BSCR Firm News/Blogs Feed

Department of Labor announces final rule expanding federal overtime protections.

23 May 2024

ABSTRACT: The U.S. Department of Labor’s final rule expanding protections under the Fair Labor Standards Act is estimated to increase overtime eligibility for four million workers and puts in place mechanisms to automatically increase salary thresholds every three years.

For the first time since 2019, the U.S. Department of Labor announced a final rule that expands overtime protections for millions of salaried workers by increasing thresholds required to exempt employees from federal overtime pay requirements.

Under the Fair Labor Standards Act (FLSA), eligible salaried employees are to be compensated at a rate of 1.5 times their regular salary for work beyond the normal 40-hour workweek. Salaried workers whose income exceeds the threshold amounts set by the Department of Labor are excluded from these overtime protections. The Department periodically updates these thresholds based on federal income data. The Department’s newest final rule, which will go into effect on July 1, 2024, increases the previous threshold amounts and implements a mechanism so that thresholds will automatically increase in the future.

New Overtime Threshold Requirements

The final rule announced on April 23, contains three central provisions expanding overtime protections.

Beginning on July 1, 2024, the Department of Labor will update the standard salary level for exemption from its current level of $35,568 per year, to $43,888 per year, and beginning January 1, 2025, to $58,656 per year. This reflects the 35^th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Regions based on data collected by the U.S. Bureau of Labor and Statistics. This is an increase from the previous 2019 rule which set the threshold at the 20^th percentile of weekly full-time salaried employees in the lowest-wage Census Region. The new rule allows workers earning more than $684 per week, but less than $844 per week to be eligible for federal overtime protections.
The highly compensated employee total annual threshold will increase from $104,432 per year, to $132,964 on July 1, 2024, and to $151,164 beginning on January 1, 2025. This reflects the 85^th percentile of full-time salaried workers nationally.
The final rule will also include a mechanism to automatically increase the threshold amounts starting on July 1, 2027, and every three years thereafter, based on more current earnings data.

Exempt Employees

Section 13(a)(1) of the FLSA provides an exemption for “any employee employed in a bona fide executive, administrative, or professional capacity” under what is commonly referred to as the “white-collar” or executive, administrative, or professional (EAP) exemption. To fall under the EAP exemption, employees must generally meet three tests: 1) they must be paid a salary that is a predetermined fixed amount not subject to reduction based on the quantity of work performed; 2) they must be paid at least a specific weekly salary level; and 3) they must primarily perform executive, administrative, or professional duties as set out under the Department’s regulations in 29 CFR 541.

Impact

The Department estimates that in the first year the new rule will allow some 4 million currently exempt workers to become eligible for overtime protections, resulting in approximately $1.5 billion in annual transfers from employer to employees. It also estimates employers will accrue approximately $1.4 billion in direct costs to implement the new regulations in the first year.

The impact of the final rule will be an increase in federal overtime protections, narrower unintended EAP exemptions, and clearer guidance for employers on how to pay employees for overtime hours. Employers will now have the choice to either increase wages for salaried employees to maintain their existing exempt status, reduce or eliminate overtime hours, pay the 1.5 times overtime premium, or reduce base salaries to offset new overtime pay.

The Department has long recognized a need to regularly update earnings thresholds to ensure they remain useful in helping distinguish between exempt and non-exempt employees. A new mechanism in the final rule will regularly update the thresholds to eliminate issues that can arise if the Department does not adequately update threshold amounts over long periods of time. For example, between 1975 and 2004, threshold levels remained stagnant while the federal minimum wage continued to increase, resulting in a federal minimum wage earner’s income exceeding the long test salary level for a 40-hour workweek.

The final rule will not apply to the special salary levels currently set in U.S. territories or the special weekly base rate for employees in the motion picture producing industry.

Supreme Court Clarifies the "Transportation Worker" Exemption in the Federal Arbitration Act

21 May 2024

ABSTRACT: The Federal Arbitration Act carves out “transportation workers” from its requirement that contractual arbitration agreements be enforced. In Bissonnette v. LePage Bakeries, the U.S. Supreme Court ruled unanimously that whether someone is an exempt transportation worker under the FAA depends on the type of work performed, and not whether the employer is in the transportation industry.

Factual Background

Truck drivers Neal Bissonnette and Tyler Wojnarowski signed an agreement to arbitrate when they purchased the rights to distribute Flowers Foods, Inc. products in certain parts of Connecticut. Flowers is the second largest producer and marketer of packaged bakery foods in the United States, including the famous brand “Wonder Bread.” Throughout the distribution process, Flowers would bake bread and buns and send them to a warehouse in Connecticut where the Petitioners would pick them up and distribute them to local shops within Connecticut.

Bissonnette and Wojnarowski brought a class action lawsuit claiming Flowers had underpaid them and other drivers in violation of state and federal law. Flowers asked the district court to dismiss the case or send it to binding arbitration, as stated in the arbitration agreement. The District Court dismissed the case in favor of arbitration, ruling that the plaintiffs waived their right to sue in court, and that the putative class members were not a “class of workers engaged in foreign or interstate commerce” necessary to exclude them from arbitration.

The FAA and Transportation Workers - Historical Background

In 1925, Congress passed the FAA to enforce arbitration agreements within the United States. § 2 of the FAA states generally that arbitration agreements “shall be valid, irrevocable, and enforceable …” However, at the time, certain industry groups already had sophisticated dispute resolution processes, so Congress carved out certain classes of people exempt from the FAA’s coverage. Those classes of people included seaman and railroad employees. Thus, Congress crafted the § 1 exemption to the broad authority in § 2 stating: “nothing herein contained shall apply to contracts of employment of seaman, railroad employees, or any other classes of workers engaged in foreign or interstate commerce.”

The § 1 exemption became known as the “transportation worker exemption”. Before Bissonette, the Supreme Court had interpreted this exemption only twice within the past one hundred years. In 2001, the Supreme Court ruled in Circuit City Stores Inc. v. Adams that § 1 exempts from the FAA only “contracts of employment of transportation workers”. In 2023, the Supreme Court ruled in Southwest Airlines v. Saxon that a Southwest baggage ramp supervisor was within “a class of workers engaged in foreign or interstate commerce” and thus exempt from the FAA because the employee was a “member of a class of workers based on what she does at Southwest, not what Southwest does generally”.

