Labor Relations & Wages Hours Update

July 2012

Hot Topics in LABOR LAW REPORTS:

Hearing on proposals to amend NLRA highlight secret ballot elections, employee raises

The House Subcommittee on Health, Employment, Labor, and Pensions held a hearing on Wednesday, July 25, analyzing three legislative proposals that would amend the NLRA. Most witnesses spoke favorably about the proposals, but Devki Virk of Bredhoff & Kaiser eviscerated the measures, saying that none “would do anything to further the central purposes of the NLRA: to grant workers a meaningful opportunity to join together.”

Secret Ballot Protection Act. One of the most hotly debated proposals was the Secret Ballot Protection Act. Introduced in 2011, the measure (H.R. 972) would make it an unfair labor practice for employers to recognize or bargain with a union that was not selected through a secret ballot election. The bill would also make it an unfair labor practice for unions not selected through that process to force, or attempt to force, an employer to recognize or bargain with it. Subcommittee chairman Phil Roe (R-Tenn) said the measure was necessary to end the “assault on the secret ballot once and for all.”

One of the witnesses, William L. Messenger, a staff attorney for the anti-union National Right to Work Legal Defense Foundation, argued that the bill is necessary because secret ballot elections are not only truer to the goals of the NLRA, they are also a superior form of determining employee choice. Messenger contended that the absence of board involvement in recognition agreements makes it impossible for the board to know whether the employees truly want representation or whether they have been coerced.

Virk countered that reports of union coercion are vastly overblown and pointed to data showing that only a quarter of all ULP charges are filed against unions and that only 10 percent of those ever resulted in a complaint, “much less a determination of culpability.” Virk also argued that removing the right to enter into recognition agreements would “inflexibly” insert government into the representation process, thereby delaying the process even further.

RAISE Act. Virk also took aim at the RAISE Act, which she said would “leave…wage increases completely in the hands of employers.” The measure (H.R. 4385) would amend a provision in the NLRA barring employers from giving deserving employees performance-based raises or bonuses. Under current law, giving individual bonuses to employees whose CBAs do not address merit pay constitutes “direct dealing” prohibited by the NLRA. Virk argued that there is no ban on such raises, but that employers and unionized employees must agree to them first.

Another witness, Tim Kane, the Chief Economist of the Hudson Institute, spoke in favor of this bill. He said that the measure would result in a 10-percent increase in pay, and 200,000 new jobs.

Tribal Labor Sovereignty Act. The hearing also addressed the Tribal Labor Sovereignty Act, which would exempt “any enterprise or institution owned and operated by an Indian tribe and located on its Indian lands” from the jurisdiction of the NLRB. Witnesses, including Robert Odawi Porter, the president of the Seneca Nation of Indians, took aim at a recent board decision, Manuel Indian Bingo and Casino, in which the board found that it had subject matter-jurisdiction over tribal government employers. That ruling was affirmed by the Circuit Court of Appeals for the District of Columbia. Porter argued that tribal nations have exclusive authority over all economic activity on their territory.

The need for the hearing itself was called into question by ranking member Rob Andrews (D-NJ). Andrews blasted the Committee for ignoring jobs. The Democrats also attacked the Protecting Jobs from Government Interference Act, which would bar the NLRB from requiring employers to reinstate work that they illegally terminated. The legislation was briefly discussed, but was not given the attention paid to the other measures.

House Appropriations Committee passes spending bill slashing labor and employment agency funds

The House Appropriations Committee’s Subcommittee on Labor, Health and Human Services, Education and Related Agencies has passed a spending bill that would slash funding for the DOL and would defund the Patient Protection and Affordable Care Act, a main target of House Republicans. The 8-6 vote drew fire from advocates for immigrant workers over its blocking of funds to implement the DOL’s new rules for the H-2B guestworker program.

The bill as passed would lower the DOL’s funding to $497 million in fiscal year 2013. It would also cut $1.3 billion in funding for the Department of Health and Human Services. Those cuts are the panel’s attempt to defund the ACA.

2 The DOL’s final H-2B rule would have, among other things, imposed new wage requirements on employers who wish to use the H-2B program, requirements that immigrant advocates say are necessary to prevent the exploitation of guest-workers.

House members send letter expressing belief that new RLA election rules were not meant to apply retroactively

In a letter sent this week, over 120 members of Congress stated that they do not believe that changes to the Railway Labor Act’s election processes were meant to apply retroactively. The new 50 percent showing of interest threshold for holding an election under the RLA has become a point of contention following a recent decision by U.S. District Court Judge Terry Means that the new rules apply retroactively and that the Communications Workers of America have submitted an insufficient showing of interest in their filing to represent passenger service employees of American Airlines.

Last month, approximately 10,000 passenger service agents were set to vote in a representation election. Judge Means blocked the election, finding that the 50 percent showing of interest requirement applied, and the union and some representatives cried foul, contending that the new rule was enacted after the union filed its representation petition. The union filed the petition in December 2011, but the National Mediation Board failed to rule on the petition until after the new rule was enacted into law.

“We are confident that congressional intent on this issue is clear, despite the recent ruling by U.S. District Court Judge Terry Means,” the members of Congress state in their letter.

House passes bill barring Obama Administration from imposing new regulations for two years

Under legislation passed by the House on Thursday, the Obama Administration could not issue “significant” new federal regulations until either two years have passed or the unemployment rate falls to 6 percent. In addition, the Regulatory Freeze for Jobs Act (H.R. 4078) would prevent the president from issuing any significant new rules between election day and inauguration day if the president loses his reelection bid.

The measure defines “significant” as any regulation that would impose an annual cost to the economy of $100,000,000 or more.

The bill passed 245-172, but had to be quickly reworked due to original language in the bill that stated that the president would be barred from passing regulations until the “employment” rate reaches 6 percent.

The bill is expected to receive a chilly reception in the Democratic-controlled Senate.

3 Workers file brief challenging constitutionality of NLRB recess appointments

According to the National Right to Work Foundation (NRWF), four workers filed a brief today, July 30, in the U.S. Court of Appeals for the Seventh Circuit in Chicago challenging President Barack Obama’s recent recess appointees to the NLRB.

The workers’ two cases, Richards, Yost, & Echegaray v Steelworkers and Lugo v International Brotherhood of Electrical Workers, were consolidated for hearing before the appeals court. The NLRB found in both cases that unions forced workers to annually renew their objections to paying full union dues. Those rulings only applied prospectively, not retroactively, and foundation staff attorneys appealed the board’s decisions and also challenged the recess appointments. The NRWF contends that since the appointments were allegedly unconstitutional, the board lacks the requisite forum to hear the suit.

High Court invites SG input on Illinois home health workers’ suit challenging mandatory union fees

The U.S. Supreme Court has invited U.S. Solicitor General Donald B. Verrilli, Jr. to weigh in on whether the Court should take up Harris v Quinn (Dkt No 11-681), a union agency fee case involving Illinois home care attendants.

Assisted by the National Right to Work Foundation, a group of Medicaid home-based personal care providers filed a class-action federal suit against Illinois Governor Pat Quinn and Illinois SEIU and AFSCME locals over an executive order that designated 20,000 providers as public employees for collective bargaining purposes. As such, a collective bargaining agreement that required the attendants to pay an agency fee to a union did not violate the First Amendment, the Seventh Circuit held. The appeals court reasoned that because the attendants were state employees, the union’s collection and use of fair share fees would be permitted by the Supreme Court’s mandatory union fee jurisprudence. However, the appeals court rejected as unripe the claims of home care assistants who had opted not to join a union and were not presently subject to mandatory fair share fees.

In their cert petition, the attendants raised two issues for review: (1) Whether a state may, consistent with the First and Fourteenth Amendments to the United States Constitution, compel personal care providers to accept and financially support a private organization as their exclusive representative to petition the state for greater reimbursements from its Medicaid programs; and (2) whether the lower court erred in holding that the claims of certain home care attendants were not ripe for judicial review.

“Calling providers State ‘employees’ because their services to persons with disabilities are paid for by a State Medicaid program is both inaccurate and immaterial,” the petitioners argued. Rather, the providers are “truly employed only by the persons with disabilities who hire, train, direct, and supervise them.”

4 NLRB Division of Advice recommends dismissing unfair labor practice charges against union involved in 2011 Boeing dispute

The NLRB’s Division of Advice has recommended dismissing unfair labor practice (ULP) charges brought against District Lodge 751 of the International Association of Machinists (IAM), the union local involved in 2011’s highly controversial NLRB complaint against The Boeing Company. In a recently released memo (Case Nos. 11-CB- 4313, 11-CB-071705, and 11-CB-071710), the Division found no evidence that the union had filed charges against the airplane manufacturer because of a decertification election that the union lost in Boeing’s South Carolina facility.

Background. The union began representing employees at the facility of Boeing’s predecessor employer in 2007. The charging parties in the instant case, Boeing employees, alleged that the employees at the North Charleston, South Carolina facility were unhappy that the terms of the subsequent contract were worse than the benefits that the employees had enjoyed prior to representation by the union. According to the charging parties, the employees knew that Boeing was looking for a facility at which to build its new 787 Dreamliner and believed that decertification would make the facility more attractive to Boeing. After Boeing bought the facility, the employees filed for decertification. The union lost the election and published reports indicated that union intended to block production of the new airplane at the South Carolina facility.

In October 2009, Boeing announced that it would place production of a second 787 line in South Carolina. The union filed ULP charges against Boeing, alleging that the decision was retaliation for a strike by the union at Boeing’s Everett, Washington facility. The NLRB issued a complaint against Boeing and while that dispute was pending, the union began a second organizing effort at the South Carolina facility and the charging parties alleged that the union promised it would resolve its dispute with Boeing if it prevailed. The parties did, in December 2011, resolve the dispute and the agreement was accompanied by a Side Letter which provided that, should the economics be feasible, Boeing would locate 737Max work in Washington State. The charging parties then filed the instant charges against the union.

No retaliation. The Division recommended dismissing the charges, finding no evidence that the union filed its ULP charges against Boeing in retaliation for the decertification campaign. The division similarly found no evidence that the union promised to withdraw its Boeing charges if it won the representation election, that the union filed those charges to ensure placement of the 787 line in Washington State, or that Boeing and the union entered into their agreement in order to place work in so-called “right-to-work” states. The Division found that statements by the union president that he would do what he could to ensure that no work was placed in the South Carolina facility did not imply that the union filed the Boeing charges merely in retaliation for the decertification election, rather than to vindicate the rights of union members in Washington State. Additionally, the only evidence that the union promised to withdraw the Boeing charges were unsubstantiated rumors. Finally, the Division found that Boeing’s own statement in the Side Letter that the agreement did not affect work at the South Carolina facility undercut

5 the argument that the union and Boeing had plotted to block working going to that facility.

Lastly, the Division found no merit in the charge that the union had failed to give the charging parties notice of the December 2011 hearing in which the agreement with Boeing was finalized. The Board had given the charging parties intervenor status solely to allow them the chance to vindicate the rights of the South Carolina employees in the Boeing-union dispute. As the Boeing attorney stated in the hearing that it would have no effect on the South Carolina employees, the Division found that the union’s failure to give the charging parties an opportunity to be heard at the hearing did not violate the Act.

LEADING CASE NEWS

DDC: Court denies NLRB’s motion to amend decision invalidating revised union election rules for lack of board quorum

Finding the NLRB’s refined arguments no more persuasive than before, and rejecting additional evidence that the agency could have been presented earlier, a federal court in the District of Columbia denied the board’s motion to amend the court’s previous decision invalidating the agency’s revised election rules for lack of a quorum (Chamber of Commerce of the United States of America v NLRB, July 27, 2012, Boasberg, J). An affidavit accompanying the board’s Rule 59(e) motion, which set forth additional facts describing the board’s “electronic voting room,” buttressed the agency’s position that Member Brian Hayes was present but had abstained from the vote to adopt the rule. However, the board failed to explain why it could not have presented the evidence at summary judgment. Nor could it establish that the court’s previous ruling was clear error. “In the end, the NLRB has offered too little too late.”

