In a key decision for many franchisors and franchisees, and others who rely on independent contractors, the National Labor Relations Board recently reinstated its test for examining contractor status.  In 2014, the Obama-era NLRB, in a case involving Fed Ex delivery drivers, “refined” its test for examining contractor status. The refinement was really a fundamental shift in how the NLRB reviewed these questions, and not surprisingly led to many more findings of employer-employee status.

The “refinement” diminished the importance of the workers’ entrepreneurial opportunities, holding that this question was really a minor part of the overall analysis, thus diminishing its importance greatly.  This question, which often supports a finding of independent contractor status, became much less of a focus for the NLRB.

In SuperShuttle DFW, the Board announced that it was overruling the Obama-era “refinement” and returning to the standard that had been in place for many years.  The NLRB cited years of case law, which held that the entrepreneurial opportunity was actually a key question in the analysis.

The NLRB made clear that it will continue to apply the common law agency test to analyze whether a worker is an independent contractor or an employee.  That test requires examination of a number of factors, including:

  • The extent of control exercised over the worker;
  • Whether the worker is engaged in a distinct occupation or business;
  • The kind of occupation, and whether it is typically performed under supervision;
  • The skill required;
  • Who supplies the tools and equipment necessary to do the work;
  • The length of time the worker is engaged;
  • The method of payment;
  • The intention of the parties with respect to their relationship; and
  • Whether the principal is a business.

The courts and the NLRB have long made clear that all of these factors must be considered and no single factor is controlling.  In addition, the analysis is not quantitative, but is qualitative.  In other words, one cannot simply count up the factors favoring one classification and make a determination. In SuperShuttle, the NLRB confirmed that all of the factors are important and no single factor will end the analysis.

The NLRB then clarified that entrepreneurial opportunity was indeed a key question, and not a sub-factor.  Just like the question regarding the right of control, the opportunity for profit and loss is really an issue that is at the heart of several of the factors.  Many of the factors may or may not demonstrate that the worker has an opportunity to make more money.  The NLRB stated that moving forward, while analyzing each factor, it will continue to ask whether the workers at issue do or do not possess entrepreneurial opportunity.

Where the common law factors demonstrate that the workers in question are afforded significant entrepreneurial opportunity, the NLRB will likely find independent contractor status.

We expect that this holding will return the balance back to the NLRB’s independent contractor analysis, and may help correct some of the more aggressive employer-employee decisions issued under the Obama-era standard.  If you have any questions regarding the status of any worker, please contact any member of our Labor and Employment Group.

At the end of 2018, the Superior Court of Delaware held that a terminated employee could proceed with his lawsuit, alleging that his employer terminated him for being a medical marijuana cardholder.  Chance v. Kraft Heinz Foods Co.  In allowing the suit to move forward, the Delaware Court found that the anti-discrimination language in the Delaware Medical Marijuana Act (“DMMA”) created an implied cause of action for employees to sue their employers.  Pennsylvania employers should pay attention to the Chance decision for several reasons: (1) the anti-discrimination language in the Delaware Medical Marijuana Act is similar to language contained in the Pennsylvania Medical Marijuana Act; (2) the Delaware decision continues the recent trend of employee-sided decisions by courts in Connecticut and Rhode Island; and (3) the Delaware case dealt with a post-accident drug test, thus further expanding protections for employees who use medical marijuana outside of work.

The facts of the case are straightforward, but important to note:

Chance was a seven-year employee at Kraft’s Dover, Delaware facility. In 2016, he obtained a Delaware medical marijuana card and used medical marijuana to treat a variety of medical conditions.  In late 2016, Kraft sent Chance for a post-accident drug test, after his “shuttle wagon” derailed. The Medical Review Officer contacted Chance and advised that he tested positive for medical marijuana. Chance explained to the MRO that he had a valid medical marijuana card and, indeed, produced a copy of the card.  Nonetheless, the test was verified positive and Chance was terminated in accordance with Kraft’s drug testing policy.

Notably, there were no allegations that Kraft believed Chance was under the influence or that the derailment was related to his use of medical marijuana.

Chance subsequently filed suit, alleging violations of, among other things, the anti-discrimination clause contained in the DMMA.  Kraft filed a motion to dismiss the suit, arguing that Federal Law, specifically the Controlled Substances Act, preempted the DMMA and that the DMMA did not create a private right of action.  The Delaware Court disagreed with Kraft and ruled for Chance.

