Category: Labor & Employment

Employer Email Policies on Chopping Block as General Counsel Seeks to Overrule Register Guard and Board Calls for Amicus Briefs

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In a development of importance to both union and non-union employers, the NLRB General Counsel has asked the NLRB to overrule its 2007 decision in Register Guard, 351 NLRB 1110 (2007).  In Register Guard, the Board had held that employers could bar employee use of the employer’s email for non-business purposes, including union or other communications protected under Section 7 of the National Labor Relations Act, so long as the employer did so on a non-discriminatory basis.

The General Counsel now seeks a new rule that employees may use employer email for union or other Section 7 protected purposes so long as doing so does not impede production or workplace discipline. The Board has issued a notice the case, Purple Communications, Inc., Case Nos. 21-CA-095151, 21-RC-091531 and 21-RC-091584, inviting interested parties to file amicus briefs by June 16, 2014.

In its notice, the Board asked the amicus briefs to address the following questions:

  1. Should the Board reconsider its conclusion in Register Guard that employees do not have a statutory right to use their employer’s email system (or other electronic communications systems) for Section 7 purposes
  2. If the Board overrules Register Guard, what standard(s) of employee access to the employer’s electronic communications systems should be established? What restrictions, if any, may an employer place on such access, and what factors are relevant to such restrictions?
  3. In deciding the above questions, to what extent and how should the impact onthe employer of employees’ use of an employer’s electronic communicationstechnology affect the issue?
  4. Do employee personal electronic devices (e.g., phones, tablets), social media accounts, and/or personal email accounts affect the proper balance to be struck between employers’ rights and employees’ Section 7 rights to communicate about work-related matters? If so, how?
  5. Identify any other technological issues concerning email or other electronic communications systems that the Board should consider in answering the foregoing questions, including any relevant changes that may have occurred in electronic communications technology since Register Guard was decided.

How should these affect the Board’s decision?

The Board also invited amici to submit “empirical and other evidence”, which most likely means studies showing how employees use email in the workplace, how much productive time is lost because of over-use of email, and the like.  It is also possible the Board’s eventual decision could have an impact on other types of employee communications through various electronic devices and social media.

It has long been anticipated that the new Board and General Counsel would want to revisit the Register Guard decision.  Now that the time has come, it will be important for employers to engage as amici in an effort to shape the outcome and provide all Board members — including possibly dissenting ones — with both legal analysis and practical and operational considerations that should inform the Board’s policy choices in this important area.

Article By:

Ronald Meisburg
Of:
Proskauer Rose LLP

Unpaid Employer Contributions as Plan Assets: Expansion Of Liability Under ERISA (Employee Retirement Income Security Act)

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The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), requires trustees of multiemployer pension and benefit funds to collect contributions required to be made by contributing employers under their collective bargaining agreements (“CBAs”) with the labor union sponsoring the plans. This is not always an easy task—often, an employer is an incorporated entity with limited assets or financial resources to satisfy its contractual obligations. In some instances, an employer will resort to filing for bankruptcy to obtain a discharge of its debts to the pension or benefit funds.

In a distinct trend, federal courts have found that, depending on the text of the underlying plan documents, unpaid employer contributions due under a CBA may be viewed as plan assets, such that the representatives of an employer who exercise fiduciary control over those plan assets can be held individually liable for the unpaid amounts (together with interest and penalties) under ERISA. These cases will no doubt help plan trustees and administrators collect monies owed to the plan. They also should serve as cautionary warnings to contributing employers to ensure that they fully understand the obligations that they are undertaking when they agree to contribute to ERISA funds pursuant to CBAs.

Background

In the typical scenario, an employer will agree under one or more of its CBAs to make specified contributions to fund the pension and health and welfare benefits promised to plan participants under the trust fund’s plan of benefits. If an employer fails to timely remit those payments in violation of the CBA and the plan’s rules, the trustees of the fund have a legal duty to attempt to recover the unpaid contributions unless, after fully examining the facts and circumstances, the trustees conclude that the likelihood of recovery is outweighed by its costs. What happens if the trustees expend the fund’s resources to seek to collect the unpaid obligations and obtain a judgment against the employer, only to find the company’s coffers empty? Or what if the company files for bankruptcy?

