NLRB Goes One Step Further, Holds Optional Waiver of Class Action Arbitrations Illegal
Why it matters
Reiterating its stance against arbitration agreements that prohibit class or collective actions, a panel of the National Labor Relations Board (NLRB) ordered a California-based grocery chain to revise its employment agreement. A Bristol Farms worker filed a putative class action in state court asserting multiple wage violations. When the company sought to compel arbitration based on an employment agreement, the employee filed an unfair labor practices charge against the grocery store with the NLRB. An administrative law judge ordered the company to revise its employment agreement, and the employer responded by proposing a settlement agreement to modify the agreement to add the statement: "SIGNING THIS AGREEMENT IS OPTIONAL." Reaffirming its commitment to both D.R. Horton and Murphy Oil, the majority of the panel was not persuaded by Bristol Farms' argument that its agreement was "truly optional." "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 right to engage in concerted activity," the majority wrote. A dissenting member of the panel voiced his position that both of the controversial precedents were wrongly decided and that employees have the right to waive their rights if they choose to.
Detailed discussion
A worker at California-based grocery chain Bristol Farms filed a putative collective action against the employer alleging multiple violations of state wage law. Based on an employment agreement signed by the employee that included a provision waiving his rights to class or collective action in any forum, the company moved to compel individual arbitration.
The employee filed a charge with the National Labor Relations Board (NLRB), and in October 2014 an administrative law judge (ALJ) found the agreement violated Section 8(a)(1) of the National Labor Relations Act (NLRA). The ALJ ordered Bristol Farms to rescind or revise the agreement to clarify to employees that it does not constitute a waiver in all forums of their right to maintain employment-related class or collective actions and provide notice to employees of the change.
Bristol Farms participated in the Board's dispute resolution program and proposed a settlement agreement. The employer suggested a modification to the agreement adding the statement: "SIGNING THIS AGREEMENT IS OPTIONAL," as well as an explicit class and collective action waiver and language clarifying that employees may access the Board and its processes.
The Board's Regional Director rejected the offer and the employer filed a motion seeking approval of the settlement agreement, arguing that the proposed changes rendered the agreement "truly optional."
But a majority of an NLRB panel disagreed, not just relying upon D.R. Horton and Murphy Oil but taking those holdings—that employment agreements waiving class arbitration violated the NLRA—one step further. "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 rights to engage in concerted activity," the majority wrote.
The right to pursue joint, class, or collective claims arising in the workplace is a substantive right under Section 7 of the NLRA, the Board stressed.
"It is a bedrock principle of federal labor law and policy that agreements in which individual employees purport to give up the statutory right to act concertedly for their mutual aid or protection are void," the majority said. "[T]hat principle is reflected not simply in the Board's case law, but also in the decisions of the Supreme Court and in the Norris-LaGuardia Act, which broadly proscribes 'any undertaking or promise … in conflict with the public policy' of that statute and which anticipated the National Labor Relations Act in guaranteeing the right of employees to engage in 'concerted activities for the purpose of … mutual aid or protection,' including '[b]y all lawful means aiding any person participating or interested in any labor dispute who … is prosecuting any action or suit.' "
A dissenting member of the panel reached the opposite conclusion. Having previously dissented in the Murphy Oil case, he wrote that the NLRA does not vest authority in the Board to "dictate any particular procedures pertaining to the litigation of non-NLRA claims, nor does the Act entitle employees to class-type treatment of such claims."
Instead of creating a substantive right for employees to insist on class-type treatment of non-NLRA claims as the majority holds, the dissent said the NLRA in fact preserves every individual employee's right to adjust any employment-related dispute with his or her employer—including a waiver of class or collective rights.
The dissent also pointed out that the revised agreement merely permits employees to opt in to signing, making it "even more clearly lawful under the NLRA."
To read the order in Bristol Farms, click here.