No quorum, no rulemaking. The district court had struck down the election rules in May, finding that because Member Hayes did not participate in the pivotal final vote, the Board lacked the requisite three-member quorum of members when it published its rule amending representation election procedures on December 16, 2011. Although the plaintiffs, the U.S. Chamber of Commerce and the Coalition for a Democratic Workplace, challenged the rule on numerous grounds, the court reached only their first contention: that the rule was adopted without the statutorily required quorum.

In its Rule 59(e) motion asking the court to reconsider, the NLRB argued that the court did not understand the mechanics of the agency’s electronic voting room when it held that Member Hayes was absent from the final vote. According to the board, at the time of the vote on December 16, 2011, Hayes “was actually present and participating in the very same room at the very same time that this vote was held.” In fact, the agency submitted evidence showing that Hayes’ staff accessed the electronic voting system and that Hayes ordered his staff to vote on 18 different issues while the election rule was pending. Thus, because Hayes was in the room at the time of the vote, a quorum existed, and Hayes had intentionally abstained from voting on the election rule. As such, the court made a clear error of fact when it concluded that Hayes was absent, the board argued.

6 Motion denied. Where was this evidence at summary-judgment time?, the court pondered. The newly presented facts about the electronic voting room were not previously unavailable, and the court was not persuaded by the board’s insistence that it had been “blindsided” by the plaintiffs’ argument that Hayes did not participate in the vote. Even if it had been caught off-guard by this argument, the board was free to seek leave to file a surreply on the ground that new arguments had been raised, the court explained.

Nonetheless, this new evidence would not have persuaded the court that it was “clear error” to conclude that Hayes did not participate in the final vote. Even if Hayes’ deputies opened the voting “task,” as the board suggested, and assuming that action could be taken as Hayes’ participation and subsequent abstention, the board did not show that this purported abstention occurred prior to publication of the rule. Moreover, the final rule itself belied the notion that Hayes had abstained, given that he subsequently issued a dissenting statement. Thus, the court declined to disturb its previous holding.

The case number is 11-2262 (JEB).

Jonathan C. Fritts (Morgan, Lewis & Bockius) for Plaintiffs. Eric Gray Moskowitz for NLRB.

5thCir: Film producers were not statutory employers and thus not individually liable, plus movie production company settled wage dispute with union; employees had no viable FLSA claim

A movie’s producers and director were not employers under the FLSA, the Fifth Circuit ruled, barring film production employees from bringing a wage suit against them (Martin v Spring Break ’83 Productions, LLC, July 24, 2012, Higginson, S). Moreover, because the employees released any FLSA claims against the production company by settling those claims through their union, there were no defendants left to pursue. Thus, the appeals court affirmed summary judgment to the defendants in its entirety.

The employees worked as grips during the filming of “Spring Break ’83.” As members of the International Alliance of Theatrical Stage Employees, they worked under a bargaining agreement with the film production company. Toward the end of production, the employees filed a grievance alleging they were not paid wages for certain work they performed. The union and production company entered into a settlement resolving the pay claims over the disputed hours. Before the union actually signed the settlement agreement, however, the employees filed an FLSA suit against the film production company as well as the movie’s director and producers as individual defendants.

Individual defendants not liable. Applying an economic reality test, the Fifth Circuit found the individual defendants were not statutory employers. Relying solely on one plaintiff’s declaration, the employees failed to present sufficient evidence to establish that any of the individuals exercised control over their work or the terms and conditions of their employment.

7 The grips alleged that the film director had the ability to hire and fire; in fact, one plaintiff personally witnessed the director firing an employee on set. However, the remaining economic reality test factors weighed against a finding of employer status. While the employee’s declaration tersely stated that the director assigned work, the evidence suggested that the line producer was the employees’ direct supervisor and that the director had no control over their work schedules or terms of employment. The employees also asserted that, in response to a complaint about late pay checks, the director stated that he “would make sure that the employees were paid.” Yet they noted too that payroll for the film crew was handled by an outside payroll company, so the record showed the director did not have control over the rate or method of payment.

Similarly, the film’s executive producer was not an employer under the Act. Although he was in charge of all financial matters, including the payment of wages, this fact was not determinative. First, the grips had already conceded that an outside company handled payroll. Further, the employees presented no evidence to rebut the executive producer’s sworn declaration that he was not involved with the day-to-day filming of the movie; was not their supervisor and did not direct them in any way; and did not hire them, set or alter their pay, maintain documentation of their employment, or exercise substantial control over the terms and conditions of their work.

Nor could the grips show that the film’s other two producers, who were responsible for editing, music, and post-production aspects of the film, were FLSA employers. These defendants both testified as well that they had very little to do with the day-to-day operation of shooting the movie. And both declared that they did not hire the grips or make recommendations regarding their hiring, supervise them or exercise substantial control over the terms and conditions of their work, or make pay decisions. The grips asserted that these defendants had “complete authority to investigate and resolve any issues relating to the final payment of wages,” thereby arguably scoring a point as to the third factor of the economic reality test. However, the defendants testified that they were solely involved with dispute resolution after the pay grievance was filed with the union. Considered in the context of the entire record, the grips only established that the defendants could investigate payment-related complaints; they did not actually determine the rate or method of payment. “The power to oversee dispute resolution concerning pay is not determinative of the power to make decisions regarding the rate or method of payment,” the court found. Accordingly, the district court did not err in finding the individual defendants were not the grips’ employers under the FLSA.

Release of claims. Moreover, the plain language of the settlement agreement between the union and film company barred the grips from suing the actual employer. As the exclusive bargaining rep, the union had authority to settle the claims on the employees’ behalf. Despite the employees’ protestations that they never signed or agreed to the settlement, it was signed by union reps and thus was enforceable and binding upon the employees in their individual capacities.

Even if they had released their right to file an FLSA claim, the employees urged, any such release was invalid because individuals may not privately settle FLSA claims.

8 Previously, however, the Fifth Circuit had ruled that a private settlement of FLSA claims was binding and enforceable so long as employees received “everything to which they are entitled under the FLSA at the time the agreement is reached.” Such was the case here. In signing the deal, the union acknowledged that the payments were the “amounts due and owing” for the disputed number of unpaid hours the grips claimed to have worked.

Finally, the court rejected the notion that because the Supreme Court has held a union may not waive employees’ FLSA rights in a CBA, a union also may not approve an FLSA settlement agreement arrived at through the union-facilitated grievance procedure laid out in a CBA. The concerns raised by the High Court — that FLSA substantive rights would be bargained away — were not implicated here. “We reiterate that FLSA substantive rights may not be waived in the collective bargaining process,” the Fifth Circuit stressed. “[H]owever, here, FLSA rights were not waived, but instead, validated through a settlement of a bona fide dispute, which Appellants accepted and were compensated for.” Thus, the district court did not err in holding the employees validly waived their claim against the company.

The case number is 11-30671.

Michael Lion Tracy (Law Offices of Michael Tracy) for Employees. Paul Franklin Mayersohn (Surpin & Mayersohn) for Employer.

6thCir: Discharge of employee for violating unwritten zero-tolerance drug policy did not violate CBA; employee’s hybrid Sec. 301 claim properly dismissed

Affirming a lower court’s grant of summary judgment in favor of an employer on an employee’s LRMA Sec. 301 claim, the Sixth Circuit ruled in an unpublished decision that the employer did not breach its collective bargaining agreement when it discharged the long-term employee for violating its unwritten zero tolerance drug policy (Williams v United Steel Workers of America, July 5, 2012, Batchelder, A).

Workplace accident. The 30-year employee was driving a forklift and eating a sandwich when his supervisor observed that he was not wearing his seatbelt. Although he tried to put his seatbelt on while holding the sandwich in his mouth and driving, he hit a metal support beam. Required to take a drug test pursuant to the company’s accident policy, the employee tested positive for marijuana and cocaine and was discharged pursuant to Work Rule 5, which states that “[b]eing under the influence of … alcoholic beverages, drugs, or any other body altering substance during scheduled work time” ordinarily justifies discharge for a first offense.

In an attempt to regain his job, the employee filed a grievance. In a ruling on the employee’s unemployment benefits claim, a state trial court found that he had not violated Work Rule 5 and reversed an administrative decision denying the employee benefits. A few months before this ruling, the union had unilaterally withdrawn the employee’s grievance from arbitration. The employee then filed this hybrid Sec. 301

9 claim alleging that his employer violated the CBA when it discharged him and that the union violated its duty to fairly represent him in efforts to get his job back. A district court granted the employer’s and union’s motion for summary judgment, and the employee appealed.

Work Rule 5. Although the employee acknowledged that his employer had the authority to enact Work Rule 5, he argued that it was not a zero-tolerance policy. Agreeing, the court noted that the rule did not define “under the influence.” While it could mean that any influence is impermissible, it could also mean, as the employee argued, that some particular level of influence must be shown. However, the court observed, the employer had two unwritten polices that it used to enforce Work Rule 5. The first was a zero tolerance policy: if an employee had any illegal drugs in his system, he violated the rule. The second was a policy requiring employees to take a drug test after being involved in a work-related accident. Accordingly, the court found that the rule’s ambiguity was resolved by considering “the practices of the shop that have developed between the parties in the day-to-day administration” of the CBA.

In this case, those practices showed that the employer always treated Work Rule 5 as a zero-tolerance policy. In addition, the union acknowledged that the CBA permitted the employer to adopt the policy, and the employee formally admitted to the district court that the employer’s enforcement was uniform and that no employee who had tested positive for drugs was ever returned to work. Thus, the court concluded, “under the influence” in the rule means “any” influence.

Although the employee argued on appeal that the employer actually did allow an employee who tested positive for illegal drugs to return to work, the court held that he could not take back the contrary formal admission he made to the lower court. In addition, the court determined that the zero-tolerance policy’s effect on Work Rule 5 meant only that any amount of drugs violated the rule, not that any violation of the rule required a discharge. Finally, the employee relied on inadmissible hearsay to support his claim that an individual who tested positive for illegal drugs was returned to work.

Unemployment benefits ruling. The appeals court next rejected the employee’s argument that the district court ignored the state court’s unemployment benefits finding that he did not violate Work Rule 5. State law explicitly bans unemployment benefits cases from having any res judicata or collateral estoppel effect in a separate or subsequent judicial proceeding, the court noted.

Irregularities in drug test. Finally, the employee argued that irregularities about the drug test created fact issues regarding the test’s reliability. According to the employee, the laboratory that handled the test was not approved by the state health department; a nurse, rather than a doctor, signed the test report; and the test did not specify how much marijuana and cocaine were found in his system. However, these issues were irrelevant to the employee’s claim that his employer violated the CBA, the court concluded, noting that the employee failed to identify any CBA provision requiring the employer to use certain labs or labs that gave a certain level of detail to their drug test results. Thus,

10 finding that the employer did not breach the CBA, the court affirmed the lower court’s grant of summary judgment.

Paul Croushore (Paul Croushore Law Office) for Employee. Sasha Shapiro (Assistant General Counsel) for Union. George Ross Bridgman (Vorys, Sater, Seymour & Pease) for Employer.

6thCir: Train engineer failed to prove that pursuit of RLA’s arbitral processes would have been futile

Because a train engineer did not avail himself of the arbitral mechanisms set forth in the Railway Labor Act for the resolution of “minor” disputes, a federal district court in Ohio correctly ruled that it could not reach the merits of his claims for breach of a CBA and disability discrimination, ruled the Sixth Circuit in affirming the grant of summary judgment in favor of an employer (Emswiler v CSX Transportation, Inc, July 20, 2012, McKeague, D.) The court also affirmed the grant of summary judgment to the engineer’s union on his claim of a breach of the duty of fair representation.

