Federal Judge Issues Permanent, Nationwide Injunction Against DOL’s Persuader Rule

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In a prior post, we discussed the Department of Labor’s issuance of a new final rule that expanded disclosure requirements for companies that hire union avoidance consultants.  The Department’s new “persuader” rule required employers to report the hiring of such consultants whenever these third parties engaged in indirect persuader activities (e.g., planning employee meetings, training supervisors to conduct meetings, and drafting or providing speeches to be made to employees), whereas the previous rule required disclosure only when the consultants engaged in direct contact with workers.

Subsequent to the DOL’s publication of the final version of the rule in late March, business groups and law firms sued to invalidate the rule.  Several states joined the case later as intervenors.  On November 16, a federal judge in Texas entered a “permanent injunction with nationwide effect,” blocking the DOL from enforcing the rule.  Judge Sam R. Cummings of the Northern District of Texas, had previously issued a preliminary injunction relating to the rule back in June.  In that earlier ruling, the Court had found that the rule effectively eliminated the Labor Management Disclosure Act’s advice exemption, was arbitrary capricious, and constituted an abuse of discretion.  In last week’s decision, the Court granted the Plaintiffs’ summary judgment motions and converted the preliminary injunction into a permanent injunction.

The Obama administration now faces the decision of whether to appeal the ruling, as they did with the Court’s preliminary injunction.  However, it is unlikely that the Fifth Circuit Court of Appeals would make any rulings on these issues prior to the inauguration of President-elect Donald Trump, after which the Department’s positions and strategy may change dramatically.  We will continue to keep you apprised of developments related to the persuader rule.

The 2016 Election – Right to Work, NLRB Vacancies, and Other Labor Implications

The legal environment for labor unions in Missouri, and across the nation, will change as a result of the 2016 state and national elections. In Missouri, the election of Eric Greitens as Governor and the supermajority of Republicans in the Missouri Senate signal the likely addition of Missouri to the list of states to have passed Right to Work laws. Missouri House Speaker Todd Richardson recently said that passing a Right to Work law “would probably be the No. 1 issue” for the start of the legislative session in January. If enacted, Missouri would become the 27th state to pass Right to Work legislation.

Right to Work laws prohibit the use of “union security” clauses as part of any collective bargaining agreement, meaning union membership cannot be a condition of employment. More significantly if membership is not mandatory, union dues will not be mandatory. For most unions, who receive the majority of their money from dues, this has the capacity to reduce or even eliminate their ability to organize, let alone administrate union contracts.

A Right to Work law in Missouri also has the potential of increasing the amount of leverage employers bring to the bargaining table. If employees begin to resign their union membership at a significant rate, an employer will have an increased ability to negotiate for its own priorities as the fear of a strike will be lessened. Furthermore, each union may have to evaluate at what point continued representation is cost effective if employees choose to leave the union and stop paying dues at a high rate.

Trump’s election to the White House will have a significant effect on national labor policy as well. Trump will nominate two people to fill the vacancies in the National Labor Relations Board (NLRB), thus influencing its direction for years to come. Employers who have transitioned to new rulings on franchises, joint employers, handbook policies and numerous other issues will likely see many of these rulings abandoned or sent to the bottom of the list when it comes to any enforcement agenda. Further, when it comes to the Department of Labor, the new overtime guidelines will likely receive close scrutiny by the new administration and it is likely the proposed changes in the Persuader Rule will be abandoned.

Finally, the executive orders that President Obama has issued over the past 8 years could be rescinded immediately, if a newly inaugurated President Trump decides to take such action. The Fair Pay and Safe Workplaces Executive Order and the Order Prohibiting Discrimination Based on Sexual Orientation and Gender Identity for federal contractors and subcontractors are just two of the likely targets of a Trump administration’s shift in labor and employment policies.

As the newly elected politicians take power, and newly appointment positions are filled, watch the Husch Blackwell Labor Relations Law Insider for updates.

