Labor Relations & Wages Hours Update

April 2015

Hot Topics in LABOR LAW:

General Counsel issues guidance memorandum on ‘quickie election’ ruleBy Pamela Wolf, J.D.

On Monday, April 6, NLRB General Counsel Richard F. Griffin, Jr. issued a guidance memorandum on modifications to the representation case procedures that will take effect on April 14 under the controversial so-called “quickie election” final rule. The memo, which comes only days after President Obama deflected a move to block the rule’s implementation, outlines how new representation cases will be processed from petition filing through certification.

Controversial rule. The final rule, issued on December 15, 2014, revises earlier representation case procedures in an effort to streamline and modernize union election procedures and remove unnecessary delay, according to the Board. However, the rule update was sharply criticized by opponents who say it unfairly favors unions and disadvantages employers by, among other things, shortening the amount of time it takes to get to election day. Those who favor the changes made by the rule say that it finally levels the playing field for employees who want to get to an up-down vote and removes avenues used by employers for unnecessary delay.

Congressional resolution shot down. Just last Tuesday, the president exercised his pocket veto authority to strike down a joint resolution of Congress to prevent the NLRB from implementing the rule under a provision of the Congressional Review Act.

“Workers need a strong voice in the workplace and the economy to protect and grow our Nation's middle class,” President Obama wrote in his Memorandum of Disapproval. “Unions have played a vital role in giving workers that voice, allowing workers to organize together for higher wages, better working conditions, and the benefits and protections that most workers take for granted today. Workers deserve a level playing field that lets them freely choose to make their voices heard, and this requires fair and

streamlined procedures for determining whether to have unions as their bargaining representative. Because this resolution seeks to undermine a streamlined democratic process that allows American workers to freely choose to make their voices heard, I cannot support it.”

Battle not over. Republicans immediately criticized the president’s action and promised continued opposition to the rule. “President Obama has decided to stand with his powerful friends in Big Labor, rather than America’s workers and job creators,” said Rep. John Kline (R-Minn.), chairman of the House Education and the Workforce Committee. “With his veto, the president has endorsed an ambush election rule that will stifle employer free speech, cripple worker free choice, and jeopardize the privacy of working families. This fight isn’t over. Congress will continue to oppose this radical assault on workers and employers, and we will continue to demand a fair union election process.”

What does the final rule do? According to the Board, the final rule:

Provides for electronic filing and transmission of election petitions and other documents;

Ensures that employees, employers and unions receive timely information they need to understand and participate in the representation case process;

Eliminates or reduces unnecessary litigation, duplication, and delay;

Adopts best practices and uniform procedures across regions;

Requires that additional contact information (personal telephone numbers and email addresses) be included in voter lists, to the extent that information is available to the employer, in order to enhance information sharing by permitting other parties to the election to communicate with voters about the election; and

Allows parties to consolidate all election-related appeals to the Board into a single appeals process.

But G. Roger King, Labor and Employment Counsel for the Retail Industry Leaders Association (RILA), Of Counsel with the McGinnis & Yaeger Law Firm, and Senior Labor and Employment Counsel to the Human Resource Policy Association characterized the rule differently. At a hearing on the joint resolution held by the House Subcommittee on Health, Employment, Labor, and Pensions, King raised these objections to the final rule, presented in simplified form below:

It is fundamentally unfair to employees and employers and is an unprecedented partisan policy initiative favoring organized labor. A union can campaign for months, or even years, file a petition with the NLRB at any time it chooses (generally when it reaches a certain level of support), carve out or gerrymander who gets to vote (including micro or fragmented voting units), and have an election as soon as 11 to 14 calendar days after it the petition is filed.

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It is a legal and procedural ‘landmine’ for employers and violates their due process rights.

It significantly curtails the free speech rights of other employees and employers.

It is inconsistent with the legislative history of the NLRA and violates the appropriate hearing requirement of the Act.

It is an unwarranted intrusion into employee privacy rights—employers will be required to furnish, if available, personal email addresses, personal cell phone numbers, and personal home telephone numbers of eligible voters in Board-conducted elections.

It will further erode the Board’s credibility as a neutral arbiter of labor relations issues in the workplace.

It is an irresponsible rejection of Board Members’ responsibility and accountability; the new rule removes those officials who were nominated by the president and confirmed by the Senate from making important election-related decisions and places that decision-making in the hands of individuals who have virtually no public or congressional accountability.

It presents a dangerous precedent for future Boards; the Board’s “extraordinary policy bias in favor of unions” reflected in the new rule only invites future Boards to respond in kind.

New time frames not established. Neither the final rule, nor the General Counsel’s memo, establishes new time frames for conducting elections or issuing decisions, according to the NLRB’s release announcing the General Counsel’s memo. All cases filed prior to April 14 will be processed under the Board’s existing rules.

Training offered. The Board said that prior to the final rule’s implementation on April 14, its 26 Regional Offices will host more than 35 training sessions nationwide for practitioners on the new procedures.

“I am confident that the guidance provided herein will allow regions to implement the final rule effectively and efficiently,” wrote General Counsel Griffin. “I am also confident that the dedication and professionalism consistently demonstrated by the personnel in the Agency’s field offices will be exhibited in the implementation of the Board’s new representation procedures.”

Minor corrections made to ‘quickie election’ final ruleBy Pamela Wolf, J.D.

The National Labor Relations Board is making what it characterized as “minor errors” to its controversial final rule on representation case procedures—the so-call “quickie election” rule. All of the corrections are to supplemental information preceding the

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amendatory language of the rule, according to a notice slated for publication in the Federal Register on Friday, April 10.

The final rule, which was published in the Federal Register on December 15, 2014, has been at the center of a bitterly fought battle. The rule has been the subject of congressional hearings and a joint congressional resolution (S.J. Res. 8; H.J. Res. 29) to block its implementation under the Congressional Review Act. President Obama earlier this month used a pocket veto to strike down the resolution. The battle likely is not over, though, as some lawmakers have declared that they will continue efforts against the final rule.

The errata lists 21 corrections that, among other things, include modifications to citations, footnotes, and statistics used to estimate the significance of the changes wrought by the final rule.

Republican lawmakers continue attack on NLRB ‘quickie election’ ruleBy Pamela Wolf, J.D.

On Tuesday, April 14, as the NLRB’s revised representation case procedures rule went into effect, Republican lawmakers introduced a pair of legislative proposals aimed to roll back what they see as unfavorable provisions of the controversial final rule—after President Obama earlier this month exercised his pocket veto authority to block a joint resolution of Congress that would have prevented the rule’s implementation. Particularly offensive to opponents of the final rule are provisions that permit elections to be held more quickly and give union organizers more employee contact information so that they can make their case to the workers.

Slowing down the time to election. The Workforce Democracy and Fairness Act, first introduced in 2011, would among other things provide that no union representation election could be held less than 35 days after a petition for an election has been filed. Opponents of the final rule, which the NLRB says streamlines procedures and gets rid of unnecessary delays, have warned that the changes wrought by the revisions would permit an election within only 11 days of the petition’s filing—hence, the rule has been dubbed the “quickie election” or “ambush election” rule.

Employers have argued that being unaware that organizing is taking place, they will be taken by surprise and lack sufficient time to make sure that employees have the information they need to make an informed choice about whether to vote for union representation. Those who disagree have pointed out that employers virtually always know that organizing efforts are afoot and very vigorously campaign against unionization with the advantage of easy access to workers.

According to a factsheet posted by its sponsors, the Workforce Democracy and Fairness Act would:

Guarantee workers the ability to make a fully informed decision in a union election. No union election will be held in less than 35 days. Workers will have a

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chance to hear both sides of the debate, and important issues that can determine how a worker votes will be decided before ballots are cast.

Ensure employers are able to participate in a fair union election process. The bill provides employers at least 14 days to prepare their case to present before a NLRB election officer and protects their right to raise additional concerns throughout the pre-election hearing.

Reassert the board’s responsibility to address critical issues before a union is allowed to represent workers. The board must determine the appropriate group of employees to include in the union before the union is certified, as well as address any questions of voter eligibility.

Employee contact information. The Employee Privacy Protection Act, also introduced on April 14, would give employers seven days to provide to union organizers a list of employee names and only one additional piece of contact information as chosen by each individual employee. Republican lawmakers have taken issue with the final rule’s requirement that employers turn over employees’ personal information, including email addresses, phone numbers, shift hours, and locations, to union organizers, which they say is required even if an employee has said he does not want to be contacted by union organizers. But employees who have tried to conduct organizing campaigns say that without this information they have much difficulty contacting workers in an effort to provide information about the upside of unionization, leaving them much less opportunity than employers to make their case to affected workers.

In a fact sheet, the lawmakers claimed that Employee Privacy Protection Act would:

Empower workers to control the disclosure of their personal information. Employers would have seven days to provide a list of employee names and one additional piece of contact information chosen by each individual employee.

Modernize the union election process. In the age of email and smart phones, relying on home addresses is both outdated and dangerous. The bill allows employees to choose the easiest and safest way to communicate with union organizers.

Roll back NLRB policies that jeopardize the privacy of working families. When enacted, the legislation would overturn the board’s “radical invasion of employee privacy.”

The legislative proposals were introduced by Senate Committee on Health, Education, Labor, and Pensions Chairman Lamar Alexander (R-Tenn.), House Education and the Workforce Committee Chairman John Kline (R-Minn.), Senate Employment and Workplace Safety Subcommittee Chairman Johnny Isakson (R-Ga.), and House Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe (R-Tenn.). These lawmakers suggest the pair of bills “will preserve long-standing union election procedures by safeguarding the right of workers to make informed decisions about union

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representation, ensuring the ability of employers to communicate with their employees, and protecting the privacy of workers and their families.”

At least some of the Republican leadership intends to continue the hard-fought battle against the NLRB’s representation case procedures final rule: “Starting today, an ambush union election scheme will begin wreaking havoc on our nation’s workplaces,” said Chairman Kline. “Through his labor board, the president has endorsed new rules that will stifle employer free speech, cripple worker free choice, and jeopardize the privacy and safety of workers and their families. We promised that the fight against ambush elections wasn’t over. That is why today I am pleased to join my House and Senate colleagues in introducing legislation that will rein in the board's unprecedented overreach, protect the rights of workers and employers, and preserve a fair union election process.”

Career lawyer named Regional Attorney for Cincinnati OfficeCareer NLRB attorney Eric V. Oliver has been named Regional Attorney of the agency’s office in Cincinnati, Ohio (Region 9). General Counsel Richard F. Griffin, Jr., made the announcement on Thursday, April 2. In his new job, Oliver will help Regional Director Garey Lindsay enforce and administer the National Labor Relations Act in southern Ohio, eastern Kentucky, southern West Virginia and Clark, Dearborn, and Floyd counties in Indiana. Oliver succeeds Lindsay, who was promoted to Regional Director last year.

Oliver graduated from Oberlin College in 1980 with a degree in Government and Music. He earned his J.D. from Case Western Reserve School of Law in 1983. Oliver began his career with the NLRB in 1984 as a field attorney in the agency’s Fort Worth, Texas, office. After transferring to the Cincinnati office in 1987, he was promoted to the job of supervisory field attorney in 2013.

Nursing home reinstates workers, rescinds subcontracts, withdraws recognition of IBTU localIn light of a federal court injunction, Sprain Brook Manor Rehab LLC has taken action to reinstate two discharged employees and to rescind subcontracts, according to the employer’s affidavit. A judge in the Southern District of New York issued a temporary injunction on March 9, in Fernbach v. Sprain Brook Manor Rehab, LLC, after finding reasonable cause to believe that the Scarsdale, New York, nursing home was a successor employer that utilized subcontractors and recognized a favored union to avoid recognizing and bargaining with its employees’ representative, 1199 SEIU United Healthcare Workers East.

Sprain Brook filed an affidavit with the court announcing that the company had complied with the order, according to an April 3 NLRB release. Pursuant to the injunction order, Sprain Brook has also restored work that had been performed by subcontractors to bargaining unit employees, with the wages and benefits they enjoyed prior to the subcontracting.

The nursing home has also agreed, pursuant to the order, to recognize and bargain with 1199 SEIU and has restored 1199 SEIU’s right to access the facility to meet with management and/or employees, the NLRB said. Sprain Brook and its subcontractors were

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also ordered to withdraw recognition from International Brotherhood of Trade Unions Local 713, which was enjoined from accepting recognition or union dues at the nursing facility.

Additionally, Sprain Brook has held mandatory on-site meetings where the court order was read to employees during each of three shifts at the facility.

Limited issues related to compliance with the order remain pending before the court, according to the NLRB. Litigation of this matter is also ongoing before an NLRB Administrative Law Judge. The preliminary injunction will be in effect until a final order is issued by the Board.

Questionable Delta flight attendant authorization cards prompt IAM to withdraw election applicationOn Monday, April 6, the International Association of Machinists and Aerospace Workers (IAM) announced that it had withdrawn its application for an election that would have determined whether the union would become the collective bargaining representative of Delta flight attendants. The union cited authorization cards with “insufficient information” or “questionable signatures” that rendered the union’s showing of interest “borderline” as the reason for its application withdrawal. The union also made clear, however, that it will continue its organizing drive to represent the flight attendants.

After what the IAM called a “historic organizing drive” by Delta flight attendants over the past few years and receipt of what it believed was a substantial majority of authorization cards from the flight attendant group, the union filed the cards with the National Mediation Board (NMB), seeking an election.

But the union said it recently discovered that a number of the cards submitted “contain insufficient information or questionable signatures.”

“By our calculation, the number of questionable cards makes our showing of interest borderline,” the IAM wrote in a statement. “However, rather than waiting months for a determination by the NMB, we believe the best course of action is to avoid further delay and withdraw our current application, renew our organizing drive, and file again twelve months from the date of the dismissal of our application, as is permitted by law.”

Union shares EEOC reasonable cause finding that NYC violated Title VII, EPAOn Monday, April 6, the EEOC released its determinations in response to complaints that were filed by Communications Workers of America Local 1180, finding reasonable cause to believe that New York City has violated both Title VII and the Equal Pay Act of 1963 (EPA) in its employment and salaries of administrative managers, according to the union. The allegations included both race and gender discrimination.

The city has until April 17 to respond to the EEOC’s proposed terms of conciliation with a counter-proposal. If the city does not come forward with a proposal of its own, or the commission finds the city’s proposal unreasonable, the agency could refer the matter to

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the Department of Justice to determine whether the federal government will file a lawsuit against New York City.

Local 1180 reported several recommendations that it says the EEOC has made to the city in order to right the wrongs the agency found, including increasing the minimum salary for administrative managers to $92,117 and submitting back wages totaling approximately $188 million and compensatory damages of nearly $57 million. However, as the union pointed out, these are merely recommendations that the city is free to reject.

The union was nonetheless pleased with the adverse determination that the EEOC has made against the Big Apple—the commission will now take steps to try to eliminate the alleged unlawful employment practices. And, as the union noted, there is still a lot of work to do.

In a Warner Cable news interview, CWA Local 1180 President Arthur Cheliotes said that the complaints involve longstanding NYC practices under which women and minority managers get paid less than their white-male counterparts. According to Cheliotes, the affected managers were not represented by the union until 2009. Because they had not been organized earlier, they lacked the opportunity to address the problem.

The cable news channel also reported a NYC spokesperson’s comment that there has not yet been a hearing in the case, and that at arbitration expected later this year, the city will make clear that salaries have been set based on responsibility and experience.   

“This process could still take many years,” Local 1180 wrote in its notice to members. “We thank you for your patience. We know it hasn’t been easy. Our members have toiled for decades, delivering important public services without the recognition or compensation they deserve. We are demanding equal pay for equal work and we are happy to share this next step with you in our Journey to Justice for Administrative Managers.”

NMB asks DOJ to investigate IAM’s questionable Delta flight attendant authorization cards By Pamela Wolf, J.D.

On the heels of an announcement April 6 by the International Association of Machinists and Aerospace Workers (IAM) that, due to questionable authorization cards, it has withdrawn its application for a representation election by Delta flight attendants, the National Mediation Board (NMB) is referring the matter to the Department of Justice for further review.

The IAM on Monday said that it had recently discovered that a number of the cards submitted “contain insufficient information or questionable signatures”—enough to make its showing of interest borderline. The union therefore withdrew its election application.

Three days later, on April 9, the NMB issued a letter to the airlines and the union, advising both that the Board is referring the matter to the DOJ. “The Board has reason to

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believe that some unknown person or persons knowingly submitted authorization cards with fraudulent signatures in possible violation of federal law,” the letter states.

“All individuals, organizations, and carriers subject to the NMB’s jurisdiction must understand that the Board regards the integrity of its election process to be a matter of paramount importance since it lies at the heart of the NMB’s statutory mission,” NMB General Counsel Mary L. Johnson wrote. She also noted that NMB investigators “examine each card submitted and compare the signature on the card to the signature sample provided by the carrier.”

“The integrity of the NMB’s election process also relies on each individual employee only submitting an authorization card that he or she personally signed and dated for presentation to the NMB,” according the letter. “The NMB’s election process has not been respected in this case. In view of these circumstances, the Board has decided to refer the matter to the appropriate office of the United States Department of Justice for further review. 

Nurses picket, county workers vote for Teamsters, Kroger employees ratify new contractNew York City nurses stage informational picketing. After months of negotiations, thousands of registered nurses from 14 New York City hospitals are participating in a day-long citywide informational picket on April 16. To get the word out on their push for “safe staffing” levels, the nurses were going to be picketing in front of area hospitals in Manhattan, Brooklyn, the Bronx, and Staten Island.

The action comes as nurses protest what they characterize as unsafe RN staffing levels in some units, as well as excessive patient assignments for nurses and caregivers that threaten to compromise the quality and safety of patient care. RNs have focused on fighting serious staffing shortages while the healthcare industry is rapidly consolidating, according to the New York State Nursing Association.

In 2014 alone there were more than 25,000 formal RN complaints to management in downstate hospitals for shortages that affect patient care. In some cases, nurses have seen their patient assignments doubled or tripled, NYSNA said. These levels conflict with professional peer-reviewed medical studies that have established safe staffing levels. Medical research clearly shows that when nurses take on too many patients, the risk of illness and health complications increases dramatically.

County employees vote to join Teamsters. San Bernardino County public employees have voted to affiliate with the Teamsters Union, paving the way for more than 13,500 workers to have a more secure future, Teamsters General President Jim Hoffa announced April 14. About 61 percent voted in favor of Teamster representation. The workers had been represented by the San Bernardino Public Employees Association.

Hoffa noted that the Teamsters “have been successful representing public employees across the country, including those employed in cities, towns, counties and public

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universities, such as the University of California system, Penn State and the University of Minnesota. We expect to be able to help the workers in San Bernardino as well."

The Teamsters have been successful in winning wage and benefit gains for the 14,000 members of Local 2010 employed at the University of California. The union also represents employees of police and fire departments across the state, as well as teaching assistants in Los Angeles public schools. There are more than 260,000 public employees nationwide who are Teamster members, according to the union.

Kroger employees ratify new contract with UFCW. The Kroger Co. associates working at Kroger in the Louisville division have ratified a new labor agreement with UFCW Local 227 covering nearly 14,000 associates working in 89 stores in the Louisville and Southern Indiana areas.

"We are pleased to reach an agreement that is good for our associates. This new contract provides wage increases, affordable health care and investment in our associates' pension fund to support their retirement," said Calvin Kaufman, president of Kroger's Louisville division. "This agreement comes after thoughtful and productive work by both the company and union bargaining committees. I want to thank our associates for supporting the agreement and for the excellent service they provide to our customers every day."

Kroger, one of the world's largest retailers, employs nearly 400,000 associates who serve customers in 2,625 supermarkets and multi-department stores in 34 states and the District of Columbia.

Board sends signal on right-to-workOn April 15, the NLRB signaled its willingness to take another look at its stance on allowing unions to charge nonmembers a fee for processing individual grievances. In right-to-work states—and their number is growing—the Board’s rule is that it may not charge nonmembers a fee for processing grievances, absent a valid union-security clause, which right-to-work states prohibit.

Specifically, the Board used the ALJ’s decision last year in Buckeye Florida Corp., which found that the Respondent violated Section 8(b)(1)(A) by maintaining and implementing a “Fair Share Policy” requiring nonmember bargaining-unit employees to pay a grievance-processing fee, as the occasion to seek briefing from the parties and interested amici on the following questions:

(1) Should the Board reconsider its rule that, in the absence of a valid union-security clause, a union may not charge nonmembers a fee for processing grievances? Should it adhere to or overrule Machinists, Local No. 697 (H.O. Canfield Rubber Co.), 223 NLRB 832 (1976), and its progeny?

(2) If such fees were held lawful in principle, what factors should the Board consider to determine whether the amount of such a fee violates Section 8(b)(1)(A)? What actions could a union lawfully take to ensure payment?

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In answering these questions, the parties and amici are invited to submit empirical and other evidence.

Briefs not exceeding 25 pages in length may be filed with the Board in Washington, D.C., on or before June 1, 2015. The parties may file responsive briefs on or before June 15, 2015, which shall not exceed 15 pages in length. No other responsive briefs will be accepted. The parties and amici shall file briefs electronically at https://apps.nlrb.gov/eservice/efileterm.aspx and serve all case participants.

A list of case participants may be found at http://www.nlrb.gov/case/12-CB-109654 under the heading “Service Documents.”

If assistance is needed in filing through https://apps.nlrb.gov/eservice/efileterm.aspx, please contact Gary W. Shinners, Executive Secretary, National Labor Relations Board.

FMCS to conduct training on new NLRB arbitral review standardThe Federal Mediation and Conciliation Service’ Institute for Conflict Management, the FMCS’ training arm, will hold a training session May 12 for labor and management advocates seeking more information about changes to the NLRB’s standards for reviewing arbitral awards and grievance settlements, and their implications for collective bargaining and arbitration practice.

NLRB and FMCS experts as well as leading labor and management advocates will provide guidance on the new deferral standard and its implications for collective bargaining negotiations, pre-arbitral strategy, and advocacy during arbitration proceedings.

NLRB General Counsel Richard F. Griffin, Jr., will deliver opening remarks, followed by discussions led by NLRB Deputy Assistant General Counsel John Doyle, FMCS Director of Arbitration Services Arthur Pearlstein, Doreen Davis of Jones Day, and Keith Bolek of O’Donoghue & O’Donoghue. Presenters will feature case studies, practice tips, and small group exercises to cover all aspects of the revised standard and the implications for labor-management negotiations and arbitration. Attendees “will leave with a clear understanding of the new deferral standard,” an April 17 FMCS press release notes, and will receive an FMCS Certificate of Training upon successful completion of the workshop.

