Category: Labor & Employment

DOL Proposes New FMLA Regulations on Military Family Leave

Recently in The National Law Review was an article regarding New FMLA Regulations written by the Labor & Employment Practice of Morgan, Lewis & Bockius LLP:

Proposed rules impact exigency leave and military caregiver leave and include clarifications on increments of intermittent leave.

On January 31, the U.S. Department of Labor (DOL) made public proposed Family and Medical Leave Act (FMLA) regulations that attempt to align existing regulations with two statutory amendments passed in 2009. The DOL’s Notice of Proposed Rulemaking (NPRM) addresses the coverage of military caregiver and exigency leaves and revamps eligibility requirements for certain airline industry employees. It also proposes changes to other FMLA regulations, although it does not contain the kind of groundbreaking regulatory changes issued in 2008. Nevertheless, the proposed changes do contain important clarifications to existing law that, if finalized, will impact employers.

Background on FMLA Amendments

As most employers are now well aware, the FMLA was amended in January 2008 to provide two types of military family leave for FMLA-eligible employees:

  • “Exigency leave”: A 12-week entitlement for eligible family members of National Guard and Reserves servicemembers to deal with exigencies related to a call to active duty.
  • “Military caregiver leave”: A 26-week entitlement for eligible family members to care for seriously ill or injured servicemembers of the regular Armed Forces, National Guard, and Reserves.

Less than a year later, Congress once again amended the FMLA. Through the National Defense Authorization Act for Fiscal Year 2010 (FY 2010 NDAA), P.L. No. 111-84, Congress expanded both types of military family leave by doing the following:

  • Expanding the FMLA’s military caregiver leave entitlement to include veterans with serious injuries or illnesses who are receiving medical treatment, recuperation, or therapy if the veterans were members of the Armed Forces at any time during the period of five years preceding the date of the medical treatment, recuperation, or therapy. Veterans had not been covered under existing law.
  • Expanding the exigency leave entitlement to include family members of the regular Armed Forces deployed to a foreign country who were not entitled to exigency leave under existing law.[1]
  • Extending the availability of military caregiver leave for current members of the Armed Forces to include a preexisting serious injury or illness that was aggravated by active duty service.

FY 2010 NDAA did not include an effective date, so these changes were presumed to be effective on October 28, 2009. The DOL, however, has now taken the position that employers are not required to provide employees with military caregiver leave to care for a veteran until the DOL defines, through regulation, a qualifying serious injury or illness of a veteran. Thus, according to the DOL, until the regulations are finalized, any time provided voluntarily by employers under this provision cannot count to reduce an employee’s FMLA entitlement. Because the statute did not have a delayed effective date for this provision, however, it is not clear whether a court would agree with this approach.

Later in 2009, Congress also passed the Airline Flight Crew Technical Corrections Act (AFCTCA), Public Law 111-119, to provide an alternate eligibility requirement for airline flight crew employees.

Now, more than two years after the passage of the 2009 amendments, the DOL has issued its NPRM to promulgate rules related to the FY 2010 NDAA and AFCTCA. The public comment period on these proposed rules will close 60 days after the NPRM is officially published in theFederal Register.

A summary of the key proposals follow.

Proposals Relating to Qualifying Exigency Leave

Definition of Active Duty

§ 825.126(a)

The DOL proposes important amendments that help clarify what kind of service qualifies for exigency leave under the FMLA. Specifically, the proposal would replace the existing definition of “active duty” with two new definitions: “covered active duty” as it applies to the Regular Armed Forces and “covered active duty” as it applies to the Reserves. The DOL believes that this change will “more accurately reflect the fact that there are limitations on the types of active duty that can give rise to qualifying exigency leave.”

The proposed definition of “covered active duty” as it relates to the Regular Armed Forces comes as no surprise, given the mandate of the FY 2010 NDAA. Simply put, a member of the Regular Armed Forces meets the definition of “covered active duty” when deployed with the Armed Forces in a foreign country.

The proposed definition of “covered active duty” as it relates to Reserve members, however, is a bit more nuanced. Proposed Section 825.126(a)(2) defines “covered active duty or call to covered active duty” status for a member of the Reserve components as duty under a call or order to active duty during the deployment of the member to a foreign country under a federal call or order to active duty in support of a contingency operation. While the FY 2010 NDAA struck the term “contingency operations” from the FMLA, the DOL takes the position that it will continue to require members of the Reserve components to be called to duty in support of a contingency operation in order for their family members to be entitled to qualifying exigency.

That means that, if the proposal is adopted, employers would need to offer exigency leave only to those Reserve members who are (1) called to duty in support of a contingency operation when that call is (2) in a foreign country.

Exigency Leave for Childcare and School Activities

§ 825.126(a)(3)

The current regulations allow eligible employees to take qualifying exigency leave to arrange childcare or attend certain school activities for a military member’s son or daughter. The proposed regulations would place new limits on this type of leave. Specifically, if the proposal becomes effective, the military member must be the spouse, son, daughter, or parent of the employee requesting leave in order for the employee to qualify for the leave under the DOL’s proposed amendment to the regulation. The child in question could be “the military member’s biological, adopted, or foster child, stepchild, legal ward, or child for whom the military member stands in loco parentis, who is either under age 18 or age 18 or older and incapable of self-care because of a mental or physical disability at the time that FMLA leave is to commence.”

For example, the employee may be the mother of the military member and may need qualifying exigency childcare and school activities leave for the military member’s child. Under this proposal, the child for whom childcare leave is sought need not be a child of the employee requesting leave.

Exigency Leave for Rest and Recuperation

§ 825.126(a)(6)

Current regulations allow an eligible employee to take up to five days of leave to spend time with a military member on rest and recuperation leave during a period of deployment. The DOL proposes to expand the maximum duration of rest and recuperation qualifying exigency leave from five to 15 days, noting that the leave remains limited to the actual amount of time granted to the military member.

The proposal also clarifies that employers may request a copy of the member’s rest and recuperation leave orders or other military documentation to certify the need for leave.

