The Employment Law AUTHORITY

Today’s Hot Topics in Labor & Employment Law July/August 2010

U.S. SUPREME COURT TACKLES ARBITRATION CASE THIS ISSUE Finds Question Of Enforceability Must Be Decided By Arbitrator O Federal Contractors. Answers to the most common questions regarding the On June 21, with Justice Antonin trate must be evaluated by the arbitrator, new posting requirement. Scalia writing for a 5-4 majority, the U.S. not a court. Rent-A-Center, West, Inc. v. page 2 Supreme Court issued an important de- Jackson, No. 09–497, U.S. Supreme O State Round-Up. Learn about the lat- cision for employers that are utilizing or Court (June 21, 2010). are considering adopting arbitration est employment law news in your state. Factual Background page 3 agreements. The Court addressed the en- forceability of an arbitration agreement Antonio Jackson was employed by O Washington Watch. Hal Coxson dis- (included as part of an employment Rent-A-Center, West, Inc. At the time cusses the recent changes at the NLRB and their potential effect on the labor contract), which stated that the arbitrator of hiring, he signed an agreement, en- movement. determines the enforceability of the titled “Mutual Agreement to Arbitrate page 4 contract. According to the majority, Claims,” as a condition of his employ- because the employee in this case chal- ment. A section entitled “Claims Cov- O Family & Medical Leave. More work- lenged his employment contract as a ered By The Agreement” stated that all ers entitled to leave to care for a child. whole, rather than specifically chal- “past, present or future” disputes aris- page 6 lenging the provision in the agreement ing out of Jackson’s employment with O Wage & Hour. Court holds pharma- granting the arbitrator the authority to Rent-A-Center must be submitted to ar- ceutical sales reps were misclassified determine enforceability (the “delega- bitration. Another section, designated as exempt. tion provision”), the agreement to arbi- Please see “ARBITRATION” on page 7 page 8 XXXXX AND MUCH MORE AND PORTLAND MAKES 40! OFFICES OF OGLETREE, DEAKINS, Ogletree Deakins Opens Office In Pacific Northwest NASH, SMOAK & STEWART, P.C. Continuing its aggressive growth complex, multiple plaintiff, and class Atlanta Memphis strategy, Ogletree Deakins opened its action litigation and also has substantial Austin Miami newest office in Portland, Oregon in experience in enforcing and defending Birmingham Minneapolis July. This is the fifth office the firm has noncompetition agreements. Bloomfield Hills Morristown opened this year (the other new offices Lively joins Ogletree Deakins from Boston Nashville are in Las Vegas, Denver, Orange County the Portland office of Lane Powell, Charleston New Orleans and Minneapolis), giving Ogletree where she chaired the firm’s Labor and Charlotte Orange County Deakins 40 offices nationwide. Employment group. In her practice, Chicago Philadelphia This represents the firm’s first foray Lively defends employers from claims Cleveland Phoenix into the Pacific Northwest. According of harassment, discrimination, retalia- Columbia Pittsburgh to Managing Shareholder Kim Ebert, tion, wrongful discharge, and wage and Dallas Portland “We have long felt the need to be in this hour violations. She has extensive liti- Denver Raleigh region of the country, but had to identify gation experience having successfully Greensboro San Antonio the right lawyers. The firm now can truly tried more than 40 jury trials in multiple Greenville San Francisco provide our clients with first class ser- states and jurisdictions. Houston St. Louis vice coast to coast.” Both lawyers have been listed in Indianapolis St. Thomas The “right lawyers” are David Symes Chambers USA’s “America’s Leading Jackson Tampa and Leah Livey, both of whom join Lawyers for Business” in the Labor & Las Vegas Torrance Ogletree Deakins as shareholders. Employment category the last three Los Angeles Tucson Symes, formerly with Perkins Coie in years. “We are extremely fortunate to Kansas City Washington, D.C. Portland, represents employers in litiga- have two accomplished attorneys as part www.ogletreedeakins.com tion and arbitration across a variety of of our firm and leading our efforts in industries. He has successfully handled the Pacific Northwest,” Ebert said. AGENCY ACTION JULY/AUGUST 2010

