Management Memo

Management’s inside guide to labor relations

NLRB Issues 13 Complaints Alleging McDonald’s and Franchisees Are Joint-Employers

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On December 19, 2014, the National Labor Relations Board published a public notice stating that the NLRB General Counsel has issued 13 unfair labor practice complaints against McDonald’s USA, LLC, and McDonald’s franchisees alleging that McDonald’s and the franchisees are joint-employers, and as such, are jointly  responsible for alleged violations of the National Labor Relations Act. What’s at stake in these cases is not only shared responsibility for these alleged violations of the Act, but possibly also shared responsibility in collective bargaining should those unions organize the franchisors’ workers.

In addition to the public notice, the Board has also created a separate webpage on its website with the header “Organizations of Interest” specifically addressing these complaints. The 13 complaints arise out of 291 charges filed since November 2012. Though the actual complaints have not yet been made public, the Board hinted that they involve claims that unlawful “statements and taking actions against”  workers who participated “in nationwide fast food worker protests … during the past two years” including alleged “discriminatory discipline, reductions in hours, discharges, and other coercive conduct directed at employees in response to union and protected concerted activity, including threats, surveillance, interrogations, promises of benefit, and overbroad restrictions on communicating with union representatives or with other employees about unions and the employees’ terms and conditions of employment.”

While the General Counsel’s actions are alarming, particularly for businesses that rely upon a franchise model, the issuance of these complaints comes as little surprise because, as we reported in July of this year, the General Counsel had previously announced the decision to take this action and pursue claims of joint-employer liability. What is somewhat surprising about the announcement is its timing because the Board has not yet issued its decision in Browning-Ferris, 32-RC-109684, where the Board invited interested parties to opine in amici briefs on the benefits and drawbacks of the current standard relied upon by the Board to determine if two employers are a joint-employer and to propose a new standard and factors the Board should consider in such cases. Similar to its recent repudiation of Register Guard, the Board may use Browning-Ferris to moot the thirty years of joint-employer case law that followed TLI, Inc. 271 NLRB 798 (1984).

While the General Counsel issued the complaints based on charges filed in 13 Regional Offices  across the country, including, among others, Region 2 (Manhattan), Region 10 (Atlanta), Region 13 (Chicago) and Region 31 (Los Angeles), the Board has agreed to consolidate the hearings at six Regional Offices, with the first scheduled to commence, absent settlement, on March 30, 2015.

Stay tuned.

NLRB’s Expedited Election Rules Favor Labor, Not Employers

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In our new Act Now Advisory, “NLRB Adopts Expedited Election Rules, Effective April 15, 2015,” we report on the National Labor Relations Board’s new rules for representation elections. These rules will substantially shorten the time between the point when a union files a petition for a vote and the timing of the vote, severely limit the right of employers to litigate important issues before an election is held, and are expected to result in more union wins in representation votes. We include steps that employers may want to consider taking in advance of April 2015, in order to adapt to the new reality of ambush elections.

Following is an excerpt:

After a series of false starts, on December 12, 2014, the National Labor Relations Board (“NLRB” or “Board”) adopted a 733-page final rule (“Final Rule”) that will significantly change the Board’s longstanding union election procedures and eliminate many of the steps that employers have relied on to protect their rights and the rights of employees who may not want a union. Cumulatively, the amendments in the Final Rule, which will take effect on April 15, 2015, will tilt the scales of a union election in labor’s favor by expediting the election process. Among the most important changes contained in the Final Rule are the following …

Read the full advisory here.

NLRB Holds Employees Have the Right to Use Company Email Systems for Union Organizing

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Updated, 12/12/14 — In its Purple Communications, Inc., decision, the National Labor Relations Board (“NLRB” or “Board”) has ruled that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted” by employers that provide employees with access to email at work.  While the majority in Purple Communications characterized the decision as “carefully limited,” in reality, it appears to be a major game changer.  This decision applies to all employers, not only those that have union-represented employees or that are in the midst of union organizing campaigns.

Under this decision, which applies to both unionized and non-union workplaces alike, if an employer allows employees to use its email system at work, use of the email system “for statutorily protected communications on nonworking time must presumptively be permitted . . . .” In other words, if an employee has access to email at work and is ever allowed to use it to send or receive nonwork emails, the employee is permitted to use his or her work email to communicate with coworkers about union-related issues.