On the preemption argument, the Delaware court noted that the Controlled Substances Act “does not make it illegal to employ someone who uses marijuana, nor does it purport to regulate employment matters.”  Rather, the CSA prohibits the unauthorized manufacture, dissemination, dispensing and possession of marijuana.  Accordingly, said the Court, the CSA was not in conflict with the DMMA, which provides that an “employer may not discriminate against a person in hiring, termination, or any term or condition of employment . . . if the discrimination is based upon either of the following: a) The person’s status as a cardholder; or b) A registered qualifying patient’s positive drug test for marijuana . . . unless the patient used, possessed, or was impaired by marijuana on the premises of the place of employment or during the hours of employment.”  In support of its finding that the two acts were not in conflict, the Delaware court cited to the 2017 decision of the Rhode Island Superior Court and the 2018 decision of the U.S. District Court for the District of Connecticut (Noffsinger v. SSC Niantic Operating Co, LLC).

Regarding the right of action argument, the Delaware Court made a common-sense ruling.  According to the court, the legislature would not have included anti-discrimination language in the DMMA if there was no mechanism for enforcing it:

The purpose of Section 4905A is to prohibit employment-related discrimination based upon either status as a medical marijuana cardholder or a qualifying patient’s positive drug test . . . In the DMMA, no agency or commission has been tasked with enforcement of the anti-discrimination provision . . . no remedy other than a private right of action is available to cardholders . . . The fact that an anti-discrimination provision was included in the DMMA demonstrates legislative intent to remedy the problem of discrimination based upon one’s cardholder status . . . Absent a finding of an implied right of action, Section 4905A would be devoid of any purpose within the broader context of the statute.

Again, in finding a private right of action, the Delaware Court found support in the prior decisions of the Rhode Island and Connecticut courts.

So . . . why should a Delaware decision matter to Pennsylvania employers?  Because the Pennsylvania Medical Marijuana Act (the “PA Act”) includes an anti-discrimination provision similar to the one in the DMMA.  By way of reminder, the PA Act states that “No employer may discharge, threaten, refuse to hire or otherwise discriminate or retaliate against any employee regarding an employee’s compensation, terms, conditions, location or privileges solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.”  MMA section 2103(b)(1).  Because the two provisions are similar, it is reasonable to expect that a Pennsylvania Court, when confronted with the issue for the first time, will look to the decision of its neighboring state for guidance.

As Delaware joins the ranks of Connecticut, Rhode Island and Massachusetts in issuing employee friendly decisions and expanding protections for off-duty use of medical marijuana, Pennsylvania employers should take heed!

  • Conduct a careful review of your drug use and testing policies. A policy that mandates termination for a positive test, with no exception for legal off-duty medical marijuana use, could be discriminatory.  Relying on the traditional argument that a positive test for marijuana can result in termination because marijuana remains illegal under federal law, is not recommended.  Based on the decision in Kraft, such an argument likely will be rejected,
  • Proceed with caution when an employee, who is certified to use medical marijuana, tests positive, even if the test was administered post-accident. Rushing straight to termination based solely on a positive test may violate the PA Act.

Should you need assistance in revising your drug use and testing policies or wish to discuss the impact of medicinal marijuana legalization on your workplace, please contact Denise E. Elliott, Esq. or another member of our Labor and Employment Group.

As explained in Part 1 of this four-part series, we are exploring some of the more recent state law developments addressing sexual harassment in the workplace. Since the #MeToo movement began over a year ago, there have been various reactions from employees, employers and state legislatures. Employees have reacted by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment. The data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017. In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017. You can find more information on the EEOC’s report here.

Employers have reacted to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  Going forward, employers need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In Part 1 of this series we explored the recent flurry of legislation enacted in the State of California. In Part 2 we look at the recent developments under Delaware law.

DELAWARE

On August 29, 2018, Delaware passed a law that includes mandatory distribution to employees of a state-created information sheet on sexual harassment. Employers with four or more employees in the state of Delaware will be required to distribute the information sheet to new employees at the commencement of employment and all existing employees by July 1, 2019 at the very latest. The sexual harassment information sheet can be found here.

