Would You Like Fries . . . and an Unfair Labor Practice Charge with That?

This post was contributed by Bruce D. Bagley and Lee E. Tankle of McNees Wallace & Nurick LLC's Labor & Employment Practice Group.

Mainstream media, attorneys, and business owners are discussing the meaning and impact of a two paragraph press release issued on July 29 by the Office of the General Counsel of the National Labor Relations Board (NLRB). That Office is the "prosecuting arm" of the NLRB, and in the press release, the General Counsel indicated he has authorized the issuance of unfair labor practice (ULP) complaints against franchisor McDonald's USA, LLC for the actions of its franchisees. In a typical franchisor-franchisee relationship, a franchisor, like McDonald's, may contract with a franchisee to provide the latter with use of the franchise name, logo, processes, recipes, etc., in exchange for an upfront franchise fee and sales-based royalties. So is this press release declaring McDonald's a "joint employer" with potentially over 13,000 United States franchisees the super-sized issue pundits have made it out to be?

Over the past two years, 181 ULP charges have been filed with the NLRB involving numerous McDonald's restaurants. The charges arose largely from the termination of a number of fast food workers who had participated in various protests and union organizing efforts at McDonald's franchised stores across the country. Per the General Counsel's press release, 68 of those cases were found to be meritless, 64 are pending investigation, and 43 were found to have merit. In those 43 cases found to have merit, the General Counsel contends that the various franchisees and McDonald's USA, LLC (the franchisor headquartered in Illinois) are "joint employers" and will therefore be named as parties to the complaints.

We have previously discussed the United States Court of Appeals for the Third Circuit's views on joint employer status under the Fair Labor Standards Act (FLSA), a different federal statute.

Why all the hubbub now under the National Labor Relations Act (NLRA)?

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Mailing FMLA Notices to Employees? Not So Fast

This post was contributed by Gina E. McAndrew, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Scranton, Pennsylvania.

Recently, the United States Court of Appeals for the Third Circuit issued an opinion analyzing the so-called "mailbox rule" in a case which centered on the receipt of an FMLA notice. In Lupyan v. Corinthian Colleges, Inc., Lupyan, the employee, submitted a request for leave from her position as an instructor with Corinthian Colleges, Inc. ("CCI"). Based on a suggestion by her supervisor to apply for short-term disability, she obtained a Certification of Health Provider form from her doctor. Pursuant to this form, CCI determined that she was eligible for FMLA leave. Lupyan met with CCI's Supervisor of Administration, who instructed her to indicate FMLA on her Request for Leave form, and changed her projected return-to-work date to a date in excess of twelve weeks based on the Certification form. Lupyan claimed she was never told of her rights under FMLA during the meeting; however, CCI claimed that it sent correspondence to Lupyan that same afternoon indicating that her leave was designated as FMLA leave and explaining her rights. Lupyan denied receiving the letter, and further denied any knowledge of actually being placed on FMLA.

More than twelve weeks after her leave began, Lupyan received a full release to return to work from her doctor. Lupyan was terminated shortly thereafter, in part because she did not return from her FMLA leave within the twelve weeks allotted for such leave. Lupyan claimed this was the first time she became aware she was placed on FMLA. She filed suit, alleging CCI interfered with her FMLA rights by failing to provide notice that she was on FMLA leave (and thus was unaware of the requirement to return to work within twelve weeks), and further alleging she was terminated in retaliation for taking such leave. The District Court for the Western District of Pennsylvania granted CCI's motion for summary judgment and Lupyan appealed.

Under the FMLA, employers are required to provide both general and individual notice to its employees. In terms of individual notice, the employer must give an individual employee written notice that the employee's absence falls under the FMLA and is governed by it. Once the employer is on notice of FMLA-qualifying leave it must take specific action, including notifying the employee of FMLA eligibility within five business days and notifying the employee in writing whether leave is designated as FMLA leave, the obligations and consequences for not meeting those obligations under the FMLA, and the amount of leave which will count against FMLA entitlement. Failure to provide this notice may constitute an interference claim; prejudice occurs when this failure renders the employee unable to exercise the right to leave in a meaningful way. 

