The NCAA men’s basketball tournament, a/k/a March Madness, kicks off Sunday, March 15 with Selection Sunday, then rolls on Tuesday, March 18 with a couple of play-in games and then on to the actual tournament, which begins Thursday, March 20. The brackets, the gambling, the office conference rooms dedicated to the games, the continual online streaming of games, the excitement…it’s all here! And with Warren Buffet recently announcing he will give $1 billion to anyone who can pick a perfect bracket, the stakes just got higher! While the Billion-Dollar Bracket may be new this year, March Madness, Super Bowl betting and Fantasy Football pools have long been ingrained in the American workplace, and with managers, supervisors and human resources professionals alike participating in the action, the slew of workplace issues associated with these events keeps increasing.

There is no question these events cause major distractions in many workplaces and gambling pools associated with these events create a wide range of risks for employers, like productivity loss, discrimination, whistleblower issues, disability issues and even criminal penalties. These risks are often overlooked because no one wants to be Debby Downer, but before burying their heads in the sand, employers should be familiar with some of the risks and some helpful solutions:

Is Workplace Gambling Legal?

The most obvious issue: Workplace gambling. But the real question: Is it even legal? On a federal level, probably not. If an office NCAA bracket pool crosses state lines or is conducted online (as many of them now are), it may violate the Interstate Wire Act of 1961. This act prohibits those “engaged in the business of betting or wagering [who] knowingly use a wire communication facility for the transmission in interstate or foreign commerce” to place bets on sporting events or contest. Because the Internet is a “wire communication facility”, an online pool seemingly violates this Act if its participants pay entry fees as a wager to win a bigger prize – yet we all know that such pools are readily available from mainstream internet sites, e.g. ESPN. There is a fantasy sports exception, but bracket pools do not seem to fit within this exemption because they require individuals to bet on the outcomes of the games.

The next federal law is the Professional and Amateur Sports Protection Act, which makes it illegal for anyone to operate “a lottery, sweepstakes, or other betting, gambling, or wagering scheme…in which amateur or professional athletes participate.” The Act grandfathered in previously authorized sports gambling in four states (Nevada, Delaware, Oregon, and Montana), but March Madness bracket pools were not included in the grandfathering.

Lastly, the Uniform Internet Gambling Enforcement Act (“UIGEA”) provides, “no person engaged in the business of betting or wagering may knowingly accept” funds “in connection with the participation of another person in unlawful Internet gambling.” The UIGEA has an exception that permit fantasy sports if: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid and the prize is made known to participants before the contest begins; (2) all winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individual athletes in multiple real-world sporting or other events; and, (3) the fantasy game’s result is not based on the final scores or point-spread of any single real-world game and not solely on any single athletes’ performance in a single event. March Madness bracket pools fail the second and third prongs.

On a state level, whether the tournament is illegal or not depends on the state. Although most states ban gambling, state gaming laws typically provide exceptions for “social” or “recreational” gambling, but to qualify for these exceptions (in most instances) the following must occur: (1) all of the money in a pool must go to a winner or a charitable organization, i.e. the “house” cannot receive any of the proceeds; (2) there must be a maximum amount a person can wager (like a $20 entry fee); and, (3) the pool must be limited to a certain number of people with pre-existing relationships (like co-workers). So, in some states, NCAA bracket pools that meet these requirements may be permissible. Ohio’s Constitution bans gambling, except lotteries, charitable bingo, casinos and racinos.

While law enforcement is probably not concerned with workplace bracket tournaments, employers should be aware that if they choose to sponsor a pool, theoretically at least, they risk fines and criminal penalties.

Controlling Gambling in the Workplace

Based on the information above, there are sound arguments that March Madness bracket gambling is likely prohibited by law, including in Ohio; however, this legal/illegal minor detail has never seemed to stop the gambling tradition. As such, employers need to figure out how to deal with these issues as they creep into their workplaces over the next few weeks and when fantasy football season comes around in the fall.

