Allyn & Fortuna LLP
Paula Lopez, May 13, 2016.
Earlier this month, a split three-member NLRB panel affirmed the December 24, 2015 administrative law judge’s decision invalidating a class and collective action waiver contained in CVS’s workplace arbitration policy. The administrative decision was one of a flurry of decisions issued by the NLRB at the end of 2015 addressing this issue and continuing to apply the Board’s decisions in D.R. Horton and Murphy Oil U.S.A., Inc. to invalidate class action waivers. D.R. Horton and Murphy Oil U.S.A. hold that implementing and maintaining an arbitration program containing class and collective action waivers violates Section 8 (a) (1) of the National Labor Relations Act (“NLRA”). Section 8 (a) (1) states that it is an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.” NLRA Section 7 affords employees the right to engage in “other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”
The NLRB, in invalidating class and collective action waivers, takes the position that such provisions impede on employees’ rights to act collectively in enforcing their rights in the workplace or, in other words, to engage in concerted activity as is their right under the NLRA. However, the Fifth Circuit Court of Appeals, as well as other circuit courts, have repeatedly rejected this position, relying on Supreme Court precedent upholding class and collective class action waiver. The Fifth Circuit overturned D.R. Horton and Murphy Oil U.S.A., and held that the NLRB failed to give proper deference to the Federal Arbitration Act, noting that the right to proceed through class or collective actions are procedural, not substantive rights, and there is no congressional mandate preventing individual arbitrations of non-NLRA claims.
The NLRB’s decision on CVS’ class action waiver reinforces its intent to remain steadfast in its position that such waivers impede on employees’ Section 7 rights despite repudiation by state and federal courts addressing the issue. In invalidating CVS’s class and collective action waivers, the NLRB was unswayed by the fact that employees had 30 days to opt-out of the policy without any effect on their continued employment with the company. The Board considered that an unfair labor practice occurred by the mere fact that CVS implemented and maintained the policy containing a class action waiver.
One may wonder why the NLRB continues to render decisions invalidating class and collective action waivers included in arbitration provisions, despite the likelihood that the decision will be overturned on appeal. This is because an NLRB administrative law judge is bound by Board precedent until it is reversed by the Supreme Court. Given this, it is no surprise that the NLRB has not taken any steps to have this issue heard by the Supreme Court. If and until the Supreme Court rules on this issue, employers who find themselves and their mandatory arbitration provisions scrutinized by the NLRB and the subject of an adverse decision can seek appellate review of the decision. Employers have three appellate court options when seeking review of a decision issued by the NLRB: (1) the circuit where the unfair labor practice allegedly took place; (2) any circuit in which the employer transacts business; or (3) the D.C. Circuit. As expected, many national companies favor the Fifth Circuit in seeking appellate review given its prior rulings, although employers are likely to get the same result in any of the other circuit courts. CVS has stated that it intends to appeal the NLRB’s decision.
Nicholas Fortuna, April 28, 2016
This week, Congress passed the Defend Trade Secrets Act (DTSA) which is an expansion of the Economic Espionage Act. The legislation had wide bipartisan support and the President is expected to sign it as soon as it reaches his desk. The law effectively federalizes trade secrets law and allows companies to bring civil actions in federal court.
Up until now, trade secrets were protected under state law. All states except New York and Massachusetts adopted some form of the Uniform Law Commission’s Uniform Trade Secrets Act. New York and Massachusetts rely on common law for trade secret protection.
Trade secrets typically include formulas, patterns, compilations, programs, devices, plans, methods, techniques or processes. To be protected a trade secret, certain common elements must exist: information that is not publically known, reasonable measures have been taken to protect the information, and there is economic value in keeping such information secret. Examples of trade secrets include marketing and business plans, designs, proprietary computer programs, and manufacturing information.
Trade secret protection secures business resources and promotes investment in intellectual assets that are not patentable or copyrightable, but nevertheless have significant economic value in remaining secret. The legal protection of trade secrets is intended to shelter commercial intellectual investment from wrongful use by others.
The DTSA will not replace state trade secrets law. The bill expressly states that it does not preempt existing state law. Similar to trademark law and the federal Lanham Act, DTSA will coexist with existing state law. Cases will now involve a mix of federal and state law claims and most likely will predominately be filed in federal court as opposed to state court.