EXECUTIVE ORDER 13496 (EMPLOYEE POSTING RULE) UPDATE Answers To Employers’ Common Questions Executive Order 13496’s employee 52.222-99 or -40, and you determine tice contained on the Office of Labor- notice posting requirement became ef- that you are covered by FAR’s provi- Management Standards’ website. fective June 21, 2010. While no clause sions, the notice must be posted where Q: May I post the notice electroni- implementing the requirement has employees covered by the National cally instead of posting it physically been finalized by the Federal Acquisi- Labor Relations Act (NLRA) “engage in in my workplace? tion Regulation (FAR) Councils, an contract-related activity.” Employees A: No. Electronic posting cannot interim clause has been issued. Below not covered by the NLRA include agri- be used as a substitute for physical are common questions regarding this cultural laborers, domestic workers, in- posting. new requirement for federal contractors dependent contractors, supervisors, and Q: Are there any exemptions to hav- and subcontractors. employees who work for employers ing to post the notice? Q: Where do I have to physically subject to the Railway Labor Act (RLA). A: Yes. The posting requirements do post the notice in my building? Whether or not you are currently not apply to: (1) federal contracts en- A: When and if you receive a con- “non-union” does not matter in deter- tered into before June 21; (2) contracts tract or subcontract containing FAR mining whether the employee notice entered into after June 21 that do not must be posted; the trigger for posting include FAR 52.222-99 or -40; (3) con- is having a covered federal contract or tracts below $100,000 or subcontracts subcontract. below $10,000 which are not neces- Q: Must I post the employee notice sary to the performance of the prime electronically? contract; (4) contracts/subcontracts for A: The final rule requires that you work exclusively performed outside of physically post the employee notice the United States; (5) grants or loans © 2010 and post it electronically if you “cus- (such as Medicare and Medicaid) that tomarily” electronically post notices constitute “federal financial assis- Publisher regarding the terms and conditions of tance”; (6) states or political subdivi- Joseph L. Beachboard employment (e.g., your employee hand- sions; and (7) companies subject to Managing Editor book is online, or you customarily cor- the RLA. Other exemptions also may Stephanie A. Henry respond with employees regarding apply. work issues via email). If you do post For additional information, visit our Reproduction the notice electronically, you must post website at www.ogletreedeakins.com/ This is a copyright publication. a “prominent” link to the employee no- publications. No part of this bimonthly publica- tion may be reproduced or transmit- XXXXX ted in any form or by any means, electronic or mechanical, including VETS-100 REPORTING MAY COST CONTRACTORS photocopy, recording, or any infor- Court Finds Liability Under False Claims Act mation storage and retrieval system, without written permission. A federal appellate court recently ruled that a government contractor could be held liable under the False Claims Act (FCA) for knowingly or recklessly failing Disclaimer to comply with its VETS-100 reporting obligations. The practical significance of The articles contained in this pub- this decision is that if employees of government contractors submit inaccurate lication have been abridged from VETS-100 reports or neglect to file the reports altogether, liability may exist laws, court decisions, and adminis- under the FCA. Kirk v. Schindler Elevator Corp., No. 09-1678-cv, Second Circuit trative rulings and should not be Court of Appeals (April 6, 2010). construed or relied upon as legal Daniel Kirk, a Vietnam veteran, worked as a management-level employee for a advice. If you have questions con- predecessor of Schindler Elevator Corp. When Schindler merged with Kirk’s em- cerning particular situations and specific legal issues, please contact ployer, the reorganization left Kirk in a non-managerial position, from which he your Ogletree Deakins attorney. This promptly resigned. Kirk then filed a lawsuit in federal court, claiming that Schindler publication can be considered ad- Elevator defrauded the government by failing to comply with the Vietnam Era vertising under applicable laws. Veterans Readjustment Assistance Act (VEVRAA). VEVRAA requires that federal contractors submit VETS-100 reports, which provide information on the number of Additional Information veterans employed by the contractor. To request further information The Second Circuit Court of Appeals found that the facts as alleged by Kirk or to comment on an article, please showed that Schindler Elevator had no mechanism in place to identify veterans call Stephanie Henry at (310) 217- 0130. For additional copies or covered by VEVRAA. Thus, the company had knowingly supplied a false record, address changes, contact Marilu the court held, because it had nothing upon which to base the information in its Oliver at (404) 870-1755. VETS-100 reports. As a result, the court reinstated Kirk’s lawsuit . For a full analysis of this case, visit www.ogletreedeakins.com/publications.