Proposals Relating to Military Caregiver Leave

Certification Provisions for Caregiver Leave

§ 825.310

The current regulations limit the type of healthcare providers authorized to certify a serious injury or illness for military caregiver leave to providers affiliated with the Department of Defense (DOD) (e.g., a Department of Veterans Affairs (VA) or DOD-TRICARE provider). The proposed regulations would eliminate this distinction and would allow any healthcare provider that is authorized under Section 825.125 to certify a serious health condition under the FMLA to also certify a serious injury or illness under the military caregiver provisions.

Because of this change, the DOL also proposes to remove the prohibition on second and third opinions on certifications of military caregiver leaves—at least as it relates to non-DOD/VA providers. That is, the DOL proposes in Section 825.310(d) to provide that second and third opinions are not permitted when the certification has been completed by one of the types of DOD/VA authorized healthcare providers identified in Section 825.310(a)(1)-(4), but second and third opinions are permittedwhen the certification has been completed by a healthcare provider that is not one of the types identified in Section 825.310(a)(1)-(4).

Definition of Covered Veteran for Caregiver Leave

§ 825.127

Since the current regulations do not define “covered servicemember” with regard to veterans, the DOL plans to define “covered veteran” as an individual who was discharged or released under conditions other than dishonorable at any time during the five-year period prior to the first date the eligible employee takes FMLA leave to care for the covered veteran.

That is, a veteran will be considered a covered veteran under FMLA if he or she was a member of the Armed Forces within the five-year period immediately preceding the date the requested leave is to begin. If the leave commences within the five-year period, the employee may continue leave for the applicable “single 12-month period,” even if it extends beyond the five-year period. This interpretation may exclude veterans of previous conflicts (Gulf War veterans) and may exclude certain veterans of the War in Afghanistan and Operation Iraqi Freedom, depending on the veteran’s discharge date and the date the eligible employee’s leave is to begin.

Definition of Serious Injury or Illness

§ 825.127

In the NPRM, for both current members of the Armed Forces and covered veterans, a serious injury or illness that existed before the beginning of the military member’s active duty and was aggravated by serving in the line of duty on active duty includes both conditions that were noted at the time of entrance into active service and conditions that the military was unaware of at the time of entrance into active service but that are later determined to have existed at that time. A preexisting injury or illness will generally be considered to have been aggravated by service in the line of duty on active duty where there is an increase in the severity of such injury or illness during service, unless there is a specific finding that the increase in severity is due to the natural progression of the injury or illness.

In addition, and because the FY 2010 NDAA requires the DOL to define a qualifying serious injury or illness for a veteran, the DOL proposes a new Section 825.127(c)(2) that would define serious injury or illness for a covered veteran with three alternative definitions set out in paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii).

  • Definition 1: Proposed Section 825.127(c)(2)(i) defines a serious injury or illness of a covered veteran as a serious injury or illness of a current servicemember, as defined in Section 825.127(c)(1), that continues after the servicemember becomes a veteran. Thus, if a veteran suffered a serious injury or illness when he or she was an active member of the Armed Forces and that same injury or illness continues after the member leaves the Armed Forces and becomes a veteran, the injury or illness will continue to qualify as a serious injury or illness warranting military caregiver leave.
  • Definition 2: Proposed Section 825.127(c)(2)(ii) defines a serious injury or illness for a covered veteran as a physical or mental condition for which the covered veteran has received a VA Service Related Disability Rating (VASRD) of 50% or higher and such VASRD rating is based, in whole or part, on the condition precipitating the need for caregiver leave. The DOL’s review indicates that a VASRD disability rating of 50% or higher encompasses disabilities or conditions such as amputations, severe burns, post traumatic stress syndrome, and severe traumatic brain injuries. However, the DOL notes that there are injuries that do not qualify as creating a total disability under the VASRD system that will qualify as a serious injury or illness for military caregiver leave. For example, burns resulting in distortion or disfigurement (see 38 C.F.R. § 4.118) or psychological disorders resulting from stressful events (see 38 C.F.R. § 4.129) occurring in the line of duty on active duty may not result in a VASRD rating of 60% or higher, but nonetheless may be severe enough to substantially impair a veteran’s ability to work and therefore should be considered qualifying injuries or illnesses. The DOL is particularly concerned that military caregiver leave be available to family members of veterans suffering from, or receiving treatment for, such injuries or illnesses, which may include continuing or follow-up treatment for burns, including skin grafts or other surgeries, and amputations, including prosthetic fittings, occupational therapy, and similar care.
  • Definition 3: Proposed Section 825.127(c)(2)(iii) is the third alternative definition of a serious injury or illness for a covered veteran; it covers injuries and illnesses that are not technically within the definitions proposed in paragraph (c)(2)(i) or (ii), but are of similar severity. The DOL proposes to define a serious injury or illness for a covered veteran in the third alternative as a physical or mental condition that either substantially impairs the veteran’s ability to secure or follow a substantially gainful occupation by reason of a service-connected disability, or would do so absent treatment. This proposed definition is intended to replicate the VASRD 50% disability rating standard under paragraph (c)(2)(ii) for situations in which the veteran does not have a service-related disability rating from the VA. The DOL expects that, when making determinations of serious injury or illness under this proposed definition, private healthcare providers will do so in the same way they make similar determinations for Social Security Disability claims and Workers’ Compensation claims. The DOL stresses that this definition is meant to comprehensively encompass traumatic brain injuries, post traumatic stress disorder, and other such conditions that may not manifest until sometime after the member has become a veteran.

Additionally, the DOL seeks comments on whether it should make a rule that veterans who qualify for enrollment in VA’s Program of Comprehensive Assistance for Family Caregivers automatically meet the requirement of having a serious injury or illness.

Proposals Affecting Airline Flight Crews

Effective December 21, 2009, the AFCTCA provides that an airline flight crew employee will meet the hours of service eligibility requirement if he or she has worked or been paid for not less than 60% of the applicable total monthly guarantee (or its equivalent) and has worked or been paid for not less than 504 hours (not including personal commute time or time spent on vacation, medical, or sick leave) during the previous 12 months. Airline flight crew employees continue to be subject to the FMLA’s other eligibility requirements.