In Purple Communications, the NLRB rejects its analysis in its 2007 decision in Register Guard, which the Board now finds “was clearly incorrect.” In Register Guard, the Board held that “employees have no statutory right to use the[ir] [employer’s] e-mail system” to participate in pro- or anti-union activity protected under the National Labor Relations Act (“Act”) (emphasis added).

Register Guard’s reasoning was based on principles respecting the right of employers to control access to, and use of, their property.  In Purple Communications, the Board majority not only argues that the use of email systems is not a matter of property but  goes on to say that Register Guard gave “too much weight to employers’ property rights” and “undervalued employees’ core Section 7 right to communicate in the workplace about their terms and conditions of employment.”

Purple Communications establishes a new presumption that employees who have access to email at work must be permitted to utilize the systems for communication about terms and conditions and otherwise exercise their Section 7 rights during “nonworking” times. This presumption, however, ignores the likelihood that such emails, which may have been written or sent outside of working time, will likely be opened or read during working time.  The decision also suggests that if employees are allowed to use their employers’ email systems for nonwork emails during working time, they must be able to use the systems for communication about unions and the terms and conditions during working times as well.  Further, if an employer is inconsistent in the application of such policies (e.g., permits other nonwork emails to be sent during working time, but does not permit union-related emails to be sent during this time), it is likely to be found to have violated employees’ rights under the Act and have committed an unfair labor practice.

The decision is also a major departure from established Board law that considered, on the one hand, employees’ need for access to or use of employer property (whether real property or business equipment) for the exercise of their Section 7 rights, against, on the other hand, the employer’s right to limit access to or use of its property.  Not only does the decision hold that employees are presumptively permitted to use their employers’ email systems to communicate in a union organizing campaign or concerning terms and conditions, it allows employees, in most circumstances, to use company email systems to send documents—such as authorization cards, videos, flyers, and other attachments—in most circumstances.

While the majority opinion in Purple Communications states that employers may be able, in certain circumstances, to restrict or prohibit the use of the systems for communications concerning terms and conditions where such a restriction is necessary to “maintain production and discipline,” the burden will be on an employer to establish why such a prohibition or restriction is necessary.  That burden is likely to be a heavy one.

As the Board has stated, while an employer may rebut the presumption (of the right to use the email systems) “by demonstrating special circumstances necessary to maintain production or discipline justify restricting its employees’ rights,” the burden will be steep.  “It will be the rare case where special circumstances justify a total ban on nonwork email use by employees,” and an employer seeking to meet that burden “must demonstrate the connection between the interest it asserts and the restriction.”

The Board has declared today’s email systems to be “the primary means of workplace discourse,” and that Register Guard “undervalued employees’ core Section 7 right to communicate in the workplace about their terms and conditions of employment, while giving too much weight to employers’ property interests.”  Although the Purple Communications decision appears to try and explain why the holding in Register Guard was “wrong,” the majority’s reasoning is actually based on the notion that “everyone uses email.” Further, emailing at work is an important means of communication for workers to communicate with one another and, therefore, the Board members think that they should be allowed to use it to “talk” about their terms and conditions of employment, including union organizing and a broad range of other topics.

As the decision points out, an important challenge that employers will now face is the balancing of, on one hand, their responsibilities for monitoring content and usage of their systems to ensure adherence to workplace rules and policies concerning compliance matters and inappropriate and prohibited uses of the email system with, on the other hand, possible claims of unlawful surveillance stemming from efforts to ensure that employees do not violate legitimate rules and standards relating to their use of the email systems.

In this regard, the Board states that the “decision does not prevent employers from continuing, as many already do, to monitor their computers and email systems for legitimate management reasons, such as ensuring productivity and preventing email use for purposes of harassment or other activities that could give rise to employer liability.”  While the Purple Communications decision states that “an employer’s monitoring of electronic communications on its email system will . . . be lawful so long as the employer does nothing out of the ordinary, such as increasing its monitoring during an organizational campaign or focusing its monitoring efforts on protected conduct or union activists,” it is easy to foresee the burdens that employers are likely to face in defending against unfair labor practice charges alleging such discriminatory monitoring.