2 OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. STATE ROUND-UP JULY/AUGUST 2010

Ogletree Deakins State Office Round-Up

ALABAMA INDIANA* NORTH CAROLINA The Eleventh Circuit The Seventh Circuit The Fourth Circuit Court Court of Appeals re- Court of Appeals recent- of Appeals recently held cently dismissed a law- ly held that an Indiana that an employer must suit brought by a former manager health care provider’s policy of com- pay severance benefits to its former for the Tuscaloosa Housing Author- plying with patients’ wishes to be president and CEO. The court re- ity who claimed that she was fired in treated only by white health care jected the company’s argument, based retaliation for filing a charge of race workers can create a racially hostile on the “after-acquired evidence” de- discrimination. The court found that work environment for non-white fense, that it would have fired the ex- the manager failed to show that the employees. Chaney v. Plainfield ecutive for cause under his employ- performance-related reasons cited Healthcare Center, No. 09-3661 (July ment agreement. Rinaldi v. CCX Inc., by her employer were false. Tiggs- 20, 2010). No. 09-1622 (July 16, 2010). Vaughn v. Tuscaloosa Housing Au- MINNESOTA* thority, No. 09-15485 (July 2, 2010). OHIO* The Minnesota Supreme Effective July 2, Ohio CALIFORNIA Court recently ruled that employers with 50 or The Ninth Circuit Court the state whistleblower more employees are re- of Appeals recently held statute does not contain a job duties quired to provide two weeks of un- that a group of drivers exception that bars employees who paid leave for an employee who is the may pursue their state law wage report illegal conduct or suspected il- spouse, parent or a person who has claims against EGL Inc. According to legal conduct as part of their job du- or had custody of a member of the the court, the provision in agreements ties from bringing a claim under the uniformed services when that mem- signed by the workers stating that statute. The employee’s responsibili- ber is deployed or injured. Under the Texas law applies is unenforceable ties are relevant, however, in deter- Ohio Military Family Leave Act, the because the statutory claims “do not mining whether the employee made requirement for such leave applies arise out of contract, involve the the report in “good faith” for the pur- without regard to whether the em- interpretation of any contract claim, pose of exposing illegal conduct. ployer has 50 employees within 75 or otherwise require there to be a Kidwell v. Sybaritic, Inc., Nos. A07- miles of the worksite. contract.” Narayan v. EGL Inc., No. 584, A07-788 (June 24, 2010). 07-16487 (July 13, 2010). SOUTH CAROLINA* NEVADA* The South Carolina Ille- COLORADO* The Occupational Safety gal Immigration Reform Governor Bill Ritter has and Health Administra- Act went into effect for signed two new laws (HB tion (OSHA) has opened all South Carolina employers on July 1284 and SB 109) that its first office in the state of Nevada. 1, 2010. The Act prohibits employ- clarify the regulation of medical mari- According to OSHA, Nevada’s state ers in South Carolina from employ- juana. Although the primary focus OSHA plan has not lived up to the ing unauthorized aliens and estab- of the laws is the curtailment of federal government’s expectations. lishes additional steps that smaller Colorado’s rapidly expanding medi- OSHA is pressuring state plan pro- employers must now take to verify cal marijuana industry, there are pro- grams such as Nevada’s to “ramp up” the work status of new hires. visions that will assist employers in their enforcement efforts. setting firm limits on employees’ use TEXAS of medical marijuana. NEW JERSEY* In a case of first impres- On July 6, the New Jer- sion, the Texas Supreme FLORIDA sey Department of La- Court recently held that The Eleventh Circuit bor (NJDOL) issued pro- the Texas Commission on Human Court of Appeals recently posed rule N.J.A.C. 12:56-5.8 con- Rights Act (TCHRA) sets the exclu- rejected a lawsuit brought cerning the use of time clocks and sive remedy for claims arising out by an employee who claimed that he rounding practices by employers. of alleged sexual harassment in the was fired in retaliation for his willing- Noting the confusion caused by the workplace. “Where the gravamen of ness to serve as a witness in an inter- discrepancy between the state rules a plaintiff’s case is TCHRA-covered nal bias complaint. The court found (which require payment for “all harassment,” the court wrote, “the that merely being listed as a witness hours worked”) and the federal rules Act forecloses common-law theories does not constitute protected “op- (which permit rounding), the NJDOL’s predicated on the same underly- position” under Title VII. Thampi v. proposal simply calls for a verbatim ing sexual harassment facts.” Waffle Manatee County Bd. of Comm’rs, No. adoption by the state of the federal House Inc. v. Williams, No. 07-0205 09-16139 (June 30, 2010). rules on this issue. (June 11, 2010). *For more information on these state-specific rulings or developments, visit www.ogletreedeakins.com.