The DOL proposal includes provisions to align existing regulations with the passage of the AFCTCA. The proposal also does the following:

  • Defines monthly guarantees for airline employees and “line holders” (e.g., flight crew employees who are not on reserve status). For airline employees who are on reserve status, the applicable monthly guarantee means the number of hours for which an employer has agreed to pay the employee for any given month. For line holders, the applicable monthly guarantee is the minimum number of hours for which an employer has agreed to schedule such employee for any given month.
  • Defines how to calculate “hours worked” and “hours paid.”  Airline flight crew employees may become eligible under the FMLA (as amended by the AFCTCA) if they have either the required number of “hours worked” or “hours paid.” The DOL proposes to base the number of hours that an airline flight crew employee has worked on the employee’s duty hours during the previous 12-month period. Hours paid, according to the DOL, are routinely tracked by most airlines’ payroll systems.
  • Adds recordkeeping requirements for employers of airline flight crews. The requirements include all the records required of other employers under the FMLA, plus any records or documents that specify the applicable monthly guarantee for each type of employee to whom the guarantee applies, including any relevant collective bargaining agreements or employer policy documents that establish the applicable monthly guarantee, as well as records of hours scheduled, in order to be able to apply the leave calculation principles contained in proposed Section 825.205(d).

Other Proposed Changes Universal to the FMLA

Increments of Intermittent FMLA Leave

§ 825.205

The current Section 825.205(a) defines the minimum increment of FMLA leave to be used when taken intermittently or on a reduced schedule as an increment no greater than the shortest period of time that the employer uses to account for other forms of leave, provided that it is not greater than one hour. The DOL intends to emphasize that an employee’s entitlement should not be reduced beyond the actual leave taken and therefore proposes to add language to paragraph (a)(1) stating that an employer may not require an employee to take more leave than is necessary to address the circumstances that precipitated the need for leave. However, the DOL underscores that this principle remains subject to the rest of the rule, including the increment of leave rule. Thus, this change in the rules does not necessitate action for any employer already complying with the shortest increment rule.

The DOL notes that if an employee elects to substitute paid leave for the unpaid leave time offered under the FMLA, and the employer has a policy of offering paid leave in larger increments of time than unpaid leave, the employer can then require the employee to use more FMLA leave than necessary for the purpose of the leave in order to get the benefit of wage replacement. However, the employee can always elect to take the shorter increment of leave without pay to avoid drawing down the FMLA entitlement.

The DOL further proposes to clarify that the additions to Section 825.205(a) underscore the rule that if an employer chooses to waive its increment of leave policy in order to return an employee to work at the beginning of a shift, the employer is likewise choosing to waive further deductions from the FMLA entitlement period. In other words, if the employee is working, the time cannot count against FMLA time, no matter what the smallest increment of leave may be.

The DOL also proposes to remove the language in Section 825.205(a) allowing for varying increments at different times of the day or shift in favor of the more general principle of using the employer’s shortest increment of any type of leave at any time

Currently, Section 825.205(a)(2) includes a provision on physical impossibility, which provides that where it is physically impossible for an employee to commence or end work midway through a shift, the entire period that the employee is forced to be absent is counted against the employee’s FMLA leave entitlement. The DOL proposes to do either of the following:

  • Delete this provision.
  • Add language emphasizing that it is an employer’s responsibility to restore an employee to his or her same or equivalent position at the end of any FMLA leave as soon as possible.

If the DOL retains the provision as modified, it offers the following example: If after three hours of FMLA leave use it was physically possible to restore a flight crew employee to another flight, the employer would be required to do so. If, however, no other flight is available to which the employee could be assigned, or no other equivalent work is available, restoration could be delayed and the employee’s FMLA entitlement reduced for the entire period the employee is forced to be absent.

The DOL also proposes to clarify that the rule stated in Section 825.205(c), which addresses when overtime hours that are not worked may be counted as FMLA leave, applies to all FMLA qualifying reasons, not just serious health conditions.

The DOL further proposes to add Section 825.205(d), which will provide a methodology for calculating leave for airline flight crew employees.

Recordkeeping Requirements

§ 825.300

The DOL proposes adding a sentence to Section 825.300 reminding employers of their obligation to comply with the confidentiality requirements of the Genetic Information Nondiscrimination Act of 2008 (GINA). To the extent that records and documents created for FMLA purposes contain “family medical history” or “genetic information” as defined in the GINA, employers must maintain such records in accordance with the confidentiality requirements of Title II of GINA. The DOL notes that GINA permits genetic information, including family medical history, obtained by the employer in FMLA records and documents to be disclosed consistent with the requirements of the FMLA

Conclusion

With most employers having taken the position that the veteran’s provisions went into effect when the FMLA was amended in 2009, little action is called for at this time. However, employers should take this opportunity to review their FMLA policy, and should be aware that the DOL may take issue if a qualifying exigency for a veteran is counted against an employee’s FMLA entitlement such that the employee is later restricted in taking another leave. Further, employers should consider whether they wish to provide comments to the DOL during the comment period. Beyond that, most employers need only “watch and wait” until the DOL finalizes this rulemaking process to make tweaks to existing policies. Nevertheless, the DOL’s NPRM serves as a good reminder to employers to ensure that their FMLA policies incorporate the 2009 statutory changes.

Copyright © 2012 by Morgan, Lewis & Bockius LLP.

Indiana Becomes the First "Right-to-Work" State in the Rust Belt

The National Law Review recently published an article regarding Right-to-Work by Lisa Carey-Davis of Schiff Hardin LLP:

Indiana Governor Mitch Daniels signed the Right-to-Work Act, making Indiana the first Rust Belt state — and the first state in more than ten years — to adopt right-to-work legislation. With this law, Indiana joins 22 other states, mostly in the southern and western United States, that prohibit employers from requiring employees to become or remain union members and to pay dues or fees to the union as a condition for getting — and keeping — their jobs.