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On the Clock: Employer's Three-Month Delay in Responding to Accommodation Request Triggers Claim
Why it matters
How long is too long for an employer to grant an employee's request for accommodation? A three-month delay and the need for multiple reminders raised enough questions for a California federal court to allow an employee's disability discrimination claim to move forward. Piyush Gupta experienced back problems due in part to frequent business trips and requested two accommodations: to fly business class and use a prescribed sit/stand desk. The business class request was approved for longer flights but IBM took more than three months to grant approval of the ergonomic desk and only did so after Gupta had been designated to be let go as part of a reduction in force. While the court granted summary judgment for the employer on Gupta's Fair Employment and Housing Act disability bias claim, the manner in which IBM handled the ergonomic desk request potentially violated its duty to engage in a good faith interactive process and failure to accommodate under state law, the court determined.
Detailed discussion
Piyush Gupta began working for IBM in May 2009. By 2013, he was a vice president of product management and took frequent and extended business trips, which contributed to his development of back problems. In early 2013, he discussed with his supervisor and a senior vice president his discontent with his current position and consideration of a new role or a potential exit strategy from the company.
Not long after, his physician recommended that to alleviate some of his back problems, he fly business class and prescribed him a sit/stand desk. Gupta formally requested both accommodations and IBM granted the request to fly business class on flights longer than six hours.
His supervisor informed him of a coming reduction in force (RIF), and when she asked for suggestions, he told her that if she had to lay off many people, she should probably put him on the list, too. During this time, the desk request was approved by IBM's ergonomic expert and nurse but waited approval by Gupta's supervisor. His supervisor then informed him that she was going to take him up on his suggestion and include him in the RIF. A few weeks later, she granted the approval for the sit/stand desk.
Gupta filed for short-term disability and declined to sign his severance package, electing to file suit against IBM. In his state court complaint, he alleged disability discrimination in violation of the Fair Employment and Housing Act (FEHA), disability discrimination in the failure to engage in a timely, good faith interactive process, failure to provide disability accommodation, fraud in the inducement, and wrongful termination in violation of public policy.
IBM filed a motion for summary judgment.
First considering the disability discrimination claims, U.S. District Court Judge Edward J. Davila sided with the employer. Gupta offered no argument discussing how his termination was due to his disability, the court said, and the record demonstrated that several allowances were made for it—the employer granted his request to fly business class and he was able to work from home, for example.
The employer also presented a legitimate, nondiscriminatory reason for his termination in the form of a RIF and no evidence of pretext existed. Although the timing between his requests for accommodation and termination was close, the court said IBM had been aware of Gupta's back problems since 2011 and he volunteered himself for the layoff. Although he argued his volunteering was a spontaneous remark made in the heat of the moment that neither he nor his supervisor took seriously, the court said it was reasonable to believe that the supervisor relied on his statement when she selected him for the RIF.
Turning to the claim for failure to engage in a timely, good faith interactive process to accommodate the plaintiff's disability, the court reached a different conclusion. The more than three-month delay for his ergonomic desk request to be reviewed and approved—only after he had been informed he was selected for the RIF—validated his allegations, Gupta said. IBM argued that the short delay in processing the request reflected nothing more than the routine processing of an accommodation request by a large corporation.
"Based on the record, it appears that it took 3 ½ months—and three reminders—for [Gupta's supervisor] to approve Plaintiff's request for ergonomic furniture," Judge Davila wrote. "In addition, [his supervisor] approved the request while knowing that Plaintiff was already selected for layoff, and there is no indication that [she] alerted Plaintiff that he would be ineligible to receive the ergonomic furniture due to the layoff. As such, there is a triable issue of fact as to whether IBM participated in a timely, good faith interactive process."
Further, the court denied the employer's motion with regard to the failure to provide disability accommodation claim. Again, the court found the argument that the more than three-month delay in approving the sit/stand desk request could constitute a failure by the employer particularly in the absence of evidence from IBM that the employee failed to engage in good faith discussions. "Plaintiff continued to inquire about the ergonomic furniture even after the date of separation," the court said, with evidence that Gupta continually inquired about the desk.