Unlike employee contributions, which under U.S. Department of Labor regulations are explicitly deemed to be plan assets, employer contributions are typically found to be contractual obligations that do not become plan assets until such amounts are paid by the employer to the trust fund. Hence, while an employer’s failure to remit an employee contribution relegates the employer to the status of an ERISA plan fiduciary because it is has authority and control over plan assets, employer contributions have generally been held not to constitute plan assets. As a result, an employer who fails to make its contributions due under the CBA may have committed a contractual violation but has not breached an ERISA fiduciary duty.

The Potential for Individual Fiduciary Liability

Recently, courts have regularly carved out an exception to the general rule that unpaid contributions are not plan assets by finding that employer contributions are plan assets where the CBA explicitly defines them as such. In such cases, these courts will then proceed to consider the next question of whether the officers, directors or other representatives of such employer exercised a level of control over corporate assets sufficient to make them an ERISA plan fiduciary and thus individually liable for the contributions—effectively stripping them of the protections of the corporate form. Furthermore, if elevated to the status of a fiduciary breach, the debt may not be dischargeable in a bankruptcy proceeding. Thus, the plan could proceed to collect the unpaid contributions against the principals of the debtor personally.

For over a decade, some federal district courts in the Second Circuit have applied a two-part test in delinquent employer contribution cases to find that: (i) such contributions are plan assets when so specified by the CBA; and (ii) the principals of the employer are an ERISA plan fiduciary. More recently, the Second Circuit concluded that delinquent contributions were not plan assets where there were no provisions in the relevant plan documents that stated that unpaid contributions are assets of the plan. See In re Halpin, 566 F.3d 286 (2d Cir. 2009). The Court expressly stated, however, that “the trustees were free to contractually provide for some other result.” It further noted that merely finding that delinquent contributions constitute plan assets does not end the inquiry. A court must also determine whether an individual defendant has exercised sufficient fiduciary conduct over the unpaid contributions to be found to be a plan fiduciary under ERISA.

While the Court’s statements were extraneous to the holding of the case, some district courts within the Second Circuit have seized upon this language and have cited In re Halpin for the proposition that employer contributions can be plan assets where the plan documents so provide. See, e.g., Trustees of Sheet Metalworkers Int’l Assoc. v. Hopwood, 09-cv-5088, 2012 WL 4462048 (S.D.N.Y. Sept. 27, 2012); Sullivan v. Marble Unique Corp., 10-cv-3582, 2011 WL 5401987, at *27 (E.D.N.Y. Aug. 30, 2011).

Similarly, the Eleventh Circuit, in ITPE Pension Fund v. Hall, 334 F.3d 1011 (11th Cir. 2003), held that delinquent contributions can constitute plan assets when explicitly provided for in the plan documents and corporate officers are plan fiduciaries with respect to those assets. The Court demanded a high level of clarity in the plan documents, however, regarding the delinquent contribution’s status as plan assets. It explained that when a corporation is delinquent in its contributions, the fund “has a sufficient priority on the corporation’s available resources that individuals controlling corporate resources are controlling fund assets. This in effect places heavy responsibilities on employers, but only to the extent that . . . an employer freely accepts those responsibilities in collective bargaining.”

In addition, district courts in the Third, Fourth, and Ninth Circuits have found that employer contributions constitute plan assets when the plan documents so provide. See, e.g., Trustees of Construction Industry and Laborers Health & Welfare Trust v. Archie, No. 2:12-cv-00225 (D. Nev. Mar. 3, 2014) (holding that unpaid contributions were plan assets based upon the CBA’s language and finding that the company principals’ acts and responsibilities demonstrated sufficient control and authority over the company’s operations and financials to qualify as ERISA fiduciaries); Galgay v. Gangloff, 677 F. Supp. 295, 301 (M.D. Penn. 1987) (refusing to dismiss fiduciary breach claims for alleged failure to pay delinquent contributions based upon the “clear and undisputed language [of the agreement] stating that title to all monies ‘due and owing’ the plaintiff fund is ‘vested’ in the fund,” rendering “any delinquent employer contributions vested assets of the plaintiff fund.”; Connors v. Paybra Mining Co., 807 F. Supp. 1242, 1246 (S.D.W.V. 1992) (finding company officers personally liable for delinquent contributions that were plan assets based upon CBA’s language since they breached their fiduciary duty by exercising authority over those assets by favoring other creditors over the fund); see also Secretary of Labor v. Doyle, 675 F.3d 187 (3d Cir. 2012) (holding that district court erred in failing to determine whether payments collected from various employers were plan assets subject to ERISA).