A significant difference between state and federal trade secret law is that the DTSA permits courts to order law enforcement officials to seize any property “necessary to prevent the propagation or dissemination of the trade secret.” Such orders may be obtained ex parte and are only to be used in “extraordinary circumstances.” The statute requires the party to show “with particularity” what property is to be seized, as well as proof that the target of the seizure order has “actual possession” of the trade secret or property. Targets of a seizure order, under the statute, have the right to recover damages if the seizure was abusive.
Other remedies available under DTSA are similar to those provided under the Uniform Trade Secret Act adopted to varying degrees by most states. They include an injunction to prevent actual or threatened misappropriation; damages for actual loss, unjust enrichment, and/or a reasonable royalty for the unauthorized disclosure or use of the trade secret. In the event of willful and malicious misappropriation, exemplary damages up to twice the amount of other damages may be awarded.
In actions brought for misappropriation in bad faith, the court may award attorneys’ fees. The statute allows a target to prove bad faith by circumstantial evidence. The attorney fee provision was inserted to discourage baseless claims.
The passage of DTSA is the most significant expansion of federal protection of intellectual property since enactment of the Lanham Act in 1946. The DTSA was passed in order to provide uniformity of protection for trade secrets across the country. Businesses operating in multiple states had to contend with different protections afforded their trade secrets, depending on where the issue arose. The goal is that DTSA will eliminate this disparity going forward.
Nicholas Fortuna, March 23, 2016
On March 16, 2016 the Second Circuit ruled that the human resources director of The Culinary Institute of America could be held personally liable for Family and Medical Leave Act (FMLA) violations. The court found that the human resources director had enough control over the plaintiff’s job and sufficient input into the decision to fire the plaintiff to be considered an “employer” under the statute.
The plaintiff, Cathleen Graziadio, a payroll administrator at The Culinary Institute of America, was fired shortly after she took leave to provide care for her ailing sons.
Graziado’s seventeen-year-old son was hospitalized with previously undiagnosed Type I diabetes. She informed her supervisor that she would need to take time off from work to care for him. Graziadio sought to have her absence covered by FMLA. Three weeks later, Graziadio’s twelve-year-old son fractured his leg playing basketball and underwent surgery for the injury. Again, Graziadio promptly notified her supervisor that she would need immediate leave to care for her son.
Graziadio made numerous attempts to work with the Director of Human Resources to find out what was needed to document her FMLA leave and gain approval to return to work. The responses Graziadio received were ambiguous and frustrating. Rather than instructing the plaintiff as to what documents were needed to support her FMLA leave and notifying her when she could return to work, the Director of Human Resources recommended that the plaintiff be fired. Acting on the recommendation, the president of The Culinary Institute of America fired the plaintiff.
The plaintiff sued and sought to have the Director of Human Resources held personally liable for FMLA violations. The district court granted summary judgment to the defendant and the Second Circuit Court of Appeals reversed the lower court finding that Graziadio presented sufficient evidence to defeat summary judgment on her claims under the FMLA.
An individual may be held liable under the FMLA only if she is considered an “employer” under the statute. An employer is defined under the statute as “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” The Second Circuit followed other circuit courts and determined that an “employer” under the FMLA should be evaluated as it is under Federal Labor Standards Act (FLSA). The Second Circuit, for the first time, applied the economic-reality test used under the FLSA to determine individual liability under the FMLA.
Under the economic-reality test, the court looks to see if the alleged individual-supervisor possessed the power to control the worker. The factors considered include whether the alleged individual-supervisor (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.
Graziadio presented sufficient evidence that the Director of Human Resources exercised control over her schedule and conditions of employment with respect to her return from FMLA leave and her rights under the FMLA. The Director also had substantial input in deciding that the plaintiff should be fired.
To prevail on a claim of interference with FMLA rights, the court stated that a plaintiff must establish: (1) that she is an eligible employee under FMLA; (2) that the defendant is an employer as defined by FMLA; (3) that she was entitled to take leave under the FMLA; (4) that she gave notice to the defendant of her intention to take leave; and (5) that she was denied benefits to which she was entitled under FMLA.
Graziadio presented enough evidence on each of these factors to allow her to pursue her claim of individual liability on behalf of the Director of Human Resources under the economic-reality test that the Director interfered with her FMLA rights. The case was remanded back to the district court to allow the plaintiff to pursue her claims of individual liability under FMLA.https://www.allynfortuna.com/nicholas-fortuna/
Paula Lopez, March 11, 2016.
New York City’s Council has been active in passing legislation that impacts the workplace and imposes new legal obligations on New York City employers. This week, we discuss the recently enacted New York City Commuter Benefits Law and the Caregiver Discrimination Act, and highlight employment related legislation currently pending before the New York City’s Council.
