January 2015

It’s been a long time! Kelley Drye Labor and Employment Group’s Employer Express hasn’t seen your inbox since early December, and we want to take this opportunity to hope you and yours had a wonderful holiday season.

Supreme Court Rules Employers Need Not Pay for Time Spent in Security Checks
NLRB Issues Complaints Against McDonald’s as Joint Employer for Franchisees
NLRB Decides That An Employer’s E-Mail System Is Not Protected Employer Property
NLRB Speeds Up Union Election Process With The So-Called “Quickie-Election” Rule But The Chamber Of Commerce Challenges, Arguing “Not-So-Fast”
U.S. House of Representatives Passes Bill that Would Relax ACA Employer Mandate
Macy’s to Appeal NLRB Order Directing it Bargain with Employee “Micro-Unit”
Saks Fifth Avenue Moves To Dismiss Discrimination Suit By Transgender Former Employee
Supreme Court Hears Arguments On The Issue Of Judicial Review of The EEOC’s Required Efforts At Conciliation
New York Annual Wage Notices for Current Employees Eliminated
California Supreme Court Finds Security Guard Sleeping Time Compensable
California Appeals Court Finds Security Guard On-Call Time

DECEMBER ROUND-UP

With the new year in full swing, let’s review some of the biggest decisions and legal developments affecting employers released in December:

Supreme Court Rules Employers Need Not Pay for Time Spent in Security Checks

In December 2014, the United States Supreme Court rejected a Ninth Circuit decision that improperly focused on the benefit conferred on the employer by certain postliminary activities, and found former employees placed at an Amazon.com warehouse were not entitled to pay for time spent passing through anti-theft security screenings.

The plaintiffs in Integrity Staffing Solutions Inc. v. Busk et al., were employed by Integrity Staffing Solutions and placed in Amazon warehouses to fill orders placed by Amazon.com customers. At the end of each shift, workers were required to pass through anti-theft security screens that took up to 25 minutes due to long times spent in line. The plaintiffs argued that this time was compensable as hours worked under the federal Fair Labor Standards Act (“FLSA”) and Nevada labor laws.

The FLSA does not define the term “work,” and the United States Supreme Court has sought to provide guidance to employers on what time is compensable, finding that an employee’s time is compensable if he or she is performing any activity that is pursued necessarily and primarily for the benefit of the employer and his business. Congress later passed the Portal-to-Portal Act, which limited employer liability for certain activities, such as (1) walking, riding and traveling to and from the actual place of work; (2) clothes changing in certain circumstances; and (3) other activities that are preliminary to or postliminary to principal work. These activities were deemed excluded from compensable work.

The District Court concluded that the security screenings at issue were “postliminary” activity under the FLSA and Portal-to-Portal Act, and thus not compensable. After the Ninth Circuit reversed in relevant part because it found the screenings to be “necessary to the principal work performed,” the Supreme Court granted certiorari to determine whether the screenings were “integral and indispensable” to the warehouse employees’ principal activities. 

In its decision, the Supreme Court found that the Ninth Circuit’s focus on the benefits derived by the employer was erroneous, and that the focus should instead look to whether the activity was “integral and indispensable . . to the productive work that the employee is employed to perform.” Because the security screenings could be eliminated in their entirety without impairing the employees’ abilities to perform their principal activities, the Supreme Court ruled that the screenings were not compensable time.

NLRB Issues Complaints Against McDonald’s as Joint Employer for Franchisees

In a controversial decision that has been hinted at since July, the National Labor Relations Board issued a number of complaints alleging unfair labor practices against McDonald's franchisees, naming the fast food corporation as a “joint employer.”

