*By Patrick J. Hoban
On January 6, 2012, the National Labor Relations Board (“NLRB”) issued its much-anticipated decision in D.R. Horton, Inc., 357 N.L.R.B. No. 184 (2012). In D.R. Horton, the NLRB again flexed its regulatory muscle and extended the protections of the National Labor Relations Act (“NLRA”) to all forms of class litigation. The case addressed the issue of whether a nonunionized employer could require employees, as a condition of employment, to accept a mandatory arbitration agreement that required arbitration of employment disputes and precluded “class” arbitrations (i.e., resolution of claims brought by a group of employees in a single arbitration). A plurality of the Board, consisting of Board Chairman Mark Pearce and recently departed Member Craig Becker, ruled that home builder D.R. Horton’s mutual arbitration agreement (“MAA”) violated the National Labor Relations Act because it required employees —as a condition of employment — to forego class and collective action arbitration proceedings.
Background Facts
In January 2006, D.R. Horton began requiring employees to execute the MAA as a condition of employment. The MAA required that "all disputes and claims relating to the employee's employment" be determined by arbitration. The MAA further stated that the arbitrator "may hear only [an] employee's individual claims," and "does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding." In other words, the MAA required an employee to resolve all employment-related disputes in individual arbitration, without the possibility of class or collective arbitration.
A D.R. Horton superintendent sought to arbitrate a claim on behalf of himself and other similarly-situated superintendents under the Fair Labor Standards Act (“FLSA”). The employee claimed that he and other employees were misclassified and thus entitled to overtime pay under the FLSA. D.R. Horton refused to submit to class arbitration, citing the MAA. The employee filed an unfair labor practice charge with the NLRB, claiming that the MAA violated Section 8(a)(1) by unlawfully interfering with employee rights under the NLRA.
Board’s Decision
The NLRB held that "an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by [the NLRA]." Thus, by requiring employees as a condition of employment to forego their rights to such concerted activity, D.R. Horton violated the NLRA.
The Board then addressed whether its decision was consistent with the language and goals of the Federal Arbitration Act (“FAA”). The Board determined that its decision did not conflict with the goals of the FAA because the right to bring a class or collective action was a substantive right guaranteed by the NLRA as a form of concerted protected activity. In reaching this conclusion, the Board distinguished the recent United States Supreme Court decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), which held that arbitration agreements that are silent on class arbitration cannot be construed to require a party to submit to arbitration involving class claims. The NLRB also distinguished AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) wherein the Supreme Court held that state laws prohibiting class arbitration conflict with the FAA. Under these Supreme Court decisions, it is permissible for arbitration agreements to ban class or collective actions because arbitration is designed to provide an informal, simple mechanism for the resolution of bilateral disputes according to terms agreed upon by the parties.
The NLRB made clear that its decision addressed arbitration agreements that required a waiver of the right to engage in class litigation as a mandatory condition of employment. Many arbitration agreements, however, contain clauses allowing employees to "opt out" of the program. Under such agreements, employees may choose to refrain from participation in the arbitration process, preserving employee rights to participate in class action litigation and avoid individual arbitration entirely.
The decision leaves open the possibility that arbitration agreements that allow employees to “opt out” may not violate the NLRA, even if those agreements ban class or collective actions in any forum. However, in D.R. Horton, the NLRB established broad protections for employee participation in class or collective actions under the NLRA. As a result, the NLRB may find a violation of the NLRA if employers rely on Stolt-Nielsen to argue that arbitration agreements prohibit class or collective arbitration.
In light of the NLRB’s significant expansion of the protections under the NLRA, it is likely that D.R. Horton will be appealed to the U.S. Court of Appeals and the U.S. Supreme Court. Indeed, a U.S. District Court discounted the NLRB’s D.R. Horton decision without comment less than ten days after it was issued. Lavoice v. UBS Financial Services, Inc., 11 Civ. 2308 (SD N.Y., January 13, 2012). However, employers that use or are considering using mandatory arbitration programs that restrict class and collective actions must carefully consider the impact of D.R. Horton.
*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about this decision or the NLRB, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
Sunday, January 29, 2012
Monday, January 9, 2012
No Reason to be Bored with the Board: New Election Rules, Legal Challenges and Legislation to Stop New Rules, Delaying the Rights Posting Rule and Three "Recess" Appointments
*By Patrick J. Hoban
The National Labor Relations Board (the “Board”) is once again making headlines after a series of controversial decisions, activist rulemaking and President Obama’s decision to maintain the Board’s operating quorum through three “recess” appointments. These actions have resulted in legislation to limit the Board’s authority and/or undo the effect of recent Board rules and, to date, two lawsuits. Although the recess appointments will almost certainly face legal challenges on constitutional grounds, the fully-staffed “activist” Board is poised to continue to exercise its authority to skew the labor law landscape further toward unions and against employers.
The rule changes take effect on April 30, 2012 and include the following:
Most important for employers, the amendments will significantly reduce the time between a union election petition and an election by virtually eliminating pre-election litigation. As a result, employers will have less time to present the case against unionization to their employees and rebut union propagandizing that has been underway for months. Additionally, in light of the Board’s 2011 decision in Specialty Healthcare, 357 NLRB No. 83 (2011) (see our prior alert discussing the case in more detail), the Board has imposed significant limits on an employer’s ability to challenge unit composition and eligibility issues before an election. The decision encourages unions to “cherry pick” units comprised of employees who strongly support them and will allow them to get their foot in an employer’s door with a small unit to establish a presence in the workplace. This decision, together with the new election rules, drastically undermines an employer’s ability to defend itself and its employees against a union organizing campaign.
Additionally, on November 30, 2011 the U.S. House of Representatives passed by a 235-188 vote a bill that would roll back both the new election rules and the Board’s decision in Specialty Healthcare. Rep. John Kline (R-MN) sponsored the Workforce Democracy and Fairness Act in response to the Board’s ongoing effort to tilt the Board’s policies in favor of labor unions. However, the bill is unlikely to become law anytime soon due to the Democrat majority in the Senate.
The three recess appointments to the Board include:
Regardless of how these weighty constitutional issues play out, it is safe to assume that the new Board will continue its activist ways by favoring unions over employers. Employers must continue to defend themselves against the activist Board by reviewing written employment policies to ensure they are effective and lawful, and redoubling efforts to identify and address employee issues. The Board’s new rules, standards and the new activist majority mean that employers simply cannot wait until they receive an election petition to take action.
*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about the NLRB’s election amendments or labor & employment law, please contact Pat at 216.696.4441 or pjh@zrlaw.com.
The National Labor Relations Board (the “Board”) is once again making headlines after a series of controversial decisions, activist rulemaking and President Obama’s decision to maintain the Board’s operating quorum through three “recess” appointments. These actions have resulted in legislation to limit the Board’s authority and/or undo the effect of recent Board rules and, to date, two lawsuits. Although the recess appointments will almost certainly face legal challenges on constitutional grounds, the fully-staffed “activist” Board is poised to continue to exercise its authority to skew the labor law landscape further toward unions and against employers.
Election Rule Amendments Will Hamstring Employer’s Campaigns
On December 22, 2011, the Board adopted eight amendments to its election rules that will significantly affect an employer’s ability to mount an effective representation election campaign.The rule changes take effect on April 30, 2012 and include the following:
- Pre-election hearings are limited to whether a “question of representation” exists (i.e., do employees want a union) and all voter eligibility disputes (e.g., supervisor status) will be resolved post-election.
- Hearing officers may limit pre-election hearings to evidence relevant only to the issue of whether a question of representation exists.
- Hearing officers now have the authority to determine when (and if) a party may file a post-hearing brief. Previously, parties had a right to file post-hearing briefs which necessarily extended the time for campaigning. Hearing officers also have complete discretion to limit issues addressed in and time for filing briefs.
- Parties no longer have the right to seek Board review of regional director and hearing officer decisions prior to an election. In addition, the new election rules fail to state that elections should be scheduled at least 25 days after the regional director’s determination that a question of representation exists.
- Parties may request special permission for Board review of regional director or hearing officer decisions only if they show “extraordinary circumstances” and that review after the election would be meaningless.
- Board review of regional director or hearing officer determinations on pre and post-election disputes are now discretionary. Under previous Board rules, pre-election review was discretionary, while post-election review was mandatory.
Most important for employers, the amendments will significantly reduce the time between a union election petition and an election by virtually eliminating pre-election litigation. As a result, employers will have less time to present the case against unionization to their employees and rebut union propagandizing that has been underway for months. Additionally, in light of the Board’s 2011 decision in Specialty Healthcare, 357 NLRB No. 83 (2011) (see our prior alert discussing the case in more detail), the Board has imposed significant limits on an employer’s ability to challenge unit composition and eligibility issues before an election. The decision encourages unions to “cherry pick” units comprised of employees who strongly support them and will allow them to get their foot in an employer’s door with a small unit to establish a presence in the workplace. This decision, together with the new election rules, drastically undermines an employer’s ability to defend itself and its employees against a union organizing campaign.