The engineer, who began working for the railroad’s predecessor as a train-service worker, started engineer training in 1980. He finished the in-class portion of that training, but was medically disqualified due to his Type I diabetes before he could officially become an engineer. Despite his failure to complete the training, he was placed on the engineer seniority roster with a seniority date of May 27, 1980. He left the predecessor employer in 1981 and worked a variety of other jobs before returning to the current employer in 1993 as a train-service worker. Due to his diabetes, he did not ask about completing his engineer training until 2007 when he learned of a new insulin pump that could deliver insulin immediately. He completed his engineer training in 2008 and was, due to his earlier placement on the seniority list, immediately eligible for engineer work.

In February 2009, in response to complaints about the engineer’s seniority, the railroad adjusted his seniority date to the date on which he completed his engineer training, noting that he had “voluntarily” chosen to “return to the trainman’s ranks” for 15 years. When the railroad rejected the engineer’s request to restore his seniority, he filed the instant lawsuit; he did not pursue arbitration of the claims through his union. The district court granted summary judgment to the employer on the claims for breach of a CBA and disability discrimination and to the union for the claim of a breach of the duty of fair representation.

Jurisdiction. As an initial matter, the appeals court held that the district court had jurisdiction to rule on the engineer’s claims, despite his failure to follow the RLA’s arbitrtal mechanisms. The court noted that in previous cases in which an employee failed to use the RLA’s arbitral process, it had held that the district court lacked jurisdiction over the claim and that the claim had to be dismissed. However, the U.S. Supreme Court’s 2006 ruling in Arbaugh v Y&H Corp held that threshold requirements, such as

11 the RLA’s arbitral process requirement, are essential elements of a claim but are nonjurisdictional restrictions. The Court later ruled in Union Pacific R.R. Co v Bhd. Of Locomotive Eng’rs & Trainmen that noncompliance with the RLA’s mandate that parties in minor disputes engage in a pre-arbitration settlement conference before bringing the dispute to an adjustment board was not jurisdictional. Thus, the appeals court held that its previous cases holding that a failure to exhaust RLA remedies in minor disputes deprives district courts of jurisdiction “should be accorded no precedential effect.”

Breach of CBA. Having ruled that the district court was allowed to hear the suit, the Sixth Circuit next ruled that the district court correctly found that the engineer’s failure to arbitrate required a grant of summary judgment to the employer. The engineer argued that pursuing the arbitral processes would have been futile and that, therefore, his failure to do so was excused under the U.S. Supreme Court’s decision in Glover v St. Louis-S.F. Ry. Co. In that case, the Court held that collusion between a union and employer made pursuit of the RLA arbitration futile, finding that the union and railroad had colluded to deny promotions to African-Americans solely because of their race.

In the instant case, by comparison, the appeals court found that the engineer failed to present evidence that the union and railroad were aligned against him such that arbitration would be futile. He was able only to show that the union and railroad agreed as to how to interpret the CBA’s provisions affecting his seniority date. He also submitted emails between himself and union members, but none of the emails from decisionmakers in his case. The court also noted that the engineer had not relied on the union to file a grievance, nor had the union refused his request to grieve the issue. Therefore, as the engineer failed to show that arbitration would have been futile, the Sixth Circuit affirmed the trial court’s grant of summary judgment to the employer on the breach of CBA claim.

No disability discrimination. The court also affirmed summary judgment on the disability discrimination claim because it was preempted by the RLA. The engineer contended that because the 2007 CBA allowed sick engine-service trainees to keep seniority status if they returned “at the earliest opportunity,” the union and railroad discriminated against him when they agreed to adjust his seniority without first ensuring that he had returned as soon as possible. The court rejected that argument, ruling that it required an interpretation of the CBA. The meaning of “at the earliest opportunity” required interpreting the CBA to determine when, precisely, that opportunity would arise. Thus, the RLA preempted the disability claim.

No breach of duty of fair representation. Lastly, the court found that the union had not breached its duty of fair representation. In order to prevail, the engineer needed to have shown that the union’s agreement to the seniority change was either contrary to the CBA or was made in bad-faith. The court ruled that the engineer failed to make that showing, noting that the union’s decision benefited members who missed shifts due to the engineer’s seniority. Thus, the court affirmed the grant of summary judgment on that issue as well.

12 The case number is 11-3517.

Gary A. Reeve (Gary A. Reeve Law Offices) for Employee. John B. Lewis (Baker & Hostetler) for Employer. Kristin Seifert Watson (Cloppert, Latanick, Sauter & Washburn) for Union.

6thCir: Representational nature of dispute between construction company and union placed jurisdiction with NLRB

Because a dispute over the bargaining relationship between a construction employer and the union representing its employees was a representational issue, the Sixth Circuit affirmed the district court’s dismissal of the employer’s complaint as within the NLRB’s exclusive jurisdiction (DiPonio Construction Co v International Union of Bricklayers and Allied Craftworkers, July 24, 2012, Siler, E). The appeals court also affirmed the district court’s grant of attorneys’ fees to the union.

Background. The employer, a masonry company, was a party to a CBA with a union that ended when the employer, pursuant to the CBA, gave notice of its intent to terminate the contract. The union asked the employer to begin bargaining for a new contract and when the employer refused, the union filed unfair labor practice charges with the NLRB. The employer then filed the instant motion asking a federal district court to issue a declaratory ruling that the employer had properly terminated the CBA and that no contract existed between the parties. The union moved to dismiss and the employer amended the complaint to include a breach of contract claim.

The NLRB intervened. Stating that it was in the process of analyzing the ULP claims, the Board moved to dismiss the employer’s complaint, contending that its claims were representational and, thus, fell under the agency’s jurisdiction. A federal magistrate judge found that the NLRB had jurisdiction over the representation issue and recommended that the court decline to exercise jurisdiction over the breach of contract claim. The district court adopted the recommendation, but reversed the magistrate’s decision not to award attorneys’ fees to the union.

Nature of representation. At issue was whether the parties entered into the CBA pursuant to Sec. 8(f) or Sec. 9(a) of the NLRA. If the former, then the construction employer would not be required to continue bargaining because the union would not have become the bargaining representative through an election or a showing of majority support. If the latter, then the employer had a duty to bargain.

While the NLRB has jurisdiction over activity that is subject to Sec. 7 or Sec. 8 of the NLRA, federal courts retain jurisdiction, under the LMRA, over contractual issues, the appeals court noted. However, when the conduct of the involved parties leads to ULP charges and a breach of a CBA claim under Sec. 301(a) of the LMRA, both the NLRB and the federal courts have jurisdiction. When such a dispute is primarily representational, however, the NLRB retains sole jurisdiction.

13 In its International Brotherhood of Electrical Workers, Local 71 v Trafftech, Inc decision, the Sixth Circuit previously held that disputes with concurrent jurisdiction are primarily representational if the NLRB has already exercised jurisdiction and was either considering the issue or had already decided it. The Board also has jurisdiction if the initial decision was in the “representation area.” In Trafftech, the appeals court found that the district court had jurisdiction because the NLRB had explicitly declined to address the representational issue previously.

In the instant case, the Sixth Circuit affirmed the district court’s finding that the dispute was primarily representational and, therefore, under the Board’s jurisdiction. The employer’s allegation that the union breached the CBA by failing to recognize that the contract had been correctly terminated mischaracterized the dispute. The union had not failed to acknowledge that the employer properly terminated the contract, the appeals court held. Instead, the issue was whether the employer was obliged to bargain with the union. That issue turned on whether the union’s representative status was obtained under Sec. 9(a) or Sec. 8(f)—the same issue before the NLRB. Because the dispute was primarily representational, the appeals court affirmed that the district court lacked jurisdiction.

Attorneys’ fees. The Sixth Circuit also affirmed the district court’s decision to award the union attorneys’ fees. The lower court had found that the magistrate judge abused her discretion in denying the union’s motion for sanctions because the employer’s breach of contract claim had failed to cite what contractual provision the union violated, and, moreover, alleged that a breach of the agreement occurred after it had been terminated. The district court also found that the employer failed to analyze the split between NLRB and district court jurisdiction and that the purpose of the employer’s claims was to delay the NLRB proceedings.

The employer argued that the district court failed to conduct an evidentiary hearing into the matter, but the appeals court noted that there is no requirement to hold such a hearing before issuing sanctions. The appeals court also rejected the employer’s argument that the district court should not have made its own factual findings because the lower court accurately noted that the union was not arguing an improper termination and because the breach of contract claim was not an appropriate claim. Thus, the attorneys’ fee award was affirmed.

Steven A. Wright (Steven A Wright, P.C.) for Employer. Joel F. Dillard for NLRB. John G. Adam (Legghio & Israel) for Union.

7thCir: MOA, CBAs harmonious; employer required to make fringe benefit contributions for non-bargaining unit work

After determining that a memorandum of joint working agreement (MOA) was “harmonious” with collective bargaining agreements that governed an employee, and that

14 there was no language in either the MOA or CBAs that limited the employer’s obligation to make fringe benefit contributions, the Seventh Circuit ruled that an employer was required to make contributions to two union funds for each hour worked by a covered employee (McCleskey v DLF Construction, Inc, July 23, 2012, Bauer, W). Thus, the appeals court affirmed summary judgment in favor of the two funds and their trustee.

The Operative Plasterers and Cement Masons International Associations established two funds for its members — a pension fund and health and welfare fund. The employer entered into an MOA with Local 692 of the union, under which the employer agreed to be bound by all CBAs between the union and various employer associations in the geographical jurisdiction of the union. In this instance, there were two CBAs that were relevant, the terms of which were virtually identical. Under the terms of the CBAs, the employer was required to make fringe benefit contributions to the funds on behalf of union members.

In particular, one employee performed cement-related work for the employer, and the employer made contributions to the funds for that work. That employee also performed non-cement-related work for the employer, and the employer did not make fund contributions for that work. During an audit, the funds determined that the employer had not made certain contributions on behalf of the member for that work, totaling almost $12,000. The funds and their trustee filed suit to collect the contributions for the non- bargaining unit work he performed.

Challenging both the district court’s grant of summary judgment in favor of the plaintiffs and denial of its own motion, the employer argued that the court did not properly consider the MOA, which it alleged modified the CBAs. Specifically, it contended that under the MOA, it was only required to make fringe benefit contributions for bargaining unit work. The Seventh Circuit rejected the employer’s interpretation. The relevant section not only bound the employer to the CBA, but it established the type of employee covered by the CBA. Here, the MOA established that an employee would be covered under the CBA if the individual does bargaining unit work, but it did not limit coverage to individuals who did only bargaining unit work, the appeals court explained.

The CBAs “explicitly state that [the employer] is to make contributions ‘for each hour worked’ by an employee covered by the CBAs,” the Seventh Circuit wrote. Employees covered by the CBA were bargaining unit members. Though the CBAs describe the type of work performed by those members, that employer’s obligations were not limited to employees’ performance of that work, the Seventh Circuit held.

Ruling that there was no language in either the MOA or CBAs that limited the employer’s obligations to make fringe benefit contributions, and finding the CBA clear in its requirements, the appeals court affirmed summary judgment on behalf of the funds and its trustee.

15 Bradley J. Buchheit (Hostetler & Kowalik) for Trustee. David K. Hawk (Hawk, Haynie, Kammeyer & Chickedantz) for Employer.

8thCir: Abbreviated WARN Act notice prior to layoff of steel workers precipitated by economic downturn fell within “unforeseeable business circumstances” exception

A federal district court did not err in finding that the “unforeseeable business circumstances” exception applied to an employer’s failure to give 60-day advance notice of a mass layoff as required by the WARN Act, the Eighth Circuit held (United Steel Workers of America, Local 2660 v United States Steel Corp, July 2, 2012, Wollman, R). The undisputed evidence demonstrated that the company's abbreviated notice was caused by an unanticipated and dramatic major economic downturn. Given the juxtaposition between unprecedented high demand for steel throughout most of 2008 and the unforeseeably precipitous drop in demand during the final quarter, U.S. Steel acted within the scope of commercially reasonable business judgment when it initially employed less drastic measures to weather the downturn.