NLRB Plans to Push for Protection of Partial Strikes

On October 3, the National Labor and Relations Board (NRLB) Office of the General Counsel (OGC) issued a Memorandum from the Division of Operations-Management to all Regional Directors, Officers-In-Charge, and Resident Officers.  This Memo (Memorandum OM 17-02) reveals an aggressive new position from the OGC, one which attempts to overturn decades of Board precedent.

For years, the Board has limited workers’ ability to engage in partial or intermittent strikes. In some instances, the Board has used the term “partial strike” to include anything less than a total, traditional strike (where employees completely withdraw their labor and refuse to work until the parties settle the dispute).  This would include intermittent strikes, where employees go back and forth between working and striking.  Other times, the Board has used the term “partial strike” more narrowly to describe more specific types of limited, non-traditional strikes which are situationally distinct from intermittent strikes.  Regardless of the verbiage used, however, the Board has consistently found that Section 7 of the National Labor Relations Act (NLRA), which protects “concerted activity,” does not protect employees engaging in either of these types of limited strikes.  Under current Board precedent, therefore, employees who strike multiple times over the same labor dispute may be disciplined by their employers.

Now, the OGC wishes to dramatically extend Section 7 protection to cover multiple short-term strikes. The Memo states that the Board’s present test for determining whether such strikes are protected “is difficult to apply” and “exposes employees to potential discipline for activities that should be considered protected under Section 7 of the Act.”  Accordingly, the OGC will now be taking the position that the Board should modify the law regarding intermittent and partial strikes.  In furtherance of this effort, the Memo references an attached model brief and instructs its recipients to utilize the analysis contained in the model brief and incorporate those arguments into the General Counsel’s briefs submitted to Administrative Law Judges and the Board.

The arguments contained in the model brief “urge[] the Board to clarify this area of law by drawing clear conceptual distinctions between partial and intermittent strikes and redefining the circumstances under which intermittent strikes become unprotected.” More specifically, the General Counsel proposes a framework where multiple strikes (even if those strikes are over the same labor dispute) would be protected if: (1) the strikes “involve a complete cessation of work, and are not so brief and frequent that they are tantamount to work slowdowns”; (2) the strikes “are not designed to impose permanent conditions of work, but rather are designed to exert economic pressure”; and (3) the “employer is made aware of the employees’ purpose in striking.”  The model brief argues that this framework “more effectively protects” a worker’s right to strike, “dispenses with the unpersuasive rationales” on which the Board has previously relied, and “better addresses Supreme Court precedent.”

Unfortunately, such an expansion Section 7 protections would upend years of generally understood and accepted labor relations practices. And unsurprisingly, employers would suffer the most, as they attempt to navigate new distinctions and the nuances of newly-protected strikes that will undoubtedly disrupt operations more than traditional strikes.  Accordingly, employers will have an important role to play in NLRB proceedings by pushing back against the OGC’s new and threatening position.

Weingarten Confusion

In most situations the NLRB’s long established Weingarten doctrine can be applied in a fairly straight-forward fashion.  But I still get questions regarding the interplay of drug and alcohol testing when it comes to Weingarten.  This is probably due to the fact that the Ralphs Grocery Company decision, which issued in 2014, is a relatively new expansion of the Weingarten doctrine wherein an employee has the right to consult a union steward prior to taking a drug test.  And then more recently, in Manhattan Beer Distributors the Board expanded Weingarten rights further, in the context of drug and alcohol testing, as the Board established that an employee had a right to a union steward to be physically present for the alcohol or drug test.  An employer need only wait a “reasonable amount of time” for the union representative to be physically present; however, that time will be a function of the substance being tested for and the effect of time on the outcome of the test results.  In other words, alcohol will probably have a shorter timeline in terms of what is a reasonable period, versus marijuana, which stays in the system for days, if not weeks.

Again, the employee must request the union representation. There is no duty on the part of the employer, absent a contractual requirement otherwise, to seek out union representation for these circumstances.  So be aware of these new restrictions and apply them wisely, otherwise your discipline will more than likely be found unlawful and an otherwise clean discharge will turn into the nightmare of reinstatement and full backpay.

