*By Patrick J. Hoban
The Federal District Court for the District of Columbia ruled Friday,
March 2, 2012 that the National Labor Relations Board ("NLRB") can
require private employers to post notices informing employees of their
rights under the National Labor Relations Act ("NLRA") - including the
rights to form a union and file unfair labor practice charges. National Association of Manufacturers v. NLRB, No. 11-1629, (D.D.C. Mar. 2, 2012). Z&R reported on the posting requirements in several prior alerts: Employers Need to See the Writing on the Wall – National Labor Relations Board Publishes Final Rule on Posting Requirements; National Labor Relations Board Employee Rights Notice Posters Now Available; and National Labor Relations Board Delays Implementation of Employee Rights Notice Posters Rule.
The Court issued its decision in an action consolidating
lawsuits filed by the National Association of Manufacturers and the
National Right to Work Legal Defense Fund employer advocacy
organizations. The organizations contended that the NLRB did not have
the statutory authority to implement workplace regulations (such as the
notice posting requirements). Additionally, they argued that the Rule's
enforcement provisions rendering failure to post an unfair labor
practice and extending the six-month period for filing unfair labor
practice charges violated the NLRA. They further contended that the Rule
violated employers' First Amendment rights by compelling employer
speech.
The Court held that the NLRA granted the NLRB "broad" authority
to issue rules enforcing the NLRA' s provisions – including the notice
posting Rule. Specifically, the Court explained that the NLRB' s
conclusion that historically low levels of private sector unionization,
large numbers of immigrants in the national workforce, and high school
graduates' relative ignorance of national labor law rendered the Rule
"reasonably" necessary to "carry out the provisions" of the NLRA. Thus,
the Court found the posting requirement, which informs employees of
their right to organize, provides contact information for the NLRB, and
includes information about how to file unfair labor practice charges,
was within the NLRB' s statutory authority. In short, the Court
validated the NLRB' s motive in issuing the Rule – to increase
unionization in the private sector.
By contrast, the Court found the Rule' s provision that failure
to post was a violation of the NLRA and could extend the unfair labor
practice filing period were in conflict with the express provisions of
the NLRA and struck them down. However, the Court further held that
because the Rule required employers to provide a clear statement of the
law issued by the NLRB, it was not compelling employer speech and did
not violate the First Amendment.
Importantly for employers, the Court made clear that, although
it struck down the unfair labor practice and filing period provisions of
the Rule, employers still face penalties for failing to post the
required notice. The NLRB may, on a case-by-case basis, find that an
employer' s failure to post the required notice may be evidence
supporting unfair labor practice charges and may extend the filing
period. Additionally, the Court let stand the Rule' s provision stating
that when an employer "knowingly and willfully" fails to post the notice
(i.e., fails to post the notice with knowledge of the requirement that
it do so), such facts may be considered evidence of unlawful motive in any unfair labor practice case involving other alleged violations of the NLRA.
The Rule, which becomes effective on April 30, 2012, requires employers to post and maintain an 11 x 17 inch notice that alerts workers to their rights under Section 7 of the NLRA. The
rule also requires businesses that use the Internet or an intranet site
to post human resources-related information to post the NLRB notice on
those sites as well. These obligations are unaffected by this decision.
Employers can download the notice (https://www.nlrb.gov/poster)
or obtain a copy from a regional NLRB office. The Rule was originally
to have taken effect on November 14, 2011; however, the NLRB extended
the Rule's effective date in response to the lawsuit.
It is likely that the employer organizations will appeal the
decision to the D.C. Circuit Court of Appeals. A decision in another
case filed by the United States Chamber of Commerce and South Carolina
Chamber of Commerce is still pending in U.S. District Court in
Charleston, South Carolina.
Notwithstanding ongoing legal challenges, this decision
requires that employers – especially those whose employees are not
unionized – review their workplace policies to maximize their ability to
respond to a union organizing effort.
*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 posting
requirements or labor & employment law, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
Tuesday, March 6, 2012
Sunday, January 29, 2012
Strength in Numbers – The NLRB Finds Class and Collective Arbitration Waivers Unlawful
*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.
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.
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.
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