Bissonnette

On appeal to the Second Circuit, Flowers successfully argued that Bissonnette and his peers were not “transportation workers” because they worked in the “bakery industry,” not the “transportation industry,” thus the exemption under § 1 of the FAA did not apply, and the workers were required to adhere to the arbitration agreement. A month after the Second Circuit’s Bissonnette decision, the United States Supreme Court decided Saxon, and the Second Circuit granted panel rehearing in light of Saxon. After the Second Circuit affirmed its original decision, the Supreme Court agreed to review the case.

Unanimously, the Supreme Court reversed the Second Circuit’s decision because Circuit City and Saxon did not interpret the § 1 exemption to apply as an industry-wide exemption. Rather, the Supreme Court reasoned that Congress meant what it said when drafting the § 1 exemption to include only the kind of employees that shared similar characteristics to seaman and railroad workers.

Thus, the Supreme Court clarified “a transportation worker is one who is actively engaged in transportation of goods across borders via the channels of foreign or interstate commerce. In other words, any exempt worker must at least play a direct and necessary role in the free flow of goods across borders.”

Takeaways

A careful reading of Bissonnette magnifies what the Court did not decide. The Court expressed no opinion regarding whether the Petitioners themselves were transportation workers within the Court’s clarified rule. Arguably, they were not because their activities were Connecticut-based, and they did not engage in foreign or interstate commerce. Although some worker's rights advocacy groups have heralded Bissonnette a “win” for workers, the Court’s focused ruling—which clarifies the exemption’s requirements—limits § 1 to its appropriately narrow scope.

We invariably expect wage claim litigation to rise after the Court’s ruling but expect arbitration agreements to remain in full force and effect with respect to most workers’ claims.

"Unpacking Noah's Ark: Lessons in Unfair Labor Practices and Good-Faith Negotiations"

20 May 2024

ABSTRACT: In Noah’s Ark Processors, LLC, the NLRB ruled that the company engaged in unfair labor practices by failing to negotiate in good faith, refusing to compromise, withholding relevant bargaining information, and prematurely declaring an impasse during negotiations with the United Food and Commercial Workers’ Union. The NLRB also found that the company had unlawfully threatened and terminated ten workers for participating in an unauthorized work stoppage. As a result, the NLRB called for severe remedies, which were upheld by the Eighth Circuit Court of Appeals.

The dispute in Noah’s Ark Processors arose following the expiration of the previous collective-bargaining agreement between the company and the UFCW. Negotiations ensued, but the company’s representative, an administrative assistant lacking decision-making authority, hindered progress. Consequently, the Union filed charges with the NLRB, prompting a court-issued injunction compelling Noah’s Ark to resume negotiations.

However, throughout the resumption of negotiations, Noah’s Ark repeatedly presented regressive offers that deviated from previous agreements and sought to roll back established benefits for employees. These offers included proposals to eliminate binding arbitration for labor grievances, subcontract existing operations, cut vacation days, and limit holiday pay. Despite minor concessions on certain issues, the company remained steadfast in its refusal to compromise on critical matters, such as working hours and arbitration of grievances. After only two months of negotiations, Noah’s Ark declared another impasse and implemented their proposals.

The Union reacted by filing another complaint. An administrative-law judge found that Noah’s Ark's had failed to negotiate in good faith and prematurely declared an impasse. In addition to issuing another bargaining order to keep negotiating with the union, the ALJ ordered Noah’s Ark to provide backpay to the ten terminated employees, reimburse the union for bargaining expenses, and required its CEO to read a remedial notice at an all-employee meeting. The Board adopted the ALJ’s remedies and imposed additional remedies including ordering Noah’s Ark to mail a copy of the remedial notice to every employee, post the notice in its plant, and allow NLRB representatives to inspect the facility for up to a year.

On appeal, the Eighth Circuit rejected the company’s argument that the Board’s extraordinary remedies requiring reimbursement of bargaining expenses and reading of a remedial notice by the CEO were unjustified. Concluding that “the remedies in question are not beyond those that have been imposed in other extreme cases” – and additionally noting that Noah’s Ark had failed to properly preserve this issue for appeal by raising it before the Board – the Court granted enforcement of the Board’s order in its entirety.

The NLRB’s General Counsel has urged its regional offices to pursue the “full panoply” of remedies for employer unfair labor practices, and the Noah’s Ark case makes it clear that especially in cases involving egregious facts, that approach will be followed. While the NLRB and Eighth Circuit decisions break no new ground, they serve as a reminder that the duty to bargain in good faith lies at the core of the National Labor Relations Act, and that bad-faith, “take it or leave it” collective bargaining will not pass legal muster.

FTC's New Rule Effectively Bans Non-Competes – What Now?

03 May 2024

ABSTRACT: A new FTC rule bans most non-competes, with the stated objectives of generating over 8,500 new businesses annually, raising wages, lowering healthcare cost, and boosting innovation. The Biden Administration views this as part of a broader effort to address anticompetitive practices. Legal challenges are underway by various business groups; however, the Rule maintains substantial support in other quarters.

The Federal Trade Commission issued the Non-Compete Clause Rule (the “Rule”) on April 23, 2024, by narrow 3-2 vote, banning a vast majority of non-competes nationwide. Both existing and new non-competes are no longer enforceable. Limited exceptions exist for non-competes with “senior executives”—defined as workers earning more than $151,164 annually and who are in policy-making positions—and non-competes created subsequent the sale of a business, which may still be enforced. The Rule states that all employers with now unenforceable non-competes are required to provide notice to affected employees that the non-compete is now void.

The Rule was originally posted for comment in January 2023, receiving over 26,000 comments during the required 90-day public comment period—more than 25,000 of which support this proposed ban. The FTC found non-competes “an unfair method of competition, and therefore a violation of Section 5 of the FTC Act,” noting there are alternatives to non-compete agreements, such as trade secret laws and non-disclosure agreements; notably, nearly 95 percent of workers with non-compete agreements also have non-disclosure agreements. The FTC argues companies can retain workers previously subject to non-competes “on the merits,” by raising wages, increasing benefits, and improving their work environment. Other groups in favor of this ban argue non-competes restrict job mobility, depress wages, and quash innovation by limiting employees seeking to start their own companies.

