Legal Comment

The author, R. Eddie Wayland, is TCA’s General Counsel, and a partner with the law firm of King & Ballow. Mr. Wayland frequently speaks and presents seminars throughout the U.S. on legal topics, including labor and employment issues. He also provides in-house training in these areas. He has twice been selected Chairman of the Labor and Employment Section of the Tennessee Bar Association and was founder and editor of the TBA Labor Letter. Among his publications, Mr. Wayland was co-author for Americans with Disabilities Act Compliance Guidebook, and was a contributing author for The Developing Labor Law.

DOL Final Rule on Independent Contractors

The United States Department of Labor (“DOL”) published a final rule to update the test to determine a worker’s status as an employee or independent contractor under the Fair Labor Standards Act (“FLSA”), effective March 11, 2024.

Background

Independent contractors are not covered under the FLSA requirements that employers pay the federal minimum wage and overtime, and other provisions and requirements of the statute. It is important to note that drivers are generally exempt from the overtime provisions of the FLSA under a separate exemption, but are not exempt from other requirements of the FLSA, unless they qualify as independent contractors. The FLSA does not define the term “independent contractor.” In January 2021, at the end of President Trump’s administration, the DOL issued a rule adopting an “economic realities” test to determine independent contractor status. The rule identified five factors to determine whether a worker qualified as an independent contractor. The nature and degree of control over the work and the worker’s opportunity for profit and loss were designated as core factors that carried the greatest weight in the analysis. However, upon assuming office, President Biden ordered a delay to the rule that had not yet taken effect. Subsequently, the DOL, under President Biden, announced it was withdrawing the rule and replacing it with a new rule. We previously commented on the new rule proposed by the DOL in October 2022. The DOL published the final rule on January 10, 2024.

New DOL Final Rule

The new DOL final rule to determine whether a worker is classified as an independent contractor or an employee uses a “totality of the circumstances” analysis of six “economic reality” factors. In other words, each factor identified is to be given full consideration and no factor is to be given more weight than another, nor is one factor dispositive in the determination. The factors enumerated in the new final rule are as follows:

Worker’s opportunity for profit or loss.
Investments by the worker and the employer.
Degree of permanence of the work relationship.
Degree of control an employer has over the work.
Extent to which the work performed is an integral part of the employer’s business.
Worker’s skill and initiative.

Takeaway

The trucking industry has vehemently opposed this change in the independent contractor classification rule. Essentially, more workers qualified as independent contractors under the previous rule issued during President Trump’s administration, which made it easier for a determination that a worker is an independent contractor. The final rule under President Biden rescinds the Trump rule. The anticipated result threatens to force a potential reclassification of a large percentage of drivers that are currently classified as independent contractors. Fortunately, the rule does not adopt an “ABC test,” such as the one signed into law in California. However, the independent contractor test in the new federal rule is more difficult for companies to satisfy and establish that workers are independent contractors. The rule compromises the independent contractor model and as a result endangers the trucking industry. Impacts to trucking operations likely will be significant. Modifications to the final rule could come from congressional review, a presidential administration change, or a court challenge in the near future. Until then, proactive companies should evaluate their independent contractor programs to ensure accurate classification of workers and compliance with the new final rule, including consulting with qualified counsel.

The final rule can be found at: https://www.federalregister.gov/documents/2024/01/10/2024-00067/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act

R. Eddie Wayland is Of Counsel to the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. Jennifer Sherman Schnall, an associate with King & Ballow, also participates in preparing legal comment articles. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.

The DOL Proposed a New Overtime Rule

The Department of Labor (DOL) proposed a new overtime rule to increase the number of employees eligible for overtime. This new rule, if and when implemented, would have a significant impact on employers’ current pay and related practices.

Background

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay. To be exempt, employees must be salaried and receive a specific minimum amount, and the employees must meet certain tests regarding their job duties. Currently employees who are exempt from overtime are salaried employees who are paid a salary of at least $35,568 per year and whose job duties fall within one of the so-called “white collar” exemptions, which include executive, administrative, professional, computer and outside sales roles. The regulations also exempt employees classified as “highly compensated” which are employees whose current total annual compensation totals $107,432 or more, but whose primary duty includes performing office or non-manual work, and who customarily and regularly performs at least one of the exempt duties.

Proposed DOL Rule

The new rule would raise the annual salary threshold to be exempt from overtime from $684 per week or $35,568 per year to $1,059 per week or $55,068 per year. Thus, qualified employees who make $1,059 per week or $55,068 per year would be exempt from overtime. The new rule would also increase the “highly compensated” employees’ classification to employees who make $143,988 or more. In sum, more employees would become eligible for overtime under the new proposed rule, rather than the current rule, because a higher salary would be required to be an exempt employee.

Takeaway

The new proposed rule is aimed at requiring overtime payments to more non-exempt employees and higher salaries for those who remain exempt. The proposal sets the standard salary level for federal overtime requirements at the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region (the South). Some states, such as California, impose stricter overtime laws than the federal laws.

The FLSA and the proposed rule apply to employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more. While exemptions are based on the wages or salaries and job duties as described by the FLSA, the job duties requirements remain unchanged under the new rule. Job titles do not determine exempt status. Furthermore, being paid based on a salary basis alone is not sufficient for an employee to be exempt from the FLSA overtime requirements because the duties requirement must also be met. Employers should monitor the status of this proposed new rule. If the rule is implemented, current pay practices, job status evaluation, and payroll costs, among other things, will be substantially affected. The rule can be found at:

https://www.federalregister.gov/documents/2023/09/08/2023-19032/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and

New NLRB Joint Employer Standard

On October 27, 2023, the National Labor Relations Board (NLRB) published an updated final rule addressing the standard for determining joint-employer status.

Background

Under the National Labor Relations Act (NLRA), when two entities are considered joint employers, both must bargain with the union and may be liable for unfair labor practices of the other employer. In 2020, an NLRB rule took effect that classified a joint employer by whether the entity had direct and immediate control over the other entity’s essential terms and conditions of employment. This included wages, benefits, work hours, hiring, discharge, and discipline. The new rule replaces the previous rule.

New NLRB Joint Employer Rule

The new rule states that two entities are considered to be joint employers even if the entities have indirect control over the terms and conditions of employment of the other. This is a departure from the previous rule which required direct control. Therefore, if an employer has the mere authority to control the terms and conditions of employment including wages, benefits, work hours, hiring, discharge, or discipline of the other employer, which satisfies the new standard, it will need to bargain with the other employer’s union. In fact, it will be required to bargain with the other employer’s union over all terms and conditions, not just the ones it has control over. The employers are both liable for the unfair labor practices of the other when they are found to be joint employers through having the direct or indirect control. Furthermore, to be a joint employer, the entity does not need to ever actually exercise such indirect control. Simply having the authority to control the other employers’ terms and conditions of employment is enough for the obligation to bargain and liability for the other employer’s unfair labor practices to arise, under the new standard.

Takeaway

The new standard takes effect on December 26, 2023, for cases filed after that date. While the President Trump era Board reinstated precedent that an entity is only a joint employer if it actually exercises “substantial” direct and immediate control over workers’ terms and conditions of employment, the current Board has reinstated, and some would say expands, the analysis from a 2015 NLRB decision, Browning-Ferris Industries.

In its announcement of the new rule, the NLRB stated that the rule is “more faithfully” grounded in common-law principles than the previous rule. However, employers should be aware the lower standard applied under the new rule greatly increases the likelihood that joint employer status will be determined. In particular, this new rule is set to impose joint employer status on franchised businesses. The new standard is so far-reaching it will also expose businesses to liability for unfair labor practices of its subcontractors. Many associations and elected officials have expressed opposition over the new rule for making it more likely to find joint employer bargaining obligations and liability for unfair labor practices. Employers should promptly review their contracts with other businesses and pay close attention to language that could be construed as allowing the employer to share or co-determine the essential terms and conditions of employment of the other business’s employees.

The rule can be found at: https://www.federalregister.gov/documents/2023/10/27/2023-23573/standard-for-determining-joint-employer-status

The NLRB Fact Sheet on the Rule can be found at: https://www.nlrb.gov/sites/default/files/attachments/pages/node-9558/joint-employer-fact-sheet-2023.pdf

Noncompete Agreements are Unlawful Under New California Laws

California recently enacted new law declaring it unlawful to violate the state’s prohibition on noncompete agreements by including noncompete clauses in employment contracts.

Background

A noncompete clause in an employment contract restricts the right of an employee to work for a competitor in the same industry as the employer. A non-solicitation clause restricts a former employee’s ability to contact the former employer’s clients. These clauses are also known as restrictive covenants. States vary in enforceability of restrictive covenants. Some state courts will modify such agreements if the restraint is overbroad and not otherwise reasonably necessary to protect the legitimate business interests of the employer. However, California has maintained one of the most extreme laws on restrictive covenants in the country. Under California Business & Professions Code § 16600, noncompete agreements are unenforceable. California courts have included non-solicitation clauses in its prohibition on non-compete clauses. There are a few exceptions, which include when a business is sold, a partnership dissolves, or in limited cases to protect trade secrets. Unlike other states that also restrict these agreements, California goes so far as to void the whole contract which contains noncompete or non-solicitation clauses.

The New California Laws

Recently, California enacted California Business & Professions Code § 16600.5 which will take effect on January 1, 2024. The new law makes it unlawful to include a noncompete clause in an employment contract or require an employee to enter a noncompete agreement that does not satisfy one of the previous exceptions. Now an employer that enters into a noncompete

agreement, which is void, also commits a civil violation. The law further provides that an employee, former employee, or prospective employee may bring a private action to enforce the law for injunctive relief, recovery of actual damages or both, and the individual prevailing would also be entitled to attorney’s fees and costs. Additionally, under another new California law, companies must notify employees that a previous agreement violated the law and is void. The notice must be sent to the last known address of the employee by February 14, 2024.

Takeaway

These California laws may apply to employers even if the employment was maintained outside of California. While California employers must be aware of these new laws and act accordingly, all employers who have contacts with California should pay close attention. These new laws exemplify the changing legal landscape regarding noncompete clauses across the country. The Federal Trade Commission has also announced a proposed rulemaking on prohibiting noncompete clauses. At best, employers in all states can expect possible future challenges to incorporating non-competition clauses in employment contracts as well as attempting to enforce these clauses. At worst, employers need to be concerned about potential liability for using, or having used, non-competition language in employment contracts.

The NLRB and OSHA Execute a Memo of Understanding

The National Labor Relations Board (NLRB) and the Occupational Safety and Health Administration (OSHA) entered into a Memorandum of Understanding (MOU) to collaborate in cases involving workplace safety.

Background

The National Labor Relations Act (NLRA) Section 7 protects employees’ rights to self-organize, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. The NLRA prohibits Unfair Labor Practices (ULPs) by employers which occur when employers interfere with employees’ exercise of their Section 7 rights. The NLRB’s Regions investigate ULPs which are filed by employees or labor organizations against an employer in the form of charges. The General Counsel of the NLRB makes determinations on whether to proceed with a case by the local Region based on charges with the agency. Cases are first heard by Administrative Law Judges and are appealable to the National Labor Relations Board (the Board). The Board decisions are appealable to the United States Court of Appeals.

The Occupational Safety and Health (OSH) Act regulates employee conditions relating to occupational safety and health in the workplace. The OSH Act provides OSHA with the authority to develop standards regarding workplace safety and health. OSHA is also authorized to issue citations and penalties for employers that fail to meet the standards that OSHA sets forth. OSHA can seek injunctive relief in federal district court to enforce compliance with its standards when they are violated.

Employees reporting safety and health concerns could be protected by both the NLRA and OSH Act. Due to this overlap, the NLRB and OSHA have historically entered into MOUs regarding workplace safety. The most recent MOU between the agencies supersedes all previous ones and has a term of five years.

The NLRB and OSHA Announcement and Memo

The NLRB General Counsel, Jennifer A. Abruzzo, and the Assistant Secretary of Labor for OSHA at the U.S. Department of Labor, Douglas L. Parker signed a MOU, which was announced by the NLRB on October 31, 2023. The MOU includes agreement that the NLRB and OSHA may share information and data obtained during investigations or other sources as permitted by law. For instance, the NLRB will promptly share with OSHA information related to workers currently or likely exposed to health or safety hazards and encourage those employees or labor organizations to contact OSHA. Likewise, OSHA will provide employees with the NLRB’s contact information. The MOU further outlines provisions for protecting confidentiality despite shared investigative services between the agencies. The MOU also provides for cross-training opportunities for the agencies. The NLRB will train OSHA personnel regarding NLRA Section 7 concerted activity and ULPs and OSHA will train NLRB personnel on OSHA standards and regulations, recordkeeping, and employee rights under the OSH Act.

Takeaway

While the NLRB and OSHA have collaborated in the past, this MOU broadens both agencies’ ability to enforce workplace safety standards against employers. Employers should expect to see increased complaints and charges because of this collaboration. While the time to file an OSHA complaint is 30 days, the time to file an NLRB charge is 6 months. If an employee’s complaint to OSHA is not timely, then OSHA will advise the employee on how to contact the NLRB to file a charge. The NLRB’s General Counsel, a President Biden appointee, has expressed that the MOU is an initiative to take a “whole of government approach” to enforcement of agency laws.

EEOC Settles Lawsuit for Hiring Discrimination by Artificial Intelligence

The U.S. Equal Employment Opportunity Commission (EEOC) recently settled a discrimination lawsuit against online tutoring companies for using Artificial Intelligence to filter out job applicants over certain ages.

Background

The EEOC has been monitoring the trend of Artificial Intelligence (AI) integration into the workplace for some time now. In 2021, the EEOC launched an agency-wide initiative to ensure that the use of software, including artificial intelligence (AI), machine learning, and other emerging technologies used in hiring and other employment decisions comply with the federal civil rights laws that the EEOC enforces.

The Lawsuit

iTutorGroup, hires tutors to work remotely from the United States to provide online English-language tutoring services to clients in China. In May, the EEOC filed a lawsuit against iTutorGroup’s online tutoring companies in a New York federal court on behalf of more than 200 individuals alleging age discrimination in the job application process. According to the EEOC, iTutorGroup’s AI job application screening software was programmed to automatically reject female applicants over the age of 55 and male applicants over the age of 60. For example, one female applicant over the age of 55 allegedly applied using her birthdate and was immediately rejected. The next day, she submitted an identical application reflecting a younger age and was offered an interview. The parties settled on August 9, 2023

The Settlement Agreement

Under the terms of the settlement agreement, iTutorGroup agreed to pay $365,000.00, to be distributed by the EEOC to the affected applicants. Additionally, iTutorGroup will implement a number of procedures to prevent future discrimination against applicants and employees, including hiring a third-party to facilitate an anti-discrimination training program for employees.

Takeaway

As noted above, the EEOC has been monitoring the trend of Artificial Intelligence (AI) integration into the workplace for several years. Last year, we commented on guidance by the EEOC and U.S. Department of Justice (DOJ) on AI and disability discrimination. It remains that proper training and human verification of automated functions can help employers avoid unlawful discrimination against employees and prospective employees under the applicable discrimination laws. Employers should be careful to ask for information such as age, in which a computer may use to filter out applicants. This settlement marks the resolution of the EEOC’s first discrimination case involving AI, but we expect to see similar cases more frequently as employers increasingly rely on AI in the hiring and employment process.

Eddie Wayland is Of Counsel to the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. Jennifer A. Sherman, an associate with King & Ballow, also participates in preparing legal comment articles. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.

Fifth Circuit Overturns Longstanding Limitation on Title VII Claims

Longstanding precedent in the Fifth Circuit Court of Appeals which limited Title VII discrimination to instances involving “ultimate employment decisions” was recently overturned by the Fifth Circuit (which has jurisdiction over Texas, Louisiana and Mississippi).

Background

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against “any individual with respect to his [or her] compensation, terms, conditions, or privileges of employment” because of any protected category. For decades, Fifth Circuit precedent required a plaintiff under Title VII to show he or she had been subjected to an “ultimate employment decision” to state a cognizable discrimination claim.

Court’s Decision

In Hamilton v. Dallas County, the Dallas County Sheriff’s Department implemented a scheduling policy allowing officers two days off per week. However, female officers were not permitted to take a full weekend off. Male officers, on the other hand, were free to take off Saturday and Sunday consecutively. The Court found that this was a discriminatory, sex-based policy in clear violation of Title VII, as “[t]he days and hours that one works are quintessential ‘terms and conditions’ of one’s employment” that “go to the very heart of the work-for-pay arrangement.” The trial court dismissed the action, but the case was appealed and decided en banc, before a panel of all Fifth Circuit judges on the Court.

On appeal, the Fifth Circuit observed that its “ultimate employment decisions” restriction on Title VII actions was unique, as “no other court of appeals applies so narrow a concept of an adverse employment action.” The Court said that it had for years been applying a standard that could not actually be found in the text of Title VII. As a result of this decision, a plaintiff will no longer be required to show discrimination in an “ultimate employment decision,” but may simply show discrimination in the terms, conditions, or privileges of his or her employment based on a protected class status, such as sex. Overall, the decision lowers the threshold for future Title VII discrimination claims in a change the Court believes better comports to the plain meaning of the statute.

Takeaway

This decision marks a significant change to Title VII interpretation in the Fifth Circuit. Employers in Texas, Louisiana and Mississippi should take note and be mindful that discrimination can occur in more than just decisions such as hiring and firing employees. Here, the employer implemented a sex-based policy. However, prior to this ruling the policy may have fallen into the loophole of not being an ultimate employment decision. Now employers across jurisdictions need to be aware that Title VII provides broad protection to employees in “compensation, terms, conditions, or privileges of employment,” and this includes leave policies. Employers should limit their exposure to potential liability by carefully reviewing and considering potential ramifications before implementing policies, procedures, and work rules in the workplace to ensure compliance with Title VII.

Employers Must Use New Form I-9 Starting November 2023

In August, the U.S. Citizenship and Immigration Services (USCIS) released a revised Form I-9. The form is the Employment Eligibility Verification Form required to verify an employee’s identity and employment authorization.

Background

The Form I-9 is required for each individual hired for employment in the United States, including citizens and noncitizens. The form requires employees to attest to their employment authorization in the U.S. and present acceptable documentation as an identification and evidence of U.S. employment authorization. The employer is obligated to review the documents and maintain a record of the documentation.

While previously Form I-9 was two pages, it has been reformatted to fit on a single-sided sheet. The Translator Certification section has been moved to a supplement that employers can provide when necessary. Likewise, the Reverification and Rehire section has been moved to a supplemental section as well. The instructions have been reformatted to fit 8 pages instead of 15 pages.

Notably, the USCIS and Department of Homeland Security revised the List of Acceptable Documents page by adding a Section titled “Acceptable Receipts,” which can be presented by the employee in lieu of an acceptable document for a temporary period. For example, if an employee lost his license, he may present a receipt for a replacement license as provided by USCIS and then produce the replacement within 90 days. The page also now provides examples and links to information to aid in proper completion of the form.

Furthermore, there are now alternative document examination procedures where employers can conduct a remote examination of the I-9 documents instead of a physical in-person review. The program requires live video interaction as part of the document review process and the employer must still maintain copies of the I-9 documentation so that the completed forms are available for inspection by authorized government officers upon an audit. There is a new checkbox allowing employers to indicate they examined Form I-9 documentation remotely under a Department of Homeland Security (DHS) authorized alternative procedure rather than via physical examination. While previously the U.S. Immigration and Customs Enforcement announced that employers who hired remote employees during COVID-19 would still have to conduct a physical in-person review of the documentation before the end of this August, now the revised announcement provides that these qualified employers can follow the E-Verify program guidance to conduct these examinations remotely under the program.

Takeaway

The new form is available now and employers are encouraged to begin using it immediately. On November 1, 2023, it will be mandatory for employers to use the revised form going forward and employers who fail to use the revised form will be subject to penalties. The form is available in a fillable PDF for ease with typing directly onto the form. The form is available in English and Spanish.

The revised Form I-9 can be found at: https://www.uscis.gov/i-9

The Supreme Court Rules National Labor Relations Act Does Not Protect Unions from Intentional Tort Liability

Glacier Northwest is a ready-mix concrete sales and delivery company. Glacier’s drivers, who are members of the International Brotherhood of Teamsters Union, organized a work stoppage protest designed to intentionally waste large amounts of concrete and foreseeably cause damage to the company’s trucks. After the protest, Glacier sued the Union for tort damages in state court, but the Union argued it was engaged in protected activity and should not be liable for the resulting damage. The U.S. Supreme Court disagreed by ruling the National Labor Relations Act did not protect the Union from liability for its intentional property damage.

Background

Court’s Decision

In Glacier, the Supreme Court found that the Union coordinated its protest to intentionally cause damage to Glacier’s property. The Court noted that the damage would have been even worse if not for the conduct of non-striking employees who acted quickly to avoid damage to Glacier’s trucks but could not avoid the loss of concrete that occurred as a foreseeable result of the Union’s work stoppage. The Court ruled the NLRA did not preempt the state law claims for civil damages. In other words, the Union was not successful in arguing that the federal NLRA, preempted the state law claims and thereby eliminated the Union’s liability. The Court reasoned that although the NLRA protects the right to strike, its protections are not absolute. Here, the Union put Glacier’s property in foreseeable and imminent danger and this conduct is not protected by the NLRA.

Takeaway

This case is a win for employers engaged in union disputes. A union cannot cause intentional property damage and hide behind the excuse it was engaging in protected concerted activities. While these protections are not absolute, as this decision illustrates, employers need to be aware of the NLRA’s wide range of protections for employees exercising NLRA Section 7 rights. Employers should consider seeking experienced legal counsel with any questions or concerns relating to labor disputes.

NLRB Mandates New Standard for Employee Handbooks

The National Labor Relations Board (“NLRB”) issued the Stericycle decision overruling the Boeing and LA Specialty Produce standards which it deemed to have allowed employers to adopt overbroad work rules that could chill employees’ exercise of rights. The Board adopted a new standard that began under Lutheran Heritage to examine whether a workplace rule or policy has a reasonable tendency to interfere with employees’ exercise of Section 7 rights.

Background

NLRB Decision

The NLRB ruled that the General Counsel may determine that a handbook rule has a reasonable tendency to interfere with an employee’s exercise of Section 7 rights. If the General Counsel does so, then the rule is presumptively unlawful. The employer may rebut this presumption only by proving that a handbook rule advances a legitimate and substantial business interest and that it is narrowly tailored. The Board reasoned that the previous standards weighed too heavily in favor of the employer’s interests and failed to account for how employees, being economically dependent on the employers, are inclined to construe work rules in a way that results in employees avoiding activities that are statutorily protected. The Board found the employer in this case violated the NLRA Section 8(a)(1) by maintaining certain rules for its employees that addressed personal conduct, conflicts of interest, and confidentiality of harassment complaints.

Takeaway

This Board decision significantly impacts employers of both unionized and non-union businesses. The new standard means that common handbook provisions contained currently by many employers are now unlawful. The ruling also makes it difficult for employers to know whether or not their handbook complies with this new standard. Any ambiguities will be construed against the employer. Employers should pay special attention to handbook provisions that may be implicated by this new standard such as rules that prohibit malicious statements towards the employer, prevent striking or loitering, and policies that restrict employee recordings on the Company’s premise. Prompt handbook review by experienced counsel is strongly advised in light of this decision.

The Supreme Court Rules for Sunday Sabbath Observer in Religious Accommodation Case

The Supreme Court ruled that the United States Postal Service, as an employer, did not show that the burden of granting an accommodation to a Sunday Sabbath observer employee would result in substantial increased costs to create an undue hardship under Title VII.

Background

A Sunday Sabbath observer refused to work on Sundays as a United States Postal Service Rural Carrier Associate, a non-career employee who provides coverage as needed. After the employment began, the employee’s location began delivering Amazon packages requiring employees to work on Sundays. The employee transferred to another location, but that location also began Sunday deliveries for Amazon as well. Shift swaps were implemented to accommodate work that needed to be done on Sundays as a reasonable accommodation. However, the employee was disciplined when he was absent from Sunday work when he was unable to secure shift swaps. Eventually, the employee resigned and filed a lawsuit against the employer in the Third Circuit Federal Court, alleging two causes of action for religious discrimination under Title VII, disparate treatment, and failure to accommodate. The Third Circuit ruled in favor of the employee because the accommodation did not eliminate the conflict by allowing him to avoid Sunday work without penalty.

Court’s Decision

The Supreme Court clarified the interpretation of undue hardship which would justify the employer in this case from granting the employee an accommodation to be excused from all Sunday work. Title VII of the Civil Rights Act of 1964 requires employers to accommodate the religious practice of their employees unless doing so would impose an “undue hardship” on the conduct of the employer’s business. Absent a statutory definition of “undue hardship,” Courts have interpreted that an undue hardship defense requires a showing more than a “de minimis” cost. The Supreme Court found that the ordinary meaning of “undue hardship” points towards a standard of “substantial additional costs” or “substantial expenditures.” In turn, the Supreme Court held that Title VII requires an employer that denies a religious accommodation to show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business. The Supreme Court concluded that the lower court must determine if the United States Postal Service met this burden when it did not properly accommodate an employee’s request for an accommodation to be excluded from Sunday shifts.