District courts in the Sixth Circuit have even signaled support for finding that contributions are plan assets as soon as they become due, “regardless of the language of the benefit plan.” See, e.g., Plumbers Local 98 Defined Benefit Funds v. M&P Master Plumbers of Michigan, Inc., 608 F. Supp. 2d 873, 879 (E.D. Mich. 2009) (holding company principal personally liable for delinquent contributions since “the CBA and trust agreements . . . treat these unpaid contributions as inalienable plan assets” and signaling support for holding delinquent contributions plan assets “regardless of the language of the benefit plan.”).

In a related context, a federal bankruptcy court recently refused to discharge a debtor’s debt for delinquent contributions based upon the Bankruptcy Code’s “defalcation in the performance of fiduciary duty” exception. See In re Fahey, 494 B.R. 16 (Bankr. D. Mass. 2013). Although the court initially found that the debtor lacked the necessary discretion for fiduciary status under ERISA because the “option to breach a contract does not constitute discretion in the performance of one’s duty,” the United States Bankruptcy Appellate Panel for the First Circuit reversed. The Panel ruled that “even if an ERISA fiduciary does not per se satisfy the § 523(a)(4) requirement for ‘fiduciary capacity,’ an analysis of [the Debtor’s] control and authority over the plan in functional terms nonetheless yields the conclusion that he acted as a fiduciary of a technical trust imposed by common law.” On remand, the bankruptcy court found that the debtor prioritized payments that were personally beneficial over his obligations to the ERISA funds and, consequently, committed defalcation as contemplated by the Bankruptcy Code.

View from Proskauer

Although the general rule that employer contributions do not constitute plan assets until actually received by the trust fund continues, recent decisions indicate an increased willingness by courts to carve out an exception to this rule. Funds looking to protect their ability to collect contributions should explicitly define in the plan documents and agreements with employers that plan assets also include all unpaid contributions in the hands of the employer. Employers should be fully cognizant of these provisions; otherwise its officers, directors and other representatives who choose to pay other creditors rather than the trust fund might be held personally liable for the unpaid amounts and interest and penalties, and possibly be unable to escape this liability through bankruptcy.

Article By:

Neal S Schelberg
Aaron Feuer
Of:
Proskauer Rose LLP.

Employer Used As Means to Commit Crime not a Victim under Restitution Act, Fourth Circuit Court Rules

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The Mandatory Victims Restitution Act of 1996 (“MVRA”) provides that a victim of a federal crime may be entitled to an order of restitution for certain losses suffered as a direct result of the commission of the crime for which the defendant was convicted.  A question that courts sometimes face is whether a company can be considered a “victim” under the MVRA if an employee uses that company as an instrument to defraud the federal government.

Looking at this issue, the U.S. Court of Appeals for the Fourth Circuit on April 4, 2014, declined to allow a company’s bankruptcy estate to receive restitution for a large debt caused by an owner/employee’s fraud because that company was used as an instrument for that fraud.  In re Bankruptcy Estate of AGS, Inc., No. 12-cr-113 (4th Cir., April 4, 2014).

Dr. Allen G. Saoud was convicted after a June 2013 jury trial of five counts of health care fraud.  Dr. Saoud, who is a dermatologist, in 2005 was excluded from participating in Medicare and Medicaid for 10 years.  He then plotted to maintain ownership and control of his dermatology practice, AGS, Inc. in violation of the exclusion.  He founded a new dermatology practice and transferred all of his patients to this new practice.  After selling  his new practice to Dr. Fred Scott for $1.8 million,  Dr. Saoud then sold AGS, which had lost its value, for $1 million to nurse practitioner Georgia Daniel.  Despite  these sales, he continued to control and profit from both entities, partly by collecting Medicare and Medicaid reimbursement funds.

After Dr. Saoud was convicted, the estate of AGS, Inc., which had filed for bankruptcy, sought a $1 million restitution award to cover bankruptcy creditor claims that stemmed partly from the underlying fraud.   The district court declined.  The Estate of AGS, Inc. then filed a writ of mandamus with the Fourth Circuit.