The NLRB has been hinting that it seeks to broaden its test for “joint employer status” for nearly a year, most notably when it sought interested amici to file briefs addressing the issue raised in a separate case, Browning-Ferris Industries of California, Inc., et al., v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters (“BFI”). The existing joint employer test was articulated in two 1984 NLRB decisions and focuses on whether the alleged joint employers share the ability to control or co-determine the essential terms and conditions of employment. Essential terms and conditions of employment include hiring, firing, discipline, supervision, and direction of employees. In the BFI case, the NLRB general counsel argued that this test undermined meaningful collective bargaining and should be replaced by a broader “totality of the circumstances” test which focuses on whether employers wield enough influence over the entity’s employees’ working conditions, and whether meaningful bargaining could not happen without their presence.

While the NLRB has not yet issued any decision in the BFI case, their decision to name McDonald’s USA LLC as a joint employer in these complaints demonstrates that they may have already begun to evaluate such cases under this looser standard. The underlying allegations in the complaints involving McDonald’s franchised restaurant employees, in which franchisees are accused of suppressing employee organizing activity in an SEIU backed fast food workers campaign, did not actively involve McDonald’s corporate office. Employers should be cautious going forward when they learn their franchisees’ employees are involved in any union organizing activity and should contact Kelley Drye’s Labor and Employment Group regarding a safe course to prevent litigation.

NLRB Decides That An Employer’s E-Mail System Is Not Protected Employer Property

In a stunning decision that overturned existing Board precedent, the NLRB declared in Purple Communication, Inc. that an employer may not prevent an employee from using its email for non-work purposes.

As previously reported, the NLRB made a decision that will affect how every employer in the United States manages its company email systems. Previously, Board precedent upheld the right of an employer, under traditional notions of property law, to restrict employees non-work use of employer-owned property. In 2007, this precedent was applied analogously to an employer’s email systems in the Board’s decision in The Register Guard, 351 NLRB No. 70.  It made infinite sense – if an employer could prevent employee’s non-work use of an employer-owned copy machine, or bulletin board, then an employer should similarly be able to prevent an employee’s non-work use of its email system! It was not to be.

On December 11, 2014, the Board in Purple Communications, reasoned that email systems are “materially different” from other employer-owned equipment and analogized a ban on email communication to general bans on oral solicitation during nonworking time. Under traditional NLRB precedent, such bans are viewed as barriers to employees’ efforts to organize. Thus, the Board held that email use during nonworking hours similarly cannot be restricted.

Equally as important as the decision is the fact that there are no real limits to it. For instance, the Board stated that an employer may justify a ban on nonwork-related email use by showing that “special circumstances necessary to maintain production or discipline justify [the email restrictions].” However, the presumption is that bans are now unlawful, and justification for bans related to “production and discipline” will be hard to establish. Moreover, there is no guidance as to what constitutes “nonworking” time and with the mobility of smartphones, and the presumption that employees are expected to access email systems after-hours creates a murky landscape. It is easy to imagine that only the most limited circumstances will justify a ban, especially under a Board that has shown itself to be very pro-employee.       

Moving forward, employers should examine and revise any policies restricting employer use of email systems.  Any restrictions must fit into the narrow exception that the Board has set up. Also, for gray areas like the definition of nonworking time, employers should work with counsel to come up with a strategy that will help them defend against any unfair labor practices that may come their way. Kelley Drye’s Labor and Employment Group can help review your company’s policies and reduce your exposure to liability under this new decision.

NLRB Speeds Up Union Election Process With The So-Called “Quickie-Election” Rule But The Chamber Of Commerce Challenges, Arguing “Not-So-Fast”

Union elections will come easier and speedier after the Board finalizes a highly anticipated rule but the Chamber of Commerce has recently challenged it, arguing that the speed that the rules create improperly restricts employers’ ability to communicate with workers, in violation of the First and Fifth Amendments.

After public hearings on the proposed rule changes were held earlier in 2014, it was expected that they would be finalized. However, it doesn’t reduce the importance of the Board’s adoption of the finalized rule amending its procedures in representation cases. Due to the rule’s effect on an employer’s ability to counteract union organizing, the Chamber of Commerce recently filed suit challenging their legality under the First and Fifth Amendment.