Legal Challenges to Board Actions
The Board’s ongoing activism drew swift reaction from congressional Republicans. The election rules amendments face challenges from the Senate under the Congressional Review Act, which allows the House or Senate to prevent federal agencies from enforcing their rules. Senator Mike Enzi (R-WY) announced his plans for challenging the final rule last week. Enzi contends that the new rules, by shortening the pre-election process and doing away with mandatory Board review of election challenges, deprive employers of the opportunity to present their case to their employees during a campaign. The U.S. Chamber of Commerce has also filed a lawsuit to stop the rules. See Chamber of Commerce, et al. v. National Labor Relations Board, No. 1:11-cv-02262 (D.C. Dec. 20, 2011).Additionally, on November 30, 2011 the U.S. House of Representatives passed by a 235-188 vote a bill that would roll back both the new election rules and the Board’s decision in Specialty Healthcare. Rep. John Kline (R-MN) sponsored the Workforce Democracy and Fairness Act in response to the Board’s ongoing effort to tilt the Board’s policies in favor of labor unions. However, the bill is unlikely to become law anytime soon due to the Democrat majority in the Senate.
Board Delays Deadline for Posting “Employee Rights” Poster
The Board has once again postponed the posting requirement for the employee rights poster. Employers are now required to post the notices by April 30, 2012. The decision to postpone the effective date resulted from a request by the federal court in Washington, D.C. that is currently hearing a legal challenge regarding the rule. See Nat’l Assoc. of Manufacturers v. Nat’l Labor Relations Bd., et al., No. 1:11-cv-01629-ABJ (D.C. Sept. 8, 2011). The Board said that the delay will allow for “the resolution of the legal challenges that have been filed with respect to the rule.”Board Restored to Five Members – a 3-2 Democrat Majority – After Three “Recess” Appointments
On December 31, 2011, Member Becker’s recess appointment expired and the Board lost the three members necessary to issue decisions or make rules. To maintain the Board’s authority, President Obama made three “recess” Board appointments on January 4, 2012. The U.S. Constitution grants the President the power to make recess appointments without Senate approval “during a recess of the Senate.” In this case, the Senate was conducting “pro forma” sessions and not in recess on January 4. As a result, lawmakers and employer advocates contend that the appointments are illegitimate and violate the Constitution.The three recess appointments to the Board include:
- Sharon Block (Democrat member), former Deputy Assistant Secretary for Congressional Affairs at the U.S. Department of Labor. She previously worked for former Board Chairman Battista and as an attorney for the Board. Ms. Block also served on the staff of late U.S. Senator Ted Kennedy (D-MA). Prior to her public service, Ms. Block was in private practice for five years.
- Terence F. Flynn (Republican member), former Chief Counsel to current Board Member Hayes. Mr. Flynn was previously Chief Counsel to former Board Member Schaumber. Prior to his Board work, Mr. Flynn spent nearly thirteen years practicing labor & employment law with several different law firms.
- Richard Griffin (Democrat member), former General Counsel for International Union of Operating Engineers. Mr. Griffin also served on the board of directors for the AFL-CIO Lawyers Coordinating Committee. During his career of over thirty years, he has practiced before and held various positions with the Board.
Regardless of how these weighty constitutional issues play out, it is safe to assume that the new Board will continue its activist ways by favoring unions over employers. Employers must continue to defend themselves against the activist Board by reviewing written employment policies to ensure they are effective and lawful, and redoubling efforts to identify and address employee issues. The Board’s new rules, standards and the new activist majority mean that employers simply cannot wait until they receive an election petition to take action.
*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about the NLRB’s election amendments or labor & employment law, please contact Pat at 216.696.4441 or pjh@zrlaw.com.
Tuesday, December 27, 2011
Ohio Minimum Wage Increasing Again in 2012
*By Michele L. Jakubs
As part of an Amendment to the Ohio Constitution, Ohio’s minimum wage will increase by thirty cents on January 1, 2012. The Amendment provides for an increase, tied to the rate of inflation, every January 1st. The think tank Policy Matters Ohio estimates 347,000 Ohio workers will see an increase in wages.
The hourly rate for workers 16 years and older who do not receive tips will increase thirty cents to $7.70 per hour. Tipped employees’ hourly rate will increase fifteen cents, to $3.85 per hour. This new wage affects employers who gross more than $283,000 annually, up from the current $271,000 threshold.
Employers who gross less than $283,000 annually must pay their employees the federal minimum wage, currently set at $7.25 per hour. Fourteen and 15-year old employees must receive $7.25 per hour, regardless of company revenue. Minimum-wage workers in other states, including Arizona, Colorado, Florida, Montana, Oregon, Vermont, and Washington will also see an increase in their paychecks on January 1, 2012.
If you have any questions about complying with these new wage increases, please contact Michele L. Jakubs.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, has extensive experience in all aspects of workplace law, including wage and hour compliance. For more information about employment law, please contact Michele (mlj@zrlaw.com) at 216.696.4441.
As part of an Amendment to the Ohio Constitution, Ohio’s minimum wage will increase by thirty cents on January 1, 2012. The Amendment provides for an increase, tied to the rate of inflation, every January 1st. The think tank Policy Matters Ohio estimates 347,000 Ohio workers will see an increase in wages.
The hourly rate for workers 16 years and older who do not receive tips will increase thirty cents to $7.70 per hour. Tipped employees’ hourly rate will increase fifteen cents, to $3.85 per hour. This new wage affects employers who gross more than $283,000 annually, up from the current $271,000 threshold.
Employers who gross less than $283,000 annually must pay their employees the federal minimum wage, currently set at $7.25 per hour. Fourteen and 15-year old employees must receive $7.25 per hour, regardless of company revenue. Minimum-wage workers in other states, including Arizona, Colorado, Florida, Montana, Oregon, Vermont, and Washington will also see an increase in their paychecks on January 1, 2012.
If you have any questions about complying with these new wage increases, please contact Michele L. Jakubs.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, has extensive experience in all aspects of workplace law, including wage and hour compliance. For more information about employment law, please contact Michele (mlj@zrlaw.com) at 216.696.4441.
Wednesday, November 9, 2011
SB 5 Repealed: Now What??
*By George S. Crisci
As all of you now know, Ohio’s voters repealed Senate Bill 5 by more than 60% of the vote. This outcome is consistent with the polling data that had been conducted since last August, so the outcome was not surprising.
This outcome raises serious questions about what will happen next. There is a two-part answer.
First, Senate Bill 5 never went into effect. The successful petition drive that put the repeal referendum on the ballot delayed its effective date, if at all, until after referendum. Ohio already has a collective bargaining law and related public sector employment laws (e.g., civil service, teacher tenure, etc.); those laws remained in effective throughout the referendum campaign; and they remain in effect today. Our best suggestion is to continue living with the terms of the existing laws that had developed over the years and before Senate Bill 5 ever surfaced.
Second, there are some aspects of Senate Bill 5 that also were included in the biennial appropriations bill. Those changes survive the referendum, because a referendum cannot repeal an appropriations measure. Those changes address: (1) licensure examinations, evaluations, performance-based compensation and layoffs for public school teachers; (2) laying off or transferring public school transportation employees and replacing them with independent contractors; (3) limiting sick leave benefits for less than regular full-time public school employees; (4)restructuring low-performing public schools; (5) health care plans requirements for certain political subdivisions; and (6) civil service appointment and promotion selection procedures. Public sector employers who are subject to these provisions in the biennial appropriations bill should continue their efforts to comply. If you have any questions concerning the changes that survived the repeal of Senate Bill 5 or whether you are subject to these requirements, please contact us.
Finally, commentators and political analysts have started discussions about how Governor Kasich and the Republican leadership will respond to the repeal of Senate Bill 5. Any such discussions are grounded in speculation and uncertainty. It is too soon to tell what, if anything, will happen and when it will occur. We will continue to monitor the situation and alert you to any significant and substantive developments.
*George S. Crisci
, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. For more information about legislation affecting the public sector, or any other labor or employment issue, please contact George at 216.696.4441 or gsc@zrlaw.com.
As all of you now know, Ohio’s voters repealed Senate Bill 5 by more than 60% of the vote. This outcome is consistent with the polling data that had been conducted since last August, so the outcome was not surprising.
This outcome raises serious questions about what will happen next. There is a two-part answer.
First, Senate Bill 5 never went into effect. The successful petition drive that put the repeal referendum on the ballot delayed its effective date, if at all, until after referendum. Ohio already has a collective bargaining law and related public sector employment laws (e.g., civil service, teacher tenure, etc.); those laws remained in effective throughout the referendum campaign; and they remain in effect today. Our best suggestion is to continue living with the terms of the existing laws that had developed over the years and before Senate Bill 5 ever surfaced.