The safest and easiest approach for employers is to prohibit gambling, including NCAA bracket pools, in the workplace and describe acceptable and prohibited behaviors, e.g., using company-owned computers and servers for gambling purposes and identify work areas (e.g., offices, cafeterias and parking lots) where gambling is prohibited.

Recognizing that many, if not most, employers will not want to interfere, employers who choose to allow workplace gambling should consider implementing a workplace gambling policy, or update their current one, to include the following:

  • The policy should describe the type of gambling that is allowed. If gambling is limited to March Madness brackets, the policy should expressly say so. If, however, an employer wishes to allow for fantasy leagues, OSCAR polls, Super Bowl polls, etc., the employer should take the time to make sure all allowed workplace gambling is included in the policy;
  • The policy should require that the specific type of gambling being done in the workplace be approved by human resources to ensure it fits within the legal requirements set forth above;
  • The policy should define if and how the employer’s property can be used to engage in the workplace gambling. For example, if workplace televisions, copiers, computers, email, etc. are not allowed to be used for such activities, the policy should expressly say so. If they are, the policy should clearly communicate policies regarding employee breaks, email and Internet use so employees know what is acceptable;
  • The policy should inform employees that the gambling activities cannot interfere with production or work;
  • The policy should outline the employer’s complaint procedure in the event there is an issue; and
  • The policy should outline the discipline that may be lodged against an employee in the event of a policy violation.

Continue Reading Are You Ready, Baby? March Madness = Workplace Madness

Last week, the EEOC issued guidance on religious garb and grooming in the workplace: a Q&A document and a fact sheet on the topic.

Highlights from the Q&A include:

  • A company’s “image” or marketing strategy regarding employee appearance to its customers or customer preferences cannot be used as a basis to deny employment or a religious accommodation or to segregate an employee wearing religious dress from interacting with customers.
  • Refusing to hire an employee based on an assumption that they will need a religious accommodation (such as an employee who wears a headscarf to an interview) violates Title VII in the EEOC’s view. According to the EEOC, the employer should hire the individual if qualified, then after hiring instruct her to remove the headscarf if required by company policy. At that time, the employee may request a religious accommodation if removing the headscarf conflicts with her sincerely held beliefs.
  • Managers should be trained not to stereotype work qualifications and availability of applicants and employees based on their religious dress or grooming.
  • An individual’s religious practices can deviate from commonly-understood tents of the religion and still be sincerely-held religious beliefs may require a religious accommodation.
  • Employers may deny a religious accommodation when it conflicts with a workplace safety, security, or health concern. Examples provided include clothing caught in machinery and facial hair that would interfere with sterilization of the employer’s products. However, in both cases, the EEOC suggested these situations could be remedied by close-fitting clothing and beard covers, if those accommodations resolve the conflict between the employer’s policy and the employee’s religious practices.

The Q&A provides several helpful examples (many from EEOC litigated cases), which illustrate the EEOC’s positions on various accommodations for religious dress and grooming. The fact sheet provides a concise summary of employers’ obligations under Title VII to provide religious accommodations, prohibitions against harassment based on religion and retaliation for engaging in protected activity under Title VII, which includes requesting a religious accommodation.

Posted in EEO

Recent media accounts (e.g. this report  — Blood Test Predicts Alzheimer’s Disease — by CNN ) suggest that medical researchers have discovered a blood test that will help identify whether people are likely to develop Alzheimer’s Disease in their lifetime with 90% accuracy. So far, the test only has been conducted on individuals who are over 70 years old, but researchers will begin seeing whether these promising results can be obtained on people in their 40’s and 50’s. These research findings are obviously welcome news, but raise many questions assuming the test becomes more universally available. Not the least of these questions will be whether people really will want to know their fate. Any number of factors will likely play into any one person’s decision, but whether obtaining the test will have any impact on his or her employment should not be one of them.