Importantly, the Rule traces back to the Biden Administration’s 2021 “Executive Order on Promotion Competition in the American Economy.” That Executive Order encourages all relevant federal agencies to address anticompetitive practices within their scope of jurisdiction. Because of this, opponents argue that the FTC, with this Rule, extends past its jurisdictional reach.

The U.S. Chamber of Commerce, along with other prominent groups like the Business Roundtable, immediately sued the FTC in federal court in Texas after the announcement. The USCC contends the FTC lacks authority to promulgate this Rule, stating this type of monumental change in business practice must to be passed by Congressional vote instead. Additionally, many critics state the Rule imposes extraordinary burdens on businesses in protecting their trade secrets, will cause inflation to skyrocket due to predicted wage increases, and ignores state sovereignty since existing state laws already govern non-competes and should continue to do so. While many states have various laws limiting non-competes in some way, only four have banned them entirely prior to this Rule.

The lawsuits could take months (or longer) to unfold and may put the status of non-competes, and the employees that hold them, in limbo. The Rule, while final, is not effective until 120-days after the date of its publication in the Federal Register. Currently, the Rule is scheduled for publication on May 7, 2024, putting the Rule into effect September 4, 2024. Therefore, it is vital for employers to assess what steps must be taken now to prepare. Employers not only must inform their current employees of any applicable changes, but must also shift their hiring and retention strategies.

Key Takeaways

Even in light of current challenges, employers should remain proactive in preparing for the Rule’s publication and enforcement by:

Evaluating current employee contracts for non-compete provisions which violate the Rule, assessing whether revision or rescission is required;
Identify ways to meaningful meet employer’s goals (protect proprietary information; evaluate trade secrets, non-disclosure agreements, confidentiality practices; etc.) while balancing employee satisfaction and allegiance (performance-focused incentives; benefits; work environment/culture; etc.); and
Begin drafting requisite (per the Rule) correspondence to current and former employees about any non-competes no longer enforceable.

Missouri Supreme Court establishes elements of a claim for aiding and abetting discrimination, and more

06 Mar 2024

ABSTRACT: Missouri Supreme Court establishes elements of claim for aiding and abetting discrimination under the MHRA, and also finds that employees may state a claim for hostile work environment, even if they did not directly witness the discriminatory conduct, because they too may feel the impact of discriminatory acts.

In an earlier blog I wrote that the Missouri Court of Appeals, Western District, had overruled the Circuit Court’s dismissal of claims for racial discrimination, hostile work environment, and aiding and abetting discrimination filed by several Black employees of Syncreon and Harley Davidson. See Emanual Matthews, et al. v. Harley Davidson Motor Company Operations, Inc., et al., No. WD85267 (May 2023). Subsequently, Syncreon and Harley sought transfer to the Missouri Supreme Court, which was granted. Once transferred, the Missouri Supreme Court reviewed the Circuit Court’s grant of the defendants’ motion to dismiss de novo.

The Supreme Court considered two issues: whether the Circuit Court erred in granting a motion to dismiss: (1) the plaintiffs’ claim for a hostile work environment; and 2) the plaintiffs’ claims for aiding and abetting discriminatory conduct. The Missouri Supreme Court held that the plaintiffs had sufficiently pleaded claims for both hostile work environment and aiding and abetting, reviving those claims and remanding the case to the trial court.

Hostile Work Environment Claim

Regarding the plaintiffs’ hostile work environment claim, Syncreon and Harley argued that the plaintiffs failed to properly plead two required elements. First, the defendants argued the plaintiffs failed to plead they were subjected to unwelcomed harassment. The Supreme Court disagreed. The plaintiffs’ Petition stated that Syncreon and Harley subjected the plaintiffs to a “continuous pattern of hostile work environment based on race discrimination – including outrageous instances such as swastikas, nooses, a noose hanging a doll of a Black woman, and multiple graffiti using vile racial slurs against Black employees,” all of which the plaintiffs alleged constituted “individually and collectively, racial harassment.”

As they did before the Court of Appeals, the defendants primarily focused on their argument that none of the plaintiffs pleaded they personally witnessed or experienced any of the incidents that they complained about. The Supreme Court noted the incidents complained of were, by their very nature, targeted, and preyed on all Black employees in the plant. Because the plaintiffs alleged they were “subjected to” this unwelcome harassment, the Supreme Court held this element of a hostile work environment claim was sufficiently pleaded.

The defendants further claimed the plaintiffs failed to plead that a term, condition, or privilege of their employment was affected by harassment – another necessary element. Again, the Supreme Court disagreed. The plaintiffs had pleaded that the “ongoing series and cumulative effect” of the racial incidents they alleged “was so pervasive or severe as to create a hostile work environment” for each plaintiff, which directly caused the plaintiffs damages and injury to their dignity and civil rights. Additionally, the plaintiffs alleged the harassment unreasonably interfered with their work performance and adversely affected their physiological well-being. They also pleaded that the harassing conduct was severe and pervasive as viewed subjectively by the plaintiffs and as viewed objectively by a reasonable person.

The Supreme Court held these allegations sufficiently alleged that the plaintiffs were subjected to discriminatory harassment severe or pervasive enough to create an abusive working environment.

Aiding and Abetting Discrimination Claim

Next, the Supreme Court addressed whether the plaintiffs had sufficiently pleaded their claims that Syncreon and Harley aided and abetted violations of the MHRA. This was a matter of first impression, as the Supreme Court had never previously set forth the ultimate facts necessary to support an aiding and abetting claim under the MHRA.

Interestingly, the Supreme Court relied on the Restatement (Second) of Torts, which provides, in pertinent part:

For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he…. knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself.

The assistance of or participation by the defendant may be so slight that he is not liable for the act of the other.

Restatement (Second) of Torts § 876 cmt. D (1979). Emphasis added.