Second, there are some aspects of Senate Bill 5 that also were included in the biennial appropriations bill. Those changes survive the referendum, because a referendum cannot repeal an appropriations measure. Those changes address: (1) licensure examinations, evaluations, performance-based compensation and layoffs for public school teachers; (2) laying off or transferring public school transportation employees and replacing them with independent contractors; (3) limiting sick leave benefits for less than regular full-time public school employees; (4)restructuring low-performing public schools; (5) health care plans requirements for certain political subdivisions; and (6) civil service appointment and promotion selection procedures. Public sector employers who are subject to these provisions in the biennial appropriations bill should continue their efforts to comply. If you have any questions concerning the changes that survived the repeal of Senate Bill 5 or whether you are subject to these requirements, please contact us.
Finally, commentators and political analysts have started discussions about how Governor Kasich and the Republican leadership will respond to the repeal of Senate Bill 5. Any such discussions are grounded in speculation and uncertainty. It is too soon to tell what, if anything, will happen and when it will occur. We will continue to monitor the situation and alert you to any significant and substantive developments.
*George S. Crisci
, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. For more information about legislation affecting the public sector, or any other labor or employment issue, please contact George at 216.696.4441 or gsc@zrlaw.com.
Thursday, October 6, 2011
National Labor Relations Board Delays Implementation of Employee Rights Notice Posters Rule
*By Patrick J. Hoban
The National Labor Relations Board (“NLRB”) has postponed the effective date for its new employee rights notice posters rule until January 31, 2012. Previously, most private sector employers were required to post the notice as of November 14, 2011.
The NLRB delayed the effective date after receiving inquiries from business and trade organizations asking whether they fell under the Board’s jurisdiction and needed to comply with the notice requirements. The delay in implementation is designed to allow employers time to determine if the new rule applies to them and ensure broad, voluntary compliance with its requirements.
Importantly, this delay will not affect the rule’s very specific form and content requirements for the poster. Therefore, most private sector employers will still be required to post the 11-by-17 inch notice available through download at www.nlrb.gov/poster or from a regional NLRB office. To ensure compliance, employers must obtain and post the NLRB poster at all its work locations in the same manner that it posts other required employment posters before January 31, 2012.
*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about the new posting rule, its applicability to your business, or the NLRB, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
The National Labor Relations Board (“NLRB”) has postponed the effective date for its new employee rights notice posters rule until January 31, 2012. Previously, most private sector employers were required to post the notice as of November 14, 2011.
The NLRB delayed the effective date after receiving inquiries from business and trade organizations asking whether they fell under the Board’s jurisdiction and needed to comply with the notice requirements. The delay in implementation is designed to allow employers time to determine if the new rule applies to them and ensure broad, voluntary compliance with its requirements.
Importantly, this delay will not affect the rule’s very specific form and content requirements for the poster. Therefore, most private sector employers will still be required to post the 11-by-17 inch notice available through download at www.nlrb.gov/poster or from a regional NLRB office. To ensure compliance, employers must obtain and post the NLRB poster at all its work locations in the same manner that it posts other required employment posters before January 31, 2012.
*Patrick J. Hoban, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about the new posting rule, its applicability to your business, or the NLRB, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
Wednesday, October 5, 2011
Buying or Selling a Business in Ohio? Be Careful to Consider the Impact of Ohio Workers’ Compensation Experience Issues
*By Scott Coghlan
The Franklin County Court of Appeals recently released its decision in State of Ohio ex rel. The K&D Group, Inc. v. Marsha Ryan, Administrator, Ohio Bureau of Workers’ Compensation, 2011-Ohio-5051 (“K&D Group”) upholding the Ohio Bureau of Workers’ Compensation’s (“BWC”) determination that K&D Group, Inc., a property management company, was the successor-in-interest to another property management company despite the fact that neither management company was a party to the sale of the apartment complex at issue.
This decision illustrates the need to include consideration of workers’ compensation transfer of liability issues as part of your due diligence checklist when purchasing, leasing or acquiring business interests or entering into management contracts related to such business interests.
Chapter 4123-17-2 of the Ohio Administrative Code permits the BWC to transfer the workers’ compensation experience rating and liabilities of a predecessor company to the “successor-in-interest.” In practical terms this means that the purchaser is liable to the BWC for all of the seller’s unpaid workers’ compensation premiums and it inherits the seller’s workers’ compensation experience rating. This often leads to higher than expected workers’ compensation premiums.
The K&D Group Court clearly articulated that the BWC can transfer liabilities and experience ratings between entities that are not in privity of contract with one another. At issue in K&D Group was an apartment complex that was operated by a professional management company hired by the owner. The apartment complex was sold by its owner to K&D Enterprises. K&D Enterprises, using several holding companies, eventually caused K&D Group to become the new property management company for the apartments.
Following an audit, the BWC found that K&D Group was a partial successor-in-interest to the prior management company despite the fact that neither management company was involved in the sale of the apartment complex. As a result, it transferred a portion of Mid-America’s experience rating to K&D Group, including a significant workers’ compensation claim that negatively impacted the transferred experience rating.
K&D Group protested the transfer. However, the BWC Adjudicating Committee and the Administrator’s Designee (which are the statutorily assigned entities to which premium rate making appeals are filed) upheld the BWC’s finding of successorship. The matter then was appealed to the Franklin County Court of Appeals.
The Court of Appeals upheld the BWC’s finding of successorship as well. The Court noted that OAC 4123-17-2 does not require an alleged successor to actually acquire something in order to be deemed a successor. Thus, the fact that K&D Group did not purchase the apartment complex or have a contract with the prior management company was irrelevant. The Court found that K&D Group was affiliated with K&D Enterprises (the purchaser of the apartments) despite the use of several holding companies to distance one from the other. It then focused on the management operations of the apartment complex before and after the sale. After stripping away the layers of holding companies employed to complete the assignment of the property management duties to K&D Group, the Court noted that the day-to-day operations of the apartment complex were unchanged before and after the sale; that K&D Group assumed all of the tenants’ prior leases; that it retained many of the prior management company’s former employees and the employees operated under the same manual job classification numbers. As a result, K&D Group was saddled with the prior management company’s workers’ compensation experience rating.
Management contracts are becoming commonplace, particularly in the healthcare industry. This decision reinforces the need to consider the successor-in-interest rules imposed by the BWC and the need to review workers’ compensation experience ratings as part of your due diligence in negotiating the sale, lease or assignment of business entities and contracts.
If you have any questions regarding the K&D Group decision or how to recognize, manage and reduce the impact that successor-in-interest issues may have on your business transactions, please contact us.
*Scott Coghlan, the chair of the firm’s Workers’ Compensation Group, has extensive experience in all aspects of workers’ compensation law and work safety and health matters. For more information, please contact Scott sc@zrlaw.com at 216.696.4441.
The Franklin County Court of Appeals recently released its decision in State of Ohio ex rel. The K&D Group, Inc. v. Marsha Ryan, Administrator, Ohio Bureau of Workers’ Compensation, 2011-Ohio-5051 (“K&D Group”) upholding the Ohio Bureau of Workers’ Compensation’s (“BWC”) determination that K&D Group, Inc., a property management company, was the successor-in-interest to another property management company despite the fact that neither management company was a party to the sale of the apartment complex at issue.
This decision illustrates the need to include consideration of workers’ compensation transfer of liability issues as part of your due diligence checklist when purchasing, leasing or acquiring business interests or entering into management contracts related to such business interests.
Chapter 4123-17-2 of the Ohio Administrative Code permits the BWC to transfer the workers’ compensation experience rating and liabilities of a predecessor company to the “successor-in-interest.” In practical terms this means that the purchaser is liable to the BWC for all of the seller’s unpaid workers’ compensation premiums and it inherits the seller’s workers’ compensation experience rating. This often leads to higher than expected workers’ compensation premiums.
The K&D Group Court clearly articulated that the BWC can transfer liabilities and experience ratings between entities that are not in privity of contract with one another. At issue in K&D Group was an apartment complex that was operated by a professional management company hired by the owner. The apartment complex was sold by its owner to K&D Enterprises. K&D Enterprises, using several holding companies, eventually caused K&D Group to become the new property management company for the apartments.
Following an audit, the BWC found that K&D Group was a partial successor-in-interest to the prior management company despite the fact that neither management company was involved in the sale of the apartment complex. As a result, it transferred a portion of Mid-America’s experience rating to K&D Group, including a significant workers’ compensation claim that negatively impacted the transferred experience rating.
K&D Group protested the transfer. However, the BWC Adjudicating Committee and the Administrator’s Designee (which are the statutorily assigned entities to which premium rate making appeals are filed) upheld the BWC’s finding of successorship. The matter then was appealed to the Franklin County Court of Appeals.