Though it may be a long ways down the road before the Alzheimer’s blood test becomes realistic for employees in the prime of their working years, other medical research advances permitting individuals to learn their medical fate may have a more immediate impact. Indeed, at least one company already offers direct to consumer genetic testing and interpretation services. Should an employer learn of this kind of information as it relates to one of its employees, it could be exposed to potential liability if the information were to ever use it for employment purposes. While I’m convinced that the vast majority of employers would never actually make an employment decision based upon their employees’ genetic or protected health information, mere access to the information will put the employer in the position of having to prove that their decisions were not based on such information. Fortunately, for both employee and employer, HIPAA would prevent the transfer of any protected health information held by the employer’s group health plan to its human resources decision-makers or supervisors and managers. Should information cross this imaginary line, however, the employer faces potential liability not only under HIPAA but under a variety of other federal laws such as GINA (prohibiting the use of genetic information in making employment decisions), ERISA §510 (prohibiting employers from discharging or discriminating against plan participants for the purpose of interfering with the attainment of any right to which the participants may become entitled under a plan) and the ADA (prohibiting discrimination against qualified individuals with a disability.)

As medical advances continue to provide us with more information about our health, it will become increasingly more important for employers to ensure that people who make decisions regarding individuals’ employment do not have access to the individual’s health information. Employers should resist any temptation they may have to access any protected health information held by their group health plan and should ensure that all medical information held by them as employers is segregated from employee personnel files. This definitely is one of those situations where the less known the better.

Editor’s Note: This recent post from our sister blog – Federal Securities Law Blog – highlights one of the important employment law cases that the U.S. Supreme Court will address this year. As Kelly Johnson explains, the Court’s decision in Lawson v. FMR LLC extending whistleblower SOX whistleblower protection to employees of contractors and subcontractors of public companies greatly expands the scope of SOX’s reach. Indeed, the Court refused to limit its decision to private companies whose actions contributed to shareholder fraud because the requisite facts were not properly before it. As Justice Sotomoyer noted in her dissenting opinion, the Lawson decision “threatens to subject private companies to a costly new front of employment litigation.” Private employers that provide services to public companies need to beware of this new development.

In a 6-3 decision, the U.S. Supreme Court decided last week that whistleblower protection under the Sarbanes-Oxley Act of 2002 includes employees of a public company’s private contractors and subcontractors. In Lawson v. FMR LLC, the court, in a majority opinion written by Justice Ginsburg, concluded that extending protection to employees of a contractor was consistent with the purpose and intent of Sarbanes-Oxley: to protect investors and restore trust in financial markets.

As background, plaintiffs Lawson and Zang separately initiated lawsuits against their former employer, a privately held company that provided advisory management services to the Fidelity family of mutual funds. The mutual funds were not parties to the action because, as is common in the mutual fund industry, the Fidelity funds had no employees. Instead, the funds contracted with investment advisors like FMR to handle the day-to-day operations of the funds. After they were terminated, Lawson and Zang alleged that they were fired in retaliation for raising concerns about cost accounting methodologies and inaccuracies in SEC registration statements for the funds. FMR sought to have the actions dismissed, but those motions were rejected by the trial court.

In a 2-1 decision, the U.S. First Circuit Court of Appeals reversed the trial court and found that the whistleblower protections of Sarbanes-Oxley were available only to employees of the public companies, and did not cover a contractor’s employees.

In deciding that whistleblower protection extended to contractors of public companies, the Supreme Court focused on a narrow provision of Section 1514A which provides that “no company … or any … contractor … of such company may [retaliate] against an employee … because of [whistleblowing].” In reaching its decision, the court focused on a plain reading of the statute and concluded that “A contractor may not retaliate against its own employees for engaging in protected whistleblowing activity.”