As for the rules themselves, they prevent an employer from challenging voter eligibility issues until after an election is held, and remove the normal 25-day delay that usually occurs between when a regional director directs an election and the actual election is held. Moreover, the rules provide that a pre-election hearing is to occur eight days after a notice of hearing is served. The effect these changes should have is unmistakable. Over the past decade, the median time-frame from petition to election has been 38 days. These new rules changes are anticipated to reduce that number to somewhere between 14-21 days on average, with elections now being theoretically possible after as few as 10 to 12 days. On another front, the rules require employers to identify employees who are eligible to vote by providing phone numbers and email addresses, as opposed to the previous requirement to provide only names and addresses. With more information, unions are able to contact eligible employees more easily.

Although it will not affect the rules until a court decision, the Chamber of Commerce’s lawsuit alleges that the rule changes violate the First Amendment because they restrict employers’ ability to communicate with workers. The suit also alleges a violation of the Fifth Amendment, in that it deprives employers of due process rights in the NLRB’s representation case proceedings.

Unless the new rule is overturned (something that may not occur for some time), it will affect any employer who is at risk of unionization. Given the short time frame that these rules create and the removal of some things that the employers could rely on to slow down the election process, employers should work with counsel to understand the new rules before they are hit with an election petition. It is important as ever to develop strategies to counteract unionization before a petition is filed. The attorneys in Kelley Drye’s Labor and Employment Group will be able to help your company develop helpful strategies and navigate these rule changes and will continue to monitor the Chamber’s lawsuit for any relevant developments.

HEALTH CARE

U.S. House of Representatives Passes Bill that Would Relax ACA Employer Mandate

In a vote that largely tracked party lines, the U.S. House of Representatives passed a bill early this month that would relax the Affordable Care Act’s (“ACA”) employer health care mandate to only cover employees who regularly work 40 or more hours per week.

As previously reported, employers who fall under the ACA health care mandate are already in the throes of their first month of compliance, and federal agencies continue to limit their ability to achieve cost savings within the confines of the law. Against this backdrop, and with a newly-sworn Republican majority in both houses of Congress, House Republicans passed a bill that would change the definition of full-time work from 30 to 40 hours, thereby reducing the number of employees covered by the mandate. Republican lawmakers continue to warn that if Congress does not take action, evidence of worker hours being cut to avoid the provision of benefits will rise dramatically.

While the Republican-controlled Senate may well pass the bill, President Obama has vowed to veto it. Similar legislation has been introduced in the Senate, however Senate Democrats have not expressed sufficient support to override a near-definite veto by the President.

NLRB

Macy’s to Appeal NLRB Order Directing it Bargain with Employee “Micro-Unit”

Macy’s Inc. has filed an appeal to the Fifth Circuit Court of Appeals following the National Labor Relations Board’s order, on the basis of controversial prior precedent, that the retailer was required to bargain with an allegedly “fractured” bargaining unit representing a narrow group of cosmetic and fragrance workers within one of its department stores.

In a July 2014 representation case decision, the NLRB found that certain workers in the cosmetics and fragrances department of a Macy’s store in Saugus, Massachusetts were an appropriate bargaining unit, based on the Board’s controversial Specialty Healthcare decision. The Specialty Healthcare decision, upheld by the Sixth Circuit Court of Appeals, found that an employer that challenges a proposed bargaining unit on the basis that it improperly excludes certain employees is required to prove that the excluded workers share “an overwhelming community of interest” with those in the proposed unit. Critics of the decision warned that this would open the door for unions to organize “micro-units” of employees by improperly selecting small subsets of employees of the same employer.

Because an employer is not able to directly appeal a representation decision, Macy’s was forced to refuse to bargain with the micro-unit, Local 1445, United Food and Commercial Workers Union. This action brought the dispute before the NLRB once again, who ruled early this month that Macy’s violated the National Labor Relations Act by refusing to bargain with Local 1445. In so finding, the NLRB rejected Macy’s arguments that the bargaining unit was an arbitrary segment of employees that conflicted with prior NLRB precedent that found units comprised of all employees within a single retail department store to be presumptively appropriate.