New York City’s Commuter Benefits Law (NYCCBL) went into effect on January 1, 2016. NYCCBL requires employers with 20 or more full-time employees working in New York City to offer employees the opportunity to purchase certain pre-tax transportation benefits. Full-time employees are those who work an average of 30 or more hours per week in the most recent four week period. For chain businesses, the number of full-time employees at all of its New York City locations will be counted towards determining the number of full-time employees of the employer.
Covered employers who already offer full-time employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits up to the full amount permitted under Federal law will be deemed in compliance with NYCCBL. Federal law permits employees to use up to $255/month of their pre-tax income to pay for qualified transportation benefits. Qualified pre-tax transportation benefits covered by NYCCBL include, inter alia, MTA subway and bus, Long Island Railroad, New Jersey Transit, Metro North, Amtrak, eligible ferries, van pooling, etc.
A covered employer without an existing commuter benefits program must implement a commuter benefits program and provide full-time employees with proper notice of the program. An employer can comply with NYCCBL in any of the following ways: (1) deducting from payroll the pre-tax amount to be used to pay for transportation benefits and establishing an employer administered benefits program; (2) deducting from payroll the pre-tax amount and retaining a third-party provider to administer the commuter benefits program; or (3) providing employees with a tax-free cash reimbursement for transportation up to the maximum amount of $255/month.
Employers are required to provide covered employees with a written offer to use pre-tax income to purchase qualified transportation benefits by January 1, 2016 or within four weeks after the employee begins full-time employment. NYCCBL also imposes record-keeping obligations on employers to maintain records showing that they offered their employees, in writing, the opportunity to use pre-tax income for transportation benefits, as well as the responses received from their employees.
Covered employers have until July 1, 2016 to come into compliance with NYCCBL’s requirements. The Department of Consumer Affairs is the agency currently charged with enforcing the law. However, enforcement will be transferred to a newly created Office of Labor Standards, starting in Spring 2016. Employers will not be subject to penalties for violations that occur before July 1st and employers will have 90 days to cure a violation before DCA is authorized to seek penalties. An employer found in violation of the law can be liable for a civil penalty ranging from $100 to $250 for the first violation. After the 90 day cure period passes, for every 30 days that an employer remains in violation, a civil penalty of $250 will be assessed.
The New York City Council also passed the Caregiver Discrimination Bill, which was signed into law by Mayor De Blasio on January 5, 2016. Under the new law, caregiver status is now included as a protected class under New York City’s Human Rights Law (NYCHRL), prohibiting discrimination against an employee on the basis of the employee’s actual or perceived status as a caregiver. “Caregiver” is defined as anyone who provides direct or ongoing care for a child under the age of 18 or for a care recipient. A “care recipient” is defined as an individual with a disability who is (1) a covered relative of a person residing in a caregiver’s household, and (2) relies on the caregiver for medical care of to meet the needs of daily living. “Covered relative” is a caregiver’s child, spouse, domestic partner, parent, sibling, grandchild, grandparent, child or parent of the caregiver’s spouse or domestic partner or any other individual in a familial relationship with the caregiver.
It is now an unlawful discriminatory act for an employer to refuse to hire, terminate or discriminate against an employee in compensation or in relation to terms, conditions or privileges of employment base on the employee’s status as a caregiver. While the law does not include an express requirement for employers to provide caregivers with reasonable accommodations, as is required under New York City’s Pregnant Workers Fairness Act, it is possible that the reasonable accommodation requirement may be added at a later date.
The law permits the New York City Commission of Human Rights (“Commission”) to designate additional familial relationships that would be covered under the law. Enforcement guidance guidelines will likely be issued by the Commission before the law’s effective date, which is May 4, 2016. The Commissioner of the New York City Human Rights Commission has vowed to “vigorously” enforce the law. An aggrieved employee can file a complaint with the Commission within 1 year of a violation or file a court action within 3 years. An employer found in violation could be subject to a civil penalty for violating the NYCHRL ranging from $125,000 to $250,000 (if the violation was willful). These civil penalties are in addition to other remedies available under the NYCHRL such as back and front pay, compensatory and punitive damages, attorney’s fees and costs. The law goes into effect until May 4, 2016.
