking legislative developments, regulatory activity, state law changes, key case law and expert commentary by CCH editors.