Kelley Drye’s Labor and Employment Group will keep you advised on this case on appeal, as it will be the first instance since Specialty Healthcare that a Court of Appeals will be directly presented with the issue of these fragmented bargaining “micro-units.”

TITLE VII

Saks Fifth Avenue Moves To Dismiss Discrimination Suit By Transgender Former Employee

In another development in an emerging area of discrimination law, national retailer Saks Fifth Avenue (“Saks”), has moved to dismiss a lawsuit by a transgender former employee on the grounds that Title VII does not protect transgender people.

News broke in September when the Equal Employment Opportunity Commission (“EEOC”) sued two employers for discrimination against transgender employees. That was the first time in its history that the EEOC sued under such a theory. It appears to have opened the door to other claims by employees themselves.    

One such claim was recently filed by a former employee of national retailer, Saks Fifth Avenue, who alleges that she was fired because of her status as a transsexual (the plaintiff alleges that she has transitioned from a man to a woman). Saks has recently moved to dismiss and notwithstanding the EEOC’s position on the matter in other cases, has cited extensive case law supporting the proposition that Title VII simply does not protect transsexual people.

This case, captioned Leyth v. Saks & Company, Civil Action No. 14-CV-2782 (S.D. Tx), and the decision that will come out of Saks’ motion, lie at the fault line of an emerging area of law. There are several decisions supporting Saks’ position in the matter, but it is still an open question whether Title VII protects transgender and transsexual people.  Until Congress passes an amendment to the law to make it clearer, or the U.S. Supreme Court rules definitively one way or the other, employers will have to tread carefully when dealing with transsexual or transgender employees. Kelley Drye’s Labor and Employment Group has dealt with emerging issues in this area of law and can help your company navigate the uncertainty that exists.

Supreme Court Hears Arguments On The Issue Of Judicial Review of The EEOC’s Required Efforts At Conciliation

In a much watched case, the Supreme Court heard argument to determine the appropriate standard of review to apply to the question of whether the EEOC fulfilled Title VII’s requirement that it conciliate claims before it brings suit.

The Justices of the Supreme Court are currently considering whether, and to what extent, courts should review the EEOC’s conciliation efforts that are mandated under Title VII. The Seventh Circuit had previously ruled that the precondition to conciliate is subject to no judicial review at all. The Supreme Court granted a request to review that decision on June 30, 2014.

The Court’s decision will be an important one, as it will determine how an employer can defend against EEOC suits by arguing that the agency failed to properly conciliate the matter. Right now, in the Seventh Circuit (covering Illinois, Wisconsin, and Indiana) where this case originated, employers cannot bring the defense at all. To the extent the Court’s decision establishes a standard of review, it will bring nationwide certainty to the employer’s defense in the matter. 

Nevertheless, any standard that is put forth by the Court will be untested, and employers who are ultimately sued by the EEOC will need to work with counsel to determine a proper strategy for its defense. Kelley Drye & Warren’s Labor and Employment lawyers will continue to monitor developments on this issue and will be able to advise your company no matter what the Court’s decision holds.

NEW YORK

New York Annual Wage Notices for Current Employees Eliminated

As reported earlier in a Kelley Drye Client Advisory, New York Governor Andrew M. Cuomo signed into law an amendment to the state’s Wage Theft Protection Act (“WTPA”), immediately eliminating the requirement that employers issue annual written wage notices to current employees before February 1 of each year.

Upon signing the reform measure into law, the Governor also issued a signing statement, accelerating the effective date of the provision and making clear that the annual notice requirement for employers is eliminated for the 2015 calendar year. The New York Department of Labor (“NYDOL”) also issued a notice on its website stating that the NYDOL “will not require annual statements in 2015.”