Registration will cost $250 and will be limited to the first 25 persons who sign up. For information and registration call 202-606-3627 or 206-553-2773, or email FMCS_institute@fmcs.gov. Online registration is available at http://goo.gl/o3vdvu.

TPA bill splits Dems, riles laborSenate Finance Committee Chairman Orrin Hatch (R-Utah), Ranking Member Ron Wyden (D-Ore.), and House Ways and Means Chairman Paul Ryan (R-Wis.) have introduced bipartisan, bicameral Trade Promotion Authority (TPA) legislation which, according to bill sponsors, “establishes concrete rules for international trade negotiations to help the United States deliver strong, high-standard trade agreements that will boost

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American exports and create new economic opportunities and better jobs for American workers, manufacturers, farmers, ranchers, and entrepreneurs.”

The legislation allows for a trade deal to be submitted to Congress for a straight up-or-down vote, but with checks in place to withdraw fast-track procedures to hold the administration accountable—“to hit the brakes on bad trade deals before they reach the Senate or House floor,” in the words of its Democratic sponsor.

On Thursday, April 16, President Obama indicated his support for the measure, not surprisingly, perhaps, as its sponsors note that trade promotion authority has been “sought by every President since FDR.”

According to a press statement announcing the bill’s introduction, The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015) “outlines 21st century congressional negotiating objectives that any administration—Republican or Democratic—must follow when entering into and conducting trade talks with foreign countries.” The legislation also increases transparency, they say, by requiring that Congress have access to important information surrounding pending trade deals and that the public receive detailed updates and see the full details of trade agreements well before they are signed.

A bill summary provides further details. Essentially, TPA-2015 establishes new trade-negotiating objectives, including measures to combat currency manipulation and eliminate barriers to innovation and digital trade, among others. Updated provisions address government involvement in cyber theft and protect trade secrets; the negotiating objectives continue to call for trade agreements to provide a high standard of intellectual property protection. The bill also updates provisions to promote human rights and strengthen labor and environment protection, to reflect America’s most recent trade accords.

As noted, the bill also modifies existing TPA procedures to enhance executive branch accountability and further strengthen Congressional oversight, with a new mechanism for the removal of expedited procedures for a trade agreement if, in the judgment of either the House or Senate, that agreement does not meet the requirements of TPA.

The TPA bill comes as two of the most ambitious trade negotiations in the nation’s history—the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP)—are underway to further tear down trade barriers to American goods and services.

“If we want to have a healthy economy with better jobs and bigger paychecks for more families and individuals, we must engage with other nations through trade. Our nation has been without Trade Promotion Authority since 2007,” Hatch said. “So, while other nations have moved forward and created trade agreements to benefit their workers, the United States has fallen behind.”

The TPA legislation “is a smart, bipartisan compromise that will help move America forward,” he added. “The renewal of TPA will help American workers and job creators

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unlock new opportunities for growth and promote better, higher-paying jobs here at home.”

Wyden, the bill’s Democratic sponsor, echoed these sentiments. “Opening foreign markets, where most of the world’s consumers reside, is critical to creating new opportunities for middle-class American jobs. This bill, together with strong new enforcement tools, Trade Adjustment Assistance and the Health Coverage Tax Credit, sets our country on the right track to craft trade policies that work for more people,” he said.

“I'm proud this bipartisan bill creates what I expect to be unprecedented transparency in trade negotiations, and ensures future trade deals break new ground to promote human rights, improve labor conditions, and safeguard the environment.”

Labor opposes the bill. Organized labor has long decried fast-track authority, and union leaders were predictably disheartened by the most recent legislation. “At a time when workers all over the country are standing up for higher wages, Congress is considering legislation that will speed through corporate-driven trade deals,” the AFL-CIO’s Richard Trumka lamented in a statement issued Thursday.

“For decades, we’ve seen how fast-tracked trade deals devastated our communities through lost jobs and eroded public services. We can’t afford another bad deal that lowers wages and outsources jobs. That’s why Congress must reject Fast Track (TPA-2015) and maintain its constitutional authority and leverage to improve the TPP and other trade deals.”

“Trade deals have wide-ranging impacts and shouldn’t be negotiated behind closed doors and then rubber-stamped,” he continued. “The current Trans-Pacific Partnership deal under discussion would cover 40 percent of the world’s GDP. A deal this big should be debated in a full and open manner like every other piece of legislation. Working people are showing tremendous courage standing up to the low-wage, corporate agenda. It’s time for politicians to do the same.”

And labor has a critical mass of liberals on Capitol Hill on their side on the measure, which divides Congressional Democrats. Rosa DeLauro (D-Conn) issued a statement registering her opposition to the bill, noting that it “would not alter the core Fast Track delegation of authority that Congress has only authorized once in the past 21 years.”

DeLauro cited problems with the Trans-Pacific Partnership, which “has been negotiated in secret for the last six years, and now Members of Congress are being asked to rubber stamp it. Fast tracking the TPP would make it easier for corporations to offshore Americans jobs and force our workers to compete with those in Vietnam making less than 60 cents an hour. It will put our health at risk by allowing unregulated food into our country, such as seafood from Malaysia, where banned toxic chemicals have been found in the seafood.” She also noted there were no enforceable currency manipulation provisions contained in the TPP—even though 230 representatives and 60 senators have

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urged the administration that a “strong, enforceable currency chapter” in the TPP was essential. And “there would be no way to fix that with Fast Track in place.”

House Dems push for agency movement on Fair Pay and Safe workplaces EO regsOn Thursday, April 16, 80 House Democrats prodded the Department of Labor and OMB to complete the review required in order to implement the provisions of EO 13673, President Obama’s Executive Order on Fair Pay and Safe Workplaces. Robert C. “Bobby” Scott (D-Va), Ranking Member of the House Committee on Education and the Workforce, and Elijah Cummings (D-Md), Ranking Member of the Committee on Oversight and Government Reform, led the congressional movement, urging the agency officials, in an April 15 letter, “to complete the review of proposed rules and guidance so they may be released for notice and public comment as soon as possible.”

Currently, regulations require that the government contract with companies that have a satisfactory record of performance, integrity, and business ethics. However, this contracting system does not effectively review the responsibility records of companies before awarding contracts, nor does it adequately impose conditions on violators that encourage them to reform their practices, according to a press statement issued by Scott and Cummings. They noted that a 2010 GAO report found that one-third of the companies that received the largest sanctions for violations of federal wage, health, and safety laws were still able to acquire government contracts.

EO 13673 would ensure that contractors must comply with the law before they are able to receive new federal contracts. The executive order ensures that contracting agencies have the information they need to effectively evaluate a prospective contractor’s record of labor law compliance. Also, when contractors and prospective contractors are found in violation of federal law, they are given the opportunity to remedy their labor violations before the federal government takes any action. Companies facing suspension or disbarment will have full due process rights to challenge such action, the representatives were careful to note. They also pointed out that EO 13673 has the support of 68 women’s, civil rights, and labor groups, and that a coalition of general and specialty construction contractors have come out in support of the President’s measure.

“The Fair Pay and Safe Workplaces Executive Order cracks down on federal contractors who break the law and ensures that all hard-working Americans get the fair pay and safe workplaces they deserve,” said Scott in a letter to the agency heads. “It is unfair for good actors to be undercut while competing against companies that cut corners in safety, fair pay, and compliance with non-discrimination laws.”

“All Americans—including those employed by federal contractors—deserve safe working conditions,” added Cummings. “This Executive Order will help achieve that goal by ensuring that contractors comply with federal and state labor laws. I applaud the President for this initiative and hope to see it swiftly implemented.”

GOP leaders want IRS to look into worker centers’ tax-exempt statusSenate Finance Committee Chairman Orrin Hatch (R-Utah) and House Ways and Means Chairman Paul Ryan (R-Wis.) have asked IRS Commissioner John Koskinen to review

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whether “worker centers” are properly entitled to tax-exempt status as 501(c)(3) organizations.

As the GOP leaders note, worker centers are “typically small organizations that provide services to their members such as job training, education, and legal assistance. Most file as 501(c)(3) charitable organizations, and, in many cases, this designation may be appropriate.” However, some of these organizations have been engaging in conduct akin to labor unions, Hatch and Ryan contend, including protesting and picketing—and even negotiating on behalf of specific workers. Thus, in an April 15 letter to the commissioner, they requested the IRS to look into whether in fact they should be disqualified from tax-exempt status.

“This conduct may disqualify those worker centers for one of two reasons—first, the worker centers’ activities accrue to the benefit of private individuals, rather than the general public; and, second the activities closely resemble those traditionally conducted by labor organizations,” the letter notes. Consequently, they might more appropriately be organized as 501(c)(5) organizations, in which case “donations to them should not qualify for tax deduction.”

The House Committee on Education and the Workforce has already asked the DOL to review worker centers’ filing requirements, the authors pointed out, and asked the IRS to undertake a similar review.

Metra and unions sign on to FRA confidential safety reporting systemMetra management representatives and several transportation unions joined officials from the Federal Railroad Administration (FRA) on Thursday, April 16, to announce the creation of a “Confidential Close Call Reporting System” designed to proactively address safety issues and create a more positive safety culture.

Labor, management, and FRA officials signed a memorandum of understanding that commits to implementing the voluntary system, according to a Metra release. Officials from the American Train Dispatchers Association, Transportation Communications Union, Brotherhood of Locomotive Engineers and Trainmen, and Sheet Metal, Air, Rail and Transportation Workers signed off on the MOU, along with Metra and FRA representatives.

Confidential reporting of safety issues. Under the new system, employees will be able to confidentially report “close calls,” such as safety concerns or violations of operating rules, without facing sanctions from Metra or the FRA. The aim of the system is to collect data about close calls that otherwise would have gone unreported or underreported, and to use the data to identify safety hazards and take corrective steps before an accident occurs. Corrective steps may include new or better training, physical changes, or safety or operating rule changes.

Confidentiality will be maintained by reporting the close calls to a third party, the National Aeronautics and Space Administration, which will remove any information about the incidents that could lead to the identification of the whistleblowing employee.

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NASA will compile the data and then forward it for analysis by a peer review team of labor, Metra management, and FRA representatives that will recommend corrective action. NASA also will monitor trends across railroads and share results.

The FRA says that the system complements existing safety programs, builds a positive safety culture, creates an early warning system, focuses on problems instead of people, provides an incentive for learning from errors, and targets the root cause of an issue, not the symptom.

What are close calls? A close call is defined by the FRA as “a situation in which an ongoing sequence of events was stopped from developing further, preventing the occurrence of potentially serious safety-related consequences.” Examples include trains traveling at excessive speed, workers nearly struck by trains, trains running through a switch, or a passenger door opened on the wrong side of the train. Personal injuries, serious train accidents, and alcohol or drug use would not be considered a close call.

Positive results. The FRA has promoted the adoption of the new system by a handful of railroads so far. Results from railroads that have adopted such systems are encouraging. A confidential close call reporting system resulted in a 31-percent increase in the number of cars moved between minor derailments and a 90-percent drop in disciplinary cases at one railroad, according to the FRA. That railroad, which was not been identified, also reported significant improvements in safety culture and labor-management cooperation.

Metra said that the adoption of the Confidential Close Call Reporting System will bolster its numerous existing safety programs and reinforce safety as Metra’s highest priority. “Safety is Metra’s highest priority, and this new program is a major and exciting new enhancement to our safety efforts,” remarked Don Orseno, Metra Executive Director/CEO. “We are particularly pleased with the enthusiastic cooperation of our labor unions, who have demonstrated their commitment to making Metra the safest possible railroad.”

UFCW files NLRB charge against Walmart after sudden store closures

By Pamela Wolf, J.D.

The United Food and Commercial Workers International Union has filed a charge with the National Labor Relations Board alleging that Walmart’s recent closure of its supercenter store in Pico Rivera, California, and the resulting termination of more than 500 workers without notice, was in response to employees’ vigorous and sustained efforts to improve wages and working conditions, and not the “plumbing issue” purportedly cited by the retail giant as the reason for the closure. The similar closure of the four other stores, also purportedly over plumbing problems, was designed to “mask” Walmart’s real aim of punishing employees for their concerted actions, according to the union.

Walmart has long been at the epicenter of protests over low wages and undesirable working conditions. However, in February, the retailer announced a series of wage increases that includes a starting pay boost to $9 an hour beginning that month, and another increase to at least $10 an hour by February 2016.

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This most recent controversy has sparked much controversy and spawned additional protests and other actions by groups sympathetic to the displaced Walmart workers. The other Walmart stores suddenly closed because of plumbing problems were located in Florida, Oklahoma, and Texas, according to media reports. In its NLRB charge, the UFCW is seeking an immediate injunction that would force Walmart to either reinstate or rehire the 2200 workers who have been left without jobs as a result of the five store closures.

“Walmart has claimed that there is a ‘plumbing issue’ which caused it to suddenly close the store without warning,” the union states in the charge. “City officials in Pico Rivera say that nothing has been brought to their attention and no permits at all have been sought for any work. Walmart has targeted this store because the Associates have been among the most active Associates around the country to improve working conditions.

“In order to mask this, Walmart has closed 4 other stores making the same ‘plumbing’ claim. Other local government officials have raised similar concerns that this is all pretextual. It is unheard of in the retail industry to close stores which are profitable just to fix ‘plumbing.’ Walmart has refused to disclose the nature of the ‘plumbing’ issue or to explain why it was necessary to close the store to fix ‘plumbing.’

“This unprecedented ‘closure’ to fix ‘plumbing’ is part of Walmart's overall national strategy to punish Associates who stand up and speak out for better working conditions. The General Counsel has already issued complaints in many other cases which are in various stages of litigation. One Administrative law Judge has recently issued a decision finding many violations. This is just another blatant example of unlawful retaliation which affects not only the over 500 Associates at Pico Rivera but the approximately 1700 more affected in other stores.”

In a press release, the UFCW stated that workers with OURWalmart (Organization United for Respect at Walmart) had filed the NLRB charge. However, the UFCW is listed as the charging party. OURWalmart, backed by the UFCW, has been the driving force behind many of the protests against Walmart. But both organizations have disclaimed any intent to become the recognized collective bargaining agent of Walmart employees. Several courts have banned agents of both OURWalmart and the UFCW who are not Walmart associates from entering Walmart property or stores except to shop.

Walmart cites need for repairs, upgrades. A Walmart representative defended the retailer’s actions, explaining that the closed stores had experienced the greatest incidences of recurring plumbing issues in a two-year period, according the media reports. The same representative said that the permits had not yet been sought because the full extent of the work required is not yet known, and there may also be other upgrades that would require additional permits.

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German-style work council in peril at Chattanooga VW plant?By Pamela Wolf, J.D.

The German-style “work council” is once again drawing attention amid media reports that United Auto Workers Local 42 is either seeking or about to seek recognition as the exclusive bargaining agent of employees at the Volkswagen Plant in Chattanooga. Local 42’s president said that more than 50 percent of employees have signed authorization cards that would permit the German automaker to recognize the union as the exclusive bargaining agent of blue collar workers at the plant, according to the Times Free Press. If that happens, the first American experiment with European-style work councils may end up with a less-than stellar score.

In July 2014, following a high-profile union election defeat in an area of the country that has not taken well to unions, the UAW announced the formation of Local 42. During the election campaign there were charges that VW and the union had struck a deal in advance that would put the UAW in the bargaining seat. According to the UAW, Local 42 was organized by VW workers with the goal of giving employees a voice in the workplace through the VW works council. It collects no dues and does not operate as a traditional union.

Representative engagement. In December 2014, Local 42 garnered enough employee support to become recognized under Level 3—the highest level— of Volkswagen’s Community Organization Engagement (COE) policy.

To be eligible to engage with the company, an organization must “exist for the primary purpose of representing employees and their interests to employers consistent with the National Labor Relations Act.” Access to management depends upon levels of employee support for the organization:

Organizations with greater than 15-percent support of employees in the relevant employee group (Level 1) may use employer-provided space once each month for internal employee meetings on nonwork time; may post announcements in company-designated locations; and employee-only organizational representatives may meet monthly with VW HR “to present topics that are of general interest to their membership.”

Organizations with greater than 30-percent support (Level 2) may do all of the above, plus increase their meeting times on the employer’s premises to once per week; invite external representatives to meet on-site (again on nonwork time) once monthly; post materials on a “branded” or dedicated posting location; and meet quarterly with a member of the Chattanooga Executive Committee.

Since access or engagement opportunities are cumulative, organizations with greater than 45-percent support (Level 3) may additionally meet on-site (on nonwork time) “as reasonably needed;” and meet biweekly with HR and monthly with the Chattanooga Executive Committee.

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Rival union. In February 2015, the American Council of Employees (ACE) was verified at Level 1 under the COE policy. According to some media reports, ACE is a group that may have been backed by business and political interests. However, ACE calls itself “an independent employee council created to ensure that all VW Chattanooga employees have a voice on the Volkswagen Global Works Council.” The organization also says that it is a local, not national, group that has no outside influence or political agenda.

ACE officials are not happy with reports that Local 42 is seeking recognition through authorization cards instead of by secret ballot election, according to the Chattanoogan. If the reports are true, they may give new life to earlier charges of a deal between VW and the UAW.

Volkswagen’s reaction. The German automaker offered little that would shed light on these reported developments: “Volkswagen Chattanooga management have been meeting regularly with UAW Local 42 and the American Council of Employees, according to the level of support they have achieved within the workforce as determined by our Community Organization Engagement policy,” a VW representative told Employment Law Daily. “The policy has been an effective way to maintain dialog with each of the groups, and we intend to continue with the COE policy at this time.”

Because the meetings under the policy are internal, the VW representative could not comment on any of the topics discussed.

Notably, the UAW’s Local 112, undeniably similar to a German-style work council, was formed in October 2014 to provide representation for workers at a Mercedes-Benz U.S. International (MBUSI) assembly plant in Vance, Alabama, near Tuscaloosa.

The UAW declined to comment to Employment Law Daily on behalf the union or Local 42’s president.

LEADING CASE NEWS:

D.C. Cir.: Union not liable for derisive Facebook posts by non-agent members during strikeBy Marjorie Johnson, J.D.

The D.C. Circuit refused to hold a union liable for failing to remove derisive and allegedly threatening comments posted on a Facebook page maintained for union members, denying a non-union employee’s petition for review of the NLRB order dismissing his charge on this issue. Significantly, there was no indication or allegation that union officials or agents posted the contested comments and the record revealed that only union members could post and/or view comments on the Facebook page. However, the appeals court declined to address whether the postings would be deemed “threatening” if made by union agents and emphasized that the Board was not necessarily foreclosed from ever finding a union guilty of unfair labor practices for postings on “closed” Internet sites (Weigand v. NLRB, April 17, 2015, Edwards, H.).

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Facebook page created. The employee worked for Veolia Transportation Services and was a member of the collective bargaining unit represented by the union, but he was not a union member. From 2011 to 2012, the union and Veolia were engaged in collective bargaining negotiations regarding the terms of a successor agreement and a breakdown in the negotiations led to a six-day strike in March 2012. During the negotiations and strike, the union used a Facebook page to communicate with members about its progress and its planned picket lines.

The account was created by the union VP and could only be accessed by union members who were employed and in good standing with the union.

Threats against “scabs.” Leading up to and during the strike, some union members used the Facebook page to make disparaging remarks about people who crossed the union’s picket line. For example, the posted comments included a rhetorical question asking if the picketers could “bring the Molotov Cocktails” to picket the hotel where the “scabs” were being housed. However, there were no allegations of violence or untoward disturbances during the strike.

Lower proceedings. After the employee filed a complaint, the Board’s Acting General Counsel issued a complaint alleging, amongst other things, that the union had committed an unfair labor practice in violation of Section 8(b)(1)(A) based on the union members’ posts on its Facebook page that threatened employees with less favorable representation and physical harm because they refused to participate in the strike. The General Counsel argued that the union had a “duty to disavow” the Facebook comments, just as it would have a duty to disavow picket-line misconduct.

The Administrative Law Judge (ALJ) disagreed and held that the Facebook page was in no way “an electronic extension” of the picket line as it was limited to union members in good standing and no other persons could post comments or even view comments that had been posted. There was also no indication or allegation that union officials or agents posted the contested comments. The Board affirmed on this point, agreeing that the union was not responsible for the Facebook comments because the individuals who posted them were neither alleged nor found to be agents of the union. Two members of the Board’s three-person panel also held that the Facebook comments were not “threats” under Section 8(b)(1)(A).

On appeal, the employee did not challenge the Board’s finding that the persons who posted the comments on the Facebook page were not agents of the union. Instead, he argued that the union should be held responsible for the Facebook entries because a union officer controlled the Facebook page. The D.C. Circuit disagreed and therefore denied his petition for review.

Private forum. In adopting the ALJ’s opinion, the Board reasoned that a private Facebook page available only to union members was not analogous to a union’s picket line. A picket line—unlike a private Facebook page—is a “highly visible” signal to the public and all employees of a dispute with the employer and the “coercive effect” of a threat made on a picket line is “immediate and unattenuated.” The D.C. Circuit agreed,

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finding that in stark contrast to violence or threats occurring on a picket line, the speech complained of here occurred on a private forum on the Internet that was meant for union members’ eyes only. Thus, the derisive messages were not aimed at either the public at large or at non-union persons who opted to cross the picket line.

Non-agent conduct. Because the disputed postings were made by persons who acted on their own without the permission of the union, the Board did not err by concluding that the union was not liable for the contested speech posted by persons who were not acting as union agents. The employee unsuccessfully tried to overcome this point by suggesting that, in maintaining the Facebook page, the union somehow facilitated the publication of threats against persons who opted to cross the picket line. However, the record simply did not support this contention as the Facebook page was private and for union members only. Indeed, the employee and other non-union persons could not even view the comments. Thus, at most, the union’s maintenance of the Facebook page facilitated communications between union members; not threats against non-union employees. The Board reasonably concluded that this was not a violation of the Act.

Finding that the Board’s decision regarding the Facebook postings was “the product of reasoned decisionmaking” and based on the record, the D.C. Circuit affirmed its judgment that the union was not liable for the acts of non-agents. Accordingly, it found it unnecessary to determine whether the legal considerations might be different in a case in which real “threats” were posted by union members on an open Internet site that could be readily viewed by persons who were the subjects of the threats. It also declined to address whether the disputed Facebook postings would be deemed “threatening” if made by agents of the union and emphasized that its opinion was not meant to suggest that the Board was foreclosed from ever finding a union guilty of unfair labor practices for postings on “closed” Internet sites.

