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.

Key Questions Left in the Wake of the Supreme Court's Hobby Lobby Decision

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

On June 30, 2014, the U.S. Supreme Court held in Burwell v. Hobby Lobby Stores, Inc. et al., that the Affordable Care Act's "contraceptive mandate", as applied to "closely held corporations", violates the Religious Freedom Restoration Act (RFRA). Much has been written about the decision authored by Justice Alito and its impact on the rights of corporations. However, most employers are still seeking clarity in terms of how the decision impacts their group health plans.

May any company now choose not to provide free contraceptive coverage as part of their health plan? No. At this point, the contraceptive mandate remains in effect for all employer health plans, except those that are grandfathered or non-grandfathered plans offered by (a) religious employers (e.g. churches); (b) certain religious nonprofit organizations; or (c) in light of the Hobby Lobby decision, for-profit "closely held" corporations that object to the mandate on religious grounds. In his opinion, Justice Alito did not preclude the possibility that publicly traded corporations could also voice valid religious objections to the mandate; however, given the diverse interests among shareholders in public companies, he observed that such religious objections are unlikely.

What is a closely held corporation? A broadly used IRS definition of "closely held corporation" is one in which more than 50% of all outstanding shares are held directly or indirectly by five or fewer individuals. However, Justice Alito never references any particular definition of the term in his opinion. It is possible that he intended his decision to apply only to closely held corporations within the IRS definition; however, it is more likely that Justice Alito used the term in a broader sense to include corporations with more than five shareholders who are of like mind from a religious standpoint (e.g. family businesses in which more than five family members are shareholders). The agencies charged with enforcing the ACA will likely be tasked with discerning which companies are closely held as contemplated in the Hobby Lobby decision and which are not.

May a closely held corporation be exempted from providing any form of contraception in its health plan? The owners in the Hobby Lobby decision objected to only four of the twenty means of contraception that are covered under the mandate. The four drugs, known as abortifacients or "morning after pills", were objectionable to the employers because they may prevent an already fertilized egg from developing any further. Although the owners in Hobby Lobby limited their objections to abortifacients, Justice Alito's opinion clearly anticipates that other employers will have broader religious objections to contraception; his holding is directed at the "contraceptive mandate" in general and not limited to abortifacient drugs. For this reason, it is likely that some closely held corporations with sincere religious objections to contraceptives may be exempt from covering most or even all of the methods of contraception covered by the mandate.

How will the exemption for certain closely held corporations be administered? The ball is in HHS's court on this question. Justice Alito alluded to several ways that HHS might accommodate the religious beliefs of closely held corporations while maintaining access to free contraceptive coverage for affected employees. These include a government-paid benefit or an arrangement through which employees obtain the benefit directly through the employer's insurer (not through the employer's plan). It is likely that HHS will create a process through which closely held corporations will file an exemption application in which they disclose the basis and scope of their religious objection. Such processes already exist for certain employers with respect to other health care mandates such as mental health parity requirements.

Are there other liability risks associated with excluding contraceptive coverage? An often overlooked aspect of the debate over the contraception mandate is that the Equal Employment Opportunity Commission (EEOC) has, in the past, taken the position that an employer's exclusion of contraception from a group health plan may constitute unlawful discrimination under Title VII and the Pregnancy Discrimination Act. In a 2000 agency decision, the EEOC reasoned that any plan which covers preventive prescription drugs such as vaccinations and blood pressure medication must also cover the "full range of contraceptive choices" for women other than abortion. It will be interesting to see whether this analysis holds up in court in light of the Hobby Lobby decision. Until that question is resolved, employers who may be exempt from the contraception mandate under ACA may nevertheless face EEO challenges if they exclude coverage for contraception.

Fair Share Fees Unconstitutional in the Public Sector? Not So Fast

The United States Supreme Court has been issuing employment-law related decisions like a boss over the past week or so. Many observers thought that the Court's decision in Harris v. Quinn (pdf), a case examining the constitutionality of union fair share fees, would result in more fireworks (sorry, a little 4th of July humor for you). However, in most respects, Harris was a dud.

