The Supreme Court of the United States held today that arbitration agreements, which waive the right to proceed as part of a class or collective action, are enforceable in the employment context. In Epic Systems Corp. v. Lewis, the Court held that employment agreements that call for individualized arbitration proceedings to resolve workplace disputes between employers and employees are lawful. Interestingly, the Court’s 5-4 decision was authored by the newest Justice, Justice Gorsuch.

In a series of cases, employees and former employees had asserted that agreements requiring individual arbitration violate the National Labor Relations Act, because the NLRA protects employee rights to proceed in class or collective actions. Although it had previously taken a different position, in 2012, the National Labor Relations Board agreed that arbitration agreements, which waive the right to proceed in class or collective actions, violate the NLRA. The Board’s controversial position was set forth in D.R. Horton and Murphy Oil USA.

Employers countered that the Federal Arbitration Act expresses a strong preference for arbitration and makes clear that arbitration agreements are presumptively valid. The FAA requires that courts enforce arbitration agreements, including procedural terms related to the arbitration process itself. The FAA does provide that arbitration agreements will not be enforced if there is a legal basis to set aside the agreement, such as fraud or duress in the making of the contract. However, in this case, the only argument presented was that the individual arbitration agreements violate the NLRA.

The Supreme Court rejected that contention. Ultimately, a slim majority of the Supreme Court agreed with the employers and held that the FAA requires enforcement of arbitration agreements, including agreements that call for individual proceedings, because such agreements do not violate NLRA. The Court noted that in order for a law such as the NLRA to trump the FAA, there must be a clear statement of intention in the law. The Court found no such clear intention in the NLRA.

The Supreme Court’s decision is the law of the land, and that means that arbitration agreements in the employment context that require individualized claims are lawful. Employers looking to update their employment agreements in light of this decision can reach out to any member of the McNees Labor and Employment Group. In addition, if you are thinking about implementing arbitration requirements for the first time, we can help.

It appears that a number of labor unions are planning for the potential negative impact of a big decision regarding fair share fees.  We have heard from several public sector clients who have been contacted directly, or who have had employees contacted, by labor unions about the potential impact of Janus v. AFSCME Council 31, which is currently pending before the United States Supreme Court.  The case, which could ultimately declare fair share fees unlawful, is expected to be released before the end of June of 2018.

Based on what we have read from these unions, they seem to believe that there is a good chance that the Supreme Court will declare fair share fees unconstitutional.

As a reminder, fair share fees are fees that are required to be paid by bargaining unit employees who elect not to be full-fledged union members.  By operation of state law, employees who are in the bargaining unit but who elect not to be union members are forced to pay “fair share” fees in many states, including Pennsylvania.  These fees are often a large percentage of the actual cost of union membership.

Public sector employees have raised multiple challenges to the constitutionality of fair share fees.  Specifically, a number of public sector employees have alleged that such fees violate employee First Amendment Rights.  We wrote about one such challenge here.  That decision, Harris v. Quinn, was highly critical of fair share fees, and the underlying justification for requiring fair share fees.  Harris closely examined the precedent that initially determined that such fees were lawful, which concluded the goals of limiting or eliminating “free riding” and the promotion of labor peace overrode any impact on employee First Amendment rights.

While it was highly critical of these stated goals, the Harris Court came just short of declaring all fair share fees unconstitutional.  A subsequent challenge to fair share fees that also reached the Supreme Court case also fell short of declaring the fees unlawful.

Enter Janus.  Janus is a public employee and member of a bargaining unit, but not a member of the union.  He has been forced to pay fair share fees for some time. Janus has argued that the union engages in certain activities that he does not support, and that the union uses his fair share fees to engage in such conduct.  Essentially, he does not support any of the union’s activities, and he believes it is unfair that he is forced to pay them to engage in such activities.  Janus wants to be able to opt out of paying any fees to the union.  Janus argues that forced fair share payments to a union he does not support is “compelled speech” in violation of his First Amendment rights.