At least the Board still recognizes that an employer is not “ordinarily prevented from notifying its employees, as many employers also do already, that it monitors (or reserves the right to monitor) computer and email use for legitimate management reasons and that employees may have no expectation of privacy in their use of the employer’s email system.”

While the majority in Purple Communications noted that the rule only applies to email systems at this time and that they are not addressing other systems and means of communication, it is almost certain that when the Board looks at instant messaging and other electronic communications systems in the workplace, it will reach the same conclusion.  If employees are given access to instant messaging and other tools, such as Microsoft Lync and the like and they are allowed to send nonwork related messages, then the Board will likely apply its Purple Communications rationale to those modes of communication as well.

One thing that is obvious is that every employer that uses and allows its employees to use email at work will now need to review its policies and practices concerning access to and use of email systems and the manner in which it carries out such policies.

What Employers Should Do Now

The Purple Communications decision will be applied retroactively to pending charges and representation cases involving issues of employee email use.  The ruling means changes for every company that uses email.  There are a number of steps that employers should take now:

  • Review all existing policies and practices concerning use of and access to email, and revise as necessary to conform to the new realities.
  • Determine not only what the policies and practices say but how they are being applied and enforced throughout the company.
  • Review and consider all policies and practices that involve the monitoring and preservation of email and other electronic communication.
  • Confirm that the company’s policies and practices clearly notify all employees that the company reserves and exercises its right to monitor and review all communications and attachments that are sent from or received on its email systems both internally and externally.
  • Make sure that employees are on notice and understand that they do not have a right to privacy with respect to emails and attachments and that they understand what this means.
  • Consider what the company’s policy should be on limiting the sending, receiving, and reading of nonwork messages during “work time.”
  • Determine whether there are positions within the company where restrictions on the use of email for nonwork purposes is necessary to maintain productivity and discipline.  If such positions exist, consider what restrictions are truly needed, how broad they really need to be, and, perhaps most importantly, how the company would meet its burden to prove that the restrictions are truly necessary and as narrowly drawn as they can be.
  • Train supervisors and managers about these policies and practices and how to communicate with employees about them.

Supreme Court Holds That Time Spent in Security Screening Is Not Compensable Time

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Regarding the Supreme Court’s Integrity Staffing Solutions v. Busk opinion, issued yesterday, our colleague Michael Kun at Epstein Becker Green has posted “Supreme Court Holds That Time Spent in Security Screening Is Not Compensable Time” on one of our sister blogs, Wage & Hour Defense.

Following is an excerpt:

In order to prevent employee theft, some employers require their employees to undergo security screenings before leaving the employers’ facilities. That is particularly so with employers involved in manufacturing and retail sales, who must be concerned with valuable merchandise being removed in bags, purses or jacket pockets.

Often in the context of high-stakes class actions and collective actions, parties have litigated whether time spent undergoing a security screening must be compensated under the Fair Labor Standards Act (“FLSA”). On December 9, 2014, a unanimous United States Supreme Court answered that question – no.

The Court’s decision in Integrity Staffing Solutions v. Busk may have a far-reaching practical and legal impact. Not only may it make more employers comfortable conducting security screenings of their employees, but it may bring an end to most class actions and collective actions filed against employers seeking compensation for employees’ time spent in such screenings.

ACA Update: DC Circuit Stays Halbig, Upholds Accommodation for Contraceptive Coverage

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Our colleague Stuart Gerson of Epstein Becker Green posted “DC Circuit Stays Halbig Action Pending SCOTUS Review of King, Upholds Accommodation for Contraceptive Coverage” on the Health Law Advisor blog. Following is the full text:

Only last week, we informed you of the Supreme Court’s somewhat surprising grant of cert. in the Fourth Circuit case of King v. Burwell, in which the court of appeals had upheld the government’s view that the Affordable Care Act makes federal premium tax credits available to taxpayers in all states, even where the federal government, not the state, has set up an exchange.

The Administration has taken something of a PR buffeting in the week following, after its principal ACA technical advisor’s comments on this issue were made public.

In any event, we suggested that the scheduled DC Circuit en banc argument in Halbig v. Burwell, which raises the same issue as the King case, would never take place. We were correct. The DC Circuit yesterday stayed action in its case pending Supreme Court resolution of King. We’ll continue to follow related developments.