The issue in Harris was whether a requirement that public sector employees pay "fair share" fees to a union was compelled speech in violation of the First Amendment. Fair share fees are fees that non-union members must pay to the union in order to reimburse the union for the costs of representing the employees in collective bargaining and related matters. These fees are required even though the employee is not an actual member of the union because, under the law, the union has the obligation to fairly represent all employees, whether or not the employee is a member of the union. The payment of fair share fees is typically authorized by state law. In those states where fair share fees are authorized by law, non-union member employees are typically forced to pay the fair share fee.

That was the case in Harris, which dealt with a specific group of employees, Personal Assistants (PAs), who provide in-home personal care services funded by Medicaid. Although employed by the individual to whom they are providing care, PAs are also employees of the state of Illinois by operation of state law. In addition, under Illinois law, PAs were permitted to form a union and nonmembers could be compelled to pay fair share fees. The PAs were represented by the Service Employees International Union and several of the non-union member PAs took issue with the required payment of fair share fees to a union that they did not support.

The Supreme Court has previously held fair share fees to be constitutional as they can assist in keeping labor peace and prevent non-dues paying employees from "free-riding "on the backs of dues-paying members. The majority in Harris really dismantled this prior case law and concluded that these justifications for the payment of fair share fees were not sufficient to overcome a First Amendment challenge. However, the Court came up short of expressly overruling its 1977 decision in Abood v. Detroit Bd. of Educ., which had declared fair share fees constitutional.

The Court decided Harris based on its specific facts, and held that the PAs were in a unique situation. The Court held that the justifications supporting fair share fees were not sufficient to overcome the challenge with respect to the PAs. The Court found that the labor peace justification was flawed. In addition, the Court found that the union was limited in the ability to negotiate on behalf of the PAs, and therefore, the free-riding concern was not that significant with respect to the PAs. Therefore, the Court concluded that, in this specific situation, the First Amendment prohibits the collection of the fee from PAs who do not want to join or support the union.

Although somewhat factually complicated, the Harris case had the potential to send shock waves through the public sector labor community. If fair share fees were declared unconstitutional, public sector unions would have suffered a significant negative financial impact, and as a result, their political clout would have likely been significantly diminished.

In the end, it appears that this was a case of much Abood about nothing (sorry a little stare decisis humor). Fair share fees in the public sector survive in most cases, for now. The Court did significantly undermine the legal precedent upon which fair share fees stand and that could mean a change in the future. But for now, fair share fees are constitutional in the vast majority of cases.
 

U.S. Supreme Court Finds Sworn Testimony Outside Scope of Regular Job Duties Entitled to First Amendment Protection

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

While the labor and employment law world is abuzz after the decisions in Burwell v. Hobby Lobby and Harris v. Quinn (cases this Blog will cover in the coming days), the United States Supreme Court also issued a decision further clarifying protected speech under the First Amendment. In Lane v. Franks, et al., the Court analyzed whether a public employee, testifying under subpoena, was entitled to First Amendment protection when his testimony was outside of the scope of his job duties.

The employee, Edward Lane, was hired by Central Alabama Community College as Director of Community Intensive Training for Youth ("CITY"), a statewide program in Alabama for underprivileged youth. Shortly after his employment began he conducted an audit of CITY's expenses. The audit led to the termination of an Alabama State Representative, who was on CITY's payroll. Following the termination decision, Lane provided testimony against the Representative in support of an FBI investigation of the Representative. Shortly after his testimony, twenty-nine CITY employees were laid off, including Mr. Lane. While twenty-seven of these terminations were rescinded, Mr. Lane's was not.

Lane filed suit, claiming he was terminated in retaliation for providing testimony against the Representative. The District Court found that his testimony was not protected by the First Amendment. The District Court stated that public employees speaking pursuant to official job duties were "not speaking as citizens for First Amendment purposes." The District Court opined that Lane learned of the information included in his testimony while an employee of CITY, so his "speech [could] still be considered as part of his official job duties." Lane appealed, first to the 11th Circuit Court of Appeals and then to the United States Supreme Court.

