Category Archives: legal issues

Really, the Form is in the Mail

mailA federal court decision may have added to the list of things that old-fashioned snail mail won’t be used for anymore, and should give employers pause to consider their methods for delivering important notices to employees.

The United States Court of Appeals for the Third Circuit recently remanded the case of Lupyan v. Corinthian Colleges Inc. for further proceedings, leaving a jury to settle a dispute over whether an employee received FMLA disclosures her employer sent via first-class U.S. mail.

In the court’s words:

“In this age of computerized communications and handheld devices, it is certainly not expecting too much to require businesses that wish to avoid a material dispute about the receipt of a letter to use some form of mailing that includes verifiable receipt when mailing something as important as a legally mandated notice.”

Here’s what led up to that judgment:

In December 2007, plaintiff Lisa Lupyan—an instructor at CCI since 2004—completed a request-for-leave form, specifying that she was taking “personal leave” for the remainder of the calendar year.

Court documents indicate that her supervisor, James Thomas, recommended Lupyan instead apply for short-term disability coverage. Nevertheless, Lupyan began her leave as scheduled, with her physician completing a Department of Labor “Certification of Health Provider” form. Based on the information provided in that document, however, CCI’s human resource department determined that Lupyan’s absence qualified for FMLA leave.

According to the suit, HR subsequently met with Lupyan and directed her to initial the box labeled “Family Medical Leave” on her request form. Lupyan contends that her FMLA rights—including the requirement that she return to work within 12 weeks—were not discussed in this meeting, a claim that CCI does not dispute.

CCI maintains that an HR representative mailed Lupyan an FMLA Designation Notice after the aforementioned meeting, classifying her absence as FMLA leave and advising her of her rights under the Act. Lupyan denies ever receiving said notice, and claims she was not told she was required to come back to work within 12 weeks.

On April 9—eight days after Lupyan notified CCI that she had been cleared to return to her job with certain restrictions—the school terminated Lupyan from her position, citing low student enrollment as well as the fact that she hadn’t returned within the 12 weeks allotted for FMLA leave. Lupyan subsequently sued, alleging the college interfered with her FMLA rights by failing to give notice that her leave fell under the Act.

In this case, CCI “complied with the letter of the law, to no avail,” says Ellen Storch, a Woodbury, N.Y.-based partner at Kaufman Dolowich & Voluck.

Her advice to employers in similar situations?

“Do more than the law requires when providing employees with FMLA notices.”

For example, she recommends sending notices in a way that creates evidence of receipt—say, by certified mail or an overnight carrier, which requires a recipient’s signature in order to be delivered. She also advises requiring the employee to sign an acknowledgement of receipt, to maintain communication with the employee throughout his or her leave, and to send notices in more than one way.

“If an employer can demonstrate that it attempted to deliver notices and communicate with employees about the notices in multiple ways,” says Storch, “employees will have difficulty disputing receipt of the information.”

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Breaking Down the Latest EO

Just a few days ago, my colleague, Michael O’Brien, posted an item on a letter written by the HR Policy Association, and sent to U.S. Department of Labor 490613709Secretary Thomas Perez, that expressed HRPA’s concern over President Obama’s use of executive orders. Well, it didn’t take long for the administration to respond yesterday with one more EO, this one requiring federal contractors to disclose their labor-law violations during the past three years.

The president’s latest such order, named Fair Pay and Safe Workplaces, states …

For procurement contracts for goods and services, including construction, where the estimated value of the supplies acquired and services required exceeds $500,000, each agency shall ensure that provisions in solicitations require that the offeror represent, to the best of the offeror’s knowledge and belief, whether there has been any administrative merits determination, arbitral award or decision, or civil judgment, as defined in guidance issued by the Department of Labor, rendered against the offeror within the preceding 3-year period for violations of any of the following labor laws and Executive Orders … .”

According a White House Fact Sheet, the EO will “ensure that the worst actors, who repeatedly violate the rights of their workers and put them in danger, don’t get contracts and thus can’t delay important projects and waste taxpayer money.”