Speaking of the DC Circuit, a panel of its most liberal judges today upheld religious organization accommodation for contraceptive coverage under the ACA, holding under Hobby Lobby that opt-out procedure does not substantially burden employer’s religious beliefs. Priests for Life v. U.S. Dep’t of Health & Human Services. There will be similar cases brought in other federal circuits, and we’ll report on those as well.

Complimentary Webinar – Eye on Ebola: Issues Impacting Health Care Providers

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WHEN: November 17, 2014

TIME:    2:00pm – 3:30pm EST

To register for this webinar, please click here.

Please join us for a complimentary webinar addressing the professional and business challenges encountered by health care providers dealing with Ebola and other infectious diseases. This webinar will offer a clinical overview as well as a review of the guidelines which offer protocols for addressing concerns over Ebola and similar diseases, the health regulatory and risk management issues providers might consider in developing a response strategy, and the resulting labor and employment considerations facing health care employers. A question and answer period will follow the program.

Topics will include:

  • Clinical Overview and Emergency Management Issues
  • Health Regulatory Considerations for Providers
  • Risk Management Concerns
  • Employment Issues Confronting the Health Care Industry including Labor Management Relations

Speakers:

  • Bruno Petinaux, M.D. – Associate Professor, Co-Chief of the Emergency Management Section, Department of Emergency Medicine, George Washington University Medical Faculty Associates
  • George B. Breen – Member, Epstein Becker Green, Chair, Health Care and Life Sciences Practice Steering Committee
  • Frank C. Morris, Jr. – Member, Epstein Becker Green, Employment, Labor and Workforce Management Practice
  • Amy F. Lerman – Associate, Epstein Becker Green, Health Care and Life Sciences Practice

To register for this webinar, please click here.

If you have questions regarding this event, please contact Whitney Krebs at (202) 861-0900, or wkrebs@ebglaw.com.

Labor and Employment Cases Predominate in the Supreme Court’s Current Term

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By Stuart M. Gerson

While by most accounts the current term of the Supreme Court is generally uninteresting, lacking anything that the popular media deem to be a blockbuster (the media’s choice being same-sex marriage or Affordable Care Act cases), the docket is heavily weighted towards labor and employment cases that potentially affect employers in all industries including  retail, health care, financial services, hospitality, and manufacturing.  In chronological order of argument they are as follows.

The Court already has heard argument in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433, which concerns whether the Portal-to-Portal Act, which amends the Fair Labor Standards Act, requires employers to pay warehouse employees for the time they spend, which in this case runs up to 25 minutes, going through post-shift anti-theft screening. Integrity is a contractor to Amazon.com, and the 9th Circuit had ruled in against it, holding that the activity was part of the shift and not non-compensable postliminary activity. Interestingly, DOL is on the side of the employer, fearing a flood of FLSA cases generated from any activity in which employees are on the employers’ premises.  This case will affect many of our clients and should be monitored carefully.

On November 10th, the Court will hear argument in M&G Polymers USA,  LLC v. Tackett, No. 13-1010, which I see as an important case, though most commentators don’t seem to realize it. The question involves the so-called “Yard-Man Presumption” in the context of whether the courts should infer that silence as to the duration of retirement health insurance benefits established under a CBA are meant to apply for the lifetimes of covered retirees.

In two other cases involving an issue of discretion and judicial review set for argument on December 1st, Perez v. Mortgage Bankers Ass’n, No. 13-1041; and Nichols v. Mortgage Bankers Ass’n, No. 13-1052, the Court will decide whether DOL violated the Administrative Procedure Act by not affording notice-and-comment rulemaking to a reversal of a wage and hour opinion letter issued in 2006.  The DC Circuit ruled against DOL in both cases (one in which DOL is the petitioner; another in which affected loan officers are petitioners), rejecting DOL’s contention that the policy change was an “interpretive rule” not subject to APA notice-and-comment strictures. The case at bar itself doesn’t involve much, but as a precedent concerning how free agencies like DOL (a particular worry to employers during this administration), are to regulate unilaterally, free of judicial oversight it will be important, especially in the DC Circuit where there are so many agency cases.

