By: Megan J. Muoio, November 25, 2015

On October 21, 2015, the Second Circuit Court of Appeals upheld a decision by the National Labor Relations Board (NLRB) finding that two employees were improperly fired because of negative discussion of their employer on the social media site Facebook. The employees were non-union employees at the Triple Play Sports Bar and Grille located in Watertown, Connecticut.

In the case before the NLRB, Three D, LLC (Triple Play) was found to have illegally fired two employees in connection with Facebook complaints about Triple Play’s tax withholding practices. A former employee started a Facebook discussion by addressing the employer’s issues with tax withholding in a status update, which was “liked” by a current Triple Play employee. A second Triple Play employee commented in response to the discussion and used profanity to refer to the employer. Both the employee who commented and the one who merely “liked” the former employee’s status update were fired.

The NLRB found that both the “like” and the comment in response to the former employee’s status update were protected concerted activity under Section 7 of the National Labor Relations Act (NLRA), which made Triple Play’s termination unlawful. The NLRB clarified the standard by which alleged disloyal comments made by an employee about an employer in the employee’s off-duty time will be reviewed to determine whether they fall outside the NLRA’s protection. Disloyal comments are those that are disparaging to the employer and are not connected to any ongoing labor dispute. Both disloyal and defamatory comments would not be protected by Section 7. In the Tripe Play case, the NLRB found that the comments were neither disloyal nor defamatory. The NLRB also easily concluded that a Facebook “like” could be protected concerted activity under the NLRA.

Further, the NLRB held that the employer’s handbook contained an overly-broad social media policy. The policy stated that employees were prohibited from “engaging in inappropriate discussions about the company, management, and/or co-workers,” which the NLRB found unreasonably chilling on employees’ rights under Section 7 of the NLRA.

On appeal to the Second Circuit, Triple Play challenged the NLRB’s conclusion that the employee’s Facebook comment was not disloyal or false. Triple Play did not challenge the NLRB’s conclusion that a Facebook “like” constituted protected concerted activity under the NLRA. Triple Play relied on NLRB v. Starbucks Corp., a 2011 case from the Second Circuit in which an employer was found to have lawfully terminated an employee who used obscenities during a pro-union protest that took place in the presence of customers. The Second Circuit distinguished the Starbucks case by finding that, although Triple Play customers may have had occasion to view the employees’ comments on Facebook, customers were not the target of the comments and Triple Play’s brand was not affected. The Second Circuit concluded that “the Facebook activity at issue here did not lose the protection of the Act simply because it contained obscenities viewed by customers [which] accords with the reality of modern-day social media use.” The Second Circuit also found that Triple Play’s employee handbook policy regarding social media unreasonably chilled employee’s rights under Section 7 of the NLRA because it restricted employees’ ability to communicate regarding the terms and conditions of their employment.

In light of the Second Circuit’s ruling, employers should be mindful of several types of protected activity. A “like” or other positive indicator on social media is a protected activity under the NLRA. Also, an employee who uses obscenities and makes disparaging comments about an employer on social media, where the comments may be viewed by customers, could be protected by the NLRA if the primary objective is to exercise Section 7 rights. Finally, overly-broad social media policies in employee handbooks like that used by Triple Play will not be permitted. Employers should review their policies to ensure that they are intended to prohibit protected speech.

Nicholas Fortuna, November 13, 2015

On September 28, the Ninth Circuit ruled that eyewear retailer, Luxottica, cannot require its employees to waive representative actions for violations of the Labor Code under California’s Private Attorney General Act (PAGA) in its arbitration agreements. This is important because up to now, employers were able to restrict employees to single plaintiff arbitrations for claims arising out of their employment. At issue was whether the Federal Arbitration Act preempted PAGA and thereby permitted waiver of representative actions.

The Ninth Circuit was presented with a case of first impression regarding the scope of the Federal Arbitration Act and the meaning of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, (2011). After analysis, the Court held that PAGA bars employers from compelling waivers of representative claims brought under it.