Federal agencies, the Fact Sheet states, will require prospective contractors to disclose labor-law violations involving 14 covered federal statutes and equivalent state laws, including those addressing wage and hour, safety and health, collective bargaining, family and medical leave, and civil-rights protections.  Agencies will also require contractors to collect similar information from many of their subcontractors.

“Contracting officers will take into account only the most egregious violations, and each agency will designate a senior official as a Labor Compliance Advisor to provide consistent guidance on whether contractors’ actions rise to the level of a lack of integrity or business ethics,” the Fact Sheet explains.

The White House reports that the “vast majority of federal contractors have clean records.” But it also references a 2010 Government Accountability Office report that found almost two-thirds of the 50 largest wage-and-hour violations and almost 40 percent of the 50 largest workplace health-and-safety penalties issued between FY 2005 and FY 2009 were at companies that went on to receive new government contracts.

In case you’re wondering, the Department of Labor estimates that there are roughly 24,000 businesses with federal contracts, employing about 28 million workers.

Other provisions in the EO include requiring contractors to “give their employees information concerning their hours worked, overtime hours, pay and any additions to or deductions made from their pay, so workers can be sure they’re getting paid what they’re owed” as well as directing the General Services Administration to develop a single website for contractors to meet their reporting requirements—for this order and for other contractor reporting.”

Mickey Silberman, a managing shareholder in Jackson Lewis’ Denver office, wrote in a blog post yesterday that the EO’s provisions don’t come as a huge surprise, with one exception—a section prohibiting contractors and subcontractors from requiring that new employees enter into pre-dispute mandatory arbitration agreements. “Many employers require employees to sign arbitration agreements at the outset of employment,” he writes. “This provision of the EO is a ‘game changer’ that government contractors and subcontractors must review and determine how to respond.”

It is possible, Silberman continues, that employers “will bring litigation challenging this provision of the EO.”

Littler Shareholder Michael J. Lotito, co-chair of Littler’s Workplace Policy Institute, shared with me similar sentiments. Government contractors are easy targets for more and more regulation, Lotito said. “The EO process engaging in these types of rules and regulations has been challenged on different grounds and will most certainly be again over the next several months. Even assuming the intent is sincere behind the proposals, they are subject to such abuse.”

Lotito added that “one always has to wonder how much of this is about politics and generating interest in the base between now and November.”

Guess we’ll have to wait to see if Silberman and Lotito’s predictions eventually come to pass. But there’s at least one thing we do know for sure—the Obama administration is showing no signs of letting up on its efforts to issue EOs targeted at the workplace.

 

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New Rulings Affect Labor Landscape

Mcdonalds rulingLabor unions saw a setback today with the just-announced ruling from the Wisconsin Supreme Court upholding that state’s law that effectively bans collective bargaining by state government employees. Unions nationwide have poured resources into contesting the law, which ignited a firestorm in Wisconsin when it was signed by Gov. Scott Walker three years ago.

But on a national scale, unions should be much happier about the recent ruling from the National Labor Relations Board’s general counsel, Richard F. Griffin Jr., that McDonald’s Corp. could be held jointly liable for labor and wage violations by its franchisees. Workers at various McDonald’s locations have alleged they were retaliated against after participating in strikes and demonstrations demanding higher wages. Griffin’s ruling, which will probably go before the five-member NLRB board and could possibly go as far as the U.S. Supreme Court, says McDonald’s is a joint employer along with its franchisees and therefore shares responsibility for the retaliatory measures allegedly taken against the employees. The NLRB found that of 181 cases filed against McDonald’s since late 2012, 43 cases have been found to have merit and that the Oak Brook, Ill.-based fast-food giant and its franchisees will be named as respondents if the parties cannot reach settlement, while 68 of the cases have been dismissed and 64 remain under investigation.

The ruling has the business community hopping mad — and that’s no surprise, considering that it has the potential to significantly alter the longstanding franchisor-franchisee business model and could make it easier for unions to organize hourly workers at national retail and restaurant establishments.

The following statement from Angelo Amador, vice president of labor and workplace policy at the National Restaurant Association, reflects what many others in the business community are saying about the ruling:

The ruling … asserting that McDonald’s Corp. is a ‘joint employer’ of its franchisees’ employees overturns 30 years of established law regarding the franchise model in the United States, erodes the proven franchisor/franchisee relationship and jeopardizes the success of 90 percent of America’s restaurants who are independent operators or franchisees.”

