Last year we reported on the Employee Free Choice Act (EFCA), the proposed pro-union legislation that would abolish secret ballot elections in favor of union card checks by employees. Although the bill failed in the Senate, it remains a priority agenda item for Senator Obama and the Democrats who overwhelmingly supported it.
How the NLRA Works Now
Currently, an employer may voluntarily recognize a union (pre-election recognition), or a union may file a representative petition with the NLRB. A union will typically demand recognition as the exclusive bargaining representative when it has a sufficient majority of support, as determined by signed authorization cards or a “card check.” The employer does not currently have to recognize the union without an election, which may be sought by the union, the employer, or the employees. If there is a showing (by card check or petition) that at least 30% of an appropriate bargaining unit wish to be represented by a union or by another group, the NLRB will hold a secret ballot election. If a majority of employees choose to be represented, the NLRB will certify that representative to bargain collectively with the employer on behalf of the employees in the unit. Once the employer and the union agree on a contract, the employees get to vote on it.
How the EFCA Would Work
Under the proposed EFCA, secret ballot elections are eliminated. Instead, if a majority of employees sign union authorization cards, the workforce becomes unionized without an election. Although the process is not secret, it is possible for the union to obtain the required majority before all of the employees and the employer are even aware that a union campaign is afoot. This risk is far greater for small employers: consider an employer with a workforce of 20 employees -- a union could get authorization cards from 11 employees over a weekend and, unbeknownst to the employer and the remaining staff, they will be unionized come Monday morning.
Once the union is certified, the parties must begin bargaining within 10 days. If they cannot reach agreement on a contract within 90 days, or through mediation in the 30 days after that, an arbitrator decides what terms will govern the parties’ employment relationship for the first two years. Employees have no say in this process.
The EFCA imposes substantial additional penalties on employers for unfair labor practices, including triple back pay awards for employees and fines of up to $20,000 per violation. The Act imposes no additional penalties on unions that commit unfair labor practices.
How the Elimination of Secret Ballots Plays Out in Practice
In 2007, Oregon enacted its own version of the EFCA applicable to public employees. See ORS 243.682(2). Under that law, the employees or the union could file a petition for certification without an election if a majority of employees sign authorization cards. However, as originally enacted, the statute and regulations provided employees with two important safeguards not present under the EFCA. First, employees could rescind their authorization after signing a card (this provision has since been eliminated from the regulations, but a petition has been filed to restore it). In addition, if 30% of the employees petitioned the Employee Relations Board (the Oregon equivalent of the NLRB), the Board would hold a secret ballot election. In theory, these safeguards should eliminate some of the shortcomings of the EFCA but, in practice, it is not clear that they do. The safeguards present in the Oregon law fail to address the primary drawback of such “free choice” legislation, which is the lack of secrecy.
In some organizing efforts under the Oregon law, it was reported that employees who did not want to be represented by the union felt coerced into signing cards. Employees described verbal confrontations with the union during visits to employees’ homes and workplaces. Employees who petitioned for an election have also reported hostile and retaliatory treatment from union representatives and pro-union co-workers, who were aware of the petitioners’ identities because the process was not secret.
The EFCA is Likely to Become Law
The EFCA would effect the most significant change in labor law since the NLRA was enacted in the 1940s. If elected president, Senator Obama has said he will sign the EFCA as soon as it lands on his desk. Both employers and employees should educate themselves on the significant shift in power to the unions that passage of the EFCA would effect.
You can access our original article and the text of the EFCA here.
Once parties have entered into an arbitration agreement, the courts have a limited role in adjudicating a subsequent dispute. While a court may generally decide whether a valid agreement to arbitrate exists, most other issues must be resolved by the arbitrator.
In a case decided this week by the Ninth Circuit Court of Appeals, the court held that a claim that an arbitration agreement has been breached or waived goes to the validity of the agreement and must be resolved by the court and not the arbitrator. In Cox v. Ocean View Hotel Corp., an individual filed a discrimination lawsuit against his former employer. In response to the former employer's motion to enforce an arbitration agreement, the plaintiff claimed that the employer, by earlier refusing to arbitrate, had both breached and waived the agreement. Judge A. Wallace Tashima, writing for the majority of the Ninth Circuit panel, held that plaintiff's claims went to the validity of the agreement and were properly decided by the district court.