The legal presumption under the "mailbox rule" is that if a letter is proved to have been put into the mail (by way of the post office or by delivery to the mailman), it is presumed that "it reached its destination at the regular time" and was received by the addressee. The Court noted that certified mail provides a stronger presumption of receipt, since it "creates actual evidence of delivery." Regular mail is a weaker presumption, since no receipt or proof of delivery exists. The Court acknowledged that such receipt can be proven by introducing evidence of the practices relating to the mail, such as a sworn statement from someone with "personal knowledge of the procedures in place at the time of mailing." The presumption is not conclusive- once a party has proven mailing, the other party has the burden of producing evidence, which can be minimal, to rebut the presumption.

Here, the letter was sent by regular mail, with no return receipt or tracking requested by the employer. Further, while CCI provided sworn statements by two individuals with actual knowledge of mailing procedures, the affidavits were submitted almost four years after the purported date of mailing. The Court found this to be a weak presumption of receipt under the mailbox rule and not enough to establish actual receipt. Additionally, the Court found that Lupyan's statement alone denying she received the letter was enough to create a genuine issue of material fact, reversing the lower court's order granting summary judgment and remanding the proceedings.

The Court summed up the key takeaway here, noting that "[i]n this age of computerized communications and handheld devices, it is certainly not expecting too much to require businesses that wish to avoid a material dispute about the receipt of a letter to use some form of mailing that includes verifiable receipt when mailing something as important as a legally mandated notice." In other words, when sending an FMLA notice to an employee, use certified mail!

Screaming Profanities and Threatening the Boss Not Enough to Get You Fired According to NLRB

This post was contributed by Adam L. Santuccian Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

Yep, that's right. The employee's outburst is too obscene to reproduce on the Blog, but you can review the Board's decision here. Suffice to say that the employee, who was employed for only about two months: (1) called the owner of the company a crook and a number of other colorful names; (2) the attack was personal and contained a veiled threat; and (3) was described as "physically aggressive" by a Board Administrative Law Judge. Should be enough to get you fired, right? Not with this Board.

The employee was a car salesman, and asked some general questions about restroom breaks and employee compensation during his first few days on that job. Pretty typical for a new employee. When the employee sold his first car, he questioned the commission payment he received and questioned the dealership's draw on commissions policy. At various times, the employee was told – if you don't like how we do things here, find yourself another job. (As much as we all would like to say that at times, you and your managers really need to avoid that statement.)

Eventually, the dealership's owner met with the employee to talk with him about his constant complaining. During the meeting, the employee apparently lost it, as described above, and was fired for the outburst.

The employee filed a complaint with the Board, and the ALJ initially concluded that the employee was engaged in concerted activity protected by the National Labor Relations Act, but that his belligerent, physically aggressive and menacing behavior lost the protection of the Act; and therefore, the termination was upheld.

The Board disagreed and reversed the ALJ's determination. The Board found that the Atlantic Steel factors, which are used to determine whether employee conduct lost the protection of the Act, all weighed in favor of the employee. The Board ordered the employee reinstated. The employer appealed to the 9th Circuit Court of Appeals, which determined that the Board's decision was internally inconsistent, i.e. did not make sense, and remanded the case to the Board.

On remand, the Board affirmed its earlier decision (surprise!). The Board noted that although one of the Atlantic Steel factors did weigh against the employee, overall the factors weighed in favor of protecting the employee's conduct. The Board concluded, again contrary to the ALJ, that the employee's conduct was not physically aggressive or menacing. The Board concluded, contrary to the ALJ, that the veiled threat was not really a threat. Ultimately the Board held that the employee's conduct did not lose protection of the Act.

What can we take from this case (besides a whole lot of frustration)? This Board is clearly willing to split hairs when evaluating employee misconduct and the Board's efforts to expand the protections of the Act continue – but we knew that. To us, it appears that this Board is only going to require an express (rather than implied) threat or actual physical violence in order to find that an employee's outburst loses protections of the Act. And that is a shame.