Communications Decency Act. Finally, the D.C. Circuit rejected the employee’s assertion that the Board erred in refusing to consider and reverse the ALJ’s holding that the union was not liable under the Communications Decency Act for posting threats on its Facebook page. Because the Board properly applied NLRA law in resolving this case, it did not need to analyze the CDA as an additional defense for the union, let alone consider the employee’s unsupported assertion that the CDA constituted an affirmative cause of action necessary to the Board’s analysis.

The case number is 14-1024.

Attorneys: John N. Raudabaugh, National Right to Work Foundation, for Charles Weigand. Heather Stacy Beard for NLRB.

3d. Cir.: Board must modify test for analyzing 8(a)(3) benefits discriminationBy Lisa Milam-Perez, J.D.

Finding fault with the test used by the NLRB to hold that a rehab and nursing facility had improperly withheld favorable benefits changes from employees eligible to vote in an impending union election, the Third Circuit vacated the Board’s finding that the

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employer violated NLRA Section 8(a)(3). The appeals court instructed the Board to modify its longstanding test in accordance with the standard handed down by the Supreme Court in NLRB v. Great Dane Trailers, Inc. However, the court otherwise affirmed the agency’s determinations that the employer unlawfully interrogated at least one employee and also created an unlawful impression of surveillance (800 River Road Operating Co. LLC dba Woodcrest Health Care Center v. NLRB, April 29, 2015, Rendell, M.).

Pre-election ULPs. Following a representation election to represent a group of employees at one of the health care employer’s four facilities, the SEIU emerged victorious. The employer then filed an election objection and the union countered with unfair labor practice charges. The NLRB determined that the employer unlawfully withheld benefits from employees who were eligible to vote in the election, coercively interrogated several employees about their support for the union, and created an unlawful impression of surveillance (on this charge, the Board had rejected an ALJ’s contrary finding). Before the Third Circuit were the employer’s petition for review and the Board’s cross-petition for enforcement.

Withholding of benefits. Although the employer had recently made changes to its health insurance plan that increased employee costs while also reducing benefits, after receiving a number of complaints, it opted to make some (retroactive) improvements and to reduce employee premiums. Four days before the scheduled election, all of the employees at the facility got word of the changes except for those who were eligible to vote. These employees found out about the changes, though, and shortly after the election, they asked whether they too were eligible. But the employer told them that “we cannot negotiate your contract, your benefits, your insurance because right now you are in the critical period with the Union” and “we cannot discuss this matter at this time.”

The Board found the employer violated Sec. 8(a)(3) by announcing and implementing a reduction in healthcare premiums and copays for all of its employees except for those who were eligible to vote in the representation election. In doing so, it merely affirmed the ALJ’s findings for the reasons set forth in his decision, offering no discussion of its own regarding applicable Board law on the issue.

Board test was faulty. Noting that “in order to find a Sec. 8(a)(3) violation, consideration must be given to the employer’s motive,” the Third Circuit pointed out that the High Court in Great Dane Trailers clearly set forth the manner in which the Board was to evaluate such an allegation. First, it has to make a threshold determination of whether the conduct alleged was “inherently destructive” of important employee rights. In such case, an unlawful motive may be presumed, and the employer is to be afforded the chance to rebut this presumption. The Board could nonetheless infer improper motive in such a scenario, if doing so would “strike the proper balance between the asserted business justifications and the invasion of employee rights in light of the Act and its policy.”

On the other hand, if the employer’s conduct was not “inherently destructive,” then the employer must offer evidence of “legitimate and substantial business justifications” for its actions. If it fails to do so, it will be found to have violated Sec. 8(a)(3), but if it meets

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this burden, the burden shifts back to the charging party or the Board to proffer “specific evidence” of the employer’s discriminatory intent.

No “but-for” text. “We are at a loss as to why the Board’s operative test … failed to address any of these issues,” the appeals court wrote. Its failure to consider here whether the employer’s actions were “inherently destructive” of employee rights, or the motive behind its actions, ran afoul of the Supreme Court’s instructions. The Board instead applied a “but-for” test, “asking only whether the employees would have received benefits but for the Union’s presence,” which was “inconsistent with what the Board was required to do.” Moreover, the record below was undeveloped as to the issues that, pursuant to the High Court’s directive, “should have been determinative.”

Because the appeals court was “specifically disapproving” of the Board’s reasoning—on which the Board has “repeatedly relied” in finding Sec. 8(a)((3) benefit discrimination violations, it remanded for the Board to “modify its longstanding mode of analysis in order to comply with the Supreme Court’s equally longstanding precedent to the contrary.”

One unlawful interrogation was enough. The Board had found three separate unlawfully coercive interrogations. For the appeals court, it was enough to find that substantial evidence supported the Board’s findings as to one of those complained-of interrogations, as all it takes is one coercive interrogation to support the Board’s cease and desist order and notice posting remedy. Ostensibly to uncover whether any of its supervisors had engaged in improper conduct, the employer had initiated an interrogation. To that end, an employee was told by his supervisor that the director of nursing wanted to see him in her office, but the director was not there when he got to her office—instead, the employer’s attorney was there, conducting an “exceedingly formal” interview.

But did you sign a union card? The lawyer asked the employee to sign a written statement assuring him that the lawyer’s “sole purpose” in interviewing him was to investigate any potentially objectionable election conduct and that “[w]e are not interested in determining whether you are for or against the Union or if, or how, you voted in the election.” But the lawyer then asked him whether he had signed a union card and whether he knew of other eligible employees who were involved in the union or passing out cards. Apparently this line of questioning was so upsetting to the employee that he later came back to the office to tear up the signed document and toss it in the garbage. Five days later, he ended up in front of the lawyer again, in a private conference room, at his supervisor’s direction. The lawyer said he didn’t believe the employee’s previous answers and so was giving him another chance; he then asked why he wanted a union and whether any supervisors had campaigned on its behalf.

Properly applying the Bourne factors, the ALJ found the interrogation, taken as a whole, to be coercive given the totality of circumstances, and the appeals court agreed, noting in particular that questions as to which unit employees were engaged in pro-union activities suggested that the employer was contemplating some action against these individuals.

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Substantial evidence supported the Board’s conclusion that the interrogation was unlawful.

Useful dicta. In a footnote, the appeals court stressed that “nothing in this opinion should be misinterpreted as indicating that asking employees meaningful questions, including probing for bias and testing credibility, during an internal investigation necessarily violates the NLRA.”

“Internal investigations, especially when conducted by outside counsel, serve an important function, and, in some circumstances, an employer’s legitimate business justification for an interview in connection with an internal investigation may be sufficiently substantial to overcome the coercive effect of an interview on employees’ union activities.” However, the Third Circuit did not engage further in this line of inquiry, since the employer had not asserted such a business justification here.

Impression of surveillance. Finally, the court of appeals affirmed the Board’s finding that the employer violated the Act by creating an impression of surveillance of employees’ union activity based on two conversations between the facility’s assistant director and an open union supporter about the ongoing organizing drive.

In the first conversation, the employee told the assistant director that the union was planning several events related to the organizing drive and said that “if management would have listened to their employees, the union would never be here.” The assistant director responded, “I heard your name; your name has been popping out a lot.” Their second conversation occurred later that month, shortly after the employee was quoted in a local newspaper article about the organizing campaign. He was quoted as stating that he wanted improvements in working conditions and that “the union can make things better for the workers and for the patients.” Upon passing the employee in the lunch room, the assistant director said, “Oh, it’s the famous boy.”

The employee then followed the assistant director to an office, where the assistant director told him that the director of nursing had removed copies of the newspaper containing the article from the lobby. The nursing director also distributed a memo about the article to the management team and mentioned the employee by name several times at a management meeting, the employee was told. “Just watch your back, be careful, careful about what you say,” the assistant director reportedly told the employee. “[D]o what you have to do, come to work early, and then just . . . do your job and go home.” He also advised the employee to “tone it down a little bit” and to keep his views about the union “under wraps.”

Taken together, these comments were enough to find that the Board’s order was supported by substantial evidence. The statements had a reasonable tendency to discourage the employee in exercising his statutory rights by creating the impression that the employer had sources of information about his union activity, the Third Circuit reasoned. Rejecting the employer’s contention that these comments merely conveyed an unlawful threat and did not support an unlawful impression of surveillance charge, the appeals court concluded the statements would make a reasonable person suspect that his

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actions were under surveillance. “This is the sort of coercion prohibited by Sec. 8(a)(1),” it concluded. The appeals court accordingly enforced the Board’s order in part.

The case numbers are 14-1571 and 14-2036.

Attorneys: Erin Murphy (Bancroft) and Rosemary Alito (K & L Gates) for 800 River Road Operating Co. LLC. Jared D. Cantor for NLRB.

5th Cir.: Employer misconduct not sufficiently egregious to warrant issuance of Sec. 10(j) injunctionBy Ronald Miller, J.D.

Because a federal district court ordered injunctive relief under Sec. 10(j) supported only by general findings of harm that did not evince egregious conduct in the context of the NLRA, the Fifth Circuit ruled that the lower court abused its discretion. Moreover, where the district court enjoined conduct in 2014 in an attempt to preserve the status quo as it existed in 2011, the appeals court found that it failed to adequately address the effect of the excessive passage of time between the onset of the alleged wrongful activities and the issuance of the injunction (McKinney v. Creative Vision Resources, LLC, April 13, 2015, Jolly, E.).

In August 2005, Richard’s Disposal, a waste disposal company, entered into a contract with a company called Berry to provide hoppers for its garbage trucks. Local 100, Service Employees International Union (SEIU) represented Berry’s hoppers. In 2009, Local 100 disaffiliated from the SEIU. In 2010, the son of the owner of Richard’s Disposal, and an executive of Richard’s, formed Creative Vision to provide hoppers to Richard’s. In May 2011, Creative Vision distributed applications to the Berry hoppers. On June 21, 2011, Richard’s informed Berry that it no longer needed its services. Thereafter, Creative Vision supplied hoppers for Richard’s garbage trucks, employing the same hoppers as Berry. At least 43 of the 44 hoppers had been employed by Berry and represented by Local 100.

Successor employer. Local 100 contacted Creative Vision asking that it recognize and bargain with the union. The union argued that Creative Vision was a successor to Berry, and, as such, it was required to bargain with the union. It filed unfair labor practice charges with the NLRB when Creative Vision refused to bargain. The NLRB issued an administrative complaint against Creative Vision. On July 25, 2012, the NLRB also filed a petition for injunctive relief in federal district court. The petition lingered in the federal district court for almost two years. Meanwhile, on January 7, 2013, an administrative law judge issued a decision siding with the NLRB on some of the claims against Creative Vision. After the ALJ issued his ruling, the NLRB filed a motion in the district court for an expedited ruling on the petition for a Sec. 10(j) injunction. Concluding that an injunction was needed to preserve the status quo, the district court granted the injunction.

Section 10(j) injunction. The Fifth Circuit has adopted a two-part test in reviewing petitions for Sec. 10(j) injunctions. Specifically, the court addresses: “(1) whether the Board, through its Regional Director, has reasonable cause to believe that unfair labor

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practices have occurred, and (2) whether injunctive relief is equitably necessary, or, in the words of the statute, ‘just and proper.’” At the outset, Creative Vision argued that the Fifth Circuit should overrule its two-part test based on the Supreme Court’s decision in Winter v. Natural Resources Defense Council. In Winter, the Supreme Court reversed the Ninth Circuit’s judgment affirming the district court’s grant of injunctive relief based on possible future harm.

Because Winter dealt with injunctive relief in a significantly different context from Sec. 10(j) relief, the Fifth Circuit determined that it did not control here. Rather, the appeals court noted that it had reaffirmed its two-part test in the years following Winter, and underscored that “the principles of equity inform an evaluation for Sec. 10(j) relief.” Thus, the court was persuaded that its two-prong review of Sec. 10(j) petitions for injunctive relief is not inconsistent with Supreme Court precedent, and consequently, declined to overrule that standard. Nonetheless, the court emphasized that the NLRB must establish both prongs of the two-part test with reasonable clarity in order to obtain injunctive relief.

Balance of equities. Turning to its review of the petition, the Fifth Circuit first noted that only one part of the two-part test was at issue in this appeal. Creative Vision conceded that the NLRB satisfied the first prong of the analysis—the Board had reasonable cause to believe that unfair labor practices had occurred. Thus, the appeals court turned to the second prong: whether the NLRB has shown that injunctive relief was just and proper based on the balance of the equities.

The appeals court reviewed the district court’s decision using the abuse of discretion standard. A district court typically abuses its discretion if it: “(1) relies on clearly erroneous factual findings; (2) relies on erroneous conclusions of law; or (3) misapplies the law to the facts.” The Fifth Circuit concluded that the second prong for injunctive relief—that the proposed relief is “just and proper”—did not apply to the NLRB’s petition for relief at this time point in the litigation. 

In this instance, the appeals court held that the district court abused its discretion in resting its decision on the broad and general assumption that injunctive relief may issue whenever the unfair labor practice at issue causes harm, without considering the specific impact on the union or its employees in this case. The appeals court concluded that the district court failed to make sufficient factual findings suggesting that Creative Vision’s conduct was egregious or otherwise exceptional so as to warrant a Sec.10(j) injunction, particularly when the injunction issued several years after Creative Vision commenced the allegedly wrongful conduct.

Erosion of status quo. The purpose of a Sec. 10(j) injunction is to “prevent erosion of the status of the parties pending [the NLRB’s] final decision.” Injunctive relief should issue, when: (1) the employer’s alleged violations of the NLRA and the harm to the employees or to the union are concrete and egregious, or otherwise exceptional; and (2) those harms, as a practical matter, have not yet taken their adverse toll, such that injunctive relief could meaningfully preserve the status quo among the employer, the union, and the employees, that existed before the wrongful acts occurred. To constitute

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“egregiousness” for purposes of Sec. 10(j), a labor practice must lead to exceptional injury, as measured against other unfair labor practices.

To confine Sec. 10(j) injunctive relief to its proper role, the NLRB must show, and the district court must find, that the unfair labor practice, in the context of that particular case, has caused identifiable and substantial harms that are unlikely to be remedied effectively by a final administrative order from the NLRB. The second principle, considered in the conjunctive with the first principle above, establishes that Sec. 10(j) relief is only appropriate when “any final order of the NLRB would be meaningless and the remedial purposes of the Act will be frustrated without an injunction to preserve the status quo.” In sum, a district court reviewing a petition for Sec.10(j) injunctive relief should provide only relief that is necessary and must issue specific findings of fact that suggest harm requiring Sec. 10(j) injunctive relief.

Reviewing the district court’s order and the reasons supporting its injunctive order, the Fifth Circuit found that the lower court had not pointed to the type of conduct or current harms that warrant Sec. 10(j) relief. Instead, the district court relied in large part on generalizations to support its conclusion that the NLRB was entitled to an injunction. Moreover, its order failed to address adequately relevant and key facts in the case before it, including the three-year delay between the union’s filing of its complaint and the issuance of the injunction.

In its order, the district court stated that Creative Vision’s “failure as successor to negotiate with the Union disrupted the status quo ante, and temporary injunctive relief will restore that status quo.” However, it did not articulate specifically how this particular conduct created an egregious case of refusal to bargain. Nor did it indicate the reasons a Sec. 10(j) injunction is now more appropriate to address these issues than a Board order enforced through processes established under the NLRA. Critically, the district court’s findings did not support a conclusion that Creative Vision’s conduct was in the egregious category, as compared to other unfair labor practices. Thus, the Fifth Circuit concluded that the district court and the NLRB failed to articulate either evidence or reasons, in the context of the NLRA violations, that justify resorting to an injunction.

The case number is 14-30839.

Attorneys: Laura T. Vazquez, National Labor Relations Board, for M. Kathleen McKinney. Clyde H. Jacob, III (Coats, Rose, Yale, Ryman & Lee) for Creative Vision Resources, LLC.

6th Cir.: Feud over train staffing an RLA major dispute, union injunction vacatedBy Lisa Milam-Perez, J.D.

An ongoing feud over a railroad’s attempt to man trains without union conductors, in contrast to the terms of a trainmen agreement’s embattled “crew consist” provision, was a major dispute under the Railway Labor Act, and a lower court erred in enjoining a union from striking in response to the railroad’s repeated flouting of this contract term, the Sixth Circuit held. Finding that a district court erred in concluding the parties were

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engaged in a minor dispute within the meaning of the RLA, the appeals court vacated the preliminary injunction and directed the lower court on remand to dismiss the railroad’s complaint (Wheeling & Lake Erie Railway Co. v B’hood of Locomotive Engineers and Trainmen, April 20, 2015, Stranch, J.).

Contract dispute. At the crux of the dispute was the “crew consist” clause in the applicable bargaining agreement between the railroad and the Brotherhood of Locomotive Engineers (BLET). Under this provision, the rail crew must consist of at least one conductor and one brakeman, except for a lone exception that did not apply here. However, the clause also allowed for the railroad to operate “conductor only” assignments at its own discretion.

The railroad had been seeking to eliminate the crew consist provision and, after the employer served the union notice, under RLA Section 6, of its desire to do so, the parties negotiated this term for several years. The railroad was insistent that it had to be deleted from the contract so that it wouldn’t have to assign a union conductor to each train, but the union refused, and the subsequent contract (reluctantly agreed to by the employer and ratified by the union membership) kept the crew consist provision intact. The parties acknowledged that the matter wasn’t settled, though—they had merely kicked it down the road for future rounds of negotiations.

Railroad’s self-help measures. Subsequently, though, the union learned that on several occasions, the railroad ran trains without a union conductor on board. The union sent a letter urging the railroad to cease and desist noting that the railroad’s conduct was an “egregious violation” of the agreement and that it considered the matter to be a major dispute. Initially the railroad issued a mea culpa and assured the union that it wouldn’t happen again. It did, though, two months later. When the union pressed the issue, the railroad first contended there weren’t any rested conductors available to call in, but later conceded this point and directed the union conductors who were not called in to submit time claims for the incident. In response, the union followed up with a letter noting that it “appreciates” the railroad’s “acknowledgement that there is no contractual basis for your actions and that you will undertake every effort to assure that it does not happen again. As you know, [BLET] considers the operation of any locomotive without a full crew to raise a major dispute and while we understand that sometimes mistakes are made inadvertently, future instances like this will be regarded as violations of the Carrier’s status quo obligation under the RLA and addressed accordingly.”

Mediation. A few months later, the railroad served another Section 6 notice on the union seeking to eliminate the crew consist clause. The union asked the National Mediation Board to appoint a mediator to assist the parties in their negotiations and, during negotiations, asked the NMB to try to induce the parties to submit their unresolved dispute to binding arbitration, but the railroad rejected the arbitration request as premature and accused BLET of being “intractable,” noting that its other agreement, covering locomotive engineers, had allowed it, since 1993, to operate a train manned with only an engineer.

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But the railroad committed several additional infractions, including, on a few occasions, having management perform the trainmen’s assignments. BLET sent yet another letter, reminding the railroad that the mediation process had been invoked and, as such, the parties had to maintain the status quo—and that the railroad’s actions were a violation of the status quo. When the union did not receive an immediate response, as directed, it went out on strike.

Injunctive relief. The railroad went to court that same day, seeking a preliminary injunction, and the district court granted a TRO enjoining the strike. The court concluded that the railroad met its light burden of demonstrating that the parties were engaged in a minor dispute under the RLA, reasoning that the employer’s position was “arguably justified” by the terms of the trainmen agreement which, in the court’s view, was silent on whether the railroad could utilize management personnel in the absence of a union conductor but did provide that the railroad “retained discretion to make management decisions as necessary when union trainmen were unavailable.” However, the court conditioned injunctive relief on the railroad’s agreeing to maintain the status quo by refraining from using supervisors or other management employees in place of engineers or conductors. Later, it stayed the case pending appeal.

A major dispute. The Sixth Circuit held the district court erred as a matter of law by characterizing the dispute between the parties as minor and by enjoining the union from striking. The railroad failed to show that its position—that it had the right to use management to do trainmen work when union conductors were unavailable—was at least arguably justified by the bargaining agreement. Rather, the railroad’s stance was “frivolous or obviously insubstantial,” the appeals court found. Indeed, by serving a Section 6 notice on the union, the employer had essentially acknowledged that it was required to negotiate with the union if it wanted to revise or remove the union conductor requirement, the court pointed out. “To adopt the Railroad’s position would undercut the clear language of the crew consist rule,” it wrote, ruling that the dispute was major. The union had characterized the issue as such in all of its communications with railroad officials. Significantly, too, the parties addressed their disagreement by resorting to the RLA’s procedures for negotiating major disputes.

No grievance requirement. The appeals court also rejected the railroad’s contention that BLET should have grieved the matter, in accordance with the trainmen agreement’s dispute resolution provisions, before going on strike. However, the appeals court said, “we cannot envision how a grievance procedure could have resolved this fundamental disagreement.” The union didn’t raise a claim on behalf of a particular employee; rather, it was challenging the employer’s “complete disregard of an express provision” of that contract—while Section 6 negotiations were under way.

Preserving the status quo. Both parties are obligated by law to maintain the status quo pending exhaustion of each step of the major dispute process. Here, the status quo barred the railroad from unilaterally implementing the change it sought to accomplish when it served Section 6 notice on the union before the conclusion of that process. When it nonetheless resorted to self-help by running trains without union conductors and using management personnel instead, it breached the RLA’s status quo requirements.

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Therefore, the appeals court vacated the injunction in the railroad’s favor, and remanded with instructions to dismiss the railroad’s complaint against the union.

The case number is 13-4356.

Attorneys: Margo Pave (Zwerdling, Paul, Kahn & Wolly) for Locomotive Engineers. Ronald M. Johnson (Jones Day) for Wheeling & Lake Erie Railway Co.

9th Cir.: Class certification order created new occasion for removal of wage suit to federal courtBy Ronald Miller, J.D.

In class action over Dollar Tree’s denial of rest periods to assistant store managers, the Ninth Circuit found that a class certification order created a new occasion for removal of the suit from state court to federal court and remanded the matter to a federal district court to exercise jurisdiction under the Class Action Fairness Act (CAFA). Following the class certification by a state court, Dollar Tree sought to remove the lawsuit to federal court for a second time. Because the first remand was on “grounds that subsequently became incorrect,” the successive removal was permissible, explained the appeals court. Further, contrary to the employee’s contention, the removal was timely because Dollar Tree removed within 30 days of the class certification order (Reyes v. Dollar Tree Stores, Inc., April 1, 2015, Hurwitz, A.).

