Northwest Business Litigation

NLRB prohibits class action waiver in employee arbitration agreement

The National Labor Relations Board is in the news again, this time in connection with employee arbitration agreements.  In D.R. Horton, Inc. and Michael Cuda, Case No. 12-CA-25764, two members of a three-member panel (the third member recused himself without explanation) held that an arbitration agreement required as a condition of employment may not preclude employees from engaging in concerted activity.  The two panel members held that the arbitration agreement at issue, under which employees waived their right to a judicial forum and agreed to bring all claims to an arbitrator on an individual basis, violated section 7 of the NLRA, which gives employees the right to engage in concerted activities for mutual aid or protection. Imposing the agreement on employees as a condition of employment violated section 8(a)(1) of the Act and, therefore, constituted an unfair labor practice.

While employers "remain free to insist that arbitral proceedings be conducted on an individual basis," the Board concluded that employers must "make it clear to employees that the agreement does not constitute a waiver in all forums of their right to maintain employment-related class or collective actions and does not restrict employees' right to file charges with the National Labor Relations Board."

The conclusion is arguably at odds with the recent U.S. Supreme Court opinion in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), which upheld a consumer arbitration agreement prohibiting class action despite contrary state law. The Board expressly considered Concepcion, but found, in essence, that its decision did not conflict with the Federal Arbitration Act (while strongly suggesting that if such a conflict existed, the NLRA should prevail over the FAA).  

The NLRB's ruling was issued on the same day one of the two signatories to the opinion stepped down as his recess appointment expired.  Although only two Board members voted, the decision appears to be valid under the requirements of New Process Steel v. NLRB, 130 S. Ct. 2635 (2010), which permits a decision by only two Board members if a third member is disqualified.  President Obama appointed three new recess appointments to the Board the following day.

It’s time for a year-end compliance check

If you haven't dusted off your employee handbook or updated your employment procedures in a few years, now is a good time to do a compliance audit, as several new employment laws went into effect this year and more will go into effect in 2012.  At a minimum, you should be taking steps to address the following:

•  Updating family medical leave policies and forms to comply with the prohibition on disclosure of genetic information under the Genetic Information Non-Discrimination Act of 2008 (GINA).
•  For most Oregon employers, eliminating the use of credit checks to screen candidates for employment. 
• Updating domestic violence/crime victims leave policies to include harassment (as defined under ORS 166.065) as a reason for requesting leave. 
• Modifying procedures for imposing arbitration agreements as a condition of employment (see amendments to ORS 36.620 under Oregon HB 3450). 
• Modifying policies and procedures as necessary to comply with the ADA Amendments Act regulations. 
• Complying with new tracking and/or reporting requirements for incentive stock options (ISOs), and the cost of health insurance. 
• Adjusting 401k deferrals to allow for increases in annual limits. 
• Unless the temporary reduction is extended by the federal government, adjusting for an increase in federal payroll taxes. 
• Auditing Health Savings Accounts (HSAs) to avoid increased penalties for improper distributions.
• Making sure all required state and federal posters are current for 2012 (including the new employee rights poster required by the NLRB).

With the proliferation of employment-related class actions, it's also a good idea to periodically review wage and hour, hiring, termination, and general employment policies for any unintended discriminatory effects.  If you need assistance with a compliance audit or employment issue, we're here to help.

Oregon minimum wage increases; 2012 posters now available

Oregon's minimum wage increases to $8.80 per hour on Jnauary 1, 2012.  All employers are required to post the updated minimum wage poster. Employers with at least 25 employees in Oregon must also post an Oregon Family Leave Act poster.

BOLI has issued new wage and hour and OFLA posters for 2012, available here. 

Oregon Court of Appeals clarifies statute of limitations for final paycheck penalty claims

Earlier this month the Oregon Court of Appeals ruled that a three-year statute of limitations for final paycheck penalty claims begins to run at the end of the 30-day penalty period.

ORS 652.140 specifies the time in which the employer must pay an employee's final wages. ORS 652.150 imposes a daily penalty for late payment of the final wages.  The daily penalty is calculated by multiplying the employee's hourly rate by eight hours.  The daily penalty runs for up to a maximum of 30 days, but stops accruing if either (1) the employer pays the wages or (2) the employee sues for the wages.