The Fourth Circuit also refused  to award restitution to the Estate.  The Court held that Dr. Saoud used AGS, Inc. as an instrument in his scheme to illegally obtained Medicare and Medicaid funds, and as such, the Court declined to “also hold that AGS was one of the scheme’s victims.”

AGS, Inc. should be a source of concern to companies that have sustained losses as a result of employee fraud.  If an employee, director, officer or owner uses a company to defraud the government and that company incurs tax or other debt liability as a result of that fraud, that company may not be able to receive restitution under the MVRA.  Jackson Lewis attorneys are available to advise companies on the scope of the Mandatory Victims Restitution Act and their rights in collecting amounts lost to criminal acts.

Article By:

Ramsay C. McCullough
Of: 
Jackson Lewis P.C.

Detecting FMLA (Family and Medical Leave Act) Abuse

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Dealing with employees who abuse FMLA can be difficult. Letting abuse run rampant, however, can impact business productivity and put a damper on company morale (as present employees often have to pick up the slack of someone on leave). Employers who detect abuse must proceed with caution because it is very easy to run afoul of regulations.

Under the FMLA, it is unlawful for any employer to interfere with, restrain, or deny the exercise of any right provided by the Act. Further, employers cannot use the taking of FMLA leave as a negative factor in employment actions, such as hiring, promotions, or disciplinary actions. Violating these provisions can lead to employee lawsuits for interference or retaliation. Having said that, an employer is not helpless in thwarting employees’ ill-intentioned leaves.

If there is suspected abuse, it should be documented in detail. Who reported it? Is the source credible? Is there evidence (i.e., photographs)? Employers should refrain from overzealously playing detective or prompting other employees to snoop on a coworker – doing so may violate privacy laws. However, if there is a reasonable belief or honest suspicion that abuse is occurring, an employer may begin a confidential investigation, perhaps with the aid of private investigator. Surveillance of an employee should only be used in the most egregious situations and should always be conducted by a professional. Be sure to allow the employee the chance to refute the allegation and present his or her side of the story before taking any adverse action against him or her.

FMLA leave is a right for covered employees, but it does not act as a shield for misconduct nor does it prohibit termination of an employee who abuses the terms of an FMLA leave. You can terminate an employee on FMLA leave, but caution must be used. If you are an employer and detect abuse, it is highly recommended you contact an employment attorney about how to proceed so as to avoid costly lawsuits alleging interference or retaliation.

Article By:

Benjamin L. Riddle
Of: 
McBrayer, McGinnis, Leslie and Kirkland, PLLC

Department of State Releases May 2014 Visa Bulletin

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Bulletin shows minor forward movement in the EB-2 China category and the EB-3 India category, with no movement in the EB-2 India category or the EB-3 China category.

The U.S. Department of State (DOS) has released its May 2014 Visa Bulletin. The Visa Bulletin sets out per-country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their statuses to that of permanent residents or to obtain approval of immigrant visas at a U.S. embassy or consulate abroad, provided that their priority dates are prior to the respective cutoff dates specified by the DOS.

What Does the May 2014 Visa Bulletin Say?

The May Visa Bulletin indicates minor forward movement of the cutoff date in the EB-2 China category and no movement in the EB-3 China category. The May Visa Bulletin also indicates minor forward movement of the cutoff date in the EB-3 India category and no movement in the EB-2 India category.

A cutoff date of April 15, 2012 will remain in effect for individuals in the F2A category chargeable to Mexico, while a cutoff date of September 8, 2013 will remain in effect for individuals in the F2A category chargeable to all other countries.

EB-1: All EB-1 categories will remain current.

EB-2: The cutoff date of November 15, 2004 for individuals in the EB-2 category chargeable to India will remain unchanged from the April Visa Bulletin. The cutoff date for individuals in the EB-2 category chargeable to China will advance by 38 days to April 15, 2009. The EB-2 category for all other countries will remain current.

EB-3: The cutoff date for individuals in the EB-3 category chargeable to India will advance by 16 days to October 1, 2013. The cutoff date for individuals in the EB-3 category chargeable to China will remain unchanged at October 1, 2012. The cutoff date for individuals in the EB-3 category chargeable to the Philippines will advance by 139 days to November 1, 2007. The cutoff date for individuals chargeable to Mexico and the Rest of the World will remain unchanged at October 1, 2012. We note that the EB-3 China category remains ahead of the EB-2 China category.

