Supreme Court Permits Class Action Waivers In Arbitration Agreements

pillars

As a follow up to our post last year, this week, in a 5-4 decision, the Supreme Court rejected the National Labor Relations Board’s position that class waivers in arbitration agreements violate federal labor law. The Court held that employers can legally require their employees, as a condition of employment, to agree that they will not pursue class action claims against their employers, but rather address legal issues through individual arbitration.

Writing for the majority, Justice Neil Gorsuch stated simply that, “The [Federal] Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” In support of the decision, he compared the “simplicity and inexpensiveness” of arbitration to “slower, more costly” class actions, which are, in the view of the majority, “more likely to generate procedural morass than final judgment.”

The effects of the decision remain to be seen – Justice Ginsberg read her dissent from the bench, calling for Congress to address the matter. For now, though, employers with arbitration agreements in place will want to add a class-action waiver, and those that do not use arbitration agreements at all may want to reconsider that approach.

 

Advertisements

2018 Labor & Employment Law Checklist

Each year, LP’s Labor & Employment Practice Group is pleased to provide a short checklist of steps that all companies should consider taking to measure their readiness for the coming year. We hope that you find our 2018 Labor and Employment Law Checklist to be a helpful guide to best practices for the year ahead.

Download the checkable PDF here. Print it out for yearlong reference, or get started right away and enjoy the satisfaction of checking some very important items off your list.

Deal with the Elephant in the Room and Conduct Harassment Training for Your Workforce. With the headlines around harassment and abuse allegations and the #MeToo and #TIMESUP movements, there is no hotter topic in employment law right now than workplace harassment. Appropriate training ensures both that your employees know how to stop harassment when they experience it and that your company can take advantage of certain defenses to claims that may come up in the future.  If your company has not conducted training in the last two years, put it on the agenda for 2018.

Decide on Your Investigation Procedures Now. When serious allegations of harassment and discrimination arise, they need to be investigated by experienced legal and HR professionals in order to get to the bottom of what really happened. Well run investigations also form another foundation in a company’s legal defense.  Because speed counts when employees raise issues, determine now which outside investigators are on your short list and how you will approach such investigations.

Determine Whether to Ask About Applicant Pay History. In an effort to eliminate gender discrimination in compensation, many state and local governments have taken steps to ban employers from asking applicants about their pay in prior jobs. For example, California’s law took effect January 1, 2018 and Massachusetts’ law takes effect on July 1, 2018.  Making things more complicated it that it’s not entirely clear which state’s law applies when the recruiting process crosses state lines.  Employers need to determine if the jurisdictions where they operate have laws of this kind and immediately take steps to change hiring procedures to account for them.

Monitor the Changes at the NLRB. The National Labor Relations Board is now fully controlled by its Republican members, and rulings are already starting to change the landscape for employers. For instance, recent decisions by the NLRB have relaxed the standard applicable to policies in employee handbooks.  Consider re-reviewing employee handbooks to take advantage of this change and be aware of how other changes at the NLRB impact your business.

Review Changing Leave Laws. One area where employee rights have continued to expand is in the area of leave laws. For instance, New York has a new law on paid family leave that took effect on January 1, 2018, and California has a law that took effect on that date expanding parental leave rights.  Many states and municipalities also have passed new paid sick leave laws.  It is important for employers to ensure that their HR teams understand these new laws and that their leave policies encompass the broader rights being given to employees.      

Don’t Let Employees Engage in Distracted Driving. When employees drive as part of their job, employers can be held liable for accidents that result from distracted driving. Laws around distracted driving are getting tougher.  For instance, Rhode Island recently passed a law banning all mobile phone use by drivers, with limited exceptions for hands-free devices.  In Washington, a new law went into effect on January 23rd that prohibits drivers from even holding gadgets at a stop sign or red light.  Be sure your policies make clear that safety comes first, appropriately address employee responsibilities while driving and give employees the right to defer calls until they are off the road. 

Is It Time to Reconsider Using Arbitration Agreements? Some employers have been reluctant to use arbitration agreements with their employees because of uncertainty about the enforceability of these agreements, particularly in situations involving class actions. Last fall, the Supreme Court head oral argument in a case that is expected to clarify the law in this area.  If this ruling ends up being favorable for employers, it may be time to reconsider whether arbitration is a better forum for resolving employee disputes.  

