In a closely watched case for employers, the Third Circuit Court of Appeals, which has jurisdiction in Pennsylvania, New Jersey, Delaware and the U.S. Virgin Islands, recently held that retiree healthcare benefits provided in a collective bargaining agreement (“CBA”) may be subject to modification following the expiration of the CBA.

Grove v. Johnson Controls, Inc. was a class action suit brought on behalf of a group of retirees, who were all former bargaining unit members.  Generally, the retirees alleged that they were entitled to healthcare benefits “for life” pursuant to the terms of the CBAs in place at the time of retirement.  When the employer placed a cap of $50,000 on the amount of benefits to be paid to the retirees, they brought suit.  The retirees argued that their entitlement to healthcare benefits had vested, and that the employer’s decision to cap their benefits was a violation of the Labor Management Relations Act and/or the Employee Retirement Income Security Act.

The appellate court affirmed the lower court’s decision and rejected these arguments.  The court held that the employer was not required to provide retirees healthcare benefits for life, and instead was only required to provide those benefits for the duration of the relevant CBA.  Essentially the court held that when the CBA expired, so did the employer’s obligation to continue to provide retiree healthcare benefits.  In reaching its decision, the court applied ordinary principles of contract interpretation, and noted that those principles provide that all contractual obligations cease upon the expiration of the CBA.

The court’s holding does leave open the possibility that other retirees could establish a vested entitlement to lifetime retiree healthcare benefits if the CBA language supported such a right.

As noted, this is an important decision for employers.  Many employers face significant legacy costs related to retiree healthcare, pension benefits and other post-employment benefits.  In light of Grove, many employers may begin to evaluate their post-employment benefit obligations.  However, these employers must carefully evaluate any such contractual obligations, because as Grove makes clear, whether retiree healthcare benefits are vested for life will be determined on a case-by-case basis with reference to the specific CBA language.

In City of Allentown, the Pennsylvania Supreme Court ordered the City to implement an interest arbitration award which contained (among modifications to wages, sick leave, vacation, pension and overtime) a minimum staffing requirement of 25 firefighters per shift.

As every public sector employer and practitioner knows, a municipality has no obligation to bargain with a union representing police officers or firefighters over inherent managerial policy (overall budget, standards of service, organizational structure, selection and direction of employees).  I mean, it says so, right there in the Pennsylvania Labor Relations Act!  The PLRA is forever linked to Act 111, which makes it mandatory for municipalities to bargain with police and fire unions over the terms and conditions of employment (compensation, hours, working conditions, other benefits).

Act 111 also provides the mechanism for municipalities and unions to submit their disputes to binding interest arbitration, but only those disputes which concern mandatory subjects of bargaining.  An arbitration panel that issues an award on a topic that is a managerial prerogative exceeds its powers.

But, what happens when a dispute concerns both a mandatory subject (i.e. it is rationally related to the terms and conditions of employment) and a managerial policy (i.e., budget or direction of personnel)?  Well, then the question is whether bargaining with the union over the issue would unduly infringe on the municipality’s essential managerial responsibilities.  That is the analysis that the Supreme Court applied to the minimum staffing dispute facing the City of Allentown and the International Association of Fire Fighters Local 302.

Prior case law left us with this:  the total number of firefighters that a municipality employs is a matter of managerial prerogative and a municipality need not bargain over that number.  An arbitration award that mandates a total complement number is illegal.  Prior case law also left us with this:  the number of firefighters actually assigned to a particular station or to a piece of fire equipment is a mandatory subject of bargaining, as it is rationally related to the safety of firefighters, i.e. a working condition.  So, an arbitration award that mandates the minimum crew on each rig is perfectly legal.

Confused?  Citing safety concerns and relying heavily on arbitration testimony that increased staffing leads to a safer working environment and a decrease in injuries and physical stress, the Court concluded that minimum staffing had a “direct and significant impact on firefighter health and safety” and did not unduly infringe on the City’s financial burdens.

More directly, the Court (currently comprised of 1 elected Republican, 5 elected Democrats and 1 Republican appointed by a Democrat Governor) did little more than pay lip service to how minimum staffing leads to increased overtime, or how increased overtime leads to increased pension expenses, or how increased pension expenses lead to unfunded pension liabilities, or how unfunded pension liabilities are crippling so many municipalities across the Commonwealth.