Heather Smedstad, senior VP of human resources for McDonald’s USA, said in a statement that “this decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. McDonald’s will contest this allegation in the appropriate forum.”

But proponents of the ruling say McDonald’s actually exercises significant control over its franchisees’ employees, requiring them to abide by an extensive list of rules and regulations and even providing the franchisees with software that helps them determine staffing levels for specific times of the day. Here’s what Micah Wissinger, an attorney who represents McDonald’s workers in New York, told the Society for Human Resource Management:

McDonald’s can try to hide behind its franchisees, but today’s determination by the NLRB shows there’s no two ways about it: The Golden Arches is an employer, plain and simple. The reality is that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge.”

Former NLRB chairwoman Wilma Liebman told the New York Times that the decision “could give fast-food workers and labor unions leverage to get McDonald’s to negotiate about steps that would make it easier to organize McDonald’s restaurants.”

It’s clear we now have yet another NLRB action that’s once again galvanized the business community in opposition. Considering the sheer number of employees who work for franchisees, along with the record number of temps and contractors in the U.S. workforce today, the ultimate fate of this ruling will be very closely watched .

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Employers Missing ADA Coverage in FMLA Cases

Employers are missing half of Family and Medical Leave Act cases involving employees’ serious illnesses that should also have been reviewed for Americans with Disabilities Act eligibility.

462011275 - disability and gavelThis according to Chicago-based ComPsych, in this report issued last week, June 24 to be exact, titled The Risk of Non-Compliance With ADA. The report breaks down by certain industries the percentage of FMLA cases that need ADA review, yet are being missed.

They include: retail at 13.2 percent, health services at 10.9 percent, manufacturing at 6.8 percent, public administration at 6.7 percent, trades at 6.5 percent and professional services at 5.9 percent.

These numbers, says Matt Morris, a vice president and licensed attorney at ComPsych, are “significant.”

“A common mistake employers make,” he says, “is to deem an FMLA leave request as ineligible, then not review it for ADA purposes.”

The potential consequences of such oversight “can be severe,” says Morris, “since one ADA misstep can lead to an investigation of the employer’s entire leave practices.” Hence the rash of recent ADA class-action lawsuits by the Equal Employment Opportunity Commission, he adds.

Indeed, the EEOC is coming off a record 2013 in terms of ADA penalties paid out by employers, a whopping $109.2 mill. Here are just three of the most sizable payments: $6.2 million by Sears Holding Co. involving 235 plaintiffs, $3.2 million by SuperValu involving 110 plaintiffs and $20 million by Verizon.

I asked Morris for a good example of an ineligible FMLA leave that would be covered under the ADA. Here’s what he said:

An employee has been at the company for six months and breaks his leg. He needs time off for rehab and to recoup, but is denied FMLA leave because he hasn’t been employed long enough. In this case, the employer should still review for ADA accommodation.”

Basically any ineligible FMLA leave for the employee’s own health condition (obviously not for baby bonding, etc.) has the potential to be an ADA leave, he tells me. “Although a ‘serious health condition’ under the FMLA and a ‘disability’ under the ADA are both two different standards, they are each very likely applicable to a health condition that forces someone to be out of work,” says Morris. And while the FMLA requires an employee to have been employed for 12 months and worked 1,250 hours in the last 12 months in order to be eligible, the ADA has no such standard. So, an ineligible FMLA employee still may have an ADA disability.

Perhaps the most common ADA misstep is waiting for an employee to “raise her hand” to request an ADA accommodation specifically or by name, Morris says. Courts have been clear that the “notice requirements under the ADA are nearly identical to those under the FMLA,” he says, but employers often don’t recognize that requests for FMLA leave are “hidden” requests for an accommodation — i.e., leave — under the ADA.

Interestingly, he tells me, employers all share a common misstep, which is that the company created and tried to enforce a standard policy — strange, in part, because generally this is exactly what HR tries to do: create uniformity and equality.