In addition to newly passed legislation, New York City employers should be aware of employment related legislation currently pending before the City Council. First, Intro. No. 804-A, proposes to amend the NYC Administrative Code with respect to reasonable accommodations for individuals with disabilities. The proposed amendment would expressly require an employer or potential employer to engage in a good faith interactive discussion with an employee or applicant with a disability, as part of the reasonable accommodation process, in order to identify what reasonable accommodations are available for the person to perform the job in question. Failure of an employer or potential employer to engage in the good faith interactive process would give rise to an independent cause of action for unlawful discrimination even if a reasonable accommodation is not available.
Also pending before the NYC Council is Intro. No. 815, which seeks to amend the NYC Administrative Code by expanding to the employment context the provisions of the NYCHRL with regard to the right to truthful information. The amendment would make it illegal for an employer to lie to someone about the availability of a job, benefit or program for discriminatory reasons. It would also permit an organization to bring claims for violations of the law uncovered by testers and to provide a remedy for persons aggrieved when their agents or employees are discriminated against.
The best way to stave off litigation is for employers to stay current on the law and promptly implement the policies necessary to bring them into compliance. Employers should review their existing policies to ensure compliance with NYCCBL and provide training to managers and supervisors on the new protections afforded to caregivers. We will continue to monitor the legislation pending before the New York City Council for any updates.
By: Megan J. Muoio, March 7, 2016
Currently pending before the Supreme Court is Green v. Brennan, a case from the U.S. Court of Appeals for the Tenth Circuit that involves the question of when 45-day period to file a claim of constructive discharge as a result of racial discrimination begins to run. The case was argued before the Supreme Court on November 30, 2016. A decision is expected sometime this spring.
The appellant Marvin Green was employed by the United States Postal Service as the postmaster for Englewood, Colorado. In 2008, he applied for but did not receive a promotion to the position of postmaster of Boulder, Colorado. Green alleged that he was passed over because of his race and complained to U.S.P.S. officials. In 2009, while the discrimination complaint was pending, the U.S.P.S. began investigating Green for potentially illegally delaying the mail. As a result of that investigation, Green was removed from duty and his pay was suspended.
On December 16, 2009, Green and the U.S.P.S. entered into an agreement by which the U.S.P.S. agreed not to pursue criminal charges if Green agreed to resign and either retire or take a lower-paying job in another area. On February 9, 2010, Green resigned from the U.S.P.S., effective March 31, 2010. On March 22, 2010, Green contacted the U.S.P.S. EEO counselor to report that he had been constructively discharged.
The Tenth Circuit held that Green’s claim for constructive discharge under Title VII of the Civil Rights Act of 1964 was time barred because he asserted his claim more than 45 days after “the date of the matter alleged to be discriminatory.” The Tenth Circuit held that the December 16, 2009 settlement agreement was the “last discriminatory act” upon which Green’s constructive discharge claim was based.
Green argued that a different date from the one used by the Tenth Circuit should be used to calculate the last discriminatory act. Green asserted that the date of his resignation – February 9, 2010, 41 days before he filed his claim – was the date of the last discriminatory act and therefore the day that the 45 day clock began to run. Green argued that a cause of action cannot accrue (and a claim cannot be filed) until the employee resigns so the date of resignation was the accrual date of his constructive discharge claim. Green also argued that the date of resignation would be an easily-administered bright line rule.
The government argued that the Tenth Circuit correctly held that Green’s claim was time-barred and that the 45 days began to run on December 16, 2009 (the date of the settlement agreement), but for a different reason. The government asserts that December 16, 2009 was the day that a claim accrued because it was the date that Green gave notice of his resignation. Under the government’s reasoning, Green’s claim would still be time-barred in this case.
For oral argument before the Supreme Court, counsel was appointed to defend the Tenth Circuit’s reasoning. The Tenth Circuit found that the date upon which Green’s claim accrued was December 16, 2009 because it was the date of the last discriminatory act, culminating in Green’s constructive discharge. At oral argument on November 30, 2015, only Justice Antonin Scalia seemed predisposed to adopting the Tenth Circuit’s reasoning. He stated that the plain language of “last discriminatory act” implied a discriminatory act by the employer, not the act of the employee in resigning. The remaining Justices grappled with the relative merits of Green and the government’s proposed dates, weighing the practicability of administering each. The Justices also considered whether the December 16, 2009 settlement agreement was a true notice of resignation since Green had the option to resign or take a different position.
In light of Justice Scalia’s passing, it remains to be seen whether a majority of the remaining Justices will be able to come together to endorse either Green or the government’s asserted arguments. It is possible that the Justices will split their decision 4-4, which would result in the Tenth Circuit’s decision being automatically upheld.