Takeaway

Before the Supreme Court’s ruling, we commented on the lower court’s ruling which determined that a religious accommodation should eliminate the conflict between employment requirements and the employee’s religious practices and that employers may need to deviate from neutral policies to eliminate a conflict of an employee requesting an accommodation. It is important to note, however, that the obligation of an employer to provide an accommodation does not mandate any one specific accommodation. The Supreme Court focused on the issue of whether an employer had to accept the employee’s accommodation of permanent excusal from Sunday shiftwork, despite his role as an employee who provides coverage as needed. While here, the Court determined that the accommodation would create an undue hardship, the same may not apply for another employer. Employers should consult experienced legal counsel when making determinations on religious and other accommodations to limit exposure to liability for failing to properly accommodate employees who make specific requests for accommodations.

R. Eddie Wayland is Of Counsel to the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. Jennifer Sherman, an associate with King & Ballow, also participates in preparing legal comment articles. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.

Seventh Circuit Rules in Favor of Freight Brokers in Circuit Split Over FAAAA Preemption of Negligence Claims

In Ying Ye v. GlobalTranz Enterprises, Inc., the federal Seventh Circuit Court of Appeals (which has jurisdiction over Wisconsin, Illinois, and Indiana) ruled that a freight broker was not liable for state negligence claims because of preemption by the Federal Aviation Administration Authorization Act. The federal circuit courts are split on this issue.

Background

Congress enacted the Federal Aviation Administration Authorization Act (FAAAA) in 1994 with express preemption of state laws. In other words, provisions of the Act bar state regulations which Congress deemed burdensome to interstate commerce. Under 49 U.S.C. § 14501(c), a state may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier… or any motor private carrier, broker, or freight forwarder with respect to the transportation of property. However, there are exceptions to this provision including a “safety exception” which states the FAAAA does not restrict the safety regulatory authority of a state “with respect to motor vehicles.”

Court’s Decision

GlobalTranz is a freight broker that hired the motor carrier, Global Sunrise, to transport goods for a company from Illinois to Texas. While carrying the load, the Global Sunrise driver’s truck collided with a motorcycle, resulting in the motorcyclist’s death. The motorcyclist’s surviving spouse first sued the motor carrier, but later added two Illinois tort claims against the freight broker in federal court. The first tort claim alleged the freight broker was negligent in selecting the motor carrier to transport freight on its behalf knowing that it was an unsafe company with a history of unsafe driving violations. The second tort claim was for vicarious liability, alleging that the freight broker exercised sufficient control such that it was vicariously liable for the negligence of the motor carrier. The district court granted the freight broker’s motion to dismiss the first claim as prohibited under the FAAAA’s express preemption provision and dismissed the second claim on the merits.

On appeal, the Seventh Circuit affirmed the lower court’s ruling. In its analysis, the Court reasoned that the claim related directly to the broker’s core service. Furthermore, the imposition of liability of state negligence claims on brokers would have a significant economic effect on the broker service industry. The Court also determined that the claim did not fall within the safety exception from preemption for a state’s regulatory authority with respect to motor vehicles.

Takeaway

Freight brokers currently defending against common law state negligence claims need to be aware of this favorable decision. This decision joins a similar ruling from the Eleventh Circuit. However, the Ninth Circuit ruled against the freight broker in another case with near-identical facts. In that case, the Court ruled that the safety exception under the FAAAA’s preemption did apply and supported the state’s authority to impose negligence liability against brokers. The Seventh Circuit, in its recent decision, disagreed with the previous Ninth Circuit decision and concluded that it should have considered the congressional purpose of the FAAAA and the plain meaning of its language under the safety exception. Therefore, two out of three federal circuit courts ruling on this issue have determined that the state law claims for negligence were preempted under federal law.

The split among the circuits may lead to a future decision by the Supreme Court addressing the issue. In the meantime, freight brokers should take care in their operations and dealings with carriers they contract with to ensure that their practices and procedures will not result in creating facts where the preemption defense may be weakened or avoided.

Sixth Circuit Adopts Higher Standard for Sending Notice of a FLSA Collective Action to Other Employees

In Clark, et al. v. A&L Homecare and Training Ctr, et al., the federal Sixth Circuit Court of Appeals (which has jurisdiction over Tennessee, Kentucky, Ohio, and Michigan) adopted a new, higher standard for plaintiffs seeking court-authorized notice to other potential claimants for a collective action under the Fair Labor Standards Act (FLSA). Plaintiffs must now show a “strong-likelihood” that other employees are similarly situated to the original plaintiffs before permitting the plaintiffs to send written notice of the lawsuit to other employees.

Background

In a collective action, unlike a class action, all plaintiffs must affirmatively choose to join the lawsuit by opting into the collective action. Courts certify a collective action after the plaintiffs show that there are individuals similarly situated to the named plaintiffs who began the lawsuit. Once the named plaintiffs make the sufficient showing that there are similarly situated individuals whom they seek to represent, then notice is sent to these individuals on joining the collective action. Previously, district courts in the Sixth Circuit applied a lower and more lenient standard when determining whether notice of a FLSA lawsuit could be sent to other employees who may join in the collective action.

Court’s Decision

The named plaintiffs in this case were a group of home health aides. The plaintiffs filed a lawsuit against their former employer, a home healthcare company, under the FLSA and Ohio law. The named plaintiffs alleged that they were paid less than federal and state minimum wages and

were not paid the proper overtime wages. The named plaintiffs asked the district court to conditionally certify their collective action, which would allow the named plaintiffs to notify other employees about the FLSA lawsuit and provide those employees with the option to join the lawsuit as additional plaintiffs. The district court applied the usual “fairly lenient” standard and determined the named plaintiffs had made a “modest factual showing” that two groups of employees were similarly situated for the purpose of receiving notice of the lawsuit. However, the district court held that the named plaintiffs were not allowed to send notice of the FLSA lawsuit to employees who left their employment with the home healthcare company more than two years before the case was filed. The named plaintiffs also were not permitted to send notice of the FLSA lawsuit to employees who had signed a valid arbitration agreement.

On appeal, the Sixth Circuit adopted a different and higher standard than the usual “fairly lenient” standard applied by the district court. The Court reasoned that authorizing notice in a collective action is comparable to a decision of whether to grant a preliminary injunction which requires a showing there is a likelihood of success on the merits of the case. The Court held that the named plaintiffs must show a “strong likelihood” that other employees are similarly situated to the original plaintiffs before notice of the FLSA lawsuit may be sent to the other employees.

Takeaway

Trucking companies and other employers in the transportation industry often may feel compelled to settle an FLSA lawsuit when faced with a collective action to avoid litigation and related costs, and disruption to operations, as well as to reduce potential liability. FLSA collective action lawsuits have been prolific in the transportation industry for a number of years. Many of these lawsuits have focused on claims that drivers were not paid minimum wage and claims that independent contractors are misclassified and are owed minimum wage and/or overtime payments.

The Sixth Circuit’s decision in the Clark case is positive for employers because the new “strong-likelihood” standard makes it more difficult for plaintiffs to certify their collective action and send notice to other potential claimants. Also, the Fifth Circuit (which has jurisdiction over Louisiana, Mississippi, and Texas) has recently made a similar ruling “upping the bar” for plaintiffs to be granted preliminary certification. This trend is positive for not only transportation industry employers but employers throughout the United States. Still, the best first-line defense is for companies to ensure that their policies and practices meet the minimum wage, overtime, and independent contractor standards under the FLSA.

The Supreme Court Holds a Mandatory “Stay of Proceedings” is Required Pending Appeal Over Arbitration

The federal appellate courts were divided on whether a stay is required when a district court refers a claim to arbitration. On Friday, June 23, 2023, the Supreme Court, in a 5–4 decision, resolved the split by holding that district courts do not have such discretion and instead must stay proceedings pending appeals on questions of whether arbitration is required.

Background

When a plaintiff sues for claims that should be arbitrated, the defendant can file a motion to compel arbitration. When this occurs, the Federal Arbitration Act (FAA) Section 16(a) authorizes an interlocutory appeal from the denial of a motion to compel arbitration. Therefore, if a motion to compel arbitration is denied, the parties could presumably continue to litigate in district court. However, the courts were split on whether a district court could use its discretion to continue to litigate or whether a “stay of proceedings” was required.

Court’s Decision

The Ninth Circuit case of Coinbase v. Bielski was appealed to the Supreme Court. Coinbase, a cryptocurrencies platform had a User Agreement containing an arbitration provision, which directed that disputes arising under the agreement be resolved through binding arbitration. Bielski sued Coinbase in a California federal district court on behalf of Coinbase users alleging that Coinbase failed to replace funds fraudulently taken from the users’ accounts. When Coinbase filed a motion to compel arbitration, the Court denied the motion. Coinbase then filed an interlocutory appeal and also moved to stay district court proceedings pending resolution of the arbitrability issue on appeal. The district court denied Coinbase’s motion and Coinbase appealed to the Ninth Circuit which also declined to stay the district court’s proceedings pending appeal. The Supreme Court granted certiorari review on this issue.

The Supreme Court reasoned that Coinbase’s appeal was whether the case belongs in arbitration or in the district court and therefore the entire case was essentially “involved in the appeal.” The Court ruled that prior precedent dictates that the district court stay its proceedings in such situations until the question of whether the case belongs in arbitration is complete. Also, if the district court was simply allowed to move forward with litigation and it turns out the case should have been arbitrated, then the benefits of arbitration, such as efficiency and fewer expenses, would be lost, and parties could be engaged in “blackmail settlements” to avoid continuing with litigation. In sum, the Supreme Court held that district courts must stay proceedings while an interlocutory appeal on the question of arbitrability is ongoing.

Takeaway

This case is positive for employers who have contracts with employees, independent contractors, or with other individuals and entities, which provide for arbitration of disputes. If the employer’s motion to compel arbitration in response to a lawsuit is denied, and the employer appeals, now the court cannot continue with litigation until that appeal is decided. This will preserve the corresponding benefits of arbitration.

The Supreme Court’s decision allows for more predictability. Before this decision, courts used discretion on whether to stay proceedings and as a result there was a split of authority which caused different results on the same basic issue. Now a mandatory stay of proceedings must occur in federal courts when a party appeals the denial of a motion to compel arbitration.

NEW LAW ALERT: Pregnant Workers Fairness Act Becomes Effective June 27, 2023

The Pregnant Workers Fairness Act, which was recently signed into law by President Biden, becomes effective on June 27, 2023. This means that in less than two weeks, employers must be prepared to comply with the new law. Employers now must engage in the interactive process for workers seeking pregnancy-related accommodations.

Background

The Pregnant Workers Fairness Act (PWFA) requires covered employers to provide “reasonable accommodations” to a worker’s known limitations related to pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an “undue hardship.” Covered employers include private and public sector employers with at least 15 employees, employment agencies, and labor organizations, among others. The PWFA is modeled after the Americans with Disabilities Act. Similarly, the PWFA prohibits employment practices that discriminate against making reasonable accommodations for qualified employees affected by pregnancy, childbirth, or related medical conditions. A qualified employee is an employee or applicant who, with or without reasonable accommodation, can perform the essential functions of the position. Several States have already enacted similar laws requiring reasonable accommodations for pregnant workers. The PWFA does not replace other Federal or State laws, including laws more protective of workers’ rights than the PWFA. The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing the Pregnant Workers Fairness Act. The EEOC will begin accepting employee charges against employers under the PWFA on June 27, 2023. Acceptable charges are for allegations of failure to accommodate the individual on or after June 27, 2023. The EEOC provides leadership and guidance on the federal laws prohibiting employment discrimination and will issue regulations regarding the PWFA. Recently, the EEOC launched a countdown to the Pregnant Workers Fairness Act and issued guidance on “What You Should Know About the Pregnant Workers Fairness Act.”

The EEOC’s Guidance

The new guidance from the EEOC describes examples of reasonable accommodations for the PWFA including accommodations which provide the ability to sit or drink water; receive closer parking; have flexible hours; receive appropriately sized uniforms and safety apparel; receive additional break time to use the bathroom, eat, and rest; take leave or time off to recover from childbirth; and be excused from strenuous activities and/or activities that involve exposure to compounds not safe for pregnancy. The EEOC’s guidance also reiterates that employers are prohibited from denying a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation and cannot require an employee to take leave if another reasonable accommodation can be provided that would let the employee keep working. Also, employers cannot require an employee to accept a certain accommodation without any discussion. Lastly, it is unlawful to retaliate against anyone for reporting discrimination under the PWFA or participating in a PWFA investigation.

Takeaway

It is important for employers to be aware of this new accommodation right for workers so that employers can begin the interactive process promptly as the need arises. Careful review of employee handbooks and job descriptions will aid employers in preparing to deal with these issues. The federal PUMP Act, which was also passed by Congress and went into effect late last year, requires accommodations for nursing mothers. Proper compliance with these evolving laws is

essential and employers should keep supervisors and human resource personnel well-trained regarding these developments. It is advisable for employers to map out and implement procedures for handling reasonable accommodation issues in a manner which complies with the law and in turn helps protect the employer from the cost of defending against EEOC charges and litigation.

Federal Appellate Court Rules the ADA Protects Gender Dysphoria

The federal Fourth Circuit Court of Appeals (which has jurisdiction over South Carolina, Virginia, West Virginia, North Carolina, and Maryland) has ruled, in a landmark decision, that the Americans with Disabilities Act (ADA) protects individuals with gender dysphoria.

Background

An individual meets the ADA’s definition of being disabled based on three conditions, “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” The ADA explicitly excludes gender identity disorders not resulting from physical impairments. However, “gender identity disorders” are not defined under the statute. The Diagnostic and Statistical Manual of Mental Disorders (DSM) in 1990 included gender identity disorder where there was an incongruence between the person’s sex and the gender in which the person identified. In 2013, the American Psychiatric Association decided to remove gender identity disorders from the DSM, while also adding a diagnosis for gender dysphoria. Gender dysphoria was defined as including clinically significant distress felt by someone who experiences an incongruence between their gender identity and their sex. Therefore, being transgender alone is not enough to be considered to have gender dysphoria, which includes distress.

Court’s Decision

In this case, a biological male identified as a woman while incarcerated in prison. The inmate was housed in a men’s prison because of the prison’s policy to classify individuals as male or female based on genitals, not self-identification. The inmate did not have genital surgery but was taking prescribed hormone medication for gender dysphoria. While incarcerated, the inmate sued the prison, claiming that the prison denied rights entitled under the ADA by not distributing the medication or otherwise accommodating the inmate for gender dysphoria.

The Court noted that the ADA’s specific exclusion of gender identity disorders not resulting from physical impairments should be understood as it was at the time of the enactment of the ADA. The Court concluded the inmate was able to sufficiently allege that the plaintiff’s gender dysphoria resulted in a physical distress entitled to classification under the ADA. This is in part because disability and physical impairment under the ADA were to be interpreted broadly. Furthermore, the Court reasoned that gender dysphoria does not constitute a gender identity disorder. The distinction was that gender dysphoria results in physical impairments and therefore can be considered an impairment under the ADA. These physical symptoms include distress or other disabling symptoms, such as depression, substance abuse, self-mutilation, and self-harm.

Takeaway

Under the Americans with Disabilities Act, an employer may be liable for discrimination for treating a disabled employee differently from other workers or for failing to make reasonable accommodations to the known limitations of the employee depending upon the circumstances. Although the plaintiff in this case was a prison inmate, not an employee, employers should be aware of this significant decision. The immediate result is that employers in the Fourth Circuit will have to comply with the ADA for this new classification of employees – those with gender dysphoria. Employers in other jurisdictions should continue to stay apprised of legal developments in this area and be prepared for related issues that may arise.

R. Eddie Wayland is a partner with the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.

May 31, 2023

Court Backs Employer’s Termination of Employee Over Lawful Use of CBD Where Employee Failed to Provide Sufficient Evidence of Disability for Anxiety

A federal district court recently ruled in favor of an employer who terminated its employee after two positive drug tests, holding that the employee failed to provide sufficient evidence that she was an individual with a disability to support her wrongful discharge claim. For this reason and other reasons discussed below, the Court concluded that the employer was also entitled to victory on the employee’s failure to accommodate claim.

Background

The employer had a drug testing policy which required employees who received an offer of employment to undergo drug and alcohol testing. At the beginning of her employment, the employee tested positive for marijuana and disclosed that she had a history of using CBD. She was permitted to take a second drug test and tested positive for marijuana again. The employee claimed that the positive drug tests were caused by legal over the counter CBD products, which she allegedly took to treat anxiety. Following the results of the second drug test, the employee was terminated.

The employee sued the employer for (1) wrongful discharge in violation of the Americans with Disabilities Act (“ADA”); (2) failure to accommodate in violation of the ADA; and (3) discrimination for lawful use of lawful products during nonworking hours in violation of state law.

The employer moved for a ruling in its favor on all claims. In support of her opposition to the employer’s motion, the employee relied upon her deposition testimony in which she stated that she told her medical provider that she was taking CBD oil to treat anxiety and pain, as well as a letter purportedly written by the employee’s medical provider indicating that the employee reported that she began taking CBD to treat anxiety and joint pain. The employee also submitted an affidavit in which she stated that she had anxiety resulting from an abusive relationship that limited her ability to interact with others, sleep, eat, and regulate her emotions. She further stated that she had debilitating muscle and joint pain and spasms throughout her body from multiple car accidents that limited her ability to sit, stand, walk, and manipulate objects with her hands. In addition, the employee submitted an email to her employer that she sent after the first positive drug test in which she offered to obtain verification from her doctor as to why she used CBD instead of prescription medication. In this email, the employee also described significant past trauma and mentioned that she had a service dog.

Court’s Decision

The ADA defines an individual with a disability as an individual with a physical or mental impairment that substantially limits one or more major life activities.

In an ADA wrongful discharge case, employees must demonstrate that (1) they are within the ADA’s protected class; (2) they were discharged; (3) at the time of their discharge, they were performing the job at a level that met their employer’s legitimate expectations; and (4) their discharge occurred under circumstances that raise a reasonable inference of unlawful discrimination.

The Court held that the evidence offered by the employee, whether considered separately or in combination, was insufficient to support an inference that the employee had a physical or mental impairment that substantially limited one or more of her major life activities. For instance, the Court noted that no reasonable factfinder could infer that the employee had a disability that substantially limited a major life activity merely from the fact that she may have a service dog. The Court further held that an employee’s statements to their employer in which they claim to have a physical or mental impairment, absent medical evidence, is insufficient to qualify the employee as disabled under the ADA. Accordingly, because the employee did not demonstrate that she had a disability under the ADA, her wrongful discharge claim failed.

The ADA also requires employers to provide reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability. With respect to a failure to accommodate claim, an employee must demonstrate that (1) they were an individual with a disability within the meaning of the ADA; (2) their employer had notice of their disability; (3) they could perform the essential functions of their job with reasonable accommodation; and (4) their employer refused to make such accommodations.

Like the other claim, because the evidence the employee submitted failed to demonstrate that she had a health condition that constituted a disability under the ADA, the Court held that such evidence was insufficient to prove that the employee put the employer on notice of her claimed disability. Further, the employee failed to provide evidence that she had requested a reasonable accommodation from her employer. Accordingly, the employee’s failure to accommodate claim also failed.

Takeaway

This case is not the first time a situation like this has occurred. It is also not the first time a court has ruled in favor of an employer in this type of situation either. As the court noted, an employer is not required to provide a reasonable accommodation to an employee who fails to provide sufficient evidence that they are disabled or fails to provide the employer with notice of their claimed disability. Here, the employee’s conduct and claims provided defenses for the employer. Not all situations are like this though. In addition to having well-written employment policies, it is important for employers to make sure supervisors and managers understand the ADA and how it impacts employees and employers, including the duty to explore possible accommodation if appropriate. Documented, consistent application of the policies and the law help to substantially lower potential liabilities an employer may face.

May 17, 2023

Employer Defeats Difficult Conditional Certification of FLSA Collective Action

A federal district court recently denied an employee’s motion for conditional certification of a collective action lawsuit under the Fair Labor Standards Act (“FLSA”), holding that the employee failed to meet the low standard of a “modest factual showing” that other similarly situated employees were victims of a common, allegedly unlawful policy. Specifically, the Court held that barebones affidavits submitted in support of the employee’s motion for conditional certification were insufficient against the Company’s lawful policy of prohibiting its hourly paid employees from working off the clock without compensation.

Background

The employee alleged that while working as a bartender at a restaurant, she and other hourly paid employees were required to perform unpaid off the clock work. Specifically, the employee claims that she was instructed to clock in and out at the times of her scheduled shift regardless of the time she actually worked to avoid overtime. The employer allegedly knew hourly paid employees were performing work off the clock without compensation. The employee alleges that if she did record overtime, the employer reprimanded her for violating the Company’s internal practice of avoiding overtime.

This alleged internal practice was inconsistent with the facially lawful policy in the employer’s company handbook, which prohibited its hourly paid employees from working off the clock without compensation. Specifically, the employer’s company handbook stated that “[a]t no time may a staff member perform work of any kind off the clock” and any violations of said policy “will result in disciplinary action, up to termination of employment.”

The employee sued the employer for violating the FLSA and other State law claims. After the Court denied the employer’s second motion to dismiss the lawsuit, the employee moved for conditional certification of her FLSA collective action. The employee submitted an affidavit in support of her motion for conditional certification along with the affidavit of her supervisor. In its opposition to the employee’s motion for conditional certification, the employer denied that it refused to compensate its hourly paid employees for all hours worked. The employer also submitted more than twelve declarations from employees and supervisors in support of its opposition.

Court’s Decision

Courts examine certification of FLSA collective actions using a two-step procedure. The first step is the conditional certification stage, and the second step is the decertification stage. At the conditional certification stage, the plaintiff is only required to make a “modest factual showing” that they and other employees were victims of a common policy that violated the FLSA. Courts have held that a “modest factual showing” is a low standard, but that mere speculation and unsupported assertions are not sufficient. Generally, conditional certification is typically granted. At the decertification stage, the employer is required to demonstrate that the opt-in plaintiffs are not, in fact, similarly situated to the named plaintiffs. This takes place after the discovery process and is more fact intensive.

In this case, the Court held that the lack of evidence that other similarly situated hourly paid employees worked off the clock without compensation was fatal to the employee’s request for conditional certification. The Court noted that the employee’s affidavit in support of her motion for conditional certification focused on her experience working as a bartender and alleged unpaid overtime. The Court further held that the “modest factual support” standard demands more than barebones affidavits where an employer has a facially lawful policy forbidding its hourly paid employees from working off the clock.

Takeaway

This case is a strong statement of the importance of well written and consistently enforced company policies. Because of its policies, the employer here was able to come out victorious in a situation where it is generally difficult for employers to prevail. This case also serves as a reminder for employers to instruct their managers and supervisors to enforce company policies that prohibit non-exempt employees from working before or after their scheduled shifts without compensation. Likewise, it is important that employers maintain and enforce policies requiring all non-exempt employees to accurately record their time.

May 3, 2023

Employer’s Win in EEOC Pregnancy Discrimination Litigation Upheld

An employer had a policy of offering temporary light duty status to employees who suffered an injury on the job. Litigation followed with allegations that the policy violated the federal Civil Rights Act of 1964 and Pregnancy Discrimination Act for denying all pregnant women a similar accommodation when light duty status was requested. The policy, however, was found by a federal district court to be a neutral and lawful policy. On appeal, the federal Seventh Circuit Court of Appeals (which has jurisdiction over Illinois, Wisconsin, and Indiana) affirmed this decision.

Background

The Equal Employment Opportunity Commission (EEOC) brought a lawsuit against an employer to challenge its policy called “Temporary Alternate Duty” which was used to accommodate workers injured on the job at one of the employer’s distribution centers. The policy allowed employees who were injured on the job to keep working and earn their full wages even while under medical restrictions. Employees injured on the job whose work normally required lifting were offered alternative work, including label backing, rack labeling, paperwork, and painting and detail cleaning.

Employees with medical restrictions that were not due to work-related injuries were not provided with light duty alternatives and were instead required to go on unpaid leave. This category included pregnant women who were restricted from being able to fully perform their job due to pregnancy related conditions.

The federal district court ruled in favor of the employer finding that the policy was lawful and neutrally applied. The EEOC appealed the decision.

Appellate Court’s Decision

On appeal, the federal appellate court determined that the employer’s light duty policy was not unlawful discrimination against pregnant women because it was a neutral policy that provided light duty status solely for those injured on the job. In doing so, the court looked first to whether there was a prima facie case which is demonstrated by showing there is (1) a protected class, (2) who sought an accommodation, (3) that the employer did not accommodate, and (4) that the employer accommodated others similar in their ability or inability to work. The court noted that this is not a difficult showing to make.

Once the showing was made, the burden switched to the employer to offer a legitimate, nondiscriminatory justification for denying the accommodation. Here, the employer cited to its policy to provide light duty to occupationally injured employees to implement a worker’s compensation program that benefits the employees while limiting the company’s legal exposure and costs of hiring people to replace injured workers. The court found this reasoning to be a legitimate, nondiscriminatory justification for the policy.