New OSHA Retaliation and Workplace Injury Rules Delayed for Second Time

On Tuesday, October 18, the Occupational Safety and Health Administration announced that it will once again postpone the enforcement date of the “employee involvement” provisions of its new rule on drug-testing, retaliation claims, and accident reporting, entitled “Improve Tracking of Workplace Injuries and Illnesses,” 81 Fed. Reg. 29624 (May 12, 2016).  This is the second such delay since the final rule was published in May.  OSHA had initially planned for the rule to take effect in August, but the agency later announced a delay in enforcement that would last until November 1.  This second, most recent delay in enforcement is set to last until December 1.

 

The agency has implemented the second extension in response to a request from United States District Judge Sam Lindsay to delay the enforcement date. Judge Lindsay is presiding in a case filed in the U.S. District Court for the Northern District of Texas (in Dallas) in which the National Association of Manufacturers and other industry groups and private companies have sought injunctive relief to prevent enforcement of certain provisions in the new rule. TEXO ABC/AGC, et al. v. Thomas, et al., No. 3:16-CV-1998 (N.D. TX July 8, 2016).  Judge Lindsay informed OSHA (and the other parties) that the additional time was necessary for him to consider the plaintiffs’ request for a preliminary injunction, which would result in a nationwide stay in the enforcement of the rule until the rule has been fully litigated in the courts.

 

We will provide updates as this case continues to develop.

Second Circuit Reluctantly Maintains Status Quo on Class Waiver Provisions, But Hints at Future Change in Law

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On September 2, the Second Circuit Court of Appeals issued its decision in Patterson v. Raymour’s Furniture Co., the most recent case in what has become an all-out war between employers and the NLRB over the use of class-waiver provisions in arbitration agreements.  The decision, consistent with prior Second Circuit precedent enforcing such waivers, maintains the status quo for an issue with a recently-formed circuit split (discussed in our prior post here).

Beginning with its decision in D.R. Horton, the Board has taken the position that class-waiver provisions in arbitration agreements infringe on the rights of employees to engage in concerted activities and, therefore, violate the National Labor Relations Act.  Prior to May 2016, each federal appellate court that addressed the issue had rejected the Board’s reasoning and enforced these types of arbitration agreements.  However, in May and August 2016, the Seventh and Ninth Circuits, respectively, issued decisions finding that such agreements violated the NLRA and were not entitled to enforcement under the Federal Arbitration Act.  These decisions created a circuit split with the Fifth, Eighth, and Second Circuits, each of which had previously enforced these types of agreements.

However, just as the Eighth Circuit doubled-down on its rejection of the NLRB’s position in June (Cellular Sales of Missouri, LLC v. NLRB), the Second Circuit in Patterson has refused to reverse course on the issue.  Unfortunately, the Court’s application of pro-employer precedent on this issue was less than enthusiastic.  First, the Court chose to issue its decision through a “summary order,” which holds no precedential value.  Further, rather than stating its actual agreement with the prior Second Circuit decision enforcing class-waiver provisions in arbitration agreements (Sutherland v. Ernst & Young LLP), the Court merely stated that it was “bound” by that prior holding until it is overruled, perhaps suggesting that an en banc Second Circuit should reevaluate the Court’s position on the issue.  Even more explicitly, the decision states, “If we were writing on a clean slate, we might well be persuaded . . . to join the Seventh and Ninth Circuits and hold that the EAP’s waiver of collective action is unenforceable.”

In sum, employers should be wary of taking too much comfort in the Second Circuit’s decision in Patterson.  Although an immediate reversal of Second Circuit precedent would have been devastating, employers would have preferred a more ringing endorsement of Sutherland’s holding.  Regardless, the enforceability of class-waiver provisions in arbitration agreements is an issue that is far from settled, and given the circuit split, the Supreme Court’s involvement will almost certainly be necessary.