"[T]he court cannot determine whether the 3 ½ month delay in approving the ergonomic furniture request is 'reasonable,' " the court added. "The record does not provide information on how long IBM typically takes to approve such request, nor was IBM able to offer that information at oral argument. Given that this delay could have impeded Plaintiff's ability to obtain a reasonable accommodation, there is a triable issue of material fact as to whether IBM fulfilled its duty to provide a reasonable accommodation."
Addressing the final claims, Judge Davila dismissed Gupta's fraud in the inducement and wrongful termination in violation of public policy claims (with no FEHA violation to hang it on) and ruled he was not entitled to punitive damages.
To read the order in Gupta v. International Business Machines Corp., click here.
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Is Your Company Next? EEOC Reports Collecting More Than Half a Billion Dollars in FY 2015 Enforcement Actions
Why it matters
The Equal Employment Opportunity Commission (EEOC) released its Performance and Accountability Report for fiscal year 2015, revealing the recovery of more than half a billion dollars through litigation and other enforcement activities, an increase over the prior fiscal year. Of the $527.6 million total, $65.3 million was obtained through litigation (almost three times what was recovered in fiscal year 2014), $356.6 million was attributed to pre-litigation relief for workers in the private sector, with $105.7 million for those in the public sector. As for the focus of its enforcement efforts, the agency resolved 162 merits lawsuits in FY 2015: 87 Title VII claims, 61 Americans with Disabilities Act (ADA) lawsuits, 12 claims under the Age Discrimination in Employment Act (ADEA), one Equal Pay Act (EPA) case, and one Genetic Information Non-Discrimination Act (GINA) claim. Of the new merits lawsuits filed, the numbers remained fairly consistent, with 83 Title VII claims, 53 filed under the ADA, 14 ADEA cases, seven EPA complaints, and one GINA claim. In addition to providing statistics on its enforcement efforts, the agency emphasized its focus on systemic investigations, resolving 268 such suits during FY 2015 for $33.5 million, up from $13 million in the prior fiscal year.
Detailed discussion
The Equal Employment Opportunity Commission (EEOC) released its annual Performance and Accountability Report, providing details about the agency's efforts over the course of fiscal year 2015. With statistics galore—on amounts recovered and how and the types of suits filed and resolved—the report provides insight for employers into the EEOC's activities.
For the period of October 1, 2014, through September 30, 2015, the EEOC noted an increase in both the number of charges filed as well as its total recovery. In FY 2015, 89,385 charges were filed, up from the prior fiscal year but down from FY 2013's 93,727. The agency also reported a backlog of 76,408 charges at the conclusion of FY 2015, or 750 more charges in backlog than at the end of the last fiscal year.
As for recovery, 2015 brought in big numbers for the EEOC. Merits lawsuits in the federal courts brought in $65.3 million (a significant jump over 2014's $22.5 million) while the administrative enforcement program produced $356.6 million, more than $60 million above the prior fiscal year. An additional $105.7 million was secured for federal employees for a total of $527.6 million.
Cases resolved by the agency included 87 Title VII suits, 61 claims under the Americans with Disabilities Act (ADA), 12 Age Discrimination in Employment Act (ADEA) lawsuits, one Equal Pay Act (EPA) claim, and one lawsuit filed under the Genetic Information Non-Discrimination Act (GINA). Touting its conciliation efforts, the agency said 44 percent were successfully resolved in cases of private sector charges.
The number of merits lawsuits filed continued to creep up, with 142 in FY 2015, a rise from 133 in 2014 and 131 in 2013. Of those 142 complaints, 100 were individual suits and 42 involved "discriminatory policies or multiple victims."
Of the new suits filed, 83 alleged violations of Title VII, 53 cited the ADA, 14 made claims under the ADEA, seven referenced the EPA, and one claim was made pursuant to GINA. Ending FY 2015, the EEOC reported 218 cases on its active federal court docket. This reflects a continuing decrease from the prior years, with 228 in 2014 and 231 in 2013.