At the final step of the analysis, the burden shifted back to the EEOC to “provid[e] sufficient evidence that the employer’s policies impose a significant burden on pregnant workers, and that the employer’s ‘legitimate, nondiscriminatory’ reasons are not sufficiently strong to justify the burden, but rather—when considered along with the burden imposed—give rise to an inference of intentional discrimination.” This is where the court found the EEOC had failed because the employer’s policy was consistent with its justification for applying it only to workers injured on the job.

The Court noted, however, that the EEOC may have been able to show a significant burden to pregnant women giving rise to an inference of intentional discrimination through developing evidence on other accommodations that were provided to nonpregnant women, but denied for pregnant women, separate from the light duty policy. For example, earlier in the litigation, there was evidence presented that a woman was approved for a reduced schedule to attend school, but not later when she requested a reduced schedule for pregnancy related issues.

Takeaway

As the Seventh Circuit points out, the law does not require special treatment to a protected class for an otherwise neutral policy. Here, the employer was able to provide its employees who suffered injuries that qualified for workers’ compensation with a light duty accommodation while excluding all other employees. The Court is clear that this case would have been different if there was evidence that the employer intentionally discriminated against pregnant employees, instead of treating them like everyone else. This case demonstrates the importance of well-crafted policies that are followed consistently and precisely.

Additionally, it should be noted, however, the issue of whether discrimination existed is separate from the question of whether pregnant women are entitled to accommodations under the law. Employers should pay special attention to laws that require accommodations to be offered to employees with certain medical conditions, including pregnancy. Employers should stay apprised of legal developments in this area and craft policies in line with the ever-changing Federal and State laws and regulations

April 19, 2023

Trucking Companies Settle City of Los Angeles’s Lawsuit Over AB5 Enforcement

As our readers are well aware, AB5 has been wreaking havoc on the trucking industry in California. Those that have been impacted the most include those who are based in California and/or offer their independent contractors loads in California. Notably, the lawsuit discussed here was not filed by an owner-operator alleging that he was misclassified, but instead was brought by a governmental entity seeking to enforce the strict laws of California.

ABC Test

As a reminder, under the ABC test, which was set forth by the California Supreme Court in Dynamex Operations W. v. Superior Court and put into law through Assembly Bill 5 (“AB 5”), a worker is only considered an independent contractor if the hiring entity demonstrates that the worker (1) is free from the hiring entity’s control, (2) performs work that is outside the hiring entity’s line of business, and (3) operates as an independent business of the same nature as the work performed. In 2020, Assembly Bill 2257 was enacted to provide additional exemptions to the ABC test for more than 100 categories of workers. Despite protests by workers and efforts by trucking companies, the trucking industry and other professions whose workers are typically classified as independent contractors were not included in these additional exemptions.

Settlement

In 2018, the City of Los Angeles filed suit against six trucking companies, alleging the companies misclassified their truck drivers as independent contractors, rather than employees. The trucking companies fought the lawsuit on the basis that the truck drivers were properly classified and that California’s AB5 was preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). However, after a California appellate court ruled that AB5 was not preempted (of which the United States Supreme Court ultimately did not overrule), the parties began to discuss settlement. Eventually, the City of Los Angeles settled with the six trucking companies, three of which are now inoperative. As part of their settlement with the City of Los Angeles, each company agreed to pay $525,000 as part of the settlement. Additionally, the three companies that remain in business agreed not to hire owner-operator truck drivers as independent drivers for the next four years.

Takeaway

The application of California’s AB5 significantly burdens trucking companies that depend on hiring independent contractor owner-operator truck drivers. California’s strict worker classification law will continue to strain the trucking industry where companies will be forced to incur unavoidable higher costs resulting from classifying truck drivers as employees, rather than independent contractors, as well as the expense of rolling out new compliant employment policies. Trucking companies should continue to carefully evaluate the classification of their drivers and business operations considering these ongoing issues.

April 3, 2023

Multi-Million Dollar Settlement Ends Decade Long Class Action Litigation Against Trucking Company Over Misclassification

Recently, litigation over a trucking company’s classification of truck drivers as independent contractors reached a court-approved settlement for $7.3 million, following litigation that began in 2013.

Legal Background

Generally, employees receive legal protections and benefits independent contractors do not. As we have previously reported, in 2019, the California legislature passed AB5, which established the presumption that workers are employees unless: (A) the worker is free from the control and direction of the hiring entity; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business. The law expanded a ruling from the California Supreme Court decision in 2018, the Dynamex case, which set out the ABC test for classifying employees and overruled previous tests used. Questions of whether AB5 is preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) have endured since AB5 took effect. The U.S. Supreme Court announced in June 2022 that it would deny the California Trucking Association’s petition for a hearing over the legality of AB5.

Settlement Background

In the beginning of 2013, a truck driver filed a complaint against a trucking company in California federal court alleging that the company misclassified its workers as independent contractors and, as a result, owed them unpaid wages, business expenses, and failed to provide them with meal and rest breaks. These claims were brought under the Dynamex standard, which has become the operative law in California through legislation, as noted above.

In 2014, the company voluntarily transitioned its drivers in California into employees, while maintaining that the drivers were properly classified at all times. Following a defeat on a motion to dismiss the case, the company individually settled 93 percent of its outstanding claims with drivers who were potential class members. Litigation in the class action continued in 2015 after the case was transferred to a Tennessee federal court. In 2016, the company closed its Southern California operations. At the time of the class action settlement, in late 2022, the company had restructured its transportation operations in California so that no owner-operator drivers remained in the State.

Settlement

After years of litigation between the company and the class action plaintiffs, the parties met for a settlement meeting to discuss the likelihood that the plaintiffs would receive a favorable verdict at trial and retain it through appeal. The discussion also included the likelihood that the company could prevail on federal preemption issues it raised and whether the plaintiffs would succeed in obtaining and holding onto a class certification ruling. The parties were able to reach an agreement as to the terms of the settlement at the meeting, most notably that the company would pay millions to settle all claims.

The settlement included a class of current and former California-based truck drivers who worked for the company from January 2009 onward. The class was broken up into two subclasses: 1) those who had previously settled their claims individually with the company, and 2) those who had not previously settled their claims. The 632 drivers who previously accepted individual settlements, which ranged from $3,000 to $45,000 each, based on the driver’s tenure with the company, all received a “10% bump” from what they previously received. The remaining drivers who had not previously settled their claims were awarded their full amount from the settlement fund. The named plaintiffs received $25,000 each in the settlement and attorneys’ fees were also awarded by the Court. The final settlement approved by the court ordered the company to pay $7.25 million to the class, inclusive of attorneys’ fees and other costs.

Takeaway

Classification of drivers can be, and has been, thorns in the side of many trucking companies. When dealing with an area of law that is rapidly changing, such as classification of workers, companies could be engaged in litigation for years. While parties settle to manage the risks of costly litigation, trucking companies can reduce litigation risks by staying on top of developments in this area and proactively addressing potential issues in these specific individual operations and practices. Trucking companies should continue to carefully evaluate the classification of their drivers and business operations considering these ongoing issues.

March 15, 2023

NLRB Declares Severance Agreements That Broadly Waive “Labor Law Rights” Are Unlawful

The National Labor Relations Board recently issued a decision holding that employers may not offer severance agreements requiring employees to broadly waive “labor law rights”, such as through confidentiality clauses and non-disclosure clauses. This decision is a continuation of the Biden Administration’s and the new Board’s aggressive actions in favor of its pro-labor agenda.

Background

Section 8(a)(1) of the National Labor Relations Act (the “Act”) makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act, which are to self-organize, assist labor organizations, bargain collectively, and engage in concerted activity for the purpose of collective bargaining or other mutual aid or protection, or to refrain from such activities.

In 2020, the Board issued two decisions which held that employers generally did not violate the Act by offering employees severance agreements that included confidentiality and non-disparagement clauses. These decisions established a two-part test that a severance agreement would only violate the Act if (1) it required the employer proffering the agreement to have discharged the employee in violation of the Act or it committed another unfair labor practice (ULP) discriminating against employees; and (2) the employer “harbored animus” toward the exercise of Section 7 activity.

However, following the 2020 election, President Biden appointed new members to the Board shifting the political makeup and enforcement philosophy of the Board. The new Board then set its sights on these prior decisions along with many others.

Board Decision

With the liberal majority in charge, the Board overruled the aforementioned precedent, finding the two-part test irrelevant and citing to a restoration of older precedent which found that offering an employee a severance agreement broadly waiving “labor law rights” was unlawful by itself.

The issue presented to the Board was whether the employer had violated Section 8(a)(1) of the National Labor Relations Act by offering a severance agreement to 11 bargaining unit employees who were permanently furloughed. The employer furloughed the employees in response to COVID-19 government issued regulations which prohibited nonessential employees from working and dictated what services the employer could provide to consumers. The furloughing itself was not alleged to have been unlawful.

The employees were also offered severance compensation in exchange for signing a Severance Agreement, Waiver and Release. All 11 employees chose to accept the compensation and sign the Severance Agreement, Waiver and Release. The agreement required the employees to release the employer from any claims arising out of their employment and termination. The agreement also contained a confidentiality clause and a non-disclosure clause. In signing the agreement, the employees agreed not to disclose the terms of the agreement and not to make disparaging comments about the employer. The agreement also provided for penalties against the employee if the employees breached the agreement.

The Board, in its decision, overruled the previous decisions and decided that the employer violated the Act by offering the severance agreements. The Board also found it unlawful that the employer did not notify the Union and provide an opportunity to bargain over the severance agreements. The Board concluded that the terms on their face substantially interfered with guaranteed rights of employees such as making public statements. The Board stated the terms were not limited to past employment but would also restrict communicating about any labor dispute, and raising or assisting complaints about the employer to anyone including former coworkers, the Union, the Board, any other government agency, or the media. The Board found that the act of “proffering” severance agreements, which condition severance benefits on acceptance of a broad waiver of “rights”, is unlawful because the terms themselves are unlawful.

Takeaway

The recent NLRB decision was not surprising given the proposed agenda for the Board under the current administration. The two cases that were overruled were on the “hit list” for this Board. Nevertheless, employers need to carefully tailor severance agreements so as to not contain language that the Board has deemed a broad waiver of Section 7 rights. This will be an additional restriction placed on employers in connection with such release provisions and will limit employers in their ability to bind current and former employees to certain confidentiality

January 3, 2022

Court Allows Disabled Employee’s Lawsuit to Proceed Without Proving Position Existed

A federal court recently ruled against an employer that moved to dismiss a lawsuit with claims for discrimination related to the former employee’s discharge and failure to accommodate his disability. The court determined that the former employee only had to prove his physical condition could be considered a disability under the ADA, and that the employer failed to engage in the interactive process. The court ruled that the former employee did not have to prove a vacant position existed to accommodate his alleged disability in the early stages of litigation.

Background

Under the Americans with Disabilities Act, an employer is liable for discrimination for treating a disabled employee differently from other workers. An employer is also liable if it fails to engage in a reasonable accommodation interactive process with a disabled employee to determine whether reasonable accommodations exist to the known limitations of the employee. An individual meets the ADA’s definition of being disabled when they meet one of three conditions, “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” Congress amended the ADA to broaden the protections for employees with disabilities.

Cases decided after the amendments were enacted have held, for example, that a lifting restriction may be a substantial limitation of a major life activity. Therefore, a plaintiff can survive a motion to dismiss by alleging that his physical condition substantially affects his ability to lift because in doing so he may qualify as being disabled under the ADA. Furthermore, once it is determined that the employee has a disability under the ADA, the employer must engage in the interactive process to identify potential reasonable accommodations.

The former employee was employed as a driver and remained an employee when the company was purchased by the current employer. Subsequently, the former employee was injured on the job and five months later provided the employer with a letter from his physician releasing him to return to work with permanent restrictions. Two days after receiving the doctor’s note, the employer terminated him, stating “since your restrictions are permanent, unfortunately we are unable to accommodate.” After being terminated, the former employee sued the employer.

Court’s Decision

The court first determined that the former employee could establish that he had a disability under the ADA. The court found that the facts alleged made it plausible that the former employee possessed a physical impairment that substantially limited him in one or more major life activity and also that the employer regarded him as having such an impairment. This is because the former employee was limited in the major life activity of lifting.

Then, the court allowed the claim of failure to accommodate to survive despite the employer’s argument that the former employee did not prove there was a vacant position to accommodate him. The court cited to cases from the federal Seventh Circuit Court of Appeal (which has jurisdiction over Illinois, Indiana, and Wisconsin) which mandate employers to appoint disabled employees to vacant positions for which they are qualified, unless the employer could prove an undue hardship to the employer. An employer does not have to remove another employee to create the vacancy or create a new position, and the employer does not need to promote the disabled employee to accommodate him. The employer must, however, engage in the interactive process with the disabled employee to attempt to find a reasonable accommodation.

Here, the facts showed that the employer terminated the former employee two days after being informed that his restrictions were permanent. Moreover, the former employee was employed in the industry since 1999 and presented facts that showed he was qualified for a variety of other positions with the employer. The court stated that there must have been a position at with the employer that would not require lifting of over 35 pounds or pushing at 150 pounds, to meet the employee’s restrictions. At the very least, the former employee could state a claim sufficient to survive a motion to dismiss for failure to accommodate him. In sum, the employee did not need to prove right away that such a vacant position actually existed, only that the employer did not even attempt to look for one.

Takeaway

This case illustrates an example of an employer who terminated an employee shortly after learning of his restrictions. Often, employers overlook the fact that even when an employee cannot perform the essential functions of his job, the employer may still be obligated to attempt to reassign the employee or otherwise engage in the interactive process of considering possible available options. The key is the employer’s engagement in the interactive process. Failing to properly engage in the interactive process when an employee is disabled is a prima facie violation of the ADA. Before making the decision to terminate an employee who claims to be disabled under the ADA, properly engaging in the interactive process, along with seeking knowledgeable counsel, are essential in helping to potentially avoid costly litigation later.

January 3, 2022

Contractual Language is Not Determinative in Establishing Driver’s Status as an Independent Contractor or Employee

The federal Seventh Circuit Court of Appeals (which has jurisdiction over Illinois, Indiana, and Wisconsin) recently addressed the issue of whether language in a contract between a trucking company and a driver was determinative in deciding whether that driver was an independent contractor or an employee. The court found that a driver may not be classified as an independent contractor solely because his contract with the trucking company stated that he was an independent contractor.

Background

A driver engaging in hauling freight for a major trucking company sued the company and its two subsidiaries for alleged violations of minimum wage requirements under the federal Fair Labor Standards Act (“FLSA”), violations of State laws, and violations of federal Truth-in-Leasing regulations. The driver claimed that he was improperly classified as an independent contractor because he was allegedly treated as an employee. To state a claim under the FLSA, the individual must be an employee as determined by the FLSA. The district court decided that the driver could not state a claim because his contract with the company classified him as an independent contractor. The federal district court granted the company’s motion to dismiss the case. The driver appealed the decision to the federal Seventh Circuit.

Appellate Court’s Decision

On appeal, the court determined that the district court was incorrect in holding that a driver could not state a claim under the FLSA when the contract between the driver and company expressly classified the worker as an independent contractor. Instead, the court applied a six-factor “economic reality” test based on the following factors: (1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; and (6) the extent to which the service rendered is an integral part of the alleged employer’s business. In its ruling, the court considered whether the driver could perform work for other carriers, whether the driver could reject loads, whether the driver was subject to the same operational standards and policies as employee drivers, and the amount of control the company exercised over the driving behavior of the driver, among other factors.

After applying those factors, the court determined that the rights provided to the driver in his contract with the company to operate as an independent contractor were only theoretical and did not reflect the reality of the relationship. For example, even though in the contract the driver was required to supply his own truck, he leased his truck from the company. Additionally, the driver was subject to the same operational standards and policies as employee drivers and was subject to stringent requirements imposed by the company.

The court stated that no single factor was necessarily controlling, and the ultimate conclusion on employee status is made by examining the totality of the circumstances. In doing so, the court also noted that simply classifying a driver as an independent contractor in the contract between the driver and company was not enough. Ultimately, the court reinstated the driver’s lawsuit and sent the case back down to the federal district court to apply the economic realities test to determine, based on that test, whether the driver was really an independent contractor or actually an employee.

Takeaway

As the Seventh Circuit points out, by itself, expressing in a contract that a driver is an independent contractor will not be enough to establish that a driver is an independent contractor under the law. Furthermore, rights and obligations written in contracts tend to not be as important to courts, especially when they are different than the actual and practical relationship between the driver and company. It is important to note that different States and jurisdictions may have different laws for classifying workers as employees or independent contractors. Employers need to be aware of the laws that apply to their independent contractors and/or employee drivers. Employers must take those laws into consideration when exercising authority over or making decisions regarding classifying drivers.

January 3, 2022

Class Action Involving No-Poaching Agreements Settles for Millions

A class action against a nationwide company involving no-poaching agreements recently settled to the tune of $5,000,000. Although details of the settlement have not been fully disclosed, it is reported that the company agreed to pay approximately $5 million to resolve claims against it for alleged unlawful “no-poaching” provisions included in the company’s franchise agreements.

Background

No-poach clauses are agreements to restrict one employer from employing or seeking to employ a person who was employed by another employer. No poach clauses are not uncommon in the trucking industry. No-poach clauses can also be found in franchise agreements by restricting one franchise from employing a person from another franchise of the same company.

Here, the company required all its franchise owners to sign a franchise agreement clause stating that each would not employ or solicit for employment any company employee, including employees of the company’s affiliates or employees of another company franchises. Company-owned stores were also subject to this clause and could not solicit employees of company franchises.

Complaint and Settlement

A lawsuit was filed in the federal District Court for the Western District of Kentucky alleging that the company violated antitrust laws by including no-poach clauses in its franchise agreements. A few years ago, the Washington (State) Attorney General’s Office investigated no-poaching agreements in the company’s industry and multiple other States joined in the investigation as well. This company was one of the companies that agreed to remove the no-poach clause from its standard franchise agreement following the investigations.

The lawsuit alleged that the plaintiff and other members of the class were entitled to damages from the clause being enforced and because the clause had remained in some franchise agreements after the investigations. The lawsuit alleged that through use and enforcement of the no-poach clauses the class members would have otherwise received higher wages, better benefits and working conditions, and greater job choice mobility. The lawsuit also claimed that an employee’s skills and training at one company is company-specific and not transferable to other similar companies.

The lawsuit focused on Sherman Antitrust Act Section 1 which states that restraints on trade are unlawful. Violation of antitrust laws occurs when entities agree not to compete with one another regardless of whether the entities make the same products or compete for the same services. The lawsuit alleged that that the no-poach clause restricted competition in the labor market by suppressing competition over wages and benefits, resulting in artificially low wages, fewer benefits, worse working conditions, and reduced choice and mobility as to job and work location. The plaintiff and class members settled their claim for violation of Section 1 of the Sherman Antitrust Act for $5 million with a payout of hundreds of dollars to each employee class member.

Takeaway

No-poaching agreements are often found in the trucking industry for company drivers and/or in connection with brokerage operations. As this case shows, unless carefully crafted, such agreements can result in costly litigation and expenses. Here, the company even had express warning regarding their no-poaching agreements through the investigations but chose not to address the issue, which ultimately cost the company even more money. Employers in the trucking industry need to be aware of this case because, while the company involved was not directly involved in trucking, trucking industry employers are subject to the same laws and corresponding potential scrutiny.

January 3, 2022

DOL Proposes New Rule on Independent Contractors

The United States Department of Labor (“DOL”), through its Wage and Hour Division, recently proposed a new rule to change the test that is used to determine a worker’s status as an employee or independent contractor under federal law. This proposal is a significant change that employers, and especially those employers in the in the trucking industry, need to be aware of.

Background

Independent contractors are not covered under the Fair Labor Standards Act (“FLSA”) requirements that mandate employers pay the federal minimum wage and overtime, as well as keep certain records regarding employees. The FLSA does not define the term “independent contractor.”

In January 2021, at the end of President Trump’s administration, the DOL issued a rule adopting an “economic realities” test to determine status as an independent contractor. The rule identified five factors to determine status as an independent contractor. The nature and degree of control over the work and the worker’s opportunity for profit and loss were designated as core factors that carried the greatest weight in the analysis. Other factors included, the amount of skill required for the work, the degree of permanence of the working relationship between the worker and the employer, and whether the work was part of an integrated unit of production.

However, immediately upon assuming office, President Biden ordered that the rule be delayed from taking effect. After the delay, the DOL, under President Biden, announced it was withdrawing the rule and replacing it with a new rule.

New DOL Proposed Rule

The new DOL rule to determine whether a worker is classified as an independent contractor or an employee uses a totality of the circumstances analysis. In other words, each factor identified is to be considered and no factor is to be weighed over another, nor is the presence of one factor to be decisive in the determination. Each factor is reviewed with the ultimate inquiry of whether the worker is economically dependent on the employer for work or in business for themself. The rule then states that its list of factors is not exhaustive and that additional factors may be considered if they are relevant to this ultimate inquiry. The factors enumerated in the rule are as follows:

Opportunity for profit or loss depending on managerial skills – if the worker does not have an opportunity for profit or loss, including negotiating his own pay or engaging in marketing to expand the business, then the factor weighs in favor of the worker being an employee.
Investments by the worker and the employer – if the worker does not endure his own costs to perform the work such as by providing his own tools and equipment, then the factor weighs in favor of the worker being an employee.
Degree of permanence of the work relationship – if the work relationship is indefinite in duration or continuous, then the factor weighs in favor of the worker being an employee.
Nature and degree of control – if the worker does not control his own scheduling, supervision, setting prices or rates for goods or services, and ability to work for others, then the factor weighs in favor of the worker being an employee.
Extent to which the work performed is an integral part of the employer’s business – if the function of the worker’s performance, not the individual worker, is critical, necessary or central to the employer’s business then the factor weighs in favor of the worker being an employee.
Skill and initiative – if the worker does not use specialized skills or is dependent on training from the employer to perform the work then the factor weighs in favor of the worker being an employee.

Takeaway

Essentially, the old rule under President Trump’s administration made it easier for a determination that a worker was an independent contractor, while the new rule under President Biden makes it easier for a determination that a worker is an employee. It should be noted that the DOL itself does not have the power of the Congress to create new laws. However, the rule provides information as to how the DOL will use its authority to enforce the Fair Labor Standards Act. Employers need to be prepared for this enforcement. Furthermore, it is important for employers to consider State laws which can determine employee or independent contractor classifications. State laws and the courts’ interpretation of those laws could provide for different or additional factors under State law to qualify as an independent contractor for purposes of that State. This State law inquiry and analysis could also result in additional obligations required under State law, including the need to provide unemployment benefits and Workers’ Compensation.

January 3, 2022

NLRB Rules Employers Cannot Ban Union Apparel or Insignia Absent Special Circumstances

The National Labor Relations Board (“NLRB”) recently issued a decision holding that an employer may not interfere with an employee’s right to display union apparel or insignia absent special circumstances justifying the employer’s interference. This decision is significant because it overrules a previous NLRB decision, which was issued under the Trump Administration and held that the special circumstances test only applied to a complete ban of union apparel and insignia by an employer. The decision discussed herein reestablishes the application of the special circumstances test to any instance where an employer interferes in any way with an employee’s right to display union insignia.

Background

The employer’s teamwear policy mandated that all production associates wear the assigned teamwear, which consisted of black cotton shirts with the employer’s logo and black cotton pants with no buttons, rivets, or exposed zippers. Teamwear could be substituted with all black clothing if approved by a supervisor. Two production associates were reprimanded by production supervisors for wearing black union shirts, which did not comply with the team wear policy. Thereafter, production associates were prohibited from wearing black union shirts instead of team wear shirts but were permitted to wear union stickers on their required teamwear.

As a result of the reprimands, unfair labor practice charges were filed against the employer alleging violations of the employees’ rights. An Administrative Law Judge (“ALJ”) held that the employer violated Section 8(a)(1) of the National Labors Relations Act because it failed to demonstrate special circumstances justifying the teamwear policy, which implicitly prohibited employees from substituting any shirt, including one bearing union insignia, for the required teamwear.

NLRB’s Decision

On appeal, the NLRB held that the special circumstances test applies when an employer has prohibited an employee from wearing an article of clothing bearing union insignia based on the employer’s dress code policy requiring employees to wear certain clothing. The NLRB rejected the approach that the application of special circumstances test only applied to complete bans of union apparel. A special circumstance exists and can warrant an employer’s restrictions on the display of union apparel or insignia “when their display may jeopardize employee safety, damage machinery or products, exacerbate employee dissension, or unreasonably interfere with a public image that the employer has established, or when necessary to maintain decorum and discipline among employees.”

In this case, the NLRB rejected the employer’s argument that special circumstances existed warranting the facially neutral team wear policy. Specifically, the employer argued that its team wear policy was intended to lower the risk of production associates’ clothing causing damage to unfinished vehicles and that its policy was designed to aid in the visual management of the general assembly area. The Board ultimately affirmed the ALJ’s decision holding that the employer failed to establish special circumstances that justified its team wear policy’s implicit ban on employees wearing union shirts.