On December 3rd, the Court will hear argument in Young v. United Parcel Service, Inc., No. 12-1226, which poses whether the Pregnancy Discrimination Act requires an employer to accommodate a pregnant woman with work restrictions related to pregnancy in the same manner as it accommodates a non-pregnant employee with the same restrictions, but not related to pregnancy. The 4th Circuit had ruled in favor of the company, which offered a “light duty program” held to be pregnancy blind to persons who have a disability cognizable under the ADA, who are injured on the job or are temporarily ineligible for DOT certification. Ms. Young objects to being considered in the same category as workers who are injured off the job. This case, too, will create a precedent of interest to at least some of our clients. Of  note, last week United Parcel Service sent a memo to employees announcing a change in policy for pregnant workers advising that starting January 1, the company will offer temporary light duty positions not just to workers injured on the job, which is current policy, but to pregnant workers who need it as well. In its brief UPS states “While UPS’s denial of [Young’s] accommodation request was lawful at the time it was made (and thus cannot give rise to a claim for damages), pregnant UPS employees will prospectively be eligible for light-duty assignments.”  The change in policy, UPS states, is the result of new pregnancy accommodation guidelines issued by the Equal Employment Opportunity Commission, and a growing number of states passing laws mandating reasonable accommodation of pregnant workers.

In a case not yet fully briefed or set for argument, Mach Mining LLC v. EEOC, No.13-1019, the Court will  decide whether the EEOC’s pre-suit conciliation efforts are subject to judicial review or whether the agency has unreviewable discretion to decide the reasonableness of settlement offers. The Seventh Circuit has ruled in favor of the EEOC in the instant case, but every other Circuit that has considered the matter has imposed a good-faith-effort standard upon the EEOC.

On October 2nd, the Supreme Court granted cert. in a Title VII religious accommodation case, EEOC v. Abercrombie & Fitch Stores, Inc., No. 14-86. The case concerns whether an employer is entitled to specific notice, in this case  of a religious practice – the wearing of a head scarf —  from a prospective employee before having the obligation to accommodate her.  In this case, the employer did not hire a Muslim applicant. The Tenth Circuit ruled that the employer was entitled to rely upon its “look” policy and would not presume religious bias where the employee did not raise the underlying issue. Retail clients and others will be affected by the outcome.

Finally, also on October 2nd, the Supreme Court granted cert. in Tibble v. Edison Int’l, which raises the issue of whether retirement plan fiduciaries breach their duties under ERISA by offering higher-cost retail-class mutual funds when identical lower-cost institutional class funds are available and the plan fiduciaries initially chose the higher-cost funds as plan investments more than six years (the notional statute of limitations) before the claim was filed. This issue has been around for years and the Court finally will resolve it.   The dueling rationales have been discussed in depth on many financial pages, for example recently in the New York Times. The potential importance of the case relates to whether trustees have a separate duty to reconsider their past decisions under a continuing violation theory that would supersede ERISA’s statute of limitations. The Solicitor General, in an amicus brief, argued on behalf of the United States that trustees of ERISA plans owed a continuing duty of prudence, which they breach by failing to research fund options and offer available lower-cost institutional-class investments during the six-year period prior to the filing of the complaint. The Court apparently took the case on the SG’s recommendation that noted the unresolved split on the issue in the Circuits.  If the Solicitor General proves correct, and the Petitioner prevails, fiduciaries all across the employment spectrum will be exposed to greater risk of scrutiny for their past actions.

More will follow as developments warrant.

NLRB’s Murphy Oil Decision Reaffirms Board’s Position on Class or Collective Action Waivers Despite Rejection by Federal Courts

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By Jill Barbarino

On October 28 a three-member majority of the National Labor Relations Board in Murphy Oil U.S.A., Inc.  revisited and reaffirmed its position that employers violate the National Labor Relations Act (the “Act”) by requiring employees covered by the Act (virtually all nonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

As previously reported in an Act Now Advisory, in 2012 the NLRB held in D.R. Horton that the home builder unlawfully interfered with employees’ Section 7 right to engage in concerted activity by requiring them to sign an arbitration agreement prohibiting class or collective claims in any judicial or arbitral forum.  As we have also previously reported, however, on December 3, 2013, the Fifth Circuit rejected the NLRB’s position and held that the Act does not prohibit employers from requiring employees to sign class or collective action waivers.  The Second Circuit and the Eighth Circuit have likewise rejected the Board’s position.