During the first three quarters of 2008, U.S. Steel reported some of the highest sales in its history and was operating at near capacity. When the economic downturn began in late 2008, the company’s initial response was to temporarily idle blast furnaces at its steelmaking facilities. As the economic crisis deepened, it completely shut down two steelmaking operations and laid off 313 employees at the iron ore plant involved in this dispute. Within just a matter of six days, the employer developed its idling and layoff plan, received approval from its board of directors, informed the union of its decision, and issued its WARN Act notice. The layoffs began four days after notice was given and continued over the next two weeks. However, by the end of the month, nearly all of the laid-off workers had been recalled.

Unforeseeable business circumstance. Alleging that U.S. Steel violated the WARN Act by failing to provide 60-day notice of the mass layoff, the union sued for damages. The employer sought summary judgment, arguing that the exception for unforeseeable business circumstances applied. It was undisputed that U.S. Steel’s blast furnace capacity utilization rate dropped from 92 percent to 46 percent over a five-month period in 2008, and that to operate profitably, a 65 percent capacity utilization rate was necessary. The district court granted summary judgment, concluding that unforeseeable business circumstances exemption applied, so the 60-day notice requirement did not apply.

Under the applicable regulations, 20 CFR Sec. 639.9(b)(1), “an important indicator of a business circumstance that is not reasonably foreseeable is that the circumstance is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control.” The union argued that the employer failed to present sufficient evidence that the effects of the economic downturn on the steelmaking industry were an unforeseeable business circumstance 60 days before the layoff began, given that the general economic downturn was well-known by that date. The union also asserted that

16 the employer failed to present any evidence of how similarly situated employers responded to economic conditions.

Business judgment. The test for determining whether business circumstances were reasonably foreseeable “focuses on an employer’s business judgment,” and an employer “must exercise such commercially reasonable business judgment as would a similarly situated employer in predicting the demands of its particular market.” In this instance, the economic crisis of late 2008, when coupled with the dramatic decline in customer orders at U.S. Steel, constituted an unforeseeable business circumstance under the WARN Act, concluded the Eighth Circuit.

While the union correctly pointed out that the general economic crisis commenced prior to the sixtieth day before the layoff, the employer countered that the sharply reduced demand for steel was not clear until after that time. Knowledge of an economic downturn alone does not bar application of the unforeseeable business circumstances exception, observed the appeals court. Rather, the court must consider the facts and circumstances that led to the layoffs in light of the history of the business and of the industry in which it operates.

Nothing in the record suggested that the extent of the economic downturn and its effects on the steel industry were probable anytime before late November 2008. U.S. Steel’s traditional methodology had not forecasted the unprecedented decline in capacity utilization rates in both the industry as well as the company. Prior to the layoff, U.S. Steel had been implementing less drastic measures based on past history during downturns. Thus, the undisputed evidence demonstrated that the abbreviated WARN Act notice given by the employer was caused by an unanticipated and dramatic major economic downturn.

Sufficiency of notice. Moreover, the employer gave as much notice as was practicable and the content of the notice was sufficient. Once the causal event became known to U.S. Steel, the company planned for the layoffs, sought approval of its board of directors, notified the union, and provided news to the affected employees. Further, the notice discussed the underlying factual events leading to a reduced notice period and so provided employees with an explanation of the difficulties faced by the company and the rationale for the reduced WARN Act notice period. Therefore, the written notice was not deficient under the Act’s notice requirements. The judgment of the district court was affirmed.

Samuel Huntington Heldman (The Gardner Firm) for Union. Ashlee Marie Bekish (Ogletree & Deakins) for Employer.

17 10thCir: Union impermissibly attempted to protect union seniority by endtailing nonunion employee into merged bargaining unit

A Teamsters union local acted unlawfully by insisting that a previously unrepresented employee be placed at the bottom of the seniority roster following the merger of two bargaining units rather than dovetailing his seniority, ruled the Tenth Circuit in an unpublished decision (NLRB v Teamsters, Local Union No 523, July 5, 2012, McKay, M). The NLRB reasonably concluded that the union acted unlawfully by protecting union seniority in a merged bargaining unit at the expense of a previously unrepresented employee.

Unrepresented employee. The long-term employee worked as a bakery sales representative for Dolly Madison. In 1996-97, his employer purchased the Wonder Bread/Hostess product lines. Still, the employee continued to sell only Dolly Madison products while other employees sold only Wonder Bread/Hostess products. Historically, the union represented employees selling the two product lines in separate bargaining units. The employee was not represented by either unit and received company benefits rather than those provided under either union contract. In 2005, the employer decided to merge the two units and the parties agreed to consolidate the units. Employees were to be dovetailed according to unit seniority.

Although the parties agreed that the employee should be included in the merged unit, they debated his seniority. The employee, in fact, had the most company seniority of any sales representative at his location, and the employer wanted him dovetailed into the merged unit. However, the union insisted that he be placed at the bottom of the seniority roster (“endtailed”), and the employer ultimately agreed. As a result, the employee was bumped by a sales representative with more union seniority and was forced to transfer to a location 70 miles away. After the employee filed charges with the NLRB, an unfair labor practice complaint was issued against both the employer and union. Ultimately, the board concluded that the employer and the union acted unlawfully by endtailing the employee’s seniority. Although the employer did not object, the union filed a petition for review.

Impermissible discrimination. The NLRB’s initial ruling was issued by a two-member panel. That decision was subsequently set aside following the U.S. Supreme Court’s ruling in New Process Steel v NLRB, which found that the NLRB cannot act by a two- member panel. On remand, a three-member panel reached the same result, again concluding that the union impermissibly discriminated against the employee. The union again filed a petition for review.

The Tenth Circuit found that the NLRB’s conclusion in this case was reasonable and supported by substantial evidence in the administrative record. Here, the board found that the parties did not endtail the employee in order to protect unit seniority but in order to protect union seniority. The only difference between the dovetailed Dolly Madison employees and the complainant was that he had not previously been represented by the union. Agreeing with the board, the appeals court concluded that the integrity of the

18 Hostess/Wonder Bread unit’s seniority roster was no less compromised by dovetailing only the Dolly Madison employees than it would have been if the previously unrepresented employee were also dovetailed. The decision of the NLRB was affirmed.

The case numbers are 11-9538 and 11-9542.

Michelle M. Devitt for NLRB. Steven R. Hickman (Frasier, Frasier & Hickman) for Union. John Scully (National Right to Work Foundation) for Employee.

DCCir: Law judge improperly applied Wright Line test in finding employer unlawfully disciplined supporter of upstart union; remainder of NLRB findings supported by substantial evidence

An administrative law judge failed to properly apply the Wright Line legal standard in finding that a healthcare employer unlawfully disciplined the supporter of a rival union, the D.C. Circuit held, granting in part an employer’s petition for review of an NLRB order (Sutter East Bay Hospitals v NLRB, July 24, 2012, Sentelle, D). However, the Board’s conclusion that the employer altered its solicitation rules to squelch union activity was supported by substantial evidence. And, because the employer did not challenge the finding that it had engaged in unlawful surveillance by hiring security guards to stand watch over union meetings in its cafeterias, the appeals court granted the Board’s petition for enforcement on those counts.

SEIU vs. NUHW. The incumbent SEIU had represented workers at the employer’s four Northern California hospitals. After the national union placed the local chapter in trusteeship, however, the ousted union leaders and other employees worked to decertify SEIU and certify a replacement, the National Union of Healthcare Workers (NUHW), at numerous California healthcare facilities, including the hospitals at issue here. A displaced SEIU steward who supported the upstart NUHW had an encounter with SEIU supporters in the cafeteria of one of the employer’s hospitals during which she spilled water (perhaps intentionally, perhaps by accident) in the direction of the SEIU supporters and their possessions. A security officer wrote up the conflicting accounts of the incident in a report that cast no blame on either party. Three days later, based on the security report, the hospital’s labor relations director issued a written reprimand against the NUHW supporter for “misconduct and inappropriate behavior” without undertaking his own investigation into the scuffle.

A month later, the NUHW supporter held an all-day meeting in the cafeteria of one of the employer’s hospitals to build support for NUHW. The employer hired an outside security service, gave the guards a camera, and told them to watch for activity by the members of the new union and to report any union solicitation immediately. Specifically, they were told to keep their eyes on the NUHW supporter. A similar meeting was held three days later in the cafeteria of another facility, again with hired guards on site. After the guards apprised the labor relations director that the NUHW supporter loudly addressed employees in the cafeteria and solicited dues, he issued a direct order to the employees present to “cease and disperse.” When the employee resisted, she was suspended. The

19 next day she came to work, seemingly unaware of her suspension, and allegedly launched into a tirade upon hearing the news. She was discharged for failing to obey the order to leave the cafeteria, for attempting to work while suspended, and for her alleged tirade.

Solicitation rule change. Substantial evidence supported the Board’s finding that the employer violated the Act by discriminatorily enforcing its solicitation and distribution rules, the D.C. Circuit held. It rejected the employer’s argument that it had not condoned such meetings and solicitations in the past. First, the record evidence belied this claim: the labor relations director admitted that he knew of the SEIU solicitation and distribution and that the employer had a policy generally allowing solicitation in its cafeterias so long as employees were not on the clock. He only took aggressive action when employees engaged in such conduct on behalf of NUHW.

Moreover, the Board properly found a violation of the Act without regard to whether the employer knew of past group meetings in the cafeteria because “restrictions on employee solicitation during nonworking time in nonworking areas are presumptively invalid absent a showing of special circumstances,” the appeals court noted, citing the Supreme Court’s holding in Beth Israel Hospital v NLRB. In this case, the employer “did not even attempt to demonstrate any kind of special circumstances that would justify a ban on union solicitation there.” Nor was the appeals court convinced by the employer’s insistence that it “must be allowed to control what goes on in its facilities.” In the court’s view, this argument was simply “a complaint against well-established case law preventing hospitals from banning solicitation in employee-focused cafeterias.” Thus, the appeals court upheld the Board’s finding that the employer unlawfully redefined its solicitation policy.

Discipline of union supporter. The law judge misapplied the Wright Line test to its inquiry into the discipline imposed on the union supporter, the D.C. Circuit held. The ALJ failed to examine or even mention whether the labor relations director had a reasonable, good-faith belief that the union supporter had engaged in the misconduct alleged. Also troubling to the appellate court was the “almost breathtaking lack of evenhandedness” with which the ALJ treated conflicting evidence.

The Wright Line test does not concern itself with whether the employee actually engaged in the misconduct. Instead, proper application of Wright Line requires that the judge determine whether the General Counsel has shown an improper motivation for the disciplinary action, and, if so, whether the employer can demonstrate that it would have taken the same action even without the improper motivation. The employer never had the chance to meet its Wright Line burden here because the ALJ declined to even examine what the labor relations director believed, whether his beliefs were reasonable, and whether his actions based on those beliefs were consistent with company policies and past practice.

Although the NLRB made a terse statement that a Burnup & Sims analysis would also support the ALJ’s conclusion it did not explain its reasoning when “it noted—almost in passing—that a Burnup & Sims analysis would sustain the ALJ’s conclusions.” Such a

20 bare statement simply could not withstand judicial scrutiny, the appeals court held. In so holding, it did not decide which test was correct for analyzing the facts at hand—only that the board did not properly apply any test at all. Accordingly, the employer’s petition for review was granted on this issue.

Christopher T. Scanlan (Arnold & Porter) for Employer. Milakshmi V. Rajapakse for NLRB.

DCCir: Employer unlawfully made unilateral changes to bonus plan after union called “memorial day” work stoppages

A mining company unlawfully amended its employee bonus plan in response to “memorial period” work stoppages by the United Mine Workers, a divided D.C. Circuit held, enforcing an NLRB order (Chevron Mining, Inc v NLRB, July 3, 2012, Griffith, T). The employer had stipulated to the fact that it amended the plan in response to the memorial days, the appeals court found. Moreover, these work stoppages were protected activity under the NLRA. Judge Williams dissented.