The Court of Appeals upheld the BWC’s finding of successorship as well. The Court noted that OAC 4123-17-2 does not require an alleged successor to actually acquire something in order to be deemed a successor. Thus, the fact that K&D Group did not purchase the apartment complex or have a contract with the prior management company was irrelevant. The Court found that K&D Group was affiliated with K&D Enterprises (the purchaser of the apartments) despite the use of several holding companies to distance one from the other. It then focused on the management operations of the apartment complex before and after the sale. After stripping away the layers of holding companies employed to complete the assignment of the property management duties to K&D Group, the Court noted that the day-to-day operations of the apartment complex were unchanged before and after the sale; that K&D Group assumed all of the tenants’ prior leases; that it retained many of the prior management company’s former employees and the employees operated under the same manual job classification numbers. As a result, K&D Group was saddled with the prior management company’s workers’ compensation experience rating.
Management contracts are becoming commonplace, particularly in the healthcare industry. This decision reinforces the need to consider the successor-in-interest rules imposed by the BWC and the need to review workers’ compensation experience ratings as part of your due diligence in negotiating the sale, lease or assignment of business entities and contracts.
If you have any questions regarding the K&D Group decision or how to recognize, manage and reduce the impact that successor-in-interest issues may have on your business transactions, please contact us.
*Scott Coghlan, the chair of the firm’s Workers’ Compensation Group, has extensive experience in all aspects of workers’ compensation law and work safety and health matters. For more information, please contact Scott sc@zrlaw.com at 216.696.4441.
Tuesday, September 27, 2011
EMPLOYMENT LAW QUARTERLY | Fall 2011, Volume XIII, Issue iii
Download PDF
The United States Court of Appeals for the Ninth Circuit ("Ninth Circuit") recently held that a public employee was not entitled to leave under the Family Medical Leave Act ("FMLA") based on a request made prior to reinstatement. Walls v. Central Contra Costa Transit Authority, 2010 U.S. Dist. LEXIS 40596 (N.D. Cal., Apr. 26, 2010). Instead, the Court held the employee possessed a protected property interest in his continued employment. In doing so, the Ninth Circuit reversed in part the trial court's summary judgment ruling.
Kerry Walls ("Walls") worked as a bus driver for the Central Contra Costa Transit Authority ("CCCTA") until his termination on January 26, 2006. Walls filed a grievance based on his termination with his union. Following the grievance process, CCCTA reinstated Walls subject to a Last Chance Agreement. When Walls violated the attendance requirement of his Last Chance Agreement, CCCTA terminated his employment again on March 6, 2006. Walls subsequently claimed his discharge violated the FMLA and his due process right to a pre-termination hearing under the U.S. and California Constitutions. The trial court initially granted summary judgment to CCCTA on all of Walls' claims; however, the Ninth Circuit reversed the trial court's ruling on Walls' due process claim.
In line with the trial court, the Ninth Circuit held that Walls' discharge on March 6th did not violate the FMLA. Walls argued that his discharge, which was based on his absence on March 3rd, interfered with his FMLA rights because he made a verbal request for leave during a meeting on March 1st. The parties agreed that Walls had not been reinstated to his position until March 2nd – when he signed and executed the Last Chance Agreement. Therefore, CCCTA had not reinstated him when he made his request for leave on March 1st. The trial court held (and the Ninth Circuit agreed) that because Walls was not an "employee" under the FMLA when he made his request for leave he was not protected by the FMLA.
The Ninth Circuit reversed the trial court's decision regarding Walls' due process rights. As a public employee, under California law, CCCTA could dismiss Walls for cause only because he possessed a property interest in his continued employment. As a preliminary matter, the Ninth Circuit first had to determine whether Walls' Last Chance Agreement modified or somehow altered this property interest. The Ninth Circuit, however, determined that the language contained within the Last Chance Agreement was not strong enough to demonstrate Walls had knowingly or voluntarily waived his due process rights.
The Ninth Circuit then examined whether Walls received both pre- and post-employment safeguards. The court found that CCCTA denied Walls due process because he did not have an opportunity to respond prior to his termination. Further, even though the Last Chance Agreement stated that Walls could not participate in the post-termination procedures of arbitration or file a grievance, it did not include a waiver of Walls' right to pre-termination procedures. Because Walls did not receive a pre-termination hearing, the Court held that CCCTA denied him due process under both the California and Federal Constitutions. The Court sent the case back to the trial court to determine the appropriate remedy for the denial of due process.
This decision reinforces the need for public employers to closely follow pre- and post-employment procedures. Failure to do so could result in costly litigation as it did here.
*Ami J. Patel practices in all areas of labor and employment law, with a focus on private and public sector labor law. For more information on this case or any other labor or employment issue, contact Ami at 216.696.4441 or ajp@zrlaw.com.
The United States Court of Appeals for the Fourth Circuit ("Fourth Circuit") held that the Fair Labor Standard Act's ("FLSA") anti-retaliation provision does not protect prospective employees. Dellinger v. Sci. Applications Int'l Corp., No. 10-1499, 2011 U.S. App. LEXIS 16635 (4th Cir. Aug. 12, 2011). In this case, Natalie Dellinger ("Dellinger"), a job applicant, brought suit against Science Applications when it decided not to hire her shortly after learning she recently filed an FLSA action against her previous employer. The Fourth Circuit, agreeing with the district court, concluded that Dellinger was not an "employee" of Science Applications as defined by the FLSA and that the FLSA's anti-retaliation provision did not cover prospective employees or job applicants.
Dellinger sued her former employer, CACI, Inc., in July 2009 for alleged violations of the FLSA's minimum wage and overtime provisions. Around this same time period, Dellinger applied for a position with Science Applications. Science Applications offered Dellinger a job in late August 2009. The job offer was contingent upon Dellinger passing a drug test, completing specified forms, and verifying and transferring her security clearance. Dellinger accepted the offer and began satisfying the provisions of her offer.
On her security clearance form, Dellinger was required to list any pending noncriminal court actions to which she was a party. Dellinger listed her FLSA lawsuit against CACI, Inc. Several days after Dellinger submitted her security clearance form, Science Applications withdrew its offer of employment. Dellinger then brought an FLSA action against Science Applications claiming that Science Applications violated the FLSA's anti-retaliation provision by refusing to hire her after it learned she had sued her former employer.
Science Applications filed a motion to dismiss Dellinger's complaint, contending that Dellinger did not state a claim for which relief could be granted because the FLSA's anti-retaliation provision protects only employees, not prospective employees or applicants. The district court granted Science Applications' motion to dismiss, and Dellinger appealed to the Fourth Circuit.
The Fourth Circuit upheld the district court's ruling. In doing so, the Fourth Circuit took a plain-meaning approach in examining the text of the FLSA. The FLSA prohibits retaliation "against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter." 29 U.S.C. § 215 (a)(3).
The Fourth Circuit first answered the threshold question of whether an applicant for employment is an "employee" authorized to sue and obtain relief for retaliation under the FLSA as Dellinger had not sued her employer, but rather her prospective employer. While Section 215(a)(3) prohibits retaliation "against any employee" the FLSA defines employee as "any individual employed by an employer" under the FLSA. The Fourth Circuit determined that Congress was referring to the employer-employee relationship in providing protection to those in an employment relationship with their employer. The Fourth Circuit also reasoned that because Dellinger was an applicant for employment with Science Applications and her application had been approved only on a contingent basis, she never began work. The FLSA defines "employ" as to "suffer or permit to work." The Fourth Circuit, therefore, concluded that an applicant who never began or performed any work could not, by the language of the FLSA, be an "employee."
The Fourth Circuit also distinguished the FLSA from other statutes, including the National Labor Relations Act and the Occupational Safety and Health Act, noting the definition of "employee" under those statutes and enabling regulations is broader than its definition under the FLSA. As a result, the Fourth Circuit held that the FLSA allows private civil actions only by employees against employers and that 29 U.S.C. § 215(a)(3) does not authorize prospective employers to bring retaliation claims against prospective employers.
The Fourth Circuit's decision significantly curbs the ability of job applicants to bring any type of FLSA action against prospective employers. Employers should rest a little easier knowing that the FLSA – on its face – provides no protection to individuals who have never actually worked for the employer.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment law, practices in all areas of employment litigation and has extensive experience counseling employers on the FLSA. For more information on this decision or any other FLSA compliance question, please contact Michele at mlj@zrlaw.com or 216.696.4441.
The Ohio Supreme Court recently held that a discharged employee was ineligible to receive unemployment benefits when her employer discharged her for failing to obtain a professional license required as a condition of continued employment. Williams v. Ohio Dep't of Job & Family Services, Slip. Op. 2011-Ohio-2897 (June 22, 2011).