In assessing whether a defendant provided substantial encouragement or assistance, the Supreme Court noted it considers “the nature of the act encouraged, the amount of assistance given by the defendant, his presence or absence at the time of the tort, his relation to the other, and his state of mind”. Id.

In applying this standard, the Supreme Court first noted the alleged actions of the defendants, individually, would constitute a violation of the MHRA. However, the Court found the plaintiffs pleaded sufficient additional facts that the defendants further aided and abetted others in creating and fostering a hostile work environment.

The plaintiffs specifically pleaded multiple instances that Syncreon provided substantial encouragement or assistance, including allegations it urged employees to stay quiet about incidents that allegedly created a hostile environment, discarded written employee complaints in the trash, and misled an employee as to the status of an investigation into a noose incident. The Supreme Court held all of these actions taken by Syncreon could be inferred to suggest that it not only allowed but also provided substantial encouragement or assistance to create and foster a hostile work environment. The Supreme Court also held the plaintiffs sufficiently pleaded an aiding and abetting claim against Harley Davidson. They alleged Harley had the right to control Syncreon. Further, the plaintiffs claimed Harley’s command over the employment structure and the resulting deference shown to its’ management by Syncreon reinforced the plaintiffs’ physical segregation and endorsed the ongoing structural conflict between Black and White employees. The Court noted the plaintiffs recited multiple occasions where Harley failed to prohibit Syncreon management or its own employees from engaging in acts creating the alleged hostile work environment.

By pleading that either Syncreon or Harley management attempted to destroy evidence of racial harassment, the Supreme Court held the plaintiffs sufficiently alleged that Syncreon, Harley, or both substantially encouraged or assisted the discriminatory conduct that created and fostered a hostile work environment. Similarly, the plaintiffs had also pleaded that a plant manager told a supervisor to dispose of a noose and that an employee witnessed the supervisor cutting up the noose. Because these allegations also amounted to substantial encouragement or assistance, the Supreme Court found the plaintiffs sufficiently pleaded claims against both Syncreon and Harley for aiding and abetting under the MHRA.

Final Points

This case raises two important points. First, the Missouri Supreme Court allowed claims under the Missouri Human Rights Act to proceed, even where the plaintiffs did not directly witness the alleged discriminatory acts, emphasizing that the impact of discriminatory acts may extend beyond those who directly witness them. Second, the Supreme Court spelled out for the first time requirements of an aiding and abetting discrimination claim under Missouri law. On February 13, 2024, the defendants filed a motion for rehearing with the Supreme Court. It is unlikely that motion will be granted. Stay tuned.

NLRB Lacked Substantial Evidence to Find Unfair Labor Practice, Eighth Circuit Finds

12 Feb 2024

ABSTRACT: The Eighth Circuit ruled that the NLRB lacked substantial evidence of anti-union animus to support unlawful discharge charges.

The Eighth Circuit Court of Appeal has reversed a decision of the National Labor Relations Board, ruling that the Board’s decision lacked substantial evidence to support an unfair labor practice charge of unlawful termination under the Act. The Court held that the absence of evidence of anti-union animus was fatal to the challenge to an Air Force contractor’s decision to terminate 17 employees. The Court’s decision provides important guidance about the types of permissible inferences the Board may make in the absence of “direct evidence” of anti-union animus.

Strategic Technology Institute, Inc. had a contract with the Air Force to repair components of C-130 cargo planes at a base near Little Rock, Arkansas. Importantly, the supervisor for this unit of aircraft mechanics worked remotely from Texas and was generally not present in Little Rock. An employee resigned from his position with STI, and in an exit survey, he disclosed that deteriorating working conditions had caused workers to explore unionizing. That employee spoke with the supervisor and mentioned that employees were considering unionizing. The previous year, the International Association of Machinists and Aerospace Workers successfully petitioned to represent a group of employees with another employer at the same base. Thus, according to the ALJ and the Board, there was ample evidence of union activity as a backdrop to the events that followed.

Then, a screwdriver was found on or inside an engine component, and the Air Force issued a Corrective Action Report to STI. STI responded by discharging three employees for the safety violation and reporting to the Air Force – inaccurately – that prior training, re-training, and counseling had been ineffective in correcting the employees’ prior performance problems. Shortly after the discharges, the STI manager instructed the on-site assistant manager to rate all 41 employees at the Little Rock location. The assistant manager rated all 41 employees a “3” (out of 5), and because each employee had the same rating, they were ranked at random. The bottom 14 employees on the list were all discharged. Additionally, following the discharge, the manager placed identical verbal counseling forms in the 14 terminated employees’ personnel files, indicating, falsely, that each had received prior instances of training, re-training, and counseling, as well as a history of failure to comply with instructions from management.

The Board affirmed the ALJ’s decision finding that STI discharged the 17 employees in violation of Section 8(a)(1) and (a)(3) of the Act. The Board found that management had actual knowledge of union organizing efforts but acknowledged there was no traditional “direct evidence” of anti-union animus of management. Management denied knowledge of union organizing, but the Board applied the “small plant doctrine,” which raises an inference of knowledge in small and open work sites where employees have made no effort to hide their union activities.

The Board also affirmed the ALJ’s finding that STI management’s planting “outright lies” in the discharged employees’ personnel files made its proffered explanation pretextual. As a result, the Board was permitted to make an inference of anti-union animus. The Board ordered a make-whole remedy for the employees, including reinstatement with back pay and benefits.

STI petitioned the Eighth Circuit to review the Board’s decision. The Court granted the petition, vacated the Board’s decision, and remanded the case. The Court applied the Wright Line standard for determining an unlawful discharge. Under that standard, where the motive for termination is disputed, and an employer articulates a facially legitimate reason for the termination, the Board’s General Counsel must prove that protected activity was a “substantial or motivating factor” in the decision. If the GC meets that burden, the employer then must show that it would have taken the same action in the absence of the protected activity. The Court emphasized that to meet the substantial evidence standard, the Board could draw reasonable inferences from the evidence but could not rely on speculation, suspicion, or surmise.