Memorial periods. Since 1978, successive bargaining agreements between the United Mine Workers and the mining company included a clause giving the union the ability to call “memorial periods,” unpaid work stoppages that may last one or more days at one or more mines. In 1995, the parties entered into a letter agreement that allowed union workers to participate in the company’s employee bonus plan, which provides bonus payouts based on financial and safety achievements at respective mines. Under the agreement, the company retained the right to change the bonus plan unilaterally. Disputes over such changes were not arbitrable; the sole recourse for the union was to quit the agreement.

Seeking to place economic pressure on the employer in light of ongoing (unrelated) grievances, the union called six memorial days at one mine — at a cost to the company of $1.5 to $2.5 million in pre-tax profit. The following year, the company amended the bonus plan to provide that no financial achievement bonus would be paid to union- represented employees at any mine where the union calls a memorial day that doesn’t cover all mines in the same district, regardless of whether that mine met its financial targets. At the same time, however, the company offered a one-time, 6 percent bonus that paid $700,000 to union-represented employees at the mine in question. Since then, the union has called only district-wide memorial days, so no bonuses have gone unpaid as a result of the bonus plan amendment. Nonetheless, the union alleged the employer amended the bonus plan in retaliation for the union exercising its right under the contract to call for memorial work stoppages at the mine.

The NLRB concluded that the union’s use of memorial periods to place economic pressure on the company was NLRA-protected activity. Also, under Wright Line (which

21 both parties stipulated applied here), the board held the employer’s amendment to the bonus plan was an unfair labor practice.

Protected activity. The employees’ participation in the memorial days was protected activity, the D.C. Circuit held on review, concluding the CBA permitted the memorial period work stoppages. While it was well-established that an agreement to arbitrate labor disputes “gives rise to an implied obligation not to strike over such disputes,” the memorial period clause effectively negated any implied no-strike obligation. Rejecting the employer’s argument that, by its very terms, the memorial period provision impliedly may be used only to commemorate the death of a miner or a mining disaster, the court found that under the contract, the sole limits on the union’s use were procedural: only ten days of work stoppage may be called during the contract term.

Because the CBA did not speak directly to the question of the purposes for which a memorial period may be called, the appeals court looked to extrinsic evidence of the parties’ intent. In the board proceeding, the parties had stipulated that the history and purpose of the memorial periods clause, as first reflected in the coal industry pattern bargaining agreement, were addressed in a district court ruling, two arbitration decisions, and a memorandum from the board’s Division of Advice. Both parties used these materials in making their arguments, and the board relied upon them to find the CBA authorized the union to use memorial periods to strike.

Read together, the materials showed unambiguously that a memorial period may be called to strike over an arbitrable dispute, the appeals court held. This extrinsic evidence shows that, in this contract, “memorial periods” is a term of art with a specific meaning: a contractually authorized work stoppage that can be called for any reason, no reason, or for the specific reason of placing economic pressure on an employer in connection with an arbitrable dispute.

Wright Line analysis. It was undisputed that the memorial day work stoppages were a motivating factor in the company’s decision to modify its bonus plan. Indeed, the parties had stipulated that the bonus plan was amended in response to the memorial days “to communicate to the Union that because such Memorial Days imposed financial consequences on the Employer, the Union-represented employees would also be required to bear financial consequences in the form of the loss of the bonus they might otherwise expect.” The employer argued that it would have amended the bonus plan even had the union never called the memorial days, noting that such work stoppages “cost everyone dearly” and that discouraging memorial days would increase profits. However, under Wright Line, the question is not just whether the employer’s action also served some legitimate business purpose, but whether the legitimate business motive would have moved the employer to take the challenged action absent the protected conduct, the court wrote. “Although it is unusual for an employer to directly acknowledge taking adverse action because of protected activity,” the employer did so here. Thus, the General Counsel met his burden under Wright Line.

22 The employer argued as well that amending the bonus plan was a permissible economic weapon to counter the employees’ protected activity, much like a lockout in response to a strike. As the NLRB held, however, the employer could not benefit from the economic weapon defense because its amendment to the plan was precisely the type of “selective sanction” directed “only [at] those employees who engage in protected conduct” that the board forbids. In its brief on appeal, the employer objected to the NLRB’s “selective sanction” holding, but it had not done so before the board — thus “running headlong into section 10(e) of the Act.” Although the board failed to raise this argument, the statutory provision was jurisdictional, leaving the appeals court powerless to consider it here.

Moreover, the union did not waive its right to bring an unfair labor practice charge by giving the company the unilateral right to modify the bonus plan. “The unilateral right to amend the plan was not a license to amend the plan for unlawful reasons,” the court wrote. “There is no indication in the record that the Union intended to waive its section 8(a)(3) rights by entering into the Agreement.” Finally, the appeals court rejected the employer’s contention that the plan amendment did not affect the terms or conditions of employment because no employee had actually been denied a bonus under the revised plan. “The plan amendment altered terms governing employee bonus eligibility by placing a financial penalty on the future exercise of protected activity. Indeed, as the board noted, the Union’s decision not to call memorial days that were not district-wide likely demonstrates the chilling effect of this new term of employment.”

MacKenzie Fillow for National Labor Relations Board. Eugene Scalia (Gibson, Dunn & Crutcher) for Employer.

Hot Topics in WAGES HOURS

House passes bill blocking abandoned DOL regulations on child labor in agriculture

The House approved legislation blocking the DOL from enacting proposed regulations affecting child labor rules relating to agriculture. The bill (H.R. 4157) follows the decision last spring by the DOL to abandon the proposed regulation, a decision reached after public comments indicated that great harm would be done to family farms.

Jerry Kozak, president and CEO of the National Milk Producers Federation, praised the passage of the legislation, noting that it also prohibits the DOL from enforcing similar regulations in the future.

“Even though the Department of Labor earlier this year withdrew its contentious proposed rule restricting the work that children could do on farms,” Kozak said, “NMPF remains concerned that the issue could surface again at some point in the future.”

23 House Democrats introduce legislation to raise federal minimum wage

The ranking member on the U.S. House Committee on Education and the Workforce, George Miller (D-Calif) has introduced legislation to increase the federal minimum wage to $9.80 over the next three years. The move comes after a group of economists that included Nobel Laureate Joseph Stiglitiz said that increasing the wage could greatly aid the country’s recovery from the 2008 recession.

The Fair Minimum Wage Act of 2012 (H.R. 6211) would increase the minimum wage in three 85-cent steps, over three years, from the current $7.25 per hour. After the third year, the bill would require that the minimum wage be indexed to inflation.

The bill would also increase the required wage for tipped workers in annual 85-cent increases, from the current $2.13 per hour until the tip credit reaches 70 percent of the regular minimum wage. The minimum wage has not been increased in three years and tipped workers have not gotten an increase in their minimum wage since 1991.

In announcing the bill, Miller contended that it would both “help millions of working families make ends meet and help the nation’s economy grow.”

Measure introduced in Senate to raise minimum wage over next two years

Senator Tom Harkin (D-Iowa), the chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, introduced the Fair Minimum Wage Act of 2012 last week. A companion bill to one introduced in the House, the measure (S. 3453) would increase the minimum wage to $9.80 per hour in three steps over the next two years. It would also increase the minimum wage for tipped workers from the current $2.13 per hour to a level that is 70 percent of the full minimum wage, or approximately $6.85 per hour.

According to a statement from Harkin’s office, the bill is based on the Rebuild America Act introduced by Harkin in March 2012. That bill also would close loopholes that potentially allow employers to misclassify workers as independent contractors and would provide funding for state and local governments to hire teachers and first responders. It also would provide $300 billion in infrastructure funding to build and repair bridges and highways, reinstate the Child Care and Development Block Grant that assists working families with child care costs, and improve Social Security benefits.

In addition, the legislation would update the overtime requirements for white-collar workers, expand the Work Opportunity Tax Credit allowing employers to hire more workers with disabilities, and allow American workers to earn up to seven paid sick days each year.

LEADING CASE NEWS

24 1stCir: Discharged employee who after 12 weeks of medical leave had sought additional leave with no estimated return date could not pursue claims of FMLA retaliation and state law disability bias and reprisal

A commercial credit analyst who was terminated by a bank after she had exhausted 12 weeks of medical leave and had sought additional leave with no anticipated return-to- work date could not maintain claims of FMLA retaliation and disability bias and retaliation under Massachusetts law, ruled the First Circuit in affirming summary judgment for the bank (Henry v United Bank, July 13, 2012, Howard, J). Assuming she established a prima facie case of FMLA retaliation, the court found the employee failed to show the reason proffered by the bank for her discharge was pretextual; she raised only tenuous insinuations regarding the facts surrounding her discharge and the bank’s justification. Even if she properly raised independent ADA and state law claims for reasonable accommodation, her request for open-ended additional leave fell short of raising a fact issue for trial.

Medical leave. In January 2008, the employee suffered from spinal cord compression on her cervical spine. Her primary care physician (PCP) referred her to a neurologist, but the appointment wasn’t until September 24. With some accommodations, she was able to work for a while. When they proved inadequate, her PCP gave her an “excuse slip” placing her on bed rest and stating that it was “indeterminable” when she would return to work. Over the summer she completed forms for FMLA and short-term disability leave (STD) provided by the employer. Near the end of July the employer informed her that her 12-week FMLA/disability leave had begun July 1 and she had nine weeks remaining. In early September, however, the employer sent her a letter indicating that her request for STD had not yet been approved, pending additional documentation from her doctor, and so, her work absence could not be qualified as FMLA leave. The letter provided that a Certification of Health Care Provider (CHCP) had to be completed within 15 days. A few days later, the employer’s disability insurance provider informed the employee that her STD request was denied because she lacked medical documentation showing she was totally disabled.

The employee’s supervisor, along with another VP and HR, discussed staffing needs and the problems created by the employee’s extended absence, but deferred a decision until the end of September. In mid-September, the employee’s PCP sent a CHCP indicating that the employee was “not incapacitated” and was able to perform her job with a normal work schedule, but with “no heavy lifting.” The decisionmakers determined the employee’s job could no longer be held open and sent her a letter indicating that she was expected to return on September 25, the day after her appointment with the neurologist, and that her lengthy absence was unexcused and not FMLA-eligible because it was unsupported by her health care providers.

On the day of her appointment the employee brought to work a note from the neurologist indicating that she would be having surgery in the next few weeks, that due to extreme pain, she had been unable to work since July 1, and that she was to remain off of work until further notice. Later that same day, she sent HR an email that the surgery was

25 scheduled for October 17. However, HR advised her that she was terminated because her position could not be held open indefinitely, and she had been provided 12 weeks of FMLA leave even though it was unsupported by documentation. The employee asserted that the CHCP submitted by her PCP was mistaken, but submitted no further documentation.

The employee filed a lawsuit alleging claims of FMLA retaliation and disability bias under Massachusetts law. The district court granted summary judgment to the employer.

FMLA retaliation. On appeal, the court assumed the employee could make out her prima facie case and found the bank had proffered a legitimate, nondiscriminatory reason for discharging her. The issue, then, was whether the employee could show pretext.

The employee first pointed to the employer’s conduct leading up to her discharge, including its changed position on the status of her FMLA leave, which it initially approved; its insistence that she return to work despite being aware of her neurology appointment; the demand that she complete the CHCP form in mid-September instead of after her scheduled neurology appointment; and its failure to reconsider her discharge after she informed HR that her PCP’s statements on the CHCP were mistaken. The appeals court, however, found none of these arguments persuasive; nor did they suggest discriminatory animus. The court noted there was no evidence that once she informed the employer her physician’s CHCP was mistaken, the employer prevented her from submitting a modified CHCP to correct any misperception. Moreover, once the employer received the neurologist’s note indicating she would be out of work “until further notice,” the employer simply remained consistent with its position that it could not hold her job open indefinitely.

Temporal proximity. The appeals court also rejected the employee’s temporal proximity argument, finding the timing between the conclusion of her FMLA leave, the neurologist’s note documenting her need for additional time, and her termination “unremarkable.”