Bridgeway, Inc. ("Bridgeway") is a community mental health center that provides a variety of services to the mentally ill, including housing services, employment services, and counseling. Bridgeway hired Mary Williams ("Williams") as a full-time residential social worker. After working for Bridgeway for three months, Bridgeway offered Williams a promotion to residential services program manager. Bridgeway conditioned the promotion on Williams obtaining certification as a Licensed Independent Social Worker ("LISW") within 15 months. When Williams accepted the promotion, she signed a letter which included a statement that her failure to complete the LISW certification by May 2008 "w[ould] make [her] ineligible to keep this position."
Williams scheduled her LISW certification test for April 2008. However, due to health concerns, she rescheduled her test receiving Bridgeway's consent to extend the 15-month deadline. When Williams finally took the exam, she failed. After a failed exam, the exam cannot be retaken for 90 days. As such, Bridgeway terminated Williams employment for failing to obtain her LISW certification within the allotted time.
Williams then applied for unemployment compensation with the Ohio Department of Job & Family Services. The agency denied Williams benefits after it determined she had been discharged for just cause. Several appeals followed and the Unemployment Review Commission ("URC") conducted a hearing. During the hearing before the URC, Williams argued that two other residential program managers did not have the LISW certification. However, the URC affirmed that Bridgeway discharged Williams for just cause. The URC noted that the other residential program managers had been with Bridgeway for a much longer period and that it was not uncommon for an employer to increase the educational pre-requisites for a position.
Williams appealed to Ohio's Eighth District Court of Appeals. The Eighth District Court of Appeals reversed the URC holding. Relying on Shaffer v. Am. Sickle Cell Anemia Ass'n., No. 50127, 1986 Ohio App. LEXIS 7116 (Cuyahoga Ct. App. June 12, 1986), the Eighth District Court of Appeals held that Bridgeway did not fairly apply its LISW certification requirement.
The Ohio Supreme Court accepted Bridgeway's appeal to decide "whether an employee who fails to obtain a license or certification that was a condition of employment, as verified by the letter of appointment signed by the employee at the time of hire, is discharged in connection with work within the meaning of Ohio Revised Code § 4141.29(D)(2)(a)." The Ohio Supreme Court unanimously reversed the Eighth District Court of Appeals. In doing so, the Court emphasized that Williams accepted the promotion knowing that the LISW certification was required. Moreover, Williams also controlled the timing of her certification exam and chose to wait until nearly the end of her 15-month period before taking it. As for the other two program managers who were not LISW-certified, the Court found that they were considerably more experienced and hired several years before Williams; thus, Williams was not "similarly situated" to them.
Ohio employers should take notice that an employee's failure to comply with a condition of employment will likely render him or her ineligible for unemployment compensation benefits.
The U.S. District Court for the Southern District of Ohio recently held that a former employee may be entitled to liquidated damages and attorneys' fees under the Family & Medical Leave Act ("FMLA") despite already receiving reinstatement and back pay damages through his union arbitration process. Poling v. Core Molding Technologies, No. 10-cv-963 (S.D. Ohio June 22, 2011).
Terry Poling ("Poling") began working for Core Molding Technologies ("Core") in 2006. While working at Core, Poling was a member of the International Association of Machinists and Aerospace Workers, AFL-CIO District Lodge 34, Local Lodge 1471 (the "Union"). As a member of the Union, Poling was subject to a collective bargaining agreement ("CBA"). The CBA included an employee attendance provision which provided a set amount of unpaid days off for unexcused absences and tardiness. If the employee exhausts this set amount of unpaid days off, additional absences result in termination.
Poling had a history of Reflex Sympathetic Dystrophy Syndrome ("RSDS") that required regular treatment. He asked that some of his absences be covered under the FMLA. Core approved and certified Poling's FMLA request.
In September, 2008, Poling missed a period of mandatory overtime. Having exhausted his unpaid days off, as provided under the CBA, Poling submitted evidence that his absence was due to his RSDS. However, after reviewing the evidence, Core determined that his absence was not covered by the FMLA because the evidence did not address why he was unable to work that particular day. Given Core's determination that Poling's absence was not covered by the FMLA and that he had exhausted his unpaid days off, Core terminated Poling's employment.
Poling filed a grievance with the Union based on his discharge. In his grievance, Poling argued that Core did not have "just cause" for terminating his employment. The arbitrator agreed with Poling and ordered reinstatement and a monetary award which covered back pay, benefits, and lost opportunities for overtime. Poling returned to his position until April, 2010 when Core moved his position to Mexico.
After his termination, Poling filed suit against Core alleging that Core violated his rights under the FMLA. If an employer violates the FMLA, an employee is entitled to "any wages, salary, employment benefits, or other compensation denied or lost" as a result of the violation, in addition to liquidated damages. Core filed a motion for summary judgment arguing that Poling's claims for compensatory damages (lost wages, benefits, etc.) equitable relief, liquidated damages, and court costs were void and foreclosed by that fact that Poling recovered all lost wages and benefits in his earlier arbitration process. The Court granted in part and denied in part Core's motion for summary judgment.
The Court granted Core's motion for summary judgment with respect to compensatory damages. Poling conceded that Core had paid all back wages owed to him. The Court determined Poling failed to raise a genuine issue of material fact concerning his back pay. As a result, the Court granted Core's motion for summary judgment regarding compensatory damages.
The Court, however, denied Core's motion for summary judgment on the liquidated damages issue. Poling claimed he was entitled to liquidated damages. Under the FMLA, a plaintiff is entitled to liquidated damages in an amount equal to his or her lost compensation award plus interest (unless the employer can show it acted in good faith). In denying Core's motion for summary judgment on the liquidated damages issue, the Court relied on the United States Court of Appeals for the Tenth Circuit's decision in Jordan v. U.S. Postal Service, 379 F.3d 1196 (10th Cir. 2004).
The Jordan court found that compensation that is "unlawfully denied but restored before trial, but after a significant delay" could be considered "denied or lost wages under the FMLA" for the purposes of calculating damages. Id. at 1201 (internal quotation marks omitted). The Jordan court was also motivated by the fact that an unlawful deprivation of wages for a significant amount of time can result in "damages too obscure and difficult of proof [sic] for estimate other than by liquidated damages." Id. Poling argued that Core unlawfully kept him from working and receiving compensation for fourteen months. The Court agreed determining that Poling was not foreclosed from seeking liquidated damages. The Court also based its decision on the strong presumption in favor of awarding liquidated damages to affected employees in FMLA and Fair Labor Standards Act cases.
As this case demonstrates, it is important for all employers to conduct thorough analyses when employees seek FMLA protection so as to limit their potential exposure to FMLA litigation and damages.
The United States Supreme Court recently rejected an attempt by Wal-Mart employees to pursue a nationwide class action on behalf of all female employees. The lawsuit was based on generic accusations that Wal-Mart maintained a company-wide policy of sex discrimination. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011).
To bring any type of class action, a plaintiff must prove "commonality" -- that there is some common issue of law or fact in common among all of the members of the proposed class. In the Dukes decision, the Supreme Court held that for the female plaintiffs to pursue a class action on behalf of employees based upon a supposedly discriminatory company policy, they must establish something in common more than merely "their sex and this lawsuit." Instead, they must offer "significant proof" of a "specific" employment practice that affected everyone in the proposed class and led to sex-based discrimination. In other words, there must be "some glue holding the alleged reasons for all those [nationwide employment] decisions together."
Dukes makes it clear that employees who wish to join together and pursue a class action cannot rely only on extrapolations from statistics, collections of anecdotal evidence, or expert testimony about corporate "culture" to meet Federal Rule of Civil Procedure 23's ("Rule 23") "commonality" requirement. Instead, they most point to a concrete, specific, and identifiable employment policy or practice that truly affected every employee and that gave rise to the discrimination in question. Plaintiffs must prove that they have something else in common apart from their protected status and their desire to sue a common employer.
Not only does the Dukes decision impact sex discrimination cases, it also impacts wage and hour litigation. The standards to bring a class, or collective action under the Fair Labor Standards Act ("FLSA"), are related but different to class action requirements under Rule 23. Under a Rule 23 class action, class members must meet a "commonality" requirement. Under a FLSA collective action, class members must be "similarly situated" to receive conditional certification. Since the FLSA's inception, courts have struggled to define "similarly situated," because the phrase is not defined within the FLSA. However, many courts have looked to interpretations of Rule 23's "commonality" requirement for guidance, which makes the Dukes' discussion of "commonality" extremely important to wage and hour litigation.
The Dukes decision is barely three months old, but several courts around the country have already found themselves grappling with the decision's impact on wage and hour actions. A sampling of cases dealing with issues presented by Dukes includes the following:
In light of the number of cases that have already relied upon Dukes, it is clear that the decision has and will continue to have major ramifications on wage and hour litigation. Dukes requires courts to pay attention to the disparities that exist in collective action cases (e.g., differences in supervisors, departments, facilities, divisions and regions). The "dissimilarities," not the common questions raised, have the most potential to determine whether class-wide resolution of a matter is permissible. Dukes should lead courts to narrowly interpret the "similarly situated" requirement under the FLSA.