The Supreme Court in Concepcion stated that the Federal Arbitration Act preempted California law providing that class action waivers in certain consumer contracts were void. The rule was preempted because it conflicted with the purposes of the Federal Arbitration Act. The principal purpose of the Act is to ensure that private arbitration agreements are enforced according to their terms. The Act also embodies a liberal federal policy favoring arbitration agreements, notwithstanding any substantive or procedural policies to the contrary.

The Ninth Circuit pointed out that PAGA does not trigger federal preemption because arbitration of representative claims are permitted under it, thus, it did not create a conflict with the Federal Arbitration Act requiring enforcement of arbitration agreements. Preemption comes into play when state law stands as an obstacle to execution of the purposes and objectives of Congress as embodied in the statute in question. The Ninth Circuit stated that PAGA claims are consistent with the purposes of the Federal Arbitration Act’s goal to enforce arbitration agreements.

PAGA authorizes an employee to bring an action for civil penalties on behalf of the state against his employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds going to the state. PAGA was enacted to obtain civil penalties for violations of the Labor Code and to enlist private citizens to aid the government in compelling compliance with the Labor Code. The court reasoned that agreements requiring waiver of PAGA rights would harm the state’s interests in enforcing the state Labor Code and in obtaining civil penalties under the statute to deter future violations.

The Court explained that prohibiting waiver of representative PAGA claims does not diminish parties’ freedom to arbitrate. The court distinguished class actions from PAGA representative claims. A class action is a procedural device for resolving claims of absent parties on a representative basis. The Supreme Court has specifically held such procedures are waivable as part of an agreement to arbitrate. PAGA, by contrast, is a statutory action in which the penalties available are measured by the number of Labor Code violations committed by an employer. An employee bringing a PAGA action does so as the proxy or agent of the state’s labor law enforcement agencies. Absent employees’ claims are not vindicated by a PAGA action because PAGA actions do not aggregate individual claims. PAGA facilitates the state’s interest in policing Labor Code violations. Just as the state would if it brought an enforcement action directly against the employer.

The Ninth Circuit’s opinion regarding the validity of a waiver of such representative actions is an opening to maneuver around Supreme Court’s decision to enforce waiver of class actions. We may see more pro-employee states enacting similar statutes.

 

Paula Lopez, October 23, 2015.

As noted in a previously posted blog dated May 12, 2015, New York City passed the New York City Stop Credit Discrimination in Employment Act (“SCDEA”), which amends the New York City Human Rights Law to include provisions prohibiting employers, labor organizations and employment agencies from conducting credit checks as part of their hiring process and from discriminating against an applicant or employee based on credit history, with certain limited exceptions.  SCDEA went into effect on September 3, 2015.  The New York City Commission on Human Rights (“Commission”), the city agency charged with enforcing SCDEA, has issued Enforcement Guidance (“Guidance”) intended to provide employers covered by the law with the Commission’s interpretation of SCDEA’s essential provisions and insight as to what steps employers can take to ensure compliance with the law.

At the outset, the Guidance makes it clear that in passing SCDEA, the City intended for it to be the strictest law of its kind and for the Commission to narrowly construe the enumerated exemptions allowed under the law. The Guidance emphasizes that the exemptions do not apply industry-wide or to an entire employer but are limited to particular positions or roles.  Further, an employer can be liable for violating the SCDEA regardless of whether an adverse employment action occurred as a result of considering an individual’s credit history.  It is a violation to (1) request consumer credit history from job applicants, or potential or current employees, (2) request or obtain credit history of a job applicant or potential or current employee from s consumer reporting agency, or (3) use consumer credit history in an employment decision or when considering an employment action. Whether an adverse employment action was taken—when a violation of SCDEA has been found—can be considered in determining the amount of damages or penalties to be assessed against an employer in violation of the law.

