Northwest Business Litigation

Grocers' plan to share profits during strike violates antitrust law, Ninth Circuit holds

When faced with a strike by their unionized employees in 2003, four supermarket chains in Southern California entered into a Mutual Strike Assistance Agreement.  The chains agreed that they would lock out all union employees in the event of a strike against one of them, and that they would redistribute and share profits during the course of the strike. 

While the lock-out agreement is a traditional tactic in labor disputes, the profit-sharing agreement drew the attention of the State of California, which sued the supermarkets alleging an unlawful agreement in restraint of trade, in violation of Section 1 of the Sherman Act.  In California v. Safeway, Inc., the Ninth Circuit Court of Appeals last week held that the agreement was unlawful, and directed that summary judgment be entered in favor of the state. 

The supermarkets argued that the profit-sharing arrangement was justified because it was designed to end once the labor dispute was resolved, and did not decrease the number of competitors in the market.  Further, they argued, it served the pro-competitive purpose of resisting an increase in labor costs by allowing the supermarkets to fend off union demands.  Finally, they contended that the agreement was subject to an exemption from the antitrust laws for the purpose of engaging in labor negotiations. 

The Ninth Circuit rejected all of those arguments, holding "to exempt defendants' anticompetitive agreement from the antitrust laws simply because it was entered into in order to help employers prevail in a labor dispute would be contrary to the fundamental priciples of both labor and antitrust law, as well as the actions of both Congress and the courts in their efforts to reconcile those two important bodies of national law."

Wal-Mart asks Supreme Court to review employment class action

Wal-Mart today filed a petition for certiorari in the U.S. Supreme Court, asking the Court to review certification of a huge employment class action lawsuit.  Plaintiffs in Dukes v. Wal-Mart allege that Wal-Mart discriminates against women in pay and promotions, and they seek to represent a class of some 1.5 million current and former employees.  Wal-Mart contends the class -- the largest ever in an employment case -- includes too many members, and presents too many individual issues, to be adjudicated in a single action.  So far the federal District Court in California and the Ninth Circuit Court of Appeals have disagreed.  See SCOTUS Blog's coverage of the petition for certiorari here, and our earlier coverage of the case here.

Ninth Circuit approves massive employment discrimination class action against Wal-Mart

An en banc panel of the Ninth Circuit Court of Appeals today authorized a huge class-action lawsuit to proceed against Wal-Mart.  At issue in Dukes v. Wal-Mart are claims that the company has a policy of discriminating against women in pay and promotions.  The plaintiff class is estimated to number 1.5 million current and former employees.

The en banc panel split 6-5 in favor of certifying the class.  Judge Michael Daly Hawkins, writing for the majority, states "the district court acted within its broad discretion in concluding that it would be better to handle some parts of this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly."  Pointing to the unwieldy size of the class and lack of evidence of a company-wide policy of discrimination, the dissent by Judge Sandra Ikuta states "No court has ever certified a class like this one, until now.  And with good reason."

See our coverage of the 2007 opinion by a three-judge Ninth Circuit panel approving the class here, and the 2009 order for rehearing en banc here. 

If you are thinking about hiring unpaid interns, think again

With summer fast approaching, you may be considering hiring students or others as unpaid interns.  While students and displaced workers may be grateful for the opportunity to gain experience and willing to work without pay, most employers should resist the temptation to take advantage of the "free" labor.  If your business derives a benefit from the work an intern performs, he or she will most likely qualify as an employee and must be paid at least minimum wage.

A recent article on OregonLive.com illustrates the point.  The article recounts the stories of summer interns on whose behalf the Oregon Bureau of Labor and Industries (BOLI) pursued wage claims against the companies that the provided the internships.  In all cases, the interns prevailed.

Although there is no bright-line test for determining when an internship does or does not qualify as employment, the Department of Labor and BOLI both rely on the following six factors, first announced by the U.S. Supreme Court in Walling v. Portland Terminal Co., 330 US 148 (1947):

1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
2. The training is for the benefit of the trainees or students;
3. The trainees or students do not displce regular employees, but work under their close supervision;
4. The employer that provides the training derives no immediate benefit from the activities of the trainees or students; and on occasion its operation may actually be impeded;
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

All of the foregoing factors must be met for the person to qualify as an unpaid intern.  For a more detailed explanation of the type of program that will qualify as an unpaid internship, see BOLI Technical Assistance FAQ on Interns and Trainees. 

Oregon Supreme Court won't protect medical marijuana users in the workplace

In a divided opinion, the Oregon Supreme Court Wednesday cited federal preemption principles to hold that state employment discrimination laws do not require an employer to accommodate an employee's use of medical marijuana.  Justice Kistler wrote the majority opinion in Emerald Steel Fabricators, Inc. v. BOLI.  Justice Walter filed a dissent, joined by Justice Durham.