The Court’s decision is primarily based on the lack of evidence of anti-union animus, which made any inferences of anti-union animus unreasonable, and in turn, meant the decision was not supported by substantial evidence. The Court rejected the Board’s application of several inferences to determine that the discharges violated the Act. First, while the “small plant doctrine” may be sufficient to impute knowledge, in the Eighth Circuit, that doctrine alone is insufficient to infer anti-union animus. Second, the temporal proximity between union activity and the discharges was not sufficient to raise an inference that anti-union animus motivated STI’s decision in the absence of additional evidence of animus.

Third, pretext alone is insufficient to create an inference of anti-union animus. The Court found that falsified verbal counseling forms could create suspicion, they did not amount to substantial evidence of a violation of the Act, noting that under Arkansas law the employees were employed at will. Finally, the Court rejected the application of a “mass discharge” or “mass layoff” inference that would relieve the GC of the burden of showing a correlation between union activity and adverse action on an individual basis. Under that standard, the presence of union activity and any mass discharge permits a plant-wide inference of anti-union animus.

Key Takeaways:

The ALJ noted that the GC asked that the Board overrule its 2019 decision in Tschiggfrie Props., Ltd., which requires the GC to prove a nexus between anti-union animus and the termination. The ALJ declined to overrule Tschiggfrie, so the requirement remains in force. However, the Wright Line standard was clarified by the Board’s 2023 Intertape Polymer Corp. decision to affirm that the Board may support its decision with either direct or circumstantial evidence.
This case involves the common, more difficult situation in which there is no “direct evidence” of anti-union animus, such as a manager’s disparaging remarks or an employer’s open efforts to resist unionizing. The Eighth Circuit’s analysis tracks with the more familiar McDonnell Douglas burden-shifting framework, which requires more than just evidence of pretext to establish a claim, but requires a showing of pretext and evidence of discriminatory intent.

The NLRB has petitioned for an en banc rehearing of the case. If rehearing is denied, or the panel’s decision affirmed, it is unclear whether the Board would petition for certiorari with the Supreme Court. Given the Court’s recent trend towards limiting administrative agencies’ discretion, an appeal is unlikely to succeed.

* Kaleb McKinnon, Law Clerk, assisted in the research and drafting of this post. McKinnon is a 3L student at Drake University Law School.

Fairly quiet so far after new standard is adopted for challenging workplace rules under the NLRA. But stay tuned…..

22 Jan 2024

ABSTRACT: The NLRB’s Stericycle decision was the subject of hundreds of articles and employment law blogs when issued in August 2023, due to its adoption of a new employee-friendly standard for challenging workplace rules as unlawful under the NLRA. Employers were plainly fearful of what was to come. Since then, however, things have seemingly been relatively quiet on the topic. But the Board has remanded for further consideration some pending cases in which Administrative Law Judges reviewed workplace rules under the previous Boeing standard. Join us for a quick status update, as we examine a few recent decisions issued by the NLRB that touch on this new standard.

The NLRB issued the Stericycle, Inc. decision, 372 NLRB No. 113 (2023), last August, which was widely reported on and the subject of many blog posts because the Board had adopted a new legal standard for evaluating employer work rules (i.e., handbook policies) that were challenged as “facially unlawful” under Section 8(a)(1) of the National Labor Relations Act. That decision threw employers into a tizzy, leaving them concerned about potential attacks on their Employment Handbooks and other workplace policies, and rightfully so. Surprisingly, since August it has been relatively quiet with the NLRB not making much noise about workplace policies. For this reason, we sought out and reviewed some of the most recent decisions to see where things stand on Stericycle.

First, let’s talk briefly about the new Stericycle standard. It focuses on whether a workplace rule could reasonably be interpreted to chill employees Section 7 rights, and the General Counsel’s burden is to prove that a challenged workplace rule has a reasonable tendency to chill employees from exercising their rights. The Stericycle Board found that “if an employee could reasonably interpret the rule to have a coercive meaning, the General Counsel will carry her burden,” creating a presumption that the rule is unlawful “even if a contrary, noncoercive interpretation of the rule is also reasonable.” Another critical change was that the Board will now analyze the workplace rule from the perspective of an “economically dependent” employee, who contemplates engaging in protected activity. Under Stericycle, the employer may rebut the presumption that its workplace rule is unlawful by establishing that the rule advances a “legitimate and substantial business interest” and that the employer is not able to advance that interest with a more narrowly tailored rule. The employer’s intention in creating the rule is irrelevant. Previously, the Board had applied the standard set forth in its Boeing decision (365 NLRB No. 154 (2017)), where it would determine whether employee Section 7 rights had been infringed, by balancing the nature and extent of the potential impact on NLRA rights, against an employer’s legitimate justifications associated with the rule. This would be examined from the perspective of an "objectively reasonable employee who is aware of his legal rights but who also interprets work rules as they apply to the everydayness of his job."

Since the Stericycle ruling, the Board has remanded several pending cases challenging workplace policies, where the Administrative Law Judge had applied the Boeing standard in reaching a determination. Here is a summary of a few of those decisions:

In Phillips 66 Company and Wayne Micheal Terrio, Case 15-CA-263727, decided on December 6, 2023, the Board largely upheld an ALJ’s ruling (under Boeing standards) sustaining the validity of several workplace policies, finding that they passed muster under Stericycle. But the ALJ’s ruling on a work rule restricting employees’ use of cameras did not pass Board scrutiny.While the Judge had found the employer’s rule to be categorically lawful under Boeing, the Board noted that the recent Stericycle case rejected the categorization of certain types of work rules as always lawful to maintain. For this reason, the Board severed and remanded the issue of whether the camera-use work rules were unlawful under Stericycle back to the ALJ.

Likewise, in Harbor Freight Tools USA and Daniel Ruiz, Sr., Case No. 28-CA-232596, the Board reviewed exceptions submitted to the ALJ’s decision after a 2020 trial. This underlying case involved a complaint that alleged three workplace policies in an Employee Handbook violated Section 8(a)(1).

The challenged policies were a “Proprietary and Confidential Information” policy, a “Social Media and Networking Guidelines” policy, and a “Solicitation and/or Distribution” policy. The ALJ found the first and third policies violated the National Labor Relations Act. In reviewing the decision, the Board affirmed the Judge’s finding that the portion of the “Solicitation and/or Distribution” rule restricting employees’ solicitation activity was overly broad in violation of Section 8(a)(1). The Board severed and remanded the complaint allegations related to the “Proprietary and Confidential Information” policy, directing the Judge to consider the policy under the new Stericycle standard.