According to the Guidance, the range in the amount of civil penalties that can be imposed against an employer found liable in an administrative action brought under SCDEA could be as high as $125,000 for non-willful violations and $250,000 for violations that are found to be a result of willful, wanton or malicious conduct.  These civil penalties are in addition to other remedies available under the NYCHRL such as back and front pay, and compensatory and punitive damages.  According to the Guidance, some of the factors the Commission will consider in determining the amount of civil penalties to be imposed include: the severity of the violation, existence of other violations, employer’s size (number of employees and revenue), and the employer’s actual or constructive knowledge of SCDEA.

Given the Commission’s intent to strictly enforce SCDEA and the significant fines employers found in violation of the act are exposed to, employers should diligently follow the requirements of the SCDEA.  With regards to when an employer can lawfully assert one of the enumerated exemptions and request and/or consider an applicant’s or employee’s credit history prior to making an employment decision, the Guidance provides some clarification as to which positions/roles were intended to be covered by the exemptions.

For each exemption under the SCDEA, the Commission’s Guidance provides the following clarification:

1.      Employers required under federal, state or local law to consider an individual’s consumer credit history for employment purposes (i.e. Financial Industry Regulatory Authority (“FINRA”).

Guidance: Exemption applies to FINRA members required to register with FINRA and not to employment decisions related to FINRA employees not subject to FINRA’s registration requirements (e.g., individuals performing functions that are “supportive of, or ancillary, or advisory to, ‘covered functions’ or engage solely in clerical or ministerial activities.”)

2.      When hiring and employing individuals as police offices, peace officers, or positions with a law enforcement or investigative function at the Department of Investigations (“DOI”).

Guidance: The exemptions under SCDEA are limited to police officers and peace officers as defined under NY Criminal Procedure Law §§ 1.20 (34) and 2.10, respectively, and only to DOI personnel having investigative functions.  The Guidance recognizes that there are many DOI positions without investigative functions. The exemption does not apply to employment decisions relating to clerical or civilian positions not having DOI investigative functions or falling outside the definition of police officer and peace officer.

3.      Positions subject to a DOI background investigation.

Guidance: Exemption only permits city agencies to request or consider consumer credit history collected by the DOI when making employment decisions related to appointed positions and positions requiring a “high degree of public trust”.  The Guidance considers the following positions as “involving a high degree of public trust”:

  • Commissioner titles (including Assistant, Associate and Deputy Commissioners);
  • Counsel titles (including General Counsel, Special Counsel, Deputy General Counsel, and Assistant General Counsel);
  • Chief Information Officer and Chief Technology Officer titles; and
  • Any position reporting directly to an agency head.

4.      Positions having bonding requirements under federal, state or city law or regulation.

Guidance: For the exemption to apply, bonding must be required not just permitted under City, state and/or federal law. (e.g., pawnbrokers, auctioneers, bonded carriers for U.S. customs, and ticket sellers & resellers.)

5.      Positions requiring security clearance under federal or state law.

Guidance: Applies only when the federal or state government will be reviewing consumer credit history as part of evaluating a person for security clearance, and such clearance is legally required for the person to fulfill his or her job duties.  “Security clearance” means ability to access classified information.

6.      Non-clerical positions having access to trade secrets, intelligence information or national security information.

Guidance: clarifies the definitions of “trade secrets”, “intelligence information”, or “national security information” contained in the SCDEA. The Commission interprets the definition of “trade secrets” to exclude a company’s general proprietary information such as handbooks or policies, and information regularly collected in the course of business or regularly used by entry-level, non-salaried employees and their supervisors or managers, such as recipes, formulas, customer lists, mailing lists, and processes.   With regard to exempted positions having access to “intelligence information”, the Commission will limit the exemption to cover only “those law enforcement roles that must routinely utilize intelligence information.” Similarly, the Commission narrowly construes the positions with access to “national security information” and limits the exemption to include “those government and government contractor roles that require high-level security clearances.”

7.      Positions having signatory authority over third-party funds or assets in excess of $10,000.

Guidance: the Commission interprets this exemption to only apply to executive-level positions with financial control over a company (e.g. CFO and COOs) and does not apply to all staff in a finance department.