 

Emerald Steel terminated an employee for using marijuana, even though the employee was authorized to do so under the Oregon Medical Marijuana Act.  The employee filed a complaint with BOLI alleging that the employer had discriminated against him by failing to make a reasonable accommodation for his disability as required by ORS 659A.112.  The employer responded that, under ORS 659A.124, it was not required to accommodate an employee who is "engaging in the illegal use of drugs."  Following appeal, the Supreme Court held that the use of medical marijuana was an illegal use of drugs, as defined by ORS 659A.122, because even if such use was authorized under Oregon law, it was prohibited by the federal Controlled Substances Act. 

 

The court further held that neither of the exclusions in the statutory definition of "illegal use of drugs" supports the employee.  The first exclusion, for drug use authorized under state law, doesn't apply because the Controlled Substances Act preempts the section of the Oregon Medical Marijuana Act that authorizes the use of medical marijuana.  The second exclusion, for drug use "under the supervision of a licensed health care professional," doesn't apply because the Controlled Substances Act does not authorize use of marijuana under the supervision of a health care professional. The court held that the employee's use of marijuana was therefore illegal under ORS 659A.124, and the employer was not barred from terminating his employment.

 

The court noted that its preemption holding applies only to the section of the Oregon Medical Marijuana Act that authorizes the use of medical marijuana.  It did not hold that the Controlled Substances Act preempts the provisions of the Oregon Medical Marijuana Act that exempt from state criminal liability the possession, manufacture, or distribution of medical marijuana.

Oregon Court of Appeals upholds arbitration clause in employment contract

The Oregon Court of Appeals has again enforced an arbitration clause in an employment contract, rejecting the employee's claim that the clause is unconscionable.  In Livingston v. Metropolitan Pediatrics, LLC, the plaintiff, a pediatrician, took issue with the conduct of his employer and other doctor members and employees related to an investigation of the clinic's child vaccine program.  He alleged he was ultimately terminated because of the concerns he expressed to his employer and government authorities. 

Plaintiff filed common law and statutory employment claims against his employer and the others in court.  The employer moved to abate the claims and compel arbitration, citing a clause in the employment agreement that required arbitration of "[a]ny controversy, dispute or disagreement arising out of or relating to this Agreement, or the breach thereof."  The trial court denied the employer's motion, ruling that the arbitration clause is "unconscionable" and, therefore, unenforceable.  The employer appealed, and the Court of Appeals last week agreed with the employer and sent the case back for arbitration of all claims.

The test for "unconscionability" in Oregon has two parts, one procedural and the other substantive.  A contract is procedurally unconscionable, and therefore not enforceable, if there is "oppression" or "surprise" in the "conditions of contract formation," but unequal bargaining power alone is insufficient for a finding of procedural unconscionability.  A contract is substantively unconscionable if the "terms" of the contract are "unreasonably" one-sided, such that their "effect" makes the parties' respective obligations "so unbalanced as to be unconscionable."

In this case, Plaintiff did not contend that the agreement was procedurally unconscionable; the Court of Appeals noted that, in any event, because plaintiff is a highly educated physician, any inequality in bargaining power was minimal.  The trial court, however, had found these aspects of the agreement substantively unconscionable:  (1)  the possibility that plaintiff would have to pay defendant's attorney fees and costs if plaintiff is unsuccessful on his "blacklisting" claim; (2)  excessive arbitration fees assessed against plaintiff; (3)  ambiguity about which set of American Arbitration Association rules would govern the arbitration; and (4) a requirement of confidentiality.  Before the Court of Appeals, plaintiff asserted these and other grounds for a finding of unconscionability and further argued that the arbitration clause should not apply to intentional torts, statutory claims, and claims against non-signatories to the employment agreement.  The Court of Appeals addressed the trial court's findings as well as the other arguments put forth by plaintiff, and held that none of the concerns arises to the level of substantive unconscionability or otherwise requires court litigation of the parties' disputes.  Central to the ruling of the Court of Appeals is the very broad language of the arbitration clause allowing for arbitration of "any controversy, dispute or disagreement."

Ninth Circuit: Tip pooling does not violate Fair Labor Standards Act.

Last month in Cumbie v. Woody Woo, Inc., the Ninth Circuit addressed whether a restaurant violates the Fair Labor Standards Act (FLSA) when, despite paying a cash wage greater than the minimum wage, it requires its wait staff to participate in a "tip pool" that redestributes some of their tips to the kitchen staff. 

Judge O'Scannlain, writing for the court, began with the default rule that an arrangement to turn over or redistribute tips is presumptively valid, unless such arrangement is forbidden by statute. The plaintiff, a server at a Portland restaurant, argued that tip pooling violates section 203(m) of the FLSA, which provides that restaurants must allow employees to keep all of their tips, except when the employee participates in a tip pool with other "customarily tipped employees."  The plaintiff argued that members of the kitchen staff are not "customarily tipped employees," thus rendering her tip pool "invalid."  The Ninth Circuit rejected the plaintiff's interpretation, finding that the FLSA "imposes conditions on taking a tip credit and does not state free standing requirements pertaining to all tipped employees."  (Emphasis in original.)