Interestingly, the employer’s solicitation policy was determined to be overbroad because it failed to clarify that the solicitation restriction did not apply to working areas during non-working time. Under the current standards, while an employer may ban solicitation in work areas during working time, an employer may generally not extend the solicitation ban to work areas during non-working time. See Stoddard-Quirk Mfg. Co., 138 NLRB 615 (1962). While the rule expressly allowed the employees to solicit coworkers during breaks, lunches, and other non-working times, it was determined the workplace rule unlawfully limited the solicitation to non-work areas.

In this regard, in its December 2023 decision, the Board ordered the employer to cease and desist from maintaining an overly broad work rule that prohibits nonretail employees from engaging in protected solicitation during non-working time in working areas and that prohibits retail employees from engaging in protected solicitation in non-selling areas of a retail store, including any areas where retail employees perform “actual work” and “any areas where customers or clients may congregate or employees may perform work.” Based on this ruling, employers may be wise to review for compliance any policies limiting or restricting workplace solicitation.

Regarding the “Proprietary and Confidential Information” policy, since the underlying decision finding that policy unlawful had been based on the application of the former The Boeing Co., standard, the Board severed and remanded the workplace policy issue to the ALJ, directing the Judge to consider the policy under the new Stericycle standard.

Similarly, in ExxonMobil Global Services Company and Leo R. Suarez, Case 16-CA-269606, the Board reviewed an ALJ ruling on a complaint that a “Corporate Assets Policy” violated Section 8(a)(1). In evaluating the workplace rule, the ALJ had applied the former Boeing standard. As a result, the Board remanded the case to the ALJ and directed the Judge to address the complaint allegations under the new standard adopted by Stericycle. Responding to a dissenting opinion, the Board made clear that Stericycle created a new standard, in that it makes explicit that an employer can rebut the presumption that a rule is unlawful by providing that it advances legitimate and substantial business interests that cannot be achieved by a more narrowly tailored rule. The dissenting board member, however, took issue with the Board’s decision to remand the case. The dissenting Board member argued that remand was futile as no judge could possibly find a rule unlawful under Boeing, as the ALJ had, but lawful under Stericycle. For this reason, the dissenter took the position remand was simply a waste of everyone’s time and money.

Takeaway

Although it has been relatively quiet the past several months with little to no cutting-edge post-Stericycle NLRB decisions on challenged workplace rules, as expected, workplace policies continue to be challenged as unlawful under the NLRA. Presently, due to its retroactive application of the new Stericycle decision, the Board is routinely remanding cases that come up for review decided under the former Boeing standard and directing the administrative law judges to evaluate the challenged policies under the Stericycle standard. Stay tuned as these cases and others make their way through the system and we begin to obtain a clearer view of the impact of the new standard.

NLRB in the Crosshairs of an Unexpected Foe: Big Labor

17 Jan 2024

ABSTRACT: Major labor union challenges new NLRB joint employer rule as being too weak.

In November 2023, our blog addressed the NLRB’s proposed final rule that would expand the definition of “joint employer” within the meaning of the Act. Under the new rule, any party with the right to exercise indirect control over an essential term and condition of employment would be a joint employer, creating both an obligation to bargain and potential liability for unfair labor practices concerning the term. Predictably, employer groups considered this onerous and over-reaching and acted quickly to challenge the Rule, with the leading case filed by the United States Chamber of Commerce in the Eastern District of Texas.

In November, a surprising challenger entered the fray: the Service Employees International Union filed suit challenging the final rule in the District of Columbia Circuit Court of Appeals. SEIU argues that the new rule violates common law agency principles in evaluating a joint employer relationship by being too narrow in scope as to the factors the Board may consider. SEIU has argued in the Court of Appeals that by including a “closed list” of essential terms and conditions of employment, the new Rule impermissibly fails to cover all “mandatory subjects of collective bargaining.”

The lawsuit is relatively threadbare, but the SEIU, in a joint letter with the AFL-CIO and Teamsters International Union, addressed the alleged flaws in the new Rule. First, SEIU argued that the D.C. Circuit has acknowledged that reserve or indirect control must be factors in considering joint employer status. Second, the Trump-era rule requiring substantial direct and immediate control, SEIU argued, allows employers with authority over working conditions to avoid bargaining obligations, and this is inconsistent with the Act’s purposes. Third, SEIU rejected any assertion that the Rule would not create a per se joint employment relationship with franchisees and franchisors, temp agencies, staffing agencies, or subcontractors. In addition to the lawsuit, the signatories to the letter expressed an intent to urge Congress to oppose efforts to invalidate the rule under the Congressional Review Act.

The promise of an individualized inquiry into joint employer status will be cold comfort to franchisees, employers that use staffing or temp agencies, and construction firms.

Recognizing the threat that employers’ bargaining obligations and potential liability may be greatly expanded, the Chamber of Commerce led a cohort of around a dozen intervenors in the lawsuit, which includes groups such as the American Hotel & Lodging Association, Associated General Contractors, International Franchise Association, and National Retail Federation. In December, the Chamber of Commerce, along with the same cohort of employer groups, filed suit in the Eastern District of Texas as well, challenging the new Rule as an unwarranted extension beyond the common law of agency.

In the Texas lawsuit, the Chamber of Commerce argued that the new Rule “discards the former limiting principle that [….] ‘the putative joint employer possesses sufficient control over the employees’ essential terms and conditions of employment to permit meaningful collective bargaining.” Indeed, under the new Rule it seems that there will be many employers with new bargaining obligations but little actual control to do anything about terms and conditions of employment.

This argument makes sense. Take the example of an owner who is searching for a general contractor on a construction project and requires a guaranteed maximum price. The general contractor may then line up subs for concrete, electrical, carpentry, and other trades. The subcontractors hire employees, perhaps under a multi-employer contract or other arrangement. Under the new Rule, the general contractor will likely be a joint employer of the trades’ employees regarding wages, as the general contractor “indirectly” affects the wages the subcontractor can pay, based on the amount of the contract for that trade. In turn, the owner is likely also a joint employer, as the guaranteed maximum price affects the amount the subcontractor can pay its workers. Two new parties will be at the bargaining table, but it is unclear whether their involvement will benefit workers or simply make it more likely that negotiations fail.