UPDATE: Still No Love for No Gossip Policy

We previously reported that a National Labor Relations Board Administrative Law Judge found that an employer violated the National Labor Relations Act by implementing a "no gossip" policy and firing an employee who violated the policy.

Not surprisingly, the Board has affirmed that decision (pdf).  We say it's not surprising because the Board's assault on employer policies has been ongoing and highly publicized over the past few years.

Suffice to say, employers must be sure to carefully craft policies to ensure compliance with the Act. In addition, employee disciplinary decisions should be closely scrutinized to ensure claims under the Act are not triggered.
 

Long-Term Employee Ineligible for UC Benefits for Violating Workplace Conduct Policies

This post was contributed by Joseph S. Sileo, an Attorney in McNees Wallace & Nurick's Labor & Employment Practice Group in Scranton, Pennsylvania.

After nearly 21 years of employment, a full-time clerk with Turkey Hill lost her job for engaging in several instances of bad behavior within a short period of time. The employee initially received a verbal counseling from her supervisor after telling two Spanish-speaking co-workers to stop speaking Spanish at work because it was a "pet peeve" of hers that employees should speak English when working in the United States. Then, only a few months later, the employer received a complaint that that employee was involved in an argument with a driver over the telephone during which she displayed her "middle finger" to the phone as the call ended, an unseemly gesture that was witnessed by an outside store vendor. Following this incident, the employee was advised that her behavior must improve and she was issued a written warning; when her supervisor attempted to give her copies of the Company polices that she had violated, the employee attempted to throw the policies in the garbage. Having had enough, the employer terminated the employee.

The employee filed a claim for unemployment compensation (UC) benefits and Turkey Hill challenged the employee's UC application. Turkey Hill pointed to its disciplinary policy prohibiting loud, argumentative, disruptive or otherwise unprofessional conduct toward or in the presence of others, including associates, vendors, visitors and the public, as well as its "Enduring Principles" policy which, among other things, required employees to treat others with fairness and respect and practice honesty and integrity in all relationships. Turkey Hill argued that the employee's conduct violated both policies and that her termination for such willful misconduct rendered her ineligible for UC benefits.

Not surprisingly, the employee's testimony differed significantly as compared to the employer's witnesses. As a result, the outcome of the case turned primarily on witness credibility. The employee testified that she "politely" asked her two co-workers not to speak Spanish when she was standing between them as it was rude for them to do so, she did not make a crude "middle finger" gesture during the phone call, and she never refused to read or attempted to throw away any policies presented to her by her supervisor.

Both the Referee following the hearing, and then the UC Board of Review on appeal, credited the testimony of the employer's witnesses over the employee's testimony, and determined that the employee's separation from employment was due to willful misconduct thus rendering her ineligible for UC benefits. The employee appealed.

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President Obama Signs Executive Order Prohibiting Federal Contractors from Discriminating Based on Sexual Orientation and Gender Identity

Frustrated with Congress's failure to pass the Employment Non-Discrimination Act (ENDA) and consistent with his recent Executive Order to raise the minimum wage to $10.10 per hour for employees of federal contractors, President Obama once again signed an Executive Order on Monday amending Executive Order 11246 to include "sexual orientation" and "gender identity" in the list of protected classes federal contractors may not discriminate against.

In light of the President's action, Executive Order 11246, originally issued by President Lyndon Johnson, will now prohibit federal contractors from discriminating "against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, gender identity, or national origin.” The Executive Order is not as broad as the proposed Employment Non-Discrimination Act, a law that would prohibit discrimination in employment based on sexual orientation or gender identity for all employers with 15 or more employees. There is no indication that Congress will act anytime soon to enact nationwide legislation prohibiting private employers from discriminating in hiring and employment on the basis of sexual orientation or gender identity.