Janus is currently pending before SCOTUS, and many believe that the Court finally has the votes to declare fair share fees unconstitutional.  Based on what we have seen, it appears that at least some labor unions agree.

Some observers believe that the elimination of fair share fees will significantly weaken the political clout of public sector labor unions.  We should soon know the fate of fair share fees generally, as the Janus decision is expected in the near future.  However, if fair share fees are declared unconstitutional, only time will tell what impact, if any, the elimination of fair share fees would have on public sector labor unions.

Stay tuned, we will keep you posted.

That sound you just heard was employers everywhere breathing a sigh of relief, and maybe even high-fiving.  That’s because the newly constituted National Labor Relations Board fired off several pro-employer decisions in the last week. The decisions were released in rapid succession in the days prior the expiration of the term of Board Chairman Phil Miscimarra.

As we reported just this week, the Board decided to modify the standard by which it determines whether employer policies are unlawful under the National Labor Relations Act.  That decision will provide some very welcome relief to employers who saw the Obama-era Board find just about every employer policy unlawful.  We also reported that we anticipate that the Board’s approach to social media will similarly become more fair and predictable.

The Trump-Board also made quick work of one of the Obama-Board’s most controversial decisions, Browning-Ferris, which created a new “joint employer” test.  We reported on the new expansive joint employer test adopted by the Board in Browning-Ferris, and expressed our concern regarding increased liability for employers under the new standard.  Browning-Ferris allowed for a joint employer finding, and increased liability, based on theoretical or “reserved” power/control, even if such control was never exercised.  In Hy-Brand Industrial Contractors, the Board abandoned the Browning-Ferris standard and declared that joint-employer status requires proof that the putative joint employer has actually exercised joint control over essential employment terms, rather than merely having reserved the right to exercise control.

The Board also reversed the Obama-Board’s Specialty Healthcare decision, which allowed unions to form “micro-units.”  That decision essentially required the Board to rubber stamp the union’s definition of the appropriate bargaining unit for purposes of a union election and bargaining.  This approach exposed employers to an increased risk of organizing campaigns, and the possibility of having to negotiate with several different unions.  On December 15, 2017, in PCC Structurals, Inc., the Board abandoned the Specialty Healthcare standard and returned to its prior framework for determining the scope of a bargaining unit.

Also on December 15, 2017, the Board reversed another Obama-era decision, E.I. DuPont de Nemours, Louisville Works, which had overturned 50 years of precedent.  In DuPont, the Obama-Board dramatically expanded the definition of “change” for purposes of determining whether an employer made an unlawful unilateral change to the terms and conditions of employment.  Under DuPont, an employer was found to have engaged in an unfair labor practice charge for simply continuing to do what it had done many times previously—for years or even decades. Last week, in Raytheon Network Centric Systems, the Trump-Board reversed DuPont, and announced the return to the prior standard for determining whether an employer is authorized to make changes to the terms and conditions of employment after the expiration of a collective bargaining agreement.

These decisions are certainly indicative of a return to a more employer-friendly Board.  These decisions reversed some of the more controversial, and problematic, decisions of the Obama-Board.  We are certainly hopeful these are a sign of things to come from the Board.  However, with the expiration of the term of Chairman Miscimarra, we may need to wait some time before we receive another batch of pro-employer decisions.

This post was contributed by Logan Hetherington, a McNees Summer Associate. Mr. Hetherington is a rising third year law student at Penn State Dickinson Law School and is expected to earn his J.D. in May of 2018.

Well, if you are an organization that has employees, you do! Although they may be a bit unappealing and often overlooked, worksite notices are required under both federal and state law. In fact, many municipalities and cities also have ordinances that require certain notices to be posted at the workplace. Willful failure to meet posting requirements may lead to citations and other penalties.