Judge Diarmuid O'Scannlain dissented regarding the scope of the court's role. In this case, he wrote, the claim of breach and waiver went to enforceability and not validity, and should have been decided by the arbitrator and not the court.
While wage and hour class actions continue to be popular, a California court just issued an opinion likely to put at least a slight damper on rest and meal break class actions. In Brinker Restaurant Corporation v. Hohnbaum (Cal. Ct. App. July 22, 2008), the California Court of Appeal held that the case could not continue on a class-wide basis because the issue of whether the breaks were prohibited by the employer or waived by the employee is by its nature an individual inquiry. The court further emphasized that an employer, in California, must only make meal periods available to employees. Employers are not required, at least according to this court, to ensure that employees actually take their meal periods. While the plaintiffs could show, via computer and statistical evidence, that breaks were not taken or were shortened, they could not show why.
The Brinker case suggests that in the absence of evidence that an employer has a class-wide policy prohibiting breaks, rest and meal break claims are not conducive to class treatment. However, the California Supreme Court has yet to chime in on these matters.
This is a reminder that, effective July 24, 2008, the federal minimum wage will increase from $5.85 to $6.55 per hour. This is the second of three increases scheduled under the Fair Minimum Wage Act of 2007. The next increase to $7.25 per hour will go into effect on July 24, 2009. The increases will have little effect on Oregon employers, who must comply with Oregon's higher minimum wage, currently set at $7.95. Oregon's minimum wage is scheduled to increase again on January 1, 2009.
The Internal Revenue Code for some time has required corporations to provide written statements to employees regarding transfers of stock pursuant to an exercised option or under an Employee Stock Purchase Plan (ESPP). Effective for 2007, Congress amended the Code to require the employer to also submit information returns to the IRS regarding the transfers. However, because the IRS did not have regulations, forms or processes in place to deal with the filings, in late 2007 the IRS waived the requirement for the 2007 calendar year.
Last Thursday the IRS published Proposed Regulations on the IRS filing process. The Proposed Regulations describe the content and form used to satisfy the statutory filing requirement. New IRS form 3921, Exercise of an Incentive Stock Option, and IRS form 3922, Transfer of Stock Acquired Through an ESPP, are used to provide this information to employees and are filed with the IRS. They are not yet available on the IRS web site. Although the Regulations are effective as of January 1, 2007, they indicate that companies are not required to comply with the return filing requirements for transfers occurring during 2007 and 2008. So the first filing deadline under the new process will be January 31, 2010, for transactions during 2009. The Proposed Regulations allow companies to continue relying on the current version of the regulations for transfers occurring through the end of 2008, meaning the reports issued in January 2009 will be unchanged.
While these are proposed regulations, we expect them to be finalized later this year with little, if any, modification. Since transactions occurring during 2009 will be subject to the new rules, companies must ensure that they have data gathering processes or systems in place to compile the required information in order to complete the IRS forms.
Last week, in Lemley v. Lemley, the Oregon Court of Appeals held that a settlement agreement to transfer an interest in real property is enforceable even though the agreement was executed by an attorney who lacked written authority to enter into the settlement on his client's behalf.
The case offers the karmic lesson that it is better to honor one's agreements than to seek relief through perceived legal loopholes. The parties in Lemley conducted several years of contentious court battles following their divorce. Before a round of appeals, the parties reached a settlement of their ongoing dispute over money and real property. The defendant's attorney signed a letter setting out the settlement, and the plaintiff subsequently honored all of his obligations under the agreement. When it came time for the defendant to transfer real property to the plaintiff, she balked and claimed she was not obligated to transfer the real property because her attorney was not authorized to enter into a settlement on her behalf. The trial court sided with the defendant, as it reluctantly found she did not provide her attorney with written authority to settle. As a result, according to the trial court, the attorney lacked actual or apparent agency to agree to the terms of the settlement.
The Court of Appeals did not address whether the attorney possessed authority under the law of agency to bind the defendant to the settlement agreement. Instead, the court concluded the defendant ratified the settlement agreement because the evidence showed she knew about its material terms and knowingly accepted its benefits. As a result of the ratification, the agreement was enforced as if the attorney had actual authority.