WWW.OGLETREEDEAKINS.COM 3 WASHINGTON WATCH JULY/AUGUST 2010

ORGANIZED LABOR’S FOCUS SHIFTS FROM EFCA TO THE NLRB by Harold P. Coxson, Jr.* As we approach the November 2nd tively. The fifth Board member, Craig would leave the Board with only two mid-term Congressional elections, Becker, the controversial former Assis- members. Senate Majority Leader Harry chances for passage of the Employee tant General Counsel of the Service Reid refused to recess or adjourn the Free Choice Act (EFCA) grow dimmer Employees International Union (SEIU) Senate, thus denying then-President and dimmer. The union lobby lacks the and the AFL-CIO, was blocked for con- George W. Bush the opportunity to fill votes in the Senate to stop a filibuster firmation to a full term by the Senate, the vacant seats with “recess” appoint- to take EFCA to the floor, and members but will continue to serve as President ments. Thus, when the vacancies in both Houses of Congress are reluctant Obama’s “recess appointee” until Con- occurred they were never filled. The to take on tough labor votes so close to gress adjourns at the end of 2011. Board operated with only two members the election. Now, even passage of an President Obama also named career for 27 months, from January 2008 to EFCA alternative bill, which might al- NLRB lawyer Lafe Solomon as the “Act- April 2010, during which it continued low “quickie” union representation ing General Counsel” following the res- to decide over 600 less controversial elections within two or three weeks ignation of former General Counsel cases while deferring consideration of from a union petition and include limi- Ronald Meisburg. Solomon was ap- over 100 cases where the two members tations on free speech rights of employ- pointed under the Federal Vacancies could not agree or that would reverse ers, seems unlikely before the November Reform Act of 1998. His experience NLRB precedent. election (but watch the post-election includes 10 years as the Director of It was that practice which the Su- “lame duck” session). the NLRB’s Office of Representation preme Court rejected in New Process What has not diminished is the Appeals and he has served on the Steel on the basis that Section 3(b) of unions’ push for EFCA-like “reforms” staffs of 10 different Board members. the National Labor Relations Act – the through the National Labor Relations When Member Schaumber’s term “delegation clause” – authorizes the Board (NLRB), especially now that the expires this August, many expect a po- Board to delegate its powers only to a unions have a solid three-vote majority litical “package” to be proposed by the “group of three or more members.” That of former union lawyers serving on the President consisting of a Republican group must maintain a membership of Board (and the prospects for a heavily replacement as Board member and most three in order for the delegation to re- pro-union General Counsel). While the likely a Democratic union lawyer for main valid. business community must remain vigi- the General Counsel’s position. The U.S. Chamber of Commerce lant regarding EFCA and other labor filed a very influential amicus curiae law “reform” legislation, the battle- NLRB Rebuked by Court’s New Process Steel Decision brief with the Supreme Court urging ground clearly has shifted to the regula- that the Board lacked authority to issue tory front – namely, the NLRB. Initially, the new NLRB is rushing to orders as a two-member Board. In words NLRB Composition issue new decisions reversing NLRB that will be long remembered, Justice precedent while the Board still consists Stevens wrote that “the Rube Goldberg- The NLRB is finally up to its five- of five members. At the same time it style delegation mechanism employed member complement, after operating as also will have its hands full reconsider- by the Board in 2007 – delegating to a a two-member Board for over two years. ing a series of cases previously decided group of three, allowing a term to ex- On June 22, the Senate confirmed Board by the two-member Board following the pire, and then continuing with a two- Members Mark Gaston Pearce (D) and U.S. Supreme Court’s stunning rebuke member quorum of a phantom delegee Brian Hayes (R). Both had been nomi- to the Board’s authority to issue such group – is surely a bizarre way for the nated by President Barack Obama in rulings. Board to achieve the authority to de- July 2009. The term for Member Pearce, In a strongly worded 5-4 decision cide cases with only two members.” who had been serving a “recess” ap- authored by departing Justice John The Court’s ruling further stated: pointment, now extends to August Paul Stevens in New Process Steel v. “We are not insensitive to the Board’s 2013, while Member Hayes has been NLRB on June 10, the Court ruled that understandable desire to keep its doors confirmed to fill an existing term which the NLRB did not have the authority to open despite vacancies. Nor are we un- expires in December 2012. issue two-member Board orders. That aware of the costs that delay imposes They will join Chairman Wilma means that hundreds of relatively Liebman (D) and Board Member Peter on the litigants. If Congress wishes to Schaumber (R), whose terms expire in non-controversial decisions issued by allow the Board to decide cases with August 2011 and August 2010, respec- Democrat Wilma Liebman and Repub- only two members, it can easily do so. lican Peter Schaumber are now invalid. But until it does, Congress’ decision to * Hal Coxson is a principal with By way of background, as 2007 came require that the Board’s full power be Ogletree Governmental Affairs and to a close the NLRB consisted of four delegated to no fewer than three mem- a shareholder in the law firm of members with one vacancy, with the bers, and to provide for a Board quorum Ogletree Deakins in the Washington, recess appointments of two of the four of three, must be given practical effect D.C. office. sitting members set to expire at the rather than swept aside in the face of end of the Congressional session. That admittedly difficult circumstances.”