While rendering judgment for the employer here, the court hinted that the outcome may be different in situations where a restaurant pays its wait staff less than the minimum wage and utilizes a "tip credit" to make sure the employees' wages exceed the minimum wage.

Employee may be forced to arbitrate employment claims under FAA

In 2007, the Oregon Legislature amended Oregon's arbitration statute to impose an additional requirement on employers that sought to require employees to arbitrate employment-related disputes: the employer must either provide notice of the requirement at least two weeks prior to the time employee starts work, or have the employee sign the agreement in connection with a bona fide advancement. See ORS 32.620(5).  The amendment was of questionable validity because it imposed additional requirements on arbitration agreements that did not apply to contracts generally, something arguably prohibited by the Federal Arbitration Act (FAA), 9 USC § 2.  Judge Brown recently put this issue to rest in Bettencourt v. Brookdale Senior Living Communities, Inc.

Deanna Bettencourt challenged the enforceability of an arbitration agreement based on the fact that she signed it after she started work and not in connection with any advancement.  She argued that under ORS 32.620(5), the agreement was void. The defense argued that the FAA preempts Oregon law and, therefore, prohibits Oregon from imposing any additional requirements on arbitration agreements that do not apply to contracts generally.  Judge Brown agreed, finding that the FAA places arbitration agreements on the same footing as any other contract. Consequently, ORS 32.620(5), which "only renders unenforceable arbitration agreements that would otherwise be enforceable under the FAA" is invalid.  While Judge Brown's ruling eliminated one obstacle to arbitration, she ordered the parties to go to trial on whether the parties agreed to arbitrate.

Judge Brown's ruling is good news for Oregon employers who favor arbitration over going to court.  However, employers should keep in mind that there are many issues to consider before committing to arbitration - one being that the agreement to arbitrate will likely be litigated as a preliminary matter, before the parties ever get to the underlying claims.  Therefore, before running headlong into arbitration, it is a good idea to go over the pros and cons with counsel.

Oregon Court of Appeals tackles defamation claim against a clergy member

Last week, the Oregon Court of Appeals addressed a First Amendment issue that had been untouched by both the United States Supreme Court and the Oregon courts. In Tubra v. The International Church of the Foursquare Gospel, the Oregon Court of Appeals determined that the First Amendment did not divest a lower court of jurisdiction to consider a defamation claim against a church pastor.

Plaintiff was the interim pastor of Vernonia Foursquare Church.  He was appointed by Pastors Cooke and Swor, the district superintendent and supervisor.  After a permanent pastor was hired for Vernonia and plaintiff was released, Cooke and Swor drafted a letter that Swor read aloud to the Vernonia congregation regarding the circumstances surrounding plaintiff's departure. The letter accused plaintiff of misappropriation of church funds and dishonesty during his tenure as interim pastor.  Plaintiff sued Cooke, Swor and the International Church of the Foursquare Gospel for, among other things, defamation based on the letter.

After a trial on the merits, during which the jury found for plaintiff, the defendants moved for a judgment notwithstanding the verdict, arguing that the First Amendment operated to deprive the court of jurisdiction over the defamation claim.  After a hearing, the trial court agreed and overturned the jury's verdict.

The Court of Appeals reversed, concluding that church pastors are not per se exempt from defamation claims.  The court announced that the same test guiding courts in fraud cases against religious institutions should guide courts dealing with defamation claims against church pastors. Jurisdiction hinges on whether the representation at the heart of the fraud or defamation case is "purely religious as a matter of law."  If so, the First Amendment deprives the court of jurisdiction; if not, the court may hear the case. 

Determining whether a representation is purely religious involves three inquires.  First, is the defendant organization of a religious nature?  Second, does the representation itself relate to the religious beliefs and practices of the organization?  If the answers to these first two inquires are "yes," the First Amendment deprives the court of jurisdiction unless the statements were made for a "wholly secular" purpose.  Some ideas, such as "the nature of a supreme being" and "the value of prayer and worship" must always and in every context be purely religious as a matter of law.  Other ideas, however, can be religious only because the one espousing them is doing so for a religious purpose.

Here, the Court of Appeals determined that the alleged defamatory statements --that plaintiff had misappropriated money and demonstrated a willingness to lie -- did not relate to the religious beliefs and practices of the International Church of the Foursquare Gospel, and as such, were not purely religious as a matter of law. 

It's time to update your leave policies...again

In 2009, there were a myriad of changes to both federal and Oregon laws applicable to leaves of absence.  Employers that haven't done so already should be updating their leave policies to incorporate changes that are now in effect, including:

• Changes to FMLA that provide protected leave for a qualifying exigency or serious ilness or injury incurred or aggravated in the line of duty
• Changes in FMLA forms
• Changes to Oregon's Domestic Violence Leave that require employers to provide "safety accommodations"
• Oregon's enactment of a Military Family Leave law

In addition, BOLI's proposed regulations pertaining to OFLA, Military Family Leave and Domestic Violence Leave are expected to become final in the near future.

We have prepared updated policies and forms that comply with all of the new laws.  Please contact one of our employment lawyers for more information.