CAFA threshold amount. The employee filed this action in California state court alleging that Dollar Tree violated the California Labor Code by denying proper rest breaks to its employees. The complaint sought certification as a class action but asserted that the amount in controversy was less than $5 million. In December 2012, Dollar Tree removed the action to federal court under the CAFA. In support of removal, Dollar Tree noted that the amended complaint alleged that employees “regularly” missed their breaks and “conservatively interpret[ed] ‘regularly’ to mean a rest period was not ‘authorized or permitted’ in 65 percent of shifts that were sufficiently long to trigger an obligation to authorize or permit rest periods.” This assumption placed the amount in controversy at $5,525,950.

Moving for remand, the employee argued that the assumed 65 percent violation rate was inaccurate, because he had limited his allegations to shifts where class members worked without another manager at the same time. According to the employee, only one-third of shifts were worked alone, so that the amount in controversy did not reach the $5 million CAFA threshold.

Second remand. After remand, the employee then sought certification of a class of assistant store managers (ASM). But the state court issued a tentative ruling concluding that a class of assistant managers who worked alone would not be ascertainable. Instead, as permitted under California law, the court redefined the class to consist of all assistant managers who did not receive proper breaks, regardless of whether they worked alone. Arguing that the expanded class certified by the state court placed at least $5 million in controversy, Dollar Tree again sought removal. In granting the employee’s motion to

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remand, the district court held that the second removal was untimely because it was based on the same class definition that had been the subject of the first removal.

Certification order. The district court’s order granting the second remand motion is the subject of Dollar Tree’s appeal. Here, the Ninth Circuit had to consider whether the state court’s class certification order created a new occasion for removal. Concluding that it did, the appeals court remanded the matter to the district court to exercise jurisdiction under CAFA.

A defendant generally may remove a civil action if a federal district court would have original jurisdiction over the action. Dollar Tree asserted federal jurisdiction under CAFA, which vests district courts with jurisdiction over civil actions in which “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,” the proposed class consists of more than 100 members, and “any member of [the] class of plaintiffs is a citizen of a State different from any defendant.” It was undisputed that the class actually certified by the state court satisfied these statutory requirements. However, the employee argued that the removal violated the prohibition against successive removals and was untimely.

Successive removals. A successive removal petition is permitted only upon a “relevant change of circumstances”—that is, “when subsequent pleadings or events reveal a new and different ground for removal.” Successive petitions are also permitted when the pleadings are amended to create federal subject-matter jurisdiction for the first time.

Change in class definition. On the first remand motion, the district court construed the amended complaint to cover only rest breaks during shifts in which a class member worked alone and found that it therefore did not meet the CAFA amount-in-controversy threshold. In contrast, the state court certified a class of employees who worked shifts without proper rest breaks, regardless of whether they worked alone. In doing so, the state court expressly acknowledged that it had diverged from the narrower definition of the class on which the district court settled and for which the plaintiff sought certification after remand. Thus, the state court’s class certification order altered the circumstances bearing on jurisdiction by expanding the amount in controversy.

Timeliness of removal. That the second removal was timely logically followed the appeal court’s conclusion that the successive removal was permissible. The removal statute provides

for two 30-day windows during which a case can be removed: (1) during the first 30 days after the defendant receives the initial pleading, or (2) during the first 30 days after the defendant receives “an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.”

Class certification order. The district court found that the time to remove was conclusively triggered when the amended complaint was first filed. However, this determination ignored the significance of the class certification order, which created a new amount in controversy not presented in the amended complaint as construed by the

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district court on the first remand motion. The Ninth Circuit concluded that the removal was timely because Dollar Tree removed within 30 days of the class certification order. As a result, because Dollar Tree offered an “unchallenged, plausible assertion” that the jurisdictional requirements of CAFA were met, the district court had subject-matter jurisdiction.

The case number is: 15-55176.

Attorneys: Dominic J. Messiha (Littler Mendelson) for Dollar Tree Stores, Inc. Kenneth H. Yoon (Law Offices of Kenneth Y. Yoon) and Peter M. Hart (Law Offices of Peter M. Hart) for Richard Reyes.

NLRB: Recognition bar clock starts to tick on date of first bargaining session, not date of voluntary recognitionBy Lisa Milam-Perez, J.D.

An NLRB regional director should not have processed a decertification petition filed less than one year after the first bargaining session between a union and the employer that granted it card-check recognition, a divided three-member NLRB panel held. In so holding, the Board emphasized that the proper starting measure, for recognition bar purposes, is the date the first bargaining session is held, not the date of initial recognition. “The mere prospect that the recognition bar may extend up to 1 year from the first bargaining meeting in certain cases does not make it more protective than the 1-year certification bar,” the majority reasoned. “Instead, it properly acknowledges the right of the majority of employees who designated a bargaining representative to a reasonable opportunity for their representative to negotiate an agreement on their behalf.” Also, applying its multifactor Lee Lumber test, the majority found a reasonable period of time for bargaining had not elapsed at the time the decertification petition was filed in this case; therefore, the petition was barred. Member Miscimarra dissented, noting the irony of the Board’s holding in light of its recent election rules bent on making representation elections take place more quickly (Americold Logistics, LLC, March 31, 2015).

Card-check recognition. The employer, which operates food storage warehouses nationwide, had consented to a UFCW card-check representation proceeding at one of its warehouses in Illinois. Upon a finding that a majority of its eligible employees had signed valid authorization cards, the employer executed a recognition agreement with the union on June 18, 2012. After a ramp-up period, the union was ready to begin bargaining in mid-September, but the employer wasn’t available until October. Thus, the first bargaining meeting took place on October 9, with additional sessions held over the next two days. After numerous fits and starts over the next few months—during which there was a period of more than three months in which the employer was unavailable to meet—the parties held further negotiations and, finally, reached a tentative contract in late June 2012; the union scheduled a ratification vote for June 29, and 31 employees voted to ratify, while 22 opposed. However, one day earlier, the employer filed a decertification petition—on June 28, just over one year after the parties’ initial recognition agreement.

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Direction of election. Region 25’s regional director issued a decision and direction of election, finding that the decertification petition was filed more than one year after the employer in this case had voluntarily recognized the union and thus concluding that the agency should process the petition. Contending there was a recognition bar in place, the union requested review of that determination. It urged that the 1-year recognition bar period was to be measured from the date of the first bargaining session, not the date of recognition and, as such, the recognition bar was in place here through October 2013.

Two questions were at issue before the Board: 1) whether, under Lamons Gasket Co., the regional director correctly found that there is no recognition bar because the petition was filed more than 1 year after the employer recognized the Union; and 2) if the regional director in fact erred, whether a reasonable time for bargaining had elapsed at the time the petition was filed. Answering the first question, the Board clarified that “a reasonable period of time for bargaining before the union’s majority status can be challenged is a minimum of 6 months and a maximum of 1 year, measured from the date of the first bargaining meeting between the union and the employer.”

“In our view, a union can only demonstrate its effectiveness in negotiations once bargaining has actually commenced,” the majority wrote. “Our focus on the beginning of actual bargaining furthers the Board’s fundamental statutory interest in the ‘process and the promotion of an autonomous relationship between the parties.’ Accordingly, in voluntary recognition cases, the relevant benchmarks identified in the Lee Lumber multifactor test are measured from the first bargaining meeting between the parties.” In this case, the petition was filed less than a year after the first bargaining meeting was held, so the regional director erred in concluding, as a matter of law, that he was required to process the petition.

Reasonable period of time. Turning thus to question two, the Board held that a reasonable period of time for bargaining had not elapsed when the petition was filed; therefore, the petition was barred. In Lamons Gasket, the NLRB provided benchmarks, for the first time, for determining whether a reasonable period of time had elapsed for purposes of processing a decertification petition, the Board noted: It defined a reasonable period of bargaining to be “no less than 6 months after the parties’ first bargaining session and no more than 1 year.” After that insulated six-month period, the Board applies the Lee Lumber test, considering such factors as: “(1) whether the parties are bargaining for an initial contract; (2) the complexity of the issues being negotiated and of the parties’ bargaining processes; (3) the amount of time elapsed since bargaining commenced and the number of bargaining sessions; (4) the amount of progress made in negotiations and how near the parties are to concluding an agreement; and (5) whether the parties are at impasse.”

As the regional director noted, the parties were not grappling with especially complex issues or complicated bargaining approaches. Also, the parties had met more than 20 times over the course of the eight-month period in question—bargaining constructively, and making considerable inroads. The countervailing factors: the parties were bargaining their initial contract, and they were not at impasse. Particularly significant to the majority was the fact that the parties were on the cusp of a ratified contract. “Any reasonable

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period of bargaining must include time for the Union to conclude the agreement by holding a ratification vote,” the Board said. On balance, the factors weighed in favor of barring the decertification petition.

Dissent. In a lengthy dissent, Member Miscimarra took issue with the Lamons Gasket holding and argued that the Board should adhere to its pre-Dana Corp case law, which held that the recognition bar starts running once an employer extends recognition. Concededly, an employer (or union) might drag out the commencement of negotiations after recognition, but this didn’t justify lengthening the duration in which employees are to be denied their right to have an election petition processed, he argued. At any rate, regardless of when the clock starts to tick, he would find that a reasonable period of bargaining had elapsed in this case, as evidenced by the fact that the parties in fact had bargained to a tentative contract.

For Miscimarra, the extended election bar was problematic in the card-check scenario, where employees did not have the benefit of a Board-conducted election. He noted that the Board in Dana Corp acknowledged “substantial differences between Board elections and union authorization card solicitations as reliable indicators of employee free choice.” The dissent was troubled by the “imposition of more onerous obstacles when employees may have never voted in any prior election (i.e., where the union receives voluntary recognition from an employer or legal successor) in comparison to the bar that applies when employees have voted in an election resulting in union certification.” The bottom line here is that employees are denied the right to a Board election for a longer period of time in the voluntary recognition context than if they had actually exercised the right to vote in a Board-conducted election. “This runs counter to Gissel Packing, where the Supreme Court held that ‘secret elections are generally the most satisfactory—indeed the preferred—method of ascertaining whether a union has majority support.’”

The majority countered, though, by pointing to “the more demanding standard of employee support required for voluntary recognition: unlike Board-conducted elections where a labor organization is certified if a majority of the employees who vote cast votes in favor of representation, for voluntary recognition to be valid, the union must demonstrate support of a majority of all employees in the bargaining unit. Nor does our colleague acknowledge that Board certification carries other unique benefits that do not attach to recognition.” Therefore, the majority rejected the notion that it had “elevate[d] voluntary recognition above certification.”

The slip opinion number is 362 NLRB No 58.

Attorneys: Aaron Solem (National Right to Work Legal Defense Foundation) for Karen Cox. Liz Vladeck (Cary Kane) for Retail, Wholesale and Department Store Union, UFCW, Local 578. Ryan Munitz (Sheppard, Mullin, Richter & Hampton) for AmeriCold Logistics, LLC.

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NLRB: ‘Management already knew who was involved’ created impression of surveillanceBy Lisa Milam-Perez, J.D.

An Ohio distribution warehouse engaged in objectionable election conduct during the critical election period by announcing (and awarding) a $400 safety bonus, announcing the construction of smoking shelters for employees, and interrogating employees. On these violations, a majority panel of the NLRB affirmed a law judge’s findings; in addition, contrary to the judge, the Board majority concluded that the employer also violated the NLRA by creating the impression that employees’ union activities were under surveillance. Accordingly, the Board ordered a second election (Caterpillar Logistics, Inc., March 30, 2015).

Seeking to organize the warehouse’s workforce, the United Auto Workers held an initial meeting for eligible employees at a nearby hotel. During the meeting, an employee who had not yet openly advocated for the union made a presentation in support of representation. The next day, a company supervisor approached the employee and asked him what he thought about the union. The employee said he was in favor of the union and also that he feared retaliation if the union lost the upcoming election. In response, the supervisor told him he needn’t worry, because “management already knew everyone who was involved in the organizing effort.”

Impression of surveillance. After losing the election, the union filed objections—among them, that these statements constituted both an interrogation and the creation of the impression of surveillance on the employer’s part. A law judge found they did indeed amount to an interrogation, but would not separately find they also created the impression of surveillance, reasoning that even if management knew who supported the union, “there were many other means by which they may have gained such information” other than surveillance. The Board majority disagreed. The statement came just one day after the employee’s public statement in favor of union representation, the Board noted; also, the supervisor did not indicate any other means as to how it came upon this information. As such, the employee would reasonably assume that the employer had been monitoring the employees’ union activities.

“It is well settled that an employer creates an impression of surveillance by telling employees that it is aware of their union activity without disclosing the source of that information,” the Board said, “‘because employees are left to speculate as to how the employer obtained the information, causing them reasonably to conclude that the information was obtained through employer monitoring.’” As such, the law judge’s reasoning missed the mark. An employer’s words need not, on their face, reveal that it acquired its information about protected activity through improper means, the Board noted; the critical question is whether employees would reasonably assume that the employer came to such knowledge through improper surveillance. Here, the answer was yes.

Safety bonus. Member Johnson dissented from the majority’s finding that the employer unlawfully announced a safety bonus during the critical period. In his view, the record

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evidence indicated that the safety bonus program was first devised well before the onset of the union election campaign, including the specific safety criteria that would trigger a nondiscretionary bonus, and even announced to employees long before the election petition was filed. When those safety criteria were in fact met, the employer announced it to employees; Johnson saw no reason to suspect that the employer manipulated the timing to impact employees’ vote.

The majority, however, countered that the initial rollout of a prospective safety bonus program was “full of contingencies,” and that “the first and only time” that the employer definitively announced that it was entering a safety award competition—triggering the obligation to pay a safety bonus—was at an employee meeting during the critical period. Therefore, it held, both the announcement and the actual grant of the bonus were unlawful and objectionable.

The slip opinion number is 362 NLRB No 49.

Attorneys: Derek Barella (Winston & Strawn) for Caterpillar Logistics, Inc. Kristin Watson (Cloppert, Latanick, Sauter & Washburn) for United Auto Workers.

NLRB: Withholding wage increase from union-represented employees motivated by antiunion animusBy Ronald Miller, J.D.

In a decision on remand from the D.C. Circuit, a divided three-member panel of the NLRB concluded that an employer’s decision to withhold a wage increase from represented employees while bargaining negotiations were in process was unlawfully motivated and, therefore, violated Sec. 8(a)(3). Given the evidence of animus, and the employer’s admission that it would have given the same wage increase to all of its employees if the union had not been representing some of them, the Board found that the employer’s conduct was unlawfully motivated. Member Miscimarra filed a dissenting opinion (Arc Bridges, Inc., March 31, 2015).

The employer provides services to developmentally disabled individuals. In November 2006 and February 2007, the NLRB certified a union as the collective bargaining representative for two separate units of employees. The employer’s fiscal year runs from July 1 to June 30. For many years it has been the employer’s practice to review wages in June of each year as a component of the budget process, and to budget for wage increases, if financially feasible. Customarily, such wage increases, if given, are granted in July. In July of each of the prior two years, 2005 and 2006, the employer granted across-the-board 3-percent wage increases to all staff, including managers and supervisors. In June 2007, the employer’s board of directors authorized its executive director to grant a 3-percent increase to all staff. However, the executive director did not grant the increase to any employees in July because of the union’s presence.

Economic proposals. Meanwhile, the employer and union were engaged in bargaining negotiations. In July, the union made its initial economic proposals for both units, which, among other things, sought wage increases totaling 50 percent over three years. The

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employer rejected the proposals on grounds that it could not afford them but did not present counterproposals. By August the parties had made only limited progress in bargaining, and the union announced a strike vote. Although the employees in both units voted to authorize a strike, the union never announced or instituted a strike.

On October 12, the employer granted a 3-percent wage increase, retroactive to July, to all non-bargaining unit personnel; however, union-represented employees received no increase. In bargaining, the employer later offered its represented employees a 1.5 percent wage increase and, later still, a 2 percent increase, both retroactive to July. It never offered represented employees the full 3-percent increase that it provided to its unrepresented employees.

Prior holding. The Board previously concluded that the wage increase granted to unrepresented employees was an existing benefit, and that the employer’s failure to provide it to represented employees was “inherently destructive” of their Sec. 7 rights, and violated Sec. 8(a)(3) even without proof the employer’s conduct was motivated by union animus. The employer petitioned the D.C. Circuit for review, and the General Counsel cross-applied for enforcement. The appeals court rejected the Board’s finding that the employer’s annual practice was an established condition of employment, holding that the record failed to support the Board’s finding that the employer’s “annual budget review plus the custom of . . . giving an across-the-board wage increase ‘‘if feasible’ or ‘if sufficient funds existed’” resulted in an established condition of employment. The Board accepted the appeals court’s decision as the law of the case. Accordingly, it reexamined the complaint allegation on the premise that the wage increase provided to unrepresented employees on October 12 was not an established condition of employment.

Disparate treatment. Under Shell Oil Co., an employer may, during the course of collective-bargaining negotiations, treat represented and unrepresented employees differently when providing new benefits, so long as the disparate treatment is not unlawfully motivated. Here, the Board had to determine whether the General Counsel met his burden to show that the employer’s decision not to extend the 3-percent wage increase to its represented employees was unlawfully motivated. The majority concluded that he did.

Here, it was indisputable that the union-represented employees engaged in protected activity and that the employer had knowledge of that activity. Moreover, the employer’s opposition to the union was well-established. Thus, the Board found that the record evidence established that the employer’s decision to withhold the wage increase from represented employees was motivated by antiunion animus. First, the employer’s executive director intended to give employees a 3-percent wage increase until they voted for the union. Second, statements made by the managers essentially encouraged employees to blame the union (or those employees who voted for the union) for the director’s decision to withhold the increase from them. Third, the evidence undermined two of the employer’s attempts to establish a legitimate business justification for its decision. Finally, the evidence shows that the employer’s decision to delay, and eventually withhold, the wage increase for represented employees was motivated by the approaching end of the certification year for one bargaining unit.

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Although the employer did not expressly argue that it would have withheld the wage increase from represented employees even in the absence of their protected activity, the Board further found that it failed to meet its Wright Line rebuttal burden. In doing so, the Board relied on its finding that the reasons proffered by the employer for its decision were, in fact, pretextual. Accordingly, the Board found that the employer’s conduct violated Sec. 8(a)(3).

Dissent. In a separate dissenting opinion, Member Miscimarra argued that the employer’s conduct was lawful—that is, while engaged in bargaining that remained incomplete, it refrained from unilaterally giving represented employees a wage increase. The dissent pointed out that to prove a violation of Sec. 8(a)(3) under Wright Line, the General Counsel must make an initial showing “sufficient to support the inference that protected conduct was a ‘motivating factor’ in the employer’s decision.” The dissent urged that it was important to recognize that it is not unlawful “antiunion motivation” under the NLRA when an employer desires to be more successful in union negotiations. The Act requires good-faith bargaining, but parties are permitted to take actions that improve their leverage in bargaining. Thus, the dissent argued, the issue before the Board was whether the evidence demonstrated that the employer’s decision not to grant unit employees a wage increase in October 2007 was motivated by a desire to retaliate against them for choosing union representation.

Miscimarra argued that under Shell Oil, the employer was privileged to withhold the wage increase from represented employees while collective bargaining for initial contracts was ongoing. Moreover, he urged that none of the statements made by managers supported a reasonable inference of unlawful antiunion motivation, and there was no other evidence that supported such an inference. Finally, Miscimarra rejected the majority’s inference of unlawful motive from the timing of the wage increase given to unrepresented employees. Thus, the dissent argued that the majority’s decision put the employer in the “no-win situation” of being in violation of the Act regardless of the actions it would have taken.

The slip opinion number is 362 NLRB No. 56.

Attorneys: Eugene Elk for American Federation of Professionals. Raymond Haley (Fisher & Phillips) for Arc Bridges.

NLRB: Employee unlawfully discharged for vulgar Facebook postingBy Ronald Miller, J.D.

An employer violated Sec. 8(a)(3) by firing an employee following his Facebook posting in which he vented his frustration with a manager in vulgar, profanity filled comments, ruled a three-member panel of the NLRB, find that the posting was protected, and concerted. Additionally, after its employees selected a union as exclusive bargaining representative, the employer violated Sec. 8(a)(1) by (1) threatening them with the loss of current benefits, job loss and discharge, and job loss due to lost business, and informing employees that bargaining would start from scratch; and (2) disparately applied a “no

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talk” rule. Member Johnson filed a separate opinion dissenting in part (Pier Sixty, LLC, March 31, 2015).

The employer operated a catering business. Beginning in January 2011, a number of service employees expressed interest in union representation, in part from concerns that management repeatedly treated them disrespectfully and in an undignified manner.  In March, the employees presented a petition concerning their ongoing complaints about management mistreatment to the Director of Banquet Services. The petition included complaints that managers and captains “take their job frustration [out on] the staff” and “don’t treat the staff with respect.”

Facebook comments. Following an incident in which the assistant director, in front of guests, twice addressed servers in a disrespectful manner, the employee who headed the organizing effort vented his frustration with the mistreatment by posting a message to his personal Facebook page. The incident occurred just two days before a representation election.  He deleted the post the day after the election. However, the employer’s purchasing manager notified human resources about the employee’s comments. Human resources spoke with the assistant director regarding the employee’s comments and he confirmed that he had seen them, and told the HR director that nothing out of the ordinary had occurred during the dinner service. Following an investigation, the employee was discharged on the basis that his Facebook comments violated company policy.

Workplace language. Here, the Board pointed out that vulgar language is rife in the employer’s workplace so that such comments were a daily occurrence that did not engender any disciplinary response. Thus, the Board agreed with an administrative law judge’s determination that the Facebook comments, directed at an assistant director’s alleged mistreatment of employees and seeking redress through an upcoming union election constituted protected, concerted activity and union activity. Further, the Board found that the employee’s comments were not so egregious as to exceed the NLRA’s protection. In so ruling, the Board adopted the ALJ’s rationale to find that the employee’s activity did not lose its protected character under the totality of the circumstances.

In evaluating the employee’s posting under the totality of the circumstances, the law judge considered the following factors: (1) whether the record contained any evidence of the employer’s antiunion hostility; (2) whether the employer provoked the employee’s conduct; (3) whether the employee’s conduct was impulsive or deliberate; (4) the location of the Facebook post; (5) the subject matter of the post; (6) the nature of the post; (7) whether the employer considered language similar to that used by the employee to be offensive; (8) whether the employer maintained a specific rule prohibiting the language at issue; and (9) whether

the discipline imposed upon the employee was typical of that imposed for similar violations or disproportionate to his offense. Here, the ALJ found that none of these factors weighed in favor of finding that the employee’s comments were so egregious as to take them outside the protection of the Act.