4 OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. WASHINGTON WATCH JULY/AUGUST 2010

Justice Stevens concluded with the tional Union (SEIU). That issue was a employees about their wages, hours and following memorable words: “Section point of contention during Member working conditions simply because 3(b), as it currently exists, does not au- Becker’s Senate confirmation hearing. they are members of a union, but out- thorize the Board to create a tail that In Pomona Valley Hospital Center, side the concept of “majority rule” and would not only wag the dog, but would 355 NLRB No. 40 (June 8, 2010), which “exclusive representation” of all em- continue to wag after the dog died.” involved an SEIU local union, Member ployees in a bargaining unit. As a result of this decision, on July 1 Becker wrote that he would adhere to This would result in small, frag- the Board requested that its orders from the ethical standards he agreed to up- mented bargaining units confronting a the 96 two-member decisions pending hold as described in the Standards of single employer, where multiple unions in all federal courts of appeals be re- Ethical Conduct for Employees of the would represent only a minority of em- manded to the Board for further consid- Executive Branch (5 CFR Part 2635) ployees in a single workplace. On the eration. Each of the remanded cases and Executive Order 13490 (“Ethics other hand, in the words of Professor will be considered by a three-member Commitments by Executive Branch Morris, “minority-union bargaining panel of the Board which will include Personnel”). While he acknowledged will allow unions to grow the natural Chairman Liebman and Board Member that those standards include significant way that most associations grow – by Schaumber. Consistent with Board prac- restrictions on deciding cases involving starting small and growing larger with tice, the other Board members not on former clients he represented in the two experience and achievement.” the panel will have the opportunity to years preceding his swearing in, Mem- In Dick’s Sporting Goods, Case 6- participate in the case if they so desire. ber Becker said that he would not re- CA-34821 (June 22, 2006), the NLRB’s While some courts have complied cuse himself from the cases of local General Counsel refused to issue a com- with the Board’s request to remand the cases, others have refused to enforce the Board’s order – inviting the argu- “The battleground clearly has shifted to the ment that the Board has no mechanism regulatory front – namely, the NLRB.” to reconsider the decision. For example, the Eighth Circuit Court of Appeals denied enforcement in NLRB v. White- SEIU unions (since SEIU is a separate plaint against an employer that had re- sell Corp. (June 10, 2010) and NLRB v. legal entity from its local affiliates). fused to bargain with a minority, mem- American Directional Boring, Inc. As to whether he had pre-judged is- bers-only union. The General Coun- (June 24, 2010). sues reflected in his controversial writ- sel’s Memorandum “underscore(d) that In other recent action related to the ings on labor policy as a law school the statutory obligation to bargain is New Process Steel decision, the new professor and union lawyer, Member fundamentally grounded on the prin- NLRB consisting of all five members Becker declared: “a ‘reasonable person’ ciple of majority rule.” announced that it had ratified the De- appearing before the Board will distin- Electronic Balloting in Union Repre- cember 2007 temporary delegation to guish between the roles I played as an sentation Elections the General Counsel of all litigation au- advocate and a scholar in the past and The new Board has taken its thority that normally would have re- the position I now hold as a Member of first steps toward making significant quired Board approval, such as the de- the NLRB.” However, he agreed to re- changes in the area of union representa- cision to seek section 10(j) injunctive cuse himself from consideration of the tion elections. Many expect rulemaking relief. The new Board also ratified all Dana Corp. case, involving pre-recog- (or simply a guidance memorandum) personnel and administrative decisions nition bargaining, in which he had writ- shortening the period between a union’s made during that time frame. ten an amicus curiae brief filed by the filing of an election petition and the United Auto Workers and the AFL-CIO. Pending Issues election itself. Currently, the Board’s Since then, the NLRB’s Inspector goal is 42 days, and the average was 38 Although the new Board has been General has ruled that Member Becker days last year. distracted by the New Process Steel did not violate ethics rules by deciding However, the Board is expected to re- decision, there are several significant St. Barnabas Hospital and Committee duce the time for the election to two to issues that have been recently decided of Interns and Residents, Local 1957, three weeks from the filing of the peti- or are awaiting Board action. SEIU. tion, thus reducing the period for em- Member Becker’s Recusal Stance Members-Only, Minority Bargaining ployers to communicate with their em- NLRB Member Becker, who is be- A group of 46 labor law professors ployees about the company’s perspec- lieved to be the first member to have led by Professor Charles Morris is tive on unionization. The inability of worked for a labor union immediately again pressing the Board (through the the employer to communicate means prior to service on the Board, recently filing of a 69-page brief) to engage in that employees would be prevented announced that he would not recuse rulemaking to advance “members-only, from casting a fully informed vote. himself from cases involving local non-majority bargaining.” Under this Now there’s another concern. On unions affiliated with his former em- proposed rule, an employer would be June 9, the Board published a request ployer, the Service Employees Interna- required to bargain with a minority of Please see “NLRB WATCH” on page 6