The majority found this interpretation consistent with the history and purpose of Sarbanes-Oxley, which was enacted in response to the collapse of Enron. The congressional record confirmed the focus of Congress on the activities of contractors, including accountants and attorneys, who had failed to disclose accounting reporting irregularities concerning Enron to regulators, out of fear of retaliation by their employers.

In its decision, the court rejected two arguments forwarded by FMR. FMR argued that an “employee” must be limited to public company employees to avoid the “absurd” result of extending protection to the personal employees of company officers and employees. The court rejected this argument and found that nothing in the record suggested that Congress intended this interpretation or that “ few housekeepers and gardeners” would be likely to be exposed to evidence of their employers complicity in fraud.

In addition, FMR argued that the statutory headings of Sarbanes-Oxley, including the heading “Whistleblower Protection for Employees of Publicly Traded Companies,” provided evidence that Congress intended to limit the focus of the act to employees of public companies. The high court relied on the decision of Trainmen v. Baltimore & Ohio R. Co. to find that the headings and titles of the act were not meant to take the place of the detailed provisions of the act.

An analysis of the decision indicates that the history and background of Sarbanes-Oxley underlies the basis for the court’s interpretation. Specifically, the court found that Congress included whistleblower protection in Sarbanes-Oxley as a means to ward off another Enron “debacle.” The Senate report recognized that outside professionals, including accountants, lawyers and contractors were complicit in, if not integral to, the shareholder fraud and subsequent cover-up. In fact, Congress cited examples that focused on outside professionals and discussed possible retaliation by their employers to support Sarbanes-Oxley. Further, the majority could not accept that it was Congress’ intent to leave professionals vulnerable to discharge in retaliatory action for complying with federal securities law.

The court also rejected the practical effect of FMR’s arguments which would have virtually insulated the mutual fund industry from Sarbanes-Oxley whistleblower protection. Because virtually all mutual funds have no employees, and are managed by independent investment advisors and consultants, whistleblower protection is necessary to protect insiders who are the only firsthand witnesses of shareholder fraud.

On February 25, 2014, NLRB General Counsel, Richard F. Griffin, Jr., issued the first General Counsel Memo of the year (GC 14-01) identifying cases that the NLRB’s Regional Directors must refer to the NLRB’s Division of Advice for “centralized consideration” and to “enhance our ability to provide a clear and consistent interpretation of the [National Labor Relations] Act.” The list is divided into three groups, two of which should be of particular concern to employers. The first group includes issues that reflect General Counsel initiatives or areas of the law and labor policy that are of “particular concern” to him. The second group includes what he describes as “difficult legal issues that are relatively rare in any individual Region and issues where there is no governing precedent or the law is in flux.” Finally, the third group includes matters that have traditionally been submitted to the Division of Advice.

Together, the issues listed in the first two groups suggest that General Counsel Griffin’s priorities will be every bit as pro-union as we might expect now that the NLRB itself is dominated by Obama Administration appointees. Of “particular concern” to employers in the first group is the General Counsel’s apparent desire to increase union access to employer email systems, union access to employer financial information in the bargaining process, non-union employee rights to have a representative present at a disciplinary hearing, and the circumstances justifying pre- and post-arbitral deferral. The second category includes cases addressing whether the scope of at-will employee handbook disclaimers violate employee Section 7 rights and cases involving mandatory arbitration agreements with a class action prohibition that are not resolved by D.R. Horton or subsequent Advice memoranda. Not surprisingly, virtually all of the types of cases mentioned in the two groups listed by General Counsel Griffin – a total of 28 – foreshadow a further retreat from Bush-era NLRB doctrine and an expansion of union rights.

Employers will want to pay attention to any future General Counsel memoranda that are issued for guidance on how the Obama Board is going to interpret the National Labor Relations Act. Mr. Griffin’s predecessor, Lafe Solomon, used advice memoranda frequently to guide policy, particularly as it related to social media policies. It appears that Mr. Griffin’s office will be active as well – and that employers often won’t be happy with what he has to say.