“But … they don’t consider whether the leave should be continued on a case-by-case basis,” says Morris. Maybe the more important thing is to note how easily one mistake can turn into something broader. What can happen — and, in fact, has been the way most of these cases start, he says — is:

1) The employee has an adverse action taken against her (usually, she’s fired).

2) She files a charge of discrimination with the EEOC (such charges are free to file, don’t require a lawyer, and often list several bases on which the employee believes she was discriminated against – for instance, race, sex, religion and then disability).

3) If the EEOC determines that, in that one case, the disability policy had a uniform cutoff — what it calls an ‘inflexible’ policy — it then uses its subpoena power to request the names of all employees who were subject to that policy (fired because they crossed that inflexible line).

4) The EEOC then sues on behalf of all, or most, employees subject to the policy and suddenly there are hundreds of plaintiffs.”

Thus far, this has only arisen because the policy was clear (“if you take more than X amount of time on leave, your job will not be protected”), but even if employers are detecting the right employees [for FMLA leave], they still have to have the expertise to apply such ADA standards as “reasonable accommodation,” “undue hardship” and “significant limitations (of a major life function)” appropriately.

So what should you be keeping top-of-mind? Here’s Morris’ caution:

Employers have been pining for three to four years for additional guidance from the EEOC on how to conduct the interactive process (how to determine a ‘reasonable’ amount of time, etc.). Chances are, given indications from the EEOC itself, the guidance will not come soon. Until then, employers will still be held responsible for appropriately applying these vague standards to a host of factors (e.g., What does the employee do? Could others help? Are there other jobs she could do? How long will the disability last? Are there things [you] can do to help reduce the time?)”

Hope this is helpful.

 

 

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Chamber Renders a Scathing EEOC Assessment

85449254 -- gavel and flagI have Michael J. Lotito’s LinkedIn group, Littler’s Workplace Policy Institute, to thank for cluing me in to this latest blast against the U.S. Equal Employment Opportunity Commission — a report from the U.S. Chamber of Commerce that is so weighty with criticism, it comes in two parts: one, an examination of what it calls the agency’s “unreasonable enforcement efforts,” and two, a detailed review of its “unsuccessful 2013 amicus program, in which its legal interpretations were rejected by federal courts approximately 80 percent of the time.”

The conclusions of each part give a clear sense of just how scathing this assessment of the EEOC is. Here’s part one’s:

Combating discrimination in the workplace is a worthy goal and one that the Chamber supports. However … EEOC’s abusive enforcement tactics can no longer be ignored. While some federal judges are pushing back in some cases, EEOC clearly has not received the message. Moreover, relying on judges as the final check on EEOC enforcement is often a case of ‘too little, too late’: by that time, employers have already spent significant time and resources defending themselves against unmeritorious allegations. In other words, even when employers win, they lose. The time has come for EEOC to adopt institutional procedures to provide for internal accountability, more efficient use of resources and adherence to its own statutory conciliation requirement. If EEOC continues to ignore the problem, then Congress should use its oversight authority to install much needed safeguards within EEOC.”

And here’s part two’s:

Whether EEOC’s 2013 amicus program’s success is measured on a pure numerical won/los[t] basis, or on the importance of the substantive interpretations of federal law it supported in its amicus efforts, one thing is clear: It was an overwhelming failure. What’s more, the courts’ rejection of EEOC’s underlying regulatory guidance leaves employers searching as to where to find accurate, reliable guidance on their legal obligations under federal non-discrimination laws. And, with a fully staffed Commission, several new guidance positions are possible on a broad range of topics including: wellness plans, reasonable accommodations, pregnancy and national-origin discrimination, and credit-related background checks. Of course, whether any future guidance would fare better than EEOC’s 2013 track record is unknown. However, if the best predictor of future performance is past performance, in light of EEOC’s 2013 amicus performance, it is unlikely.”

I contacted Christine Nazer, public spokesperson for the EEOC, to get her agency’s reaction to this hefty slap. Here’s what she had to say: “The EEOC’s litigation program is a critical part of the success of our mission to stop and remedy unlawful employment discrimination. By any measure, the EEOC has achieved a remarkable record at trial in recent years: We prevailed in nine out of 10 jury trials in 2013.  The agency also takes the concerns raised by members of Congress seriously, and will continue to work with them to ensure the nation’s workplaces are safe and free of discrimination.”