WWW.OGLETREEDEAKINS.COM 5 AGENCY ACTION JULY/AUGUST 2010

DOL CLARIFIES FMLA DEFINITION OF “SON OR DAUGHTER” Extends Leave To Persons With No Biological Or Legal Relationship To Child The U.S. Department of Labor (DOL) for FMLA-protected leave. Signifi- “While the DOL called this Admini- recently issued an “Administrator’s cantly, the interpretation construed the strator’s interpretation a ‘clarification,’ Interpretation” on the definition of regulations such that an employee who it actually is a departure from the FMLA “son or daughter” under the Family intends to assume the responsibilities of regulatory requirements that a person and Medical Leave Act (FMLA). The a parent need not provide both day-to- have day-to-day care responsibilities federal law allows workers to take up day care and financial support. for and financially support a child in to 12 weeks of unpaid leave during any Thus, according to the interpreta- order to stand in loco parentis. This 12-month period for a number of rea- tion, an employee in a same-sex rela- interpretation is intended to reflect sons, including for the adoption or the tionship will now qualify for leave to the changing dynamics of family struc- birth of a child or to care for a son or care for his or her partner’s child, even tures but, simultaneously, creates com- daughter with a “serious health condi- if the employee has not legally adopted pliance challenges for employers. Em- tion.” The interpretation, issued by the child. In addition, an employee who ployers should review their FMLA Nancy Leppink, Deputy Administrator will share child-raising responsibilities policies and other documents to ensure of the DOL’s Wage and Hour Division, with the child’s biological or adopted that they do not conflict with this new would broaden the definition of persons parent would be entitled to leave for the interpretation.” who stand in loco parentis so as to in- child’s birth or to bond with the child Robinson suggested, “Employers clude employees in same-sex or other following placement. may want to review their practices in non-traditional relationships (without Further, the interpretation finds that examining the family relationship re- regard to their legal or biological rela- whether an employee stands in loco sponses on medical certification forms tionship with the child). parentis to a child is not based upon used when an employee’s family mem- The FMLA defines “son or daughter” whether that child has both biologi- ber has a ‘serious health condition’. to include a biological or adopted cal parents but depends on several fac- The new interpretation states that a child, and a “foster child, a stepchild, a tors. Courts have considered the child’s ‘simple statement’ on a family relation- legal ward, or a child of a person stand- age, the degree to which the child is de- ship is all that is required to establish in ing in loco parentis.” The FMLA regu- pendent on the person, and the extent loco parentis. The existing regulations lations define “in loco parentis” to in- to which the individual exercises du- permit employers to require reasonable clude those with day-to-day responsi- ties associated with parenthood in de- documentation or a family relationship bilities to care for and financially sup- termining in loco parentis status. statement. Thus, where no biological port a child. According to Alfred Robinson, a or legal relationship is disclosed on the According to the new interpreta- shareholder in Ogletree Deakins’ Wash- certification form, employers may want tion, employees with no biological or ington, D.C. office who previously to identify other documentation it may legal relationship with a child may served as the acting Administrator of request to confirm that a person stands stand in loco parentis and be eligible the DOL’s Wage and Hour Division: in loco parentis to a child.”

“NLRB WATCH” DOL Addresses Meaning continued from page 5 Of “Clothes” Under FLSA for information related to the procurement and implementation of electronic vot- The U.S. Department of Labor ing services for remote and on-site union elections. “Electronic balloting” by tele- (DOL) recently clarified the defini- phone, email or the Internet may soon replace traditional secret ballot elections, tion of “clothes” under Section which are protected by NLRB agents and observed by a union and employer ob- 203(o) of the Fair Labor Standards server to prevent last minute campaigning, voting fraud and other misconduct. Also, Act (FLSA). Section 3(o) provides just as with postal ballots (which the Board will order in rare cases where the em- that time spent “changing clothes ployees are geographically dispersed), electronic balloting would limit the time for or washing at the beginning or end employers to communicate with employees about the election. The free speech re- of each workday” is excluded from strictions on postal ballots begin with the mailing of ballots to employees; presum- compensable time under the FLSA ably the same rule would apply to the mailing of electronic balloting instructions. if the time is excluded from com- Additional Resources pensable time pursuant to “the ex- press terms or by custom or prac- There are many other significant issues that soon will be addressed by the NLRB. tice” under a collective bargaining One way to stay up-to-date on these developments is to attend the “Not Your agreement. The DOL now has con- Father’s NLRB” program on December 9-10, 2010 in Las Vegas (see the enclosed cluded that this exemption “does flyer). In addition, the U.S. Chamber of Commerce recently launched a new publi- not extend to protective equipment cation entitled “NLRB Insight,” which is co-authored by Ogletree Deakins’ Hal worn by employees that is required Coxson and Chris Coxson. The pair also wrote the 76-page publication “The Na- by law, by the employer, or due to the tional Labor Relations Board in the Obama Administration: What Changes to nature of the job.” Expect,” which is available on the Chamber’s website.

6 OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. OGLETREE DEAKINS NEWS JULY/AUGUST 2010

New To The Firm Several new lawyers have recently joined the firm. They include: Sarah Kirk and Justin Scott (Atlanta); Stephen Ben- jamin (Columbia); Jennifer Gokenbach (Denver); Martin Rodriguez (Houston); Judy Sha (Los Angeles); Andrea Kiehl (Min- neapolis); Patricia Matias (Orange County); Tara Pfeifer (Philadelphia); James Glunt, Philip Kontul and Mariah Passarelli (Pittsburgh); Tiffany Cox (San Antonio); Michelle Leetham (San Francisco) and Phillip Russell (Tampa).