So what now? It appears that the overall complement is still a decision left for the public employer; however, once that number is set, then the parties must negotiate regarding the number of employees assigned to each shift.  Certainly, this leaves many questions unanswered.  And certainly, the impact on municipal budgets, already strained and struggling, will be significant.

In 2010, two employees filed a claim against their former employer, Robert Half International, Inc., alleging that it violated the Fair Labor Standards Act (“FLSA”). In addition to individual claims, the plaintiffs brought a collective action on behalf of all other similarly situated employees. The plaintiffs, however, had signed employment agreements containing arbitration clauses, which generally required that any dispute arising out of their employment be submitted to arbitration. It was silent as to class-wide claims.

The employer filed a motion to compel the employees to resolve their claims through arbitration on an individualized basis. The court ordered the employees to submit their claims to arbitration but left for the arbitrator to decide whether the claims could proceed on a class basis. The arbitrator subsequently ruled that class arbitration was permitted under the agreements. The employer appealed and argued that the question of whether the employees could submit claims to arbitration on a class-wide basis is one to be decided by the courts, not an arbitrator.

The First Shoe

The Third Circuit agreed. The court first explained that it is generally the province of the courts to resolve “questions of arbitrability.” That is, courts have narrow authority to decide whether or not an arbitration clause applies to particular claims and/or particular parties. On the other hand, arbitrators decide all issues they have been authorized by the parties to resolve. This includes procedural questions, and in traditional litigation, questions of class are procedural in nature. So, in this case, the court was presented with the following question: when an arbitration clause is silent as to arbitration on a class basis, is the permissibility of class arbitration a “question of arbitrability” to be decided by the court, or is it a procedural question to be decided by an arbitrator?

In a precedential opinion issued in 2014, the Third Circuit held that it was a question of arbitrability reserved for the court, because it was an issue of whether the clause applies to particular claims and/or parties. With this ruling, the Third Circuit then remanded the case to the district court to determine whether the employment agreements authorized class arbitration. On remand, finding no explicit language in the arbitration clauses, and finding no other evidence to the contrary, the district court found that class arbitration was not permitted under the agreement. The employees appealed.

The Other Shoe (sort of)

In a non-binding decision issued at the end of January, the Third Circuit agreed that class arbitration was not permitted. First, the court recognized that “a party may only be compelled to submit to class arbitration if there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l, Inc., 559 U.S. 662, 684 (2010). To determine whether the parties agreed to class arbitration in this case, the court first looked for explicit language of authorization, noting that under Third Circuit precedent, “silence regarding class arbitrability generally indicates a prohibition.” Quillion v. Tenet HealthSystems Phila., Inc., 673 F.3d 221, 228 (3d Cir. 2012). It found no explicit language. Despite this finding and its precedent concerning the silence of class arbitration, the court did not stop there. It went on to look for implicit authorization elsewhere in the employment agreement. It again found nothing and affirmed that the agreement did not authorize class-wide arbitration.

While this ruling resolves this case and gives guidance moving forward, it does not definitively answer whether the absence of explicit language precludes class arbitration. To the contrary, the court’s analysis suggests that class arbitration could be inferred from other language in the employment agreement. So, going forward, to avoid a court making such an inference – one contrary to your true intent – inclusion of explicit language prohibiting class arbitration remains the best policy. However, you must be aware that the National Labor Relations Board takes the position that explicit prohibitions of class arbitration violate the National Labor Relations Act. Three courts of appeals, among other courts, have disagreed and overturned the Board’s position. Stay tuned, as the Supreme Court of the United States is set to resolve this question later this year.

On November 3, 2016, the National Labor Relations Board issued a Decision and Order in Trump Ruffin Commercial, LLC, finding that the Trump International Hotel, Las Vegas unlawfully refused to bargain with UNITE HERE International Union after the union won a representation election among the Hotel’s housekeeping, food and beverage and guest service employees.

….In other news, just five days later, Donald Trump was elected President of the United States with the pledges to Make America Great Again, to cultivate more good paying jobs for Americans and to undo much of the agenda of the Obama administration.

Over the past several Presidential transitions, the Human Resources community has become accustomed to the swinging pendulum in the areas of labor and employment law.  We know change is coming.  We’re just not always sure what exactly it will involve.   Everyone remembers the threat of unions being certified on the basis of a card check, right?  That didn’t happen in 2009, but of course quickie elections did.  So making specific predictions on Inauguration Day can be dangerous.   But as the new Administration now has officially taken over, we have to at least try.