The extent to which Dukes will impact collective actions is unclear. Some predict Dukes will have more of an impact in other nationwide discrimination class actions including pending cases against Toshiba Corp., Goldman Sachs Group, Inc., Cigna Corp. and Bayer. Dukes also played a major role in the Ninth Circuit's recent ruling in a Costco disparate impact case (discussed above). Nevertheless, it is clear that Dukes alters the landscape of class or collective actions in dramatic ways.
While Dukes is an employer-friendly decision, the best defense to class discrimination claims and collective wage and hour claims are strong company policies prohibiting discrimination and wage and hour violations and vigilant compliance efforts.
*Stephen S. Zashin, an OSBA Certified Specialist in Labor & Employment law, has extensive experience defending class and collective actions. Stephen represents employers in all aspects of labor & employment. For more information on class or collective litigation, please contact Stephen at ssz@zrlaw.com or 216.696.4441.
48th Annual Midwest Labor and Employment Law Seminar
October 13-14, 2011
Hilton, Easton Town Center, Columbus, Ohio
Stephen Zashin will co-present "Emerging FMLA Case Law: Effective Employee Notice and Avoiding Employer Interference" and George Crisci will present "SERB and Public Sector Issues." To register go to www.ohiobar.org.
Temple Emanu El non-partisan State Issues Program
October 27, 2011 – 8 PM
4545 Brainard Road (at Emery), Orange Village, Ohio 44022
Jon Dileno will explain and present opposing views regarding Issue 2 (Senate Bill 5), as well as other current Ohio voter issues.
Bucking the Trends and Curving the Costs, How to Stay on top in Today's Health Care Market
November 1, 2011 – 8:30 AM
The Bertram Inn, Aurora, Ohio
Patrick Hoban will present an update on PPACA developments. To register contact Shawna Altman at 440.893.9882 x6.
Congratulations to George Crisci!
George S. Crisci has been appointed to a three-year term as the Management Co-Chair of the American Bar Association's Labor & Employment Law Section Committee on State and Local Government Bargaining and Employment Law. George was also named one of the "Best Lawyers in America" for 2012.
EEOC Claims on the Rise
After dropping slightly in 2009, claims filed with the Equal Employment Opportunity Commission ("EEOC") hit record highs in 2010. The EEOC received 99,922 complaints in 2010, up over 6,000 from the previous year. The most common complaints were for retaliation and race discrimination. All indications point to the EEOC receiving more than 100,000 complaints in 2011. As the economy continues to struggle and complaints continue to rise, employers must remain vigilant in understanding and complying with employment laws.
- Public Employee's Discharge Without Pre-Termination Hearing Violates Due Process
- Job Applicants Are Not Protected Under the Fair Labor Standards Act's Anti-Retaliation ProvisionI
- An Employee's Failure to Comply with a Condition of Employment Is a Just Cause Discharge for Unemployment Compensation Purposes
- Court Awards Liquidated Damages Under the Family & Medical Leave Act Despite Prior Arbitration Award
- How Much Will the Dukes v. Wal-Mart Decision Impact Wage and Hour Litigation?
- Z&R Shorts
Public Employee's Discharge without Pre-Termination Hearing Violates Due Process
by Ami J. Patel*The United States Court of Appeals for the Ninth Circuit ("Ninth Circuit") recently held that a public employee was not entitled to leave under the Family Medical Leave Act ("FMLA") based on a request made prior to reinstatement. Walls v. Central Contra Costa Transit Authority, 2010 U.S. Dist. LEXIS 40596 (N.D. Cal., Apr. 26, 2010). Instead, the Court held the employee possessed a protected property interest in his continued employment. In doing so, the Ninth Circuit reversed in part the trial court's summary judgment ruling.
Kerry Walls ("Walls") worked as a bus driver for the Central Contra Costa Transit Authority ("CCCTA") until his termination on January 26, 2006. Walls filed a grievance based on his termination with his union. Following the grievance process, CCCTA reinstated Walls subject to a Last Chance Agreement. When Walls violated the attendance requirement of his Last Chance Agreement, CCCTA terminated his employment again on March 6, 2006. Walls subsequently claimed his discharge violated the FMLA and his due process right to a pre-termination hearing under the U.S. and California Constitutions. The trial court initially granted summary judgment to CCCTA on all of Walls' claims; however, the Ninth Circuit reversed the trial court's ruling on Walls' due process claim.
In line with the trial court, the Ninth Circuit held that Walls' discharge on March 6th did not violate the FMLA. Walls argued that his discharge, which was based on his absence on March 3rd, interfered with his FMLA rights because he made a verbal request for leave during a meeting on March 1st. The parties agreed that Walls had not been reinstated to his position until March 2nd – when he signed and executed the Last Chance Agreement. Therefore, CCCTA had not reinstated him when he made his request for leave on March 1st. The trial court held (and the Ninth Circuit agreed) that because Walls was not an "employee" under the FMLA when he made his request for leave he was not protected by the FMLA.
The Ninth Circuit reversed the trial court's decision regarding Walls' due process rights. As a public employee, under California law, CCCTA could dismiss Walls for cause only because he possessed a property interest in his continued employment. As a preliminary matter, the Ninth Circuit first had to determine whether Walls' Last Chance Agreement modified or somehow altered this property interest. The Ninth Circuit, however, determined that the language contained within the Last Chance Agreement was not strong enough to demonstrate Walls had knowingly or voluntarily waived his due process rights.
The Ninth Circuit then examined whether Walls received both pre- and post-employment safeguards. The court found that CCCTA denied Walls due process because he did not have an opportunity to respond prior to his termination. Further, even though the Last Chance Agreement stated that Walls could not participate in the post-termination procedures of arbitration or file a grievance, it did not include a waiver of Walls' right to pre-termination procedures. Because Walls did not receive a pre-termination hearing, the Court held that CCCTA denied him due process under both the California and Federal Constitutions. The Court sent the case back to the trial court to determine the appropriate remedy for the denial of due process.
This decision reinforces the need for public employers to closely follow pre- and post-employment procedures. Failure to do so could result in costly litigation as it did here.
*Ami J. Patel practices in all areas of labor and employment law, with a focus on private and public sector labor law. For more information on this case or any other labor or employment issue, contact Ami at 216.696.4441 or ajp@zrlaw.com.
Job Applicants Are Not Protected Under the Fair Labor Standards Act's Anti-Retaliation Provision
by Michele L. Jakubs*The United States Court of Appeals for the Fourth Circuit ("Fourth Circuit") held that the Fair Labor Standard Act's ("FLSA") anti-retaliation provision does not protect prospective employees. Dellinger v. Sci. Applications Int'l Corp., No. 10-1499, 2011 U.S. App. LEXIS 16635 (4th Cir. Aug. 12, 2011). In this case, Natalie Dellinger ("Dellinger"), a job applicant, brought suit against Science Applications when it decided not to hire her shortly after learning she recently filed an FLSA action against her previous employer. The Fourth Circuit, agreeing with the district court, concluded that Dellinger was not an "employee" of Science Applications as defined by the FLSA and that the FLSA's anti-retaliation provision did not cover prospective employees or job applicants.
Dellinger sued her former employer, CACI, Inc., in July 2009 for alleged violations of the FLSA's minimum wage and overtime provisions. Around this same time period, Dellinger applied for a position with Science Applications. Science Applications offered Dellinger a job in late August 2009. The job offer was contingent upon Dellinger passing a drug test, completing specified forms, and verifying and transferring her security clearance. Dellinger accepted the offer and began satisfying the provisions of her offer.
On her security clearance form, Dellinger was required to list any pending noncriminal court actions to which she was a party. Dellinger listed her FLSA lawsuit against CACI, Inc. Several days after Dellinger submitted her security clearance form, Science Applications withdrew its offer of employment. Dellinger then brought an FLSA action against Science Applications claiming that Science Applications violated the FLSA's anti-retaliation provision by refusing to hire her after it learned she had sued her former employer.
Science Applications filed a motion to dismiss Dellinger's complaint, contending that Dellinger did not state a claim for which relief could be granted because the FLSA's anti-retaliation provision protects only employees, not prospective employees or applicants. The district court granted Science Applications' motion to dismiss, and Dellinger appealed to the Fourth Circuit.
The Fourth Circuit upheld the district court's ruling. In doing so, the Fourth Circuit took a plain-meaning approach in examining the text of the FLSA. The FLSA prohibits retaliation "against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter." 29 U.S.C. § 215 (a)(3).