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Hostility toward employees’ union activity. With respect to the first three factors, the Board found that the employer clearly demonstrated its hostility toward the employees’ union activity when it committed multiple  unfair labor practices in the weeks leading up to the election. The employee posted his comments directly in response to remarks by the assistant director, and his impulsive reaction reflected his exasperation with disrespectful treatment by managers. The location and subject matter of the post also did not weigh in favor of finding that the employee’s comments lost the protection of the Act. Specifically, the employee posted his comments while alone, on break, and outside the employer’s facility. Further, his comments echoed employees’ previous complaints about management’s disrespectful treatment.

Additionally, the overwhelming evidence established that the employer tolerated the widespread use of profanity in the workplace. Finally, evidence of the employer’s policies and practices relating to the discipline of employees who used the type of language in the employee’s Facebook post did not persuade the Board that those comments were unprotected. Since 2005, the employer had issued only five written warnings to employees who had used obscene language, and there was no evidence that it had ever discharged any employee solely for the use of such language. Accordingly, the Board affirmed the law judge’s finding that the employer violated Section 8(a)(3) by discharging the employee because of his protected concerted and union activity.

Partial dissent. Member Johnson argued that the employee’s vulgar and obscene Facebook comments lost the protection of the Act, and would dismiss allegations that his discharge violated Sec. 8(a)(3).  In Johnson’s view, under the totality of the circumstances, the employer was entitled to discipline the employee for posting his rant, and the General Counsel did not establish that his was terminated for union or protected activity. Further, the dissent argued that the majority inappropriately recast an outrageous, individualized griping episode as protected activity. Thus, Johnson would have concluded that the employer lawfully discharged the employee based on his comments, which were qualitatively different from the tolerated workplace banter.

The slip opinion number is: 362 NLRB No. 59.

Thomas R. Gibbons (Jackson Lewis), for Pier Sixty, LLC. Hernan Perez, pro se and Evelyn Gonzalez, pro se, for Charging Party.

NLRB: Staffing agency referral, unlawfully discharged for union activity, was ‘employee’ subject to reinstatement orderBy Lisa Milam-Perez, J.D.

A quality inspector who was discharged for engaging in union activity was an employee of the respondent employer even if he was also an employee, nominally or otherwise, of the staffing agency that placed him with the employer, a three-member panel of the NLRB held. Accordingly, a law judge properly ordered the employee’s reinstatement at the company. However, whether the employee’s backpay entitlement should be abbreviated by the employer’s subsequent discovery that he had lied about his criminal

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history was a matter to be resolved at the compliance stage (EDRO Corp dba Dynawash, March 31, 2015).

The employer had no quarrel with a law judge’s finding that it unlawfully discharged the employee for engaging in protected union activity, but it challenged the judge’s order reinstating him. It had two points of contention. First, it claimed that the discharged employee was in fact a staffing agency employee and so, at most, the employer should have been ordered to simply tell the agency that it did not object to the employee’s being referred for work with the company. Second, the employer argued that the judge should have cut off the backpay period either as of November 5, 2013, when it learned of the employee’s criminal history, or on June 9, 2014, when it learned he had lied on job applications about that criminal history.

An employer; that was enough. The employer contracted with Westaff, an employment agency, to screen and refer candidates for its quality inspector position and, if the company hired a referred candidate, to provide payroll services for that employee. The discriminatee was hired through that procedure. The employer argued that Westaff was his employer—indeed, his sole employer—and therefore, the company should not be ordered to reinstate him. In its view, it should have been required simply to notify Westaff that it had no objection to the discriminatee’s being referred to the company for open positions.

The Board disagreed. While the law judge saw the staffing agency as the “nominal” employer at most, and the respondent as the de facto employer in this scenario, the Board saw no need to belabor that issue—it was enough that the respondent was an employer, as it exercised sufficient control over the terms and conditions of his employment either way. Indeed, the company selected him for the position and set his wage rate; through its VP of operations and engineering manager, it oversaw the employee’s day-to-day assignments, trained, and evaluated his work. In fact, in its contract with the staffing agency, the agency explicitly ceded responsibility to the company to supervise the employee.

Criminal history. Prior to being placed with the employer, the discriminatee had been incarcerated for nine months on weapons-related felony charges. The employer didn’t find out about this criminal history, however, until several days after he was discharged. It claimed that it would have fired the employee on that date upon learning of his background, particularly given statements that he had made a few weeks earlier that, in the eyes of the company president, were suggestive of threats of physical violence. Consequently, the backpay period should have been tolled on that date, and reinstatement should not have been ordered, the employer urged.

However, the NLRB looked at the substance of that prior conversation, saw that it was simply a dispute over holiday pay (to which, as a probationary employee, the employee was not entitled), and noted that in response to the president’s admission that the company had a hard time retaining employees, the employee simply responded with the comment, “You get what you give.” This statement, taken in context, was hardly “objectively threatening” in the Board’s eyes; it merely alluded to the fact that the

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employer’s retention record might improve were its employee benefits more generous. The subsequent discovery of a weapons charge in the employee’s past did not transform the innocuous comment into grounds for which the employer would have discharged the employee absent his union activity, the Board found.

Dishonesty on job forms? The employer also pointed out that the employee had lied about his criminal past on his application forms to Westaff. Specifically, during the pre-hiring stage, he wrote “N/A” in large letters diagonally across the first six questions of a form which asked about crimes and rehabilitation. On a separate job application form, he checked the “NO” box next to the question, “Have you ever plead guilty, ‘no contest,’ or been convicted of a felony or misdemeanor?” However, in parentheses, the form included additional instructions for applicants of several states. Relevant here, Connecticut applicants were instructed not to complete the question, but to instead complete a “Connecticut Supplemental Form.” The employee received no such form, though—and he didn’t ask about one. The employer urged that these misrepresentations warranted denial of reinstatement and a cut-off of backpay as of the date that it made this subsequent discovery.

The Board disagreed with the law judge’s conclusion (made without reference to these job forms) that the employee had not lied about his criminal past. It stopped there, however, deeming this a matter for the compliance stage. Given evidence that the employee intentionally misrepresented his criminal history on the staffing agency application forms, the Board said the employer would have the opportunity in compliance proceedings to demonstrate that these misrepresentations would have prompted it to terminate the employee when it discovered this violation of company policy, regardless of his union activity.

The slip opinion number is: 362 NLRB No 52.

Attorneys: Edward Lynch, Jr. (Anderson, Reynolds & Lynch) and Thomas Gibbons (Jackson Lewis) for Westaff and EDRO Corp. William Haller for International Association of Machinists.

NLRB: Employer’s cancellation of bargaining sessions and demand for conditional bargaining unlawfulBy Ronald Miller, J.D.

An employer unlawfully refused to bargain where it canceled seven consecutive scheduled bargaining sessions over the course of two months, ruled a three-member panel of the NLRB. Additionally, the employer unlawfully refused to bargain where it conditioned bargaining on the union’s agreement that, if a court of competent jurisdiction determined that the Board lacked a quorum when the regional director certified the union as the bargaining representative, then any contract executed by the parties would be null and void and the employer would withdraw its recognition of the union (Professional Transportation, Inc., April 2, 2015).

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Negotiation dates. On June 5, 2012, the regional director certified the union as the bargaining representative for a unit of the employer’s employees. The union immediately requested bargaining dates, but the employer was initially unable to meet because of scheduling conflicts. The parties held their first bargaining session on September 25, 2012. Thereafter, they met twice in November and once more in late January 2013. Concerned that the negotiations were “dragging,” the union urged the employer to agree to more negotiation dates. The parties scheduled a series of meetings in February and March. The employer cancelled the February meetings claiming it was still drafting counterproposals. The employer’s negotiator subsequently cancelled the March meetings citing a “major conflict” that he had previously overlooked.  New March dates were scheduled but those were later canceled by the employer, citing its need to review the possible ramifications of the D.C. Circuit’s decision in Noel Canning v. NLRB.

On April 22, the parties agreed to three June dates. But on May 31, the employer notified the union that it “is bargaining subject to a reservation of rights based upon the reasoning expressed in the Noel Canning. Specifically, the employer informed the union that it would negotiate only if the union would agree that the employer’s obligation to recognize the union and abide by any collective bargaining agreement would be nullified if “a court of competent jurisdiction determined that the Board lacked a quorum when the union was certified. In response, the union reiterated its willingness to bargain, but not under the employer’s conditions.

At the first June bargaining session, the employer repeated its position regarding Noel Canning and asserted that the union was agreeing to this “conditional bargaining” by participating in the bargaining session. The union would not agree to that condition but was otherwise willing to negotiate. The bargaining session concluded, and no further sessions were held.

Cancellation of bargaining sessions. First addressing the employer’s cancellation of seven consecutive bargaining sessions, the Board agreed with an administrative law judge that such conduct by the employer violated its duty to bargain in good faith. Here, the Board found that the cancellations clearly established an impermissible pattern of dilatory conduct by the employer.

Conditional bargaining demand. The Board also agreed that the employer unlawfully refused to bargain by insisting to impasse that if the D.C. Circuit’s opinion in Noel Canning was upheld, any collective bargaining agreement reached by the parties would be nullified and the employer would no longer recognize the union. In the Board’s view, the employer’s position was a belated attempt to challenge the regional director’s certification of the union. The Board pointed out that the employer had ample opportunities to contest the validity of the election. Here, the employer executed a stipulated election agreement with the union, and did not file any objections to the outcome of the election or file any objections to the conduct of the election, which the union won. Further, the employer did not contest certification of the union as bargaining representative by the regional director, but instead began bargaining. Under such circumstances, the Board concluded that the employer waived its right to challenge the validity of the underlying representation proceeding or the Union’s certification.

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Accordingly, the employer acted unlawfully by agreeing to bargain only if the union accepted its conditional bargaining demand

Regardless of whether the employer’s conduct amounted to an untimely challenge to the union’s certification, its conditional bargaining demand did not involve wages, hours, or other terms and conditions of employment, and was therefore a permissive subject of bargaining. Accordingly, the employer acted unlawfully by insisting on its bargaining demand to the point of impasse.

Remedial order. Moreover, the Board pointed out that once the union started pressing the employer to negotiate more frequently, it canceled seven consecutive bargaining sessions without valid reasons, and then insisted to the point of impasse, that the union agree to its conditional bargaining demand. Under such circumstances, the Board found that the employer had engaged in a series of dilatory tactics in contravention of its duty to bargain in good faith. To remedy such conduct, the Board determined that a bargaining schedule requiring the employer to meet and bargain with the union on a regular and timely basis was appropriate. In addition, the employer was required to submit written bargaining progress reports every 30 days.

The slip opinion number is: 362 NLRB No. 60.

Attorneys: John Kattman (Kattman & Pinaud) for International Brotherhood of Teamsters Local 512. Jon Goldman (Kahn, Dees, Donovan & Kahn) for Professional Transportation Inc.

NLRB: Board refuses to permit withdrawal of unfair labor practice charge despite settlement of class actionBy Ronald Miller, J.D.

Finding that the withdrawal of a pending unfair labor practice charge would not effectuate the purposed of the NLRA, the NLRB denied a charging party’s motion. Here, the Board pointed out that an agreement settling a class action addressed the employees’ private rights under federal and state wage and hours laws, but did not address the public interest in protecting employees’ statutory right to engage in collective action regarding terms and conditions of employment (Flyte Tyme Worldwide, March 30, 2015).

Relying on the NLRB’s decision in D.R. Horton, Inc., an administrative law judge found that an employer violated Sec. 8(a)(1) by maintaining and enforcing its arbitration agreement policy (AAP) that required employees to individually arbitrate all employment-related claims or disputes, and to waive their right to maintain collective and class actions in all forums. The ALJ also found that the employer violated Sec. 8(a)(1) by filing a motion to dismiss a class action wage and hour lawsuit filed by employees and to compel arbitration under the AAP.

Remedial order. To remedy these violations, the law judge ordered the employer to: (1) rescind or revise the nationwide handbook provisions regarding the AAP to make it clear to employees that the AAP does not constitute a waiver in all forums of their right to

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maintain employment-related class or collective actions; (2) notify employees of the rescinded or revised AAP by providing them a copy of the revised AAP or specific notification that the AAP has been rescinded; (3) file a motion with the federal district court asking to withdraw the employer’s motion to dismiss the class action lawsuit and compel individual arbitration of the eight employee-plaintiffs’ claims; (4) reimburse the eight employee-plaintiffs in the federal district court action for any legal and other expenses related to their opposing the employer’s motion to dismiss and to compel individual arbitration; and (5) post a Notice to Employees.

The charging party, an attorney, filed a motion seeking withdrawal of a pending unfair labor practice charge in this case based on a settlement agreement reached between the employees that he represented and the employer resolving the class action lawsuit for alleged federal and state wage and hour violations. The settlement agreement provided for the payment of $900,000 to the eight named plaintiffs and other class members. Additionally, the settlement covered attorneys’ fees. As part of the settlement, the employees agreed that the charging party would request withdrawal of the unfair labor practice charge in this case, and relinquish any right to receive any monetary recovery as a result of the charge. However, the settlement was not contingent on the Board’s approval of the withdrawal of the charge.

In Murphy Oil USA, Inc., the Board reaffirmed its decision in D.R. Horton, Inc., and found that an employer violated Sec. 8(a)(1) by requiring its employees to agree to resolve all employment-related claims through individual arbitration, and forgo their rights to pursue collective or class action to resolve employment-related disputes. The Board emphasized that employees’ substantive right to engage in collective action to improve working conditions is “at the core of the Act,” and is “the foundational principle that has consistently informed national labor policy as developed by the Board and the courts.”

Public interest. Further, the Board noted that “[i]t is well established that the Board’s power to prevent unfair labor practices is exclusive, and that its function is to be performed in the public interest and not in vindication of private rights. Thus, the Board alone is vested with lawful discretion to determine whether a proceeding, when once instituted, may be abandoned.”

Here, the Board found that it would not effectuate the policies of the Act to dismiss the charge in this case where the settlement agreement did not address or provide any remedy for violations of alleged in the charge. Specifically, the settlement left in place the AAP’s requirement that employees waive, as a condition of employment, the filing of class and collective action claims in all forums. The settlement also failed to rescind or modify in any way the waivers already executed by employees pursuant to the mandatory arbitration provision of the AAP. Therefore, the Board concluded that the AAP would continue to have a chilling effect on the employees’ Sec. 7 rights to engage in collective action in the future.

The slip opinion number is: 362 NLRB No. 46.

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Attorneys: David Islinger (Jackson Lewis) for Flyte Tyme Worldwide.

NLRB: Single employer status found for companies, but no ruling on alter ego statusBy Ronald Miller, J.D.

Following a loan default of a waste management company, and its subsequent operations under the control of the owner of the finance company that made the loan, a three-member panel of the NLRB found that the two companies were a single employer with respect to its unfair labor practices directed at the union representing bargaining unit employees, and the discharge of former bargaining unit employees who were members of the union. However, where the Board agreed with an administrative law judge’s refusal to find that the two companies were alter egos, because the existing contract was an unenforceable members-only contract, if found it unnecessary to reach the question of whether the companies were alter egos (Rogan Brothers Sanitation, Inc., April 8, 2015).

RBS was engaged in the collection and disposal of residential and commercial waste. It employed a bargaining unit of approximately 25–30 employees. In January 2011, RBS was experiencing financial difficulties. It secured a loan from a business financing service. The loan terms included a provision in which the owner of the finance company expressed his intention to form his own waste company to take over a portion of RBS’ operations if it defaulted on the loan. In a separate agreement, the owner of the finance company was retained as a consultant to RBS on issues such as negotiating with Local 813, implementing company policies, and banking and payroll services.

Loan default. On June 30, the RBS loan was declared in default, and the owner of RBS signed a vendor agreement indicating that the company was to perform waste removal services for R&S, the company set up by the finance company’s owner. Customers of RBS were informed on R&S letterhead of the change. RBS assets that served as security for the loan were transferred to R&S as full satisfaction of its debt. R&S’s workforce consisted mainly of former RBS bargaining employees who were not members of Local 813. However, the workforce did include some bargaining unit employees who were members of Local 813.

In a September 29 letter to the owner of RBS, with a copy to the owner of R&S, the union demanded that RBS cease “undermin[ing] the Union’s collective bargaining rights [by] . . . subcontracting, transferring, assigning and/or conveying work covered by your collective bargaining agreement with the Union.” When one employee refused to resign his union membership, his employment was terminated from RBS and he was not offered employment with R&S. A second union member was told that there was no more work for him and a third member was told that things would be changing and we can no longer employ union drivers. That employee was given a withdrawal card for Local 813, an R&S employment application, and job offer at R&S. Two weeks later, R&S voluntarily recognized a different union.

Alter ego status. The principal issues in this case are (1) whether R&S and RBS are alter egos and a single employer, jointly liable for the discharge of employees, and (2) whether

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a collective bargaining agreement between RBS and Teamsters Local 813 was unenforceable as a “members-only” agreement—one that applied only to bargaining unit employees who were members of Local 813. An administrative law judge found that the two companies were not alter egos but were a single employer. As a single employer, the law judge found that the companies violated Sec. 8(a)(3) in discharging three employees and violated Sec. 8(a)(1) by their agents’ statements to employees. The ALJ further found that R&S violated Sec. 8(a)(3) by refusing to hire one of the discharged employees.

The law judge also found that the CBA between RBS and Local 813 was an invalid and unenforceable members-only contract. As a result, he dismissed a complaint allegation that the employers violated Sec. 8(a)(5) by failing to apply the contract’s wage and benefit provisions to all unit employees and by refusing to furnish the union with relevant requested information.

The employer filed exceptions to the single-employer finding and to the Sec. 8(a)(3) findings predicated on single-employer status. It also excepted to the refusal-to-hire violation. For its part, the union excepted to the dismissal of the refusal-to-bargain allegations, and the law judge’s failure to find that the two companies were alter egos.

Single employer status. Single employer status is characterized by the absence of an arm’s-length relationship among seemingly independent companies. In determining whether separate entities constitute a single employer, the Board examines the following four factors: (1) common ownership or financial control; (2) interrelation of operations; (3) common control of labor relations; and (4) common management. In this instance, the Board found that all four criteria were present.

First, there was common ownership among RBS and R&S. One individual owned 100 percent of one company and 50 percent of the second entity. The fact that both individual swore on a license application that they were the principal owners of R&S refuted any testimonial evidence that one of the individuals was the sole owner of the company. At any rate, the Board agreed with the law judge’s finding that R&S and RBS acted in such a manner that made the finance company owner the person in complete control of the financial and business operations of RBS, so that a single individual exercised common financial control of both entities.

Satisfaction of the interrelation of operations factor requires evidence of functional integration between two companies, such as shared facilities, equipment, and personnel. Here, the law judge found that when R&S took over the waste collection operations of RBS, some of the “people who actually did this work were drivers on the Rogan Brothers payroll . . . [who] continued to work on their same trucks and do their same routes.” Other employees were former RBS drivers and helpers who had been terminated the previous week and immediately rehired for R&S. Further, the controller for RBS became the controller for R&S. Such evidence demonstrated the absence of an arm’s-length relationship between the two companies and supported the finding of interrelated operations.

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Control of labor relations. In assessing the common control of labor relations, it is only necessary to conclude that there had been an ability by one entity to exercise ‘clout’ over labor relations of others. The finance company owner exercised such clout when he “took control over [RBS’s] labor relations; relegating to himself the role of negotiating with [Local 813]. . . .” In addition to his role as the labor relations representative for RBS in matters involving Local 813, he figured prominently in the unfair labor practices committed by the employers. His pivotal role in the discharge of the three RBS employees underscored the extent of his control of the labor relations of RBS and R&S. Thus, the Board found that the finance company owner’s control over significant employment matters established common control of labor relations.

Finally, the Board determined that the record showed common management of both companies. The finance company owner “became increasingly involved in the business affairs of [RBS] as the de facto manager of the company,” and eventually it was he who was running or attempting to run the business of RBS. In addition to handling labor relations for RBS, and performing the main management functions for R&S, he set up bank accounts; used loan proceeds to make payments to RBS’s creditors, and dealt directly with Local 813’s benefit funds department regarding delinquent contributions owed by RBS. Further, the RBS general manager was hired to run R&S. As a result, the Board found that these four factors supported the ALJ’s finding that RBS and R&S were a single employer. As a single employer, RBS and R&S were jointly and severally liable for the unlawful discharge of RBS employees.

Discharges. In agreement with the law judge, the Board found that the employers violated Sec. 8(a)(1) by informing two employees that they were being discharged because of their membership in Local 813. Because the RBS general manager continued in that role with R&S, an employee could reasonably believe that he acted as an authoritative spokesman for both companies, so that when he unlawfully threatened to discharge an RBS employee if he did not resign his membership with Local 813, those statements were properly attributable to the employers. A subsequent phone call by another manager to the second employee threatening that he had to resign from Local 813 was likewise attributable to the employers. As a single employer, RBS and R&S were jointly and severally liable for the unlawful discharges of these employees and were similarly liable for the 8(a)(1) violations committed by their agents.

Members-only contract. Agreeing with the law judge, the Board adopted his finding that the contract between RBS and Local 813 was an unenforceable members-only contract and his dismissal of the refusal to bargain allegations under Sec. 8(a)(5) on that basis. Accordingly, the Board found it unnecessary to address the union’s exceptions to the law judge’s finding that the companies were not alter egos. Finally, the Board adopted the law judge’s finding of a Sec. 8(a)(3) refusal-to-hire violation.

The slip opinion number is 362 NLRB No. 61.

Attorneys: Andrew Hoffmann (Hoffmann & Associates), and Jane Barker (Pitta & Giblin) for Local Union No. 813, International Brotherhood of Teamsters. Michael

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Mauro (Marshall M. Miller Associates) for R&S Waste Services, LLC, and Rogan Brothers Sanitation, Inc.

NLRB: Unresolved most-favored-nations clause no basis to declare impasseBy Lisa Milam-Perez, J.D.

Bus companies that declared an overall bargaining impasse based on a stand-off with a union over a most-favored nations clause unlawfully refused to bargain, a three-member NLRB panel held, affirming a law judge’s finding that the employers violated NLRA, Section 8(a)(5) when they implemented their final contract offer (Atlantic Queens Bus Corp., April 21, 2015).

The bus companies, school bus contractors for New York City’s Department of Education (DOE), had a longstanding relationship with the union representing their respective employees. They typically bargained jointly with the union and signed identical bargaining agreements. Those CBAs had long included a most-favored-nations clause that applied to significant terms such as wages and various benefits and provided that if the union entered into a contract with another bus contractor that offered more favorable terms to that employer, the other companies would have the right to adopt those terms as well.