Nor did comments of her supervisor communicate a retaliatory message. One comment was made in the background during a telephone call: “What did I do to you? Did I do something to you?” Even if directed at the employee, it reflected no FMLA animus. The second comment, made while a coworker was on disability leave, asked whether anybody had heard from the coworker or his wife on when he would be coming back to work, and later, when the coworker’s wife called, that he was a “wuss” and “needed to get a back bone.” Nothing in the record connected this stray remark to the employee’s leave. Neither comment helped create a triable issue on pretext and motive.

Credibility of justification. The employee’s attempt to discredit the evidentiary basis for the employer’s stated reason for terminating her similarly failed. Relying on her own testimony, she asserted the employer could have hired a temp because her job was not complicated and the employer could have taken precautions to protect confidential customer information. She also challenged the employer’s perspective on the increasing

26 work load during her absence and the immediate need for three analysts. But these iterations, and others, amounted to mere disagreement with her employer’s business decisions and did not show the sort of weaknesses or implausibilities that give rise to a triable question of pretext, wrote the court.

The employee did nothing more than raise “tenuous insinuations on the facts surrounding her termination and the bank’s reason for taking that action,” concluded the court. This was not enough to create a triable issue on discriminatory or retaliatory animus. The undisputed facts showed that the employer made several workplace accommodations for the employee from the time that she began displaying physical symptoms in January 2008. While she was out of work, the employer held her job open for 12 weeks and contributed to her group health insurance during that period, despite its view that she failed to provide appropriate medical documentation to support FMLA leave. There was no evidence of contemporaneous statements made by the decisionmakers that suggested retaliation for her requesting and taking leave. Thus, she failed to raise a triable question of pretext.

State law disparate treatment and reprisal. The First Circuit summarily disposed of the employee’s claims of disparate treatment and retaliation under Massachusetts law. They were based on the same operative facts as her federal FMLA claim, and were thus doomed by the court’s conclusion on that claim.

State law failure to accommodate. Although, the court concluded the employee impermissibly tried to recast her disability bias claim into an independent reasonable accommodation claim under the ADA and Massachusetts law, it nonetheless found the claim failed. The record did not give rise to a jury question on whether her apparent request for extended leave constituted a reasonable accommodation.

From July through September, the employer received several communications from the employee’s medical providers documenting her inability to work. Though one note in July suggested that she might return after three more weeks of leave time, she did not. Although her physician indicated (CHCP provided in mid-September) that she was able to work with a slight restriction, she claims this was an error. Thus, as of the date of her termination, the employee could not work in her position at all, and had given her employer neither a relative time frame for her anticipated recovery, nor any indication of when or whether she would ever be able to return.

When the employee exhausted her FMLA leave, she had been out of work for three months, and the employer had informed her on September 22 that it could not hold her job open indefinitely, requiring her to return to work on September 25. Even after her long-awaited neurologist appointment on September 24, she gave her employer only a generally stated note that she had been unable to work since July 1, that surgery would be scheduled in a few weeks, and that she was to remain out of work “until further notice.” The record contains not even an estimate as to her expected recovery time or the possibility that she might be able to perform any of the essential functions of her sedentary position. “Such an open-ended request for additional leave is just the type of

27 wait-and-see approach that has been rejected as giving rise to a triable issue on reasonable accommodation,” wrote the appeals court.

Because the employee’s extended leave request is not a reasonable accommodation, the employer had no obligation to show it would impose an undue burden on its business or to engage in the interactive process. To the extent such burdens may be relevant to the reasonable accommodation mix here, the claim still fell short. There was no material factual issue on the employer’s need to fill the employee’s position, and no trier of fact could reasonably find the employer was required to go further than it did to accommodate her, especially since she remained firm in her stance that she could perform no part of her duties for an indefinite time.

Consequently, the appeals court affirmed the lower court’s grant of summary judgment on all claims.

The case is number 11-1666.

Emily J. Daniell (Law Office of Michael O. Shea) for Employee. Marylou Fabbo (Skoler, Abbott & Presser) for Employer.

1stCir: Reduction of work hours not an adverse action in absence of commensurate reduction in benefits; trial court did not err in dismissing Title VII claims at trial or granting employer new trial on FMLA claim

A gas station convenience store worker who was unable to prevail on his Title VII and FMLA claims could not convince the First Circuit that a district court erred in granting his employer’s Rule 50 motion to dismiss his hostile work environment and disparate treatment claims at trial and then in granting the employer’s motion for a new trial after a jury ruled in his favor on the remaining FMLA claim (Cham v Station Operators, Inc, July 16, 2012, Lynch, S). Nor could the employee establish that the trial court erred in excluding certain evidence at the new trial, which ultimately resulted in a verdict for the employer. Finding no error, the appeals court affirmed the trial court’s resolution of all claims in the employer’s favor.

The employee, a Muslim and native of Gambia, alleged that his hours were reduced after he took FMLA leave following an auto accident. He filed suit, alleging that his weekly hours were reduced due to his race or national origin when a new manager took the helm, and that they also were reduced after he took FMLA leave. The case went to trial twice: The district court disposed of the employee’s Title VII claim at a trial in which he prevailed on his FMLA retaliation claim. However, the court granted the employer’s motion for a new trial, persuaded that the jury should not have heard prejudicial evidence that was solely related to the dismissed disparate treatment claim. At the second trial, a jury returned a verdict in the employer’s favor on the FMLA claim. The employee appealed, challenging the court’s actions at each step, as well as its exclusion of certain evidence at the second trial.

28 On appeal, the First Circuit considered the remaining disputed issues of whether the employee’s hours were reduced and, if so, whether the reduction amounted to an adverse employment action; whether the employee was treated less favorably than similarly situated employees outside of his protected class; and whether there was sufficient evidence of pretext. The appeals court affirmed the lower court on all counts.

No adverse action. The employee’s disparate treatment claim was based on the purported loss of three shifts during the weeks encompassing Labor Day, Thanksgiving, and Christmas, resulting in a reduction from 40 to 32 hours of work. However, the loss of a shift on a holiday week does not rise to the level of an adverse employment action, the appeals court held, particularly in the context of a workplace where schedules regularly fluctuate and the employee suffered no significant change in benefits, such as health insurance, as a result. Likewise, a schedule reduction from 32 hours to 24 hours for a single week did not give rise to a disparate treatment cause of action without evidence that the schedule change would last longer or would result in a loss of benefits. The appeals court rejected out of hand the employee’s “extreme argument” that the one-week schedule reduction amounted to a constructive discharge; being given less work hours in a single week hardly rendered working conditions so difficult that a reasonable person in his shoes would feel compelled to resign.

The employee also had alleged to no avail that his work schedule was reduced from 40 to 32 hours a week upon his return from FMLA leave. He claimed that his Friday night shift was taken away when he came back from FMLA leave. But the employer countered that a fluctuation in work hours was fairly typical; indeed, the undisputed testimony at trial was that no employee was entitled to any particular shift and that the employee did not have a contract with the employer guaranteeing him any shifts. Moreover, the employee’s schedule upon his return was within the scope of the normal variation, and there was substantial fluctuation in the employee’s weekly hours even before he took FMLA leave.

No pretext shown. Even assuming that the reduction in work hours for a non-regularly scheduled employee amounted to an adverse employment action for Title VII purposes, the employee did not provide sufficient evidence that the employer's proffered explanation for reducing his work hours was pretextual and that the employer was motivated by racial animus or in response to his FMLA-protected leave.

The manager testified that he had to hire two extra employees and needed to give them work hours; one was hired to cover the employee’s shifts when he was on FMLA leave and, later, to cover shifts that the employee had complained about. This hiring, rather than any racial animus, motivated the scheduling decisions. The employer also asserted that prior to his leave, the employee had received overtime hours and company policy was to avoid employees working overtime. While working under the manager who allegedly made the discriminatory scheduling decisions, the employee was the highest paid sales associate during the relevant time period and, upon his return from FMLA leave, his scheduled hours were equal to or greater than most of the other employees at the store in question, including the employee who was hired to cover some of his shifts

29 while he was on leave, as well as the employee who was hired shortly after his return from leave.

In addition, while the employee contended that a similarly situated Caucasian employee did not have his scheduled hours reduced, he introduced no evidence as to any hours that his coworker actually worked at any point in time. Further, the fact that his comparator worked the night shift while the employee worked the day shift reduced any similarity between the two for purposes of showing disparate treatment. Also without merit was the employee’s assertion that he had been disciplined for missing a shift while another Caucasian employee had not. That coworker, too, was an inapt comparator. Unlike the employee, the Caucasian employee had called in 30 minutes after his shift was to have started, but the employee failed to provide any notice at all.

After concluding that the employee had not mustered enough evidence for a reasonable jury to find that the employer’s stated reason for the adverse action was pretextual, the First Circuit bypassed an analysis of whether he made out a prima facie case and held that the trial court did not err in granting the employer’s Rule 50 motion.

New trial. Although the employee’s hostile work environment and disparate treatment claims had been dismissed, the jury had been exposed to much evidence that was irrelevant to the employee’s FMLA retaliation claim — evidence that could be both prejudicial and confusing to the jury, the district court found in granting the employer’s motion for a new trial. The First Circuit held that the lower court did not abuse its discretion in doing so, rejecting the employee’s contention that the evidence was not sufficiently prejudicial. “The admission of evidence that later becomes irrelevant when one or more claims is rejected as a matter of law prior to submission to the jury may be grounds for granting a new trial, if deemed unduly prejudicial,” the appeals court observed. Here, most of the prejudicial evidence was introduced in support of the hostile work environment claim, and so became irrelevant once the employee had voluntarily agreed to dismiss that cause of action. While the employer could have requested a limiting instruction at trial asking the jury to disregard the evidence, it was still within the court’s discretion to grant the more drastic remedy of a new trial. It was a judgment call for the experienced trial judge, who offered a cogent explanation for the court’s action.

Finally, the district court properly ruled on the employer’s motions in limine excluding evidence prior to the new trial. Its decision to exclude evidence of the employee’s work hours and schedules prior to September 2004 on the basis that evidence prior to that date was “too attenuated” from his FMLA retaliation claim, which began in May 2005, was not an abuse of discretion. It was in September 2004 that the allegedly retaliatory supervisor assumed control over the employee’s schedule, and the court reasonably determined that it represented an appropriate cut-off date. Nor was it an abuse of discretion to exclude evidence of the employee’s panic attack and trip to the ER on what would be his last day of work, along with the corresponding testimony of two medical providers. The district court reasoned that compensatory damages were not available for FMLA retaliation claims, as opposed to the first trial where the hostile work environment claim was still pending, and so the testimony of the medical providers was not relevant.

30 The employee could not persuade the appeals court that this evidence was relevant to prove that the alleged FMLA retaliation and the harm to his health was relevant to whether his working conditions had become so intolerable as to amount to a constructive discharge.

Mark P. Gagliardi (Law Office of Mark P. Gagliardi) for Employee. Neal J. McNamara (Nixon Peabody) for Employer.

2ndCir: Executive exemption applied to night-shift warehouse “captains” who supervised functionally identical units performing parallel tasks

“Captains” in a wholesale food warehouse were exempt executive employees under the FLSA and the New York Labor Law, ruled the Second Circuit, finding the record evidence allows for no other conclusion than that each team of workers supervised by the captains comprised a recognized subdivision of the company (Ramos v Baldor Specialty Foods, Inc, July 12, 2012, Lynch, G). Tackling an issue of first impression in the circuit, the appeals court considered whether an individual unit can have “a permanent status and a continuing function,” within the meaning of the FLSA regulations, when it is functionally identical to other units, works the same shift, and performs parallel tasks in the same physical space. Answering in the affirmative, the appeals court held the second prong of the executive exemption test was satisfied, and the captains were unable to pursue their overtime claims.