Takeaway

With this decision, the NLRB has returned to the pre-Trump precedent under which any limitation on the display of union apparel or insignia by an employer is presumptively unlawful,

absent special circumstances, regardless of whether the employer permits other related Section 7 activity. Under the special circumstances test, an employer will bear the burden of demonstrating a legitimate business objective warranting any restriction on an employee’s display of union apparel or insignia. Employers should be mindful of this decision when drafting, reviewing, and/or updating their employee handbooks or other workplace rules relating to dress codes and uniform policies.

November 14, 2022

New EEOC “Know Your Rights” Poster Released, Employers Must Display

By: R. Eddie Wayland, TCA Legal Counsel

The U.S. Equal Employment Opportunity Commission (EEOC) recently announced a new “Know Your Rights” poster. Employers are required by federal law to display this poster, which provides certain notices to their employees regarding federal employment laws. This updated poster replaces the previous “Equal Employment Opportunity is the Law” poster.

Background and Announcement

The EEOC provides guidance on the federal laws prohibiting employment discrimination. As part of its duties, the EEOC creates a poster that employers are required, by federal law, to display at their premises in conspicuous places. Failure to do so is punishable by a fine of $569 for each separate offense. The poster summarizes the rights of employees under the laws enforced by the EEOC, including Title VII of the Civil Rights Act, Americans with Disabilities Act, Equal Pay Act, Age Discrimination in Employment Act, and Genetic Information and Nondiscrimination Act. The poster also provides information to employees regarding how to file a charge of discrimination.

The new poster is reformatted from the previous EEOC poster with two pages of bullet-pointed sections summarizing the law, including a section on “What Types of Employment Discrimination are Illegal?” and “What Employment Practices can be Challenged as Discriminatory?” When announcing the new poster, the EEOC noted that the new poster specifically lists “harassment” as a prohibited form of discrimination and clarifies that sex discrimination includes “pregnancy and related conditions, sexual orientation, or gender identity.” The new poster also provides information for federal contractors. While the previous poster included the EEOC toll-free phone number and website, the new poster also provides a QR code

which can be scanned by an employee’s smart phone or device to link directly to the EEOC website for information regarding filing a charge of discrimination. The poster is also available in Spanish, with additional languages coming soon.

Employers are required to display this poster “in a conspicuous location in the workplace where notices to applicants and employees are customarily posted.” While typically this location includes in front of a human resources office or a lunch or break room, due to the recent increases in remote work, employers are encouraged to post a copy in a digital format where employees can view online. Displaying the poster online, however, does not replace the obligation to post the poster in a physical location, unless no physical location exists for the employer. The poster should also be in a place accessible to individuals with mobility limitations and applicants. Local and State laws may have additional poster display requirements for employers as well.

Takeaway

While the EEOC did not issue any compliance deadline for employers to post the new poster, employers should update their poster in a timely fashion, ensuring they have posted the “Know Your Rights: Workplace Discrimination is Illegal” poster, marked “Revised 10/20/2022”. Fines may be imposed on employers for noncompliance, in addition to other negative repercussions such as adverse inferences or impacts in a lawsuit or charge brought by an employee against the employer.

View the New Poster (Revised 10/20/2022) Here: https://www.eeoc.gov/poster

Eddie Wayland is a partner with the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.

November 2, 2022

NLRB Proposes New, More Expansive Joint Employer Rule

By: R. Eddie Wayland, TCA Legal Counsel

The National Labor Relations Board (“NLRB”) recently issued a Notice of Proposed Rulemaking, which would substantially expand the more narrow joint employer standard set forth in the 2020 Rule adopted by the NLRB during the Trump Administration. As we previously reported when it was adopted, the 2020 Rule, which became effective on April 27, 2020, replaced a prior more expansive Obama-era standard adopted by the NLRB in its 2015 Browning-Ferris decision. If adopted, the new proposed Biden Administration rule will broaden the standard for determining whether a business is a joint employer of employees directly employed by another employer under the National Labor Relations Act (“NLRA”).

Background – 2020 Joint Employer Rule

Under the current 2020 Rule, “substantial direct and immediate control” over the “essential terms and conditions of employment” by an employer is required to establish joint employer status. This rule defines “substantial” control as more than control exercised on a sporadic, isolated, or de minimis basis. The 2020 Rule identifies the “essential terms and conditions of employment,” as “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.” The 2020 Rule also provides that while indirect and reserved but unexercised control may be considered when determining joint employer status, such control cannot support a joint employer finding without evidence of substantial direct and immediate control.

New Proposed Joint Employer Rule

Like the Browning-Ferris standard, the joint employer standard under the proposed Biden Administration rule only requires “indirect control over another company’s employees” to

establish joint employer status. The proposed new rule further lacks guidance on what qualifies as “indirect control.” The proposed rule also provides that “[p]ossessing the authority to control [one or more essential terms and conditions of employment] is sufficient to establish status as a joint employer regardless of whether control is exercised.” In addition, the proposed rule not only expands the list of essential terms and conditions of employment provided under the 2020 Rule, but also provides that the more expansive list is not exhaustive. Specifically, the proposed rule provides that the essential terms and conditions of employment “generally include, but are not limited to: wages, benefits, and other compensation, hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.”

Public comments on the proposed joint employer rule must be submitted to the NLRB by November 7, 2022.

Takeaway

The proposed rule is less favorable for employers than the 2020 Rule, which is currently in effect. Under the proposed rule, a company could be required to bargain with another employer’s union and/or potentially face liability under the NLRA for any unfair labor practices committed by another employer if the company merely reserved the right to exert control over those employees’ terms and conditions of employment. If passed, the proposed rule could also complicate a company’s relationship with staffing agencies, as well as franchisee/franchisor relationships. Employers should consider seeking experienced legal counsel with any questions or concerns regarding how the proposed rule may affect them.

October 17, 2022

EEOC and DOJ Issue New Guidance on Use of Technology in Employment Decisions

By: R. Eddie Wayland, TCA Legal Counsel

The U.S. Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Justice (DOJ) recently announced new guidance to provide clarity on employers’ uses of technology including, software, algorithms, and artificial intelligence, to assess potential employees and current employees. The guidance addressed the potential for this technology to result in unlawful discrimination by employers and discussed the best practices to prevent violating the law when using such technology for evaluations that are used to make employment decisions. The guidance provides examples of technology employers are using, includes considerations for how these technologies could discriminate against individuals with disabilities, explains employers’ obligations under the ADA when using these technologies to make employment decisions, and informs employees of their rights.

Background

Employers are increasingly using technology, including software and applications that use algorithmic decision making and/or artificial intelligence. This includes automatic resume-screening software, chatbot software, video interviewing software and other software used for hiring, as well as employee monitoring software and worker management software used for evaluating current employees. Software used may incorporate algorithms and artificial intelligence, where the computer analyzes criteria, which is used by the employer to make decisions. Examples include when software scans resumes for certain keywords, when chatbots ask job candidates about their qualifications and filter for certain answers, when video monitors evaluate individuals and provide results to the employer, and when the evaluation requires certain mental and physical abilities to operate. Whether this technology is used in the hiring process for potential employees, or to make employment decisions for current employees, employers must ensure compliance with laws that prohibit discrimination.

EEOC and DOJ Announcement

The new guidance from the EEOC describes what and how technology is increasingly used by employers and how an employer’s use of technology could violate the law, including the Americans with Disabilities Act (“ADA”). According to the EEOC, common violations include when an employer fails to provide a reasonable accommodation which would fairly rate the employee or potential employee, when the employer screens out an individual with a disability, or the employer inquires about disability and medical information in violation of the law.

To prevent potential violations of the law, the EEOC recommends training staff to quickly recognize when a reasonable accommodation would be necessary, such as taking an evaluation in another format, and staff should be able to develop alternatives, such as other tests, or testing formats, or additional time to test. Employers should clearly describe how the evaluation is conducted by the technology and provide opportunities to request a reasonable accommodation. If a third-party administers the evaluation it should be instructed to forward all requests for a disability accommodation to the employer immediately. The evaluations should be designed to accurately measure directly what it is intended to measure and what is necessary for the job. The EEOC guidance also addresses what employees can do to prevent being treated unfairly by evaluations conducted using technology, such as speaking with the employer, or filing a charge if ADA rights have been violated.

Similarly, the DOJ’s guidance describes how algorithms and artificial intelligence could result in the employer engaging in unlawful discrimination by completing a task that would otherwise be conducted by a person. The DOJ listed the following ADA disabilities that may be potentially impacted: diabetes, cerebral palsy, deafness, blindness, epilepsy, mobility disabilities, intellectual disabilities, autism, and mental health disabilities. Employers must consider how hiring technologies could affect these or other disabilities. The DOJ emphasizes that the technologies should identify job skills, not disabilities, and not discriminate against an individual who is qualified for the job but may need a reasonable accommodation for the job. The DOJ also encourages job applicants and employees to be aware of their rights and seek help from the EEOC and DOJ (for state and local government jobs) for issues that arise when employer’s use technology in taking evaluations and making employment decisions.

Takeaway

The use of technology continues to expand, and employers are finding more ways than ever to utilized technology to improve efficiency and productivity. When using technology to make employment decisions, it is important to note that even if the employer uses technology (or does so through a third-party company) to administer evaluations, the employer can still be responsible for discrimination that has occurred. Automated results used by the employer to make decisions should be double-checked by a person trained and able to recognize discrimination issues that may arise and act before the employee or potential employee is discriminated against.

As process and use of technology continues to develop, employers must remember that associated legal responsibilities still apply. Employers should consider these issues when considering the use of technology in the workplace to make employment decisions and/or conducting evaluations of employees or potential employees using technology for employment decisions.

September 7, 2022

Religious Accommodation Where Employment Requirements and the Employee’s Religious Practices Conflict

By: R. Eddie Wayland, TCA Legal Counsel

An employee was a Sunday Sabbath observer who refused to work on Sundays and received a religious accommodation from his employer. The federal Third Circuit Court of Appeals (which has jurisdiction over Pennsylvania, Delaware, and New Jersey) was tasked with determining whether an accommodation is reasonable or acceptable if it does not eliminate the conflict between employment requirements and the employee’s religious practices.

Background

The employee worked for the employer as a non-career employee who provided coverage as needed. After the employment began, the employee’s location began requiring employees to work on Sundays. The employee transferred to another location, but that location also began requiring employees to work on Sundays as well. The employee informed his supervisor that he would not be reporting to work on Sundays due to his religious beliefs. The supervisor offered to adjust his schedule to allow him to attend Sunday morning religious services and report to work afterwards. Later, another employee offered to cover the employee’s shifts on Sundays but became unable to continue such coverage due to an injury.

Ultimately, shift swaps were implemented to accommodate work that needed to be done on Sundays as a reasonable accommodation for the employee. However, even during non-peak season, fellow employees who covered for the employee were faced with a larger workload due to the employee’s absence. The employee was disciplined when he was scheduled to work on Sundays but was absent. The supervisor himself was forced to cover at times to meet the workload and a tense atmosphere developed among the employees. Eventually, the employee resigned and filed a lawsuit in federal court against the employer alleging religious discrimination under Title VII of the Civil Rights Act, disparate treatment, and failure to accommodate. The trial court ruled in favor of the employer.

Appellate Court’s Decision

On appeal, the appellate court determined that the trial court was incorrect in holding that an accommodation does not need to wholly eliminate the conflict between a work requirement and a religious practice to be reasonable. Instead, an accommodation is reasonable if it “eliminates the conflict between employment requirements and religious practices.” This led the appellate court to the conclusion that “permitting a Sabbath observer to swap shifts would not be a reasonable accommodation if other employees are regularly unavailable to cover a Sabbath observer’s shifts.” In other words, to offer an accommodation, which in practice still results in infringing on the employee’s beliefs and practices, does not comply with Title VII. The appellate court determined that because no coverage was secured by the shift swapping, it was not a reasonable accommodation because it did not successfully eliminate the conflict.

The appellate court further noted that even though unpaid leave for a religious observance could be a reasonable accommodation, it may not be if the employer provides paid leave absences due to nonreligious work conflicts. The court also stated that if an employee’s religious observance prohibits working on a certain day, then offering the employee to attend religious services, but requiring the employee to work afterwards is not a reasonable accommodation and neither is offering the employee a different day of rest or holiday than that recognized by the employee’s religion.

The appellate court then turned to the next inquiry of whether the employee’s requested reasonable accommodation would cause the employer an undue hardship. Under this inquiry, an employer is not required “to accommodate at all costs.” Furthermore, an employer does not have to implement an accommodation that is an undue hardship, which is one that results in more than a “de minimis cost” to the employer. An undue hardship is evaluated on a case-by-case basis and both economic and non-economic costs are considered. Here, the appellate court determined that there was more than a de minimis cost for the employee to be exempted from all Sunday work because the work was actually imposed on the employee’s coworkers, disrupted the workplace and workflow, and diminished morale. Therefore, the appellate court affirmed the ruling in the employer’s favor.

Takeaway

As the Third Circuit points out, a religious accommodation should eliminate the conflict between employment requirements and the employee’s religious practices. This includes that employers may need to deviate from neutral policies to eliminate a conflict of an employee requesting an accommodation. Employers need to be fully informed on the employee’s requests for a religious accommodation and evaluate how those needs conflict with the needs of the workplace. Additionally, the accommodation that the employer implements must be effective and practical in actually eliminating the conflict, not just reasonable in theory. Lastly, employers should be prepared to justify any denial of the employee’s requests for accommodations with both economic and non-economic factors that make the requested accommodation an undue hardship on the employer. It is best to try to prevent costly litigation, however, by working with employees through an interactive process, documenting all conduct, and consulting with counsel when issues arise. Remember that employment laws such as Title VII can apply to public and private employees, as well as employees who are part-time, temporary, and non-career.

September 7, 2022

NLRB Continues its Aggressive Pro-Labor Agenda, Announcing Partnership with DOJ to “Enhance and Maximize the Enforcement of the Federal Laws”

By: R. Eddie Wayland, TCA Legal Counsel

A few months ago, we informed readers that President Biden’s administration had its sights set on business-friendly laws and regulations enacted under the Trump administration with a stated goal of becoming more employee and union-friendly. As part of that agenda, the NLRB entered into a partnership with the Department of Labor (“DOL”) to share information and conduct joint investigations and enforcement activities against employers, including independent contractor misclassification issues and other areas where the two agencies’ jurisdictions overlap.

Less than a month ago, in continuation of this agenda, we informed readers that the NLRB had announced a partnership with the Federal Trade Commission (“FTC”) with stated goals of “protect[ing] workers from anti-competitive and unfair labor practices” by “promot[ing] fair competition and advanc[ing] workers’ rights.”

Now, the NLRB has, once again, announced another partnership, this time with the Department of Justice (“DOJ”), with stated goals of “strengthening [their] collaborative relationship to enhance and maximize the enforcement of the federal laws administered and enforced by the two agencies.” This partnership is yet another push in the continuation of the Biden NLRB’s aggressive agenda.

Background – Previously Announced NLRB Partnerships

As a refresher, the DOL and the NLRB released a Memo of Understanding (“MOU”) announcing that the two agencies plan to share information regarding, among other areas, independent contractor misclassification. The MOU between the FTC and NLRB announced that these agencies will have a primary focus on “labor market developments relating to the ‘gig economy’ and other alternative work arrangements,” and including the misclassification of workers, the treatment of workers, and restrictive covenant provisions. These MOUs clearly implicate the trucking industry, along with others.

Department of Justice and NLRB Partnership

The new MOU with the DOJ is specifically between the NLRB and the DOJ’s Antitrust Division. In it, the MOU lists five ways that the two agencies intend to work together:

Coordinated Enforcement – The agencies will establish procedures for consulting and coordinating at various stages of their respective antitrust and labor law investigative and enforcement activities, aiming to promote coordinated enforcement initiatives. The coordination will include consulting on specific complaints or unfair labor practice charges.
Referrals – The agencies will refer matters to each other when one agency’s investigation uncovers conduct falling within the purview of the other agency. For example, when the NLRB detects potential antitrust violations, such as no-poaching agreements, while investigating conduct under the National Labor Relations Act, it will evaluate the conduct and potentially refer the matter to the Antitrust Division, which will then determine whether to open its own investigation into the conduct.
Appointing Liaisons – The agencies will designate one or more points of contact to meet, at least quarterly, to discuss topics of mutual interest.
Information Sharing – The agencies plan to share complaints, investigative files, reports and guidance on policy and enforcement matters.
Training, Education and Outreach – The agencies will provide training to each other’s staff to help them identify cases and issues that may arise under the other agency’s jurisdiction. They also intend on engaging in public outreach and education.

The MOU further notes that “[t]he Agencies specifically share an interest in protecting workers who have been harmed or may be at risk of being harmed as a result of interference with the rights of workers to obtain fair market compensation and to freely exercise their legal rights under the labor laws.”

In the press release announcing the MOU, NLRB General Counsel Jennifer Abruzzo stated: “Under the National Labor Relations Act , workers have the right to organize to improve their pay and working conditions. When businesses interfere with worker organizing, either through creating structures designed to evade labor law or through anticompetitive practices, it hinders our economy and our democracy. This MOU will strengthen the federal government’s ability to effectively stop this kind of unlawful activity and, therefore, to better protect workers’ right to freely associate with one another to improve their wages and working conditions and to collectively bargain through freely chosen representatives.”

Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division had this to say about the partnership: “By cooperating more closely with our colleagues in the NLRB, we can share information on potential violations of the antitrust and labor laws, collaborate on new policies and ensure that workers are protected from collusion and unlawful employer behavior. . . . [W]e support the Board’s ongoing efforts to update its guidance to ensure that workers are properly classified under the labor laws.”

Takeaway

Once again, classification of workers and other common industry practices are at the forefront of enforcement activities, and employers in the trucking industry must be vigilant. The DOJ and NLRB’s partnership should be another clear sign to employers that the Biden Administration and his agencies are expanding enforcement and are prepared to enforce their agenda through previously unused formal joint MOUs to help coordinate and assist each other in enforcement activities. Most notably, these two agencies have not been shy in stating that their ultimate goal is to ramp up enforcement activities. Since the DOJ Antitrust Division has criminal and civil prosecution authority under the Sherman Act, this cooperation and referral process arguably may significantly raise risks for those under investigation by the NLRB. Employers should be mindful of how these developments and potential changes may have an impact on their workforce. Ultimately, employers should be aware that if they have issues with one agency, they may well end up being in the crosshairs of a second agency

Mindful awareness of such changes and timely, appropriate proactive steps to minimize potential adverse consequences are prudent actions to consider. Once again be reminded of the old sailing adage: “You may not be able to control the force and direction of the wind, but you can adjust your sails.”

August 23, 2022

Employers Should Be Cautious Before Requiring Coronavirus Testing Now

By: R. Eddie Wayland, TCA Legal Counsel

The Equal Employment Opportunity Commission (EEOC) recently revised its ongoing Coronavirus “Guidance” Document with respect to when employers may require their employees and applicants for employment to undergo coronavirus testing. Under the new Guidance, employers should be cautious in requiring employees or applicants to undergo testing and should be hesitant to require testing unless the testing is “job-related and consistent with business necessity.”

Background

Throughout the pandemic, the EEOC has maintained that employers could require their employees to be regularly tested for the coronavirus. This is because “an individual with the virus will pose a direct threat to the health of others” so it automatically satisfied the Americans with Disabilities Act (“ADA”), which provides that employers may only require medical examinations or make medical inquiries where they are “job related and consistent with business necessity.” The EEOC also stated in the prior Guidance that “[t]esting administered by employers consistent with current guidance from the Centers for Disease Control (CDC) will meet the ADA’s ‘business necessity’ standard.” For the last two and a half years, the mere threat of exposing a workforce to the coronavirus satisfied the requirements. Lately, these “declarations of emergency” have, in large part, been allowed to lapse, thus creating a change in the EEOC’s position.

EEOC Updated Guidance

The new Guidance from the EEOC has removed the language stating that screening testing can be justified based on a direct threat analysis and replaced it with the statement that employers

who want to conduct mandatory coronavirus testing for screening purposes will need to show that it is “job-related and consistent with business necessity” within the meaning of the ADA.

The EEOC explained that “business necessity” is met in various circumstances:

(1) To comply with government requirements or guidance – If guidance from the CDC, FDA, or State or local public health authorities recommends coronavirus testing, then employers’ compliance with those guidelines will be considered a “business necessity.”

(2) Based on the likelihood of infection and transmission – Employers are to weigh the relevance and impact of a variety of factors, including: the level of community transmission, the vaccination status of employees, the accuracy and speed of processing various types of coronavirus tests, the degree of breakthrough infections among employees who are current on their vaccinations, the ease of transmissibility of the current variant, the possible severity of illness from the current variant, the types of contacts employees may have with others in the course of their work, and the potential impact on operations if an infected employee enters the workplace. The EEOC’s guidance advises employers to check the latest CDC guidance to determine whether screening testing is appropriate based on the listed factors.

(3) If an individual is exhibiting symptoms in the workplace – On an individualized basis, an employer may require further screening or coronavirus testing if the employee at work is exhibiting symptoms or an employer otherwise has a reasonable belief based on objective evidence that the individual has coronavirus, and testing would be consistent with recommendations by the CDC or other public health authorities.

The EEOC’s guidance permits employers to require coronavirus screening when one of the above circumstances apply. The guidance states that employers cannot require employees to submit an antibody test (as distinguished from a viral screening test) before reentering the workplace, however.

Employers may additionally screen job applicants for symptoms of coronavirus after making a conditional job offer, provided that screening is similarly administered to all employees in the same type of job who are entering the workplace. At the pre-offer stage, screening of job applicants before they come in for an interview is only permissible if the employer screens all individuals, including visitors and contractors, before permitting entry to the worksite.

Takeaway

Going forward, employers should generally be hesitant to require employees to be tested for the coronavirus. If an employer still wants to require testing, that employer must ensure that such testing is “job-related and consistent with business necessity.” Ultimately, this analysis will likely vary employer to employer, depending upon their workforce, as well as potentially office to office, if applicable. Employers should regularly check for updates from the EEOC and CDC, and regularly review their practices and policies to ensure appropriate compliance.

August 10, 2022

NLRB Continues its Aggressive Pro-Labor Agenda, Announcing Partnership with FTC to “Promote Fair Competition” and “Advance Workers’ Rights”

By: R. Eddie Wayland, TCA Legal Counsel

A few months ago, we informed readers that President Biden’s administration had its target set on business-friendly laws and regulations enacted under the Trump administration with a stated goal of becoming more employee and union-friendly. As part of that agenda, the NLRB entered into a partnership with the Department of Labor (“DOL”) to share information and conduct joint investigations and enforcement activities against employers, including independent contractor misclassification issues and other areas where the two agencies’ jurisdictions overlap.

Just last week, in continuation of its aggressive agenda, the NLRB announced a new and unprecedented partnership with the Federal Trade Commission (“FTC”) with stated goals of “protect[ing] workers from anti-competitive and unfair labor practices” by “promot[ing] fair competition and advanc[ing] workers’ rights.”

Background – Department of Labor and NLRB Partnership

As a refresher, the DOL and the NLRB released a Memo of Understanding (“MOU”) announcing that the two agencies plan to share information regarding unlawful compensation practices, retaliation based on the exercise of rights under the NLRA or laws enforced by the DOL, discriminatory failure to hire, and the issues of joint employer, alter ego, independent contractor misclassification, and business models designed to evade legal accountability. The MOU took effect early last December and will remain in effect for five years.

The agencies have agreed to advise employees when they have reason to believe that there may be “unlawful conduct that falls within the jurisdiction” of the other agency. Simply, if in the course of an investigation of an employer, one agency uncovers conduct that it believes may violate the other agencies laws, the investigating agency will advise employees that an opportunity may exist to pursue that conduct with the other agency.

FTC and NLRB Partnership

Under the newly announced MOU between the FTC and NLRB, these agencies will share information for law enforcement purposes and conduct cross-agency training and coordinated outreach and education. The agreement identifies areas of mutual interest for the two agencies with the primary focus being “labor market developments relating to the ‘gig economy’ and other alternative work arrangements.”

In the press release announcing the partnership, NLRB General Counsel Jennifer Abruzzo stated: Workers “have the right under federal law to act collectively to improve their working conditions. When businesses interfere with those rights . . . it hurts our entire nation. This MOU is critical to advancing a whole of government approach to combating unlawful conduct that harms workers.” Lina Khan, Chairman of the FTC, added: “We’re committed to using all the tools at our disposal to promote free and fair labor markets in which companies must compete with each other to attract and retain workers. This agreement will help advance our mission to crack down on anticompetitive mergers and unfair practices that deny workers and their families the pay, benefits, and conditions they deserve.”

The MOU’s list of “areas of mutual interest” between the two agencies also includes:

The extent and impact of labor market concentration
The imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions
Claims and disclosures about earnings and costs associated with gig and other work
The impact of algorithmic decision-making on workers
The ability of workers to act collectively
The misclassification and treatment of workers

The FTC’s new partnership with the NLRB furthers the aggressive agenda that is being advanced, with an increased focus on deceptive and unfair practices in labor markets, anti-competitive conduct, and worker protections. The FTC sees this partnership as part of a broader initiative to use its full authority to crack down on anticompetitive contract terms “that put workers at a disadvantage by leaving them unable to negotiate freely over the terms and conditions of their employment.”