The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:

China: October 1, 2012 (no movement)
India: October 1, 2003 (forward movement of 16 days)
Mexico: October 1, 2012 (no movement)
Philippines: November 1, 2007 (forward movement of 139 days)
Rest of the World: October 1, 2012 (no movement)

Developments Affecting the EB-2 Employment-Based Category

Mexico, the Philippines, and the Rest of the World

The EB-2 category for individuals chargeable to all countries other than China and India has been current since November 2012. The May Visa Bulletin indicates no change to these categories. This means that individuals in the EB-2 category chargeable to all countries other than China and India may continue to file AOS applications or have applications approved through May 2014.

China

The April Visa Bulletin indicated a cutoff date of March 8, 2009 for EB-2 individuals chargeable to China. The May Visa Bulletin indicates a cutoff date of April 15, 2009, reflecting forward movement of 38 days. This means that individuals in the EB-2 category chargeable to China with a priority date prior to April 15, 2009 may file AOS applications or have applications approved in May 2014.

India

In December 2013, the cutoff date for EB-2 individuals chargeable to India retrogressed by 3.5 years to November 15, 2004 due to unprecedented demand for EB-2 visa numbers from applicants in this category. This cutoff date has since remained constant, and the May Visa Bulletin again indicates no change. This means that only individuals in the EB-2 category chargeable to India with a priority date prior to November 15, 2004 may file AOS applications or have applications approved in May 2014.

Developments Affecting the EB-3 Employment-Based Category

China

From September through December 2013, the cutoff date for EB-3 individuals chargeable to China advanced by 2.75 years, and, from January through April, this cutoff date advanced by an additional 366 days. The May Visa Bulletin indicates a cutoff date of October 1, 2012, reflecting no change to the cutoff date from April. This means that individuals in the EB-3 category chargeable to China with a priority date prior to October 1, 2012 may continue to file AOS applications or have applications approved in May 2014.

India

In March, the cutoff date for EB-3 individuals chargeable to India advanced by 14 days to September 15, 2003. There was no change to this cutoff date in April. The May Visa Bulletin indicates a cutoff date of October 1, 2013, reflecting forward movement of 16 days. This means that only EB-3 individuals chargeable to India with a priority date prior to October 1, 2003 may file AOS applications or have applications approved in May 2014.

Rest of the World

From September through December 2013, the cutoff date for EB-3 individuals chargeable to the Rest of the World advanced by 2.75 years, and, from January through April, this cutoff date advanced by an additional 366 days. The May Visa Bulletin indicates a cutoff date of October 1, 2012, reflecting no movement of this cutoff date. This means that individuals in the EB-3 category chargeable to the Rest of the World with a priority date prior to October 1, 2012 may continue to file AOS applications or have applications approved in May 2014.

Developments Affecting the F2A Family-Sponsored Category

Beginning in October 2013, a cutoff date of September 1, 2013 was imposed for F2A spouses and children of permanent residents from Mexico, and a cutoff date of September 8, 2013 was imposed for F2A spouses and children of permanent residents from all other countries. In March, as a result of heavy demand in the F2A Mexico category, the cutoff date for F2A applicants born in Mexico retrogressed by 504 days to April 15, 2012; the cutoff date for F2A applicants from all other countries remained unchanged. There was no change to these cutoff dates in April, and the May Visa Bulletin again indicates no change to these cutoff dates. This means that those applicants from Mexico with a priority date prior to April 15, 2012 will be able to file AOS applications or have applications approved in May 2014, and those applicants from the Rest of the World with a priority date prior to September 8, 2013 may file AOS applications or have applications approved through May 2014.

The May Visa Bulletin indicates that demand in the F2A category continues to increase dramatically and that the cutoff date for individuals from Mexico and all other countries is therefore likely to retrogress in the coming months.

How This Affects You

Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward or backward or remain static. Employers and employees should take the immigrant visa backlogs into account in their long-term planning and take measures to mitigate their effects. To see the May 2014 Visa Bulletin in its entirety, please visit the DOS website here.

IRS Clarifies How Plan Sponsors Should Handle Same-Sex Spouses in Qualified Retirement Plans

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On April 4, 2014, the IRS issued Notice 2014-19, requiring that qualified retirement plans apply “spouse” and “marriage” to same-sex spouses just as the plan would to opposite-sex spouses and establishing criteria for what plan amendments are needed and the timing for doing so.