Still, as we report in our July-August HRE cover story, “Get Ready to Rumble,” which went live earlier today, and in last year’s June 16 cover story, “Watch Your Step!” the EEOC does, indeed, need to be reckoned with by employers and their HR departments because of its stepped-up enforcement tactics. And when it does come knocking, and it will, you and your counsel better be prepared with well-documented answers and proof of compliance.

Mind you, as the Chamber points out, and as many news stories and blog posts by us corroborate, including this one of mine on April 17, the agency hasn’t exactly been without its missteps in trying to carry that enhanced enforcement out.

But EEOC missteps haven’t stopped the agency from marching in and clamping down. At least, not yet.

As Merrily Archer — a Denver-based attorney, head of EEO Legal Solutions and a former staff attorney with the EEOC — put it in a recent blog post quoted by writer Will Bunch in “Get Ready to Rumble,” EEOC lawyers and human resource executives should ideally be acknowledging their shared goals in reducing discrimination — “but that level of peace and understanding is not likely anytime soon.”

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Ruling on ‘Trial-by-Formula’ Still Reverberating

Employment lawyers continue weighing in on the California Supreme Court’s recent ruling in Duran v. U.S. Bank National Association. Granted, this is California, but attorneys courthouse 158540094say the case will still be looked at and referred to beyond California for years to come in terms of whether, and how, plaintiffs may use statistical sampling — so-called “trial by formula” — to prove liability.

Duran was a wage-and-hour class-action brought under the California Labor Code and unfair competition law on behalf of 260 “business banking officers” who claimed they were misclassified and denied overtime compensation. The question was whether they worked more than 50 percent of their time outside the branch.  If they did, they weren’t entitled to overtime or meal/rest breaks; if not, they were.

In Duran, the trial court allowed plaintiffs to prove liability for the entire class based on a sample of 20 plaintiffs “randomly selected” to testify at trial. From that sample, the court extrapolated that all 260 class members had been denied overtime, even though 78 of them — fully 25 percent of the class — swore under oath that they were not misclassified.

The trial court ignored that evidence in favor of statistics, and entered judgment against the employer for nearly $15 million (including $6 million on behalf of the workers who denied they were misclassified). The Court of Appeal reversed, concluding that the trial court’s flawed trial plan amounted to an improper “trial by formula,” which deprived the employer of its due-process rights because the employer could not raise individual challenges to absent class members’ claims. On this basis, the Court of Appeal also ordered the class decertified. Plaintiffs appealed, and the California Supreme Court rendered its decision upholding the appeals-court reversal.

This alert by William L Stern, a partner with Morrison & Foerster in San Francisco, lays the facts out nicely. In his opening, Stern writes:

‘There are three kinds of lies: lies, damned lies and statistics.’ The California Supreme Court could have been channeling Mark Twain when it rejected, emphatically, the unbridled use of statistical sampling to prove liability in a class-action wage/hour case. In a unanimous decision, California’s high court … gave the heave-ho to the kind of ‘trial by formula’ that has become a feature of modern-day wage/hour litigation. At the same time, the court restored some sanity to class-action litigation generally.”

Of course, on a national precedent-setting scale, Duran only has to be followed by California courts and by federal courts (in California and elsewhere) considering class actions brought for violations of California law. Nevertheless, Stern told me privately, it is persuasive in that “two of its holdings simply reaffirm what the U.S. Supreme Court already said in Wal-Mart v. Dukes — that any trial plan has to accommodate a defendant’s affirmative defenses, and that convenience can’t be exalted over a defendant’s due-process rights.”

On the face of it, California or no, the decision is pretty far-reaching, attorneys say. This more recent post by Brendan G. Dolan and Heather M. Sager, attorneys with Chicago-based Vedder Price, says that, “while many observers anticipated a narrowly written decision limited to the particular facts of the Duran case, the California Supreme Court endorsed a significantly increased level of academic rigor on statistical evidence and survey and sampling methodologies relied upon by courts and plaintiffs’ lawyers to support class certification in wage-and-hour litigation.” This obviously bodes well for all employers.