Takeaway

The FTC and NLRB’s partnership should be another clear sign to employers that the Biden Administration and his agencies are expanding enforcement and prepared to enforce their agenda through previously unused formal joint MOUs to help coordinate and assist each other in enforcement activities. Most notably to employers in the trucking industry, the MOU specifically lists “classification” of workers and restrictive covenant provisions such as non-compete and non-disclosure provisions. These areas include both independent contractor and employee drivers, for example. Employers should be mindful of how these developments and potential changes may have an impact on their workforce.

Mindful awareness of such changes and timely, appropriate proactive steps to minimize potential adverse consequences are prudent actions to consider. Remember the old sailing adage: “You may not be able to control the force and direction of the wind, but you can adjust your sails.”

July 27, 2022

New DOL Guidance on Mental Health Conditions for FMLA Leave

By: R. Eddie Wayland, TCA Legal Counsel

The United States Department of Labor (“DOL”) recently announced new guidance on when employees may use leave under the Family and Medical Leave Act (“FMLA”) for their own or a family member’s mental health condition. This Legal Comment is a follow-up of our last Legal Comment which considered a recent federal court of appeal’s decision regarding an employer’s decision to deny FMLA leave to an employee.

Background

Under the FMLA, eligible employees of covered employers are entitled to take leave for up to 12 workweeks in a 12-month period. The leave required under the FMLA is unpaid and the employer must restore the employee to his position of employment or an equivalent position upon return from leave.

An employee is an eligible employee when the employee:

Worked for the employer for at least 12 months;
Worked 1,250 hours during preceding 12 months; and
Worked at a location where the employer has at least 50 employees within a 75-mile radius of the worksite or office.

An employer is a covered employer when the employer is a private-sector employee with 50 or more employees in 20 or more workweeks in the current or preceding calendar year, including a joint employer or successor in interest to a covered employer.

The qualifying events or reasons in which an employee is entitled to leave under the FMLA include:

Newborn/adoption,
Personal “serious health condition,”
Care for family member with a “serious health condition,”
Certain circumstances related to military service.

DOL Announcement

The new guidance from the DOL advises that a serious health condition can include a mental health condition. The FMLA provides leave for eligible employees to take for their own serious health conditions or to care for a spouse, child, or parent because of their serious health condition. To qualify as a serious health condition both mental and physical conditions must require inpatient care or continuing treatment by a health care provider.

The guidance provides that a mental health condition that qualifies as a serious health condition is one that requires inpatient care, including an overnight stay in a hospital, or other medical facility, such as a treatment center for addiction or eating disorders. Alternatively, a qualifying mental health condition may require continuing treatment by a health care provider. This includes conditions that incapacitate an individual for more than three consecutive days and require ongoing medical treatment. Ongoing medical treatment could be either multiple appointments with a health care provider or a single appointment and follow up care such as through prescription medication, outpatient rehabilitation counseling, or behavioral therapy. Continuing treatment could also be for chronic conditions such as anxiety, depression, or dissociative disorders that cause occasional periods when an individual is incapacitated and require treatment by a health care provider at least twice a year. A health care provider can include a psychiatrist, clinical psychologist, or clinical social worker.

The DOL also published Frequently Asked Questions on the FMLA’s mental health provisions (“FAQs”). The FAQs state that FMLA leave can be used for severe anxiety, depression, or anorexia nervosa, if the aforementioned requirements are met. Furthermore, an employee can qualify for FMLA leave for the mental health condition of the employee’s child that is over 18 years of age if the child is incapable of self-care because of a disability that is recognized under the Americans with Disabilities Act. Using FMLA leave to provide care for a family member includes helping with basic medical, hygienic, nutritional, or safety needs, and filling in for others who normally provide care. Care could also be in the form of participating in the family member’s medical treatment program or attending care conferences with the family member’s health care providers.

Takeaway

FMLA leave is not limited to physical health conditions, and employees may qualify for FMLA leave for mental health conditions of their own or that of a family member. It is important for employers to identify whether an employee’s leave qualifies under the FMLA because if an employee is on leave not properly designated under the FMLA, it does not count as FMLA leave. In other words, the clock does not start running on the 12 weeks of FMLA leave until the employer designates the leave as FMLA-protected and informs the employee the amount of leave that will be counted against the employee’s FMLA leave entitlement. Employers can enforce their usual and customary requirements for requesting leave and a doctor’s certification, including requirements outlined in an employee handbook. Also, as a reminder, employers are required to keep the employee’s records regarding FMLA confidential and cannot punish the employee in retaliation of using FMLA leave. Ultimately, employers need to be aware that mental health conditions can qualify for leave and act accordingly to ensure the FMLA designation is properly and timely made.

July 14, 2022

Denial of FMLA Leave Not Required for Employer to Have Interfered with Employee’s FMLA Rights

By: R. Eddie Wayland, TCA Legal Counsel

An employee worked for his employer for twenty-seven years, during which he periodically took leave under the Family and Medical Leave Act (FMLA). He retired and then filed a lawsuit against his employer after a conversation with his employer’s FMLA manager who allegedly discouraged him from taking more FMLA leave. On appeal, the federal Seventh Circuit Court of Appeals (which has jurisdiction over Illinois, Wisconsin, and Indiana) clarified that an employer can violate the FMLA simply by discouraging, not actually denying, an employee from exercising his rights under the FMLA.

Background

The employee was a 27-year employee with the employer. Over the 27 years, he had multiple medical conditions, including Post-Traumatic Stress Disorder. During his employment, he asked his FMLA leave manager about taking time off so he could receive recommended treatment for his PTSD. At that point, he had exhausted only 304 hours of his 480-hour allotment.

According to the employer, the employee asked for leave that would last several months, and the leave manager told him he did not have that much FMLA leave left. The employee then asked whether he would be fired, and the leave manager said that if he used leave he did not have, he would be charged for his absences once the FMLA leave was exhausted. The leave manager told the employee that he could not take FMLA leave he did not have.

According to the employee, he asked for a total of eight weeks’ leave, using all of his remaining FMLA leave, plus his sick and annual leave. He alleged that the leave manager told him, “You’ve taken serious amounts of FMLA . . . don’t take any more FMLA. If you do so, you will be disciplined.” The employee alleged that the leave manager’s statement made him afraid he would be fired for taking FMLA leave. Instead of taking the FMLA leave, the employee decided to retire.

After his retirement, the employee filed his suit against the employer, the FMLA manager, and other agents of the employer, for alleged violations of multiple federal laws, including the Family and Medical Leave Act. The trial court ruled in favor of the employer on the FMLA claim, noting that the employee was never denied FMLA leave. The employee appealed his claims regarding the FMLA.

Appellate Court’s Decision

There are two distinct theories of recovery under the FMLA. The first being through an interference claim where it is “unlawful for any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided” by the FMLA. The second being through a retaliation claim where an employer that “discharge[s] or in any other manner discriminate[s] against any individual for opposing any practice made unlawful by” the FMLA can be liable for retaliation. In this case, the court was required to address the first theory.

The court determined that based on the statutory text and context of the FMLA, denial of FMLA leave is not required for the employee to show that the employer interfered with his FMLA rights. The court held that the statutory text of the law is not ambiguous as to whether denial is required to show a violation, and that it is not required. Under the FMLA, it is unlawful to interfere with “the exercise of or the attempt to exercise” FMLA rights. The court noted that while denial would certainly be an interference, an interference does not have to be in the form of a denial.

Takeaway

As the Seventh Circuit points out, an employer can violate an employee’s FMLA rights through discouragement of exercising rights. An employee need not be denied FMLA leave for the employer to be liable for an FLMA interference claim. Furthermore, this case demonstrates that it is important to remember that, whether you are the President of the company or a benefits administrator in Human Resources, if you are a supervisor or executive, you are an agent of the company, and your words can impact the employer’s liability. The court noted that the parties have not litigated on appeal which of the defendants are proper defendants, but under the FMLA an employer is defined as “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” FMLA managers, HR representatives, and supervisors of employees should be well informed on FMLA issues such as this one. Lastly, it is good practice for managers and supervisors to document communications with employees, especially after verbal conversations, to help avoid the “he said, she said” issues which occurred in this case.

June 23, 2022

Office Birthday Party Costs Employer $450,000

By: R. Eddie Wayland, TCA Legal Counsel

An employee filed a lawsuit against his employer after his employer terminated him for his reaction to a surprise birthday party in his honor. The employee claimed that he was unlawfully discriminated against based on a disability, and that the employer failed to accommodate his disability, and retaliated against him. After a trial, the jury in Kentucky awarded him $450,000.

Background

Prior to his birthday, the employee asked his employer if they could skip the festivities that year, due to his anxiety disorder. The office manager, however, inadvertently did not relay the employee’s request to the birthday party coordinator. As such, despite the employee’s request, the employer held the surprise birthday party for the employee at lunchtime. The surprise allegedly triggered a panic attack that forced the employee to leave the office suddenly. The employee then ate the rest of his lunch in his car, and texted the office manager, saying that he was upset his request was not accommodated.

The next day, the employee’s supervisor and director of business operations met with the employee regarding his behavior during the celebration. During that meeting, the employee allegedly began to suffer a second panic attack. The employee then told his supervisors to be quiet, balled his fists, and became red-faced. Concerned by the behavior, the employer sent him home for the day. Three days later, the employer terminated the employee, citing concerns that other employees had been frightened for their safety when the employee suffered the panic attacks.

Court Case and Result

The employee filed a disability discrimination lawsuit against his employer under a state law which prohibits employers from discharging an employee because the person is a qualified individual with a disability. The employee alleged, among other things, that his employer failed to reasonably accommodate his request to not have a birthday party for him, and also failed to reasonably accommodate his request that his supervisor stop confronting him about his reaction to the birthday party. The employee also alleged that his requests were ignored and that he was terminated on the basis of his disability. The employer argued that the employee could not demonstrate that he had a disability that substantially limited a major life activity, and that it had a legitimate, nondiscriminatory reason for his discharge (i.e., workplace concerns for other employees’ safety).

After a two-day trial, the jury found in favor of the employee. The jury found that the employee had a defined disability; that he was able to perform the essential functions of his job with or without reasonable accommodations; and that he suffered an adverse employment action because of his disability. The jury awarded $450,000, which included $120,000 in lost wages and benefits; $30,000 in future lost wages and benefits; and $300,000 for past, present, and future mental pain and anguish. The employee was also entitled to recover his attorneys’ fees and costs.

Takeaway

As this case shows, even something as simple and innocent as an office birthday party for an employee can turn into a very expensive lesson if not handled properly. During the trial, the employer’s chief of staff admitted that she forgot to pass the accommodation request on to the person responsible for the office parties. Employers should make sure that employees understand that requests for accommodation must be taken seriously, and need to be referred to the appropriate individuals so that the situation can be handled appropriately. Additionally, employers need to be aware that the federal Americans with Disabilities Act and many state anti-discrimination laws generally prohibit discrimination and require reasonable accommodations for disabilities, which includes mental disabilities in addition to physical ones.

June 9, 2022

An Update on Recent Federal Arbitration Developments

By: R. Eddie Wayland, TCA Legal Counsel

There have been many actions in the courts and legislatures across the country lately involving arbitration. Two significant developments have come from the Congress and from the Supreme Court. Legislatively, the Congress has amended the Federal Arbitration Act (FAA) to make pre-dispute arbitration agreements relating to claims of sexual assault or sexual harassment invalid and unenforceable, and also to prohibit waivers of the right to bring such claims on a class or collective basis. Just across First Street in Washington, D.C., judicially, the Supreme Court has ruled that a party’s right to attempt to send a case to arbitration after first litigating the case does not hinge on whether the delay prejudiced the other party.

New Law Ends Arbitration of Sexual Harassment Claims

The FAA generally permits employers to enforce pre-dispute mandatory arbitration agreements with employees, precluding claimants from publicly filing claims in federal and state court. Passed by the Congress, and signed by the President, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” recently became law and amends the FAA. Effective March 3, 2022, any such claims that arise or accrue on or after that date are not required to go to pre-dispute arbitration. Those claims may also be brought as a joint, class, or collective action in cases involving workplace sexual harassment and sexual assault disputes.

These restrictions appear to apply to all existing arbitration agreements, even those signed prior to the Act’s enactment. As a result, the Act may effectively invalidate any current pre-dispute agreement forcing an employee to arbitrate a case related to a sexual harassment or sexual assault dispute, except as to disputes that have already arisen or accrued prior to enactment of the new federal law. The presumption that an arbitration agreement will govern claims of sexual harassment or sexual assault compelling an employee or other alleged victim to pursue those claims in an arbitration forum rather than in court no longer exists. Notably, however, the Act includes an exception that a claim may still go to arbitration but only if an employee elects to arbitrate a specific case after the alleged conduct has occurred. Additionally, the Act only bars enforcement of pre-dispute arbitration.

Employers who have adopted arbitration agreements and/or class or collective action waivers should update their existing arbitration agreements and waivers to take this new law into account. Furthermore, many States have also begun to legislate this area, including going further by banning more claims from arbitration than just the claims in the federal Act. Employers need to be cognizant of the implications of any state laws in the States where they are located.

A Waiver of a Right to Arbitration Does Not Require a Showing of Prejudice

The Supreme Court recently held that the FAA does not authorize federal courts to create arbitration-specific procedural rules. In doing so, the Supreme Court nixed a prejudice requirement that had been applied by multiple federal circuit courts. The Supreme Court determined that a party’s right to send a case to arbitration does not hinge on whether the delay prejudiced the other party.

Ruling on appeal, the Supreme Court was required to consider an Eighth Circuit Court of Appeals decision. The dispute stemmed from a wage and hour claim in which an employee alleged, among other things, that the employer capped paychecks at 80 hours per two-week period, regardless of hours worked. The employee filed a lawsuit in federal court. The employer litigated the case but then moved to compel arbitration. The employee claimed that the employer waived its right to arbitration. The Eighth Circuit held that the employee failed to show that the employer prejudiced her by acting inconsistently in invoking its arbitration agreement with her — in this case, waiting months to move to compel arbitration.

In reversing the decision of the Eighth Circuit, the Supreme Court held that FAA’s “policy favoring arbitration” did not permit federal courts to add arbitration-specific waiver rules – such as a prejudice requirement. Accordingly, when determining whether a party has waived their right to arbitration, a court should consider the conduct of the party and whether the party knowingly relinquished the right to arbitrate by acting inconsistently with that right.

Going forward, general claims of prejudice will not be a criterion that is considered by the courts when determining if a party has waived their right to arbitration. It is important for employers to be aware of their right to arbitrate, when applicable, and act upon that right timely and appropriately. By lowering the bar to show that employers waived the ability to compel arbitration, this decision may make it easier for some employees to keep class action claims in court and out of private individual proceedings.

Takeaway

As these recent actions show, changes in the field of arbitration are afoot. Employers, who utilize arbitration clauses with their employees or otherwise, need to stay informed and up to date on these changes as they will have significant impacts on the ability to arbitrate and the arbitration of claims brought by employees. It is advisable to consult with experienced legal counsel to make sure that you are aware of all of the applicable federal and state laws, and that your arbitration clauses are in compliance with those laws.

May 26, 2022

Federal Appellate Court Dismisses Age Discrimination Claim as Insufficient

By: R. Eddie Wayland, TCA Legal Counsel

A supervisor filed a lawsuit against his employer after his employer terminated him for allegedly placing a concealed camera in the office. The supervisor claimed that he was unlawfully terminated on account of his sex, in violation of Title VII, and age, in violation of the Age Discrimination in Employment Act (“ADEA”). The federal Fifth Circuit Court of Appeals (which has jurisdiction over Texas, Mississippi, and Louisiana) was tasked with determining whether the termination was a violation of the ADEA.

Background

As part of his duties, the supervisor supervised an entire department for his employer. During his employment, a manager complained to the supervisor about the behavior of another employee. The supervisor relayed the information to senior authorities and the employer opened an investigation into the allegations which concerned “highly inappropriate comments being made” in the workplace. During the investigation, the employer discovered that the supervisor had been present and even participated when sexually and racially inappropriate language was used in the workplace. The employer demoted the supervisor for his alleged involvement in fostering an inappropriate work environment.

A few months later, the supervisor allegedly placed a concealed camera in the department. Following this additional violation of company policy, the employer determined that the supervisor should be terminated.

After his termination, the supervisor filed a lawsuit alleging unlawful discrimination on account of his sex in violation of Title VII and age in violation of the ADEA. The federal district court ruled in favor of the employer on all claims. The employee appealed the ruling to the federal Fifth Circuit Court of Appeals, but dropped his sex discrimination claim.

Appellate Court’s Decision

Federal law provides, under the ADEA, that it is “unlawful for an employer . . . to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.” The Fifth Circuit noted that to prove such a case, a plaintiff must demonstrate that: “(1) he was discharged; (2) he was qualified for the position; (3) he was within the protected class at the time of discharge; and (4) he was either i) replaced by someone outside the protected class, ii) replaced by someone younger, or iii) otherwise discharged because of his age.” Once a plaintiff shows this, the employer must show that it has a legitimate, nondiscriminatory reason for the termination.

In ruling for the employer, the Fifth Circuit found that the supervisor’s basis for his claim was insufficient. In arguing that he was discriminated against on the basis of his age, the supervisor relied on testimony provided by his boss who stated that the supervisor “had not been adequately prepared or mentored” or “taught to be a leader”, and that the supervisor “struggled to engage and to learn more.” The supervisor claimed that these comments would allow a jury to determine that he was terminated because he was “old and slow.”

In rejecting this claim, the Fifth Circuit noted that, to prove age discrimination, the decision-maker’s comments must be “sufficiently suggestive of age bias.” By way of example, the Fifth Circuit stated that referring to a plaintiff as an “old goat”, or describing his appearance as “old man clothes” could suggest age bias.

Takeaway

As the Fifth Circuit points out, just because an employee claims that they were discriminated against, does not mean that they actually were. Specific evidence is required to advance discrimination claims. An employer’s decision to terminate an employee for in appropriate conduct or poor performance will not sufficiently support an allegation of discrimination where bias does not exist. Relatedly, it is important from employers to not only ensure there is appropriate and sufficient documentation that supports termination decisions, but also to train supervisors and employees on discrimination as a means of preventing it from emanating into the workplace.

May 12, 2022

An Employee May Be Terminated for Performance Issues Found During FMLA Leave

By: R. Eddie Wayland, TCA Legal Counsel

An employee filed a lawsuit against her employer after her employer terminated her for performance issues discovered while she was out of the office on leave under the Family and Medical Leave Act (FMLA). The federal 7th Circuit Court of Appeals (which has jurisdiction over Illinois, Wisconsin, and Indiana) was tasked with determining whether the termination was a violation of the FMLA.

Background

During the first year of her employment, the employee showed performance deficiencies in her work. The employee did not receive formal discipline or counseling for her deficiencies. Instead, her supervisor provided her with ongoing training.

Later that year, after using her available sick time for extended leave, the employee returned to work, but her performance continued to suffer. Upon her return, her supervisor questioned her about additional performance issues discovered while she was out. Her supervisor then created a spreadsheet to keep track of her performance issues after discovering another mistake.

About a month later, after continuing to go through health issues, the employee had to take leave under the FMLA. Before her leave, her supervisor made comments about the employee being “sick a lot” and needing “a full team there to run her department.” Shortly after the employee began her leave, the employer’s audit system discovered several more errors in the employee’s work. Then, a little later, a government agency that the employer worked with notified the employer of two additional errors that the employee made in the prior year.

Following the discovery of these errors, the employee’s supervisor recommended that the employee be terminated because of her poor performance. While the employee was on FMLA leave, the employer initiated an investigation into the employee’s performance.

Prior to the end of the investigation, the employee returned from her FMLA leave. Three days after the employee’s return to the office, the employer completed its investigation and terminated the employee the following day.

After her termination, the employee filed a lawsuit alleging violations of the Americans with Disabilities Act (ADA) and interference and retaliation arising under the FMLA. The federal district court ruled in favor of the employer on all claims. The employee appealed the ruling to the federal Seventh Circuit Court of Appeals, but dropped her ADA claim.

Appellate Court’s Decision

An employee is protected from termination for taking leave under the FMLA. An employee is also entitled to return to their same or an equivalent job at the end of their FMLA leave. The Seventh Circuit noted, however, that “an employee is not entitled to return to her former position if she would have been fired regardless of whether she took the leave.”

In ruling for the employer, the Seventh Circuit made multiple findings. First, the Seventh Circuit noted that the employee never disputed the employer’s issues with her work performance and that her supervisor began tracking her performance deficiencies months before she began her FMLA leave. Second, the Seventh Circuit considered the employer’s employment policies, which specifically stated that the employer could terminate the employment of an employee “without engaging in corrective counseling whenever the seriousness of the situation require[d].” Third, the Seventh Circuit held that her supervisor’s comments were not sufficient to cause an issue because the supervisor was not the final decision-maker regarding the termination of the employee. Lastly, the Seventh Circuit found that “[w]aiting to confirm the results of the investigation supports a finding that [the employer] terminated [the employee] based on performance,” not in retaliation for taking leave.

Takeaway

As the Seventh Circuit points out, just because an employee is out on FMLA leave or has recently returned from FMLA leave, it does not mean an employer cannot terminate that employee for legitimate performance issues. Furthermore, this case demonstrates the importance of having effective and clear policies. It also demonstrates the importance of following those policies and maintaining full and complete documentation of employee performance deficiencies, policy violations, and investigations. Employers should still be mindful to treat employees consistently with how other employees with similar performance or conduct issues have been treated.

April 28, 2022

NLRB Sets Its Sights on Independent Contractor Misclassification under the NLRA

By: R. Eddie Wayland, TCA Legal Counsel

The General Counsel for the National Labor Relations Board (“NLRB”) has set its sights on independent contractor misclassification under the National Labor Relations Act (“NLRA”). Significantly, the initial target for implementing this new enforcement strategy was a group of affiliated transportation, logistics and brokerage companies. The General Counsel recently issued a Complaint against these affiliated transportation companies, alleging that they were joint employers who violated the NLRA by improperly misclassifying drivers as independent contractors, rather than employee-drivers, and by engaging in other related violations.

Background

As readers may recall, a recent Legal Comment article addressed how, in December 2021, the NLRB sought public input on its analysis of independent contractor status under the NLRA. Many companies, including many of our readers, use independent contractors. Properly classified independent contractors are exempt from coverage of most relevant federal employment laws, including the NLRA and the separate Fair Labor Standards Act (“FLSA”), because such workers are not “employees” under the statutes. Therefore, independent contractors are not covered by the NLRA.

The Trump-era NLRB overruled the prior Obama-era standard for determining when a worker is an independent contractor and returned to a more balanced standard for businesses. This current standard takes into account various factors when evaluating whether a worker is an independent contractor, such as the amount of control a company exercises over a worker, level of skill needed for the job, and manner of payment. This standard makes it simpler for employers to classify workers as independent contractors under the NLRA. It is highly likely the Biden-era NLRB will seek to modify the current standard. In doing so, it will likely adopt a more difficult test for businesses to satisfy in classifying workers as independent contractors, such as the ABC test, for example. It follows that any such new standard probably will significantly increase the potential likelihood of “employee” status.

During the 2022 TCA Convention in Las Vegas last month, a session was conducted on this topic. The presentation discussed the Biden Administration’s pro-labor push, including in the area of independent contractor misclassification, involving both the NLRB and the Department of Labor (“DOL”), which administers and enforces the FLSA. The Biden Administration has a stated goal of being more union friendly, and more aggressive, resulting in a more radical overall approach. President Biden has previously proclaimed to organized labor that he “is going to be the strongest labor President you have ever had.”

The previously announced NLRB/DOL partnership to work together in a joint effort to address issues, including independent contractor misclassification, sends a clear message. This joint partnership program will continue to be implemented and realized as more and more related developments come out of the NLRB and the DOL. The issuance of this new Complaint by the NLRB General Counsel is a definite sign of the Biden Administration’s commitment to follow this path. It also shows that the General Counsel is not content on waiting for a new standard to be otherwise implemented under the NLRA.

General Counsel’s Complaint

The Complaint was issued on the authority of the new NLRB General Counsel, Jennifer Abruzzo, who was appointed by President Biden. The Complaint alleges that the employer and its affiliates violated Section 8(a)(1) of the NLRA by misclassifying drivers as independent contractors. The Complaint further alleges these entities also violated Sections 8(a)(1) and 8(a)(3) by engaging in other activities in violation of the workers’ NLRA Section 7 rights, such as interrogating a driver about his union activities and retaliating against drivers because they assisted the Teamsters Union in seeking to organize drivers. The Complaint seeks an affirmative order that the alleged joint employers must reclassify their independent contractor drivers as employees, and further seeks compensation for any harm the workers incurred, including being made whole for direct and foreseeable consequential harm, as a result of the misclassification as independent contractors, and other related violations.

It appears that the goal of this Complaint is to have a previous NLRB decision overturned and replaced with a more liberal ruling. The previous NLRB decision held that a company’s act of misclassifying drivers as independent contractors is not, standing alone, a violation of the NLRA. In addition, the previous NLRB decision also refused to issue an order directing the employer to reclassify the drivers as employees, but this new Complaint specifically seeks an order reclassifying the independent contractors and making them whole.