Here’s an easy one:  President Trump is unlikely to be appointing what we would call traditional candidates to run the departments and agencies that regulate the American workplace.    While he has nominated some people who have significant governmental service on their resumes, the current list includes a fair share of people with no such experience – – CEOs, philanthropists, investment bankers, a neurosurgeon, even the co-founder of World Wrestling Entertainment.   These appointments do not signal “business as usual” for the federal government, nor did the President who, in his inaugural address, pledged to transfer power from Washington back to the American people.

At first blush, this would portend wholesale rollback of workplace regulations.  Indeed, President Trump’s nominee for Secretary of Labor, fast-food executive Andrew Puzder, has been a critic of substantially increasing the minimum wage and a vocal opponent of the Obama administration’s efforts to make more workers eligible for overtime pay.  And critics have noted similar opposition by other nominees to what has been the recent mission or focus of the agency that they may be leading (See Governor Rick Perry and Betsy DeVos).

But here’s the rub:  a substantial portion of President Trump’s electoral base of support likely will not support the pendulum swinging back in ways that make their workplaces less safe or adversely impact their earnings.  So…this will be a bit more complicated.

What can we say now in January 2017 with confidence?

  • We’re not going to get back all of that time we spent learning the ever changing minutiae of the Affordable Care Act.  But we can certainly anticipate that there will be new regulation impacting employer provided health insurance.
  • We will see change in leadership at the Equal Employment Opportunity Commission.  The current EEOC Chair’s term will end in July 2017, and the new Chair will likely fill the now vacant EEOC General Counsel position.   That new leadership is less likely to retain the current EEOC’s focus upon pay equity issues and seeking to expand gender identity and sexual orientation protections through selective litigation.   And let’s not forget the agency’s proposed regulations that would require employers to provide compensation data and hours for all employees as part of the EEO-1 reporting process.  We think that it is unlikely that these requirements will become effective in March 2018, as currently planned.
  • The NLRB will be looking at the bureaucratic version of Extreme Home Makeover.  Readers of our Annual NLRB Year in Review will recall that the Obama Board has involved itself in everything from revising the representation election timeline, to creating rights to use your email system for organizing activity to uncovering the dastardly hidden meaning of the most innocuous provisions of your employee handbook.  They expanded the concept of joint employment to the point you might have to sit at the bargaining table to discuss wages, benefits and working conditions of people who are not even your employees.  And then when they were done with that, they even tried to get involved in college football!  The party’s soon over at the Board.  President Trump will have the opportunity to fill two current Member vacancies on the Board as soon as he gets down to work.  More critically, by November he will have the opportunity to replace NLRB General Counsel Richard Griffin Jr., an Obama appointee, former union lawyer and spearhead for most of the NLRB’s most aggressive initiatives.
  • OSHA recordkeeping requirements should be reduced.  We know how this has been an area of focus over the past 8 years and has caused more work for employers.  And the new silica rules and anti-retaliation rules that seek to effectively prohibit mandatory post-accident drug testing and safety incentive programs may soon be on the cutting room floor.

So, that’s enough prognostication on Day 1 of the Trump Administration.  Stay tuned!

 

Public employers in Pennsylvania beware: if you implement an attendance policy designed to get your employees to show up for work, you may commit an unfair labor practice!  If your employees are represented by a labor union, and your policy outlines disciplinary action, then you must bargain with the appropriate union before issuing discipline under the policy.  The employer in Chester Upland Sch. Dist. v. Pa. Labor Relations Bd., learned that the hard way.

In that case, the public school district unilaterally adopted a new attendance and punctuality policy.  The new policy applied progressive discipline to employees who reached a certain number of absences due to personal illness.  The updated policy was adopted shortly after the expiration of a collective bargaining agreement between the district and its employees.

Upon learning of the change, the employees’ union filed an unfair labor practice charge, arguing that the district committed an unfair labor practice by adopting the policy without engaging in collective bargaining.  The union pointed to the prior collective bargaining agreement’s sick leave provisions, which provided each employee with eleven sick days per school year and was silent on discipline.  The district countered that the updated policy did not impose a new source of discipline; employees were always subject to discipline for attendance violations.  Rather, according to the employer, the new policy simply advised employees as to how attendance issues were tracked for disciplinary purposes.