Nerds Win, Jocks Lose

Once again I shake my head at the NLRB’s analysis in their application of the National Labor Relations Act. In the high profile Northwestern University case which issued in August of last year, the Board found that it would not assert jurisdiction over the grant-in-aid scholarship football players of Northwestern University, citing in particular the fact that it would not promote stability in labor relations.  The Board bypassed the issue as to whether the football players were statutory employees and went with a policy oriented approach, finding that it was not in the best interest of all involved to invoke jurisdiction.  As the Board noted “even when the Board has authority to act( which it would in this case, were we to find that the scholarship players were statutory employees) the Board sometimes properly declines to do so”, stating that the policies of the Act would not be effectuated by its assertion of jurisdiction.

In declining jurisdiction the Board focused on the fact that the overwhelming majority of Northwestern’s competitors in football are public colleges and universities over which the Board cannot assert jurisdiction, so it would not promote stability in labor relations to assert jurisdiction in that situation. This underlying theme is restated repeatedly in the Board’s decision in Northwestern University and while there are other distinctions set out by the Board, this is the core determining factor for the Board.  Yet, here we are, a few months later, and the Board holds in Columbia University that graduate students should be protected under the Act even though the Board will not have jurisdiction over the bulk of the universities and colleges who compete for their services, resulting in the same instability in labor relations.  The Board’s reasoning and distinctions simply make no sense.  Indeed, I think that if the matter is taken up on appeal, given the Northwestern University case, grounds for overturning the Board’s Columbia University decision are readily apparent.  There simply is not a rational distinction between the two cases.

So we are going to have to wait this one out and see if there is an appeal and what the courts’ findings may be in this further expansion by the Board of its jurisdiction.

Fifth Circuit Makes it Easier for Plaintiffs to Defeat Summary Judgments

courtroomiStock_000006975339_DoubleIn a recent decision, Heinsohn v. Carabin & Shaw, the Fifth Circuit found that an employee’s “self-serving” testimony created a material fact question. The Court also included language that should be of concern for employers when seeking summary judgment.

In Heinsohn, the Court reversed summary judgment in a pregnancy discrimination case in which the employer fired a legal assistant for making mistakes on the job that she denied making. The Fifth Circuit found that an employee’s “self-serving” deposition testimony created genuine issues of fact as to the employer’s alleged legitimate, nondiscriminatory reasons for terminating Heinsohn. Continue Reading

Employer Options Under the New DOL Regulations

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Executive, Professional and Administrative employees are exempt from overtime requirements if they meet three tests:  the salary level test; the salary basis test; and the duties test. As I am sure you have heard, new overtime regulations raise the required annual salary level from $23,660 to $47,476 (or $913 each week). Under the new salary level test, which goes into effect on December 1, 2016, exempt employees paid less than $47,476 no longer qualify for exempt status. So what is an employer to do?  Here are some potential options:

1. Retain Exempt Status. Increase the employee’s annual salary to at least $47,476 and the employee will remain exempt. Please note, however, that the rules establish a mechanism for automatically updating the salary and compensation levels every three years; thus, you may be required to again increase the employee’s salary in three years to meet the new threshold. Additionally, the employee still needs to meet the duties test, and this is a good time to review compliance with that test. This is the only option that does not require the employer to track the employee’s work hours.

a. Example.  Currently an exempt employee has an annual salary of $41,600 ($800 weekly) and, therefore, no longer passes the new salary test.  Employer raises the employee’s annual salary to $47,476.  Employee retains the exemption from overtime pay under the new regulations.

2. Convert to Hourly. Convert the exempt employee from a salary to an hourly wage and begin paying overtime for more than 40 hours worked in a week. The employer must begin tracking the hours worked by the employee. Overtime hours can be controlled by limiting or forbidding overtime without the employer’s express approval.

a. Example.  Currently exempt employee has an annual salary of $41,600 ($800 weekly).  Employer converts the employee to the equivalent hourly wage of $20 an hour ($800 ÷ 40 hours).  The employee’s overtime rate would be $30 an hour ($20 x 1.5).  Thus an employee who works 45 hours during one week would be paid $950 (($20 x 40 hrs) + ($30 x 5 hrs.)).  Assuming the employee averages working 45 hours a week during a year, this equates to an annual salary of $49,400 ($950 a wk x 52 wks).  Under these particular facts, it would be cheaper to pay the employee the $47,476 annual salary and have the employee remain exempt.