Notwithstanding having “no illusions” that the Board’s decision would be the “last word on the subject”, in a 59-page decision, it reiterated and endorsed its prior position and addressed its critics head on, including the two lengthy dissents from Members Harry Johnson and Philip Miscimarra.

The Decision

Murphy Oil is the owner and operator of over 1,000 retail fueling stations.  Prior to March 6, 2012, Murphy Oil required all job applicants and current employees to execute a “Binding Arbitration Agreement and Waiver of Jury Trial,” which provided in pertinent part that all disputes related to an individual’s employment shall be resolved by binding arbitration and that the parties to the agreement “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.”  The Charging Party, Sheila Hobson, signed this Agreement when she applied for employment in 2008.  Two years later, Hobson filed a collective action pursuant to the Fair Labor Standards Act alleging that Murphy Oil failed to pay her and others for work-related activities performed off the clock.  Murphy Oil moved to compel arbitration and to dismiss the FLSA claims based on the plaintiffs having signed the Agreement.  Hobson, thereafter, filed an unfair labor practice charge and the NLRB’s General Counsel issued a complaint, alleging that Murphy Oil had violated Section 8(a)(1) of the Act.

At the heart of the dispute between the Board and its critics is the interpretation of Section 7 and 8(a)(1) of the Act as well as the application of the Federal Arbitration Act (“FAA”) and Supreme Court jurisprudence interpreting same.

Section 8(a)(1) of the Act states that it “shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees” in the exercise of their Section 7 rights.  Section 7 of the Act states that employees shall have the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]”  

The Supreme Court, on the other hand, in CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 673 (2012), held that where there is no specific “contrary congressional command” as to whether a claim can be arbitrated, the FAA “requires the arbitration agreement to be enforced according to its terms.”   The CompuCredit decision, however, only addressed the enforcement of an arbitration clause that barred access to courts, not a waiver of class or collection actions.  Moreover, the CompuCredit decision was not an employment-related dispute and did not involve the NLRA.  Thus, the specific issue at play in D.R. Horton and Murphy Oil remains unaddressed by the Supreme Court.

The Board’s rationale for upholding D.R. Horton is as follows:

(1)   Section 7 of the Act grants employees the  substantive right to act “concertedly for mutual aid or protection” and mandatory arbitration agreements that bar an employee’s ability to bring join, class, or collective workplace claims restrict this substantive right.

(2)   The conclusion that mandatory class action waivers are unlawful under the Act does not conflict with the FAA or its underlying policies because:

(a)    such a finding treats arbitration agreements no less favorably than any other private contract that conflicts with federal law;

(b)   Section 7 rights are substantive, which means that they cannot be waived under the FAA like procedural rights found in other statutes;

(c)    the “savings clause” in the FAA affirmatively provides that an arbitration agreement’s conflict with federal law is grounds for invalidating an agreement;

(d)   if there is a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act – which prevents private agreements that are inconsistent with the statutory policy of protecting employees’ rights to engage in concerted activity – requires the FAA to yield to the NLRA as necessary to accommodate Section 7 rights.

The Board criticized the Fifth Circuit’s decision for, among other things, giving too little weight to the “crucial point” that “the Board, like the courts, must carefully accommodate both the NLRA and the FAA” and not treat the FAA and its policies as “sweeping far more broadly than the statute or the Supreme Court’s decisions warrant.”

As to Member Johnson’s argument in his dissent that “there was no such thing as a class or collective action in any modern sense when the Act was passed in 1935” the Board majority found this point to be irrelevant because the language of “Section 7 is general and broad.”  As an example, the Board stated that the pursuit of unionization is “obviously protected” through the use of “modern communication technologies such as social media . . . regardless of whether workers during the Depression had access to Facebook.”

The Board also stated that contrary to the suggestion in Member Miscimarra’s dissent, it has not taken the position that the Act creates a guarantee to class certification or the equivalent; it does, however, create a right to “pursue joint, class or collective claims if and as available, without the interference of an employer-imposed restraint.”

What Does This Mean for Employers

After Murphy Oil, it is clear that the Board’s position and the position of at least some federal courts on this issue remain at odds.  If employers require employees covered by the Act to sign class action waivers, they should be aware that it could take significant time and money to ultimately have such an agreement upheld in federal court.  Clearly the last word on this issue will come only when the Supreme Court, as it is likely to do, considers the issue.  Until then employers that require such waivers should recognize that challenges through unfair labor practice charges will remain a fact of life.