In addition, much like California’s training requirements, Delaware requires employers with at least 50 employees in the state of Delaware to provide interactive sexual harassment training and education. However, unlike California’s training requirements, the new Delaware law requires that both non-supervisory and supervisory employees receive the training.

Employers covered by the new law must provide interactive sexual harassment training to employees that includes the following components:

  • Addresses the illegality of sexual harassment;
  • Defines sexual harassment with the use of examples;
  • Describes the legal remedies and complaint process available to employees;
  • Provides directions to employees on how to contact the Delaware Department of Labor; and
  • Instructs employees that retaliation is prohibited.

The training must be conducted for new employees within one year of the commencement of their employment. Current employees must receive the mandatory training by January 1, 2020.

New supervisors must receive additional interactive training within one year of the commencement of their employment in a supervisory role and existing supervisors must receive training by January 1, 2020. The additional training for supervisors must also include: (1) specific responsibilities of a supervisor regarding the prevention and correction of sexual harassment; and (2) the legal prohibition against retaliation.

For employers who provide – or have already provided – training that meets the requirements of the law prior to January 1, 2019, are not required to conduct additional training until January 1, 2020. After January 1, 2020, both the employee and supervisor training programs must be repeated every two years.

Stay tuned for Part 3 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement. In the meantime, if you or your organization have any questions regarding compliance with state laws in the area of sexual harassment, please contact any member of our Labor and Employment Practice Group.

While most Americans prepared for the Thanksgiving holiday, the Pennsylvania Supreme Court issued an opinion that establishes new precedent in the ever-developing area of cybersecurity law, and also limits a longstanding tort doctrine that had previously barred a large subset of negligence claims where the plaintiff claimed only economic loss (not bodily injury or property damage).  As a result of this decision, Pennsylvania businesses and employers face increased exposure to liability.

The case, Dittman v. UPMC, arose after UPMC experienced a data breach where employee data was compromised and then used to file fraudulent tax returns.  After suffering financial loss as a result of the breach, UPMC employees sued UPMC for negligence, alleging that UPMC owed its employees a duty of reasonable care to protect their electronically stored information, and that UPMC breached that duty. The Court held that an employer who collects and stores employee information on its internet-accessible computer system has a common law duty to protect that data from any foreseeable risk of harm. The Court also held that the employees’ claims of economic loss were not barred by the longstanding economic loss doctrine, which generally prevents a party from recovering solely economic damages under a negligence theory of liability.  The Court provided much needed clarification on the doctrine’s scope, stating that it does not preclude all negligence claims where the loss is solely financial, but does bar solely financial claims where the duty arises from a contract between the parties.  Because the plaintiffs in Dittman alleged breach of a common law duty separate, apart, and independent from any contractual duty, the economic loss doctrine did not bar UPMC employees’ claims.

The Dittman ruling is significant for two major reasons.

  1. It Establishes a Common Law Duty to Protect Personal Information. Before Dittman, it was very difficult for a data breach victim to recover due to the difficulty of tracking down the ultimate wrongdoer and a lack of precedent allowing recovery from those who collected and stored the compromised personal information.  By establishing a duty of reasonable care for employers who collect and store their employees’ personal and financial information on internet-accessible computer systems, the Pennsylvania Supreme Court created a clear method of recovery for employee data breach victims.  While the Court only imposed this duty on employers who collect and store employee information on internet-accessible computer systems, it is likely that the Court’s reasoning will be extended to other contexts where one party collects and stores another’s information, such as the business-consumer context or the university-student context.

Companies with employees in Pennsylvania should take immediate action to evaluate existing data security measures or impose data security measures if none are in place.  Since data breach victims will likely attempt to extend Dittman to other contexts, any business or entity that collects and stores data of Pennsylvania residents should evaluate their data security measures in order to avoid liability.

  1. It Is Much Easier for Plaintiffs to Bring Negligence Claims Seeking Solely Economic Damages. Before Dittman, defendants relied on the economic loss doctrine to quickly dispose of negligence claims seeking solely economic damages (as opposed to physical injury or property damage).  Now, negligence actions seeking solely economic damages cannot be dismissed as quickly or easily.  Instead, defendants will be tasked with proving that the plaintiff alleges a breach of a purely contractual duty, not a duty separate and apart from any contractual relationship.  By clarifying and limiting the economic loss doctrine in this way, the Court has opened the door to increased litigation and slower resolution of negligence claims seeking only economic damages.