The Impact of the New Law in Indiana and Beyond

Supporters of the new law contend that because it offers employers “more flexibility and lower hiring costs,” more businesses will now choose to call Indiana home. Republican House Speaker Brian Bosma declared that the Right-to-Work Act “announces, especially in the Rust Belt, that we are open for business.”

Some suggest that other Rust Belt states may soon follow Indiana’s example. State Representative Jerry Torr, who sponsored Indiana’s bill, has predicted that two of Indiana’s more heavily unionized neighbors — Michigan (19%) and Ohio (14%) — will “fall like dominoes” in the wake of Indiana’s decision because “they will have to in order to compete.” Mike Shirkey, a Republican state representative from Michigan, admitted that he was disappointed that Indiana beat Michigan to the punch, adding “now a border state is going to establish a leverage position in being attractive to businesses.”

Currently, roughly 11% of Indiana’s workforce is unionized, primarily in the auto and steel industries. If history is any indication, that number may soon decline. On average, right-to-work states have significantly lower rates of unionization than states without such laws. In 2010, for example, the average rate of unionization was seven percent in right-to-work states, while the average in the rest of the states was more than double at 15%.

The Right-To-Work Act was passed by Indiana’s Republican-controlled legislature over bitter opposition from Democratic lawmakers, including a walkout by House Democrats that denied Republicans for several weeks the quorum required to take action on the bill. Democrats also proposed an amendment that would have put a Right-to-Work referendum on the November ballot, but that amendment was voted down. Unlike Ohio — where a short-lived statute that stripped public sector employees of collective bargaining rights was struck down last year by voters — ballot initiatives in Indiana must be approved by the legislature and cannot be introduced by voters. Therefore, a referendum vote on Indiana’s new law is unlikely.

What the New Law Means for Indiana Employers

The new law contains a grandfather clause that exempts any collective bargaining agreement already in effect on March 14, 2012. Until those grandfathered contracts expire, employers may continue to abide by and enforce union security provisions contained therein by requiring employees to join unions and to pay dues as a condition of employment.

But contracts “entered into, modified, renewed, or extended” after the new law takes effect on March 14 cannot contain such requirements. Specifically, the law prohibits employers from requiring employees to join or remain members of any labor organization, and from requiring them to pay dues, fees or “other charges of any kind” to such organizations. If a contract violates any of these prohibitions, the entire contract — not just the offending clause — is “unlawful and void” according to the statute. In addition, any Indiana employer that violates the law may be subject to both criminal and civil penalties and may be sued by an individual who claims to have been injured by the employer’s actual or threatened violation of the law.

Employers are not required to inform employees about the change in the law, but some may wish to do so.

© 2012 Schiff Hardin LLP

United Insurance Company of America Pays $37,500 To Resolve EEOC Disability Discrimination Lawsuit

The National Law Review recently published an article by the U.S. Equal Employment Opportunity Commission regarding a Disability Discrimination Ruling against the United Insurance Company of America:

Company Rescinded Job Offer to Recovering Drug Addict Because of His Disability, Agency Charged

RALEIGH, N.C. – United Insurance Company of America will pay $37,500 and furnish other relief to resolve a disability discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC), the agency announced today.

According to the EEOC’s lawsuit, Craig Burns is a recovering drug addict who has been enrolled in a methadone treatment program since 2004. In January 2010, United Insurance offered Burns a position as an insurance agent in its Raleigh office, conditioned upon Burns’ passing a drug test. After Burns’ drug test showed the presence of methadone in his system, Burns submitted a letter to United Insurance from his treatment provider explaining that he was participating in supervised methadone treatment program and taking legally prescribed medication as part of the treatment. Upon receiving this information, United Insurance notified Burns that he was not eligible for hire and withdrew its offer of employment.

Such alleged conduct violates the Americans with Disabilities Act (ADA), which protects employees and applicants from discrimination based on their disabilities. The EEOC filed suit in August 2011 in U.S. District Court for the Eastern District of North Carolina (Civil Action No. 5:11cv00430), after first attempting to reach a pre-litigation settlement through its conciliation process.

In addition to monetary damages, the two-year consent decree resolving the suit requires United Insurance to conduct training on, among other things, an employer’s obligation to conduct an individualized assessment in determining whether an employee or applicant is disabled under the ADA; appropriate methods of determining whether an employee or applicant poses a direct threat under the ADA; and the obligation to engage in an interactive process under the ADA when an employee or applicant requests a reasonable accommodation. United Insurance will also post a copy of its anti-discrimination policy at its headquarters in St. Louis.

“The ADA requires employers to make an individualized assessment of whether an individual can do the job rather than relying on fears or stereotypes,” said Lynette A. Barnes, regional attorney for the EEOC’s Charlotte District, which includes the Raleigh Area Office, where the original charge of discrimination was filed. “We are pleased that, in resolving this case, United Insurance is taking action to ensure that it fulfills its obligations under the ADA.”

The EEOC is responsible for enforcing federal laws prohibiting discrimination in employment. More information about the EEOC is available on its website at www.eeoc.gov.

© Copyright 2012 – U.S. Equal Employment Opportunity Commission.

 

EBSA Moving Forward with Rules to Protect Retirement Savings

An article featured recently in The National Law Review by the U.S. Department of Labor regarding Retirement Savings:

 

 

 

The Employee Benefits Security Administration is moving forward with regulations and proposals that will increase the quality of advice being provided to individual retirement account investors and 401(k) plan sponsors and participants. Assistant Secretary of Labor Phyllis C. Borzi delivered this message to the American Society of Pension Professionals and Actuaries last week during the group’s Los Angeles Benefits Conference. A final rule requiring financial services firms to disclose fees to retirement plan sponsors will be out soon, and EBSA is working toward re-proposing a separate rule that would re-define who is a fiduciary for the purposes of giving advice to retirement savers. These rules combined with other regulatory efforts will help ensure that employers and workers are able to make informed decisions and obtain the best possible advice when choosing how they save.