The Pennsylvania Labor Relations Board rejected the employer’s arguments, finding that the district committed an unfair labor practice by unilaterally changing the terms and conditions of employment through adopting the new attendance policy.  The district appealed to the Commonwealth Court, which upheld the Board’s determination.  The Court provided several reasons for doing so.

First, it recognized the PLRB’s long history of treating sick leave policies as mandatory subjects of collective bargaining.  Second, the Commonwealth Court held that new policy did not simply explain how the district tracked absences for disciplinary purposes; instead, it specifically imposed progressive discipline for using sick days.  An employer’s unilateral changing of terms and conditions of employment, explained the Court, is an unfair labor practice regardless of whether it happens during the term of a CBA, following the expiration of a CBA or during the course of negotiations.  Moreover, the new policy directly conflicted with the express terms of the collective bargaining agreement, which did not provide for disciplinary action.

This case serves as an important reminder to public employers in Pennsylvania that when adopting new policies, a careful examination of the appropriate collective bargaining agreements is required.  Before implementing new rules that can result in disciplinary action, negotiation is typically required.  Adopting new disciplinary rules without engaging in collective bargaining will not withstand the scrutiny of the PLRB or Pennsylvania courts.

In a recent decision, the National Labor Relations Board confronted the issue of whether it has jurisdiction over The Pennsylvania Virtual Charter School (PVCS) – a school formed pursuant Pennsylvania’s Charter School Law. In addressing the issue, the Board was confronted with two questions: (1) whether the school was exempt from the National Labor Relations Act (the “Act”) as a political subdivision; and (2) if the school was not exempt, whether the Board should nevertheless exercise its statutorily-granted discretion to decline jurisdiction. It answered both questions with a resounding “no.”

Political Subdivision Exemption

Political subdivisions are excluded from the list of “employers” subject to the Act. According to the Supreme Court of the United States, an entity is a “political subdivision” if it was created directly by the state, so as to constitute departments or administrative arms of government, or it is administered by individuals who are responsible to public officials or to the general electorate.

Applying this test, the Board held that PVCS was not created directly by the Commonwealth of Pennsylvania, but was a created by private individuals that formed a non-profit corporation. To reach this conclusion, the Board asked whether PVCS was created by a governmental entity, legislative or judicial act, or public official. It found that the answer was no. The Board found it largely irrelevant that: (1) the school’s charter was – as it must be under the Charter School Law – issued by the Pennsylvania Department of Education; (2) PVCS received ninety-seven percent of its funding from the Commonwealth of Pennsylvania; and (3) the Charter School Law places employees of cyber charter schools within Pennsylvania’s public employee labor relations system.

Moreover, the Board found that PVCS was not administered by individuals who are responsible to public officials or the general electorate. Under this prong of the political subdivision test, the Board examined if the administrators are individuals appointed by, or subject to removal procedures applicable to, public officials. PVCS’ board of trustees were appointed and removed pursuant to the school’s bylaws. The bylaws provided that sitting board members appoint and remove other board members, and only board members appoint and remove administrators. Under the Charter School Law the board members are statutorily deemed “public officials.” The Board held that despite the Charter School Law’s designation of the board members as “public officials,” they were not public officials for purposes of the Act. It reasoned that “PVCS’ board was created and governed by its internal bylaws (the first board was selected by the private citizens . . .) and is a self-perpetuating entity.” Accordingly, the Board found that PVCS was not administered by individuals responsible to public officials or the general electorate and was not a political subdivision.

Declination of Jurisdiction

Having concluded that PVCS was not exempt as a political subdivision, the Board finally examined whether it would nevertheless exercise its discretion to decline jurisdiction. PVCS argued that the Board should decline jurisdiction because cyber charter schools do not have a substantial effect on commerce and exercising jurisdiction would supplant state control. The Board found that PVCS had 3000 students, it had an operating budget in the millions of dollars each year, and it was only one of fourteen cyber charter schools in Pennsylvania. As a result, the Board determined that there was sufficient impact on commerce to justify maintaining jurisdiction. Additionally, the Board concluded that its jurisdiction would not supplant state control because charter schools are not state schools, but an alternative permitted by the Commonwealth of Pennsylvania. As such, it held that PVCS should be subject to the same federal regulations as other private employers.

It is noteworthy that the Board reached the same conclusion with respect to charter schools in New York. You can find the full PVCS opinion here. You can find the New York opinion here.