Notably, the Complaint does not set forth any specific allegations about the factors pertaining to misclassification, which may be grounds for dismissal. The lack of any factual allegations, however, is evidence of the General Counsel’s goal to create a standalone violation of the NLRA as a matter of law—apparently regardless of whether the company has a good faith belief that the workers are properly classified.

Takeaway

Ultimately, this new NLRB Complaint is further evidence of the continuing ideological shift in the Biden-era Board and in other federal agencies. Once again, at least for now, in the words of Bob Dylan “The Times They Are a-Changin.” This Complaint is only part of the early stages in an expected long line of aggressive actions that the Biden Administration and its federal agencies, including the DOL and the NLRB, are pursuing and will continue to pursue. Employers should continue to monitor developments in this area as we are only witnessing the beginning of these various legal developments.

April 14, 2022

Federal Court Reinstates Trump-era DOL Independent Contractor Rule

By: R. Eddie Wayland, TCA Legal Counsel

A Texas federal district court recently reinstated the independent contractor rule that was put into place by President Trump’s Department of Labor. The rule was previously withdrawn by the Biden Administration.

Background

At the end of the Trump Administration in January 2021, the Department of Labor (“DOL”) issued a rule that sought to clarify the controlling factors for who is, and who is not, an independent contractor for purposes of the Fair Labor Standards Act. The rule consisted of two main factors and three guiding factors to be evaluated. The two main factors were: (1) the level of control the individual has over his own work; and (2) the opportunity for profit or loss due to their own personal investment. If, and only if, the analysis of the two main factors proved inconclusive of determining independent contractor status, employers were to weigh the three guiding factors: (1) the level of skill of the role involved; (2) the permanence of the working relationship; and (3) how the role in question relates to the employer’s overall business operation. The rule also provided that employers could offer independent contractors certain employee benefits without impacting their classification status, but only if the workers satisfied the five-part test’s other provisions. The rule was widely regarded as favoring independent contractor status and was to take effect on March 8, 2021.

Shortly after taking office, but before the March 8 effective date, the Biden Administration delayed the effective date of the rule. A couple of months later, the Biden Administration ultimately withdrew the Trump-era rule. Following that decision by the Biden Administration, various business groups filed a lawsuit in federal court in Texas challenging the Biden administration’s actions.

District Court’s Decision

Ruling against the Biden Administration, the district court made two important determinations. First, the court concluded that the delay of the effective date of the Trump-era rule violated the Administrative Procedure Act in three different ways. Second, the court held that the withdrawal the Trump-era rule was arbitrary and capricious under the Administrative Procedure Act because it restricted comments to the question of whether or not to withdraw the Trump-era rule, rather than allowing the public to propose other alternatives such as modifying the standard set forth in that rule. The court concluded that “[b]y refusing to consider alternatives to the total withdrawal of the Independent Contractor Rule, the DOL failed to ‘consider important aspects of the problem before [it]’—the lack of clarity of the economic realities test and the need for regulatory certainty.”

Based upon these conclusions, the court overturned the Biden administration’s decisions and ruled that the Trump-era rule “became effective as of March 8, 2021, the rule’s original effective date, and remains in effect.”

Takeaway

As noted above, this decision has reinstated the Trump-era independent contractor rule. Therefore, at this time, employers should use this rule to determine independent contractor status. For now, this ruling will provide some direction as to how the Department of Labor should analyze the question of whether a worker is an independent contractor or an “employee” under the Fair Labor Standards Act (and thus entitled to, among other things, minimum wage). How long this rule will remain in place, however, is to be seen. The Biden Administration has not indicated whether it intends to appeal the decision. But whether there is an appeal or not, this decision does not permanently codify the Trump-era rule. It is highly like that the Biden Administration will now restart its efforts to have this rule withdrawn and be replaced with a new, more restrictive rule which is less favorable to establishing independent contractor status. Employers should continue to monitor developments in this area as we have not seen the end of this legal drama.

March 31, 2022

Supervisor’s Willful Safety Violation Does Not Absolve Company from OSHA Fine

By: R. Eddie Wayland, TCA Legal Counsel

The federal Fifth Circuit Court of Appeals (which oversees Texas, Mississippi, and Louisiana) recently affirmed a $35,000 fine against an employer whose foreman allowed his crew member to work while a violation continued, despite explicit instructions by a company manager to fix an Occupational Safety and Health Administration (“OSHA”) rules violation.

Background

An employer’s construction crew was installing a concrete drainage pipe alongside a road. For the first two days of the project, the crew had adequate protection from cave-ins. But beginning on day three, the work would be too close to the street to continue with the safety measure the company had been using. The company’s safety manager told the foreman on the job that the crew would need to start using a trench box, which is placed in the ditch and has walls that guard against cave-ins.

The supervisor did not follow the instructions. The very next day, a crew member entered the excavation despite the lack of a trench box. The supervisor admitted that he allowed the crew member to enter the excavation without a trench box. He further admitted that he did not follow the instructions because the crew member would only be in there for a short time, and it would take more work than necessary to complete the job. An OSHA Compliance Officer happened to visit the worksite while crew member was working in the trench without adequate protection. The inspector issued the employer a citation for the violation.

The employer appealed the decision to an Administrative Law Judge, and then to the Occupational Safety & Health Review Commission. Both upheld the fine. The employer then appealed those decisions to the federal Fifth Circuit Court of Appeals arguing that the foreman’s authorization of the violation — and disregard of his manager — was “unpreventable employee misconduct” and that the violation was not “willful” because of the manager’s instruction to comply.

Court of Appeals’ Decision

Under the Occupational Safety and Health Act, to establish a safety violation, it must be shown that the employer had actual or constructive knowledge of the unsafe conditions with reasonable due diligence, among other things. As the Fifth Circuit noted, because a corporation may only act through its agents, “it is usually liable for acts of its supervisors in the performance of their assigned duties.” An exception to this principle applies when the supervisor’s own conduct is the OSHA violation. The Fifth Circuit found that the exception did not apply here, however, as the violation was the crew member working in the trench without adequate protection. Although the supervisor allowed the violation to happen, the Fifth Circuit stated that “authorizing another’s violation is not the same as committing the violation oneself.” The Fifth Circuit also rejected the employer’s argument “that a supervisor’s knowledge cannot be imputed to the employer when the supervisor authorizes, or takes some other active role in, a subordinate’s safety violation.”

The employer also argued the unpreventable employee misconduct defense. This defense provides that even if OSHA can make a case of unlawful conduct, an employer is not liable if it can show that the violation resulted from unpreventable employee misconduct. This defense only works when an employer can prove that it has and enforces proper safety rules. Here, while the employer had safety rules, the Fifth Circuit found fault with the employer’s enforcement of those rules and ultimately rejected the unpreventable employee misconduct defense. The Fifth Circuit came to this conclusion by noting that the record showed that the employer never disciplined the crew member who was exposed to the hazard; and while the company had four OSHA rules violations in the past five years, and had conducted over 1,000 projects, it had only recorded two disciplinary actions for violations. The Fifth Circuit found this to show that at least two violations went unpunished, and the small number of disciplinary measures taken suggested that the employer did not enforce its safety rules, in light of the large number of projects.

Takeaway

This decision should serve as a notice to all employers that OSHA violations, even when wrongfully and willfully encouraged by a supervisor, can still result in liability to the employer. Employers should ensure that they have proper written safety rules and procedures in effect. Additionally, employers should make sure that all managers and agents of the company are properly trained on these rules and their enforcement. Lastly, employers must make certain that these rules are fully and properly enforced and that failures to abide by the rules are met with appropriate action and discipline as warranted.

March 17, 2022

California’s Meal and Rest Break Requirements are Preempted by FMCSA for Short-Haul Drivers, Too

By: R. Eddie Wayland, TCA Legal Counsel

The California Court of Appeals recently held that federal law preempts California’s meal and rest period requirements for short-haul drivers. In doing so, the California Court of Appeals reiterated that federal law preempts the meal and rest period requirements for motor carriers as a whole.

Background

A truck driver employee filed a lawsuit against his employer alleging various wage and hour violations, including failure to provide meal and rest periods, unfair business practices, and representative claims for penalties under the California Private Attorney General Act. The employer filed a motion for summary adjudication related to the meal and rest periods claim. The employer argued that California’s laws regarding meal and rest periods were preempted by federal regulations concerning commercial motor vehicle safety.

Trial Court’s Decision

The trial court denied the employer’s motion for summary adjudication. As such, the case went to trial and the employer was found to be in violation of the California laws. The employer appealed the decision.

Court of Appeals’ Decision

As readers may recall, the United States Court of Appeals for the 9th Circuit (which oversees California, Oregon, Washington, Arizona, Nevada, Idaho, Montana, Alaska, and Hawaii), recently held that the Federal Motor Carrier Safety Administration is responsible for regulating commercial motor carrier safety and that federal law preempts California’s meal and rest break rules. Here, to avoid this ruling, the employee argued that California requirements still applied to him, because the previous preemption ruling does not apply to short haul drivers because short-haul drivers are exempted from the 30-minute break rule under federal regulations.

The California Court of Appeals, however, did not agree. In reversing the trial court’s decision against the employer, the Court of Appeals stated: “[i]t is undisputed that certain [federal] hours of service rules apply to short-haul drivers, such as the daily limits on driving time and the daily and weekly limits on on-duty time. Thus the [hours of service] rules, as a general matter, apply to short-haul drivers. The fact that such drivers are exempted from one rule does not remove them from the universe of drivers subject to the hours of service rules, and it is not reasonable to read the language of the [FMCSA] order to suggest they are.”

Takeaway

In light of this decision, regardless of whether a California commercial truck driver is considered a long haul or short haul driver, California’s meal and rest break regulations are preempted by federal hours of service regulations—so long as the driver is a driver of property-carrying commercial motor vehicles and is subject to the FMCSA’s hours of service rules. Therefore, employers will need not comply with California’s meal and rest break regulations for those drivers. Employers must still be conscious of other California laws, however, to the extent that those laws may apply to their company and/or drivers.

March 3, 2022

Biden-era NLRB and DOL to Partner to Reverse Trump-era Labor Laws, Including Employer-Friendly Independent Contractor Standard

By: R. Eddie Wayland, TCA Legal Counsel

President Biden’s administration has its target set on business-friendly laws and regulations enacted under the Trump administration with a stated goal of becoming more employee and union friendly. Among the regulations targeted, the National Labor Relations Board (NLRB) under the Biden administration is eyeing changes to its joint employer standard and its independent contractor standard. The NLRB has also entered into a partnership with the Department of Labor (DOL) to share information and conduct joint investigations and enforcement activities against employers, including independent contractor misclassification issues and other areas where the two agencies’ jurisdictions overlap.

Joint Employer Standard

The NLRB announced in December 2021 that it will reexamine its joint employer standard. The NLRB’s joint employer analysis has significant implications for employers, as it determines when one entity jointly employs another entity’s workers for purposes of the National Labor Relations Act (NLRA). Among other results, a joint employer finding makes both entities liable for each other’s unfair labor practices. The Trump-era NLRB instituted a business-friendly standard that required that an entity have direct and immediate control over employee terms and conditions of work to be considered a joint employer. Biden’s NLRB is likely to restore the standard applied during the Obama-era or issue a similar rule. The Obama-era standard found joint employment status where one of the entities exercised only indirect control over another’s employees or had the unexercised right of control over such employees.

Independent Contractor Standard

In December 2021, the NLRB sought public input on its analysis of independent contractor status under the NLRA. Many companies, including many of our readers, use independent contractors to supplement their workforce. Independent contractors are exempt from coverage of most relevant federal employment laws, including the NLRA, because such workers are not “employees.” Therefore, independent contractors are not covered by the NLRA, including the right to unionize under the statute. The Trump-era NLRB overruled the prior Obama-era standard for determining when a worker is an independent contractor and returned to a more business-friendly standard. The current standard takes into account various factors when evaluating whether a worker is an independent contractor, such as the amount of control a company exercises over a worker, level of skill needed for the job, and manner of payment. This standard makes it easier for employers to classify workers as independent contractors under the NLRA. It is highly likely the Biden NLRB will modify the current standard and adopt a more difficult test that restricts when a company can classify someone as an independent contractor, such as the ABC test, for example. It is likely that the new standard will significantly increase the potential likelihood of “employee” status.

Department of Labor and NLRB Partnership

Lastly, the DOL and the NLRB released a Memo of Understanding (MOU) announcing that the two agencies will be collaborating “to strengthen the agencies’ partnership through greater coordination in information sharing, joint investigations and enforcement activity, training, education, and outreach.” The MOU took effect early December and will remain in effect for five years. The MOU states that the DOL and NLRB “may share, … any information or data that supports each agency’s enforcement mandates, whether obtained in the course of an investigation or through any other sources to the extent permitted by law.” The agencies plan to share information regarding unlawful compensation practices, retaliation based on the exercise of rights under the NLRA or laws enforced by the DOL, discriminatory failure to hire, and the issues of joint employer, alter ego, independent contractor misclassification, and business models designed to evade legal accountability.

The DOL also recently announced that it will be hiring 100 new investigators to boost enforcement efforts. The DOL’s hiring surge, as well as the partnership between the DOL and NLRB, are part of a broader push to promote President Biden’s pro-labor mandate. The impact will likely result in more enforcement actions by each agency and related increased legal challenges for employers in the years ahead.

Takeaway

Presently, the existing NLRB and DOL standards for joint employer status and independent contractor status remain the status quo. The future of these current standards is certainly in play, however. It is likely the NLRB will issue standards that are more employee and union friendly. Employers who have independent contractors should take notice that determining whether workers are employees or independent contractors may get more difficult under the NLRA in the near future. In the meantime, the DOL and NLRB’s partnership will likely result in a renewed interest in investigation and enforcement activity from both the DOL and NLRB. Wage and Hour audits may now come with the additional risk factor of an unfair labor practice charge, or a union campaign could produce an investigation or lawsuit for employee misclassification. Employers should be mindful of how these developments and potential changes in existing standards may have an impact on their workforce.

Mindful awareness of such changes and timely, appropriate proactive steps to minimize potential adverse consequences of potential new standards are prudent actions to consider. Remember the old sailing adage: “You may not be able to control the force and direction of the wind, but you can adjust your sails.”

February 16, 2022

An Employer’s Rights When Faced with a Strike

By: R. Eddie Wayland, TCA Legal Counsel

Employers faced with a strike, or a potential strike, often wonder whether they can seek injunctive relief in federal or state court. This Legal Comment explores those options and discusses an example from Alabama where a State court provided necessary relief.

Background

The difficulties and shortages in supplies and labor created by the pandemic have resulted in an increase in strikes and possible strikes across the country. Some employees faced difficulty during the pandemic and can become frustrated by what they allege is unfair treatment. This perception and related developments have led to a time of more frequent and widespread strike activity. Employers faced with a strike, or a possible strike, may seek to determine their legal options to prevent or mitigate the effects of a strike, including injunctive relief.

Federal Court

Federal law prohibits courts from enjoining (stopping) employees’ rights to lawfully strike. However, courts may enjoin a strike if the strike conduct is unlawful. Whether the strike conduct is unlawful is depending on the facts of the labor dispute.

Under federal law, courts are prohibited from enjoining the following: (i) striking or refusing to work in protest; (ii) becoming a union member; (iii) paying or withholding unemployment benefits, insurance, money, or things of value to a person participating in a labor dispute; (iv) providing legal assistance to those involved in a labor dispute; (v) picketing or other public displays of support for or opposition to labor practice; (vi) peacefully assembling in public or private; and (vii) agreeing to or urging others to engage in or refrain from any of these activities.

In order to enjoin a strike under federal law, there are rigid procedural requirements that must be met. The lawfulness of a strike may depend on the object, or purpose, of the strike, its timing, or the conduct of the strikers. A strike may be unlawful if it has an unlawful objective or if unlawful means are employed. Unlawful objectives include inducing or engaging in a strike for secondary purposes, striking for jurisdictional or work-assignment purposes, and striking for recognition of a union as bargaining agent under certain conditions. Unlawful means include sit-down strikes, minority strikes, partial strikes, work slowdowns, and picket line misconduct or violence, among others. Courts may also enjoin strikes that are in contravention of a no-strike agreement, or in some circumstances work stoppages over disputes subject to a grievance and arbitration procedure in a collective bargaining agreement.

When an employer seeks relief in federal court prohibiting any of the above labor activities, the employer must show why the conduct at issue should be enjoined. A court can issue an injunction only where it finds: (i) the unlawful acts will continue unless restrained; (ii) substantial and irreparable injury will occur if the action is not enjoined; (iii) the balance of hardships between the parties favors the injunction; (iv) there is no adequate remedy at law; and (v) public officers are unable to furnish adequate protection to protect complainant’s property.

State Court

While issues dealing with strikes generally falls under the federal government’s jurisdiction, employers may also have the option to seek an injunction in State court if there is unlawful conduct during a strike. In a recent case in Alabama, a state court temporarily prohibited picketing at the Employer’s properties due to the violent nature of the labor dispute. The Alabama State court issued an order temporarily prohibiting all picketing at the employer’s properties based on video showing picketers attacking non-strikers, personal vehicles, property, and uninvolved community members and interfering with company operations. State courts have authority to enjoin strikes when it poses a threat to the public’s health and safety, trespass occurs, there is blocking or attempting to block ingress or egress of vehicles at employer’s facilities, and for property rights and protection.

Takeaway

General, lawful strikes and picketing cannot be stopped because they are protected by the law. However, there may be grounds for injunctive relief in federal or State courts where a strike includes dangerous, violent, or threatening activity. While the law guarantees the right of employees to strike, the law also places limitations and qualifications on the exercise of that right. Employers who anticipate a strike or are concerned with a threat of being involved in a strike should proceed cautiously and on the basis of competent legal advice.

February 3, 2022

Supreme Court Halts Enforcement of Biden OSHA Vaccination or Weekly Testing Mandate

By: R. Eddie Wayland, TCA Legal Counsel

On January 13, the Supreme Court of the United States stayed OSHA’s Emergency Temporary Standard (“ETS”) requiring employers with 100 or more employees to implement a mandatory vaccination policy for their employees or have unvaccinated employees submit to weekly COVID-19 testing and wear a mask at work. The ETS went into effect on January 10, 2022, but the ruling immediately stops enforcement of the ETS.

Background

On November 4, 2021, following direction by the Biden Administration, OSHA issued an ETS requiring employers with 100 or more employees to implement a mandatory vaccination policy for their employees or have unvaccinated employees submit to weekly COVID-19 testing and wear a mask at work. The ETS was immediately challenged in federal courts by various employers, business interest groups, and States. The federal Fifth Circuit Court of Appeals stayed enforcement of the ETS citing “grave statutory and constitutional issues.”

Following multiple challenges in various federal courts across the entire country, the challenges were consolidated through a procedural move into the federal Sixth Circuit Court of Appeals. The consolidation put all of the challenges to the ETS into one challenge before the Sixth Circuit. On December 17, 2021, the Sixth Circuit dissolved the stay by the Fifth Circuit and allowed the ETS to go into effect. The decision was immediately appealed to the Supreme Court, asking the Court to once again halt enforcement of the ETS.

In the wake of the Sixth Circuit’s decision, OSHA released a statement delaying the original enforcement dates of the mandate. OSHA stated that it “will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard.” On January 10, 2022, the ETS went into effect.

Supreme Court Halts Enforcement of Mandate

Following oral arguments, and 3 days after the ETS went into effect, the Supreme Court stayed enforcement of the ETS. The Supreme Court held that the stay was appropriate because those challenging the ETS were likely to succeed on their claim that the Secretary of Labor lacked authority to impose the mandate. The Supreme Court found that while OSHA has the authority to regulate workplace health and safety, COVID-19 extends well beyond the workplace. “Permitting OSHA to regulate the hazards of daily life—simply because most Americans have jobs and face those same risks while on the clock—would significantly expand OSHA’s regulatory authority without clear congressional authorization.”

This ruling means that OSHA cannot enforce the ETS, and employers need not comply. Because the ETS came to the Supreme Court on an emergency appeal to stay the mandate and not on a merits-based appeal, the case will now go back to the Sixth Circuit for a ruling on the legal merits of the case. The Sixth Circuit will have to determine if the Secretary of Labor lacked authority to impose the mandate. Given the Supreme Court’s guidance on the issue through this opinion, however, it is likely the Sixth Circuit will agree with the Supreme Court and the pending ETS will not take effect.

Takeaway

The Supreme Court’s decision to halt enforcement of the ETS is both a win for employers and for the Constitution. Employers need not worry about this ETS for the time being. Compliance is not required, and it is unlikely that compliance with this ETS will be required when the Sixth Circuit issues its ruling on the legal merits of the case. It is anticipated that it will be a number of months before the Sixth Circuit issues this ruling. Employers must still be cognizant of applicable State and local mandates that are in effect around the country and could be coming following this decision.

January 20, 2022

A Multi-Million Dollar Cautionary Tale Regarding Implementation of Diversity Programs

By: R. Eddie Wayland, TCA Legal Counsel

An Employee filed a lawsuit against his Employer under Title VII of the Civil Rights Act of 1964 alleging that he and seven other white male executives were fired as part of the Employer’s “diversity” push. A jury of his peers found that he was terminated based on his race and sex. The jury awarded him $10,000,000 in punitive damages, with a hearing set for a later date to determine back pay, front pay/reinstatement, attorneys’ fees, and other damages.

Background

The Employee had been employed as the Senior Vice President of Marketing and Communications for nearly five years. The Employee had received positive evaluations every year and was hitting his targets set by the Employer. Despite his positive evaluations, the Employee was terminated and replaced with a white female and a black female who shared his former duties. The Employee filed suit against the Employer in federal court in North Carolina alleging that he had been wrongfully terminated and that his termination had been motivated by his race and sex in violation of Title VII of the Civil Rights Act of 1964.

Court Decision

To prove his claims, the Employee asserted that he could prove discrimination using a “mixed motive” approach and that evidence could be used to demonstrate that his race and gender were motivating factors in the employer’s decision to fire him. His evidence included an alleged pattern of white males being terminated from employment and the specifics of the Employer’s new-founded Diversity, Equity & Inclusion (“DE&I”) program.

The Employee pointed to evidence that the Diversity and Inclusion Executive Council, formed under the DE&I program, determined in 2018 that the Employer was failing to meet its diversity targets, specifically within its leadership ranks. Relying on the Employer’s “nine-box” performance ratings document from 2017 for all senior leaders, the Employee was able to demonstrate that by 2019, every white male on the document had been terminated and every woman and minority on that same document had been promoted. The Employee also presented evidence that the Employer’s diversity statistics from 2016-2019 showed a 5.9% decrease in white employees at or above the Vice President level as well as contemporaneous increases in the numbers of women and minorities. The Employee also pointed to the proximity between the Council’s meeting regarding these targets and the discharge of the first white male member of leadership within the same month. Additionally, the Employee presented evidence that when a recruitment firm contacted the Employer to enquire about plaintiff’s employability following his termination, the Employer specifically indicated that his performance was not the reason for his termination.

In attempting to defend its decision and the DE&I program, the Employer presented evidence that the Employee had admitted that he had never been subject to discrimination while employed. It also argued that the Employee had been consistently underperforming and that, while his evaluations were strong generally, he was often described as lacking potential and failing to engage with his peers. The Employer asserted that it expected its senior executives “to be exceptional, not just good,” and had a legitimate performance-based explanation for its discharge decision.

After a lengthy trial, the jury hand down a verdict in favor of the Employee. The jury found that he proved that his race and sex were a motivating factor in the Employer’s decision to terminate his employment and that the Employer did not prove that it would have made the same decision to discharge the Employee regardless of his race or sex. The jury awarded the Employee $10 million in punitive damages and set a later hearing to determine back pay, front pay/reinstatement, and other damages.

Takeaway

This case serves as a reminder that if an employer decides to implement a diversity program, it should be created, administered, and implemented in a wholly non-discriminatory manner. As this case illustrates, any classification of individuals in the workplace can be subject to alleged discrimination. While diversity programs can and should be a positive vehicle for promoting diversity in the workplace, employers should take time to review any diversity programs and initiatives to ensure the clear communication and implementation of their programs, including avoiding any overly robust implementation strategies that may attempt to “increase diversity” through potential discrimination with respect to other classifications.

January 6, 2022

Sixth Circuit Revives Vaccination or Weekly Testing Mandate, OSHA Delays Enforcement

By: R. Eddie Wayland, TCA Legal Counsel

Readers will recall that we recently wrote about President Biden’s vaccine mandate which took shape in the form of an Emergency Temporary Standard (“ETS”) promulgated by the Occupational Safety and Health Administration (“OSHA”). Although enforcement of the ETS was halted by the federal Fifth Circuit Court of Appeals, the federal Sixth Circuit Court of Appeals recently revived the ETS allowing it to go into effect. In response to the Sixth Circuit’s ruling, OSHA has delayed the deadlines for compliance.