© Copyright 2012 U.S. Department of Labor

Pepsi to Pay $3.13 Million & Made Major Policy Changes to Resolve EEOC Finding of Nationwide Hiring Discrimination Against African Americans

Recently the National Law Review published an article by the  U.S. Equal Employment Opportunity Commission regarding Hiring Discrimination by Pepsi towards African-Americans:

 

 

Company’s Former Use of Criminal Background Checks Discriminated Based On Race, Agency Found

MINNEAPOLIS – Pepsi Beverages (Pepsi), formerly known as Pepsi Bottling Group, has agreed to pay $3.13 million and provide job offers and training to resolve a charge of race discrimination filed in the Minneapolis Area Office of the U.S. Equal Employment Opportunity Commission (EEOC).  The monetary settlement will primarily be divided among black applicants for positions at Pepsi, with a portion of the sum being allocated for the administration of the claims process. Based on the investigation, the EEOC found reasonable cause to believe that the criminal background check policy formerly used by Pepsi discriminated against African Americans in violation of Title VII of the Civil Rights Act of 1964.

The EEOC’s investigation revealed that more than 300 African Americans were adversely affected when Pepsi applied a criminal background check policy that disproportionately excluded black applicants from permanent employment.  Under Pepsi’s former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense.

Pepsi’s former policy also denied employment to applicants from employment who had been arrested or convicted of certain minor offenses. The use of arrest and conviction records to deny employment can be illegal under Title VII of the Civil Rights Act of 1964, when it is not relevant for the job, because it can limit the employment opportunities of applicants or workers based on their race or ethnicity.

“The EEOC has long standing guidance and policy statements on the use of arrest and conviction records in employment,” said EEOC Chair Jacqueline A. Berrien.  “I commend Pepsi’s willingness to re-examine its policy and modify it to ensure that unwarranted roadblocks to employment are removed.”

During the course of the EEOC’s investigation, Pepsi adopted a new criminal background check policy.  In addition to the monetary relief, Pepsi will offer employment opportunities to victims of the former criminal background check policy who still want jobs at Pepsi and are qualified for the jobs for which they apply.  The company will supply the EEOC with regular reports on its hiring practices under its new criminal background check policy.  Pepsi will conduct Title VII training for its hiring personnel and all of its managers.

“When employers contemplate instituting a background check policy, the EEOC recommends that they take into consideration the nature and gravity of the offense, the time that has passed since the conviction and/or completion of the sentence, and the nature of the job sought in order to be sure that the exclusion is important for the particular position.  Such exclusions can create an adverse impact based on race in violation of Title VII,” said Julie Schmid, Acting Director of the EEOC’s Minneapolis Area Office. “We hope that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance with Title VII.”

“We obtained significant financial relief for a large number of victims of discrimination, got them job opportunities that they were previously denied, and eradicated an unlawful barrier for future applicants,” said EEOC Chicago District Director John Rowe. “We are pleased that Pepsi chose to work with us to reach this conciliation agreement and that through our joint efforts, we have been able to bring about real change at Pepsi without resorting to litigation.”

The EEOC enforces federal laws against employment discrimination.  The EEOC issued its first written policy guidance regarding the use of arrest and conviction records in employment in the 1980s.  The Commission also considered this issue in 2008 and held a meeting on the use of arrest and conviction records in employment last summer.  The EEOC is a member of the federal interagency Reentry Council, a Cabinet-level interagency group convened to examine all aspects of reentry of individuals with criminal records.

The Minneapolis Area Office is part of the EEOC’s Chicago District.  The Chicago District   is responsible for investigating charges of discrimination in Minnesota, Illinois, Wisconsin, Iowa and North and South Dakota.  Further information is available at www.eeoc.gov.

© Copyright 2012 – U.S. Equal Employment Opportunity Commission

Court of Appeal Reminds Litigants That Settling With Named Plaintiff Does Not Necessarily End Putative Class Action

An article recently published in the National Law Review by Neil A.F. Popović and Lai L. Yip of Sheppard Mullin Richter & Hampton LLP  regarding Putative Damages and Class-Action Lawsuits:

 

If a defendant in a putative class action settles with the class representative prior to class certification, does the defendant nonetheless have to respond to pre-settlement discovery requests to identify absent class members? According to the California Court of Appeal in Pirjada v. Superior Court, 2011 WL 6144930, Case No. B234813 (Cal. App. Dec. 12, 2011), the answer is no, although the appellate court left open the possibility that the trial court could require some form of notice to protect the interests of absent class members.

Plaintiff Seeks Discovery Identifying Putative Class Members

Putative class representative Obaidul Pirjada (“Pirjada”) brought a purported class action on behalf of all security guards who had been employed in California by defendant Pacific National Security, Inc. (“Pacific National”) during the preceding four years, alleging violations of the California Labor Code and the California Business and Professions Code. Pirjada propounded discovery requesting, among other things, the names and addresses of all putative class members. Pacific National did not object or respond to the discovery requests.

Plaintiff, Without Counsel Involvement, Settles Directly With Defendant

Without the involvement of his attorneys, Pirjada settled directly with Pacific National after negotiating with its CEO. Then, by letter to his counsel, Pirjada requested that his claims be dismissed with prejudice, and enclosed the settlement agreement along with payment for legal services.

Plaintiff’s Counsel Files Motion for Order Providing Notice to Putative Class Members; Defendant Files Motion to Dismiss

Instead of dismissing the lawsuit, however, Pirjada’s counsel filed a motion seeking to provide notice to absent members of the proposed class that substitution of a suitable class representative was necessary. Pacific National filed a motion to dismiss based on the parties’ settlement, which Pirjada joined.

Superior Court Denies Both Motions

The superior court denied Pacific National’s motion to dismiss, noting that a plaintiff’s individual settlement does not vitiate plaintiff’s or his counsel’s fiduciary obligations to the putative class members. The court granted sixty days leave to amend to add a new plaintiff as class representative. The court denied counsel’s motion for notice, finding it unnecessary because unlike in CashCall, Inc. v. Superior Court, 159 Cal. App. 4th 273 (2008), and Best Buy Stores, L.P. v. Superior Court, 137 Cal. App. 4th 772 (2006), members of the putative class of security guards know whether they were injured and thus can determine without notice whether to assert claims against Pacific National. The court specifically noted, however, that regardless of notice, plaintiff’s counsel was authorized to communicate with potential class members.