We all understand the importance of including a confidentiality clause in settlement, severance, and separation agreements. While nothing can prevent a departing employee from going on a conspicuous shopping spree or driving around town in a flashy new car with his/her settlement dollars or severance payment, employers want to avoid a situation where a former employee openly discloses the amount of a settlement or severance payment and encourages legal challenges by other employees who may have different circumstances than the employee receiving the payment and/or causing discord among current employees who feel cheated by the departing employee receiving a payment they do not believe the employee deserved. A recent Facebook mistake by the daughter of a plaintiff who settled a lawsuit with his former employer highlights the need for well drafted confidentiality clauses. In a story making news beyond just the human resources and legal circles, Dana Snay’s Facebook post cost her father his $80,000 settlement.

Patrick Snay sued his former employer, Gulliver Prepatory School in Miami, for failing to renew his contract. He alleged age discrimination and retaliation. The case resolved confidentially for $60,000 in attorney’s fees, $10,000 in back pay, and $80,000 in non-wage damages. The payments were subject to a confidentiality clause with a tender-back provision for the $80,000 payment. The confidentiality clause prohibited Snay from discussing the case or the settlement with anyone but his attorneys and spouse. Snay told his daughter about the settlement allegedly because she had suffered psychological scars from the incident and needed to be told something about its resolution. This breach of the confidentiality clause on its own probably never would have become known. Snay’s college-age daughter, however, could not resist bragging about the settlement on Facebook. “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.” As is true of many ill-advised Facebook posts, Dana Snay forgot that current and former Gulliver students were among her 1,200 friends. News traveled back to the school’s lawyers who challenged the settlement just four days after the deal was executed, refusing to make the $80,000 payment. A Florida appeals court ruled in favor of Gulliver Preparatory. “His daughter [] did precisely what the confidentiality agreement was designed to prevent, advertising to the Gulliver community that Snay had been successful in his age discrimination and retaliation case against the school,” the court’s opinion said. Snay has an option to appeal to the Florida Supreme Court.

My guess is that Ms. Snay is no longer going to Europe and has learned a valuable lesson about Facebook posts that will serve her well in her first job after college. But employers can learn something from this incident too. If an employer wants to prevent disclosure of the existence or amount of a settlement or severance payment, a well written confidentiality clause is essential. These clauses can permit disclosure to immediate family members (the Snay/Gulliver confidentiality clause did not) but subject those family members to the same confidentiality requirements as the employee, preventing disclosure outside the immediate family.

Most states, including Ohio, participate in Daylight Savings Time.  This means that this Sunday, March 9, 2014, Daylight Savings Time begins, and we spring forward and push the clocks forward one hour at 2:00 a.m.  Daylight Savings Time runs from the second Sunday of March to the first Sunday of November.

So, what does this mean for employers?  Well, the key concern for employers is how the change impacts hourly (non-exempt) employees who work during the time change, e.g., the graveyard shift?

As you know, the Fair Labor Standards Act (FLSA) requires employers to credit and pay employees for all hours worked. For an employee who is on duty at 2:00 a.m. when Daylight Savings Time starts and the clocks are moved up an hour, this typically means the employee will work one hour less that shift/week. Although an employer may choose to pay the employee for the normal number of hours in the employee’s shift, this is not required. If an employer does choose to pay the employee for this extra hour, even though it was not worked, the employer does not have to include the extra hour in the employee’s regular rate for calculating overtime. This is pursuant to 29 U.S.C. § 207(e)(6) which excludes certain payments from the definition of “regular rate.” This extra hour of payment is also not considered a “premium” payment, so an employer cannot receive a credit to use toward overtime compensation under 29 U.S.C. § 207(h)(2).