Background

On November 4, 2021, following direction by the Biden Administration, OSHA issued an ETS requiring employers with 100 or more employees to implement a mandatory vaccination policy for their employees or have unvaccinated employees submit to weekly COVID-19 testing and wear a mask at work. On November 5, 2012, one day after OSHA issued its ETS, the ETS was published in the Federal Register, making the ETS effective and starting the clock on the compliance deadlines. Upon publication, the ETS was immediately challenged in federal courts by various employers, business interest groups, and States. One day later, the federal Fifth Circuit Court of Appeals stayed enforcement of the ETS citing “grave statutory and constitutional issues.”

Federal Sixth Circuit Court of Appeals Revives Mandate

As a three-judge panel, the Sixth Circuit held that OSHA had “demonstrated the pervasive danger that COVID-19 poses to workers—unvaccinated workers in particular—in their workplaces,” that regulating an “agent that causes bodily harm”—including a virus—falls squarely within OSHA’s rulemaking authority, and noting that “Congress expressly included funding for OSHA in the American Rescue Plan that is to be used ‘to carry out COVID-19 related worker protection activities.’” Accordingly, the Sixth Circuit dissolved the stay and allowed the ETS to go into effect.

In dissent, Judge Larsen concluded that OSHA could not offer a sufficient showing that COVID-19 posed a “grave danger” to the American workplace, and that because “Congress has clearly marked the perimeter of OSHA’s authority: the workplace walls,” OSHA had exceeded the scope of its authority. As such, the dissent would have maintained the stay. This position largely matches the previous ruling by the Fifth Circuit.

The decision was immediately appealed to the Supreme Court, asking the court to once again halt enforcement of the ETS. The Supreme Court has given the government until December 30, 2022, to respond to the appeal. Therefore, it is not expected that the Supreme Court will make a ruling until after that time.

OSHA Delays Enforcement

Following the Sixth Circuit’s decision, OSHA released a statement delaying the original enforcement dates of the mandate. OSHA stated that it “will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard.”

As a reminder, compliance with the ETS includes determining the vaccination status of all covered employees, adopting written vaccination policies that comply with the ETS, and requiring all employees who are not fully vaccinated to wear masks at the workplace. The testing requirements provide that all employees must be vaccinated and/or all employees who are not fully vaccinated are required to be tested weekly. Employers who fail to comply with the ETS may be subject to OSHA penalties, including up to $13,653 per violation for serious violations and heightened penalties for willful or repeated violations of up to $136,532 per violation.

Takeaway

Currently, whether this mandate will survive court scrutiny is still uncertain. As previously predicted, the Supreme Court will have the final say in this matter. For now, the ETS is once again effective, with compliance deadlines coming shortly after the start of the new year. As a precaution, employers should analyze their structure and workforce to determine if the ETS would apply to them. If so, employers should familiarize themselves with the requirements of the ETS. In doing so, employers should put compliance plans in place pending the Supreme Court’s ruling on the matter. At this time, employers should be preparing to comply with the ETS as if it will go into effect on January 10, 2022.

December 22, 2021

A Paid Suspension to Investigate an Employee’s Conduct is not an Adverse Employment Action

By: R. Eddie Wayland, TCA Legal Counsel

An Employee, suspended with pay while the Employer investigated alleged misconduct, filed a lawsuit against the Employer alleging discrimination. The federal 11th Circuit Court of Appeals (which has jurisdiction over Florida, Alabama, and Georgia) was tasked with determining whether the suspension was enough to constitute racial discrimination.

Background

The Employee had been serving as an Executive Director for a nonprofit since 2016. The Executive Committee voted to suspend the Employee, with pay, pending an investigation into complaints about actions he took without approval and allegations of a hostile work environment. After informing the Employee of the suspension, the Employer posted a security guard outside the building and hired a consultant to handle any public relations issues. A few days after the suspension, the Employee informed the Employer he was going to resign.

The Employee filed suit in federal court against the Employer alleging race discrimination under Title VII and Section 1981 as well as constructive discharge. He claimed that past high-ranking employees who were white had engaged in worse misconduct and received more favorable treatment. The federal district court dismissed the case because it found that the Employee was not subject to an adverse employment action. The Employee appealed the dismissal to the federal Eleventh Circuit Court of Appeals.

Appellate Court’s Decision

The Eleventh Circuit concentrated on the definition of an adverse employment action. Both Title VII and Section 1981 race claims require that an employee suffer an adverse employment action as one of the elements of those claims. The court pointed to a definition of adverse employment actions that provides that adverse employment actions are events that “affect continued employment or pay–things like terminations, demotions, suspensions without pay, and pay raises or cuts.”

The Employee argued that the circumstances surrounding his suspension, including having a security guard at the door, his position as an Executive Director, and compiling a list of reasons for the suspension in a letter to the Employee, and not just the suspension itself, constituted an adverse employment action. The Eleventh Circuit disagreed as the Employer’s actions in hiring a guard and compiling a list of reasons for the suspension in a letter to the Employee were reasonable and not out of the ordinary. Further, there was no case law to support the notion that whether an action constitutes an adverse employment action should depend on whether the employee is high-ranking in the organization.

The Employee further argued that even if his paid suspension was not an adverse employment action, his ultimate resignation amounted to a constructive discharge and was an adverse employment action. The court disagreed with the Employee’s argument and dismissed it by stating that because a paid suspension alone is not an adverse employment action, an employee’s resignation in response to it cannot be an adverse employment action either.

Accordingly, the Eleventh Circuit found that the circumstances of the paid suspension did not rise to the level of an adverse employment action and upheld the dismissal of the lawsuit.

Takeaway

As the Eleventh Circuit points out, a paid suspension can be a useful tool for an employer to hit “pause” and investigate when an employee has been accused of misconduct or other wrongdoing. A paid suspension may be particularly useful where the employee under investigation supervises or otherwise works directly with the employees who are the complainant or the potential witnesses. Employers must keep in mind that employees may be uncomfortable and not as cooperative as they may otherwise be during the investigation when the person under investigation is physically present and perhaps looking over their shoulders. Additionally, regardless of who the employee under investigation is, employers must remember to follow established company policy when investigating claims of misconduct in the workplace.

December 16, 2021

Tennessee Supreme Court Affirms Decision Restricting the Ability of Businesses to Bring Claims Relating to the Purchase of Goods

By: R. Eddie Wayland, TCA Legal Counsel

The Tennessee Supreme Court recently affirmed a Tennessee Court of Appeal’s decision that a corporation may not assert a damaged goods claim under the Tennessee Consumer Protection Act (“TCPA”). The Tennessee Supreme Court based its decision on a matter of statutory interpretation that a corporation is not a “person” and that equipment purchased for a commercial purpose are not “goods” within the meaning of the TCPA.

Background

The main parties to the lawsuit were a logistics company and a manufacturer of heavy-duty diesel engines used primarily to power the manufacturer’s commercial trucks.

The manufacturer developed an engine designed to satisfy 2010 Environmental Protection Act (EPA) standards requiring reduction of nitrogen oxide emissions. During development, the manufacturer ran several tests, some of which showed that the engine was successfully meeting expectations, while falling short in others. In particular, the manufacturer became aware through testing that the engine was prone to premature cracking of the cooling element and that this could result in leakage of coolant into other engine components. Nevertheless, the manufacturer proceeded with launching the engine into use beginning in September 2010.

In early 2011, the logistics company met with an independent truck and equipment dealer, which exclusively sold and serviced new and used trucks and equipment for the manufacturer at issue. The logistics company met with several of the manufacturer’s competitors who marketed their trucks as superior because the manufacturer’s technology was allegedly prone to overheating, which would strain and damage the engines’ major components.

The dealer and manufacturer representatives stated that the engines, including their cooling components, would last a million miles. After this and calculating a significant cost savings, the logistics company ordered 243 of the manufacturer’s trucks through the independent dealer, which amounted to a total of approximately thirty million dollars.

At some point in 2012, the logistics company began experiencing problems with a number of the trucks. The manufacturer repaired the trucks pursuant to the applicable warranties, and the logistics company accepted the trucks as fixed and returned them to service. In November 2012, representatives for the logistics company and the manufacturer met to discuss the logistics company’s significant reliability concerns about the trucks. The manufacturer’s representatives stated that they were aware of the problems identified by the logistics company and working to fix the issues. After continued truck failures, the logistics company ran an analysis that showed the number of truck issues were increasing. The logistics company provided this data to the manufacturer, but the situation was not resolved to the logistics company’s satisfaction.

The logistics company filed suit in Tennessee state court against both the manufacturer and the independent dealer alleging breach of express and implied warranties, breach of contract, negligent misrepresentation, fraud, and violation of the TCPA.

Trial Court’s Decision

After discovery, the trial court ruled in favor of the manufacturer and independent dealer on the breach of contract and breach of warranty claims, on the basis that the manufacturer fulfilled its obligations by repairing or replacing parts when presented by the logistics company. The trial court also found that the manufacturer’s warranties conspicuously disclaimed any implied warranties and that the logistics company had failed to present evidence that the manufacturer was contractually obligated to provide trucks “free from defects.” The trial court also ruled in favor of the manufacturer and independent dealer on the negligent misrepresentation claim finding that it was barred by the economic loss doctrine, which provides that parties cannot recover under civil tort law for purely economic damages suffered under a contract and instead must look to the contract itself for remedies.

The logistics company’s remaining claims for fraud and violation of the TCPA proceeded to trial. The judge ruled in favor of the independent dealer because it found that the logistics company failed to put on any proof showing that it made misrepresentations or failed to make any required disclosure of material facts. As to the manufacturer, the jury returned a verdict for the logistics company on both the fraud claim and the TCPA claim, awarding approximately $10.8 million in compensatory damages and $20 million in punitive damages. Conversely, the trial court also granted the independent dealer’s request for attorney fees and costs against the logistics company for approximately $330k on the grounds that the logistics company’s claims against it lacked a factual basis.

Court of Appeals’ Decision

Both the logistics company and the manufacturer appealed the trial court’s decision to the Tennessee Court of Appeals. Among the issues raised by the manufacturer were that the economic loss doctrine barred the plaintiff’s fraud claim and that the TCPA claim failed because the trucks were not “goods” within the meaning of the statute. The logistics company, on the other hand, argued that the trial court improperly granted the independent dealer’s request for attorney fees against it and by ruling for the manufacturer on the breach of warranty claims. The Court of Appeals reversed in part and affirmed in part the ruling of the trial court. In ruling against the logistics company, the Court of Appeals held that the economic loss doctrine barred the fraud claim, that the trucks do not constitute “goods” under the TCPA, that the logistics company waived its argument for breach of warranty, and that the trial court properly awarded the attorney fees and costs of the independent dealer.

Supreme Court’s Decision

The Tennessee Supreme Court affirmed the decision of the Court of Appeals wiping out the $30.8 million award that the logistics company had been awarded by the trial court. Central to its decision was the Court’s analysis of the plain language of the TCPA. The Court noted that the plain language prohibited “[r]epresenting that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another[.]” The TCPA defines the term “goods” as “any tangible chattels leased, bought, or otherwise obtained for use by an individual primarily for personal, family, or household purposes or a franchise, distributorship agreement, or similar business opportunity.”

Even though corporations or other entities satisfy the definition of a “person” in other parts of the TCPA, the Court held that they are not “individuals” within the scope of the relevant portion of the Act regarding “goods.” The Court further held that the trucks at issue were not “goods” within the meaning of the TCPA because the trucks were purchased for commercial purposes instead of “for . . . primarily . . . personal, family, or household purposes[.]” Therefore, the Court held, even if the term “individual” was broad enough to encompass the logistics company within the meaning of the Act, its TCPA claim would still fail as a matter of law.

As to the Court’s decision regarding the logistics company’s fraud claim, it held that the economic loss doctrine applied and barred the claim. Specifically, the Court held that the parties were sophisticated business entities that enjoyed equal bargaining power. By this ruling, the Supreme Court effectively ruled that it viewed the case as being one best addressed by contract law rather than tort law because the parties had the ability to fairly contract with each other and obtain contractual damages on the back end.

Takeaway

The Tennessee Supreme Court’s decision places an increased importance on contractual language in purchase agreements and renders the majority of business disputes subject primarily to contract law rather than tort law. TCPA claims are essentially no longer available to corporate plaintiffs when the claim relates to the purchase of goods for commercial purposes. Likewise, fraud claims will likely no longer be available when the only misrepresentations concern the quality or character of the goods sold. For these reasons, it is recommended that corporate entities work closely with their legal counsel and advisors when contracting for the purchase of goods to ensure that any damages that may arise will be adequately and properly provided for under the terms of the contractual agreement in the event of a breach.

December 2, 2021

Biden’s OSHA Mandates Vaccination or Weekly Testing, Federal Court of Appeals Immediately Halts Enforcement

By: R. Eddie Wayland TCA Legal Counsel

President Biden’s vaccine mandate has taken shape in the form of an Emergency Temporary Standard (“ETS”) promulgated by the Occupational Safety and Health Administration (“OSHA”). On November 4, 2021, following direction by the Biden Administration, OSHA issued an ETS requiring employers with 100 or more employees to implement a mandatory vaccination policy for their employees or have unvaccinated employees submit to weekly COVID-19 testing and wear a mask at work. On November 5, 2012, one day after OSHA issued its ETS, the ETS was published in the Federal Register, making the ETS effective and starting the clock on the compliance deadlines. The mandate comes with limited exceptions and has fast approaching compliance deadlines, which are December 6, 2021, and January 4, 2022, as further discussed later in this article. Upon publication, the ETS was immediately challenged in federal courts by various employers and States.

OSHA Mandate

The ETS requires that employers with 100 or more employees implement a mandatory vaccination policy for their employees, subject only to lawful exemptions. As an alternative, the ETS provides that employers may implement a policy allowing unvaccinated employees to elect to undergo weekly COVID-19 testing and to wear a mask in the workplace.

The ETS applies to private employers with at least 100 employees. For a single corporate entity with multiple locations, all employees at all U.S. locations are counted for purposes of the 100-employee threshold. This means that if a company has multiple offices and locations, and those offices individually have less than 100 employees, but collectively the employer employs 100 or more employees, the ETS applies. Part-time employees count toward the company total; independent contractors do not. Employees who are not covered by the ETS (e.g., employees working from home) are still counted towards the 100-employee threshold. An employer will be covered by the ETS if it reaches the 100-employee threshold while the ETS is in effect and will remain covered even if it then drops below 100 employees.

The ETS applies to all employees who come into physical contact with others while working in a workplace. The ETS does not apply to employees who do not report to a workplace where other individuals such as coworkers or customers are present, who work from home, or who work exclusively outdoors. However, the ETS applies in the event an employee who typically works remotely comes to a workplace. This means that employees who work remotely or do not come into contact with other employees must comply with the ETS if they come into the office or come into contact with other employees in an indoor setting.

Regardless of which policy an employer chooses to implement, employers must determine the vaccination status of their employees. Vaccinated employees must provide acceptable proof of vaccination, and that documentation is to be maintained by the employer. Employers must also create a roster identifying each employee’s vaccination status. The ETS requires employers to provide up to four hours of paid time off for employees to get vaccinated and paid sick leave to employees to recover from vaccine side effects.

Testing documentation must be maintained by the employer and treated as a medical record. Employees who are not fully vaccinated must be tested at least once every seven days and must provide documentation of their most recent test result to their employer no later than the seventh day. Under the ETS, employers need not pay for COVID-19 testing. There are, however, possible implications under federal and state wage and hour laws that should be considered, including potentially having to pay employees for time spent getting tested.

By December 6, 2021, employers will have to be in compliance with the ETS. This includes determining the vaccination status of all covered employees, adopting written vaccination policies that comply with the ETS, and requiring all employees who are not fully vaccinated to wear masks at the workplace. Starting January 4, 2022, all employees must be vaccinated and/or all employees who are not fully vaccinated are required to be tested weekly. Employers who fail to comply with the ETS may be subject to OSHA penalties, including up to $13,653 per violation for serious violations and heightened penalties for willful or repeated violations of up to $136,532 per violation.

Fifth Circuit Court of Appeals Halts Enforcement

On the same day that OSHA published the ETS in the Federal Register, multiple employers and States filed lawsuits to block the enforcement of the ETS. The lawsuits generally allege that the ETS is unconstitutional and that it would cause irreparable harm to employers. One day later, the Fifth Circuit Court of Appeals (which covers Texas, Mississippi, and Louisiana) halted enforcement of the ETS citing “grave statutory and constitutional issues.”

While the stay of enforcement by the federal Fifth Circuit is only temporary to allow for arguments on the merits of the ETS to play out in court, it is likely that the Fifth Circuit will continue to block enforcement of the ETS until a ruling can be reached. At the same time, similar lawsuits have been filed in the federal Sixth, Seventh, Eighth, and Eleventh Circuits. It remains to be seen how these legal cases will play out in the different courts. It may ultimately end up before the Supreme Court before all is said and done, but for now, the Fifth Circuit is leading the way by staying the enforcement of the ETS nationwide.

Takeaway

Currently, whether this mandate will survive court scrutiny is uncertain. For now, the ETS has been enjoined from being enforced. Nevertheless, while employers need not immediately comply, employers should analyze their structure and workforce to determine if the ETS would apply to them. If so, employers should familiarize themselves with the requirements of the ETS. In doing so, employers should put compliance plans in place so that compliance will not be unduly burdensome or implemented in a hurried manner should the stay be lifted and the ETS go into effect.

November 11, 2021

Account Executive Trainees Seek FLSA Class Certification in Wage Suit Against Freight Broker

By: R. Eddie Wayland, TCA Legal Counsel

A group of account executive trainees at a freight brokerage company with facilities across the United States are seeking conditional class certification in a Fair Labor Standards Act (FLSA) lawsuit against their employer. The lawsuit alleges that the employees were not paid for all hours worked.

Background

The employer, a freight brokerage company, classified account executive trainees (“employees”) as exempt from overtime and paid them a regular biweekly salary. The employees filed a lawsuit against their employer under the FLSA, and other various State laws, alleging that they are not exempt and therefore have failed to receive wages, including applicable overtime, for all of the hours they worked. Further, the employees alleged that all of the employer’s account executive trainees were subject to the unlawful pay practice. On that basis, the employees are seeking to conditionally certify a class covering all account executive trainees who worked for the employer over the last three years.

Case Allegations and Defenses

The account executive trainees are to solicit by phone potential customers needing freight transportation services, provide constant contact with those customers to answer questions about the status and location of their freight, and act as the liaison between the customer and the drivers handling the freight. The work generally requires working hours outside of the designated 7:45 a.m. to 5:15 p.m. shifts and, allegedly, around the clock availability.

In order to conditionally certify an FLSA collective action class, the employees are required to make a “modest factual showing” that members of the proposed class are similarly situated and collectively victims of the same treatment or policy.

The employees here alleged that the employer’s account executive trainees were all trained and supervised the same way at facilities across the country and were kept from deviating from the same company-wide guidelines on how to do their jobs. The employer paid all the account executive trainees only their normally biweekly salary even when they put in more than 60 hours of work per week. Additionally, the employees alleged that the account executive trainees did not need specialized certifications, training, or relevant experience to perform their job. Lastly, the employees alleged that the account executive trainees performed basic tasks in accordance with the employer’s guidelines and had no decision making or supervisory authority.

The employer responded by arguing that the employees are not similarly situated because of the various employment locations of the employees. The employer further responded by stating that the plaintiffs who brought the lawsuit were not able to bring the lawsuit because they did not work for the employer as account executive trainees and therefore could not represent a class on that basis.

The court will now decide whether to conditionally certify the class as a collective action. A certification of the class will allow the case to go forward as a whole, and then the “opt-in” process will begin. In FLSA collective actions, individuals must opt-in to the case to be a part of the case. This is the opposite of Rule 23 class actions where everyone is a member of the class unless they chose to opt out of the class. If the court declines to certify the class, only the plaintiffs will remain in the lawsuit and the other potential class members will have to bring their own lawsuit if they so choose.

Takeaway

The lawsuit is a reminder for employers that they should carefully review their salary guidelines and the various related classifications and exemptions to overtime under the FLSA, as well as under any applicable State wage hour laws. In addition, employers should have clear and complete job descriptions for each position that include any decision making and/or supervisory authority or other duties and responsibilities that support any claimed exempt status. Employers should consult with knowledgeable individuals or experienced employment counsel if they have any serious or difficult questions concerning any employment positions they believe qualify for exempt status.

October 28, 2021

Biden Administration NLRB Ready to Play Hardball With Employers

By: R. Eddie Wayland, TCA Legal Counsel

The National Labor Relations Act (“NLRA”) is a federal statute initially passed by Congress in 1935 and, as subsequently amended, governs relationships between employers and their employees regarding employee rights protected by the statute, including the right of employees to participate in, or to refrain from, engaging in concerted protected activities, including the right to join, organize or form unions and to engage in related activities including collective bargaining. The NLRA applies to most employers whose businesses are engaged in interstate commerce or affect interstate commerce, with limited exceptions. The National Labor Relations Board (“NLRB”), is the federal government agency that has the authority and responsibility to administer, interpret and enforce the NLRA. As a federal law, the statute applies to employers throughout the United States.

The General Counsel for the National Labor Relations Board (“NLRB”) recently issued a memorandum instructing her office to “avail themselves of all remedial tools to ensure discriminatees are restored as nearly as possible to the status quo they would have enjoyed but for the unlawful conduct.” In short, this means that when labor charges are brought against an employer, or when the NLRB determines that an employer has engaged in unfair labor practices in violation of the NLRA, the NLRB and its General Counsel will be seeking forms of redress not previously utilized. Ultimately, this General Counsel’s memorandum builds on the aggressive positions and actions that the NLRB under the Biden Administration intends to take in their interpretation and enforcement of the NLRA.

Background

While many have been justifiably worried about the potential impact that the PRO Act and its related statutory amendments would have under the federal labor laws, the PRO Act has become mired in the halls of Congress as part of the legislative process. But, the NLRB is now under majority control of democratic appointee Board members, and the new General Counsel, who was appointed by the President and confirmed by the Senate in a party-line tie vote broken by the Vice President, are on the move.

In their positions, the NLRB and its General Counsel are responsible for the enforcement of the NLRA. Through their enforcement of the NLRA, the NLRB and its General Counsel interpret and apply the NLRA as they determine appropriate and based on their interpretations of the law. Those interpretations of the NLRA and the actions enforcing the NLRA are often strongly influenced by political ideology and beliefs.

How the current NLRB and General Counsel intend to approach, interpreting and enforcing the NLRA can perhaps be fairly gleaned from President Biden’s statement, that he wants to be the “strongest labor President you have ever had.”

Recent Actions

The NLRB General Counsel has marked out a proposed approach for aggressive enforcement and expanded potential remedies under the NLRA. The General Counsel recently issued a formal memorandum (available at this link) that is targeted at significantly expanding the available remedies that may be sought against employers. This potential significant expansion of the Board’s traditional remedies will also affect employers’ abilities to reach settlements in many instances, which may likely result in more NLRB litigation.

Under the memorandum, titled “Seeking Full Remedies”, the General Counsel has provided guidance on the types of remedies that should be sought against employers. For unlawful firings these remedies, in addition to the traditional reinstatement, backpay compensation and benefits compensation, now include compensation for consequential damages, front pay, and liquidated backpay. For unlawful conduct committed during a union campaign, remedies include expanded union access to employees; reimbursement of union organizational costs; reading of the Notice to Employees and Explanation of rights by a company principal or board agent; publication of the Notice in newspapers; visitorial and discovery clauses to assist the agency in monitoring compliance with NLRB orders; extending posting periods for Notices; required training for employees, supervisors, and managers regarding employee rights under the NLRA and compliance with Board orders; instatement of a qualified candidate of the union’s choice if a discharged employee is unable to return to work; and broad cease and desist orders. The memorandum also encourages apology letters from employers.

Lastly, the memorandum addresses potential settlements. For employers who want to settle pending unfair labor practice charges, new requirements will be instituted. In addition to the potential remedies mentioned above, settlements will now be required to include default language that requires an employer to agree that the allegations are admitted if the employer is found to have violated the terms of the settlement agreement. Furthermore, non-admissions clauses, which have been included in NLRB settlements for many years, and which provide that the employer is not admitting wrongful conduct or liability in settlements will not be allowed in future informal settlement agreements. Ultimately, in many situations these actions will require employers to admit, or at least agree to, any allegations if they want to settle the case.

Takeaway

These actions by the Biden Administration’s newly appointed Board majority and General Counsel should signal a wakeup call to employers. They represent significant pronounced shifts in policy and enforcement under the NLRA. With this shift in perspective and emphasis by the NLRB, and with the President’s stated desire to be the strongest ever labor President, increased union organizing, and related activities ever can be expected.

There are established standards which govern how an employer, and more importantly its managers and supervisors, respond to union activities among the employers’ employees. The failure to respond properly and lawfully, due to a lack of knowledge or otherwise, can and will be costly.

Taking proactive steps to instruct and educate company agents and representatives, including all levels of management and supervision, is one such viable option in preparing to successfully meet challenges and avoid potential liability. By developing a plan of action to prepare for and lawfully deal with NLRA labor law issues, an employer can take efforts to help mitigate potential legal problems and liabilities. In so doing, consulting with experienced legal counsel or other knowledgeable consultants may provide cost effective and beneficial assistance in developing a plan. As Benjamin Franklin said, “An ounce of prevention is worth a pound of cure”.