Notably, the Executive Order does not contain any type of "religious exemption" meaning that religiously affiliated federal contractors and subcontractors must abide by the Executive Order. Under an Amendment to the Order issued by President George W. Bush, religiously affiliated contractors may favor individuals of a particular religion when making employment decisions. However, President Obama's Order does not allow religious organizations with federal contracts or subcontracts to consider sexual orientation or gender identity when making employment decisions. Federal law already prohibits discrimination against federal employees based on sexual orientation and President Obama's Order extends that protection to discrimination on the basis of gender identity.

What does this mean for many Pennsylvania employers? Frankly, not much. The Executive Order only applies to federal contractors and subcontractors. Unlike 18 other states and the District of Columbia, Pennsylvania does not have a law prohibiting employment discrimination based on sexual orientation or gender identity—however many of the Commonwealth's largest cities including Pittsburgh, Harrisburg, and Philadelphia do. While Pennsylvania employers are free to include sexual orientation and gender identity in the list of protected classes guarded by their discriminatory harassment policies, they are under no legal obligation to do so unless they are a federal contractor or subcontractor or covered by a local ordinance. Furthermore, according to the White House, 91% of Fortune 500 companies already prohibit discrimination based on sexual orientation; and 61% already prohibit discrimination based on gender identity.

The President's Executive Order requires the Department of Labor to prepare regulations to implement the requirements of his Order within 90 days. We will update you again when proposed regulations are released in mid-October.

Halbig v. Burwell: A Death Blow for the Affordable Care Act?

This post was contributed by Eric N. Athey, a Member in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Lancaster, Pennsylvania.

On July 22, 2014, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled in Halbig v. Burwell that the Affordable Care Act (ACA) authorizes the issuance of tax credits to assist individuals to purchase health coverage only on state-run exchanges. On the same day, a panel of the U.S. Court of Appeals for the Fourth Circuit reached the opposite conclusion in King v. Burwell, holding that ACA tax credits were also available to participants in federally-run exchanges. These decisions raise many questions; however, all that is certain at this point is that these two decisions, both issued by three-judge panels of larger appellate courts, will not be the final word on the subject.

Legislative Intent vs. Plain Language of the Law. At the heart of the Halbig case is a single sentence in Section 36B of the ACA, which states that the amount of a premium tax credit is based on the cost of a health plan that an individual enrolls in "through an Exchange established by the State . . . [under the ACA]." Given the ACA's failure to reference federally-run exchanges in its discussion of tax credits, the Court found that these credits may only be issued for coverage obtained through state-run exchanges. However, the Fourth Circuit and the dissenting judge in Halbig reached the opposite conclusion, reasoning that if one reads the entire text of the ACA, it is clear Congress's intent was to allow credits to be issued to participants in federally-run exchanges as well. As the dissent in the Halbig case argued, it seems unlikely that Congress intended to plant a "poison pill" in Section 36B that could tear down the ACA.

What Happens if the Halbig Decision is Upheld? If the decision stands, this would mean that individuals seeking to purchase coverage through any of the 36 federally-run exchanges (including Pennsylvania's exchange) could not qualify for a tax credit to assist with the cost of the premium. The decision would also have significant ramifications for the ACA's individual mandate and employer mandate. By making exchange coverage unaffordable to many potential purchasers (i.e. costing over 8% of household income), the decision could have the effect of exempting them from the individual mandate penalty. In addition, since employer mandate penalties are triggered when an employee obtains a tax credit to obtain exchange coverage, the elimination of tax credits in 36 states could effectively exempt employers from penalties in those states (including Pennsylvania).

Will the Halbig Decision be Upheld? At this point, the U.S. Department of Health and Human Services (HHS) is likely to pursue one of two options: (1) request an en banc rehearing of the Halbig case by all active judges on the court; or (2) petition for the case to be heard by the U.S. Supreme Court. If HHS chooses to pursue an en banc rehearing, their chances of prevailing are probably good – 7 of the Court's 11 active judges were appointed by Presidents who were Democrats (4 of whom were appointed by President Obama).