In overturning the lower courts' decisions, the Supreme Court restated the special test applied to public employees for First Amendment protection purposes. The first part of this analysis examines whether the speech in question was made pursuant to official duties or as a citizen and whether the employee was speaking on a matter of public concern. If the employee is speaking as a citizen and on a matter of public concern, the second part of the test is whether the public employer has "adequate justification for treating the employee differently from any other member of the general public."

The Court noted that "[t]ruthful testimony under oath by a public employee outside the scope of his ordinary job duties is speech as a citizen for First Amendment purposes," even when that speech "relates to his public employment or concerns information learned during that employment." The Court noted that such testimony is a "quintessential example of speech as a citizen," as it comes with the obligation to tell the truth. This obligation is separate and distinct from any obligations a public employee may have to his employer.

The Court opined that the essential question is whether the relevant speech is "ordinarily within the scope of an employee's duties" and "not whether it merely concerns those duties." In its analysis, the Court found that such public employee speech holds special value because of how public employees gain knowledge, and is "necessary to prosecute corruption by public officials." The Court ultimately found Lane's sworn testimony, pursuant to a subpoena, to be speech as a citizen and on a matter of public concern. In applying the second step of the analysis, the Court found that the employer had no legitimate interest in treating Lane differently from any other member of the public, finding that his testimony did not involve any false statements or disclose any privileged or confidential information.

The Court's decision provides useful guidance to public employers in the area of First Amendment protection for public employees. However, future decisions will likely shed light onto when speech is "ordinarily within the scope of an employee's duties" sufficient to warrant First Amendment protection. Many employees, especially public employees, provide testimony on a regular basis pursuant to official job duties. Accordingly, while Lane is helpful, First Amendment issues must still be evaluated on a case-by-case basis.

U.S. Supreme Court Issues Long-Awaited Decision in NLRB v. Noel Canning; President Obama's Recess Appointments to NLRB Deemed Unconstitutional

This post was contributed by Bruce D. Bagley, a Member in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

On June 26, 2014, the United States Supreme Court unanimously found that President Obama acted unconstitutionally when he made several recess appointments to the National Labor Relations Board ("NLRB") in 2012. The Court, in an Opinion authored by Justice Breyer, affirmed (albeit for differing reasons) the January 2013 judgment by the U.S. Court of Appeals for the District of Columbia Circuit. (Similar rulings holding the appointments to be unconstitutional had been made by the Fourth Circuit Court of Appeals and our own Third Circuit Court of Appeals.)

As we have reported previously, on January 4, 2012 the President appointed three individuals to be Board Members. He had previously been unable to procure sufficient support for his appointments from the United States Senate, which under the U.S. Constitution, must confirm such presidential appointments. The President thereafter made the appointments anyway, claiming that the Senate was in "recess" for its 2011-2012 winter holiday break, and that he had authority under the Constitution's Recess Appointments Clause to make such appointments at that time. The Senate, however, did not consider itself to be in recess, as it had agreed to reconvene every three business days during the period from December 20, 2011 through January 23, 2012.

The Court split 5-4 on the rationale for confirming the Court of Appeals' judgment. Justice Scalia and the three more conservative Justices would have more broadly limited the president's recess appointment powers. Justice Breyer and the four more liberal Justices concluded that the Recess Appointments Clause does empower the president to fill vacancies during a recess of sufficient length, which Breyer opined should be a hiatus of at least 10 days. But here the Senate had been on only a three day break, according to Breyer, because it was meeting every three business days. All nine Justices agreed that a three day break in business was not of sufficient length to constitute an actual recess which would allow the President to make these unilateral appointments.