Plaintiff’s Counsel Moves to Compel Discovery to Identify New Class Representative, Which Superior Court Denies

Plaintiff’s counsel then moved to compel responses to the previously propounded requests for information identifying putative class members, arguing that Pacific National had waived its objections by failing to respond; that Pirjada could not provide contact information for other putative class members because he worked at only one Pacific National location and was the only guard assigned there; and that Pirjada contacted counsel only after his employment at Pacific National had ended. The superior court denied the motion to compel, stating that Pirjada had settled his claims and that his discovery requests were therefore moot. The court reiterated, however, that counsel were free to communicate with class members, even if it they were not entitled to discovery.

Court of Appeal Denies Petition, Deciding Superior Court Did Not Abuse Discretion

Plaintiff’s counsel filed a petition for writ of mandate challenging the superior court’s denial of the motion to compel, as well as the denial of the motion to provide notice.

The Court of Appeal concluded that the superior court acted within its broad discretion in denying the motion to compel, and choosing instead to protect absent class members by allowing counsel leave to amend the complaint after using informal means to identify potential replacement class representatives.

With respect to notice, the Court stated:

[P]recertification discovery may be allowed in appropriate circumstances to identify a substitute class representative in place of one who is not able to serve in that capacity, as well as to assist the lead plaintiff in learning the names of other individuals who might assist in prosecuting the action. But the obligation to notify absent class members before dismissing the case rests with the superior court, not the lead plaintiff or class counsel. The nature and extent of that notice must be decided by the court itself.

Pirjada, 2011 WL 6144930. at *14. The Court noted that under California Rule of Court 3.770, no notice to absent class members is required at all “if the court finds that the dismissal will not prejudice them.” Id. Moreover, because the superior court issued an order to show cause regarding dismissal, counsel will have the opportunity at that hearing to demonstrate that some form of notice is required to avoid prejudice to absent class members.

Lessons for Class Action Defendants

The somewhat unique circumstances in Pirjada highlight the importance of making sure to tie up procedural loose ends, such as outstanding discovery, when a defendant settles with the named plaintiff(s) prior to class certification. More broadly, the case serves as a reminder that named plaintiffs and their counsel have an ongoing fiduciary duty to potential class members, and courts must take reasonable steps to protect those interests, including through potential discovery and notice procedures.

Under Parris v. Superior Court, 109 Cal. App. 4th 285 (2003), and its progeny, “‘trial courts must apply a balancing test and weigh the actual or potential abuse of the class action procedure against the potential benefits that might be gained'” by allowing precertification discovery to identify a substitute class representative.Pirjada, 2011 WL 6144930, at *5 (quoting Starbucks Corp. v. Superior Court, 194 Cal. App. 4th 820, 825 (2011)). Addressing that standard remains a key consideration for defendants who seek to avoid ongoing class action litigation when they settle with a named plaintiff.

Copyright © 2011, Sheppard Mullin Richter & Hampton LLP.

Recent NLRB Memo Identifies “Hot Topic” Cases for 2012

Recently an article appeared in the National Law Review by Peter T. Tschanz of Barnes & Thornburg LLP regarding Hot Topic cases:

 

The NLRB recently circulated a memorandum asking all Regional Directors, Officers-in-Charge and Residential Officers to begin tracking what the Agency has defined as “Hot Topic” Cases.  The categories include:

– Cessation of Dues Check-Off;

– Information Requests for Financial Records;

– Post Arbitration Deferral;

– Social Media; and

– Use of Employer e-Mail.

The memorandum provides insight into the types of issues likely to grab the NLRB’s attention in 2012.  The memorandum can be accessed here.

New NLRB Rule Speeds Union Elections

An article published recently in the National Law Review by John A. Ferguson Jr., Robert S. Nichols, Nancy M. O’Connor, and Lon R. Williams Jr. of Bracewell & Giuliani LLP covered the New Union Election Rules by the NLRB:

Time and Procedures for Employers to Respond to Union Election Petitions Are Eliminated or Reduced

Today the National Labor Relations Board (NLRB) published in the Federal Register its new Rule that will change procedures for private sector union representation elections. The Rule becomes effective April 30, 2012. The Rule dramatically shortens the period between the filing of an election petition and the election unless the parties stipulate to the election date. The Rule also effectively eliminates pre-election challenges to NLRB rulings on such critical issues as the appropriate bargaining unit and eligible voters.

While the NLRB defends these changes predicting they “will reduce unnecessary litigation in representation cases and thereby enable the Board to better fulfill its duty to expeditiously resolve questions concerning representation,” the sure effect of these changes will be to reduce the time period—and thus the opportunity—for employers to communicate their views on unions with their employees and to respond meaningfully to union campaign efforts before an election is held.

Which Election Procedures Will Be Changed?

The specific amendments to the NLRB’s current rules of procedure include:

  • Authorizing NLRB hearing officers in pre-election hearings to limit evidence on any individual eligibility issue.
  • Expanding these hearing officers’ discretion over post-hearing briefs, including limiting the subjects that can be addressed, the amount of time for filing, and also determining whether a brief can be filed at all.
  • Eliminating the right to request pre-election review of a Regional Director’s rulings, requiring the request for review to be consolidated with any post-election requests for review of the Regional Director’s rulings on challenges and objections.
  • Eliminating the current 25-day waiting period between the Regional Director’s post-hearing Decision and Direction of Election and the election.
  • Limiting special appeals from rulings of the NLRB hearing officer or Regional Director to “extraordinary circumstances where it appears that the issue will otherwise evade review.”
  • Subjecting the current right to appeal a Regional Director’s post-election rulings on potentially outcome-determinative challenges and objections to the NLRB’s discretion.

What Changes That the NLRB Had Initially Proposed Are Not Included in Its New Rule?