The statute of limitations for final paycheck claims has been disputed.  Employers have argued for the application of the one-year statute of limitations established by ORS 12.130.  Plaintiffs have argued for the application of the three-year limitation specified in ORS 12.100(2) with some success at the trial court level.  In Russell v. U.S. Bank, the Oregon Court of Appeals applied the three-year limitations period.  Further, the court held that the three-year period does not begin to run until the total amount of penalty wages owed to the employee has accrued.  In other words, if the final paycheck is not paid for 30 or more days, the claim does not accrue until the 30th day.  The court emphasized that "the key point is that the employee's cause of action . . . is for the penalty wages themselves, not for the earned wages that the employer should have paid the employee on his or her last day of work." 

The employee has a single penalty claim which increases by one day of wages for each day the final wages remain unpaid, up to a maximum of 30 days.  In this case, the employee sued three years and eight days after her termination.  Because her final wages remained owing after 30 days following her termination, the court ruled that her claim was timely filed.

NLRB orders employers to post notice of employee rights

The National Labor Relations Board (NLRB) has issued a final rule that will require most private-sector employers to post a notice informing employees of their rights under the National Labor Relations Act (NLRA), starting November 14, 2011.  Exceptions exist for certain small employers with an annual income less than the specified jurisdictional amount.  Failure to post the required notice will be deemed an unfair labor practice. 

Notices must be posted, in a size and with language prescribed by the NLRB, that inform employees of their rights under the NLRA, contact information for the NLRB, and information concerning basic enforcement procedures.  The notice must be posted in a conspicuous place, including places where other personnel rules or policies are customarily posted.  Employers must also post the notice on an Intranet or Internet site if the employer customarily communicates with employees about personnel rules or policies by such means.  If 20 percent or more of the employer’s workforce is not proficient in English and speaks a language other than English, the notice must be posted in the language the employees speak.  Postings in multiple languages may be required, depending on the numbers of languages spoken by the employees.  The specific contents of the notice can be found in the Appendix to Subpart A of the final rule, starting at page 185.

Notices will be made available to the public free of charge at NLRB regional offices or by download from the NLRB website. 

Oregon wrongful discharge remedy available for Sarbanes-Oxley violation

The Oregon Court of Appeals last week revived a plaintiff's common law wrongful discharge claim against his former employer, based on his claim of retaliation for making complaints to his supervisors about management conduct and threatening to take his complaints to the corporate directors, and also for exercising his right to complain that his bonus was cut.  The trial court had dismissed the complaint for failure to state a claim.

In De Bay v. Wild Oats Market, Inc., the plaintiff alleged that he gave his supervisors a detailed written report questioning the management team's actions and motives in deviating from the company's strategic growth plan.  Plaintiff also alleged that his bonus was cut in half after he made the report, and that he was subsequently fired for threatening to bring his concerns to the board.  Plaintiff argued on appeal that these allegations were sufficient to state a wrongful discharge claim for exercising important societal rights and obligations protected under state and federal laws, specifically ORS 659A.230, ORS 652.355, and section 806 of the Sabanes-Oxley Act, 18 USC § 1514A. 

The Court of Appeals found that a wrongful discharge claim based on "whistleblowing" under ORS 659A.230 requires that the employee complain to a recognized outside authority with the power to take action on such complaints.  Plaintiff had not alleged a report to any outside authority and therefore failed to state a claim under that statute. 

Likewise, the court found that ORS 652.355, which prohibits retaliation for making a wage claim, did not apply to plaintiff's circumstances because he did not allege that he had filed or even discussed a "wage claim." 

However, for the purpose of a motion to dismiss, plaintiff's allegation that he was fired for reporting managerial wrongdoing to his supervisors fell within the scope of conduct protected by Sarbanes-Oxley, which prohibits a publicly-traded company from discharging an employee for reporting to a supervisor a violation securities laws or any federal law relating to fraud against shareholders.  In addition, the court found that Sabanes-Oxley did not provide the exclusive remedy for the alleged conduct because, unlike a wrongful discharge claim, the statute did not allow for the recovery of noneconomic or punitive damages.  On that basis, plaintiff was entitled to pursue a claim for common law wrongful discharge.