Baldor Specialty Foods, a Bronx, New York, wholesale food distributor, divides its employees into day and night shifts. The night shift has a number of different departments, including the warehouse department, transportation department, receiving department, maintenance department, night sales, and “international produce exchange” team. The company employs 20 captains on the night shift, each of whom performs the same duties as other captains. These duties include overseeing the work of a team of three to six “pickers,” who retrieve food products from the warehouse shelves and load them onto trucks for delivery to customers. Although each team performs the same general tasks as other teams, each has a distinct “assigned work area” in the warehouse. On every night shift, a picker works exclusively with his assigned team and captain.

Wage suit. The captains sued the employer under the FLSA and New York Labor Law, filing a putative class action on behalf of similarly situated employees working the nightshift at one of Baldor’s warehouses. It was undisputed that the employees satisfied the $455 per week salary requirement; directed the work of at least two other employees; and that the employer gave “particular weight” to the captains’ recommendations as to hiring, firing, and other decisions regarding the workers under their charge. The captains also conceded that their primary duty was managing teams of workers. The sole issue on appeal in determining their exempt status was whether the individual teams they managed constituted a “customarily recognized department or subdivision” of the company, within the meaning of Sec 541.100(a)(3) of the relevant DOL regulations. More specifically,

31 Sec. 541.103(a) of the DOL rules required the appeals court to decide whether the captains’ teams were units with “a permanent status and a continuing function,” as opposed to “a mere collection of employees assigned from time to time to a specific job or series of jobs.”

The captains contended that the teams of pickers they supervised did not constitute customarily recognized departments or subdivisions as defined in the regulations because each team performed the same tasks as other teams, at the same time and in the same warehouse. In the captains’ view, the teams cannot be customarily recognized subdivisions as a matter of law because they cannot be distinguished from one another by “a specific standard such as function, geographical area or operational responsibility.” It argued that a subdivision must have at least some functional independence from the other subdivisions for the exemption to apply.

Customarily recognized subdivision. Considering for the first time whether such functionally identical units can be said to have “a permanent status and a continuing function,” the Second Circuit found the captains’ teams satisfied this element of the executive exemption criteria. While sister circuits and several district courts have interpreted the meaning of the “customarily recognized department or subdivision” provision, no court has adopted the narrow construction urged by the captains that, as a matter of law, “multiple units cannot have a permanent status and continuing function if they are functionally, temporally, or geographically identical to each other.” Nor does this proposition find support in the scant legislative history of the FLSA’s executive exemption, in the DOL regulations, or in its interpretations of those regulations.

While operating in different locations, working different shifts, or performing distinct functions from other teams are certainly factors that can support a finding of a “customarily recognized department or subdivision,” there is no case that goes so far as to require these distinctions as a matter of law. The appeals court could discern no reason that Congress, in crafting the executive exemption, would have imposed a distinction between supervising unique and non-unique teams; rather, the intent was to distinguish between managerial and nonmanagerial employees. “The job of supervising a team of employees becomes no less managerial merely because the team operates alongside other teams performing the same work in the same building,” the court reasoned. “Interchangeability of a team’s function does not alter the supervisory nature of the captain’s job.”

Executive employees — by DOL terms. With the other criteria for the executive exemption “indisputably satisfied,” the appeals court was bolstered in its finding that each of the captains’ respective warehouse teams was a customarily recognized subdivision with a continuing status and function under the FLSA. Ultimately, whether those teams performed the same responsibilities “and thus [were] interchangeable” was immaterial, the court concluded. However, while it held the application of the executive exemption was clearly established under the relevant DOL factors, the appeals court appeared less convinced as a matter of policy. “Admittedly, a warehouse worker who earns $700 per week ensuring that vegetables and other foodstuffs are loaded onto the

32 correct delivery trucks and who lacks an office, a cubicle, or even a chair to call his own does not fit the popular image of a ‘bona fide executive.’ But whatever incongruity there may be has nothing to do with the criterion plaintiffs would have us read into the regulation,” the court wrote. “In any event, Congress left the line-drawing task to the Department of Labor, which has drawn lines that exempt plaintiffs from the FLSA’s overtime protections.” Thus, the Second Circuit affirmed the lower court’s holding that the captains were not entitled to FLSA overtime pay.

The case number is 11-2616-cv.

C.K. Lee (Kraselnik & Lee) for Employees. Marc B. Zimmerman (Phillips Nizer) for Employer.

3rdCir: Firing employee who worked part-time for other employer while on paid leave did not violate FMLA

In an unpublished opinion, the Third Circuit affirmed summary judgment in favor of a city that fired a physician who worked part-time for another city while on FMLA leave, even though her medical certification stated that she could not work (Warwas v City of Plainfield, July 25, 2012, Roth, J). Because the employer terminated her based on its belief that she was misusing her leave, its actions did not constitute interference with her FMLA rights. Her First Amendment retaliation claim also failed.

Moonlighting on FMLA time. The physician worked as a health officer for the city. Due to stress from unrelated incidents, she developed peptic ulcers and depression, and took FMLA leave. Her medical certification indicated that she “was restricted to home and could not work/attend school.” Nonetheless, the physician continued to work at home on a part-time job she had with another city. The employer found out and the physician was fired for violating the employer’s policy on outside employment. After further proceedings, a merit system board ordered her reinstated and modified the punishment to a fine and an official reprimand.

The physician returned to work but was told her office was unavailable and to come back in two days. The parties disputed whether she returned, but she was informed that she was on unauthorized leave and would be fired for further absences. She did not return and was terminated. The employee filed suit, alleging FMLA interference and retaliation for asserting her First Amendment rights. The employer moved for summary judgment, which was granted, and the physician appealed.

FMLA interference. The district court did not reach the merits of the employee’s FMLA claim, finding that the doctrine of issue preclusion barred her from seeking relief under the Act. It explained that the merit system board adjudicated the propriety of the employee’s termination and her FMLA claim sought to re-litigate the board’s factual finding that she was guilty of conduct unbecoming by receiving compensation for secondary employment while using paid sick time. The Third Circuit did not determine whether this was error on the district court’s part. Instead, it assumed arguendo that the

33 employee could proceed to the merits of her claim and found that summary judgment was still appropriate.

The FMLA does not prohibit firing an employee who abuses leave or shield an employee just because the alleged misconduct happened while she was on leave. Thus, an employer can defeat an FMLA claim by showing the discharge was based on an honest belief that the employee either misused or failed to use her leave for the intended purpose. The record here clearly indicated that the physician was terminated for reasons unrelated to her FMLA rights. It was undisputed that the city thought she failed to use her FMLA leave for the intended purpose when, despite her doctor’s note asserting she could not work, she worked for another city while on leave. Her FMLA claim thus failed on the merits.

First Amendment retaliation. The employee also alleged that her appeal to the merit system board was protected by the Petition Clause and the employer’s termination of her for failing to report to work was retaliation for this appeal. Rejecting this argument, the appeals court found that her action in seeking review of disciplinary findings concerned a private personal grievance and not a matter of public concern. Thus, summary judgment for the employer was affirmed on this claim as well.

Stephen E. Klausner (Klausner & Hunter) for Employee. Lori A. Dvorak (Dvorak & Associates) for Employer.

6thCir: Employer’s bleak financial forecast, employee’s poor work performance, and high salary motivated termination as part of RIF; employee failed to present evidence raising question of fact undermining rationale

Evidence supported an employer’s assertion that an employee’s poor work performance, high salary, and the employer’s bleak financial forecast motivated its decision to terminate the employee as part of a reduction in force the day he returned from FMLA leave, ruled the Sixth Circuit in an unpublished opinion affirming the trial court’s decision granting the employer summary judgment on the employee’s FMLA claims (Winterhalter v Dykhuis Farms, Inc, July 23, 2012, Cole, Jr, G). The employee did not present any evidence that would raise a genuine issue of material fact as to whether the employer’s economic hardship had a basis in fact, and he did not show that his poor performance and salary did not actually motivate the decision to terminate him.

Poor job performance. The employee was hired in 2007 as a unit manager for a family- owned, pork-producing business. The employee oversaw the operations of four farms that produced the genetic lines of “parent” sows used to repopulate the employer’s herds. In February 2008, the employee received a performance review indicating problems such as a bad attitude, difficulty cooperating with others, turning in paperwork late or incomplete, and spending time on one farm instead of all four herd locations. He received a verbal warning in May 2008 for failure to turn in reviews on his crew despite several reminders.

34 After the employee was transferred to a different herd, his manager began documenting performance problems, including his failure to document inventories, violations of bio- security rules, and late vaccinations. The employee injured his shoulder in May 2009, but continued to work until he had surgery in October. When he returned from leave in January 2010, he was given a termination letter informing him that the company was downsizing and his position had been eliminated. Although identifying economic hardship as the primary reason for his termination, the letter stated that the “secondary reasons are based on job performance.”

Reduction in force. Due to low hog prices and high overhead, the employer’s equity-to- asset ratio plummeted between 2006 and 2009. Based on advice from a financial consultant, the employer began an operational reduction strategy that included selling assets, reducing herd sizes, and reducing its workforce. The employer allegedly selected the employee for termination because of the three workers in his unit, he was the highest paid and had the lowest job performance. Between September 2009 and March 2010, 13 employees were laid off. Six were re-hired, but most of those were part-time seasonal workers and one replaced a departing employee. By late spring, the employer was again profitable. The employee filed suit, asserting that the employer interfered with his FMLA rights when it failed to restore him to his prior position, and that it terminated him in retaliation for taking FMLA leave.

In considering the employer’s motion for summary judgment, the trial court emphasized that the FMLA does not require an employer to reinstate an employee who would have lost his job even if he had not taken FMLA leave, but placed the burden of proof on the employer to show that the employee would have been discharged anyway. The employer met this burden, and the employee failed to refute it, the district court decided, granting summary judgment to the employer on both claims.

Retaliation claim. As there was no dispute that the employee met his prima facie burden on the retaliation claim, the appeals court launched into a review of the employer’s rationale for his termination. The employer articulated two reasons for its decision: the economic downturn and the employee’s poor performance and high rate of pay. There was sufficient evidence to support both of these assertions, the court decided. Though the employee claimed that he could show pretext, the court disagreed. For example, the employee challenged the factual basis of the employer’s economic downturn argument, arguing that there were certain additional hires during the critical period. However, the employee took a granular approach, looking at only a few months around his termination and not the entire period of the downturn, the court reasoned. Further, the hires were part- time seasonal workers, while the 13 terminated employees left full time positions. The employee’s reliance on certain optimistic statements by the employer was of no avail — they did not create a genuine issue of material fact as to the employer’s assertion of economic hardship, the court concluded.

Additionally, the employee argued that there was a genuine issue of material fact based on emails discussing whether his coworkers were “getting stuff done” in his absence. He claimed this demonstrated that the employer impermissibly considered his leave in

35 deciding to terminate him. However, the employee did not bring his claim under a mixed motive theory, so the court rejected this argument. The employee did not show that pay disparity or his poor performance did not actually motivate his termination. Moreover, he could not show that these factors were insufficient to motivate the employment action, the court concluded. Accordingly, the employer was entitled to summary judgment on the FMLA retaliation claim.

Similarly, the employer was entitled to summary judgment on the FMLA interference claim, the appeals court ruled. As a threshold matter, the employee would have to establish by a preponderance of the evidence that he had a right to restoration. For the reasons it set forth in its analysis of the retaliation claim, the court ruled that the employee failed to create a genuine issue of material fact in this instance.

Bradley K. Glazier (Bos & Glazier) for Employee. Andrea J. Bernard (Warner Norcross & Judd) for Employer.

7thCir: Question of Fed Ex delivery drivers’ independent contractor status certified to the Kansas Supreme Court

In multidistrict litigation involving the question of whether certain FedEx delivery drivers were independent contractors or employees, the Seventh Circuit certified to the Kansas Supreme Court the question of whether the drivers were employees as a matter of law under the Kansas Wage Payment Act (KWPA) (Craig v FedEx Ground Package System, Inc, July 12, 2012, per curiam). The appeals court also asked whether the answer was different for drivers who covered more than one FedEx service area. Because it was likely that employers in other industries may have similar arrangements with workers, the decision will have ramifications beyond this particular case and FedEx’s business practices, affecting FedEx competitors and employers in other industries as well.