This year, Daylight Savings Time ends on Sunday, November 2, 2014 and we fall back and push the clocks back on hour at 2:00 a.m.  This means that hourly (non-exempt) employees who are at work at 2:00 a.m. when the clocks are pushed back typically will work an extra hour that day/week and must be paid for it, including overtime if the extra hour pushes or contributes to the employee’s workweek hours exceeding forty.

The rule of thumb is easy: Employers are only required to pay hourly (non-exempt) employee for hours actually worked. Of course, this rule can be modified by an employer policy, employment agreement or collective bargaining agreement.

Here is how this works in application:

Springing Forward:  An hourly (non-exempt) employee works the graveyard shift when Daylight Savings Time starts this Sunday. The employee is scheduled to work 12:00 a.m. to 8:00 a.m., but because of the time change, the employee does not actually work the hour from 2:00 a.m. to 3:00 a.m. Since the employee only worked seven hours that day, the employer is only required to pay the employee for the seven hours actually worked unless there is a policy or agreement providing otherwise.

Falling Back: An hourly (non-exempt) employee works the graveyard shift when Daylight Savings Time ends on Sunday, November 1, 2015. The employee is scheduled to work 12:00 a.m. to 8:00 a.m., but because of the time change actually works the hour from 1:00 a.m. to 2:00 a.m. twice because at 2:00 a.m. all of the clocks are turned back to 1:00 a.m. In this scenario, the employer is required to pay the employee for nine hours, even though the employee’s schedule only reflects eight hours. In addition, in states where employers must pay overtime for hours in a day worked over eight, which does not include Ohio, the employer would have to provide overtime payment on this extra hour.

The Sixth Circuit recently addressed the issue of whether a “sex-plus” claim of discrimination, where a former employee claimed that she was discriminated against specifically for being an African American female, can be made under Title VII. The case is significant for reinforcing the notion that the various traits protected by Title VII necessarily coexist and should not always be considered separate from each other, but also for its emphasis on the importance of e-mail traffic in discrimination cases.

Facts

In Shazor v. Prof’l Transit Mgmt., Marilyn Shazor, an African American woman, was assigned by her employer, Professional Transit Management (“PTM”), to serve as the Chief Executive Officer of a regional transit authority. Tensions flared shortly after Shazor assumed the role of CEO because senior management officials began to question her allegiance to PTM. They exchanged e-mails in which they referred to her as “a ‘prima donna’ and not a team player” and as “one hellava bitch.”

After efforts were made by the union representing the transit authority’s bus drivers to expand the number of represented employees, the authority decided to retain a consulting firm in an effort to help educate managers and supervisors on how to handle the unionizing issues. Shazor’s supervisor claimed that Shazor had told two lies in connection with this decision – that the supervisor was unavailable to advise the transit authority regarding the union-organizing drive and that she had not played a role in selecting the consulting firm – and that those lies caused him to terminate her employment.

A Hispanic woman was ultimately selected to replace Shazor.

The Decision

Shazor filed suit in federal court asserting race and gender discrimination. The District Court granted PTM’s motion for summary judgment and dismissed her claims. On appeal, the Sixth Circuit disagreed and reversed the lower court’s ruling.

The Sixth Circuit found that a prima facie case of race discrimination had been established and that Shazor had rebutted PTM’s legitimate nondiscriminatory reason for her discharge in a manner sufficient to allow her claims to survive summary judgment. On the question of whether Shazor was replaced by someone outside of her protected class, the Court held that Shazor’s replacement by someone of a different protected class was sufficient. That the replacement was also a member of a racial minority was of no consequence.

Despite the fact that she was replaced by a female, the Court held that her sex discrimination claim can proceed because it “cannot be untangled from her claim for race discrimination.” In other words, according to the Court, “African American women are subjected to unique stereotypes that neither African American men nor white women must endure.” In a “sex-plus” case like this one, where the Court finds that the plaintiff established a sufficient foundation of discrimination, the defendant is not permitted to “undermine her prima facie case by showing that white women and African American men received the same treatment.”