Background

In September of 1996, Congress enacted the Defense of Marriage Act (DOMA), which provided that same-sex marriages would not be recognized under federal law. On June 26, 2013, however, the U.S. Supreme Court held in the Windsor case that DOMA’s treatment of such marriages was unconstitutional. Following Windsor, the IRS issued Revenue Ruling 2013-17 on August 29, 2013 (effective September 16, 2013), requiring same-sex marriages legally performed under state law to be recognized for federal tax purposes in any state regardless of whether the state recognizes the validity of same-sex marriages. This Revenue Ruling further provided that individuals who entered into registered domestic partnerships, civil unions, or other similar relationships under state law did not qualify as “spouses” and that these relationships did not qualify as “marriages” for federal tax purposes.

The newly issued April 4 Notice gives further guidance respecting qualified retirement plans on a wide range of subjects including qualified joint and survivor annuity rules, the Retirement Equity Act’s spousal beneficiary safeguards, required minimum distribution calculations and timing, control group determinations, ESOP rules, and the QDRO exceptions to the Code’s anti-alienation rules.

Notice 2014-19

The new IRS Notice describes when qualified retirement plans must be in administrative and documentary compliance with Windsor and the August 2013 Revenue Ruling. Plan sponsors and recordkeepers must have been administering their retirement plans consistent with Windsor as of June 26, 2013, even if these plans did not contemplate valid same-sex marriages. The corollary to this is that failing to recognize same-sex marriages before June 26, 2013, will not disqualify a plan. Furthermore, because last summer’s Revenue Ruling was not effective until September 16, 2013, there will be no risk of disqualification during the gap period between the effective date of Windsor and September 16 for plans that recognized same-sex marriages only if a participant was domiciled in a state that recognized same-sex marriages. The IRS further clarified that plan sponsors could operate their plans prior to June 26, 2013 to reflect Windsor on some or all qualification requirements without risk of disqualification so long as the basic qualification rules were satisfied, i.e., plan sponsors could be more generous than the Code required if it was feasible administratively.

From a documentation standpoint, all qualified retirement plans must be consistent with Windsor and both the IRS Revenue Ruling and the new Notice. Depending on how a plan uses or defines the terms “spouse” and “marriage,” plan amendments may or may not be needed. If a plan uses or defines these terms in a neutral manner without reference to “opposite-sex” or DOMA and they can be reasonably construed in harmony withWindsor and the IRS guidance, then no plan amendment is likely needed. However, if a plan couches the terms “spouse” and “marriage” in accordance with DOMA or inconsistently with Windsor, then the plan will need to be amended retroactively to June 26, 2013 to maintain its qualified status.

The deadline for adopting any needed amendments is generally going to be December 31, 2014, although for some plan sponsors, the amendment deadline could be later depending on their unique circumstances.

Next Steps

In response to Notice 2014-19, plan sponsors will need to review the terms of their retirement plans to ensure each plan contains a proper definition of “spouse” and “marriage” and to timely amend their plans, as necessary. Additionally, plan sponsors should confirm the administrative aspects of their plans with their recordkeepers. Based on all of this, Notice 2014-19 is welcome news as it provides certainty: individuals can better plan their benefits and retirements, recordkeepers can confidently begin any needed programming and website changes, and plan sponsors can undertake any needed revisions to their plan documents, summary plan descriptions and other communications.

Article By:

Jorge M. Leon
Kirk A. Pelikan
Charles P. Stevens
Of:
Michael Best & Friedrich LLP

Revitalized National Labor Relations Board (NLRB) Takes on Vigorous Agenda Including Reissued Quickie Union Election Rules And Greater Employee Handbook Scrutiny

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The National Labor Relations Board (“NLRB” or the “Board”) has been notably active in the first quarter of 2014.

As addressed in our March 2013 Alert, the Board faced uncertainty regarding its power to act following the January 23, 2013 decision in Noel Canning v. NLRB by the U.S. Court of Appeals for the District of Columbia Circuit. Noel Canning held that President Obama’s three recess appointments to the Board, made on January 4, 2012, were unconstitutional. Then, in August 2013, the NLRB received a full complement of five Senate-confirmed members.

While it has taken a few months for the Board to ramp up after the new members were sworn in, the newly invigorated NLRB is quickly making up for that time. For instance, the Board issued 19 decisions in January 2014 alone.