Litigation history. FedEx delivery drivers alleged that they were employees rather than independent contractors, both under federal law and the laws of the states in which they worked. The Judicial Panel on Multidistrict Litigation consolidated a number of actions and transferred them to a federal district court in Indiana. This case is the lead case for claims based on ERISA and Kansas law. A nationwide class seeking relief under ERISA was certified, and statewide classes were also certified under Rule 23(b)(3). A Kansas class, with 479 members, alleged that the drivers were improperly classified as independent contractors rather than employees under the KWPA and that, as employees, they were entitled to repayment of all costs and expenses they paid during their time as FedEx employees, as well as overtime.

The parties filed cross-motions for summary judgment on the issue of whether they were properly classified as independent contractors. The stipulated record revolved around a form operating agreement that FedEx entered into with each class member and certain FedEx work practices. The district court granted summary judgment in favor of FedEx.

36 That decision was drawn on by the court to rule in favor of FedEx in other employment status cases. Twenty-one cases are pending on appeal, and present substantially the same issue: whether the district court erred by deciding as a matter of law that the certified classes were independent contractors and could not prevail on their claims. This appeal addressed the lead case, and the remaining appeals were stayed.

Independent contractor status. The KWPA requires employers to pay their employees “all wages due,” Kan Stat Ann Sec. 44-314(a), and provides an expansive definition of “employee.” The Act also defines “employer” broadly to include any corporation “employing any person.” Importantly, under the relevant regulations, Kan Admin Regs Sec. 49-20-1(e), an independent contractor does not come within Sec. 44-313(b). However, no absolute rule exists for determining whether a worker is an independent contractor or an employee. Each case must be decided on its own facts and circumstances, and the primary consideration is the “right of control test.”

The Seventh Circuit expressed considerable doubt as to how the Kansas Supreme Court would apply its law to the facts and circumstances of this case, noting that other courts have reached different conclusions regarding the drivers’ status. At any rate, the appeals court observed that the KWPA “embeds within its provisions a public policy of protecting wage earners’ rights to their unpaid wages and benefits,” and perhaps that public policy tips the scales in favor of finding employee status. Under such circumstances, the court concluded that the Kansas Supreme Court was in a better position to provide a definitive answer on this controlling question of state law.

Certification of question. The question of the drivers’ employment status under Kansas law was outcome-determinative and unguided by controlling Kansas Supreme Court precedent. Moreover, the question appears to be a close one, and the issue is of great importance to the structure of the American workplace. Under these circumstances, the Seventh Circuit concluded that the Kansas high court was in a better position to say what Kansas law is and should have the first opportunity to address this issue.

Beth A. Ross (Leonard Carder) for Employee. J. Timothy Eaton (Shefsky & Froelich) for Employer.

10thCir: Jury instructions skewed burden of proof to show FLSA exemption applied

A federal district court erred in instructing a jury that an employer bore a heightened burden of proof in establishing that a former employee was exempt under the FLSA, the Tenth Circuit ruled, vacating a jury verdict in the employee’s favor (Lederman v Frontier Fire Protection, Inc, July 11, 2012, Tymkovich, T). The trial court told the jury that the employer must show an employee “plainly and unmistakably” falls within a claimed exemption; however, this phrase is a legal standard, not an evidentiary burden, the

37 appeals court concluded. Finding that the error prejudiced the employer, the appeals court reversed the trial court’s judgment and remanded.

When the employer, a company that sells and installs fire sprinkler systems, was sued by a former estimator for overtime pay, it asserted the affirmative defense that the employee was exempt from overtime under the FLSA’s outside sales exemption. At trial, the jury saw mixed evidence regarding whether the employee qualified as an outside salesperson; in particular, conflicting facts were presented as to the proportion of the employee’s working time spent in the office, the importance of sales to his position, and whether he had authority to finalize sales.

Jury instructions. During a conference to discuss jury instructions, the employer proposed the following jury instruction on the exemption issue: “An employer seeking an exemption from the overtime requirements of the FLSA bears the burden of proving an exemption.” The employee, however, proposed an instruction that an employer “bears the burden of proving that the particular employee fits plainly and unmistakably within the terms of the claimed exemption.” The court adopted the employee’s instruction over the employer’s objections and advised the jury, accordingly, in oral instructions. The jury, ultimately, found the employee was not an outside salesperson and found the employer liable for overtime. On appeal, the employer claimed the jury instructions were erroneous.

“Plainly and unmistakably.” The employer argued the phrase “plainly and unmistakably” refers to the principle that exemptions from FLSA’s overtime provisions are to be construed narrowly. In the employer’s view, this principle is a rule of statutory interpretation for the court rather than a burden of proof for the factfinder. The employee countered that binding circuit precedent holds that “plainly and unmistakably” is the burden of proof the employer is required to meet to establish an FLSA exemption.

As a textual matter, the phrase “plainly and unmistakably” is found nowhere in the FLSA, the Tenth Circuit noted. Thus, the appeals court undertook a brief review of the evolution of circuit case law applying the FLSA exemption, tracing the use of the phrase “plainly and unmistakably” within the circuit. The appeals court found that all of its other rulings employing the phrase have done so in addressing legal, rather than factual, issues. When its prior cases employing this phrase are read as a whole, they do not establish a heightened evidentiary requirement on employers seeking to prove an FLSA exemption, the court concluded. “Our cases stand for the proposition that in considering an FLSA exemption, a court must find that the claimed exemption falls ‘plainly and unmistakably’ within the terms of the statute—not for the proposition that an employer need prove such an exemption by anything more than a preponderance of the evidence.”

Ordinary burden applies. Once a court finds the employer is eligible to claim the exemption, the factfinder reviews the disputed facts to determine if the exemption is met, the appeals court explained, and the ordinary burden of proof—preponderance of the evidence—controls the jury’s evaluation of whether the facts establish an exemption to the FLSA. (Other courts have confronted similar FLSA burden-of-proof issues and have

38 also come to the conclusion that the proper standard is a preponderance of the evidence, the appeals court observed.) Thus, in the case at hand, the district court erred in instructing the jury that the employer must prove that the employee fits “plainly and unmistakably” within the outside sales exemption. The jury should have been instructed to consider the evidence under the preponderance-of-the-evidence standard.

Prejudice. Moreover, the legal error was prejudicial to the employer. There were many disputed questions of fact relevant to the outside sales exemption issue, the appeals court noted. For example, conflicting evidence was presented regarding the amount of time the employee spent outside of the employer’s place of business. Similarly, the jury heard contradictory facts regarding the employee’s authority to finalize sales. Given these disputed facts on key issues regarding the employee’s exempt status, the appeals court was unswayed by his contention that the instructions, as a whole, were not prejudicial in that they “could not have seriously misled” the jury.

Although the court below had referred to the preponderance standard at other points in the instructions—both before and after the challenged instruction—those references did not clarify or negate the erroneous instruction, the appeals court reasoned; the correct portions of the instructions “simply conflict[] with the erroneous portion without shedding further light upon it.” And the employee’s counsel likely exacerbated the error by emphasizing the “plainly and unmistakably” standard at the start of his closing argument, the court noted further. Thus, the Tenth Circuit held “the jury might have based its verdict on the erroneously given” standard of proof. Finding the district court’s instructional error was prejudicial, the appeals court reversed the judgment and remanded for further proceedings.

David Lichtenstein (Attorney at Law) for Employee. Michael P. Zwiebel (Springer and Steinberg) for Employer.

11thCir: Drivers not economically dependent on DHL; delivery service not joint employer of drivers

DHL Express was not a joint employer of the delivery drivers employed by a third-party contractor that it hired to deliver its packages, ruled the Eleventh Circuit (Layton v DHL Express (USA), Inc, July 9, 2012, Wilson, C). Because DHL bore no financial or managerial responsibility for the delivery drivers, provided little guidance regarding the execution of daily tasks, and did not have the power to hire, fire, and pay the drivers, the totality of the economic circumstances indicated that the drivers were not economically dependent on it. Thus, DHL was not a joint employer of the drivers, the appeals court held.

Third-party contractor. In some parts of the country, DHL hires third-party contractors who in turn employ couriers to deliver its packages. Between 2005 and 2009, DHL utilized Sky Land Express as such a contractor in Alabama. The relationship between

39 DHL and Sky Land was governed by a cartage agreement stating that Sky Land was an independent contractor of DHL. Sky Land employed delivery couriers who used vehicles owned by the contractor. DHL also owned the three warehouse facilities that the drivers operated from, and other equipment. As Sky Land drivers loaded packages for delivery, a DHL employee would often inspect vehicles and uniforms to ensure that they conformed to the standards set forth in the cartage agreement. (Both the vehicles and uniforms bore the names of DHL and Sky Land.) Throughout the day, DHL sent information regarding customer complaints, requests for delivery, and other matters directly to the drivers. The drivers used scanners owned by DHL to log the time of package pickups and deliveries. Scanner information was transmitted to DHL.

The plaintiff filed a collective overtime action under the FLSA naming DHL, Sky Land, and its individual owner as his joint employers. The district court granted conditional certification to a class of 49 drivers employed by Sky Land. DHL moved for summary judgment on the ground that it was not an employer of the drivers. Among other things, the district court ruled that DHL was not an employer or joint employer of the drivers.

An employee may have more than one employer, the Eleventh Circuit noted on appeal. The relevant FLSA regulations provide that “whether the employment by the employers is to be considered joint employment or separate and distinct employment for purposes of the act depends upon all the facts of the particular case.” As an initial matter, the Eleventh Circuit declined to consider all the factors stated in Charles v Burton in evaluating the employee’s FLSA claims, as the employee had urged. That case dealt only with claims under the Migrant and Seasonal Agricultural Worker Protection Act, and thus did not dictate the factors that the court must utilize in evaluating FLSA claims. Instead, the appeals court turned to an examination of the economic realities of the relationship between DHL and the drivers, using the eight factors of Aimable v Long & Scott Farms, which considered both the FLSA and AWPA as a guide.

Economic realities. Although DHL made business decisions that directly impacted the length of drivers’ workdays, this type of indirect control was not the type of control exercised by a statutory employer, the appeals court found. There was no evidence that DHL had an “overly active” role in the oversight of the drivers. While DHL had certain objectives that Sky Land and the drivers were tasked with accomplishing, DHL did not involve itself in the specifics of how those goals were reached. Thus, the fact of control weighed against a finding of joint employment.

Nor did DHL “supervise” the drivers’ work, ruled the court. Although DHL managers oversaw the loading of trucks, audited drivers’ vehicles and uniforms, and communicated with the drivers via scanners for nonroutine situations, those actions evidenced a small amount of supervision. Drivers were basically unsupervised while completing their essential job functions, which took up the majority of the workday. DHL’s only involvement in the hiring process was a stipulation in the cartage agreement that all persons hired had to pass a basic background check. It did not participate in the actual hiring or firing of any employees. In view of DHL’s minimal involvement, this factor weighed against finding joint employment as well.

40 The drivers conceded that DHL had no power to set the drivers’ pay rates or payment methods, so this factor also weighed against joint employment. Similarly, DHL had no involvement with the payment of drivers. DHL’s ownership of the warehouse facilities used by the drivers did not weigh in favor of finding joint employment; the drivers spent only a small part of their days at the warehouses and worked the vast majority of the time in delivery vehicles owned by Sky Land.

While the drivers performed a routine task that was a normal and integral phase of DHL’s business, this factor did not support a conclusion that a joint employment relationship existed. The drivers operated vehicles owned by Sky Land and were not contractually restricted from using those vehicles to serve other companies. Moreover, the drivers performed most of their work away from DHL’s facilities, and they did not work side-by- side with DHL employees. Finally, because Sky Land owned the delivery vehicles and DHL owned the warehouse, both made significant investments in facilities and equipment. Consequently, this factor did not aid in the joint employment inquiry.

Marc N. Garber (The Garber Law Firm) for Employee. Devand Anthony Sukhdeo (Jackson Lewis) for Employer.