While employers are now relieved of the headache of providing wage statements to their current employees, the WTPA amendment signed into law by Governor Cuomo on December 29 brings stiffer penalties for non-compliance for many of the WTPA’s remaining requirements. Under the WTPA, employers must still:

  • Provide wage notices to all newly hired employees within 10 days of hire or face increased penalties from $50 per worker, per workweek, to $50 per worker, per workday, up to a maximum of $5,000;
     
  • Comply with WTPA paystub requirements, with an increased $250 penalty per violation. The statutory cap for penalties on repeat offenders has also doubled to $20,000;
     
  • Provide wage notices to employees in the hospitality industry whenever there is a change in the pay rate.  Note that the New York minimum wage has increased from $8.00 to $8.75, as of December 31, 2014, and the scheduled increase to $9.00 in 2015, means that hospitality employers will need to issue new pay notices in 2015 and 2016 for any minimum-wage employees, and thereafter, in subsequent years in which such increases take effect.

Kelley Drye will continue keeping you apprised of these legislative developments. Reach out to the Labor and Employment Group for assistance in coordinating your compliance with state and federal wage and hour obligations.

CALIFORNIA

California Supreme Court Finds Security Guard Sleeping Time Compensable

In a highly anticipated decision clarifying a state wage order that defines working time, the California Supreme Court ruled in early January that employers have to pay workers for all the time they spend on a job-site, including time spent sleeping – a higher standard than that required by Federal law.

In Tim Mendiola et al., v. CPS Security Solutions, Inc. et al., the plaintiff brought wage and hour claims on behalf of a class of live-in security guards at construction sites who were on duty between 16 and 24 hours in a given day. On weekdays, most employees were on duty for a total of 16 hours – 8 hours of patrol and 8 hours of on-call time where they were able to attend to personal activities. CPS only paid its guards for on-call time where the guard was actively investigating an issue. On weekends, the guards were on-duty for 24 hours, with 8 hours of sleeping time deducted from their pay.

A California Appeals Court found that all of the weekday on-call time was compensable, but allowed for CPS to deduct 8 hours of sleeping time for weekend days when the guards were on-duty for 24 hours. California courts have previously held that employees working 24-hour shifts can have up to 8 hours of sleep time excluded from their paychecks, as long as there is a valid agreement to do so between the employees and their employer, and they get at least 5 hours of uninterrupted sleep.

The California Supreme Court affirmed that portion of the Appeals Court decision that found weekday on-call time compensable, but reversed as to the employer’s ability to deduct sleeping time. The high court found that workers are still under the employer’s control during that time, and that the company benefits from their guards’ presence at work sites, even if sleeping.

The decision highlights the careful analysis required of employers where state standards conflict with federal law. The employer in this case obtained permission from the California Labor Commissioner before setting up its overnight staffing, and had relied on federal law that allows much of this time to be excluded from hours worked. Still, the California Supreme Court found the plan illegal. If you are considering a new staffing solution or potentially controversial pay deduction policy, consider having Kelley Drye’s Labor and Employment Group audit that proposal for legal compliance in all jurisdictions in which you operate.

California Appeals Court Finds Security Guard On-Call Time

In a ruling that preceded the California Supreme Court’s CPS Security Solutions decision, a California Appeals Court vacated a $90 million judgment against ABM Industries Inc., finding that the company’s policy of requiring security guards to carry a radio during their rest breaks did not effectively put them on-call during these breaks.

In Augustus et al., v. ABM Security Services Inc., the plaintiffs alleged that the facilities management company’s security guards did not receive valid rest breaks because they were required to carry radios. The Appeals Court found that the “issue is whether simply being on call constitutes performing ‘work.’ We conclude that it does not.”

Whether this can survive the California Supreme Court’s CPS Security Solutions decision is yet to be seen, and California employers are certainly in a precarious position when it comes to evaluating their obligations under state law. Kelley Drye’s Labor and Employment Group has extensive experience counseling California employers, and can assist in the difficult task of line-drawing in the face of these potentially conflicting decisions.