“ARBITRATION” continued from page 1 party challenges the validity “of the Justice John Paul Stevens, writing as “Arbitration Procedures,” included precise agreement to arbitrate” under for the dissent, took issue with the a provision which stated that, “The Ar- Section 2, the federal court must con- majority’s claims about the underlying bitrator, and not any federal, state or lo- sider the challenge before ordering contract: “Its breezy assertion that the cal court or agency, shall have exclu- compliance with that agreement. subject matter of the contract at issue – sive authority to resolve any dispute re- As a result, the Court reasoned, “in in this case, an arbitration agreement lating to the interpretation, applicabil- an employment contract many elements and nothing more – ‘makes no differ- ity, enforceability or formation of this of alleged unconscionability appli- ence,’ ... is simply wrong.” If Jackson’s Agreement including, but not limited cable to the entire contract (outra- unconscionability claim is correct, “it to, any claim that all or any part of this geously low wages, for example) would would contravene the existence of clear Agreement is void or voidable.” not affect the agreement to arbitrate and unmistakable assent to arbitrate In February 2007, Jackson filed a dis- alone.” Even where that is not the case, the very question petitioner now seeks crimination suit against Rent-A-Center the majority held, “we nonetheless re- to arbitrate.” Thus, according to the in federal district court in Nevada. quire the basis of challenge to be di- dissent, it was necessary for the Court Rent-A-Center then filed a motion un- rected specifically to the agreement to to resolve the merits of Jackson’s un- der the Federal Arbitration Act (FAA) arbitrate before the court will inter- conscionability claim in order to de- to force Jackson to resolve his claims vene.” Thus, unless he specifically cide whether the parties have a valid through arbitration. Jackson argued challenged the delegation provision arbitration agreement under the FAA. that the arbitration agreement is “unen- contained in the Arbitration Procedures forceable in that it is unconscionable.” section of his contract, the Court must Practical Impact Rent-A-Center countered that because treat it as enforceable, “leaving any According to Jill Garcia, a share- Jackson had agreed that the arbitrator challenge to the validity of the Agree- holder in Ogletree Deakins’ Las Vegas would have exclusive authority to re- ment as a whole for the arbitrator.” office, “Rent-A-Center is an excellent solve disputes about the enforceability Justice Scalia and the majority found decision for employers nationwide, of the agreement, the issue of uncon- that Jackson had challenged only the and particularly those in the Ninth Cir- scionability was for an arbitrator, not validity of the contract as a whole and cuit. The ability to enter into arbitra- the court, to decide. not the delegation provision. None of tion agreements, whether with consum- The trial judge granted Rent-A- Jackson’s substantive unconscionabil- ers, employees or franchisees, is a cor- Center’s request and compelled arbitra- ity challenges – for example, that the nerstone in day-to-day business opera- tion. The Ninth Circuit Court of Ap- agreement’s coverage was one-sided tions. Employers would be wise to re- peals reversed, holding that a court in that it required arbitration of claims visit their existing agreements and must decide whether the agreement an employee was likely to bring but ensure they include a provision which is enforceable. The case ultimately not claims Rent-A-Center was likely specifically delegates the question of reached the U.S. Supreme Court. to bring – was specific to the delegation enforceability to the arbitrator.” provision. On the contrary, Jackson ar- Jeffrey Winchester, also a shareholder Legal Analysis gued that the “entire agreement” fa- in the firm’s Las Vegas office, adds a The question before the Justices vors Rent-A-Center and that the limi- warning for employers: “Based on this was whether the provision in the Arbi- tations on discovery further his “con- ruling, delegation clauses are likely to tration Procedures section of the con- tention that the arbitration agreement come under attack by plaintiffs seek- tract that delegates resolution of the as a whole is substantively unconscio- ing to avoid arbitration of claims. Em- conscionability issue to the arbitrator nable.” Thus, the Court reversed the ployers should consider taking steps is valid under the FAA. The validity Ninth Circuit’s decision. to highlight the delegation clause, such of so-called delegation provisions – According to Ron DeMoss, General as printing the clause in bold, using agreements to arbitrate threshold issues Counsel at Rent-A-Center and who large font, and including language concerning an arbitration agreement argued this case before the Supreme whereby the employee acknowledges – are governed under Section 2 of the Court, “It helped our case that we had that, by signing the agreement, he or FAA. a very fair and reasonable arbitration she is waiving the right to have a court The Court ruled that a challenge to agreement. In fact, Justice Ginsburg determine the enforceability of the the contract as a whole “does not pre- remarked that our employment arbi- agreement, as well as waiving the right vent a court from enforcing a specific tration agreement was more favorable to have his or her statutory claims heard agreement to arbitrate.” If, however, a than most.” in court.”