Be Careful Gathering Genetic Information. Employers must be careful in how they gather and use genetic information concerning employees and applicants. Congress passed the Genetic Information Nondiscrimination Act in 2008 and approximately 37 states have laws on this topic.  As of January 1, 2018, changes to the Illinois Genetic Information Privacy Act prohibit employers from penalizing employees who refuse to provide genetic information.  This law was intended to head off efforts to require employees to provide genetic information in wellness programs.

If Using Biometric Data, Make Sure You Know Legal Requirements. In 2017 we saw a large number of class actions filed under the Illinois Biometric Information Privacy Act (IBIPA) against employers whose employees clock in and out using their fingerprint or a hand scan.  These cases, which allege that the employers failed to meet the very specific requirements set out in IBIPA, are still in their early stages, but employers who use fingerprints or other biometric information for time tracking, security access, or other purposes should make sure that they understand and are complying with IBIPA’s requirements.

Review how Marijuana is Treated Under Drug Policies. Recreational marijuana is now legal in seven states, including California, and nineteen states have laws permitting the use of marijuana for medical purposes. In view of the spread of laws permitting marijuana use, many employers have re-examined their drug policies and decided to treat marijuana differently from other illegal drugs.  There are pros and cons to these changes and the right move depends to some extent on where an employer has operations, but 2018 may be the time to assess whether you are taking the right approach.

Are You Ready for a Data Breach? In 2017, nine states enacted new or amended security breach laws. Last year, updates to Illinois’ Personal Information Protection Act went into effect expanding the definition of protected information and increasing the notice obligations for breaches.  All employers should review the security safeguards being used to protect such information and also plan now for the steps that need to be taken in the event of a data breach.

Understand Pregnancy Accommodation Obligations. Under the Americans with Disabilities Act, employers have an obligation to accommodate pregnancy-related conditions. Now, however, many states are also passing specific laws requiring employers to accommodate employees who are pregnant or breastfeeding.  Illinois amended its own Human Rights Act in 2015 to protect pregnant employees, and other states have been catching up.  For instance, Vermont and Massachusetts have new laws going into effect in 2018.  Employers should be sure that as issues arise, they understand and comply with both their federal and state pregnancy accommodation obligations.

DOL Ditches Prior Intern Test in Favor of More Company-Friendly Test

600px-US-DeptOfLabor-Seal_svgLast week, the Department of Labor (DOL) issued a news release stating that going forward, it will use the seven-factor “primary beneficiary” test — set forth by the 2nd Circuit and applied by other Circuits — to determine whether interns working at for-profit employers are employees under the Fair Labor Standards Act (FLSA), expressly rejecting its previous test from 2010.

The “primary beneficiary” test that will now be applied by the DOL analyses the following seven, non-exhaustive factors:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL noted that this new test will be applied in a “flexible” manner, and that whether an intern qualifies as an employee under the FLSA depends on the unique circumstances of each case.

It is widely agreed that the primary beneficiary test is easier for companies to satisfy than the DOL’s prior test, but it’s too early to tell how much of an impact this change will be. If you do have an internship program, it’s a great time to review intern classifications and make sure that they are being treated properly under employment laws.

 

 

More from the New NLRB

National_Labor_Relations_Board_logo_-_colorJust a day after the newly Republican-majority National Labor Relations Board (NLRB) restored its “direct and immediate control” test for joint employer status and implemented a new employer-friendly test for handbook policies, it took two more big steps:  overturning a ruling limiting the changes employers can unilaterally implement in union workplaces and disallowing so-called “micro-units”.

In its decision regarding unilateral changes, the Board restored old precedent that permits employers to unilaterally change policies without the union’s permission – and without first bargaining with the union – if they have taken similar actions in the past.

In its decision regarding micro-units, the Board overturned its 2011 decision that made it easier for unions to organize very small groups of employees (which, in turn, made it easier for unions to get a foothold in an otherwise non-union company).  Instead, under the Board’s decision Friday, the old standard – where employers could establish that all employees sharing a community of interest should be included in the same unit – once again stands, and the playing field between unions and employers has become a bit more level.

These rulings aren’t surprising. As we wrote last week, we expect that the trend of employer-friendly decisions will continue, so stay tuned.