8.      Positions involving digital security systems.

Guidance: Commission interprets this exemption to apply to executive level positions such as CTO or a senior information technology executive having control access to all parts of a company’s computer system.  The exemption does not apply to all staff in a company’s IT department or to all persons with access to a computer system or network available to employees.

The Commission also states in the Guidance that any employer who believes its use and/or consideration of an applicant or employee’s consumer credit information is exempted from the anti-discriminatory provisions of the SCDEA must maintain a record of its use of the exemption and be able to show that the position or role falls under one of the enumerated exemptions. According to the Guidance, an employer should inform employees or applicants of the claimed exemption and keep a record of its use for a period of five years from the date the exemption was used.  The Guidance also states that employers should maintain an exemption log to aid them in responding to requests for information from the Commission.  The exemption log should include the following information:

  1. The claimed exemption;
  2. Why the claimed exemption covers the exempted position;
  3. The name and contact information of all applicants or employees considered for the claimed exemption;
  4. The job duties of the exempted position;
  5. The qualifications necessary to perform the exempted position;
  6. A copy of the applicant’s or employee’s credit history that was obtained pursuant to the claimed exemption;
  7. How the credit history was obtained; and
  8. How the credit history led to the employment action.

While the Guidance provides crucial insight as to how the Commission will interpret the applicability of the enumerated exemptions, further clarification is needed on the applicability of some of the exemptions.  For instance, the Guidance is specific about the application of the exemption to FINRA employees but fails to mention how it applies to other self-regulatory organizations expressly covered by the law.  Similarly additional clarification is necessary with regard to individuals with authority to enter into financial agreements on behalf of the employer valued at $10,000 or more.  The Guidance only addresses the applicability of the exemption to CFOs and COOs but does not acknowledge that in many large corporations non-executive level employees may have such authority and would likely be covered by the exemption.

The SCDEA has been in effect for less than two months and the Guidance is an initial effort to assist employers in understanding the law and its applicability. The Commission will continue to provide clarification on the law through information on its website as well as the promulgation of formal rules.  In the meantime, New York City employers should take advantage of the insight provided by the Guidance as to how the Commission will be interpreting the SCDEA and review their policies for compliance with the law.

By: Megan J. Muoio, October 19, 2015

On September 19, 2015, three trade groups representing the home care industry filed an emergency application with the Supreme Court, seeking a stay of rules implemented by the Department of Labor (DOL). Those rules require home care workers who are employees of a business or outside provider to be paid minimum wages and overtime pay. Those employees, as well as home care providers hired directly by the person being served or someone on their behalf, had long been exempt from minimum wage or overtime rules. The Fair Labor Standards Act (FLSA) exempted categories of “domestic service workers,” including persons who provide “companionship services” and for persons who live in the home where they work.

The trade groups – the Home Care Association of America, the International Franchise Association, and the National Association for Home Care and Hospice – challenged the DOL’s new rules in the District Court for the District of Columbia. The groups argued that home care workers who care for the elderly and disabled in their homes had been exempt from the minimum wage and overtime pay provisions of the FLSA since it was implemented 77 years ago, regardless of whether they were employed by a business or outside provider or directly by the person being served. Judge Leon of the District Court agreed and vacated the DOL rules. On appeal to the Circuit Court of Appeals for the District of Columbia, the DOL prevailed and the rules were reinstated.

The trade groups argued that, in the absence of a stay from the Supreme Court, the DOL rules would go into effect on October 13, 2015 and would cause industry-wide confusion and irreparable harm. The application for a stay was to prevent implementation of the rules pending the trade groups’ forthcoming petition to the Supreme Court for a full appeal of the merits of Home Care Association of America v. Weil. The trade groups argued that they were likely to prevail on the merits of their petition because the DOL rules were at odds with the Supreme Court’s previous precedent in Long Island Care at Home v. Coke, a 2007 case in which the Court unanimously denied a home care worker’s request to be paid minimum wage and overtime pay. In that case, the Supreme Court deferred to the DOL’s then-current interpretation of the FLSA minimum wage and overtime exemptions for those engaged in “companionship services.”