As for the court’s reasoning, this alert on the California Employment Law Blog by Los Angeles attorney and author Steve Pearl quotes the ruling’s introduction. I’ll just leave it with you here. It gives a pretty clear sense of the case and the decision:

We encounter here an exceedingly rare beast: a wage-and-hour class-action that proceeded through trial to verdict. Loan officers for U.S. Bank National Association sued for unpaid overtime, claiming they had been misclassified as exempt employees under the outside-salesperson exemption. this exemption applies to employees who spend more than 50 percent of the workday engaged in sales activities outside the office. After certifying a class of 260 plaintiffs, the trial court devised a plan to determine the extent of USB’s liability to all class members by extrapolating from a random sample. In the first phase of trial, the court heard testimony about the work habits of 21 plaintiffs. USB was not permitted to introduce evidence about the work habits of any plaintiff outside this sample. Nevertheless, based on testimony from the small sample group, the trial court found that the entire class had been misclassified. After the second phase of trial, which focused on testimony from statisticians, the court extrapolated the average amount of overtime reported by the sample group to the class as a whole, resulting in a verdict of approximately $15 million and an average recovery of over $57,000 per person. As even the plaintiffs recognize, this result cannot stand. The judgment must be reversed because the trial court’s flawed implementation of sampling prevented USB from showing that some class members were exempt and entitled to no recovery. A trial plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced. Statistical sampling may provide an appropriate means of proving liability and damages in some wage-and-hour class-actions. However … the trial court’s particular approach to sampling here was profoundly flawed.”

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Still Time to Chime in on NLRB’s Email Decision

99274052--gavel and hourglassYou still have time to offer input into a National Labor Relations Board decision that bars employees from using their employer’s email for union-organizing purposes, according to this notice from the Society for Human Resource Management.

The NLRB invited briefs back on April 30 pertaining to its interest in reconsidering its decision in the Register Guard case. Even if you missed it, you have until June 16 to submit your position in writing.

For background, here is an earlier synopsis of the initial ruling from Littler and here, from the National Legal and Policy Center, via the Before It’s News website, is an even-more-detailed one, with history and background on other cases that impact this one. It notes that, in 2007 …

… by a 3-2 margin along party lines [with the three Republicans forming the majority], the NLRB concluded that a Eugene-Ore.-based newspaper, The Register Guard, owned by Guard Publishing Co., was within its rights in stipulating that its e-mail and other employee-communications systems ‘are not to be used to proselytize for commercial ventures, religious or political causes, outside organizations, or other non-job-related solicitations.’ Management, concluded the board, had the authority to apply that rule to an affiliate of the Communications Workers of America to which a number of newsroom employees belonged. The majority opinion held [that]: ‘[E]mployees have no statutory right to use the[ir] employer’s e-mail system for Section 7 purposes.” The ruling, however, wasn’t a complete victory for the employer. It held that Guard Publishing’s disciplinary action against an employee-CWA representative was unlawful to the extent that it punished that person’s purely informative [as opposed to advocacy] use of company e-mail. The board remanded the case to a District of Columbia circuit court, which upheld the ruling [Guard Publishing v. NLRB, 571 F.3d 53 -- D.C. Cir. 2009].”

Not surprisingly, there are politics involved, according to the NLPC:

Its partial victory notwithstanding, organized labor has been smarting over Register Guard these last several years. All the more frustrating, from their standpoint, is the fact that the ruling was handed down on the last day in office of then-NLRB Chairman Robert Battista, a Republican. With a 3-2 Democratic majority since last summer — after more than a half-decade of operating short-handed – plus the guidance of pro-union current General Counsel Richard Griffin, a reversal is now within their grasp.”

If the NLRB reverses its decision, “which is likely given its current 3-2 pro-union majority,” the NLPC says, “it would be handing unions a potent organizing tool, and more broadly, restricting employer property rights.”

If you’re really in an amicus-brief-submitting frame of mind, here is another invitation to submit briefs to the NLRB. In this case, the board is inviting briefs “to afford the parties and interested amici the opportunity to address [its] joint-employer standard, as raised in Browning-Ferris Industries (Case 32-RC-109684).