In the D.C. Circuit case, the employer group filed a motion to dismiss for lack of subject matter jurisdiction, arguing that Administrative Procedures Act requires challenges to be filed in a district court first. SEIU filed its suit under Section 10(f) of the Act, which provides for review of an order of the Board where an unfair labor practice occurred. Challenges to rulemaking, as opposed to an order, should be filed in the district court.

The group also argued that SEIU lacked standing because of a lack of concrete and particularized harm, particularly with regard to items included in prior challenges by SEIU. In a challenge to the Trump-era rule in 2021, SEIU objected that the mandatory subjects of bargaining did not include “safety and health conditions” in its list of essential terms of employment. Because the new Rule includes health and safety, as well as all of the other terms and conditions of employment one would expect to find in a collective bargaining agreement, any harm to SEIU has been resolved.

The Court of Appeals is expected to rule on the Motion to Dismiss and, should the lawsuit survive, expected cross-motions for summary judgment, early in 2024. Baker Sterchi attorneys will continue to monitor these cases and other challenges to the NLRB final rule and update this blog accordingly.

EEOC Issues Its Year End Litigation Round Up and Strategic Enforcement Plan for the Next 5 Years

17 Nov 2023

ABSTRACT: In its 2023 year end litigation round up and strategic enforcement plan for fiscal years 2024-28, the EEOC highlights its increased enforcement activities over the past year, and new areas of emphasis for future enforcement.

In its Year End Litigation round up for Fiscal Year 2023, the EEOC reports that systemic lawsuits, defined as “pattern or practice, policy and/or class cases where the discrimination has a broad impact on an industry, profession, company or geographic location,” have increased to 25, nearly doubling the number of filings from the previous year. The EEOC also filed 32 non-systemic class suits seeking relief for multiple harmed parties and 86 suits seeking relief for individuals. A full report of all applicable cases is not yet available as of November 2023, but will be posted on the EEOC website. That report should provide more insight into the specific types of cases pursued by the EEOC in this fiscal year.

Companies facing EEOC charges should be aware that the EEOC has significantly heightened its level of activity in all areas in recent years, which increases the likelihood that a seemingly isolated charge of discrimination may expand into something much more onerous. The agency notes in its press release that “the cases filed by the EEOC challenge workplace discrimination under all of the statutes enforced by the Commission and represent a broad array of issues, including barriers in recruitment and hiring, protecting vulnerable workers and persons from underserved communities, qualification standards and inflexible policies that discriminate against individuals with disabilities, the long-term effects of the COVID-19 pandemic, advancing equal pay, (and) combatting unlawful harassment…” The EEOC’s recent emphasis on COVID-19 issues means that employers should keep abreast of case law developments in this area, and prepare to adjust hiring and other employment practices around accommodating potential sufferers of Long COVID.

Additionally, the EEOC’s multi-year Strategic Enforcement Plan for Fiscal Years 2024-2028 sheds some light on how EEOC challenges might look moving forward. The Plan contains six new or significantly broadened areas of strategic emphasis points.

Targeting discrimination, bias, and hate directed against religious minorities (including antisemitism and Islamophobia), racial or ethnic groups, and LGBTQI+ individuals.
Expanding the agency’s vulnerable and underserved worker priority to include those with arrest records, LGBTQ+ workers, temporary and older workers, individuals in low wage jobs and individuals with limited English-speaking capabilities.
Additional emphasis on protecting workers affected by pregnancy, childbirth, or related medical conditions, including under the new Pregnant Workers Fairness Act (PWFA) and other EEO laws; employment discrimination associated with the long-term effects of COVID-19 symptoms; and technology-related employment discrimination.
Highlighting the continued underrepresentation of women and workers of color in certain industries and sectors, such as construction and manufacturing, finance, tech and other science, technology, engineering, and mathematics fields.
Recognizing employers’ increasing use of technology, including artificial intelligence and machine learning, to target job advertisements, recruit applicants, and make or assist in hiring and other employment decisions.
Addressing overly broad waivers, releases, non-disclosure agreements, or non-disparagement agreements when they restrict workers’ ability to obtain remedies for civil rights violations. The first is expanding the vulnerable and underserved worker priority including those with arrest records, LGBTQ+ workers, temporary and older workers, individuals in low wage jobs and individuals with limited English-speaking capabilities.

By remaining compliant and staying abreast of the EEOC’s strategies moving forward, employers can minimize their exposure to the broadening and expansion of EEOC enforcement actions. Employers should be sure to pay close attention to any practices that may indicate an exposure to systemic lawsuits, as the EEOC’s doubling of these types of lawsuit claims in the past fiscal year may indicate a key point of EEOC policy moving forward. BSCR will continue to monitor EEOC activity in these areas and advise employers on how best to avoid running afoul of these heightened EEOC initiatives.

* Andrew Snively, Law Clerk, assisted in the research and drafting of this post. Snively is a 3L student at Pepperdine Caruso School of Law.

New NLRB Joint Employer Rule Greatly Expands Bargaining, Other Obligations

07 Nov 2023

ABSTRACT: Many more employers will have bargaining obligations under the NLRB’s new joint employer rule.

On October 27, 2023, the NLRB published a final rule for determining joint-employer status under the National Labor Relations Act. This rule rescinds the NLRB’s 2020 rule, which required a threshold of “substantial direct and immediate control over essential terms and conditions of employment,” in favor of an expansive rule purportedly based on common law agency principles. In reality, the new rule is likely to dramatically expand the bargaining obligations of employers who use subcontractors, staffing agencies, participate in multi-employer projects, and franchisors. The new rule is also likely to ensnare numerous employers in Board proceedings who only have a tangential relationship to the unfair labor practice at issue.