WWW.OGLETREEDEAKINS.COM 7 WAGE & HOUR JULY/AUGUST 2010

SECOND CIRCUIT STRIPS PHARMACEUTICAL SALES REPS OF THEIR EXEMPT STATUS Case Returned To Lower Court To Determine Companies’ Overtime Liability A federal appellate court recently physicians must prescribe drugs appro- independent judgment to qualify for held that pharmaceutical sales repre- priate for their patients and cannot the administrative exemption. There sentatives did not fall under either the make binding commitments. The court is currently a rep classification case “outside sales” or “administrative” was further influenced by the fact that pending in the Ninth Circuit, and other exemptions to the Fair Labor Standards it is difficult to tie the reps’ compen- appellate courts may be asked to con- Act (FLSA), and that, accordingly, they sation directly to the results of their sider the question as well. The disagree- had been misclassified and are entitled marketing efforts. After considering ment among the courts may bring the to unpaid overtime. The overtime to these factors, the court held that the issue before the U.S. Supreme Court. which the workers could be entitled reps do not qualify for the outside sales In the meantime, the Second Cir- is significant, because they typically exemption. cuit’s decision poses a serious chal- work 12-hour days, travel for their The Second Circuit also considered lenge for pharmaceutical companies jobs, and attend after-hours events as whether the reps are exempt administra- classifying reps as exempt. Pharmaceu- part of their marketing efforts. In re tive employees and found that they tical companies, particularly those do- Novartis Wage and Hour Litigation, have little discretion over their sales ing business in New York, Connecticut, 09-0437-cv, Second Circuit Court of strategy or methods. Rather, the sales and Vermont, should closely examine Appeals (July 6, 2010). reps are trained in how to question phy- the classification of their reps and the sicians to determine why they may be basis for any exemptions. In addition, Factual Background Sales representatives at two pharma- ceutical companies brought separate “The disagreement among the courts may bring overtime class actions in which they the issue before the U.S. Supreme Court.” claimed that their employer had mis- classified them as exempt employees hesitant to prescribe certain drugs, are the federal Department of Labor (DOL) (who are not entitled to overtime pay). taught four “social styles” to use de- made it clear through the Novartis case The reps claimed that they are not cov- pending on a physician’s response to a that it does not think reps working for ered by either the “outside sales” or “ad- sales call, and are provided with spe- pharmaceutical companies are exempt, ministrative employee” exemptions. cific “core messages” to convey during so the DOL may increase enforcement Legal Analysis each sales call. of overtime payments to reps in the The court also found that the reps wake of this decision. In a consolidated opinion addressing play no role in formulating the com- While the court held that neither ex- both cases, the Second Circuit Court pany’s core messages, written market- emption applies to the Novartis reps, of Appeals considered Novartis’ posi- ing materials, or advertising messages. there may be more flexibility in apply- tion that their reps are covered by either In fact, they are specifically instructed ing the administrative exemption to the outside sales exemption (because not to deviate from the core message or reps at other companies that may allow they are marketing and selling prod- company-provided written materials. more latitude and independent discre- ucts), or the administrative employee The court was particularly persuaded tion. Companies should examine the exemption (because they are highly by one rep’s testimony that Novartis duties of their reps and work with coun- compensated and exercise sufficient expects the reps to act like “robots.” sel to assess their level of independent discretion and independent judgment Given those indicators that the reps’ discretion. in their jobs). The court first decided jobs are highly formulaic and lack inde- Deborah Hesford DosSantos, a share- that the reps did not qualify for the pendent discretion, the court rejected holder in Ogletree Deakins’ Boston of- outside sales exemption because they the claim that they are covered by the fice, notes that “pharmaceutical com- never actually sell product; rather they administrative exemption. panies likely face a unique challenge provide information about the product Based on the court’s ruling that the in allowing reps to exercise autonomy and encourage doctors to prescribe it. reps are not covered by either exemp- while still complying with strict fed- Without selling their product (by mak- tion, the cases will now be remanded eral regulations regarding pharmaceu- ing a deal that results in the transfer of to the lower courts to determine the tical marketing. Companies should the item in exchange for money), the appropriate damages. consider working with their counsel to reps cannot qualify for the outside sales develop a plan that is consistent with exemption. Practical Impact both wage and hour law and other in- Novartis asked the court to focus on The Second Circuit is only the sec- dustry regulations.” If it is not feasible the fact that physicians are asked to ond federal appellate court to address to allow reps a greater level of discre- “commit” to prescribing a specific the classification of sales reps under tion and autonomy, companies should drug. But the court noted that, by defi- the FLSA. The Third Circuit Court of carefully consider reclassifying reps as nition, physicians do not commit to Appeals ruled earlier this year that nonexempt, and may need to limit their buying a Novartis product. Rather, reps exercise sufficient discretion and travel time and after hours work.

8 OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C.