Among the issues raised by the NLRB in this one is whether the parties and amici believe the NLRB should adhere to its existing joint-employer standard or adopt a new standard. Those briefs are due on or before June 26.

 

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Careful on the Employee-Conduct Stuff

If you’re thinking of putting anything “official” out to your employees – i.e., in writing – saying you expect them to act in a positive and professional manner, and represent your Gavel and Paperscompany well …

… well … better think again.

Earlier this month, the National Labor Relations Board ruled that Cass City, Mich.-based Hills and Dales General Hospital violated federal law — i.e., the National Labor Relations Act — by establishing new work rules prohibiting negative comments and requiring all workers to represent the hospital “in the community in a positive and professional manner.”

This legal alert from Ballard Spahr calls the decision “the latest in a trend of rulings showing the NLRB’s aversion to what it views as overly broad employer policies.

The facts of the case, Hills and Dales General Hospital, are pretty interesting and might arouse some “there but for the grace of God go I” thinking among you. The acute-care hospital was wrestling with some pretty negative behavior on the part of employees that was responsible for a loss of customers, including back-biting, back-stabbing and gossiping. The hospital, wanting everyone involved in turning this problem around, sent its proposed Values and Standards of Behavior policy to all employees for comment. Then it issued the new policy to showcase the new culture.

Here were the clauses the NLRB didn’t like:

Teamwork

11. We will not make negative comments about our fellow team members and we will take every opportunity to speak well of each other.

16. We will represent Hills & Dales in the community in a positive and professional manner in every opportunity.

Attitude

21. We will not engage in or listen to negativity or gossip. We will recognize that listening without acting to stop it is the same as participating.

Indeed, the board concurred with an administrative law judge who ruled prohibiting “negative comments” and “negativity” violated workers’ rights to engage in protected, concerted activity. And the fact that employees were involved in the drafting of the new rules mattered not to the NLRB. It found, according to the alert, “that the rules were unlawfully broad and ambiguous on their face, and that ‘employees might well endorse an unlawful rule, knowingly or not, but their consent or acquiescence cannot validate the rule.’ ”

Ballard Spahr partners Mary Theresa Metzler and Alexandra Bak-Boychuk, who authored the alert, say employers “should continue to take great care when drafting or issuing employee handbooks and policies to avoid overly broad restrictions [such as this hospital's] that might violate the NLRA.”

Specifically, Bak-Boychuk told me directly:

While it’s difficult to predict what will happen next, I generally expect that the board will continue down the same path, meaning interpreting employee Section 7 [of the NLRA] rights [to organize, in a protected concerted activity] in a pretty broad way. I think we will continue to see close scrutiny of employer handbooks and policies, down to a granular level. In this case, for instance, one of the board members offered an opinion on the prohibition of ‘gossip,’ which wasn’t even at issue in the case.”

Speaking specifically to the Section 7 concern, the NLRB ruling, linked above, states that:

… paragraph 11 of the hospital’s policy is unlawful because employees would reasonably construe the language of the rule to prohibit Section 7 activity. Although the rule does not explicitly restrict Section 7 activity and the Acting General Counsel did not offer evidence that the hospital made statements or engaged in conduct that linked the rule to such activity, paragraph 11 implicitly includes protected activities because it prohibits negative comments about managers.”

You stand warned.

 

 

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Giving HR the Boot

A story in today’s Wall Street Journal, titled “Is It a Dream or a Drag? Companies Without HR,” focuses on several mid-sized companies that have decided to get rid of their HR departments or never even had one in the first place.

These companies include LRN, a training and consulting firm (which has also served as a source for several stories we’ve written here at the magazine). David Greenberg, LRN’s executive vice president, told the Journal that the 250-employee company did away with its HR department several years ago because “we wanted to force people issues into the middle of the business.”

The story notes that companies are jettisoning their HR function because they’re concerned it bogs down innovation and nimbleness with too many rules and too much bureaucracy — and that software can handle most of the transactional stuff. I should add that the story doesn’t cite much in the way of statistics or research to support its thesis — in fact, the only figures it cites are from a SHRM study showing that U.S. employers had a median of 1.54 HR professionals for every 100 employees in 2012, which is actually up from a low of 1.24 in 2009. Nevertheless, the anecdotes within the story are interesting and offer some food for thought.