Two Big Moves By New NLRB

National Labor Relations Board Building SignThe newly Republican-majority National Labor Relations Board (NLRB) has been busy — just yesterday  overturning two employee-friendly standards.

First, the Board overturned its decision in Browning-Ferris, which said that “indirect control” or the ability to exert such control over another company’s workers is sufficient to make a you a joint employer. With this ruling, the Board returned to its more employer-friendly joint employer standard, which looks to “direct and immediate” control.

Second, the Board reversed its aggressive position on employee handbook policies and provisions. Previously, the Board had held that a policy is illegal if employees could “reasonably construe” it to prohibit them from exercising their rights to come together (or collectively bargain) under the National Labor Relations Act (NLRA). This standard had been used by the board to find many employer policies (such as social media and confidentiality policies) illegal. However, per yesterday’s decision, the Board will instead be focusing on the “nature and extent” of a challenged policy’s “potential impact on NLRA rights” and the “legitimate justifications associated with the rule” — which together make for a far more pro-employer approach.

Employers now find themselves in a far better position when it comes to joint employer claims and handbook policy challenges. We expect to see additional employer-friendly decisions soon, so stay tuned.

Court Holds Extended Leave Is Not An Accommodation Under the ADA

fmlaIn a very employer-friendly decision, the 7th Circuit Court of Appeals held that the Americans with Disabilities Act (ADA) does not give employees the right to take an extended leave of absence.

In Severson v. Heartland Woodcraft, Inc., the 7th court considered a discrimination claim brought by an employee who was fired when his 12 weeks of FMLA-protected leave for a pre-existing back condition expired and he was still unable to return to work. The employee claimed that his firing violated the Americans with ADA because the “at least two additional months” that he needed to recover from surgery after his FMLA leave ended was a “reasonable accommodation.” The 7th Circuit strongly disagreed, holding that the employee’s proposed accommodation of at least two additional months of leave was not reasonable. According to the Court, the ADA “is an anti-discrimination statute, not a medical leave entitlement.”

This ruling is contrary to the position taken by the Equal Employment Opportunity Commission (EEOC) that multi-month leaves of absences may be required under the ADA. According the EEOC, leave or extended leave as a job accommodation should be considered when a worker’s doctor is able to estimate a specific endpoint for the leave, the employee asks for the leave ahead of time, and the leave will likely enable the employee to fully perform the job afterward.

In light of the decision in Severson, employers (especially those in Illinois, Indiana and Wisconsin) can feel more comfortable refusing requests for multi-month and indefinite leave requests under the ADA. And while the language in Severson should apply to shorter leaves as well, its holding is limited to extended leaves, so employers still need to consider whether an employee’s request for a shorter leave (either after the expiration of an FMLA leave or if the employee did not qualify under the FMLA) would be a reasonable accommodation.

Could the 2016 Overtime Regulations Come Back to Life?

600px-US-DeptOfLabor-Seal_svgIt seems like we spent the better part of 2016 getting ready to comply with the new overtime regulations that had been set to go into effect December 1, 2016 — until a federal judge in Texas issued a last-minute injunction.  The Texas court’s injunction meant that the new overtime standards — including a much higher minimum salary requirement — did not go into effect as planned, even though many employers had already made changes to comply with them. That injunction is currently being appealed before the 5th Circuit, but the new Department of Labor’s positioning in that appeal is raising the potential that the 2016 rules could come back to life — at least until a new, replacement rule can get through the rule making process.

The issue here is that while the new Secretary of Labor has taken steps toward revising the overtime regulations (with an eye toward making them more employer-friendly), the DOL has not asked the appellate court to uphold the injunction that was issued late last November.   This sets up a situation where the 5th Circuit could rule to dissolve the injunction — allowing the Obama administration’s rule to go into effect —  before the agency has a replacement rule ready via the regulatory process.

Were this to occur, it would create a very difficult situation for the DOL and employers alike. The current DOL would be charged with implementing a rule that it plans to do away with, and employers would have to figure out how to comply with a rule that will likely change in the near future.

We suggest that employers hold tight until more information is known. Given the last-minute nature of the injunction, many employers had already taken steps to comply with the new overtime rules before they were stayed, so if the injunction is dissolved, those employers should be able to pick the process back up where they left off.

It is not clear when the 5th Circuit will issue its decision on the fate of the regulations and injunction, but we will alert you when it does.