7-Eleven Franchise Operators’ Overtime & Minimum Wage Lawsuit Given Green Light by NJ District Court

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By Maxine Neuhauser

For retail and hospitality industries especially,  it is turning out to be a long, hot summer as franchises continue to be in the employment law spotlight.

On July 29, 2014 the NLRB’s General Counsel announced a decision to treat McDonald’s, USA, LLC as a joint employer, along with its franchisees, of workers  43 McDonald’s franchised restaurants with regard to unfair labor practices charges filed by unions on behalf of the workers and authorized charges against of both the franchisees and McDonalds. (See our July 30 blog post  and Aug. 14 blog post)

Then, on August 5, 2014 New Jersey U.S. District Court Judge Rene Bumb,  ruled in Naik v. 7-Eleven that four franchise owner-operators of Indian descent may pursue overtime and minimum wage claims against franchisor 7-Eleven under both the federal Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Law (“NJWHL”). In deciding 7-Eleven’s motion to dismiss plaintiffs’ wage claims, the court held that the complaint asserted sufficient factual allegations to establish, if proved, that the plaintiffs are employees of 7-Eleven, and not independent franchisees.  The decision has potential wide-ranging implications regarding the coverage and application of host of employment law statutes, as well as potential joint employment and labor-management issues.

The plaintiffs each entered into a 7-Eleven Store Franchise Agreement (“FA”) which characterizes the parties’ relationship as that of franchisor/independent contractor. Plaintiffs allege, however, that, they are they are actually 7-Eleven employees and entitled to overtime and minimum wage.

The court ruled that the language of the FA characterizing plaintiffs as independent contractors  was not alone sufficient to carry the day for 7-Eleven and instead applied a weighing of the factors and economic realities analysis, used when classifying individuals working directly for a business.

The court found that the factors weighed in favor of plaintiffs being characterized as employees, including the factor asking whether the services rendered by plaintiffs are integral to the defendant’s business. As to that element, the court stated, “It is unclear how Defendant could run their business at all without its franchisees [,]” this, despite the fact that franchisees are integral to a franchise business by the very nature of the business model.

The court did not accept that 7-Eleven’s alleged regulation of vendors, equipment maintenance, product supply, uniforms, and implementing a standardized store environment constitute mere quality control measures to ensure uniformity. Rather, it found that the plaintiffs’ allegations, “depict an economic reality of dependence” on 7-Eleven, which supported their classification as employees.

The motion to dismiss comes at an early stage of the ligation and the court’s decision to let  the cases proceed is not a decision on the merits.  Nevertheless the court’s legal analysis in deciding the motion, has certainly raised questions regarding intersection of franchise law and employment law that bear watching – both in terms of application of employment law statutes  and with regard to joint employment.

As a side note, the court dismissed plaintiffs’ claims alleging national origin discrimination and harassment in violation of the New Jersey Law Against Discrimination, but on reasons unrelated to the plaintiffs’ status as employees or independent contractors.

NLRB Again Expands Its Definition of Protected Concerted Activity – One Hand Clapping May Be Concerted

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By Ian Gabriel Nanos

We have written about it before but a recent NLRB decision is yet another example of the NLRB’s expanding and expansive view of what constitutes protected, concerted activities, and is therefore protected under the National Labor Relations Act.  In Fresh & Easy Neighborhood Mkt, the NLRB (Chairman Pearce and Members Hirozawa and Schiffer) found that an employee engaged in protected, concerted activity when the employee spoke to co-workers about a single act of sexual harassment that was “seemingly directed at [the employee] alone.”   The majority noted that it did not matter whether she thought or believed that she was engaged in protected activity.

The dissenters (Members Johnson and Miscimarra), on the other hand, cautioned that the majority decision could have “limitless application” to myriad employee complaints falling outside the NLRB’s jurisdiction.  As Member Johnson noted in his dissent, with apologies to George Bernard Shaw, the Board at this point consists of “five Board Members divided by a common language,” when it comes to their views of how broadly protected concerted activity can be defined under the Act.