Below are summaries of certain significant NLRB developments from the first quarter of 2014:

NLRB Proposes Quickie Election Rules Again – Will Help Unions to Organize On February 5, 2014, the Board reissued proposed amendments to its existing rules governing union election procedures, new rules which it first proposed in2011. These rules will make union organizing easier by dramatically expediting the Union election process. In May 2012, the United States District Court for the District of Columbia had blocked the prior rules, holding that the NLRB lacked a quorum when it adopted those rules.

The new proposed rules, which the Board issued with a full quorum, would make several significant changes that would greatly benefit unions. The proposed rules would:

  • speed up union elections by ending the current practice of scheduling pre-election hearings within fourteen days from the petition filing and instead requiring hearings to be held within seven days of the filing;
  • substantially reduce an employer’s right to litigate whether employees are eligible to vote prior to an election, by automatically deferring such issues until after the election; and
  • require employers to provide union organizers with the names, addresses, email addresses and phone numbers of employees once a petition has been filed.
  • The NLRB is accepting public comments on the proposal until April 7, 2014. In addition, the Board will hold a public hearing on the proposed rules during the week of April 7, 2014.

NLRB Employee Handbook Scrutiny The Board has been more closely examining provisions in companies’ employee handbooks. This increased scrutiny impacts employers in both union and non- union workplaces.

As noted in our April 2013 Alert, several of the Board’s prominent decisions over the past few years have addressed social media policies. Recently, the NLRB has expanded its focus to other aspects of employer handbook policies, such as those policies pertaining to confidentiality, dispute resolution, at-will employment statements, and non-union statements.

A recent example is a decision issued by an NLRB Administrative Law Judge (“ALJ”) that partially invalidated an employer’s dress code. Boch Imports, Inc., NLRB, No. 1-CA-83551 (Jan. 13, 2014).

In Boch, the ALJ found that a dress code provision in a Honda dealer’s employee handbook that prohibited employees who have contact with the public from wearing pins, insignia, or other message clothing violated section 8(a)(1) of the National Labor Relations Act (“NLRA” or the “Act”) (which prohibits employers from interfering with employees as they engage in protected concerted activity). Although the dress code rule applied to all pins, insignia, or other message clothing, the ALJ found that the rule violated an employee’s presumptive right to display a union insignia in the workplace.

Notice Posting Rule Abandoned – But New Emphasis on Digital Media to Publicize NLRA’s Protections in Union and Non-Union Workplaces The Board has decided not to seek U.S. Supreme Court review of two U.S. Court of Appeals decisions which held that the NLRB’s Notice Posting Rule was invalid. The Notice Posting Rule would have required private employers to post a notice in the workplace of employee rights under the Act.

The Board has issued an update on its website stating that the NLRB remains committed to making sure that “workers, businesses and labor organization are informed of their rights and obligations under the National Labor Relations Act.” According to that update, the workplace poster is available on the NLRB website and may be disseminated voluntarily. The Board has also established a free mobile app for iPhone and Android users, which provides information about the NLRA.

Although the NLRB chose to abandon its proposed Notice Posting Rule, the Board’s subsequent statements and its use of digital media to disseminate information about the Act demonstrate a commitment to remain relevant, modernize, and seek to influence employees in both unionized and non-unionized workplaces.

Employer Take Aways

  • Employees must prepare for the new quickie election rules. Management must promote positive employee relations before union organizing occurs. Employers will no longer have the time to campaign fully against unionization once a labor organization files a petition.
  • Employers must be very mindful of the Board’s increased focus on non-union workplaces, including its scrutiny of employee handbook and social media policies.

The NLRA applies to virtually all private sector employers, whether unionized or not unionized. If the NLRB finds that a policy violates the NLRA, the Board may order that the employer rescind that policy and may also require management to post a notice to employees stating that the employer will not violate the Act. The NLRB may also invalidate any discipline or termination that the employer based on that policy and can require the reinstatement, with back pay, of any discharged employee.

  • The U.S. Supreme Court is still considering the Board’s appeal of Noel Canning, which may require the Board to revisit certain prior rulings. In the meantime, the NLRB is moving forward with its vigorous agenda.
Article By:

David I. Rosen
Galit Kierkut
Charles S. Zucker
Grace A. Byrd
Of:
Sills Cummis & Gross P.C.