The NLRB’s Final Rule implements only some of the more dramatic procedural changes that the NLRB had originally proposed in June 2011. Some of those proposed changes which are not included in the current Rule would have:

  • Required employers to directly provide the union—within two days of the Regional Director’s decision—each eligible employee’s name, telephone number, e-mail address, work location, shift and classification. Currently, only the employee’s name and home address are required to be provided by the employer to the Regional Director within seven days of the decision. The Regional Director then makes that information available to the union.
  • Set the pre-election hearing within seven days of the filing of the election petition and required that the non-petitioning party, such as an employer, submit a written statement of position with all substantive arguments before that hearing or risk waiving those arguments on appeal.

Has the NLRB’s Final Rule Been Challenged?

Yes.

  • On December 1, 2011, the U.S. House of Representatives passed theWorkforce Democracy and Fairness Act, which would allow a union representation election only after 35 days from the filing of the petition and would also require a two-week waiting period before the first hearing could be held on that petition.
  • On December 20, 2011, the U.S. Chamber of Commerce and the Coalition for a Democratic Workplace filed a lawsuit in the United States District Court for the District of Columbia challenging the Rule, claiming that employers will be denied a fair opportunity to explain to employees the consequences of unionizing.

© 2011 Bracewell & Giuliani LLP

California Appellate Court Issues a Decision That Mutual of Omaha Insurance Agents Qualify as Independent Contractors as a Matter of Law

From a recent posting in the National Law Review an article by attorney Thomas R. Kaufman of Sheppard Mullin Richter & Hampton LLP regarding the way insurance companies treat their independent agents:

December 31, 2011, as a final act for the year, the First Appellate District of the California Court of Appeal issued a good appellate decision for employers on the issue of independent contractor status, Arnold v. Mutual of Omaha. The case creates a veritable roadmap for insurance companies on how to treat agents so that they maintain their status as independent contractors rather than employees.

The Key Facts

Ms. Arnold worked as a non-exclusive insurance agent for Mutual of Omaha, which meant she was authorized to sell their products but was free to (and did) sell products of other insurance companies. Nonetheless, she claimed she was actually an employee rather than an independent contractor (IC), and that she therefore was entitled to recover for reimbursement of expenses and waiting time penalties for unpaid final wages on behalf of herself and a purported class of similarly situated agents. The factual record was very strong for the defense as to the limited control Mutual of Omaha exercised over Arnold (and its other agents):

  1. The contract Arnold signed with Mutual of Omaha expressly stated that the parties understood it was an independent contractor agreement.
  2. Her chief duties were to procure and submit insurance applications, collect money, and service clients.
  3. She was compensated entirely on commissions for products sold, with a chargeback if money was uncollected or refunded.
  4. She received no performance evaluations and nobody at Mutual of Omaha monitored or supervised her work schedule.  Plaintiff decided when, where, and to whom she would market insurance.
  5. Although Mutual of Omaha provided some training on its products and sales techniques, it was not mandatory for ICs to take the training.  The only mandatory training was as to compliance with certain state insurance laws and regulations.
  6. Mutual of Omaha provided some office space if agents wanted to use it, but it was optional, and agents had to pay for the “workspace and telephone service.”  Mutual of Omaha also did not pay for business cards or any other business expenses, although it provided certain services for a fee if an IC wanted them.
  7. Under the IC agreement in place, either party could terminate the relationship at any time with or without cause, or if Arnold failed to sell a Mutual of Omaha product for 180 days.

On this record, the trial court granted summary judgment to Mutual of Omaha that Arnold was an independent contractor rather than an employee.  Arnold appealed.

What Makes the Case Noteworthy

The court of appeal affirmed, declaring that it was not even a close case.  As a preliminary matter, the court held the common law test of employee v. IC applies to claims under Labor Code Section 2802.  This is a multi-factor test (roughly 10 factors depending how you count them), codified in a decision called S.G. Borelli & Sons, Inc. v. DIR, 48 Cal. 3d 341 (1989).  This holding is not exactly earth-shaking as the plaintiff’s argument of statutory interpretation was not particularly cogent.  It is the summary judgment aspect of the case that makes it notable, because the case sets forth a pretty good roadmap of what an insurance company who wants to have independent contractor agents should follow to preclude a lawsuit that the agents are really employees.  The court pointed to the existence of undisputed facts on several specific issues as justifying summary judgment:

“After a careful review of the opposing evidence, we find nothing that raises a material conflict with the supporting evidence summarized above. The salient evidentiary points established Arnold used her own judgment in determining whom she would solicit for applications for Mutual’s products, the time, place, and manner in which she would solicit, and the amount of time she spent soliciting for Mutual’s products. Her appointment with Mutual was nonexclusive, and she in fact solicited for other insurance companies during her appointment with Mutual. Her assistant general manager at Mutual’s Concord office did not evaluate her performance and did not monitor or supervise her work. Training offered by Mutual was voluntary for agents, except as required for compliance with state law. Agents who chose to use the Concord office were required to pay a fee for their workspace and telephone service. Arnold’s minimal performance requirement to avoid automatic termination of her appointment was to submit one application for Mutual’s products within each 180-day period. Thus, under the principal test for employment under common law principles, Mutual had no significant right to control the manner and means by which Arnold accomplished the results of the services she performed as one of Mutual’s soliciting agents.”

The court mentioned that several other factors further tilted in Mutual of Omaha’s favor, but it appears that establishing undisputed facts on the above items would generally be sufficient to support summary judgment.  Furthermore, the court recognized that a plaintiff cannot avoid summary judgment simply by raising a triable issue of fact on one or two minor factors of IC status.  Rather, the court held that if a reasonable factfinder considering all of the evidence together could not conclude that the agent was an employee, the employer is entitled to judgment:

“The existence and degree of each factor of the common law test for employment is a question of fact, while the legal conclusion to be drawn from those facts is a question of law. (Harris v. Vector Marketing Corp. (N.D. Cal. 2009) 656 F.Supp.2d 1128, 1136.) Even if one or two of the individual factors might suggest an employment relationship, summary judgment is nevertheless proper when, as here, all the factors weighed and considered as a whole establish that Arnold was an independent contractor and not an employee for purposes of Labor Code sections 202 and 2802. (SeeVarisco, supra, 166 Cal.App.4th at p. 1106.)”