Impasse? Amidst upheaval prompted by the DOE’s announcement that it was re-bidding its bus contracts and revoking its requirement that contractors hire each other’s laid-off workers at the same wages and benefits, the parties faced tense negotiations for a successor bargaining agreement. At an early bargaining session, both parties dug in their heels on the most-favored-nations clause, with the union indicating it would never agree to a contract with that provision, and the companies insisting they would never agree to a contract without it. However, there was movement on wages on both sides of the table over the course of seven bargaining sessions. Nonetheless, with the parties ostensibly deadlocked over the lone issue of whether to include a most-favored-nations clause in the contract, the employer declared an overall impasse and implemented its final contract offer, prompting this unfair labor practice complaint.

Under Board precedent, an overall impasse can feasibly be declared based on a deadlock over a single issue, but the party asserting impasse must establish that (1) a good-faith impasse existed as that issue; (2) the issue was critical—i.e., of “overriding importance” in negotiations; and (3) the impasse on this issue “led to a breakdown in overall negotiations—in short, that there can be no progress on any aspect of the negotiations until the impasse relating to the critical issue is resolved.” The law judge held that the disputed provision was not a critical contract term and, as such, the parties were not at an overall impasse. The Board didn’t address that issue; instead, it adopted the ALJ’s finding based on the employer’s failure to satisfy the third element: The employer was unable to show that, at the time it declared impasse, the parties were unable to make any headway on bargaining without first coming to an agreement over the most-favored-nations clause.

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Progress on wage terms. As the Board observed, the record evidence reflected that labor costs were a significant issue in the contract negotiations and, while there was little progress on that issue during the first months of bargaining, the parties had substantially changed their respective positions on this issue during the last month of negotiations. In particular, both parties moved significantly on wages—with the union abandoning its demand for a 3-percent raise each year of the contract, asking instead for 2-percent for the first two years and indicating it had even more room to move—on the very day that the companies declared impasse. Accordingly, while the parties had taken “opposing and potentially irreconcilable positions regarding the most favored-nations clause issue,” these starkly contrasting positions didn’t impede the course of negotiations.

“Regardless of whatever importance the parties may have attached to the most-favored-nations clause issue, and even if the parties were at an impasse regarding that issue on or before [the date impasse was declared],” the record did not reflect that, as of that afternoon, the parties were incapable of making further progress “on any aspect of the negotiations.” Thus, the employers violated Sec. 8(a)(5) by declaring impasse and implementing their final offer.

The NLRB slip opinion number is 362 NLRB No 65.

Attorneys: Jeffrey Pollack (Mintz & Gold) and Richard Milman (Marshall M. Miller Associates) for Atlantic Queens. Richard Brook (Meyer, Suozzi, English & Klein) for Amalgamated Transit Union.

NLRB: Union unable to prove that new employee should be ineligible to vote in electionBy Ronald Miller, J.D.

Because it was impossible to determine from the record whether a new employee averaged at least four hours of bargaining unit work per week from the date of his hire through the remainder of the quarter preceding the eligibility date of a representation election, a three-member panel of the NLRB concluded that a union failed to satisfy its burden of proof to establish that the employee was ineligible to vote in the representation election (Circo Group, LLC dba Circo Bar, April 24, 2015).

In this instance, the Board was called upon to consider a determinative challenge in the election. The tally of votes showed six votes for and six votes against the union, with two challenged ballots. The union filed a challenge to the ballot of the barback, who was hired as an employee of the employer’s bar in the quarter preceding the eligibility date of the election. The record contained evidence of the employee’s employment contract, his tax and I-9 forms, his receipt of an employee handbook, two paychecks he received for work performed during an election eligibility period, and work schedules covering the eligibility period. A hearing officer stated that, based on the paychecks and work schedules, it appeared more probable than not that the employee worked for the employer sporadically, with no established pattern of regular continuing employment.

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However, the Board pointed out that the applicable test is not whether the employee worked “sporadically, with no established pattern of regular continuing employment,” but whether he was eligible to vote as a regular part-time employee under Davison-Paxon Co. In Davison-

Paxon, the Board held that, to qualify as a regular part-time employee, an employee must average at least four hours of bargaining-unit work per week during the quarter preceding the election eligibility date. When an employee is hired during that quarter, the Board considers whether the employee averaged four hours of bargaining unit work during the weeks in which he was employed.

Here, it was impossible to determine whether the employee worked the requisite number of hours under Davison-Paxon to be eligible to vote. The two paychecks that he received during the eligibility period did not specify the number of hours that he worked, and nothing in the record clarified that question. The burden of proof rested with the union as the party challenging the employee’s eligibility to vote. Because it failed to satisfy its burden to present evidence establishing the employee’s ineligibility to vote, the Board reversed the hearing officer and overruled the challenge to his ballot.

The slip opinion number is 362 NLRB No. 75.

Attorneys: Agustin Collazo (Agustin Collazo Law Offices) for Circo Group, LLC.

Hot Topics in WAGES HOURS & FMLA:

Federal contractor will pay $1.2M in back wages, suffer 3-year debarmentIn the aftermath of a DOL Wage and Hour Division investigation, federal electrical contractor Lighting Services Inc. will pay 38 electricians/technicians more than $1.2 million in back wages. The WHD found that the company had not paid required prevailing wages to workers at Marine Corps Base Hawaii in Kaneohe Bay. The division also found the employer submitted falsified payrolls and told workers to provide false information to investigators.

Because Lighting Services Inc. violated the Davis-Bacon and Related Acts and the Contract Work Hours and Safety Standards Act, the company and owner Scott Wilks are excluded from obtaining federal contracts for three years, according to an April 2 WHD release.

WHD investigator determined that Lighting Services and Wilks committed what the agency called “multiple egregious violations,” including: instructing employees to misrepresent to investigators the type of work they did; requiring employees to falsify time records; failing to list numerous workers on certified payroll records; and paying rates more than $20/hour below required wage rates.

The DOL’s regional solicitor in San Francisco brought charges against the contractor, seeking payment of back wages and debarment from federal contracts. The department

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resolved the charges and obtained appropriate remedies through consent findings approved by an administrative law judge last month, the WHD said.

“An employer cannot reduce its labor costs by underpaying workers the required wage standards in a federally funded construction contract,” remarked WHD District Director Terence Trotter. “Just as standards of quality must be met on completed electrical work, employers must also adhere to federal standards that safeguard the electricians’ pay and working conditions.”

Panda Express willing to pay 2.9M to settle general mangers’ overtime claimsBy Pamela Wolf, J.D.

Panda Express is willing to pay $2.97 million to settle the FLSA claims of general managers that they were improperly classified as exempt from FLSA overtime requirements and were cheated out of overtime pay for hours worked over 40 in a work week. The net proceeds from the settlement will be distributed to 155 general managers who worked for Panda Express nationwide, except for in California.

Among other things, the plaintiffs continue to assert that general managers are misclassified as exempt under FLSA overtime requirements, according to the memorandum in support of the proposed deal. The plaintiffs also contend that the primary duties of general managers are to perform the same work as hourly workers; that they are subject to daily, constant, and pervasive overarching control by corporate management; and that any purported “managerial” duties they may perform are automated by corporate management.

The defendants on the other hand, contend that the general managers are properly classified as exempt; that they perform primarily managerial duties using their own discretion; and that they fall within the FLSA executive and/or administrative exemptions. The complaint also included claims under New York law, but apparently due to a lack of numerosity, they will be dismissed under the agreement.

In June 2011, the court conditionally certified a collective of general managers working for Panda Restaurant Group, Inc. and Panda Express, Inc. nationwide, except in California, during the three years period preceding notice to the potential class. A total of 155 individuals opted in to the litigation.

The deal. The maximum gross settlement amount is limited to $2.975 million, according to the agreement. Class counsel’s fees, costs, and expenses not to exceed 33.33 percent of the gross settlement amount ($991,567) will be deducted. Subject to court approval, a $10,000 service award would go to the named plaintiff, and $5,000 service awards would go to each of four pre-certification opt-in plaintiffs. Settlement awards would be allocated to claimants according to a pro-rata formula based on number of weeks worked.

The parties contend that, “Collectively, the $2,975,000 settlement for 155 Plaintiffs represents a significantly higher result per Plaintiff than in other misclassification cases with court-approved settlements.”

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The case, Kudo v. Panda Restaurant Group, Inc., was filed in the Southern District of New York; the case number is 7:09-cv-00712 (CS).

‘Outside sales’ exemption, FLSA collective action waiver questions declinedBy Pamela Wolf, J.D.

The Supreme Court will not take up the question of whether sales representatives at KeHE Distributors, LLC, were exempt from FLSA overtime under the “outside sales” exemption. Nor will the Justices determine whether those who signed waivers in a separation agreement are excluded from a collective action. In an April 6 order, the Court denied the employer’s bid for review the Sixth Circuit’s ruling answering both questions in the negative.

In July 2014, the Sixth Circuit found in Killion v.   KeHE   Distributors, LLC  that a district court erred in concluding that the reps’ reordering of merchandise amounted to a “sale” for FLSA purposes and that making sales was the reps’ primary duty. Moreover, those who signed unmodified separation agreements purportedly giving up the right to become a member of a class or collective action could not be excluded from a collective action, according to the appeals court.

In a petition for cert, KeHE Distributors asserted that the Sixth Circuit’s conclusion that an employee’s right to join a FLSA collective action may not be waived created a 7-1 circuit split, with the Second, Third, Fourth, Fifth, Eighth, Ninth and Eleventh Circuits finding otherwise. The Sixth Circuit ruling also conflicted with High Court precedent, according to the petition.

KeHE also argued that the Justices should address whether the FLSA’s outside sales exemption excludes those who are paid entirely on commission and write orders to replenish customer inventory, but do not alone cause increased sales.

However, since the High Court has denied KeHE Distributor’s petition for cert, the Sixth Circuit ruling will stand.

Jury gives $1.3M to 101 workers denied minimum wage, overtime payThanks to a Washington state jury, 101 workers once employed by a restaurant and a spa that are now closed will receive more than $1.3 million in back wages and damages. The decision stems from a U.S. Labor Department investigation that revealed numerous violations of federal labor law.

A unanimous jury verdict found that the workers were systematically denied minimum wage and overtime pay under the FLSA by business owners Huang Jie and Zhao Zeng Hong, the DOL’s Wage and Hour Division said in an April 7 release. The lawsuit was filed in 2013 against the two owners and their companies, Pacific Coast Foods, Inc., dba J&J Mongolian Grill, and J&J Comfort Zone, Inc., dba Spa Therapy. The jury also found that the defendants interfered with and retaliated against workers (most of whom spoke little to no English) who cooperated in the investigation.

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The WHD found that employees of the J&J Mongolian Grill and Spa Therapy put in on average more than 70 hours during a six-to-seven day workweek. A number of the workers were paid less than the federal minimum wage of $7.25 per hour, and none of them received overtime pay for hours worked beyond 40 in a workweek, the WHD said. Both businesses were located in Bellingham's Bellis Fair Mall.

The DOL brought the case to court to stop the business owners, who have since divorced, from continuing to break the law and to recover wages owed to 101 cooks, kitchen helpers, cashiers, and masseurs. In addition to the back wages, the jury also awarded compensatory damages to four employees who had suffered retaliation, including threats, reduction of hours and, finally, termination of employment because they refused to be silenced about the defendants' labor law violations.

“No one who works hard and plays by the rules should be cheated out of the wages to which they are legally entitled,” remarked Secretary of Labor Thomas E. Perez. “In this case, the business owners took advantage of their workers and continued to do so even after being informed by investigators that they were operating in violation of federal labor law. That's unconscionable.”

$15M resolves remaining wage claims of exotic dancers at Rick’s CabaretBy Pamela Wolf, J.D.

After 6 years of litigation, including a partial summary judgment award of nearly $10.9 million in damages on other claims, a federal court has preliminarily approved a $15 million deal to resolve the remaining FLSA and New York Labor Law minimum wage claims of a certified class of more than 2,000 exotic dancers who have worked for Rick’s Cabaret International, Inc.

The partial summary judgment and award of damages came last November, some five years into the litigation. The dancers had already prevailed on class certification and on their claims that they were employees under federal and state law, and not independent contractors.

As might be expected, negotiations took a more serious turn in the wake of the partial summary judgment award of damages, according to the background included in the memorandum in support of the parties’ bid for preliminary approval of the deal they have reached.

Trial set to begin this month. Trial was set to begin on April 27, 2015. The remaining issues for trial were the amount of hours class members worked for workdays not covered by the summary judgment order; the amount of tip-outs class members paid to the house mom, disc jockey, and club management; whether Rick’s Cabaret International, Inc., and RCI Entertainment (New York), Inc., are joint employers of the entertainers; whether the defendants’ FLSA and NYLL violations were willful; and whether the defendants had a good-faith basis for their actions.

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The preliminarily approved settlement. The deal submitted by the parties and approved by the court on Thursday, April 2, provides a common settlement fund of $15 million from which attorneys’ fees, litigation expenses, administrative costs, and class representative and discovery participant service payments would be deducted. The net settlement proceeds, after court approval of all amounts set out in the agreement, would be $9,395,000. The net amount will be distributed to a Rule 23 class with 2,212 current members.

Assuming that $9,395,000 is the net settlement fund amount to be distributed, individual settlement allocations will range from $11 to $83,087, with 289 individuals receiving over $10,000, according to the memorandum. The average allocation will be $4,247. The allocation amounts will be paid as 1099 income “given the parties continuing dispute over the classification of Class.”

The court will hold a final approval hearing on September 18, 2015.

The case, Hart v. RCI Hospitality Holdings, Inc., was filed in the Southern District of New York; the case number is 09 Civ 3043 (PAE).

Revised FMLA definition of “spouse” not being enforced in Texas, Arkansas, Louisiana, NebraskaBy Pamela Wolf, J.D.

Consistent with a preliminary injunction imposed by federal court in Texas on March 26, the Department of Labor has confirmed that it will not be enforcing in Texas, Arkansas, Louisiana, and Nebraska its final rule revising the definition of “spouse” under the FMLA to include employees in same-sex marriages.

Because the issue of conflicts between state and federal definitions of marriage is currently pending before the U.S. Supreme Court as well as many lower federal courts, in Texas v. United States of America, the court issued a preliminary injunction staying the implementation of the DOL’s recent amendments to its FMLA regulations. “Without a doubt, the questions involved in this action are serious and must be resolved by the proper authority,” the district court wrote, adding, “the Supreme Court will soon address these issues and provide much needed clarity for the lower courts.”

In a request for hearing on the issue of whether the preliminary injunction should have been issued and should instead be dissolved, the federal government said that “while the preliminary injunction remains in effect, the defendants do not intend to take any action to enforce the provisions of the Family and Medical Leave Act … or the Department of Labor’s FMLA regulations, against the states of Texas, Arkansas, Louisiana, or Nebraska, or officers, agencies, or employees of those states acting in their official capacity, in a manner that employs the definition of the term ‘spouse’ contained in the February 25, 2015, final rule, Definition of Spouse Under the Family and Medical Leave Act … and would have been inconsistent with the previous definition employing a “place of residence” rule.”

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WHD is targeting Oklahoma agriculture industryThe DOL announced on Thursday, April 9, that it will be engaged in a multi-year enforcement initiative in the Oklahoma agriculture industry. The initiative was prompted by a high violation rate for the FLSA, the H-2A visa program, and the Migrant and Seasonal Agricultural Worker Protection Act, the DOL said in a Wage and Hour Division News Brief.

Agriculture plays a significant role in Oklahoma's economy, with nearly 80,000 farms contributing to the state's production and providing jobs for thousands of workers, according to the WHD. Farmworkers play an essential role in producing our nation's food supply, but they are among the most vulnerable and lowest paid workers. Many are not familiar with the protections to which most agricultural workers are entitled, such as receiving legally required wages, safe transportation and housing, and field sanitation facilities.

Between 2011 and 2014, the WHD in Oklahoma found the majority of the agriculture industry investigations they conducted had monetary violations with back wages collected or civil money penalties assessed. In order to improve compliance with agricultural statutes, including the FLSA, the MSAWPA, the labor provisions of the H-2A visa program, and the field sanitation provisions of the OSH Act, the division plans to launch a multi-year educational and enforcement initiative. During 2015, the agency is reaching out to growers by providing education and technical assistance in order to increase awareness and, in turn, compliance.

The WHD’s initial enforcement efforts will focus on watermelon growers because it’s a labor-intensive crop.

“The department hopes to reduce the number of violations by educating and providing assistance to employers and workers out in the field,” remarked Regional Administrator Cynthia Watson. “No employee who works so hard for their wages should be denied their basic rights under the law.”

Houston specialty grocery store initiative reaps $1.3M for workers affected by FLSA violationsA Department of Labor multiyear enforcement initiative found widespread FLSA minimum wage and overtime violations among specialty grocery stores in Houston and reaped $1.3 million-plus to workers affected by the violations. According to the Wage and Hour Division, many workers in these stores live on $300 a week in an area where a month’s rent averages $1,000 or more.

In fiscal years 2013 and 2014, the WHD’s Houston District Office concluded 120 cases and returned to 1253 workers more than $1.3 million in back wages and damages. In its investigations, the WHD found that employees worked off the clock, were not paid for mandatory training time, were wrongly classified as overtime-exempt, or were paid straight time for overtime hours. Some employees’ pay also fell below the federal minimum wage when they were required to pay for register shortages and uniforms.

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During the multiyear enforcement initiative, investigators also found employers committed recordkeeping violations by failing to maintain time and payroll records, and others did not display posters to inform workers about their workplace rights, as required.

“Violations of the law were as varied as the employers we investigated,” said WHD Regional Administrator Cynthia Watson. “We will use every enforcement tool available to us to make sure workers in this industry are paid fairly and in accord with the law. We will continue to focus our effort on grocery stores that cater to a variety of communities and their supply chains, most of whom employ the most vulnerable workers.”

San Francisco Bay area nursing homes, residential care facilities targetedAccording to a multiyear compliance assistance and enforcement initiative conducted by the Department of Labor’s Wage and Hour Division, San Francisco Bay Area residential care facilities and nursing homes have underpaid more than 1,300 workers by millions of dollars. Between 2011-2014, minimum wage and overtime violations resulted in more than $6.8 million dollars in back wages and damages for the workers, the WHD said in an April 7 press release. In addition, the initiative has served to level the playing field among the businesses by ensuring compliance with the FLSA.

The WHD said that it has at the same time worked with business owners, worker advocacy groups, and employees to educate the industry on basic federal labor law requirements. Nonetheless, investigators continued to see widespread abuses where many employers purportedly took advantage of workers vulnerable to exploitation because they often don’t know their rights. As a result, the workers were subject to wage violations and retaliation.

Working conditions in some residential care facilities can be difficult for many caregivers, the WHD explained. Many of the facilities require employees to stay overnight on the premises to ensure round-the-clock care for patients. Despite the fact that they are on call assisting residents overnight, investigators found that some workers were not paid for such time, and some were denied adequate sleeping facilities and were forced to sleep on the floor.

Investigators also found that employees who were paid hourly often worked 10 to 14 hours a day, six days per week, but were only paid for eight hours per day. Some workers were paid a flat weekly salary regardless of the hours they worked and were therefore denied time and one-half pay for hours worked beyond 40 per workweek. Employees were also threatened and harassed if they questioned their working conditions, the WHD said. Some employees were purportedly intimidated or retaliated against by their employers and were instructed not to cooperate with WHD investigators.

The division pointed to these investigations completed in the past year, which reflect what the WHD called a disturbing trend in violations:

The owners of Retirement Plus of San Carlos and four other San Francisco Bay Area facilities paid its caregivers as little as $5 per hour and misclassified one

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employee as an independent contractor. The employer paid more than $630,000 in minimum wages, overtime, and damages to resolve the case.

Lake Alhambra Assisted Living Center violated a protective order prohibiting retaliation against caregivers for cooperating with the investigation. Ultimately, the business paid $304,000 in back wages and damages to 32 caregivers, plus $25,000 in civil money penalties as ordered in a consent judgment filed in the Northern District of California. The order also included the appointment of an independent monitor to ensure the business pays its workers properly in the future.

Anne’s Guest Home, which operates six facilities in Pleasanton and Livermore, California, was found in violation of the FLSA’s minimum wage, overtime, and recordkeeping provisions. The company paid some workers below the federal minimum wage and failed to pay overtime at time and one-half for hours worked beyond 40 in a workweek. The firm was ordered to pay more than $447,000 in back wages and damages in a consent judgment filed in the Northern District of California.

Farol’s Residential Care Home paid caregivers salaries below the minimum wage in many cases and did not pay overtime when employees worked over 40 hours per week. The business was ordered to pay a total of $405,284 in back wages, damages, interest, and penalties in a consent judgment also filed in the Northern District of California. Twenty-seven workers will receive back wages in this settlement.

Vicky Rebecca Quedado, dba We Care ICF/DD-H and Becker Home Inc. of Northern California, operates three intermediate residential-care facilities and will pay $261,356 in back wages and liquidated damages to 21 low-wage workers for FLSA violations. The division found that the business paid the workers flat salaries for all hours worked instead of paying them overtime when they worked more than 40 hours in a workweek, as the law requires.

“The hardworking men and women who take care of our relatives and friends need to be compensated fully for their time,” remarked WHD Administrator Ruben Rosalez. “We know that rewarding hard work with fair and full pay leads to happier and more productive workers. The trend of violations is therefore not only harming workers, but patients alike who might suffer with less quality care.”

Low-wage worker protests in full swing at home and abroadBy Pamela Wolf, J.D.

Low-wage worker protests for a $15-an-hour wage are taking place today in 200 cities across the United States, including Boston, Chicago, Indianapolis, Kansas City, Las Vegas, New York, Phoenix, Pittsburgh, San Diego, and Tampa, according social and other media reports. Organizers expected tens of thousands of protesters to turn out. Today’s date represented numerically—4-15—provides irresistible timing for protests

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organized by Fight for $15. The protesting workers include child care teachers, adjunct professors, and fast-food, airport, retail, and home care workers. Service Employee International Union members have also joined in sympathy protests. And the protests are not just confined to the United States—they’ve gone global—with worker protests planned in 40 countries.

Social medial reports show protests at McDonald’s, Wendy’s, Hardee’s, and other locations across the county, with some fast food restaurants closing due to the protests. In other cases, fast-food and other low-wage workers, including Brinks security workers, reportedly have walked off the job.

Although the ongoing efforts of Fight for $15 and other groups to increase the minimum wage have made some headway, many question how much of a difference the protests have really made for the affected workers. In February, Walmart, long at the center of low-wage protests, announced a series of wage increases that includes a starting pay boost to $9 an hour beginning this month, and another increase to at least $10 an hour by February 2016. But some believe the increases have little to do with protests and more to do with positive changes in the economy and the fact that low-wage workers are now more willing to leave those jobs to find ones that pay better. As a result, low-wage jobs may now have a higher turn-over rate and be more difficult to fill.