Major League Baseball (MLB) All-Star Weekend Volunteers Not Employees Under Fair Labor Standards Act (FLSA)

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Judge John G. Koeltl from the Southern District of New York has dismissed the minimum wage claims of an individual who served as a volunteer at last year’s Major League Baseball All Star Weekend FanFest, held at New York City’s Javits Center, based on the “amusement or recreational establishment” exemption.  Chen v. Major League Baseball, 2014 U.S. Dist. LEXIS 42078 (S.D.N.Y. Mar. 25, 2014).

Plaintiff worked three shifts as a volunteer at FanFest, stamping attendees’ wrists, handing out paraphernalia and directing attendees.  He argued that this work made him an “employee” of Major League Baseball.  Judge Koeltl declined to address whether Plaintiff’s volunteer services made him an “employee”, because even if the court made such a conclusion, Plaintiff’s claim failed as a matter of law as  Plaintiff was “employed by an establishment which is an amusement or recreational establishment . . . [which did] not operate for more than seven months in any calendar year.”

While Chen is a victory for the employer community in light of the widespread series of actions brought by individuals classified as outside FLSA protection, principally asserted by interns,  many businesses are not seasonal in nature and thus cannot readily avail themselves of this exemption.  All potential exemptions and defenses to claims for minimum and overtime wages must be closely analyzed under the FLSA and, as applicable, state law.

Article By:

Noel P. Tripp
 
Of:
Jackson Lewis P.C.

 

Retirement Plan Fee Litigation Finds Its Way to North Carolina

Poyner Spruill

Over the last few years, we have seen a significant increase in litigation involving the fees paid by retirement plans. However, until recently, no major litigation had occurred in North Carolina.  On March 12, 2014, one of these cases was filed against Winston-Salem-based Novant Health, a large hospital system in the southeast.  This case and other recent litigation should serve as a reminder to retirement plan fiduciaries of the need to monitor their plans’ service provider arrangements.

The complaint against Novant Health alleges that Novant’s retirement plan paid unreasonable fees to the plan’s recordkeeper and to an investment advisor.  The plaintiffs argue that the fees paid by the plan were unreasonable because, among other things, plan expenses increased more than 10-fold in one year without a corresponding increase in services.  The plaintiffs also claim that the fiduciaries breached their duties by failing to leverage the size of the plan to negotiate lower fees and by selecting retail mutual fund share classes when cheaper, “institutional” share classes were available.

While this case is still a long way from being decided, it should serve as a pointed reminder to plan sponsors and other plan fiduciaries that they need to routinely monitor the reasonableness of plan fees and expenses.

If the plan document so provides, a plan can pay its own administrative expenses, but only if the appropriate fiduciary determines that those expenses are reasonable.  Before entering into a service provider relationship, the fiduciary must first make a determination that the services are necessary and the fees are reasonable.  The fiduciary then must monitor the arrangement over time to ensure that it remains reasonable.

The following fiduciary risk-management practices are worth considering for any plan committee or other fiduciary involved in the selection or monitoring of service providers:

  • Regularly identify all service providers that directly or indirectly receive fees from the plan.
  • Make sure each service provider has provided the plan fiduciaries with fee disclosures required by ERISA.
  • Regularly calculate the amounts that each service provider directly or indirectly receives from the plan.
  • Understand what services are provided to the plan for the fees paid.  If one vendor provides both services to the plan and non-plan services, make sure that the plan is not subsidizing any non-plan services.
  • Periodically confirm whether the service provider’s pricing is competitive.  This is particularly important as the size of the plan grows because the fiduciary will be expected to leverage the plan’s size to reduce fees.  Depending on the circumstances, it might be best to conduct a formal request for proposals from time to time.
  • If an advisor questions whether a fee arrangement is reasonable, take prompt action to investigate the issue and determine whether the arrangement is reasonable.
  • Make sure that participant communications accurately reflect how plan expenses are paid.
  • Document, document, document!  Document the decision-making process used to select a service provider, and document the fiduciary’s monitoring and review process.

These practices will assist the fiduciary in meeting its fiduciary duties and, perhaps more importantly, demonstrate fiduciary prudence to any inquiring party.

Article By:

Kelsey H. Mayo
David L. Woodard
 
Of:
Poyner Spruill LLP