The trade groups then sought a stay of the implementation of the DOL rules from the Supreme Court. The DOL argued that the home care industry had changed, with people increasingly receiving care in their homes by professionals employed by third-party agencies rather than in institutional settings. In light of the growth and professionalization of the home care industry, the DOL concluded that the exemption should no longer apply and that home care workers who provide care in patients’ home should receive the same wage protections as their counterparts in institutional settings.

On October 13, 2015, Chief Justice John Roberts, without explanation, denied the trade groups’ application for a stay. The denial had the effect of permitting the DOL rules to go into immediate effect. Notwithstanding the setback, the trade groups are expected to file a petition for writ of certiorari shortly, seeking the full Supreme Court’s review of the merits of the DOL’s new rules.

Nicholas Fortuna, October 7, 2015

The National Labor Relations Board has been actively changing long-standing legal precedent to be more employee friendly. Recently, the NLRB has issued a spate of high-impact decisions. All employers should take note of these decisions because its jurisdiction covers non-union as well as union workplaces.

Joint-Employer Status Test

On August 27, 2015 the NLRB made it easier to declare that separate entities are joint-employers, thereby making a company that does not directly employ the workers in question liable for the direct employer’s actions. In the case Browning-Ferris Industries of California Inc. the NLRB determined a staffing agency was a joint-employer with Browning-Ferris and declared that Browning-Ferris had an obligation to recognize and bargain with the staffing agency’s union. A new test to determine if separate entities are to be considered joint employers was established.

Under the new test for considering whether a joint-employer relationship exists, the board no longer requires the putative joint employer to exercise authority to control terms and conditions of employment. Now, indirect control is enough to establish joint-employer status.

Employers who use contract employees should review their agreements and practices to determine the extent to which they exercise control or even reserve the right to exercise control over contracted employees. Typically, employers reserve greater powers in their independent contractor agreements than they ever exercise. That excess of authority may lead to a finding of joint-employer status.

Successor Employer Rule Altered

This summer the NLRB held that a new employer subject to a state or local worker retention statute, which requires a new employer to continue to employ its predecessor’s workforce for a specific period of time, may be considered a successor employer under the National Labor Relations Act as soon as it assumes control of the business. As a result, the new employer can be held liable for the acts of the predecessor employer. Further, a new employer may have no choice but to recognize a union representing these predecessor employees.

The case at issue involved GVS Properties. Under New York City law a subsequent employer in the building service industry must retain its predecessor’s employees for a 90-day transition period, but previously was not considered a successor employer of those employees during the transition period. GVS was held to be a successor employee as soon as it took over operations from its predecessor and was required to bargain with its union.

Dues Deduction Upon Expiration of a Collective Bargaining Agreement

The NLRB ruled on August 27, 2015 that an employer may not unilaterally stop making dues deductions upon the expiration of a collective bargaining agreement. The Board reasoned that check offs were a mandatory subject of bargaining and should remain in place while the parties negotiate a new agreement. The Board explicitly overturned the Bethlehem Steel decision which held that an employer’s obligation to check-off union dues ends when its collective bargaining agreement expires. Until the recent decision, the Bethlehem Steel ruling was the law for 50 years. The decision overturning Bethlehem Steel came In The Matter of Lincoln Lutheran of Racine.

Virtual Organizing Permitted

The NLRB’s general counsel issued a memo detailing when an electronic signature would be acceptable to support showing of interest in a union representation case. According to the memo, the NLRB eliminated the requirement that a showing of interest in union representation be supported by actual signatures, making it easier to organize a drive for representation. Virtual organizing will allow unions to conduct campaigns more discreetly thereby limiting the employer’s opportunity to respond to an organizing drive.

The NLRB has shown little regard for precedent when trying to enhance workers ability to organize. We expect further strengthening of worker’s rights in decisions issued by the NLRB.