Key Takeaways

The new joint employer rule takes effect on December 26, 2023, and only applies to cases filed after that date. However, given the NLRA’s six-month deadline to file charges, the joint employer rule could apply to events occurring from July 2023 to present.
Under the new rule, an employer may be a “joint employer” if it “possesses the authority to control (whether directly, indirectly, or both),” or exercises the power to control one or more of the employee’s “essential terms and conditions of employment,” as defined in the rule. It is generally going to be irrelevant whether the employer actually exercises control.
Employers will be required to bargain in good faith with employees over terms and conditions of employment it “possesses the authority to control or exercises the power to control.”
Health and safety rules are likely to be an inflection point, finding more employers are “joint employers” at the same time that OSHA has ramped up enforcement.
The NLRB rule does not affect the Department of Labor’s “economic realities” test for determining employment status under the Fair Labor Standards Act.

Overview

In 2020, the NLRB implemented a final rule finding that an entity could only be a joint employer where it exercises direct control over employees. The 2020 rule provided employers greater certainty as to whether it was a worker’s employer. Over and over, in its responses to commenters in the final rule, the Board stated that its new rule is more in line with the common law of agency and rejected any policy or empirical arguments that the new rule creates greater uncertainty for employers. However, the expansive new rule encompasses many more joint employers and is likely to cause confusion where an entity provides only input or is tangentially related to the term or condition of employment at issue.

The new rule defines joint employers as “two or more employers of the same particular employees [as the] joint employers of those employees if the employers share or codetermine those matters governing employee’s essential terms and conditions of employment.” The key questions in the new rule are:

What kinds of control constitute “share or codetermine”?
What are “essential terms and conditions” of employment?
What obligations does a joint employer have under the new rule?

Forms of Control Sufficient to Create Joint Employer Status

An important component of the new rule is that the mere possession of authority to control the terms and conditions of employment – even if such control is never exercised – is sufficient to create a joint employment relationship. Here, the Board cited with approval comments highlighting that the new rule encompasses control through an intermediary, specifically through franchise, staffing, and temporary employment relationships, to create a joint employment relationship. For example, a company that uses a staffing agency for certain workers could be their joint employer if the contract with the staffing agency allows the company to discipline and discharge workers (or even just to instruct the staffing agency to discipline or discharge a worker). In this scenario, the company would likely now be required to bargain with the workers’ union and refrain from committing other unfair labor practices. Remember, even if a union is not present, and employer can be liable for unfair labor practices related to protected concerted activity.

Essential Terms and Conditions of Employment

For purposes of collective bargaining, once a company is deemed a joint employer, the company must bargain in good faith over those terms and conditions of employment over which it has control, as well as any mandatory subjects of bargaining over which it possesses control.

In the new rule, the NLRB has outlined the terms and conditions of employment it sees as “essential”:

Wages, benefits, and other compensation;
Hours of work and scheduling;
The assignment of duties to be performed;
The supervision of the performance of duties;
Work rules and directions govern the manner, means, and methods of the performance of duties and the grounds for discipline;
The tenure of employment, including hiring and discharge; and
Working conditions related to the safety and health of employees.

Joint Employer’s Obligations

An entity may, in some cases, be a joint employer on one essential term of employment but not others. For example, an entity may have control over wages or safety, but not be a joint employer with regard to discipline or discharge of workers. Notably, the new rule states that the joint employer rule applies “for all purposes” under the Act, and where an entity is a joint employer, it has two primary obligations. First, the joint employer must bargain in good faith, and there is a long body of Board law concerning good faith bargaining. Second, the joint employer must refrain from committing unfair labor practices such as threatening employees with loss of job or benefits if they join or vote for a union, threatening to close plants, questioning employees about union activity, or restraining or interfering with employees’ rights under the Act. Take, for example, a company that uses a staffing agency to fill certain positions, and the company retains the right to dictate workplace safety rules. If the temporary workers band together and complain to management about a safety risk, the company must treat those workers as its own employees and 1) bargain over the safety risk if they select a representative, and 2) refrain from retaliating against them for engaging in protected concerted activity. (In this example, the OSH Act also likely applies).

As a result of the new rule, employers would be wise to review existing contracts with business partners to determine whether a joint employment relationship exists (and for which essential terms and conditions,) as well as determine what new bargaining obligations may apply. At the same time, employers should train managers and consider policies to avoid retaliation or interference with employees’ protected concerted activity. This should already be underway given the NLRB General Counsel’s heightened focus on protected concerted activity over the last two years.

Construction Industry

Construction projects regularly use a general contractor and subcontractor relationship and there is, rightly, much concern that general contractors will now have an employee-employer relationship with employees of their subs. Several construction trade organizations and others commented that the final rule should follow the Board’s decision in NLRB v. Denver Building & Construction Trades Council, arguing that general contractors and subs have separate identities that preclude joint employer status. The Board declined to follow Denver Building and noted in its final rule that the new definition of “joint employer” requires both a “common-law employment relationship with particular employees,” and that the putative joint employer “‘share or codetermine those matters governing employees’ essential terms and conditions of employment.’” The Board also provided examples of conduct which might constitute joint employment: jointly developing employees’ wage structure, consulting on human resources matters, coordinating on hiring decisions, or jointly developing health and safety rules.

Importantly, the Board acknowledged that in some contracting situations, a prime contractor does not have discretion over certain contractual terms and obligations. The Board cited the federal Service Contract Act or state or municipal “prevailing wage” ordinances as examples. Where a general contractor does not have discretion over the terms and conditions of employment (e.g., there is a government-mandated wage), then a joint employer relationship is not created, and the general contractor need not bargain over that term or condition of employment. However, if the general contractor has any discretion on the effects or implementation of a particular requirement, it is required to bargain over the effects or implementation.

Next Steps

Employers should consider reviewing contracts executed in the past six months to determine whether the new rule imposes bargaining obligations that had not previously been fulfilled.

There is already a bipartisan resolution in the works to overturn the NLRB rule under the Congressional Review Act. Under the CRA, a joint resolution of both houses of Congress can override an administrative rule. However, such a resolution must also be signed by the President, or be passed by a veto override, which is highly unlikely.

Of course, federal lawsuits challenging the rule are inevitable, and it is possible the Supreme Court will take up the issue in this term. Baker Sterchi attorneys will continue to monitor these developments and update this blog accordingly.