The Fourth Circuit first answered the threshold question of whether an applicant for employment is an "employee" authorized to sue and obtain relief for retaliation under the FLSA as Dellinger had not sued her employer, but rather her prospective employer. While Section 215(a)(3) prohibits retaliation "against any employee" the FLSA defines employee as "any individual employed by an employer" under the FLSA. The Fourth Circuit determined that Congress was referring to the employer-employee relationship in providing protection to those in an employment relationship with their employer. The Fourth Circuit also reasoned that because Dellinger was an applicant for employment with Science Applications and her application had been approved only on a contingent basis, she never began work. The FLSA defines "employ" as to "suffer or permit to work." The Fourth Circuit, therefore, concluded that an applicant who never began or performed any work could not, by the language of the FLSA, be an "employee."
The Fourth Circuit also distinguished the FLSA from other statutes, including the National Labor Relations Act and the Occupational Safety and Health Act, noting the definition of "employee" under those statutes and enabling regulations is broader than its definition under the FLSA. As a result, the Fourth Circuit held that the FLSA allows private civil actions only by employees against employers and that 29 U.S.C. § 215(a)(3) does not authorize prospective employers to bring retaliation claims against prospective employers.
The Fourth Circuit's decision significantly curbs the ability of job applicants to bring any type of FLSA action against prospective employers. Employers should rest a little easier knowing that the FLSA – on its face – provides no protection to individuals who have never actually worked for the employer.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment law, practices in all areas of employment litigation and has extensive experience counseling employers on the FLSA. For more information on this decision or any other FLSA compliance question, please contact Michele at mlj@zrlaw.com or 216.696.4441.
An Employee's Failure to Comply with a Condition of Employment is a Just Cause Discharge for Unemployment Compensation Purposes
by Stefanie L. BakerThe Ohio Supreme Court recently held that a discharged employee was ineligible to receive unemployment benefits when her employer discharged her for failing to obtain a professional license required as a condition of continued employment. Williams v. Ohio Dep't of Job & Family Services, Slip. Op. 2011-Ohio-2897 (June 22, 2011).
Bridgeway, Inc. ("Bridgeway") is a community mental health center that provides a variety of services to the mentally ill, including housing services, employment services, and counseling. Bridgeway hired Mary Williams ("Williams") as a full-time residential social worker. After working for Bridgeway for three months, Bridgeway offered Williams a promotion to residential services program manager. Bridgeway conditioned the promotion on Williams obtaining certification as a Licensed Independent Social Worker ("LISW") within 15 months. When Williams accepted the promotion, she signed a letter which included a statement that her failure to complete the LISW certification by May 2008 "w[ould] make [her] ineligible to keep this position."
Williams scheduled her LISW certification test for April 2008. However, due to health concerns, she rescheduled her test receiving Bridgeway's consent to extend the 15-month deadline. When Williams finally took the exam, she failed. After a failed exam, the exam cannot be retaken for 90 days. As such, Bridgeway terminated Williams employment for failing to obtain her LISW certification within the allotted time.
Williams then applied for unemployment compensation with the Ohio Department of Job & Family Services. The agency denied Williams benefits after it determined she had been discharged for just cause. Several appeals followed and the Unemployment Review Commission ("URC") conducted a hearing. During the hearing before the URC, Williams argued that two other residential program managers did not have the LISW certification. However, the URC affirmed that Bridgeway discharged Williams for just cause. The URC noted that the other residential program managers had been with Bridgeway for a much longer period and that it was not uncommon for an employer to increase the educational pre-requisites for a position.
Williams appealed to Ohio's Eighth District Court of Appeals. The Eighth District Court of Appeals reversed the URC holding. Relying on Shaffer v. Am. Sickle Cell Anemia Ass'n., No. 50127, 1986 Ohio App. LEXIS 7116 (Cuyahoga Ct. App. June 12, 1986), the Eighth District Court of Appeals held that Bridgeway did not fairly apply its LISW certification requirement.
The Ohio Supreme Court accepted Bridgeway's appeal to decide "whether an employee who fails to obtain a license or certification that was a condition of employment, as verified by the letter of appointment signed by the employee at the time of hire, is discharged in connection with work within the meaning of Ohio Revised Code § 4141.29(D)(2)(a)." The Ohio Supreme Court unanimously reversed the Eighth District Court of Appeals. In doing so, the Court emphasized that Williams accepted the promotion knowing that the LISW certification was required. Moreover, Williams also controlled the timing of her certification exam and chose to wait until nearly the end of her 15-month period before taking it. As for the other two program managers who were not LISW-certified, the Court found that they were considerably more experienced and hired several years before Williams; thus, Williams was not "similarly situated" to them.
Ohio employers should take notice that an employee's failure to comply with a condition of employment will likely render him or her ineligible for unemployment compensation benefits.
Court Awards Liquidated Damages Under the Family & Medical Leave Act Despite Prior Arbitration Award
by Patrick M. WattsThe U.S. District Court for the Southern District of Ohio recently held that a former employee may be entitled to liquidated damages and attorneys' fees under the Family & Medical Leave Act ("FMLA") despite already receiving reinstatement and back pay damages through his union arbitration process. Poling v. Core Molding Technologies, No. 10-cv-963 (S.D. Ohio June 22, 2011).
Terry Poling ("Poling") began working for Core Molding Technologies ("Core") in 2006. While working at Core, Poling was a member of the International Association of Machinists and Aerospace Workers, AFL-CIO District Lodge 34, Local Lodge 1471 (the "Union"). As a member of the Union, Poling was subject to a collective bargaining agreement ("CBA"). The CBA included an employee attendance provision which provided a set amount of unpaid days off for unexcused absences and tardiness. If the employee exhausts this set amount of unpaid days off, additional absences result in termination.
Poling had a history of Reflex Sympathetic Dystrophy Syndrome ("RSDS") that required regular treatment. He asked that some of his absences be covered under the FMLA. Core approved and certified Poling's FMLA request.
In September, 2008, Poling missed a period of mandatory overtime. Having exhausted his unpaid days off, as provided under the CBA, Poling submitted evidence that his absence was due to his RSDS. However, after reviewing the evidence, Core determined that his absence was not covered by the FMLA because the evidence did not address why he was unable to work that particular day. Given Core's determination that Poling's absence was not covered by the FMLA and that he had exhausted his unpaid days off, Core terminated Poling's employment.
Poling filed a grievance with the Union based on his discharge. In his grievance, Poling argued that Core did not have "just cause" for terminating his employment. The arbitrator agreed with Poling and ordered reinstatement and a monetary award which covered back pay, benefits, and lost opportunities for overtime. Poling returned to his position until April, 2010 when Core moved his position to Mexico.
After his termination, Poling filed suit against Core alleging that Core violated his rights under the FMLA. If an employer violates the FMLA, an employee is entitled to "any wages, salary, employment benefits, or other compensation denied or lost" as a result of the violation, in addition to liquidated damages. Core filed a motion for summary judgment arguing that Poling's claims for compensatory damages (lost wages, benefits, etc.) equitable relief, liquidated damages, and court costs were void and foreclosed by that fact that Poling recovered all lost wages and benefits in his earlier arbitration process. The Court granted in part and denied in part Core's motion for summary judgment.
The Court granted Core's motion for summary judgment with respect to compensatory damages. Poling conceded that Core had paid all back wages owed to him. The Court determined Poling failed to raise a genuine issue of material fact concerning his back pay. As a result, the Court granted Core's motion for summary judgment regarding compensatory damages.
The Court, however, denied Core's motion for summary judgment on the liquidated damages issue. Poling claimed he was entitled to liquidated damages. Under the FMLA, a plaintiff is entitled to liquidated damages in an amount equal to his or her lost compensation award plus interest (unless the employer can show it acted in good faith). In denying Core's motion for summary judgment on the liquidated damages issue, the Court relied on the United States Court of Appeals for the Tenth Circuit's decision in Jordan v. U.S. Postal Service, 379 F.3d 1196 (10th Cir. 2004).
The Jordan court found that compensation that is "unlawfully denied but restored before trial, but after a significant delay" could be considered "denied or lost wages under the FMLA" for the purposes of calculating damages. Id. at 1201 (internal quotation marks omitted). The Jordan court was also motivated by the fact that an unlawful deprivation of wages for a significant amount of time can result in "damages too obscure and difficult of proof [sic] for estimate other than by liquidated damages." Id. Poling argued that Core unlawfully kept him from working and receiving compensation for fourteen months. The Court agreed determining that Poling was not foreclosed from seeking liquidated damages. The Court also based its decision on the strong presumption in favor of awarding liquidated damages to affected employees in FMLA and Fair Labor Standards Act cases.
As this case demonstrates, it is important for all employers to conduct thorough analyses when employees seek FMLA protection so as to limit their potential exposure to FMLA litigation and damages.
How Much Will the Dukes v. Wal-Mart Decision Impact Wage and Hour Litigation?
by Stephen S. Zashin*The United States Supreme Court recently rejected an attempt by Wal-Mart employees to pursue a nationwide class action on behalf of all female employees. The lawsuit was based on generic accusations that Wal-Mart maintained a company-wide policy of sex discrimination. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011).