As recognized by the trial court, the Supreme Court’s decision is certain to spark increased litigation. Indeed, in dismissing UPMC employees’ claims, the trial court noted that the creation of a private cause of action for victims of data breaches would likely trigger the filing of hundreds of thousands of lawsuits each year and overwhelm Pennsylvania’s judicial system.  Interestingly, in overturning the trial court’s decision and reviving UPMC employees’ claims, the PA Supreme Court did not address the impact of its decision.

Carol Steinour Young and Sarah Dotzel practice in McNees Wallace & Nurick’s Litigation Group.

The Fair Credit Reporting Act (“FCRA”) has been a fertile area for lawsuits against employers.  Recently, the Third Circuit Court of Appeals provided yet another warning for employers regarding compliance with the FCRA.  In Long v. SEPTA, the court held that an employer violates the FCRA when it fails to provide a copy of the applicable consumer report to prospective employees before taking an adverse employment action.  This decision serves as an important reminder of employer obligations under the FCRA and also provides clear and direct guidance on the steps an employer must take before it rejects an applicant on the basis of information contained in a consumer report or background check.

In Long v. SEPTA, SEPTA denied employment to three applicants who had been convicted of drug offenses.  Prior to making that decision, however, SEPTA did not send the plaintiffs copies of their background checks, nor did it send them notices of their rights under the FCRA.  The plaintiffs, in turn, filed a class action lawsuit, alleging that SEPTA violated the FCRA by taking an adverse employment action against them without providing copies of their background check reports or notices of their rights under the FCRA.

SEPTA argued that it made no difference whether the plaintiffs’ consumer reports were provided before or after its decision not to hire them because the reports were accurate.  Therefore, according to the employer, the plaintiffs suffered no legal injury under the FCRA.

The court rejected the employer’s argument and instead interpreted the statute based on its plain language as establishing two fundamental requirements: (1) that an employer must provide a consumer report and FCRA rights disclosure; and (2) that it must do so before it takes any adverse action.  The court explained that doing so “allows [the prospective employee] to ensure that the report is true, and may also enable him to advocate for it to be used fairly—such as by explaining why true but negative information is irrelevant to his fitness for the job.”  The court went on to note that the “required pre-adverse-action notice of FCRA rights provides the individual with information about what the law requires with regard to consumer reports….It helps ensure that reports are properly used and relevant for the purposes for which they are used.”

Accordingly, a prospective employee has the right to receive their consumer report and a description of their rights under the FCRA before an employer takes any form of an adverse action against them on the basis of information discovered in the report—regardless of how accurate the background check may be.  The court has made it explicitly clear that prospective employees have the right to know of and respond to such information prior to an employer’s adverse action.

If you have any questions regarding FCRA compliance, please contact any member of our Labor and Employment Practice Group.

There have been a variety of responses to the #MeToo movement since it began a little over a year ago. Employees have responded by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment.  Among other things, the data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017.  In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017.  You can find more information on the EEOC’s report here.

Employers have responded to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  This year, employers will need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In this four-part series, we explore some of the more recent state law developments addressing sexual harassment in the workplace.  We will start our exploration with the State of California.

CALIFORNIA

Limitations on Settlements of Sex-Based Harassment and Discrimination Claims

On September 30, 2018, a new law was enacted that prohibits the inclusion of language in settlement agreements that prevent the disclosure of factual information related to:

  • Acts of sexual assault;
  • Acts of sexual harassment as defined under Section 51.9 if the California Civil Code;
  • Acts of workplace harassment and discrimination based on sex;
  • Failure to prevent acts of workplace sexual harassment or sex discrimination; and
  • Retaliation against a person for reporting harassment or discrimination based on sex.

The new law applies to any settlement agreement entered into on or after January 1, 2019 settling a claim filed in a civil or administrative action. If a settlement agreement contains a provision prohibiting disclosure of the information listed above, the provision will be considered void as a matter of law and against public policy.

As a result of this new law, employers with operations in California should consider the impact on potential settlement of sex-based harassment and discrimination claims. The new prohibitions on certain confidentiality provisions of a settlement may create a greater risk for damage to the employer’s reputation even after settling a sex-based claim with an employee or former-employee.