3. Remain Salaried, but Pay Overtime. Have the employee remain on a salary, but pay overtime when the employee exceeds 40 hours in a workweek. This will require the employer to track the employee’s time. The regular rate will be calculated by dividing 40 hours into the weekly salary and then paying 1 ½ times that amount for overtime hours. This may be a good option where an employee enjoys the status of a salaried employee and doesn’t want to become an hourly employee. Overtime hours can be controlled by limiting or forbidding overtime without the employer’s express approval.

a. Example.  Currently exempt employee has an annual salary of $41,600 ($800 weekly).  Employer retains the employee at this salary, but pays the employee overtime for any hours worked over 40 in a week.  The employees overtime rate would be $30 an hour (($800 ÷ 40) x 1.5).  Thus, an employee who works 45 hours during one week would be paid $950 ($800 + (30 x 5)).  Assuming the employee averages working 45 hours a week during a year, this equates to an annual salary of $49,400 ($950 x 52).  Please note that the employee is paid the same amount whether he is paid hourly or paid a salary.  Under these particular facts, it would be cheaper to pay the employee the $47,476 annual salary and have the employee remain exempt.

4. Fluctuating Workweek Plan. Use the Fixed Salary/Fluctuating Work Week plan, which is approved by the DOL regulations. Under this plan, the employee is paid a fixed salary that covers the straight time for all hours worked, including overtime hours. Thus, overtime is paid at a ½ time rate (compared to 1 ½ time rate) for the hours worked over 40 hours.  Under this plan, the regular rate must be calculated each week (by dividing the total number of hours worked by the fixed salary). Certain conditions, including prior employee agreement and paying the same salary when the employee works less than 40 hours in a week, are necessary to use this plan. Continue Reading

Seventh Circuit Creates D.R. Horton Split, While Eighth Circuit Maintains Prior Position

On May 26, the Seventh Circuit Court of Appeals issued its decision in Lewis v. Epic Systems Corporation, another case evaluating the NLRB’s position that class-waiver provisions in arbitration agreements violate the National Labor Relations Act.  However, unlike any other Circuit Court that has addressed this issue thus far, the Seventh Circuit agreed with the NLRB’s position, finding that the company’s arbitration agreement was not entitled to enforcement under the Federal Arbitration Act.

Over the last few years, the Board has consistently taken the position that these class-waiver provisions infringe on the rights of employees to engage in concerted activities.  But federal appellate courts (including the Fifth, Second, and Eighth Circuits) have consistently rejected the Board’s reasoning and enforced these types of arbitration agreements.  However, the Seventh Circuit’s decision in Epic Systems has created a circuit split that will likely require intervention by the United States Supreme Court.

Importantly, the Eighth Circuit recently doubled-down on its rejection of the Board’s position.  On June 2, one week after the Seventh Circuit issued its Epic Systems opinion, the Eighth Circuit announced its decision in Cellular Sales of Missouri, LLC v. NLRB.  In once again rejecting the Board’s position, the Eighth Circuit relied on its prior decision in Owen v. Bristol Care, Inc., finding that the company did not violate the NLRA by requiring its employees to waive collective actions, or by enforcing this arbitration agreement.  However, the Eighth Circuit did give “considerable deference” to the Board’s finding that employees could reasonably construe the company’s arbitration agreement to foreclose their right to file charges with the Board.

Several other cases involving the enforceability of class-waiver provisions are pending on appeal in the various federal appellate courts.  The decisions in those cases will reveal whether the outcome in Epic Systems constitutes merely an outlier or represents a larger shift in thinking on this important issue.

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