Turning more specifically to the Board's findings in the case at issue, the Company's argument in Noel Canning was simple and direct. It argued that the Board's finding it had committed unfair labor practices must be overruled because the Board lacked a proper quorum, due to the fact that three of the Board's five Members had been unlawfully appointed. The Supreme Court readily agreed with the Company's position. And by doing so, the Court has implicitly invalidated literally hundreds of NLRB Decisions issued from January 4, 2012 to July 30, 2013, the date on which new Members were finally and lawfully confirmed by the Senate during its regular session.

Many of the Board's Decisions issued during that January 2012 to July 2013 time period were quite significant. In Costco Wholesale Corp., 358 NLRB No. 106 (2012), the Board had invalidated a policy prohibiting employees from making defamatory statements about the company. In Banner Health System, 358 NLRB No. 93 (2012), the Board had found unlawful a blanket policy prohibiting employees from discussing ongoing investigations of misconduct with other employees. In D.R. Horton, 357 NLRB No. 184 (2012), the Board had concluded it was unlawful for employers to require employees to arbitrate claims rather than file civil actions. In WKYC-TV, Gannet Co., 359 NLRB No. 30 (2012), the Board had held it was unlawful to cease deducting union dues from employees' pay checks after expiration of the collective bargaining agreement. All of these cases, and many others, will now be of no precedential value, given the lack of a proper quorum at the Board when the decisions were issued.

Many of you may recall what happened the last time the Supreme Court found that the Board lacked a proper quorum, in New Process Steel v. NLRB, 130 S.Ct. 2635 (2010). It took the Board several years to re-evaluate and reissue determinations on hundreds of cases, just as the Board must presumably do now as a result of Noel Canning. But in what must be of most import for those of us on the management side, the Board is currently at full strength (three Democrats and two Republicans). It is unlikely that the present Board will ultimately deviate from the harshly pro-union precedent established by the Obama-appointed recess Board Members. Long-term, Noel Canning may be remembered much more for its rebuke of President Obama's usurpation of legislative authority than it will be for its impact on principles of substantive labor law.

NLRB Continues to Throw Up Roadblocks for Internal Investigations

As we previously reported, the National Labor Relations Board has thrown down some pretty significant roadblocks for employers attempting to conduct thorough and actionable internal investigations. The Board continued those efforts recently when it declared that an employer's request that a union-covered employee sign his own witness statement at the conclusion of an interview was unlawful.

In Murtis Taylor Human Services Sys., the Board first held that a union representative was within his rights when he advised an employee not to answer questions posed during an investigatory interview. The Board's hair splitting on this issue was evident, at various points in the decision the Board states:

  • The union rep advised the employee not to answer certain questions until the employer clarified the nature of the alleged policy violation.
  • At no time during the interview did the union rep attempt to prevent the employee from answering questions.
  • Although the union rep advised the employee to refrain from answering...

We are not sure how the Board reconciled these seemingly contradictory conclusions. But without a doubt, this decision will lead to more aggressive interference from union reps during investigatory interviews, which in turn will lead to poorer overall investigative results. Ironically, that will very likely be a negative outcome for both employers and employees.

In addition, the Board found that the employer violated the Act by directing an employee to review the notes taken during his interview, make any changes that were necessary and then sign the document. The employee was even told to take the statement to his attorney for review, but he would still need to sign it. The Board held that by unilaterally implementing the signature requirement without bargaining with the union, the employer violated the National Labor Relations Act.

The employer attempted to argue that the management rights clause in its contract with the union allowed it to implement reasonable rules and regulations such as the signature requirement. However, the Board quickly dispensed of that argument finding that the contract clause was not specific enough. As it stands, an employer without a prior practice of requiring employees to sign witness statements must bargain with the union prior to implementing such a requirement.

The principles set forth in this decision are specific to unionized workforces, for now. The decision in Murtis Taylor further erodes unionized employers' ability to conduct thorough and accurate internal investigations. Employers will likely face significant interference from union representatives during investigatory interviews, which will very likely impede the fact gathering process. In addition, employers may be unable to secure an employee's signature on a witness statement, which may lead to more employees changing their stories during the investigation process. Unfortunately, employers' ability to police the workforce continues to be impaired by decisions of the Board.