If this case eventually winds up in the Supreme Court, it is impossible to predict the outcome. The Supreme Court's recent decision in the Hobby Lobby case demonstrates that the Court is willing to scale back aspects of the ACA. However, the Halbig case has far broader implications and the Court may be reluctant to (in the words of Judge Edwards) "gut" the ACA. If the D.C. Circuit reverses itself en banc, it is also conceivable that the Supreme Court may not agree to hear the case since the two appellate courts to have considered the issue would then be in agreement. However, opponents of the ACA undoubtedly see Supreme Court review as a tantalizing opportunity to upend the law and, regardless of the ultimate decision by the D.C. Circuit, it is a safe bet that one of the parties is going to be seeking review by the high court.

EEOC Issues New Enforcement Guidance on Pregnancy Discrimination

The Equal Employment Opportunity Commission (EEOC) recently released updated enforcement guidance on pregnancy discrimination to help employers comply with both the Pregnancy Discrimination Act (PDA) and the Americans with Disabilities Act (ADA) when addressing pregnancy-related issues.

The PDA states that an employer may not discriminate against an employee or applicant for employment on the basis of pregnancy, childbirth, or related medical condition and that women impacted by pregnancy, childbirth, or related medical conditions must be treated the same as other persons similar in their ability or inability to work. The new EEOC guidance provides that the PDA not only covers a current pregnancy but also covers discrimination based on a past pregnancy or future pregnancy. The guidance also states that employers must provide light duty work for pregnant employees if the employer offers light duty assignments to employees with similar work restrictions as those who are not pregnant.

As you can see by looking at the guidance, it is quite lengthy. Here are some of the EEOC's key points all employers should know:

1) Despite the Supreme Court's decision in Burwell v. Hobby Lobby, the EEOC states that employers can violate Title VII if they provide health insurance that excludes coverage of prescription contraceptives, whether the contraceptives are prescribed for birth control or for medical purposes. The EEOC states that in order to comply with the law, "an employer's health insurance plan must cover prescription contraceptives on the same basis as prescription drugs, devices, and services that are used to prevent the occurrence of medical conditions other than pregnancy. For example, if an employer's health insurance plan covers preventive care for medical conditions other than pregnancy, such as vaccinations, physical examinations, or prescription drugs to prevent high blood pressure or to lower cholesterol levels, then prescription contraceptives also must be covered." My colleague, Eric Athey, examined this issue in his review of the Hobby Lobby decision. While this issue is yet to be examined by a court, employers should think carefully before excluding coverage for contraception from their insurance plans.

2) Neither an employee nor an applicant can be subject to discrimination because of a past pregnancy, childbirth, or related medical condition. This means that employees must continue to treat new mothers with caution when recently pregnant employees return from maternity leave. An adverse employment decision in close proximity to an employee's return to work could lead to a discrimination claim.

3) If an employer provides light duty work for employees who are not pregnant but who are similar in their ability or inability to work, the employer must also provide less physically demanding light duty work for pregnant employees.

4) While leave related to pregnancy, childbirth or related medical conditions can be limited to only females impacted by those conditions, if an employer extends leave to new mothers beyond the period of recuperation from childbirth (and beyond the amount of leave granted by the FMLA), it cannot lawfully refuse to provide an equivalent amount of leave to new fathers for the same purpose—this, according to the EEOC, means that if employers provide additional leave to mothers to bond with children, they must provide the same benefit to fathers. 

5) Pregnancy alone is not a disability under the ADA but pregnancy-related impairments are disabilities if they substantially limit one or more major life activities or did so in the past. Therefore, if a pregnant woman experiences difficulty walking or pregnancy-related carpel tunnel syndrome, employers may need to consider providing the pregnant employee with a reasonable accommodation unless doing so would create an undue hardship. The EEOC suggests that some reasonable accommodations for pregnant employees may include the redistribution of marginal, non-essential functions, modification of work schedules, and modifying workplace policies to allow pregnant workers to take more frequent breaks.