Increased Sexual Harassment Training Requirements

Since 2005, California employers with at least 50 employees have been required to provide two hours of sexual harassment prevention training to all supervisory employees once every two years. On September 30, 2018, legislation was approved that will require California employers with at least five employees to provide sexual harassment training and education to all employees (both supervisory and non-supervisory).  This new law requires employers to provide at least two hours of sexual harassment prevention training and education to all supervisory employees and at least one hour of such training to all non-supervisory employees by January 1, 2020.  Thereafter, the training and education must be provided once every two years.

As a reminder, the sexual harassment training required since 2005, must address all of the following:

  • The definition of sexual harassment under the California Fair Employment and Housing Act and Title VII of the federal Civil Rights Act of 1964;
  • The statutes and case-law prohibiting and preventing sexual harassment;
  • The types of conduct that can be sexual harassment;
  • The remedies available for victims of sexual harassment;
  • Strategies to prevent sexual harassment;
  • Supervisors’ obligation to report harassment;
  • Practical examples of harassment;
  • The limited confidentiality of the complaint process;
  • Resources for victims of sexual harassment, including to whom they should report it;
  • How employers must correct harassing behavior;
  • What to do if a supervisor is personally accused of harassment;
  • The elements of an effective anti-harassment policy and how to use it;
  • “Abusive conduct” under California Government Code section 12950.1, subdivision (g)(2).

This training must be provided in a classroom setting, through interactive E-learning, or through a live webinar. E-learning training must provide instructions on how to contact a trainer who can answer questions within two business days. All training must include questions that assess learning, skill-building activities to assess understanding and application of content, and hypothetical scenarios about harassment with discussion questions.

Additional information on the requirements related to California’s mandatory sexual harassment training can be found here.

Stay tuned for Part 2 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement.

In March 2016, OSHA published its standards for respirable crystalline silica in general industry/maritime (29 C.F.R. § 1910.1053) and in construction (§ 1926.1153), both of which have been phased in.  OSHA has been enforcing the construction standard for about a year (since September 23, 2017), and this summer the standard for general industry/maritime became enforceable (as of June 23, 2018).  Employees in general industry can be exposed to small silica particles during manufacturing (e.g., glass, pottery, ceramics, brick, concrete, and artificial stone) and during other non-construction activities that use sand (e.g., abrasive blasting and foundry operations).   Employers who are involved in such activities, or in construction work, may be affected by the silica standards.

Consequences of noncompliance are serious for employers, not only in terms of potential health risks to their employees, but also risks of enforcement actions by OSHA (and states with OSHA-approved programs).  OSHA has been conservative and generally modest in penalties issued to date, but that is likely to change.  For example, in August 2018, a construction company was cited for violations of the silica construction standard, with a proposed penalty of over $300,000.  Employers in construction and, now, general industry, should heed this warning as a sign of things to come.

Although the two silica standards differ in certain respects, both generally require employers to develop a written exposure control plan, perform an exposure assessment and periodic monitoring, implement feasible engineering and work practice controls, ensure respiratory protection and medical surveillance where necessary, comply with housekeeping measures, and maintain recordkeeping.  The general industry standard also requires demarcation of regulated areas.  It is important that silica hazards are incorporated into an employer’s hazard communication program, as the OSHA Hazard Communication Standard is also incorporated by reference and expanded upon in the silica standards.

Both standards are now subject to enforcement, except for some general industry/maritime requirements for employees exposed at or above the action level, and some requirements for hydraulic fracturing operations in the oil and gas industry.  For enforcement of the general industry/maritime standard, OSHA gave employers an additional 30-day grace period (until July 23, 2018), as long as they were making good-faith efforts to comply.  But the time has come for compliance, inspections, and enforcement.

Employers should be prepared accordingly, consider how to handle an inspection, and consult OSHA’s guidance.  OSHA recently issued various compliance materials on its general industry/maritime webpage, including interim enforcement guidance.  Additional resources  added by OSHA to its construction work webpage include a slide presentation for training construction workers, a five-minute video on protecting workers, a series of short videos for various construction tasks, and an FAQ page.