In determining that Shazor had successfully rebutted PTM’s legitimate nondiscriminatory reason for terminating her employment (that she lied), the Sixth Circuit focused on the disputed allegations pertaining to Shazor’s statements. With regard to Shazor’s alleged statement about her supervisor’s availability to provide advice to the transit authority, the Court found that e-mails demonstrating that the supervisor was working in Arizona at the time Shazor made the statements created a factual issue regarding the truthfulness of her statement. As to Shazor’s involvement in the selection of the consulting firm, her supervisor based his conclusion that she lied on a report from the transit authority’s general counsel. Because the supervisor’s version of events relied on inadmissible hearsay, the court determined that the evidence was inadmissible, even at the summary judgment stage. Without the general counsel’s statements, the record pertaining to this second lie was “little more than a he-said, she-said” and that Shazor’s testimony again created genuine issues of fact.

Continue Reading “Sex-Plus” Discrimination Claims Are Still Viable

Posted in EEO

Concluding that the employer’s failure to notify a pregnant employee of her FMLA rights and to reinstate her to her former position or any other equivalent position after taking leave unlawfully interfered with her FMLA rights, the Sixth Circuit Court of Appeals in Clements v. Prudential Protective Services, LLC, reversed a district court finding of summary judgment in the employer’s favor.

Facts

Telitha Clements worked for Prudential Protective Services, LLC (“Prudential”) as a security guard in Detroit, Michigan from 2006 until she was laid off in 2009. Clements worked at the New Center Complex for years under a number of different employers, but she always had the same supervisor, Lamont Lively. Lively scheduled the employees and had the authority to approve or deny vacation requests.

In 2009, Clements was pregnant with her second child and anticipated having the baby in late May. Clements informed Lively that her last day of work would be May 23, 2009. Just as he had done prior to having her first baby, Lively informed Clements that she should let him know when she was ready to return to work, and he would put her back on the schedule. Neither Lively nor Clements notified the main office about her leave. No Prudential employee ever provided Clements notice of her rights under the Family and Medical Leave Act prior to her taking her leave.

Approximately six weeks after the birth of her son, Clements attempted to reach Lively and let him know she was ready to return to work. Lively was away from work due to the death of his mother, so Clements spoke with an employee named Sabrina. Sabrina informed Clements that the hours at the New Center Complex had been cut due to a lack of business, so Clements would not be back on the schedule at the New Center Complex. There is a dispute as to whether Clements was told to report to the main office.

Clements visited the Prudential main office on at least two occasions to obtain paperwork for her unemployment benefits. On or about August 24, 2009, Clements spoke with Prudential’s Vice President of Operations. He informed her she was not laid off because there were security jobs available at other locations. Prudential stopped authorizing Clements’ unemployment benefits after this meeting. Clements continued calling Prudential for the next two months regarding a position at the New Center Complex, but was not returned to work.

Clements files suit

In July 2011, Clements filed an FMLA interference suit in federal court claiming that Prudential interfered with her rights because upon returning from leave she was not restored by Prudential to the position she held before going on leave or an equivalent position. Prudential moved for summary judgment stating Clements did not comply with the FMLA notice requirements prior to taking leave; Clements suffered no prejudice from Prudential’s failure to notify her of her leave rights, because Prudential would have laid her off even if she had not taken leave; and Clements voluntarily failed to seek reassignment to a different job. The District Court granted summary judgment.

The Sixth Circuit disagrees

The Sixth Circuit Court of Appeals reversed and remanded the case to district court. The Court found genuine issues of material fact, including whether Clements was “laid off” during her leave, whether a similar job existed to which she could have returned, and if so, whether she was aware of the open position.