The postings are not only important because the government says so, they also serve an integral role in educating employees. Many of the required notices inform employees of their rights, and duties, under particular statutes. This can aid employers in several ways. For example, if employers have up-to-date notices posted where employees can frequently see them, the employers shield themselves from future issues when dealing with employee grievances because the employee cannot claim ignorance. Moreover, management will be more aware of potential illegal conduct which could put the employer in the hot seat and (hopefully) make better decisions with respect to employee relations.

The majority of required worksite notices can be acquired from the United States Department of Labor or state departments of labor. The notices and posters may be obtained free of charge from these agencies, or, employers can purchase them from private retailers. However, employers should be aware that many of these postings have specific requirements. The posters and notices must be placed where employees can openly see them and many must be posted in Spanish or other language versions if employees don’t speak English. Additionally, not all employers have to post the same notices. Government contractors, for instance, are obligated to post specific notices regarding prevailing wages and other employee rights. Likewise, smaller employers may not be subject to some posting requirements.

Even though most worksite postings are easily accessible, many employers may be surprised to learn that their posters and notices are actually out-of-date. The content of the notices change as the law does. Consequently, governments routinely revise their posters and notices but typically don’t inform employers of these revisions. Employers should routinely check their postings and update them as necessary. Our Labor and Employment Group maintains a list of required federal and Pennsylvania worksite notices. We also aid employers in navigating the complex overlap between federal, state, and local posting requirements and can help employers ensure that they are in compliance with postings and the statutes which trigger them.

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.

Back in 2015, Pittsburgh enacted a paid sick leave ordinance, following a trend among cities throughout the country. Pittsburgh’s paid sick leave ordinance required employers with fifteen employees or more to provide up to forty hours of paid sick leave per calendar year. Employers with less than fifteen employees were not spared. The ordinance required that those employers provide up to twenty-four hours per calendar year. The impact: 50,000 workers would receive paid sick leave.

But, what authority did Pittsburgh have to impose such a requirement?

The Pennsylvania Restaurant and Lodging Association, among others, challenged whether Pittsburgh actually had authority to enact the ordinance. Initially, the trial court found that the Steel City had no such authority. Pittsburgh appealed, arguing that because it had adopted a Home Rule Charter, it had authority to exercise broad powers and authority.

A few weeks ago, the Commonwealth Court of Pennsylvania issued its opinion, agreeing with the trial court that Pittsburgh indeed lacked the necessary authority. The court found that the Home Rule Charter Law has an exception with respect to the regulation of businesses. The exception specifically provides that “a municipality which adopts a home rule charter shall not determine duties, responsibilities or requirements placed upon businesses, occupations and employers . . . except as expressly provided by [separate] statutes . . . .” Although Pittsburgh attempted to point to various statutes which it felt provided it with the needed authority, the court was not convinced. Struck down by the court, it was – and remains – the worst of times for Pittsburgh’s paid sick leave ordinance.

But, what about Philadelphia? It is a home rule charter municipality. It has a paid sick leave ordinance. Does the Commonwealth Court’s opinion effectively render its ordinance invalid, too? Nope. Philadelphia’s authority is derived from a different law, which applies only to cities of the first class (oh, and Philly is the only First Class City in Pennsylvania under the law). It includes no such limitation on the regulation of businesses. Yet, while Philadelphia’s statute may be unaffected by the court’s opinion, it may not be best of times for Philadelphia’s ordinance either. The Pennsylvania State Legislature is making efforts to affect Philadelphia and all municipalities. Senator John Eichelberger’s Senate Bill 128 would ban municipalities from passing sick leave and other leave requirements that are stronger than those required by federal and state governments. The bill was voted out of committee and is set for consideration by the Senate.

So, for our blog subscribers with businesses only in the city limits of Pittsburgh, there is no requirement that you establish a paid sick leave program for your employees. However, Philadelphia’s paid sick leave ordinance remains alive and well, and you must abide by its requirements. While some do not expect the General Assembly to move this bill through both chambers before the end of the current session, we will track the bill’s progress and update this blog should it be considered and voted on by the Senate. So, stay tuned for future posts on legislation effecting Philadelphia’s and all municipalities’ authority to impose paid sick leave requirements.