To bring any type of class action, a plaintiff must prove "commonality" -- that there is some common issue of law or fact in common among all of the members of the proposed class. In the Dukes decision, the Supreme Court held that for the female plaintiffs to pursue a class action on behalf of employees based upon a supposedly discriminatory company policy, they must establish something in common more than merely "their sex and this lawsuit." Instead, they must offer "significant proof" of a "specific" employment practice that affected everyone in the proposed class and led to sex-based discrimination. In other words, there must be "some glue holding the alleged reasons for all those [nationwide employment] decisions together."
Dukes makes it clear that employees who wish to join together and pursue a class action cannot rely only on extrapolations from statistics, collections of anecdotal evidence, or expert testimony about corporate "culture" to meet Federal Rule of Civil Procedure 23's ("Rule 23") "commonality" requirement. Instead, they most point to a concrete, specific, and identifiable employment policy or practice that truly affected every employee and that gave rise to the discrimination in question. Plaintiffs must prove that they have something else in common apart from their protected status and their desire to sue a common employer.
Not only does the Dukes decision impact sex discrimination cases, it also impacts wage and hour litigation. The standards to bring a class, or collective action under the Fair Labor Standards Act ("FLSA"), are related but different to class action requirements under Rule 23. Under a Rule 23 class action, class members must meet a "commonality" requirement. Under a FLSA collective action, class members must be "similarly situated" to receive conditional certification. Since the FLSA's inception, courts have struggled to define "similarly situated," because the phrase is not defined within the FLSA. However, many courts have looked to interpretations of Rule 23's "commonality" requirement for guidance, which makes the Dukes' discussion of "commonality" extremely important to wage and hour litigation.
The Dukes decision is barely three months old, but several courts around the country have already found themselves grappling with the decision's impact on wage and hour actions. A sampling of cases dealing with issues presented by Dukes includes the following:
Case Name
|
Argument made based on Dukes
|
Outcome
|
| Bouaphakeo, et al. v. Tyson Foods, Inc., No. 5:07-cv-04009-JAJ, 2011 U.S. Dist. LEXIS 95814 (N.D. Iowa Aug. 25, 2011). | Defendant argued for decertification of the plaintiffs’ Rule 23 class action because a single purported common question of law was not enough to bind class together (court had previously certified class on a single common question of law). | Motion for decertification of class denied |
| Spellman, et al. v. American Eagle Express, Inc., 2011 U.S. Dist. LEXIS 53521 (E.D. Pa. May 18, 2011), motion for reconsideration denied by Order dated July 21, 2011. | Defendant argued conditional certification of an FLSA collective action was inappropriate in light of Dukes. | Motion for Reconsideration denied (However, court noted that during the second step of the collective action process, Dukes’ analysis of what constitutes a common question would be persuasive to whether the FLSA action should be certified) |
| MacGregor, et al. v. Farmers International Exchange, No. 2:10-cv-03088, 2011 U.S. Dist. LEXIS 80361 (D.S.C. July 22, 2011). | Court found that plaintiffs’ allegations were not rooted in a common policy that itself was unlawful, but rather in the enforcement decisions of individual supervisors, which, if true, contradicted company policy. | Court denied conditional certification of FLSA collective action |
| Cruz v. Dollar Tree Stores, No. 3:07-04012-SC, 2011 U.S. Dist. LEXIS 73938 (N.D. Cal. July 8, 2011). | Court originally certified class of former store managers who claimed they were misclassified under the FLSA in 2009. Based upon Dukes, Court decertified finding that letting the case proceed would entail “unmanageable difficulties” in determining whether particular employees spent the majority of their time performing managerial duties; court stated that plaintiffs failed to provide common proof to serve as “glue” that would allow a class-wide determination. | Court decertified class of former store managers because the necessary individual inquiry into each class member’s claims could result in a series of “mini trials” that undermine the efficiency class and collective treatment is meant to provide. |
| Ramos, et al., v. SimplexGrinnell et al., No. 1:07-cv-00981-SMG, 2011 U.S. Dist. LEXIS 65593 (E.D.N.Y. June 21, 2011). | Relying on Dukes, judge upheld class certification for about 600 workers who alleged that the Tyco fire and safety equipment unit violated New York labor law and that they were underpaid. | Granted plaintiff’s motion for class certification |
| Creely v. HCR ManorCare, Inc. et al., No. 3:09-cv-02879-JZ, 2011 U.S. Dist. LEXIS 77170 (N.D. Ohio July 1, 2011). | Defendants filed a motion to file supplemental briefing based upon Dukes. Judge Zouhary wrote in his order: “This Court concludes the concerns expressed in Dukes simply do not exist here.” | Upheld class certification |
| Jasper v. C.R. England et al., No. 2:08-cv-05266-GW-CW, 2009 U.S. Dist. LEXIS 34802 (C.D. Cal. Mar. 30, 2009), motion to vacate Order denied (C.D. Cal. June 30, 2011). | Defendants filed an application to vacate the order on the motion to certify class action and to order re-briefing in light of Dukes. | The court denied defendant’s motion to decertify a class of up to 1,000 truck drivers |
| Ellis v. Costco Wholesale Corp., No. 07-15838, 2011 U.S. App. LEXIS 19060 (9th Cir. Sept. 16, 2011). | In 2007, the district court certified a class of current and former female employees who claimed Costco denied them promotion based upon their sex. Costco filed a motion to vacate the class certification. The 9th circuit remanded the case for the district court to consider whether the claims for various forms of monetary relief will require individual determinations and are therefore only appropriate for a Rule 23(b)(3) class. The 9th circuit also held the district court failed to conduct a vigorous analysis of “commonality” and “typicality” requirements under Rule 23. Thus, the court vacated the district court’s certification of the class under Rule 23(b)(2). | Affirmed in part, vacated in part and remanded to district court |
In light of the number of cases that have already relied upon Dukes, it is clear that the decision has and will continue to have major ramifications on wage and hour litigation. Dukes requires courts to pay attention to the disparities that exist in collective action cases (e.g., differences in supervisors, departments, facilities, divisions and regions). The "dissimilarities," not the common questions raised, have the most potential to determine whether class-wide resolution of a matter is permissible. Dukes should lead courts to narrowly interpret the "similarly situated" requirement under the FLSA.
The extent to which Dukes will impact collective actions is unclear. Some predict Dukes will have more of an impact in other nationwide discrimination class actions including pending cases against Toshiba Corp., Goldman Sachs Group, Inc., Cigna Corp. and Bayer. Dukes also played a major role in the Ninth Circuit's recent ruling in a Costco disparate impact case (discussed above). Nevertheless, it is clear that Dukes alters the landscape of class or collective actions in dramatic ways.
While Dukes is an employer-friendly decision, the best defense to class discrimination claims and collective wage and hour claims are strong company policies prohibiting discrimination and wage and hour violations and vigilant compliance efforts.
*Stephen S. Zashin, an OSBA Certified Specialist in Labor & Employment law, has extensive experience defending class and collective actions. Stephen represents employers in all aspects of labor & employment. For more information on class or collective litigation, please contact Stephen at ssz@zrlaw.com or 216.696.4441.
Z&R Shorts
UPCOMING SEMINARS48th Annual Midwest Labor and Employment Law Seminar
October 13-14, 2011
Hilton, Easton Town Center, Columbus, Ohio
Stephen Zashin will co-present "Emerging FMLA Case Law: Effective Employee Notice and Avoiding Employer Interference" and George Crisci will present "SERB and Public Sector Issues." To register go to www.ohiobar.org.
Temple Emanu El non-partisan State Issues Program
October 27, 2011 – 8 PM
4545 Brainard Road (at Emery), Orange Village, Ohio 44022
Jon Dileno will explain and present opposing views regarding Issue 2 (Senate Bill 5), as well as other current Ohio voter issues.
Bucking the Trends and Curving the Costs, How to Stay on top in Today's Health Care Market
November 1, 2011 – 8:30 AM
The Bertram Inn, Aurora, Ohio
Patrick Hoban will present an update on PPACA developments. To register contact Shawna Altman at 440.893.9882 x6.
Congratulations to George Crisci!
George S. Crisci has been appointed to a three-year term as the Management Co-Chair of the American Bar Association's Labor & Employment Law Section Committee on State and Local Government Bargaining and Employment Law. George was also named one of the "Best Lawyers in America" for 2012.
EEOC Claims on the Rise
After dropping slightly in 2009, claims filed with the Equal Employment Opportunity Commission ("EEOC") hit record highs in 2010. The EEOC received 99,922 complaints in 2010, up over 6,000 from the previous year. The most common complaints were for retaliation and race discrimination. All indications point to the EEOC receiving more than 100,000 complaints in 2011. As the economy continues to struggle and complaints continue to rise, employers must remain vigilant in understanding and complying with employment laws.
Subscribe to:
Posts (Atom)