The opinion provides another reminder to employers that firing employees for internal reports of wrongdoing may provide the basis for "whistleblower" claims under both statutory and common law.

U.S. Supreme Court rejects class action against Wal-Mart

The Supreme Court today reversed the Ninth Circuit and pulled the plug on what would have been the largest-ever employment discrimination class action.  The Court rejected certification of a class of up to 1 million current and former female employees of Wal-Mart.  According to Justice Scalia, writing for the Court, Wal-Mart's decentralized employment practices make it impossible for the class to meet the "commonality" standard of FRCP 23, and claims for back pay are generally not available under FRCP 23(b)(2), which allows for injunctive or declaratory relief.

See the opinion in Wal-Mart v. Dukes here.  See our earlier coverage of the case here.

Ninth Circuit holds that pharmaceutical sales reps aren't entitled to overtime pay

Last month, in Christopher v. SmithKline, the Ninth Circuit held that pharmaceutical sales representatives are exempt from the Fair Labor Standard Act's overtime requirements. 

Two pharmaceutical sales representatives filed a lawsuit challenging defendant's practice of requiring overtime work without paying additional compensation, as a violation of the FLSA.  The FLSA requires overtime payment for employees for hours worked in excess of forty per week.  However, there are numerous exceptions to this rule, including an exemption for persons employed "in the capacity of outside salesman." The trial court did not allow the plaintiff's case to proceed to trial, finding that pharmaceutical sales representatives "unmistakably fit within the terms and spirit of the [FLSA's outside sales] exemption."  The plaintiffs appealed to the Ninth Circuit.

The Ninth Circuit affirmed the trial court's ruling.  Despite the fact that PSRs do not technically sell pharmaceuticals to doctors, a doctor's commitment to a PSR to prescribe his assigned product when medically appropriate is a "meaningful exchange."  This meaningful exchange, the Court held, fits within the FLSA's definition of a "sale," which includes "other dispositions."  In addition, PSRs are "rewarded with commissions when their efforts generate new sales.  They receive commissions in lieu of overtime and enjoy largely autonomous work-life outside of an office."  For these reasons, the Ninth Circuit Court held that PSRs are exempt from the overtime-pay requirement of the FLSA.

This result creates a split with the Second Circuit, and raises the possibility that the U.S. Supreme Court will take up the issue.

Ninth Circuit to review en banc grocery antitrust case

The Ninth Circuit this week agreed to review en banc a case in which a Mutual Strike Assistance Agreement entered into by four supermarket chains was held to be a violation of antitrust law.  In an opinion issued last year, a three-judge panel of the court directed the entry of summary judgment against the supermarkets, which had agreed to redistribute and share profits during a strike by unionized employees.

See our earlier coverage of the case here. 

US Supreme Court: Fiance of an individual who engaged in protected conduct can sue for retaliation

In Thompson v. North American Stainless, the US Supreme Court last week held that the fiancé of an individual who filed an EEOC complaint could bring a claim for retaliation under Title VII.

In this case, the plaintiff was terminated three weeks after the EEOC notified his employer that his fiancé had filed a charge alleging sex discrimination against that employer. The plaintiff sued, alleging that the employer fired him in retaliation for his fiancé’s actions. The Sixth Circuit held that he did not engage in activity protected by the antiretaliation provision of Title VII, and therefore was not part of the class of persons for protected by the law.

In a unanimous opinion written by Justice Scalia, the Supreme Court overruled the Sixth Circuit and held that the plaintiff had alleged facts sufficient to state a retaliation claim under Title VII. The Court noted that the Supreme Court had previously held that the Title VII antiretaliation provision prohibits “any employer action that well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” The Court held that it is “obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.” While the Court did not “identify a fixed class of relationships for which third-party reprisals are unlawful,” it noted that firing a close family member would almost always qualify, whereas “inflicting a milder reprisal on a mere acquaintance will almost never do so.”

The Court also clarified the question of who may sue under Title VII, which allows civil actions to be brought by “the person claiming to be aggrieved.” The Court rejected an argument that this language should be construed as allowing anyone with Article III standing to bring a claim. The Court instead applied the test from the Administrative Procedures Act, “under which a plaintiff may not sue unless he falls within the zone of interests sought to be protected by the statutory provision whose violation forms the legal basis for his complaint.”