Our regular blog subscribers will note that we have routinely commented on the Board’s increasing efforts to expand its jurisdiction. This is yet another instance. Why does this matter? Even though your business may not be a charter school, it is a reminder that the Board is continuing its aggressive expansion of the Act.

In yet another reversal of precedent, the National Labor Relations Board has ruled that students who perform work for a university for which they are compensated can form and join labor unions under the National Labor Relations Act.  Key to the Board’s holding was that these students, including teaching assistants and research assistants, were more akin to employees, as opposed to well, students.  Yeah, we know.

Now, the students will have the opportunity to participate in an election to determine if they will be represented by a labor union.  There are some issues that remain unresolved, including who should be considered part of the unit, given the transient nature of these positions.  The Columbia University teaching and research assistants will then have the opportunity to vote in a representational election.

The decision does not come as a surprise to most observers, many of whom believed that the Democratic majority on the Board would take the opportunity to reverse the 2004 Brown University decision, which had held that graduate assistants were primarily students and not employees covered by the Act.  In Columbia University, the Board noted that the Brown decision was not grounded in the language of the Act, because no specific exemption exists under the Act for students.  The Board held that the Brown University decision “deprived an entire category of workers of the protections of the Act.”  To us, this begs the question – are they really workers?

Importantly, the decision applies only to private universities covered by the Act, and not public universities that are governed by state labor law.  Those universities who are covered will need to take proactive steps to evaluate their teaching and research assistants, both graduate and undergraduate.  While for many, the decision may have limited practical impact, it is likely that one or two negative consequences will flow from the decision: there will be fewer opportunities for teaching and research assistants; and/or the cost of tuition will increase.

The United States Department of Labor issued regulations earlier this year finalizing the “Persuader Rule.” Under the new Rule, employers and consultants (including lawyers) would be required to report labor relations advice and services under the Labor-Management Reporting and Disclosure Act’s “persuader activity” regulations when such advice and services are offered in the context of union organizing campaigns. Information subject to mandatory reporting under the Persuader Rule includes the identity of the employer, a description of the services rendered to the employer, and the fee arrangement between the employer and consultant/attorney.

The rule was set to become effective on July 1, 2016. Fortunately for employers and management-side labor attorneys everywhere, a United States District Judge in Texas issued a nationwide injunction barring the Department of Labor from enforcing the rule. According to the Judge, the rule obligates attorneys to violate the attorney-client privilege by disclosing clients’ identities, fee arrangements, and the nature of the advice and services provided. The opinion also holds that the Persuader Rule violates employers’ First Amendment rights to free speech and association, as well as their Fifth Amendment Rights to due process.

The decision does not mean that the Persuader Rule is dead, however. The Department of Labor may appeal the District Court’s Decision to the Fifth Circuit Court of Appeals. Alternatively, the Department could elect to scrap the current rule and go back to the drawing board. For now, however, employers and management-side attorneys are not required to comply with the Persuader Rule. We will continue to monitor this issue and report any further developments right here on our blog.

An appeals court recently reinstated the four game suspension issued to Tom Brady by the National Football League. The Patriots quarterback previously had his four game suspension reversed by the United States District Court for the Southern District of New York, but in a 2 to 1 decision, the Second Circuit Court of Appeals overturned that decision. We previously offered you some lessons that could be taken from the “Deflategate” saga. We also noted that we did not believe that the District Court used the appropriate standard of review in evaluating Brady’s appeal of his suspension (yes, this is us patting ourselves on the back).

The decision is a double edged sword for employers with a unionized workforce, because it contains both good and bad news. The good news is, the court recognized that the NFL had bargained for the right to issue disciplinary action to players for rules violations and to have Commissioner Rodger Goodell serve as the arbitrator to decide internal appeals of those disciplinary actions. The court recognized that the collective bargaining agreement between the NFL and the Players’ Association was clear on these points. The court noted that, while this scheme was unorthodox, it was what the parties bargained for in the agreement.

The bad news: the court also recognized that the decisions of arbitrators are afforded broad deference and are very hard to overturn. And all too often it is the employer on the losing side of an arbitration decision that faces an uphill battle on appeal. In affirming Goodell’s decision on Brady’s internal appeal, the court reaffirmed the high level of deference owed to arbitrator’s awards. The battle may have been won by the NFL here, but it often seems that employers generally are losing the war.

Only time will tell if Brady and the Players’ Association pursue a further appeal. In the meantime, we can continue to take lessons from this much publicized labor dispute with a football twist.