Steve Miranda, managing director of Cornell’s Center for Advanced Human Resource Studies, notes the benefits of having HR staffers available to protect companies from running afoul of federal laws such as the FMLA. And the story cites restaurant chain Outback Steakhouse, which created its HR department in the wake of a $19 million settlement with the EEOC over a sex discrimination lawsuit.

Yet companies such as Klick Health (which has also served as a source for at least one HRE story) have forgone creating an HR department because they believe training managers and employees to handle conflicts on their own is a better approach, according to the story. CEO Leerom Segal said that instead of an HR function, Klick Health has two employees with customer-service backgrounds serve as “concierges” — it’s their jobs to ensure a “frictionless work experience” for employees.  The concierges serve as part of what the company calls its five-person “mojo team.” However, a former employee told the story’s authors that he often worried about liability when he had to discipline or terminate a direct report during his time at Klick Health.

As regular readers of HRE well know, HR — at its best — does a whole lot more than just protect its company from liability. Smart HR pros help their companies attract, retain and develop their talent — no small thing in an era where innovation matters more than ever and employee tenure is shorter than ever. This is not something a piece of software can do, no matter how beautifully designed; it’s certainly not something a lawyer can do, nor can an outside expert substitute for an insider who truly knows the organization and its people. If you’re looking for greater proof of the value HR can add, just review some recent HR Execs of the Year or our HR’s Rising Stars feature.

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Latest Wrinkle in Employers’ Severance Policies

More of a case has been made for some much-needed and immediate reviews of employers’ severance policies.

476619387 -- money and gavelAs this story from Bloomberg lays it out, the U.S. Supreme Court just decided in favor of the Obama Administration and its Internal Revenue Service in a dispute over taxes on severance compensation, overturning a lower-court decision that could have forced the IRS to refund more than $1 billion.

In its ruling in the case of Quality Stores Inc., the court has said payments to laid-off workers are subject to Social Security and Medicare taxes under the Federal Insurance Contributions Act. In essence, the defunct company fired 3,100 workers when it closed its stores in 2001 and 2002, paid the taxes on their severance and then asked a bankruptcy judge to order the IRS to refund $1 million.

Obviously, this is a huge victory for the IRS, which has been fighting more than 2,400 refund claims from companies and their ex-employees. It’s also a huge wake-up call in the business community. As Bob Hertzberg — the lawyer representing Quality Stores before the Supreme Court — told Bloomberg: “The decision is a huge blow for employers and employees alike. In addition to the impact on Quality Stores and its former employees, this ruling has far-reaching implications for the thousands of other organizations and workers fighting for refunds.”

This news comes right on the heels of a news analysis by HRE Staff Writer Mark McGraw about a U.S. Equal Employment Opportunity Commission lawsuit against CVS Pharmacy Inc. that experts say could also shake up how companies approach severance agreements.

In that case, the EEOC is charging that CVS “conditioned the receipt of severance benefits for certain employees on an overly broad agreement set forth in five pages of small print,” and interfered with their right to file discrimination charges and/or communicate and cooperate with the EEOC, according to the suit.

As A. John Harper III, a partner in the labor and employment practice group in the Houston office of Haynes and Boone, told McGraw, the provisions in the CVS separation agreement coming under scrutiny are “common in many severance and other employment-related agreements.”

Comments he got from Robert Hale, a Boston-based partner and chair of Goodwin Procter’s labor and employment practice, are worth repeating, too:

If the EEOC wins here, that would make it difficult for employers to reach agreements that prevent former employees who accept severance pay [from making] disparaging statements or [disclosing] personnel information that many employers understandably view as confidential.”

At the very least, as this case makes its way through the courts and as the Quality Stores decision continues reverberating, employers should be closely evaluating their severance agreements. As Hale puts it,

HR should work with counsel to take a hard look at existing severance agreement forms to determine whether any steps should be taken to reduce the risk that a decision in this case would make those existing agreements more vulnerable to legal challenge.”

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