The EEOC also emphasized its efforts with regard to systemic cases, such as allegations of a pattern or practice of discrimination in a lawsuit that "has a broad impact on an industry, occupation, business, or geographic area." Such lawsuits were included on the agency's strategic enforcement plan with a goal to have systemic cases make up at least 22 percent of its litigation docket by 2016. Despite this goal, the numbers reflect a decrease in the number of systemic lawsuits filed—just 16 in 2015, down from 17 in 2014 and 21 in 2013—and pending in litigation (48 this year, 57 in the prior year, and 54 in 2013).
Over the course of FY 2015, the agency completed 268 systemic investigations, issued 109 cause findings, resolved 70 investigations by voluntary conciliation agreements, and obtained roughly $33.5 million. Twenty-six systemic cases were resolved through litigation, six of which included at least 50 victims of discrimination, the agency said, and 13 that had at least 20 victims.
The EEOC highlighted some of its success stories, including a $3.8 million settlement involving 300 women alleging sexual harassment and discrimination as well as a $2.8 million conciliation with an employer the agency said used a hiring assessment that ran afoul of both Title VII and the ADA.
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SEC's Whistleblower Program Continues to Grow
Why it matters
The Securities and Exchange Commission's whistleblower program continues to grow, as evidenced by the agency's Office of the Whistleblower annual report for 2015. In the prior fiscal year, whistleblower tips came in from all 50 states for a total of 3,923—an increase of 8 percent over the prior fiscal year and a 30 percent increase of the tips received in FY 2012, the first year of the program. Employees in 61 different foreign countries filed tips (led by the United Kingdom and Canada), accounting for 10 percent of all reports to the agency. The whistleblowers reported on a variety of alleged wrongdoing, from Foreign Corrupt Practices Act-related activity to insider trading to problems with corporate disclosures. The financial incentives provided by the agency increased as well, with eight awards doled out in FY 2015 totaling $34 million and the first 30 percent recovery award (the maximum amount permitted by statute) in the first anti-retaliation case. Recognizing the continued growth, the SEC said it anticipates "that the whistleblower program will continue to be 'a game changer' in the enforcement of the federal securities laws and the protection of investors and the marketplace," adding that the agency wants "whistleblowers—and their employers—to know that employees are free to come forward without fear of reprisals."
Detailed discussion
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Securities and Exchange Commission (SEC) to establish a new program for corporate whistleblowers. The SEC's Office of the Whistleblower (OWB) began its efforts in August 2011, and each year since, the agency has seen the number of reports—and the related awards—increase.
In fiscal year 2015, the OWB received a total of 3,923 tips from whistleblowers across the globe, representing every state, the District of Columbia, and 61 different foreign countries (led by the United Kingdom with 72 tips, Canada with 49, and 43 from China). Foreign tips accounted for about 10 percent of all reports during FY 2015.
The 2015 number of tips represents an increase of 303 or more than 8 percent over FY 2014 and a rise of almost 30 percent since FY 2012 when the program began. The 3,923 figure brings the overall total to 14,116, the SEC said.
Whistleblowers reported on a broad range of activity, from Foreign Corrupt Practices Act-related activity to insider trading. The top three most common complaints were Corporate Disclosures and Financials, Offering Fraud, and Manipulation.
As for financial recovery, the OWB reported $54 million in whistleblower awards since the program began with $37 million paid out in FY 2015 alone to eight whistleblowers. Of those eight awards, one was for the first ever of 30 percent of the amount recovered by the SEC, the largest percentage allowed under the Dodd-Frank Act. That case also happened to be the agency's first anti-retaliation case.
The SEC highlighted another first: the first enforcement action against a company for using language in confidentiality agreements that impeded a whistleblower from reporting possible securities law violations. In a message from the Chief of the OWB, Sean X. McKessy, the agency promised similar actions in the future, noting that "[a]ssessing confidentiality agreements for compliance … will continue to be a top priority for OWB into Fiscal Year 2016."
To read the SEC's 2015 report on the Whistleblower Program, click here.