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.

This post was contributed by Erica Townes, a McNees Summer Associate. Ms. Townes is a rising third year law student at the Widener University Commonwealth Law School and is expected to earn her J.D. in May of 2017.

Recently you’ve noticed that an employee takes FMLA-covered leave the same week every year or always seems to have a medical emergency between Thanksgiving and January 1. Similarly, another employee regularly calls out of work requesting FMLA-covered, coincidentally on Fridays during football season. How can employers prevent this type of FMLA leave abuse? Several courts have addressed this issue.

Generally, employers are free to enforce company policies even with respect to employees on FMLA leave, provided that such policies are consistent with the FMLA.  Specifically, company policies cannot conflict with or diminish rights guaranteed under the FMLA.  Accordingly, the Third Circuit, the court of appeals that covers Pennsylvania, has routinely held that employers do not have to forego enforcement their call-in policies simply because an employee is FLMA eligible.

The Third Circuit has upheld an employer’s right to terminate employees for violating other policies while the employee was out on FMLA leave.  While employees may view these call-in policies as burdensome or intrusive, courts have expressly held that, despite the fact that employees have the right to take FMLA leave, employees do not have the right to be left alone when out on leave.

For example, one employer implemented a policy that required employees out on paid sick leave to stay home unless the employee was tending to a personal matter related to the reason they were on sick leave.  The employer further required employees to notify a hotline upon leaving and returning to their home, and if necessary, a sick leave investigator could call or visit the employee while he or she was out on leave.  In that case, the court held that the policy could be applied to an employee who was using FMLA-covered leave concurrently with paid sick leave, and that such application of the policy did not run afoul of the FMLA because nothing in the FMLA prevents employers from ensuring that employees are not abusing their leave.

In another case, an employee took FMLA and paid sick leave concurrently to have an operation done.  Only a few weeks after the operation, the employer learned that the employee had gone on a trip to Cancun, Mexico with friends, and as a result, the employee was terminated.  The employee brought a claim challenging her discharge under the FMLA.  Ultimately, the court held that the employee was bound by the employer’s sick leave and absenteeism policies, emphasizing that the FMLA, in no way, restricted the employer from preventing FMLA fraud.  As such, the discharge was upheld.

The Third Circuit has also held that an employer may enforce a written policy prohibiting moonlighting, or working part-time for a different employer, while the employee is out on FMLA leave.

The lesson learned from these cases is that employers have the right to safeguard against FMLA leave fraud and abuse.  To that end, employers may implement policies to reduce the fraudulent use of FMLA, so long as such policies do not abrogate rights guaranteed to the employee under the Act.

Practice Pointers

In addition to the policies mentioned above, consider the below practice pointers.

  • Consistency.  When handling FMLA leave, consistency is critical.  Providing an exception to the rule out of sympathy may hurt the employer in the long run as a disgruntled employee will use such exceptions against the employer in the future.  As the old adage goes, no good deed goes unpunished.
  • Records.  Maintain accurate records of FMLA leave so that (1) an employee’s FMLA eligibility can be accurately determined and (2) to identify suspicious patterns of absence.
  • Paid Leave.  Consider requiring employees to use paid leave concurrently with, or even before, FMLA leave. An employee will be less inclined to abuse FMLA leave if he or she has to exhaust their on time.
  • Abuse.  Immediately address employees who violate your policies.  Without doing so, employees may later argue that the employer excused the violation.
  • Seek Advice.  If you are still unsure whether you can enforce a particular policy, seek advice from legal counsel.

 

McNees recently issued an Employer Alert regarding the U.S. Department of Labor’s new Fair Labor Standards Act regulations, which significantly change the FLSA’s white collar overtime exemptions.  You can review the Employer Alert by clicking here.

Please feel free to reach out to any member of the McNees Labor and Employment Team to discuss the new regulations and strategies for effectively implementing the changes in your organization.

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.