Earlier this month, McDonald’s USA, LLC, announced a wage hike to $10 an hour by 2016 for workers at corporate-owned stores. But, arguably, that move was more motivated by an effort to establish that the corporate entity does not occupy joint-employer status with multiple franchisees that are part of ongoing National Labor Relations Board hearings into alleged unfair labor practices than to help low-wage workers. In fact, its company profile states that more than 80 percent of McDonald’s restaurants are franchised.

Meanwhile, the White House and many Democratic lawmakers continue to push, without success, for a federal minimum wage hike. At the state level, however, 2014 saw minimum wage hikes through legislative action in a dozen states, and in four more states through ballet initiatives. Voters in yet another state approved a nonbinding ballot initiative that would raise the minimum wage.

High-tech manufacturer owes $282,000 in back wages, damagesAdvanced Design, Engineering & Manufacturing (Adem), LLC, of Santa Clara, California, violated the FLSA’s overtime provisions, according to a Wage Hour Division investigation, the DOL said April 15. As a result, more than three dozen workers at the Silicon Valley company will receive more than $282,000 in overtime and damages. The company will pay $141,410 in back wages to 38 employees, an equal amount in liquidated damages, and $14,212 in civil money penalties because the violations were found to be willful.

WHD investigators found Adem, a company that engineers and manufactures special and/or automated fixtures for assembly lines in the semiconductor equipment, robotic automation, aerospace, defense, scientific instruments, medical, and energy industries,

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violated the FLSA amid widespread wage violations. The division determined the company did not pay its workers the required one and one-half times the regular pay for hours worked beyond 40 hours in a work week but instead paid straight time rates for these hours and disguised the wages on their records as bonuses. Several workers who were claimed to be exempt were, in fact, entitled to overtime pay, the investigation revealed.

“Falsifying records to disguise overtime as straight time, and labeling the payments as bonuses is illegal and unacceptable,” said San Francisco Wage and Hour District Director Susana Blanco. “Failing to pay legally required overtime hurts workers and their families, and it gives Adem an unfair competitive advantage over law-abiding employers. This agency works to protect employees and level the playing field for employers.”

Court will not take up overtime pleading standards under FLSABy Pamela Wolf, J.D.

The Supreme Court Justices have declined to take the opportunity to clarify the appropriate pleading standard, at least for FLSA cases, in the wake of the Court’s Twomby and Iqbal decisions. On Monday, April 20, the Court issued an order denying the petition for cert filed in Landers v. Quality Communications, Inc., by a cable installer whose FLSA claims were dismissed in the lower courts. He sought to recover, for himself and other similarly situated workers, the minimum wages and overtime pay he said his employer failed to pay. The case had implications beyond the FLSA as to how much factual detail must be pleaded in a complaint in order to survive dismissal.

Below, in an issue of first impression, the Ninth Circuit joined the First, Second, and Third Circuits in holding that to survive a motion to dismiss post-Twombly and Iqbal, a plaintiff asserting an overtime claim must allege that he worked more than 40 hours in a given workweek without being compensated for the overtime hours worked during that workweek. Also agreeing that the plausibility of a claim is “context-specific,” the appeals court explained that a plaintiff may establish a plausible claim by estimating the length of his average workweek during the applicable period and the average rate at which he was paid, the amount of overtime wages allegedly owed, or any other facts that will permit a court to find plausibility.

The Ninth Circuit applied that standard to the cable installer’s claims and concluded he had failed to state a claim for unpaid minimum wages and overtime. His complaint did not allege facts showing there was a specific week in which he was entitled to but was denied minimum or overtime wages. The appeals court thus affirmed the district court’s dismissal of the complaint.

The question that the Court declined to address is: “Whether plaintiffs seeking overtime under the FLSA must support their allegations with detailed facts demonstrating the time, place, manner, and extent of their uncompensated work; or whether it is sufficient if plaintiffs’ allegations give defendants fair notice of plaintiffs’ claims for overtime and the grounds upon which it rests.”

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The case is Landers v. Quality Communications, Inc., Dkt. No. 14-969.

Contractors to pay $1.42M in back wages, liquidated damages for FLSA violationsThe Department of Labor has obtained a consent judgment for $1.42 million in back wages and liquidated damages for more than 300 current and former employees of four Long Island City, New York, plumbing and heating contractors. The related businesses are Danica Group LLC; Copper Plumbing & Heating LLC; Copper II Plumbing & Heating LLC; and Copper III Plumbing & Heating LLC; they have three owners.

Wage and Hour Division investigators found that the contractors violated FLSA overtime and recordkeeping requirements, according to an April 21 WHD release. The contractors paid employees straight time wages rather than time and one-half when they worked beyond 40 hours in a workweek and issued separate paychecks for the overtime hours from a petty cash account.

The contractors also misclassified at least 25 employees as independent contractors, the WHD said, paying them a weekly salary that did not compensate them at time and one-half when employees worked beyond 40 hours in a workweek. The defendants also frequently paid many employees late, sometimes requiring workers to wait several weeks to be paid, and maintained incomplete and inaccurate payroll records.

Under the terms of the consent judgment entered in the case, the companies and their owners will pay the workers $710,000 in back wages covering the time period between September 2010 and April 2014, and an equal amount in liquidated damages. Under enhanced compliance provisions, the defendants also have committed to taking effective steps to improve their payroll recordkeeping, ensuring that employees are paid on time each week, and reclassifying as employees those who were previously misclassified as independent contractors and properly paying them.

“Hundreds of workers were denied their lawful pay when they were not paid promptly and correctly or were misclassified as independent contractors,” remarked Wage and Hour Division Administrator Dr. David Weil. “The misclassification of employees as independent contractors deprives workers of wages and benefits they are entitled to under the law, thereby hurting our economy. It also leads to unfair competition because businesses that play by the rules operate at a disadvantage to those that don't.”

The DOL filed its lawsuit in the Eastern District of New York; the case number is CV13-5155.

Construction worker misclassification scheme demolished The DOL’s Wage and Hour Division has obtained consent judgments that put an end to an employee misclassification scheme and provide $700,000 in back wages, damages, penalties, and other guarantees to more than 1,000 construction industry workers in the southwest. The judgments come after a nearly five-year investigation of illegal business practices by 16 defendants in Arizona and Utah.

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Misclassification scheme. The defendants—operating collectively as CSG Workforce Partners; Universal Contracting, LLC; and Arizona Tract/Arizona CLA—required the construction workers to become “member/owners” of limited liability companies, stripping them of the state and federal protections that come with employee status. “The workers were building houses in Utah and Arizona as employees one day and then the next day were performing the same work on the same job sites for the same companies but without the protection of federal and state wage and safety laws,” the WHD said in a statement. The scheme was designed so that the companies could ostensibly avoid paying hundreds of thousands of dollars in payroll taxes.

The investigation of the defendants’ practices began in southern Utah and moved to Arizona after passage of state legislation in Utah that required LLCs to provide workers’ compensation and unemployment insurance to their “members,” the WHD said. To avoid legal jeopardy in Utah, the defendants moved their operations south to Arizona.

As the WHD noted, misclassified employees with independent contractor or other non-employee status lack minimum wage, overtime, workers compensation, unemployment insurance, and other workplace protections. Employers frequently misclassify workers as a means of reducing labor costs and avoiding employment taxes. By doing so, such employers gain an unfair competitive advantage over companies that are legally compliant and lower standards for all workers, especially in highly competitive markets and industries.

Consent judgments. Federal courts in Arizona and Utah approved consent judgments against the companies and their owners on April 21. Those consent judgments require the defendants to:

Pay $600,000 in back wages and liquidated damages to employees in Utah and Arizona, plus an additional $100,000 in civil penalties;

Stop using limited liability companies to avoid FLSA compliance;

Treat themselves as “employers” and their current and future workers as “employees” under the FLSA;

Comply with FLSA minimum wage, overtime, recordkeeping, and anti-retaliation provisions;

Pay all applicable federal, state and local taxes; and

Work with the DOL to identify workers who were harmed by the misclassification scheme and determine proper individual payment of back wages.

“Legitimate independent contractors are valuable contributors to our economy, but those who deliberately misclassify actual employees as independent contractors—or partners—are a serious problem in many industries, especially in construction,” WHD Administrator David Weil commented. “We will continue to work together with other

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enforcement authorities to ensure a fair and level playing field for businesses, and fair and full pay for workers.”

Related consent judgment. In a separate but related case, the DOL obtained a consent judgment against a major client of the Arizona defendants in this case. The judgment in the District of Arizona against Paul Johnson Drywall, LLC, required the company to stop using the Arizona defendants' unlawful LLC business model and to pay $600,000 in back wages, liquidated damages and civil money penalties.

Targeting misclassification. The WHD said that it has aggressively expanded its efforts to combat employee misclassification in sectors where workers are especially vulnerable and violations are rampant. The DOL has entered 20 Memoranda of Understanding with states, including the Utah Labor Commission, through which it collaborates with states agencies to combat misclassification.

The consent judgments were obtained in the District of Arizona (2:15-cv-00461-JAT) and the District of Utah (2:13-cv-253-DS).

LEADING CASE NEWS:

D.C. Cir.: State Department security officers must repay excess overtime for time spent in IraqBy Ronald Miller, J.D.

The State Department permissibly construed a statute capping premium pay when determining that overtime paid to five security officers during their time spent in Iraq protecting the U.S. Embassy exceeded the statutory limit, ruled the D. C. Circuit. In so ruling, the appeals court concluded that the Office of Personnel Management’s (OPM) interpretation of the statute was reasonable and deserving of the court’s deference. It also found that the Department did not act arbitrarily in denying the employees a discretionary waiver of their obligation to repay excess compensation. Judge Sentelle filed a separate concurring opinion (Lubow v. United States Department of State, April 17, 2015, Srinivasan, S.).

Foreign posting. The five plaintiffs worked as diplomatic security agents for the State Department. In late 2003 and early 2004, they responded to a call for volunteers to serve one-year assignments in Iraq. The employees arrived in Iraq in February 2004. Initially, the plaintiffs were assigned to Iraq on temporary duty status; their permanent duty station was in Washington, D.C. As a consequence, they received “locality pay” in addition to their base salary, intended to equalize their compensation with that of non-federal workers in the same geographic area. In other words, they were paid as if they were working in Washington, D.C.

In June or July of 2004, the plaintiffs’ permanent duty station changed to the United States Embassy in Baghdad. Because the plaintiffs were now stationed in a foreign location, they no longer received locality pay. While in Iraq, the plaintiffs worked, and

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received compensation for, a significant number of overtime hours. In early 2005, they returned to the United States.

Cap on premium pay. Federal law, 5 U.S.C. Sec. 5547, limits the amount of “premium pay” a federal employee may receive. “Premium pay” includes overtime pay, holiday pay, Sunday pay, and night pay differential. The cap operates as a limit on the combination of an employee’s basic and premium pay in a two-week period. However, when an employee performs “work in connection with an emergency” the biweekly cap does not apply. Instead, the statute calls for calculating the cap on an annual basis. The State Department determined that the military operations in Iraq and the aftermath qualified as an emergency. As a result, the plaintiffs were subject to the annual cap.

At the end of 2004, the annual maximum GS-15 pay rate for employees receiving no locality pay was $113,674. For employees assigned to work in Washington, D.C., the annual maximum GS-15 pay rate was $130,305. With respect to the plaintiffs, if Sec. 5547(b)(2)’s cap were calculated as if they received locality pay for Washington, D.C the applicable cap would be $130,305. But if the cap were calculated as if the plaintiffs received no locality-pay adjustment the applicable cap would be $128,200.

In September 2004, the OPM issued final regulations implementing Sec. 5547. The OPM also published a statement in the Federal Register elaborating on the operation of the annual cap. The statement responded to an agency’s question about the application of the cap in the circumstances of this case. The OPM explained that the statute “expressly provides that the annual premium pay cap must be applied to an entire calendar year and that it is based on the applicable rates in effect at the end of the calendar year.”

Overpayments. On November 24, shortly after the OPM’s new regulations took effect, the five plaintiffs received emails from the State Department notifying them that it was “conducting a review of premium pay earnings involving employees supporting the effort in Iraq.” The message explained “the rate of the annual premium pay cap that applies to you is $128,200.” It also notified them that the Department would be “obligated to seek collection of any overpayments.” In April 2005, the Department sought the repayment of varying amounts of premium pay received in excess of the cap. The employees were given the option to dispute their debts through either internal or external administrative review. The administrative reviews determined that the Department properly applied Sec. 5547(b)(2) to the employees’ situation.

Thereafter, each employee requested that the department forgive the debt pursuant to Sec. 5584(a). Ultimately, the waiver requests were denied. The reviewing agency found no basis to overturn the judgment that granting the waivers would create an unfair gain for the employees.

Judicial review. The employees sought judicial review in federal district court. The district court initially remanded the case based on an “intervening event,” the enactment of an Emergency Supplemental Appropriations Act. The Act allowed heads of agencies to “waive” 5 U.S.C. Sec. 5547(b)(2)’s limit on the aggregate of basic and premium pay up to $200,000 during 2005. Specifically, the court questioned had the State Department

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taken advantage of that authorization. On remand, the Department found that the 2005 waiver had no effect on the amount of the employees’ 2004 debts because any pay received by them in 2005 had been excluded from the overpayment calculations for 2004. The district court then granted summary judgment to the Department.

On appeal, the employees sought review of the State Department’s decision requiring them to repay excess overtime pay they received for work on assignment in Iraq in 2004. They questioned whether Sec. 5547(b)(2)’s cap on premium pay was properly applied; the Department’s refusal to waive their repayment obligations; and a review board’s upholding the denial of discretionary waivers. The D.C. Circuit affirmed the district court.

Annual premium pay. The appeals court first addressed the decision that the employees’ compensation for overtime work exceeded the cap on annual premium pay. The OPM interprets

Sec. 5547(b)(2)(A)’s direction to use the GS-15 rate “in effect at the end of such calendar year” to require the use of the GS-15 rate applicable to the specific employee in question. The employees dispute OPM’s understanding of the statute. They maintain that the statutory references to the GS-15 and Executive Schedule rates “in effect at the end of such calendar year” intend only to reference the rates generally in force at the end of the year.

Chevron framework. Both parties agreed that Chevron’s two step framework governed the court’s review of the OPM’s interpretation of Sec. 5547(b)(2). Under the Chevron framework, if “Congress has directly spoken to the precise question at issue,” then “the court, as well the agency, must give effect to the unambiguously expressed intent of Congress.” But “if the statute is silent or ambiguous with respect to the specific issue,” the court examines “whether the agency’s answer is based on a permissible construction of the statute.” Here, the district court resolved the issue in favor of the OPM’s interpretation at the first step. On appeal, the D.C. Circuit found that it was unnecessary to decide the question of Sec. 5547(b)(2)’s ambiguity at Chevron step one because the employees made no argument the statute unambiguously compels their interpretation.

Moreover, the appeals court found that the OPM’s reading of the text is reasonable and deserving of its deference at Chevron step two. The OPM read Sec. 5547(b)(2)(A) to mean that the employing agency must apply the GS-15 rate “in effect” with respect to the specific employee in question as of December 31, taking into account the employee’s locality pay as of that date. The phrase “in effect” was amenable to that reading. Further, it was eminently sensible for the OPM to apply Sec. 5547(b)(2)(A) such that an agency would need to take account of an employee’s location only at a single, identifiable point during the year for purposes of determining the “applicable” locality-based adjustment.

Retroactive operation. The employees objected to what they saw as the statute’s “retroactive” operation under the OPM’s interpretation. But the statute would be “retroactive” even under the employees’ reading of Sec. 5547(b)(2)(A): an agency could not definitively calculate its employees’ annual cap until the end of the year because the

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agency would not necessarily know whether the statutory rates might change. The merits of the OPM’s interpretation became all the more apparent when compared with the uncertainty of the alternative approach offered by the employees. Because they believed that Sec. 5547(b)(2) does not speak directly to the circumstances of this case, they proposed that the agency elect to implement different premium-pay caps to govern different parts of the year.

Because the OPM’s resolution of the dispute was based on a permissible construction of the statute, the appeals court affirmed the district court’s grant of summary judgment to the State Department.

The case number is: 13-5057.

Attorneys: Rachel A. Canfield (Greenberg Traurig) for Richard E. Lubow. Alan Burch, Office of U.S. Attorney, for United States Department of State.

D.C. Cir.: Flight attendant’s wages not all foreign earned incomeA United Airlines flight attendant stationed in Hong Kong, whose duties were performed both in and out of the United States, could not exclude all of her income using the foreign earned income exclusion, the D.C. Circuit held. Only that portion of her wages attributable to services performed in a foreign country was excludable (Rogers v. Commissioner of Internal Revenue Service, April 17, 2015, Edwards, H.).

The employee’s claim that Code Sec. 911 allowed her to exclude all of her wages from taxable income was without merit. Pursuant to Reg. Sec. 1.911-3(a), income earned over international waters is not income earned "in a foreign country or countries." Moreover, the regulation was not procedurally defective, arbitrary or capricious, or manifestly contrary to the language of Code Sec. 911 and, therefore, was binding on the court.

However, the Tax Court’s opinion was unclear about the excludability of the guaranteed pay that the employee earned when canceled flights required her to remain in Hong Kong until she was assigned to a new flight. Therefore, this issue was remanded to ensure that the entirety of the guaranteed payment was properly excluded from the employee’s income.

Further, the accuracy-related penalty was proper because the employee did not act with reasonable cause and in good faith when excluding all of her wages as foreign earned income. Prior to filing the return, her employer provided a duty time apportionment with the percentages of time her flights were in or over the U.S., international waters, and foreign countries. The taxpayer was well aware that she could not exclude all of her income when she filed her return. Moreover, the individual previously was issued a deficiency notice for similar behavior.

Finally, because she did not prevail on either of the issues presented, and the IRS’s position was substantially justified, the employee was not entitled to litigation costs or fees.

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The case number is 13-1241.

Attorneys: Yen-Ling K. Rogers, pro se. Damon W. Taaffe, Department of Justice, for Commissioner.

2nd Cir.: Court broadens reading of FLSA retaliation provision to include complaints to employerBy Brandi O. Brown, J.D.

Seizing the chance to interpret the ongoing validity of its own precedent in light of the Supreme Court’s FLSA retaliation decision in Kasten v. Saint-Gobain Performance Plastics Corp., the Second Circuit concluded that not only does an oral complaint suffice, as the High Court held in Kasten, but also an oral complaint made to the employer, rather than only to a government entity, would be enough. Dissenting in part, District Court Judge Korman, sitting by designation, contended the lower court erred by not entering a default judgment for the employee, and also lamented that this case was not the best platform for overruling precedent (Greathouse v. JHS Security Inc., April 20, 2015, Carney, S.).

Boss pulled a gun. The employee who filed the lawsuit below worked as a security guard for the employer for five years. His “boss” was the president and part-owner of the business. He alleged that during his employment, he was subjected to many improper employment practices. The final problem that led to his discharge was when he was not paid for several months in 2011. He complained to his boss about his nonpayment and was told, “I’ll pay you when I feel like it.” Then his boss drew a gun and pointed it at him. The employee took that to mean that his employment had ended.

Default ruling. He filed suit two weeks later against the employer and his boss individually, alleging violations of the FLSA and New York Labor Law, including claims that he was discharged in retaliation for his complaint. Neither defendant appeared or filed an answer, and the clerk of court entered defaults against both.

The matter was referred to a magistrate judge for consideration of damages, and the magistrate recommended an award of over $30,000 for unpaid overtime, unpaid wages, and improper deductions. However, with regard to the retaliation claim, the magistrate concluded that the Second Circuit’s decision in Lambert v. Genesee Hospital barred a damages award. The court in Lambert held that an informal oral complaint to a supervisor did meet the protected activity requirement for an FLSA retaliation claim, i.e., that the employee “file” a complaint. Here, the employee had not filed a complaint with a government agency or other prosecuting authority, and Kasten had not overturned that part of the Lambert holding that a complaint made to a supervisor was not a “filed” complaint.

The district court rejected the employee’s objection and adopted the magistrate judge’s conclusions. On appeal, the employee argued that Lambert should be overruled. The Second Circuit appointed pro bono counsel to act as amicus curiae in support of the still non-responsive defendants.

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Kasten overrules Lambert in part. Under FLSA Sec. 215(a)(3), the statute’s anti-retaliation provision, “any person” is forbidden from “discharg[ing] or in any other manner discriminat[ing] against any employee because such employee has filed any complaint or caused to be instituted any proceeding under or related to this chapter.” In Kasten , the Supreme Court held this provision covered oral complaints as well as written ones, thus overruling Lambert to the extent that it required the latter in order to be protected. However, the High Court “expressly declined to address the question whether an employer’s retaliation for an intra-company complaint” was actionable. That said, the appeals court continued, it is “difficult to ignore” that the complaint underlying the decision in Kasten had been made to the employer and not to a government agency. Thus, it had to be read “as casting serious doubt” on that component of Lambert as well.

When it was decided, Lambert was “contrary to the weight of authority” in sister circuits, and it was “even more so” after the decision was handed down. In fact, eight sister circuits had held that employees were protected from retaliation for complaints made to employers, and a ninth one assumed that to be the case. In fact, the Supreme Court granted certiorari in Kasten with the express purpose of resolving a circuit conflict regarding the protection of oral complaints. It concluded that the only “permissible” interpretation was that an oral complaint was protected as long as it was “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.”

However, although it mentioned a “reasonable employer” within that articulation, the Supreme Court expressly declined to answer whether the FLSA applied to complaints made directly to employers instead of government authorities.

Ambiguous phrase. Applying itself to answering that question, the Second Circuit concluded that the FLSA did apply to complaints made directly to employers. First, the phrase “filed any complaint” found in Section 215(a)(3) allowed for more than one meaning. Thus, contrary to the court’s earlier conclusion in Lambert, it was ambiguous. This revised understanding was based on the teachings of Kasten and other circuit court decisions. While the word “filed” might be subject to a narrow understanding, the phrase “any complaint” suggested something broader. The statute’s text did not expressly direct that complaints had to be filed “formally” or that informally filed complaints were excluded. It also did not expressly direct that a complaint had to be filed with a government agency or other particular entity in order to be protected. Even if the word “filed” may have pointed in that direction, in context, a broader reading seemed to be warranted. Plausible interpretations could support either argument.