Here are the facts.  An employee walked into the break room and discovered that someone wrote a sexually degrading comment next to where her name appeared on a company whiteboard.  The employee, upset with the sexual statement that was directed at her, wanted to file a complaint of sexual harassment.  So far the NLRA is not yet implicated.  But here is where it gets interesting:  The employee then created a hand-copied reproduction of the offending material and asked three co-workers to sign the documentation.  The employee explained that she did this to document evidence in support of her claim of sex harassment.  She added that she thought the other female co-workers also found the material offensive.  She admitted that she did not intend, however, to create a joint-complaint with her co-workers.  In fact, the co-workers indicated that, by signing the documentation, they believed they were merely serving as witnesses to validate the accuracy of the documentation.  And some of the co-workers even went to far as to complain to the employer that they felt the employee “bull[ied]” them into signing the document.

After the employer received notification of the offending statement, the employer initiated an investigation, including review of video footage in the break room to identify the perpetrator.  The employer also spoke with the employee about her efforts to obtain signatures from her co-workers, inquired about the employee’s motivations for doing so and instructed the employee to refrain from obtaining any further witness statements so that the employer could conduct an investigation.  Significantly, the employer informed the employee that she could talk to other employees about the incident and/or request that they be witnesses.  The employee did not receive any discipline for her initial efforts to obtain the signatures.

Nevertheless, according to the NLRB, the employee engaged in “concerted activity” for the “mutual aid or protection.”  The NLRB reasoned that, even if the employee was pursuing her own claim with respect to conduct directed at her, “she wanted her co-workers to be witnesses to the incident, which she would then report to the [employer].”  The Board found that the personal element of the sexual harassment complaint and “selfish motivation” for speaking to her co-workers was not a bar to finding “concerted activity” because “concertedness is not dependent on a shared objective or on the agreement of one’s coworkers with what is proposed” – even if the co-workers disagreed with the complaint or did not want to sign the document.

The Board further concluded that this activity was for the “mutual aid or protection” because the employee’s efforts to obtain witnesses effectively invoked federal or state law protections that “implicated” the rights of other employees.  The Board surmised that, since it would be “unquestionably” protected to “join forces with another employee who likewise had been the victim of alleged sexual harassment,” the analysis should not change just because the offending conduct was “seemingly directed at [the employee] alone.”  The reason, is that in both cases the employee is still attempting to “’band together’ in solidarity to address their terms and conditions of employment with their employer.”

The Board then explicitly overruled the Board’s divided decision in Holling Press, Inc., 343 NLRB 301 (2004), because that decision “effectively nullifie[d] the solidarity principle when it comes to claims of sexual harassment involving conduct directed at only one employee.”  In other words, as far as the majority of the current Board is concerned, solidarity need not be inconsistent with solitary.

This expansive approach to the notion of “concerted activity” is certainly not without precedent.  For example, we recently wrote, about an ALJ decision finding that a waiter at a restaurant who, acting alone, instituted a class action lawsuit claiming violation of state or federal wage and hour laws, engaged in concerted activity on behalf of himself and co-workers, even if none of those co-workers are aware of the filing.

There is, however, something of a saving grace.  The Board in Fresh & Easy found that the employer’s action – on these particular facts – was lawful.   The Board explained that the employer had a legitimate business interest in conducting its own investigation.  The employer’s instructions that the employee should not attempt to obtain any witness statements, moreover, was narrowly tailored to meet the employer’s need to conduct an impartial and thorough investigation and were found to comply with the standards enunciated by the Board in Banner Health  in 2012, when it considered when and in what circumstances requiring confidentiality in connection with investigations could itself interfere with employees’ rights under the Act.  Indeed, the Board acknowledged that the employer’s instruction did not prevent the employee from “from discussing the pending investigation with her coworkers, asking them to be witnesses for her, bringing subsequent complaints, or obtaining statements from coworkers in future complaints.”  In addition, the Board found that the employee’s inquiry as to the employee’s motivations for obtaining the signatures was narrowly tailored – again, on these facts – to the employer’s legitimate interest in conducting a legitimate investigation, including into the assertions that some of the co-workers felt “bull[ied]” into signing the documentation.

Unfortunately, this remains a cautionary tale: on a new set of facts, the Board may not find the employer’s instructions to be sufficiently narrowly tailored and the employer may not come out as relatively unscathed.