Note that much of what the EEOC states is just guidance. While the guidance is instructive and employers should look to it when making decisions, court decisions over the next few years interpreting laws governing pregnancy discrimination could deem this guidance moot.

Another Federal Court Finds "Fluctuating Workweek" Overtime Compensation Violates Pennsylvania Minimum Wage Act

This post was contributed by Adam R. Long, a Member in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

Recently, Judge Mitchell Goldberg of the United States District Court for the Eastern District of Pennsylvania issued a decision in Verderame v. RadioShack Corp., finding that the "fluctuating workweek" method of overtime compensation violates the Pennsylvania Minimum Wage Act ("PMWA"). Under the fluctuating workweek method, an employee receives a guaranteed fixed weekly salary for all straight-time earnings, regardless of the number of hours worked, and an additional one-half of the employee's regular rate for all hours worked over forty in the workweek. The employee's regular rate may change from week to week, because it is based upon the employee's actual hours worked. The fluctuating workweek method is expressly permitted by the Fair Labor Standards Act's regulations and used by employers to compensate non-exempt employees on a fixed salary basis while minimizing overtime costs.

Judge Goldberg's decision in Verderame is the third recent federal District Court decision finding that use of the fluctuating workweek method violates the PMWA. See Foster v. Kraft Foods Global, Inc.(W.D. Pa. 2012); Cerutti v. Frito Lay, Inc. (W.D. Pa. 2011). The Third Circuit has yet to consider the issue.

The Verderame decision highlights the often forgotten facts that the requirements of the FLSA and the PMWA are not identical and that employers must ensure compliance with both laws. In addition, the growing number of decisions finding that the PMWA does not permit use of the fluctuating workweek have a much broader impact than simply for those employers that use this method of overtime compensation. Employers found liable in overtime exemption misclassification cases often seek to use the fluctuating workweek to calculate damages, as this method results in the payment of only an additional one-half of the employer's regular rate for overtime hours. If the fluctuating workweek method is not available under the PMWA, employers will be required to pay an additional one and one-half of the regular rate for purposes of damages.

Unless and until the Third Circuit weighs in, decisions like Verderame make it increasingly risky for Pennsylvania employers to use the fluctuating workweek method. These decisions also have increased the potential value of overtime misclassification cases, providing yet another reason for employers to conduct wage and hour audits and ensure that all employees are properly classified for overtime purposes.

FAIL: Union Argues Arbitration Panel Should Ignore Public Employers' Ability to Pay

Yeah, I know, crazy right? Here is the story. Apparently the Union did not think so. When the American Federation of State, County and Municipal Employees ("Union") and the City of Philadelphia ("City") could not reach terms on a new collective bargaining agreement, they submitted the dispute to binding interest arbitration.

The Union was seeking, among other things, 8 percent annual wage increases! The City countered that it simply did not have the money to fund the Union's demands. The Union argued that the City's financial health was irrelevant. Huh? How can you pay for something if you don't have any money?

The Union's argument was essentially – cut programs, raise taxes, lay off other workers we don't care; how you pay for our 8 percent annual pay increases is your problem not ours! Insane, right?

Thankfully, the arbitration panel rejected the Union's argument and determined that it was appropriate to consider the City's ability to pay. However, the Union was undeterred. The Union petitioned the court to vacate the arbitration decision, arguing that the panel should not have considered the financial health of the City when rejecting their hefty wage increases. Thankfully, the court disagreed.

The court concluded that the Union's arguments lacked merit, and that it was appropriate for the arbitration panel to consider ability to pay when making decisions regarding wages and other compensation related items.

Thankfully, the arbitration panel and the court brought some sanity to what seemed like an insane dispute. Ability to pay is obviously highly relevant to consideration of pay and benefit demands. Public employers are facing increasing budget constraints these days and are often on the brink of distressed status. When evaluating union demands, public employers must consider their ability to pay and when appropriate explain to the union early and often that the budget simply cannot tolerate increased expenses. Where appropriate, lay the foundation for demonstrating the financial inability to meet the union's demands.