Remedial nature, agency interpretations. With that in mind, the court considered the FLSA’s purpose and agency interpretations. Because of the statute’s remedial nature, the court has repeatedly noted that an expansive interpretation was called for, would thus “counsel in favor of construing the phrase ‘filed any complaint’ in section 215(a)(3) broadly.” Holding that a complaint to an employer would be covered would further that purpose “by encouraging speedier and more efficient resolution of employee grievances” and resolution of matters before “employees have lost significant wages or other benefits.” To hold otherwise would have the effect of incentivizing termination.

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Moreover, the views of the EEOC and the Secretary of Labor supported such a reading. The EEOC Compliance Manual provides that an employee is protected from retaliation for reporting unlawful treatment to the employer. The Secretary and the EEOC have “been consistent for decades” on this issue.

Thus, the Second Circuit concluded that the protections of Section 215(a)(3) are not limited to employees who “file formal, written complaints with government agencies.” However, the appeals court noted that the standards articulated in Kasten applied as to what constitutes a complaint being filed. “Defining the exact contours of that standard is beyond the scope of this opinion,” the court added, though, and it declined to address whether the employee’s complaint in this case provided an adequate basis for default judgment against the employer. That decision belonged to the district court in its discretion.

Dissent. In a partial dissent, Judge Korman explained that he would have held that the employee was entitled to an award of damages only because the “troubling procedural posture” of the matter was such that it would have been inappropriate to do anything but enter a default judgment. Troubled by the sua sponte treatment of the default judgment decision, Korman noted that exception to a court’s obligation to enter default judgments under Fed. R. Civ. P. 55 is limited to frivolous suits. However, there had “never been a suggestion” that the employee’s suit was a frivolous one. Moreover, he explained, while the party against whom default judgment is entered can move for relief from that judgment for good cause, there was “little justification” for giving the defendants the “substantial” benefits they had received in this matter—e.g., the magistrate acting as counsel and judge, sua sponte denying damages, and then having counsel appointed to argue the appeal in their absence.

Although noting that his dissent was not dependent on Lambert’s “continued validity,” Korman also contended this case was not the appropriate venue for reaching that question. The Second Circuit panel in Lambert had been fully aware that it was fighting the tide of sister circuits with its decision, he observed, noting too that Kasten had “expressly left open” the issue that had been decided in Lambert—whether a complaint made to a supervisor could serve as a predicate for a retaliation claim under the FLSA. And while a panel could overrule an earlier panel’s decision, such as Lambert, when a Supreme Court decision cast doubt on it, he did not believe this matter met the standard of other cases where that was allowed. Finally, he argued, the employee could not recover under Kasten in any event, because his oral complaint did not meet the standards described by the Supreme Court in that decision.

The case number is 12-4521-cv.

Attorneys: Penn Dodson (AndersonDodson) for Darnell Greathouse.

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7th Cir.: Window washers worked for service establishment, so exempt from overtimeBy Ronald Miller, J.D.

High-rise window washers in Chicago were exempt from overtime under the FLSA’s retail or service establishment exemption, ruled the Seventh Circuit. After it was conceded that the employees’ regular pay exceeded one and a half times the federal minimum wage, the appeals court found that the window washers were paid mostly by commission and that their employer was a retail or service establishment (Alvarado v. Corporate Cleaning Services, Inc., April 1, 2015, Posner, R.).

Retail or service establishment exemption. Window washers employed by Chicago’s largest high-rise window washing company filed suit under the FLSA seeking overtime compensation. The employer conceded that it had not paid the employees time and a half for hours worked in excess of 40 in a workweek. However, it asserted that the employees were exempt from overtime under the retail or service establishment exemption. The exemption requires the satisfaction of three conditions: (1) the worker’s regular pay exceeds one and a half times the federal minimum wage; (2) “more than half his compensation for a representative period (not less than one month) represents commissions on goods or services”; and (3) he must be employed by “a retail or service establishment.”

It was conceded that the employees satisfied the first condition, so the issues presented on appeal were whether the window washers were paid mostly by commission and whether the employer was a retail or service establishment. The district court granted summary judgment in favor of the employer with regard to its status as a retail or service establishment and, following a bench trial, ruled in favor of the employer on the commission requirement. This appeal ensued.

Commission requirement. When the employer receives a window-washing order, it calculates the number of “points” to assign to the job based on the job’s complexity and the estimated number of hours that the window washers will take to complete it. The employer pays each window washer the number of points allocated to him multiplied by a rate specified in the company’s collective bargaining agreement with the union that represents the employees. It also uses the number of points assigned to a job to determine the price it charges to customers. Moreover, the employer regularly made price adjustments depending on costs of permits and equipment rental, competition, or a desire to maintain good relations with customers. The annual pay for window washers ranged from $40,000 to $60,000.

Although the CBA contains a provision entitling window washers to be paid by the hour and thus to receive overtime, the union has never tried to enforce that provision. Further, although the employer called its compensation system a “piece-rate” system as opposed to a compensation system, and there are real differences between the two compensation systems, the Seventh Circuit noted that the nomenclature was not determinative. Rather, in reality, the employer’s system was a commission system. In a piece-rate system a

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worker is paid by the item produced by him, while in a commission system he is paid by the sale. In the present case, the window washers are paid only if there’s been a sale.

Additionally, in a commission system, the compensation need only be “proportional and correlated” to the price, as was the case in this instance. However, the appeals court pointed out that a more important consideration was that commission-compensated work involved irregular hours of work. Here, the employees can work only when the employer is hired to wash a building’s windows. Employment necessarily was irregular (rather than the standard eight-hour workday) because of the peculiar conditions of the window-washing business. Further, window washers do not work in high winds, rain, snow, sleet, or freezing temperatures, so there is little work in the winter. The window washers make up for this slack by working more than eight hours a day during the spring, summer and fall. This is the reason for exempting the employer from the requirement of paying window washers time and half for overtime.

Retail or service establishment requirement. Still, to qualify for the exemption, the employer had to show that it was a retail or service establishment. Here, the appeals court determined that because the employer was selling a service, it met the “retail or service establishment” requirement in Sec. 207(i). If that were not enough, the court determined that it could best be described as a retail service establishment: It sells its window-cleaning services to building owners and managers, and they are the ultimate customers, since they do not resell the window cleaning. An additional reason to classify the employer as a retailer is that it sells its service to building owners and managers by the building; it doesn’t make a new contract for each window on each building. Thus, judged by the unit of sale recognized in the industry, the employer was a retailer, explained the court.

The employees argued that the sale of window-washing services to managers of tall buildings “lacks a retail concept.” In an amicus curiae brief, the Department of Labor embraced the employees’ argument that the building managers who buy the employer’s cleaning services “resell” them to the building’s occupants. However, the Seventh Circuit observed that nowhere did the DOL engage with the primary reason for treating the window washers as commission workers—their irregular work hours. Nowhere did it suggest that the window washers would be better off if paid overtime. Finally, the court pointed out that the requirement of paying extra for overtime is said to be a boon to low-wage workers, but the window washers in this case were not low-wage workers. Thus, the judgment of the district court was affirmed.

The case number is 13-3818.

Attorneys: Douglas M. Werman (Werman Law Office) for Ramon Alvarado. Ira M. Levin (Burke, Warren, MacKay & Serritella) for Corporate Cleaning Services, Inc.

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9th Cir.: VP’s choice to fire lawsuit-filing supervisor supports $6.6M punitive damages awardBy Joy P. Waltemath, J.D.

Refusing to overturn a jury verdict of $6.6M in punitive damages (reduced from $15.9M) for retaliatory discharge, the Ninth Circuit found in an unpublished opinion that a UPS Vice President and District Manager was a “managing agent” under California law in that his decision to terminate a supervisor who sued for overtime pay was a “policymaking decision aimed at protecting the company ‘culture.’” His conduct was also sufficiently reprehensible to qualify for punitive damages under state law (Marlo v. United Parcel Service, Inc., April 23, 2015, per curiam).

Jury verdict. In late August 2012, a unanimous federal jury awarded the former UPS supervisor $2,201,425 in economic and non-economic damages and an additional $15,897,053 in punitive damages following a six-day trial. The eight-person jury found UPS retaliated against him for bringing a prior wage and hour lawsuit, reporting safety violations to OSHA and the DOT, and discussing and encouraging other UPS supervisors to file their own lawsuits due to alleged safety and wage violations by the company. That punitive damages award was later reduced to $6.6M.

Managing agent? On appeal, UPS argued that the evidence was insufficient to support the jury’s finding that the VP and District Manager who decided to terminate the supervisor was a “managing agent” under California law, which required a finding that he exercised “substantial independent authority and judgment” in his corporate decisionmaking so that his decisions “ultimately determine[d] corporate policy.” But the appeals court disagreed, citing the fact that he was the highest-ranking supervisor in a 7,000-employee district that covered a “vast geographic area” in southern California; his responsibilities included “managing a complex business,” involving the management of supervisors and employees in various departments throughout his territory: operations, sales, marketing, engineering, automotive, finance and accounting, HR, and labor relations.

“Culture = policy.” According to the appeals court, the VP viewed part of his role as maintaining a company “culture,” which the court said was in essence, a company policy, of supervisors acting as “owners” subject to a salary, rather than eligible for the overtime pay sought by the fired supervisor’s class lawsuit. He viewed that lawsuit as threatening “to upend

that culture;” talked about it with his senior staff; was displeased that other supervisors were filing similar lawsuits; and viewed the lawsuit as a “distraction” that negatively affected employee morale. In the court’s opinion, the jury could reasonably conclude that the VP’s decision to terminate the supervisor was a policymaking decision aimed at protecting the company “culture.” The court also summarily found that the VP’s conduct was sufficiently reprehensible to qualify for punitive damages under California law.

The case number is 12-57170.

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Attorneys: John Furutani (Furutani & Peters) for Michael Marlo. Elena R. Baca (Paul Hastings), Elizabeth A. Brown (Grube Brown & Geidt), and Mark Andrew Perry (Gibson, Dunn & Crutcher) for United Parcel Service, Inc.

Mass. Sup. Ct.: Dunkin Donut franchisee’s no-tipping policy didn’t violate Massachusetts Tips ActBy Ronald Miller, J.D.

A no-tipping policy implemented by a Dunkin Donuts franchisee did not violate the Massachusetts Tips Act, ruled the Massachusetts Supreme Judicial Court. However, on questions reported to the state high court in response to a suit by employees who challenged the employer’s practice of placing tips in the cash register or in an “abandoned change” cup, it was determined that the employer would violate the Act if it failed to clearly communicate to customers the no-tipping policy and then retained tips left by customers. On the other hand, if the employer clearly communicates the no-tipping policy, and customers nonetheless leave tips, the employer may lawfully retain the tips (Meshna v. Scrivanos, April 10, 2015, Duffly, F.).

No-tipping policy. In 2003, a Dunkin Donuts franchisee in Massachusetts implemented a no-tipping policy at certain of its stores. Employees of the stores filed suit alleging that implementation of the policy violated the Massachusetts’ Tips Act, G. L. c. 149, Sec. 152A. The employees were paid on an hourly basis and earned at least the minimum wage under Massachusetts’ Wage Act, G. L. c. 151, Sec. 1. The employer instituted various mechanisms for enforcing the no-tips policy, including the placement of signs in the stores stating “no tipping” or “thank you for not tipping.” Employees were instructed to inform customers of the no-tipping policy and to refuse to accept tips. Tips left by customers were placed in the cash register, and later in an “abandoned change” cup, adopted after commencement of this litigation.

The Tips Act provides that no employer “shall . . . accept . . . any . . . deduction from a tip” given to any wait staff, service, or bartender employee, or “retain . . . any tip” given to the employer directly. Concluding that the no-tipping policy was not a violation of the Tips Act, the trial court granted the employer’s motion for summary judgment on that claim. However, the trial court denied the motion with respect to claims that the employer’s policy of placing money left as tips in the cash register, and a later policy of placing money left as tips in “abandoned change” cups, violated the Tips Act.

Reported questions. The employees’ were granted a request for direct appellate review to the state high court of two questions: (1) Does G. L. c. 149, Sec. 152A allow an employer to maintain a no-tipping policy; and (2) If a no-tipping policy is permitted under Massachusetts law, may an employer be liable under G. L. c. 149, Sec. 152A if (a) the employer fails to communicate the no-tipping policy clearly to customers, who consequently leave tips that are retained by the employer; and/or (b) the employer clearly communicates the no-tipping policy to customers, who nonetheless leave tips that are retained by the employer?

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Construing the language of the Tips Act, the Massachusetts high court first looked to the intent of the legislature. That required the court to “interpret the statute to be sensible, rejecting unreasonable interpretations unless the clear meaning of the language requires such an interpretation.”

Protections of Tips Act. As an initial matter, the court observed that it was undisputed that the employees were entitled to the protections of the Tips Act. Such employees included service employees, service bartenders, and wait staff employees. Wait staff employees include counter staff who “serve beverages or prepared food directly to patrons,” “work in a restaurant . . . or other place where prepared food or beverages are served,” and have “no managerial responsibility.” Here, the parties agreed that the employees in this instance were “wait staff employees” within the meaning of the Tips Act.

The court next turned to the question of whether the Tips Act permits an employer to maintain a no-tipping policy. In the plain and unambiguous language of the statute, an employer may not take away any amount from a “service charge, tip, or gratuity” that was “given to” a wait staff employee. The Tips Act also contemplates that tips intended for employees may be given directly to an employer, and addresses an employer’s obligation in such a situation. The Tips Act prohibits an employer from retaining a service charge or tip that was paid to it rather than to the wait staff employee. However, no language in the Tips Act prohibits an employer from imposing a no-tipping policy.

No-tipping policy. Finding that the Tips Act did not require that employers of wait staff employees must permit customers to give tips to such employees, the high court turned to the question of whether an employer seeking to enforce a no-tipping policy may be held in violation of the Act by retaining tips left by customers. Here, the court concluded that if an employer has not clearly communicated its no-tipping policy to customers, tips left by customers where service is provided by wait staff belong to those employees, and may not be retained by the employer. On the other hand, where the employer has clearly communicated to customers that a no-tipping policy is in effect, money left by customers in establishments where service is provided by wait staff is not a tip that was given to wait staff employees, regardless of a customer’s intent.

The Tips Act defines particular circumstances in which a fee that is assessed by an employer is not a tip or service charge subject to the provisions of the Tips Act. In those circumstances, an employer must “inform the patron that the fee does not represent a tip or service charge for covered employees.” Unless an employer who has implemented a no-tipping policy clearly conveys to customers that money they leave when paying their bill does not represent a tip for wait staff employees, it is readily conceivable that customers will have the reasonable expectation that the money they leave will be given to the wait staff employees. The absence of a clear communication to customers of a no-tipping policy could permit employers to pocket sums not intended for them, and would facilitate “an ‘end run’ around the [Tips] Act.”

Although an employer may adopt a no-tipping policy, it “may not escape this prohibition in . . . the Tips Act,” by failing to communicate to customers that the policy is in effect,

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and that the money they leave will not be kept by the employee as a tip. In the absence of such a communication of the no-tipping policy to customers, the court found that “a sum of money . . . , given as an acknowledgment of any service performed by a covered employee,” remains a “tip . . . that a patron . . . would reasonably expect to be given to a [covered] employee.” Thus, an employer who accepts any portion of such sums in those circumstances violates the Tips Act.

Communicated policy. On the hand, where an employer who employs wait staff employees has clearly communicated a no-tipping policy that effectively conveys that money left by a customer

will not be received by any wait staff employee as a tip, the court concluded that any money that is nonetheless left by a customer is not a tip “given to” the wait staff employees because a customer cannot reasonably expect that this money has been given to the employees. Accordingly, where there has been a clear communication of a no-tipping policy to customers, the employer has not violated the Tips Act if the sums of money that nonetheless have been left by customers are retained by the employer, or placed in an “abandoned change” cup for use by other customers.

The case number is SJC-11618.

Attorneys: Shannon Liss-Riordan (Lichten & Liss-Riordan) for Ron Meshna. Diane M. Saunders (Ogletree Deakins) for Constantine Scrivanos.

Nev. Sup. Ct.: Nevada cab drivers entitled to minimum wage following repeal of exceptionBy Ronald Miller, J.D.

Taxicab drivers stated a viable claim for minimum wages under the under the Minimum Wage Amendment to the Nevada Constitution, ruled the Nevada Supreme Court in an unpublished decision. Relying on its decision in Thomas v. Nevada Yellow Cab Corp., the state high court determined that Minimum Wage Amendment implicitly repealed NRS 608.250(2)(e)’s exception for taxicab drivers (Gilmore v. Desert Cab, Inc., April 16, 2015, Saitta, N.).

In its July 2014 decision in Thomas, the Nevada high court found that a voter-approved minimum wage amendment to the Nevada Constitution impliedly repealed the state’s statutory minimum wage scheme, which excluded cab drivers and other specific workers from its protections.

The case number is: 62905.

Attorneys: Leon M. Greenberg (Leon Greenberg PC) for Barbara Gilmore. Jeffrey A. Bendavid (Moran Law Firm) for Desert Cab, Inc.

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Wis. Sup. Ct.: Employees not entitled to pay for 20-minute meal break that conflicted with state regulationBy Ronald Miller, J.D.

Finding that a decision of the Wisconsin Department of Workforce Development declining to seek back wages on behalf of employees for unpaid 20-minute meal breaks was reasonable and consistent with the purpose of a state regulation, the Wisconsin Supreme Court deferred to the agency’s interpretation. The purpose of the regulation was to protect the life, health, safety, and welfare of the employees and to accommodate reasonable departures from the rule on meal break length where, under a CBA, labor and management have agreed on that issue, so that the employer’s violation of the regulation was a technical one (Aguilar v. Husco International, Inc., April 1, 2015, Crooks, N.).

Meal breaks regulation. The United Automobile Workers (UAW) filed a complaint with the Wisconsin Department of Workforce Development (DWD) on behalf of production workers it represented at an employer’s plant in which it alleged that the employees were owed wages for 20-minute meal breaks. The breaks had been unpaid, and the union previously agreed to that arrangement in every collective bargaining agreement agreed to at the plant. As a result, the workers had a shorter work shift than they would have if the schedule complied with the DWD regulation on meal breaks. However, the provision was in conflict with the DWD regulation that required employers to pay employees for meal breaks that are shorter than 30 minutes.

Still, the DWD regulation allowed employers with CBAs to request waiver from the state for shorter meal breaks, but no such request was made. After the conflict was discovered, the practice was ended.

Back pay claim. Following an investigation of the complaint, an investigator determined that the DWD would not seek collection of back wages on the grounds that the factors favoring a waiver were present in this case (specifically, that the parties to the CBA had agreed to the provision and there was no evidence that the shorter meal breaks jeopardized the life, health, safety, or welfare of employees). Thereafter, the DWD issued a final determination in the matter affirming the decision not to seek back pay. As permitted by Wis. Stat. Sec. 109.11, six employees brought a class action suit seeking back pay for unpaid breaks taken during the two-year period preceding the filing of their complaint.

The trial court denied the summary judgment motions of both parties, and they sought interlocutory appeal. The court of appeals held that the matter was appropriate for summary judgment and granted summary judgment to the employees, reasoning that the CBA could not trump the DWD meal regulation. Thereafter, the employer sought review from the Wisconsin Supreme Court.

Summary judgment appropriate. While the Wisconsin Supreme Court agreed with the court of appeals that summary judgment was appropriate, it reversed the lower court’s decision and granted summary judgment in favor of the employer.  Because this case involved a CBA, the court began its analysis with determining whether federal

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preemption applied to the employees’ claim. Because the employees’ state law claim did not require the interpretation of the CBA, the state high court determined that the case was not preempted by Section 301 of the LMRA.

Next, the state court turned to the question of whether the employees were entitled, under Wis. Admin. Code DWD Sec. 274.02, to back pay for the unpaid meal breaks. At this juncture, the court noted that since the plaintiffs had pursued a judicial remedy after first exhausting their administrative remedies, it had the benefit of the agency’s interpretation of the regulation. Such interpretation would be given “controlling weight” if it was “reasonable and consistent with the meaning and purpose of the regulation.” In this instance, the Wisconsin high court concluded that the DWD’s decision not to seek recovery of back pay in this case was reasonable and consistent with the purpose of the regulation. Therefore, it reversed the court of appeals and remanded for entry of summary judgment in favor of the employer.

Agency interpretation. In this case, the CBA permitted meal breaks that were 10 minutes shorter than the regulation required for unpaid meal breaks. There was no assertion that the CBA’s terms were violated or that the CBA itself requires that the employer pay employees for the meal break time. The sole question was whether the DWD’s interpretation of its own rule was reasonable. The DWD promulgated an administrative rule requiring employers to pay employees for on-duty meal periods. Specifically, the regulation, Sec. 274.02, states that meal breaks of under 30-minutes cannot be unpaid. While Sec. 274.05 provided an exception, that provision was not applicable here because the employer did not apply for a waiver.

First, the court considered the employees’ contention that the agency ruling in this instance was not the kind of agency decision that is accorded deference. Here, the high court noted that the correct question is an agency interpretation of its own regulations, and if so, whether that interpretation is reasonable and consistent with the purpose of the regulation, and therefore, entitled to controlling weight deference. The employees disputed the characterization that there was an agency decision in this case that should be accorded deference.

There was no question that the regulation was promulgated by DWD and no question that it is the agency charged with administering and resolving employment disputes. Thus, the high court treated the DWD decision as one by an agency interpreting its own rules. The standard employed when reviewing an agency’s interpretation of its own rules is that it is due controlling weight. This standard recognizes the expertise and experience of the DWD in both legal questions raised by employment disputes and technical matters such as formulas for back-pay calculations.

Technical violation. The DWD decision rested in large part on the investigator’s determination that the failure to obtain the waiver that would have satisfied the regulation was “a technical violation” that did not warrant awarding back pay because “the factors required to approve a waiver or modification of DWD 272.02 are present in the facts of this case.” The Wisconsin high court concluded that it could not say that the DWD’s decision not to pursue an award of back pay was unreasonable.

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To find for the employees, the court observed that it would have to take the position that in spite of the fact that there was no violation of the CBA (the terms of which they agreed to); no allegation of risk to workers’ life, health, safety, or welfare; and no likely alternative to simply adding 10 minutes to the lunch break (and as a result, imposing a longer workday), it was outside the range of reasonableness for the DWD to deny back pay and deem the violation to be technical. Similarly, the court could not say that the ruling was contrary to the purpose of the regulation. Therefore, the decision of the court of appeals was reversed.

The case number is: 2013AP265.

Attorneys: John C. Schaak (Quarles & Brady) for Husco International, Inc. Nathan D. Eisenberg (The Previant Law Firm) for Mauricio Aguilar and International Association of Machinists and Aerospace Workers, District No. 10.

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