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U.S. Court of Appeals Finds Meal Break Not Compensable if "Predominant Benefit" Is for Employees
Why it matters
Joining the majority of federal appellate courts to consider the issue, the Third Circuit Court of Appeals adopted the "predominant benefit" test for whether meal breaks are compensable under the Fair Labor Standards Act (FLSA). The case involved a Pennsylvania prison guard who filed a putative collective action alleging she and her fellow corrections officers were owed overtime pay under the federal statute for a portion of their meal breaks. A federal district court judge dismissed the suit. On appeal, the Third Circuit considered various tests used by the federal courts of appeal, including one that looks at whether the employee has been relieved from all duties during mealtime. Siding with the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Tenth, and Eleventh Circuits, a majority of the panel adopted the predominant benefit test and affirmed dismissal, ruling that the prison guards received the bulk of the benefit of the meal break.
Detailed discussion
Sandra Babcock, a corrections officer at a county prison in Butler, Pennsylvania, filed suit claiming that the county failed to properly compensate her and her fellow officers for overtime in violation of the Fair Labor Standards Act (FLSA).
A collective bargaining agreement (CBA) between the county and the prison employees provided that corrections officers work eight-and-one-quarter-hour shifts that include a one-hour meal period. Forty-five minutes of that hour are paid and 15 minutes are unpaid. The suit sought compensation for the 15-minute period. Babcock argued that corrections officers were not permitted to leave the prison without permission, had to remain in uniform and in close proximity to emergency response equipment, and be on call to respond in case of an emergency.
These restrictions—which prevented the officers from sleeping, running personal errands, breathing fresh air, or smoking during their mealtime—required compensation, the suit contended.
In a motion to dismiss the suit, the county relied upon the "predominant benefit" test to argue that the time period was not compensable. A federal district court judge agreed. The plaintiff appealed. While Babcock did not dispute the use of the predominant benefit test, she argued that her complaint established a plausible claim for relief under it or an alternative, the "relieved from all duties" test.
Having not established the appropriate test to use in the circuit, the Third Circuit Court of Appeals began by adopting the predominant benefit test, which asks "whether the officer is primarily engaged in work-related duties during meal periods." Eight other circuits use the test, including the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Tenth, and Eleventh.
Only two other cases were cited by Babcock to support the use of the relieved from all duties test—an earlier Eleventh Circuit decision and an opinion from the Ninth Circuit. But the Third Circuit said neither court actually applied that test, with the Eleventh Circuit using a slightly different version of the predominant benefit test and the Ninth Circuit recognizing the two standards and stating that neither test was dispositive.
Having formally adopted the test, the panel applied it to the facts of the case. "Here, although Plaintiffs face a number of restrictions during their meal period, the District Court correctly found that, on balance, these restrictions did not predominantly benefit the employer," the court said. "In comparison to the cadre of case law addressing mealtime compensability in the law enforcement context, the allegations in Plaintiffs' complaint do not suffice. For example, the corrections officers here could request authorization to leave the prison for their meal period and could eat lunch away from their desks."
Another factor: the existence of the CBA. Although the agreement was silent on the compensability of the 15-minute period at issue, "it provides corrections officers with the benefit of a partially-compensated mealtime and mandatory overtime pay if the mealtime is interrupted by work," the panel wrote. " 'The FLSA requires no more.' The CBA, then, assumes 'that generally an officer is not working during a meal period, but provides for appropriate compensation when an officer actually does work during the meal.' "
"[E]ven accepting all of Plaintiffs' allegations as true, we do not find that the officers were 'primarily engaged in work-related duties' during the daily, agreed-upon fifteen minutes of uninterrupted mealtime," the court said. "As a result, we find that they receive the predominant benefit of the time in question and are not entitled to compensation for it under the FLSA."
The majority affirmed dismissal of the complaint.
In a dissenting opinion, one member of the panel disagreed with the majority's "flawed application" of the predominant benefit test, arguing that the CBA was a "red herring" that distracted the court. Babcock should be able to conduct discovery to permit her access to the facts and circumstances before the court performed the test based simply on the allegations in the complaint, the dissent said, and at the motion to dismiss stage, the plaintiffs' "allegations regarding the restrictions on their movement and activities are sufficient to state a claim under the FLSA that the meal period is compensable work."
To read the opinion in Babcock v. Butler County, click here.
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