According to the court, Prudential had “virtually nothing” in the way of written policies and procedures for any aspect of its business. The VP of Operations described the hierarchy of the reporting system as “kind of loose.” As a result, there were no forms for an employee who wished to take leave to fill out, no paperwork of any kind to be prepared when an employee went on “leave” and no written procedures to be followed when leave was taken. Indeed, Clements apparently believed she had the choice to receive unemployment benefits rather than take an assignment in another building. In an effort to obtain unemployment benefits, Clements requested a letter stating she had been laid off, and a Prudential employee provided it. Prudential later argued Clements was not laid off and that she could have returned to work whenever she wanted—just not at the New Center Complex.

Takeaway for employers

Without clear written policies and procedures addressing leaves of absence that are clearly communicated to their employees, employers like Prudential here have difficulty demonstrating that employees failed to follow the rules. In addition, designating human resources personnel to handle leave issues as they arise will help ensure consistent handling of leave requests throughout the organization and in compliance with the law.

 

Class action waivers in arbitration agreements, when used correctly, are an extremely effective tool for employers to reduce exposure on employment claims.  So, naturally, the current National Labor Relations Board (NLRB) will not support them.  Having lost before the Fifth Circuit Court of Appeals on their argument that Section 7 and Section 8 of the National Labor Relations Act (NLRA) categorically prohibit explicit class action waivers, the NLRB remains undeterred.  Here is what the NLRB is up to now.

Background

As brief background, Section 7 of the NLRA, 29 U.S.C. § 157, grants most private-sector employees in the United States the right to collectively bargain (federal, state, and local public-sector employees are not covered and other federal laws cover certain categories of private-sector employees, for example the Railway Labor Act).  Section 8 of the NLRA, 29 U.S.C. § 158, prohibits among other things certain actions by employers to interfere or restrain an employee’s exercise of those rights granted by Section 7.

By now, many readers are probably familiar with the NLRB’s decision in D.R. Horton.  For those who are not, the NLRB held in D.R. Horton (a) that an arbitration agreement prohibiting class or collective actions by employees interferes with or restrains those employees’ Section 7 rights to band together collectively, thus constituting a violation of Section 8, and (b) that an arbitration agreement prohibiting class or collective actions could reasonably be interpreted by employees as restricting their right to file unfair labor practice charges (i.e., complaints alleging violations of Section 8) with the NLRB.

The Fifth Circuit upheld the NLRB on holding (b) above, but overruled it on holding (a) above.  The practical effect of the Fifth Circuit’s ruling in D.R. Horton was that employers were required to include a cautionary statement in an arbitration agreement with a class action waiver that the agreement and waiver does not preclude filing unfair labor practice charges with the NLRB; however, the class action waiver itself was not improper under the NLRA.  We wrote about this decision here approximately three months ago.

Leslie’s Poolmart

Despite the Fifth Circuit overruling the NLRB in D.R. Horton, an Administrative Law Judge (ALJ) of the NLRB recently held in Leslie’s Poolmart & Cunningham, No. 21-CA-102332, that the NLRB’s decision in D.R. Horton was still good law until the United States Supreme Court overruled it. The ALJ then proceeded to expand D.R. Horton by holding that not only are explicit class action waivers in arbitration agreements a violation of Sections 7 and 8 of the NLRA, but so are arbitration agreements without any explicit class action waiver if the employer ever argues that the arbitration agreement prohibits a class or collective action.

Here is what happened. In Leslie’s Poolmart, an employee filed an overtime class action against the employer. The employer removed to federal court and then filed a motion to compel arbitration of the employee’s individual overtime claims and, even though the arbitration agreement lacked an explicit class action waiver, a motion to dismiss the employee’s class or collective claims. The district court granted the motion except as to one class action claim under California state law.  As a result, in parallel NLRB proceedings against Leslie’s Poolmart, the ALJ held that the employer’s attempt to effectively enforce a class action waiver in the federal court litigation was qualitatively no different than enforcing an explicit class action waiver held invalid by the NLRB in D.R. Horton.

Continue Reading The National Labor Relations Board Continues Its Hostility Toward Class Action Waivers in Arbitration Agreements