Copyright © 2011, Sheppard Mullin Richter & Hampton LLP.

Barnes & Thornburg Labor Relations’ Top Ten Traditional Labor Stories of 2011 (Part 1)

‘Tis the season for year-end recaps, and we here at BT Labor Relations couldn’t resist taking our own look back at the year in traditional labor. As we move into 2012, here’s our countdown of the top ten traditional labor issues that made the news this year. Numbers 10 through 6 are below; check back tomorrow for our top five.

10. The Board sues Arizona over secret ballot constitutional amendment

2011 started off with a bang in January when the Board’s Acting General Counsel Lafe Solomon threatened to sue four states (Arizona, South Carolina, South Dakota, and Utah) over their secret ballot union election constitutional amendments. All four states added provisions to their state constitutions mandating that union elections be held by secret ballot only, after constitutional amendments passed by public referendum at the November 2010 election. These constitutional amendments were in response to the Employee Free Choice Act (EFCA) proposed in Congress in 2009, which would have required an employer to recognize a union if a majority of employees signed cards stating their desire for representation. This “card check” method of recognition is currently allowed by the NLRA, but employers have the option of demanding that election of the union be confirmed by a secret ballot. EFCA would have taken this option away from employers (as well as enacting other pro-union changes to the NLRA).

EFCA never became law, but the constitutional amendments in these states passed anyway, purportedly preserving the right of a secret ballot election for employers in those states. The amendments as they currently stand do not conflict with the NLRA, but the NLRB nevertheless took exception to them, claiming that such state provisions are preempted by federal law. After a back and forth discussion with the states’ Attorneys General during the early part of 2011, the NLRB filed suit against Arizona in May, asking the court to declare that Arizona’s constitutional amendment was preempted by federal law and therefore unenforceable.

Although EFCA never became law, the NLRB has made attempts to individually implement many of the pro-union changes proposed in the bill, and Arizona has become the battleground for card checks. So far, the NLRB’s lawsuit appears to have some traction. The Arizona federal court hearing the case has deniedArizona’s motion to dismiss and litigation continues. Stay tuned in 2012 as this issue continues to develop …

See B&T’s previous coverage of this issue here.

9. The NLRB strikes a blow to mandatory arbitration policies in Supply Technologies

Companies love mandatory arbitration policies in contracts and in May, the U.S. Supreme Court issued a landmark decision in AT&T v. Concepcion upholding such policies in consumer contracts. Employers also see the appeal of mandatory arbitration clauses and many union contracts include such provisions. However, an NLRB Administrative Law Judge reminded employers of the limits of such policies in a decision in June, finding in Supply Technologies LLC that an employer’s arbitration policy violated the NLRA by unlawfully restricting employees’ rights by suggesting that an employee had to bring any unfair labor practice charge through the arbitration procedure, and thus could not make that charge with the Board. This decision served as a warning for employers hopeful after theConcepcion decision that arbitration provisions should be carefully reviewed before being included in collective bargaining agreements. Employers should know that just because SCOTUS approves, doesn’t mean the Board will.

See B&T’s previous coverage of this issue here.

8. Congress sits up and takes notice (although no new legislation is actually passed)

With a new majority in the House of Representatives after the 2010 elections, certain Republican members of Congress have made the NLRB their new target this year. Several hearings were held by Congressional Committees to discuss what many characterize as the pro-union, “activist agenda of the National Labor Relations Board.” The Board’s complaint against Boeing was a frequent target, as well as its decisions regarding posting requirements, “quickie” elections, and “micro” bargaining units.

Additionally, Republicans in both the House and the Senate have introduced bills to amend the NLRA to reverse these controversial actions taken by the NLRB in 2011. The Democrats weren’t able to get EFCA passed when they had a majority of both houses, so it is unlikely that any of this legislation will actually be passed by a divided Congress, but the NLRB’s continued perceived pro-union actions have made traditional labor a key issue as we move into the 2012 election season.

See B&T’s previous coverage of this issue here.

7. General Counsel memo regarding mandatory language in settlement agreements puts additional pressure on employers

This year, the Board has placed additional pressure on employers looking to settle NLRB proceedings with the issuance of a memo by General Counsel Solomon in January which requires mandatory language in settlement agreements whereby an employer in effect agrees in advance that if it is even accused of violating the agreement, all of the prior charges against it have merit. Although the Board characterized this language as necessary for effective enforcement of such agreements, this requirement likely has the effect of simply making employers less willing to settle a case. And it was another example of the Board’s aggressive efforts to secure rights for unions in 2011.

See B&T’s previous coverage of this issue here.

6. Specialty Healthcare decision opens the door for “micro” bargaining units

One of the Board’s more controversial decisions of 2011 was issued in August regarding appropriate bargaining units. In Specialty Healthcare (357 NLRB No. 83), the Board overturned 20 years of precedent regarding determination of an appropriate bargaining unit in non-acute health care facilities. The Board increased the burden on employers who wish to challenge a bargaining unit petitioned for by a union to include more employees. Under the new standard, employers have the burden to prove that the employees the employer believes also should be part of the unit share an “overwhelming community interest” with the petitioned for employees. The previous rule (as articulated by the Board inPark Manor Care Center, 305 NLRB 872 (1991)), applied a lower standard: whether the community of interest of the employees the employer sought to include was “sufficiently distinct from those of other employees” in order to justify their exclusion from the bargaining unit.

The upshot is that this decision allows unions to pursue so-called “micro” bargaining units, and it will be easier for unions to certify bargaining unit(s) piecemeal, even when a majority of employees in a facility do not desire union representation. This decision helps unions trying to “get a foot in the door” by allowing them to target vulnerable employer sub-groups.

This decision was targeted by legislation introduced in Congress to reverse it, but for now, it remains current Board law and sets up new challenges for employers seeking to avoid unionization.

See B&T’s previous coverage of this issue here.

Disagree with our picks? Let us know in the comments what traditional labor issues you think were most important in 2011. And don’t forget to check back tomorrow for our top five!

© 2011 BARNES & THORNBURG LLP