Even with these compliance materials, the silica standards can be complex and difficult to implement in a practical manner.  Employers should consult professionals to ensure compliance and mitigate any enforcement actions that may arise.

If you have followed our blog over the past year, you are aware of the long and tortured history of the National Labor Relations Board’s joint employer standard.  The recent history starts with the Obama Board’s decision to overturn decades of case law.  But the saga continued.

Just last month, we reported on the Trump Board’s proposal to promulgate regulations adopting a joint employer standard.  According to the Board, issuing regulations will clear up the uncertainty currently surrounding the standard that was created by years of case law.  Those who have been following this matter might view the Board’s proposed rulemaking as a welcome opportunity for clarity on an issue that has vexed employers and unions alike in recent years.

But not everyone was pleased by the Board’s announcement.  In a joint letter to Trump-appointed Board Chairman John Ring, United States Senators Elizabeth Warren, Kirsten Gillibrand, and Bernie Sanders questioned the Board’s ability to remain independent on the issue given its overturned decision in Hy-Brand (in February 2018, the Board reversed its own ruling after its Ethics Officials determined that one of the Board Members should have been disqualified from participating in the case due to a conflict of interest).  Essentially, Senators Warren, Gillibrand, and Sanders accused the Board of using rulemaking to reinstate the Hy-Brand decision.  In other words, they believe that the Board has already decided on the final rule to be issued based on personal bias and without regard for the notice-and-comment process.  Serious allegations, to be sure.

Earlier this week, Chairman Ring responded to the Senators with a letter of his own.  The Chairman explained, in no uncertain terms, that a majority of the Board will engage in rulemaking on the joint employer issue and that it intends to issue a notice of proposed rulemaking sometime this summer.  He reminded the Senators that all Board Members, both past and present, have personal opinions formed by years of experience.  After assuring the Senators that the Board has not pre-determined the final joint employer rule, Chairman Ring also pointed out that the courts have held that personal opinions do not render Members incapable of engaging in rulemaking unless it can be shown that their mind is “unalterably closed” on the issue.

If we’ve learned anything from this dust-up between the Senators and the Board, it’s that the Board will proceed with rulemaking on the joint employer standard, and that accusations of bias from U.S. Senators will not stop it from doing so.  As we said last time – stay tuned.  More news is coming, and soon.

With increasing frequency, when employees sue their employer or former employer, they also name individual managers or the company’s owners as defendants in their suit.  Under federal EEO laws (e.g. Title VII, ADA, ADEA), individuals generally cannot be held liable for acts of discrimination.  However, employment laws such as the FMLA, FLSA and the Pennsylvania Human Relations Act do allow for individual liability under some circumstances.  In Abdellmassih v. Mitra OSR (February 28, 2018), the U.S. District Court for the Eastern District of Pennsylvania addressed whether individuals may be held liable under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for failing to issue required COBRA notices.

Mr. Abdellmassih was terminated from his position at a KFC restaurant and sued his employer under a variety of laws.  He named the co-owners of the company as individual defendants with respect to his claims under several laws, including COBRA.  The basis for his COBRA claim was that he was allegedly never issued a COBRA notice after he lost his health coverage due to the termination of his employment.

COBRA provides that a plan administrator who fails to comply with COBRA’s notice requirements may, at a court’s discretion, be held personally liable for up to $100 per day that the required notice is not provided.  Mr. Abdelmassih argued that his former employer’s co-owners served as the health plan’s administrators and, therefore, should be individually liable for the plan’s failure to issue required COBRA notices.  However, upon reviewing the company’s health insurance brochure, the court noted that the owners were not named anywhere in the document – as plan administrators or otherwise.  Indeed, the brochure merely directed employees to contact a human resources representative if they had questions regarding their COBRA rights.  Since the co-owners were not named in the document, the court found there was no basis to impose individual liability upon them under COBRA.  However, Mr. Abdelmassih’s COBRA claim against the corporate entity remained intact.

The lesson of the Abdelmassih case is simple.  When identifying the “plan administrator” in a plan document or summary plan description, avoid naming individuals.  A general reference to the employer (or third party administrator firm) – or the department with responsibility for plan administration (e.g. human resources) –  is the best way to avoid individual liability situations under COBRA.  A quick check of your company’s plan language on this point may save you (or someone in your company) from significant liability!

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.