October 14, 2021

Appellate Court Affirms Finding in Favor of FMLA Plaintiff, Increases Damages Award Against Employer

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Seventh Circuit (which has jurisdiction over Illinois, Indiana, and Michigan) recently affirmed a trial court’s decision that an employer interfered with its former employee’s medical benefits under the Family and Medical Leave Act (“FMLA”). The Seventh Circuit reversed the decision in part, however, finding that the trial court did not properly calculate the amount of front pay owed to the employee, and further determined that the employee was entitled to more compensation than originally awarded.

Background

The employee was a pilot for the employer, a commercial airline operator. A few years after starting the job, the employee was notified by his physician that he was a type II diabetic. The employee’s notice would entitle him to FMLA medical leave for up to twelve weeks. The employer’s FMLA policy required employees to notify the employer “as soon as practicable” of the need for taking leave. “As soon as practicable” was defined within the employer’s FMLA policy as “the same or next business day.”

Eight days after receiving his diabetes diagnosis, the employee was told by his FAA-designated physician that he would need to take medication for sixty days and would be prohibited from flying until after test results were returned. Over the next couple of days, the employee contacted the employer’s base manager to notify the company that he would be taking medical leave. The employer told the employee that he could find the required FMLA forms on the employer’s website and requested that the paperwork be submitted within five days.

The employee submitted his paperwork five days later requesting sixty days’ leave but his physician provided a medical certification indicating an estimated leave time through only July 31, 2014. After receiving this information, the employer emailed the employee stating that the leave would only extend through July 31, based upon the physician’s certification. The employee emailed the company’s vice president of operations, notifying him that he would require leave through at least late August. Instead of responding to the employee, the vice president emailed others within the company, including the new chief pilot that the employee should not be spoken with and that after the employee’s FMLA leave ended, it was the company’s intent to “terminate his employment for noncompliance with the law.”

After the employee emailed the employer several times throughout the month of July, the employer finally responded in early August to request that the employee provide an additional medical certification supporting his request for leave. Before the employee could obtain the necessary medical paperwork, on August 22, the employer sent the employee a letter stating that the employee had voluntarily resigned without notice, processed on August 15, “for failure to return from leave.”

District Court’s Decision

The employee sued the employer alleging violations of FMLA and the Americans with Disabilities Act. Despite the employer’s attempts to dismiss the employee’s claims, the case proceeded to trial. The employer argued that the case should have been submitted to arbitration. Nevertheless, a jury found that the employer had interfered with the employee’s FMLA rights and violated the FMLA by retaliating against the employee as well as by terminating him.

In a separate hearing on damages, the court found that the jury determined that the employer’s failure to afford the employee fifteen full days to obtain his initial medical certification contributed to his termination and entitled the employee to back pay and front pay for interference as well as termination. The district court ultimately awarded the employee a total of $426,493.46. The employer and the employee both appealed the decision.

Appellate Court’s Decision

On appeal, the Appellate Court affirmed the decision favoring the employee but held that that the District Court’s damages award was miscalculated and insufficient. The Appellate Court, reversing the district court in part, held that the employee was entitled to an additional approximately $200,000.00. The miscalculation, the Appellate Court held, arose out of an errant finding that the employee would work an additional twenty hours per month at his new job in order to arrive at his previous monthly take home pay. The Appellate Court agreed with the employee that the District Court’s methodology was inherently unfair because it obligated the “victim of unlawful discrimination” to “work longer hours at his new job so that he can make the ‘same amount’ as he would have made at his old job.”

Takeaway

This case shows the importance for employers to have clear FMLA (and other) policies, but more importantly, the consequences of not following those polices. Employers should consider legal requirements when granting and/or denying employee requests for FMLA leave, and should further consider the relative strengths and weaknesses of denying such requests. Where it is believed that an employee is not abiding by FMLA policy requirements, employers should proceed with caution so as to uphold the policies, while not improperly interfering with an employee’s legal rights potentially resulting in a FMLA violation. As this case demonstrates, statements of frustration and intent, whether made in an email communication or otherwise, can be very telling. Careful administration of FMLA processes and requirements are important. Moreover, when an FMLA-related situation becomes sidetracked or is otherwise complicated, careful and thoughtful analysis and development of a legal plan of action is necessary to avoid potential liability as occurred in this case.

September 30, 2021

Appellate Court Affirms Dismissal of Pregnancy Discrimination Case Based Upon Employer’s Honest Belief

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Sixth Circuit (which has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee) recently considered the question of whether a former employee could prove that her firing was connected to her pregnancy, which would support a claim for pregnancy discrimination under the Tennessee Human Rights Act. The Sixth Circuit ruled for the employer, holding that the employer believed that the employee fraudulently filled out office paperwork and finding that the employee failed to put forth sufficient evidence that would have supported a claim for pregnancy discrimination.

Background

About a year and a half after beginning work for the employer, the employee was verbally counseled for being late to work on seven different occasions within a ninety-day period. A few months later, she received a written warning for being late to work a total of twelve times with five of those occasions and an absence coming after the prior verbal counseling.

About five months after the written warning, the employee told the office manager she was pregnant. Five days later, the employee was given a final written warning, noting that the employee had received fifteen tardies, two incidents of leaving work early, missing two time-card punches, and an absence over a twelve-month period. The final written warning also noted that three of the tardies, two early departures, and two missed time-card punches had come after the first written warning.

The company’s regional director discussed the final written warning with employee. During the same conversation, the employee mentioned that she had examined a patient earlier in the day who did not possess all of the necessary documentation to pass a physical. According to the employee, she informed the regional director that she offered to waive a fee for the patient whose wife would return with the required paperwork and pick up the patient’s certification. The regional director denied that she and the employee ever discussed the employee’s waiver of the fee or plan to allow the patient’s wife to bring the necessary paperwork and obtain the certification. Nevertheless, the employee wrote in the patient chart that she had “[n]otified [the regional director] about situation regarding . . . physical and patient leaving upset. [Regional director] agreeable with plan . . . .”

Following this development, the regional director consulted her immediate supervisor, the company’s national director of health and wellness. Approximately a week later, the national director decided to meet with the employee and the employee’s office manager. The employee claimed that during the meeting she was given the ultimatum of resigning and being able to keep her health insurance or being threatened with termination and being reported to the licensing board. According to the employee, she stated that she was “twenty weeks along” and agreed to resign so she would not lose her health insurance immediately. The company’s national director and office manager denied that employee was given an ultimatum and instead testified that the employee’s decision to resign was her own idea and voluntary. Ultimately, the employee resigned.

District Court’s Decision

The employee sued the employer alleging a violation of the Tennessee Human Rights Act for pregnancy discrimination. The case made its way to federal court and the District Court ruled in favor of the employer. The District Court held that there was a genuine issue as to whether the employee actually resigned when faced with threatened termination and reporting to the licensing board. The District Court further held that the employee had put forth sufficient evidence of potential pregnancy discrimination to shift the burden of proof to the employer. But ultimately, the District Court determined that the employer honestly believed that the employee intentionally made inaccurate statements in the chart and that the employee failed to put forth sufficient evidence showing that the employer did not honestly believe in this professed non-discriminatory reason. Additionally, the District Court held that the employee failed to provide sufficient evidence that actual discrimination, as opposed to the alleged falsification of documents, was the real reason for the employee’s termination.

Appellate Court’s Decision

On appeal, the employee challenged the District Court’s “honest belief” ruling on the basis that this rule “does not exist under Tennessee law.” However, the employee did not address the District Court’s conclusion that she had not plausibly linked her pregnancy to her firing. This, the Sixth Circuit held, was fatal to the employee’s appeal because an appeal must not only challenge the primary basis of a trial court’s decision, but it must also challenge the alternate basis as well. The Sixth Circuit affirmed the District Court holding that the employee “forfeited the right to challenge the second basis for the [D]istrict [C]ourt’s holding, even if she prevailed on her argument about the ‘honest belief’ rule . . . .”

Takeaway

This case shows that employees have the burden of plausibly linking their pregnancy to alleged adverse employment decisions, such as terminations. Further, this case illustrates the importance of an employer’s record keeping functions with respect to employee job performance. Because the employer here maintained good records, the employer was able to use those records to show its honest belief and help prevent a bad outcome for the employer. When employers have concerns about employee performance, including concerns about employee ethics, employers should keep good records of such issues and follow internal policies for reviews of such performance, including any verbal or written counseling, warnings, reprimands, and related decisions.

September 16, 2021

California Supreme Court Rules Missed Meal, Rest and Recovery Periods Must be Paid at Regular Rate of Pay

By: R. Eddie Wayland, TCA Legal Counsel

The California Supreme Court recently addressed what the proper rate for paying missed meal, rest, and recovery periods is under California state law. The California Supreme Court concluded that the rate must be calculated using not only the employees’ base hourly rate but also a proportionate share of nondiscretionary payments, thus increasing the rate. This ruling has been applied retroactively by the Court.

Background

Under California’s Labor Code, Section 226.7(c), employers are required to provide their employees with time for meals, rest, and recovery. If such time is not provided, employers are required to “pay the employee one additional hour of pay at the employee’s regular rate of compensation.” In 2015, a bartender brought a class action suit against his former employer alleging that the employer failed to fully pay the required payments as the employer did not take into account in its calculations certain nondiscretionary incentive payments the employee received.

At issue in this litigation is the interplay of two areas of California law. Specifically, Section 226.7(c) discussed above, and Labor Code Section 510(a) which provides employees with overtime pay when employees work more than a certain amount of time. The overtime provision in Section 510(a) requires an employer to compensate an employee by a multiple of the employee’s “regular rate of pay” while section 226.7(c) requires the payment to be made at the “regular rate of compensation.” Here, the employer argued that these two payment calculations were distinct from one another based on the variation in wording and that, unlike the requirements for overtime payments, the employer was not required to take into account nondiscretionary incentive payments in calculating payments due for failures to provide the required meals, rest and recovery periods.

Lower Court Decisions

The trial court and court of appeals both ruled that meal and rest period premiums could be paid at an employee’s base hourly rate because “compensation” should be interpreted differently than “pay.” Specifically, the trial court found that the phrase “regular rate of compensation” was “not interchangeable” with the term “regular rate of pay” which governed overtime pay. Expanding on this point, the court of appeal held that these phrases were “not synonymous.” The employee timely appealed the court of appeal’s decision and the California Supreme Court granted review.

California Supreme Court’s Decision

Acknowledging that the phrasing of these two regulations were slightly varied, the California Supreme Court chose to take a deeper dive into the intended meaning by the legislature and the Industrial Welfare Commission in enacting these provisions. The court began their analysis by noting that when construing the Labor Code and wage orders, the court is to adopt the construction that best gives effect to the purposes of the Legislature and Industrial Welfare Commission. Further, the court noted that these rules are to be liberally construed to favor the protection of employees.

After reviewing how the phrase “regular rate” had been interpreted in California and federal law and the related legislative purpose, the California Supreme Court found that the legislature intended the phrases at issue to be synonymous. As such, any nondiscretionary incentive bonuses earned by an employee should be included in calculations for determining the rate of pay owed to the employee in this situation. The fact these incentive payments may not be determined or paid until weeks or even months after a pay period did not affect this conclusion or excuse the employer. As noted by the court, the section only required the employer to pay the overtime premium as soon as convenient or practicable.

Beyond disagreeing with the employee’s position on this matter, the employer also argued that if the court were to find in favor of the employee its decision should not be applied retroactively. The court rejected this argument. The court ordered that the decision was to be applied retroactively.

Takeaway

California employers should review and update their California compensation practices to ensure that they use the employee’s “regular rate of pay” when paying meal and rest break premiums rather than the base hourly rate of pay. Notably, because the Court ordered that the decision be applied retroactively, California employers should assess the impact of the retroactive application of this ruling on the employer’s previous compensation practices. Employers should determine the best approach for assessing and remedying any past situations or violations, if applicable.

September 7, 2021

Appellate Court Overturns Multi-Million Dollar Decision in Driver Poaching Case

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Eighth Circuit (which oversees Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) recently overturned a multi-million-dollar jury award in a case involving two major trucking companies. The case centered around “poaching” drivers, which is a term that has been given to the practice of recruiting and hiring drivers who are under a contract or restrictive covenant with another trucking company.

Background

To help combat driver shortages, many trucking companies have begun offering driver training programs. Some trucking companies will advance the costs of the training to a driver in exchange for the driver’s agreement to enter into a contract to provide services exclusively to that company for a predetermined period of time. Trucking Company A had such a program.

Through its program, Trucking Company A advanced the cost of the training program to the drivers it hired but required that the drivers perform services for it exclusively for a period of six to ten months at a reduced wage rate to make up for the cost of the program. These drivers were hired as at-will employees. The drivers could cancel their contract at any time but would still have to wait until the expiration of that remaining time period to perform services for another trucking company. Alternatively, the drivers could pay the remaining amount due for the training program to get out of the remaining time period.

Trucking Company B recruited CDL-licensed drivers using general advertisements and required potential employees to initiate contact with it. While a driver was under contract with Trucking Company A, if that driver applied to work for Trucking Company B, Trucking Company B would receive a notice that the driver was under contract with Trucking Company A and that Trucking Company A would not release that driver from his contractual commitment. Previously, Trucking Company B would end the hiring process if it received that notice. However, as the driver shortage gained steam and to meet its hiring goals, Trucking Company B began to hire drivers even after it received a notice from Trucking Company A.

Trucking Company A sued Trucking Company B under Iowa state law, alleging among other things, intentional interference with contracts. Following a 6-day trial, a jury awarded Trucking Company A over fifteen (15) million dollars. That award was later reduced to six (6) million dollars. Both trucking companies appealed the decision.

Appellate Court’s Decision

On appeal, the Appellate Court reversed the lower court’s decision in favor of Trucking Company A. The Appellate Court found that, under Iowa law, to prove intentional interference with a contract, it must be proven that a company intentionally and improperly caused an employee to violate his covenant not to compete. Merely hiring a competitor’s at-will employee to further the company’s legitimate competitive interest is not enough.

The Appellate Court focused on two issues. First, the Appellate court noted that hiring a driver under a covenant was not enough to violate the covenant because it was only actually driving for Trucking Company B that created a violation of the covenant. In doing so, the Appellate Court further noted that Trucking Company A failed to show whether the drivers performed the obligations under the covenant, including paying off the remaining debt for the driving school, prior to actually driving for Trucking Company B. As such, the Appellate Court noted that an at-will employee has a right to accept employment by a competitor at any time.

Second, the Appellate Court noted that offering employment to a competitor’s at-will employee is not interference with contract. To prove intentional interference with a binding non-compete, the interference must be intentional and improper. Advancement of one’s own economic interests, without more, is not enough. The Appellate Court found that Trucking Company B’s inducement to hire Trucking Company A’s drivers would have to show that Trucking Company B was encouraging the drivers not to reimburse Trucking Company A for the training costs or violate the covenant in another way. The Appellate Court provided an example of such action: sending a targeted message to the drivers telling them that they would get a deal from Trucking Company B if they violated the covenant with Trucking Company A. But the Appellate Court noted here that Trucking Company B used its normal advertising and recruiting procedure. As such, the Appellate Court found that this was merely a product of the free labor market created by at-will employment.

Takeaway

While this case was decided under Iowa state law, it is a major decision that will make waves throughout the trucking community. Notably, the case did not strike down restrictive covenants or the practice of requiring drivers to reimburse a trucking company for its training program. Instead, it places potential limits on the practice, at least under Iowa or similar State laws. This includes allowing drivers who are in restrictive covenants to be solicited for employment (under general advertising methods) and hired by competitors. Trucking companies may still seek damages from competitors to the extent that a driver does not complete the terms of his restrictive covenant when he starts driving for the competitor. All motors carriers who have a program for advancing trainings costs with a follow-up contract with a restrictive covenant, and particularly those who are operating under Iowa state law, should carefully reexamine their restrictive covenants in light of these developments.

August 24, 2021

Appellate Court Gives Police Officer Second Chance at ADA Case

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Fourth Circuit (which oversees South Carolina, Virginia, West Virginia, North Carolina, and Maryland) recently granted an employee a second chance at his ADA lawsuit claiming the city forced him to retire or accept an unwanted transfer after his request for a reasonable accommodation due to a medical disability. In doing so, the Fourth Circuit overturned the lower court’s ruling in favor of the employer.

Background

An employee working for a city (“the City”) was employed as a police officer. As a policeman, he wore the standard duty belts supporting pepper spray, a gun with ammunition, a taser, a baton, handcuffs, a flashlight, a radio, and a body camera battery pack. For a period of about four years, the employee felt increasing pain and discomfort when wearing his duty belt. The employee then notified the Chief of Police that he had a permanent nerve damage condition called meralgia paresthetica, which caused discomfort, pain, numbness, and tingling to his waist, left leg, and thigh area. This pain was attributed to the wearing of his police duty belt.

In response, the police department asked the employee to undergo a fitness-for-duty evaluation, the stated purpose of which was to determine if his condition required accommodation under the Americans with Disabilities Act (“ADA”). That examination revealed that he suffered from left thigh meralgia paresthetica, and although this condition would not pose any motor deficits that would prevent him from working as a police officer, his biggest limitation would be an intolerance for wearing the police duty belt. A few months later, the employee informed the City that his condition appeared to be permanent and that while he wished to continue serving as a police officer, his ability to wear a duty belt would be limited. He then requested a reassignment to a unit—such as white collar crimes or traffic light enforcement—that would allow him to serve as a police officer without needing to wear the full duty belt. In response, the City transferred him from a position as a patrol officer to the City’s records unit. Eventually, the employee was promoted to a detective position in the property crimes investigation unit, which allowed him to wear plain clothes.

Approximately a year later, due to an increased need for patrol officers, detectives within certain units, including the property crimes investigation unit, were required to work patrol shifts. Also that year, the job descriptions for all police officers in the City were updated to include that police officers must be able to wear a standard issued duty belt as an essential function of the position. The employee, now a detective, was placed on light-duty status, which was limited by policy to eight months, due to his inability to meet the essential job functions.

After the maximum time for working light duty expired, the employee requested an accommodation that would allow him to continue working as a detective. The City rejected the accommodation, and countered with a civilian position as a logistics manager. The employee initially accepted the civilian position but retired a short time later citing the City’s refusal to accommodate his medical disability as his reason for retirement.

District Court’s Decision

Shortly after the employee’s retirement, he filed a lawsuit in federal court alleging that the City had failed to accommodate his disability. The City requested that the court grant the City an order saying that there were no contested factual issues and the City therefore won as a matter of law. The District Court ruled in favor of the City. The employee appealed, alleging that it was inappropriate for the City to force him to choose between retiring or accepting reassignment to a position that created problems and issues with his disability when a reasonable accommodation would have allowed him to maintain his existing or similar position.

Appellate Court’s Decision

The Appellate Court reversed the lower court’s decision, finding that, generally, unilateral transfers are inappropriate when other accommodations would allow an employee to remain in their current position. The Appellate Court further noted that the lower court did not consider the disfavored status of involuntary reassignments.

The Appellate Court focused on the four elements of proving a cause of action under the ADA: (1) that the individual has a disability within the meaning of the statue; (2) that the employer had notice of the disability; (3) that with reasonable accommodation the employee could perform the essential functions of the position; and (4) that the employer refused to make such accommodation. The appellate court determined that the lower court had skipped over the first three elements of the claim in analyzing the employee’s case before concluding that the employee could not satisfy the fourth element, because the City offered him a position as a logistics manager.

The ADA defines “reasonable accommodation” by way of an illustrative list of possible accommodations which may include “reassignment to a vacant position.” However, while it is listed in the ADA’s list of possible accommodations, recent case law and Equal Employment Opportunity Commission (“EEOC”) guidance has recognized that reassignment, particularly a forced reassignment, should be considered a “last resort.” Focusing on this issue of last resort, and the district court’s failure to consider it, the appellate court overturned the lower court’s decision and sent the case back to the lower court for further analysis.

Takeaway

Management should remain vigilant about requests for reasonable accommodations. The ADA often requires employers to provide reasonable accommodations that would not cause the employer an undue hardship. The reasonable accommodation process should be an interactive process between the employer and the employee, in which the two collaborate and develop effective possible accommodations that are reasonable within the workplace. While each situation is unique, as seen above, some accommodations are preferred over others. Employers should remain cognizant of the complexities surrounding requests for reasonable accommodations and, when faced with a difficult situation, should consider seeking experienced counsel for advice when confronted with such a request.

August 10, 2021

Appellate Court Upholds Harassment-turned-Retaliation Ruling Against Trucking Company

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Sixth Circuit (which oversees Tennessee, Kentucky, Ohio, and Michigan) recently addressed a trucking company’s liability when an employee sued alleging sexual harassment by the driver trainer, after being terminated. The Sixth Circuit upheld the lower court’s decision against the trucking company finding the trucking company liable for the $150,000 jury verdict.

Background

A trucking company (“company”) hired a female truck driver who did not yet have her commercial driver’s license (“CDL”). Because of her lack of a CDL, the trucking company hired her as a trainee, and arranged for her to accompany one of the trucking company’s employees hauling freight until she had the experience and skills to pass the driving test. After the female employee’s first trip with the driver trainer, she reported to the company’s second-in-command that she awoke to the driver trainer touching her chest inappropriately. The second-in-command stated that she would handle it, but then took no further actions to investigate or inform other management.

The company continued scheduling the female driver and the driver trainer to work together. After approximately two months, the female driver reported that she had again awoken to the driver trainer touching her inappropriately, this time by putting his hand between her legs. This time she reported the incident not only to the second-in-command, but also to the company’s owner. At that point, the company stopped scheduling the female driver with the driver trainer and looked for alternate solutions to complete the female driver’s training. Finding no alternate solution, the company terminated the female driver. The female driver then sued the company under Title VII of the Civil Rights Act and applicable State law, alleging sex discrimination and retaliation.

After a jury trial, the jury concluded that the company was not liable for the driver trainer’s harassment, but that it was liable for terminating her employment in retaliation for her complaint. The jury awarded the female driver $50,000 in lost wages and $100,000 in punitive damages. The company moved for a new trial, alleging the jury’s retaliation finding and its award of punitive damages were against the weight of the evidence. The lower court denied the company’s request for a new trial. The company appealed the decision to the Sixth Circuit Court of Appeals.

Appellate Court’s Decision

In upholding the lower court’s decision, the Appellate Court focused on the evidence introduced at trial. Representatives from the company admitted at trial that the female employee would have remained on the work schedule had she not reported the assault, which was sufficient causation for a finding of retaliation. That evidence established a causal connection between the female employee’s sexual harassment complaint and the loss of her job.

Regarding the punitive damages, the Appellate Court again sided with the lower court in determining that punitive damages were warranted. In order to establish punitive damages, the female driver had to prove that the company acted with malice or with reckless disregard to the employee’s federally protected right not to be subjected to retaliation. The Appellate Court analyzed the company’s responses after each of the female driver’s two allegations of harassment. Regarding the first allegation of assault, the Appellate Court noted that the company continued sending the female driver and the driver trainer together out on runs, which was not protecting the female driver. After the second allegation of assault, the Appellate Court observed that the company never even explored the option of putting the female driver with any other driver trainer. Ultimately, the Appellate Court determined that the undisputed evidence indicated that the company did very little to help the female driver after her allegations of assault.

Takeaway

The trucking company’s actions following the employee’s complaints in this case are a good example of how not to handle allegations of harassment by employees. Allegations by employees, male or female, are often complex and involve multiple issues, including differing descriptions of the same story. These allegations should be taken seriously, investigated properly, and handled quickly and appropriately. Employers should have policies in place for such actions, including how to handle these situations. These policies should be consistently applied. Furthermore, employers should understand that such harassment or discrimination claims can also quickly turn into additional retaliation claims which can lead to significant liability, including punitive damages.

July 27, 2021

8th Circuit Affirms Finding that Employer’s Actions did not Violate ADA or FMLA

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Eighth Circuit (which oversees Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) recently addressed whether an employee could pursue a claim under the Americans with Disabilities Act (“ADA”) and the Family Medical Leave Act (“FMLA”) when the employee requested additional days off beyond that which she was entitled to under both laws, as an accommodation. The Eighth Circuit ruled that regular and reliable attendance is a necessary element of most jobs, and therefore additional time would not be warranted.

Background

The employee began suffering from a variety of medical symptoms and was subsequently diagnosed as having reactive arthritis. This diagnosis was certified to the employer by a physician and the employer was advised that the employee would require one and a half to two days off per month to address the condition. After receiving the certified diagnosis, the employer authorized the employee to take up to two full days and two half days of intermittent FMLA leave per month, but noted that any absences beyond the approved leave would count against her record per company policy.

Over the course of the next two years the employee took intermittent FMLA leave. However, on eleven separate occasions the employee took leave which was not FMLA approved. During that time, the employee called out of work due to symptoms unrelated to those approved for her FMLA leave. Two days later, the employee left work during a shift and did not state that she was seeking FMLA leave or suffering from symptoms related to her approved condition. This last absence placed the employee in violation of the company’s attendance policy for the year and as a result the employee was terminated for excessive absences.

The employee brought suit against the employer claiming violations of the ADA and the FMLA. According to the employee, the employer violated these provisions by discriminating and relating against her because she was disabled, as defined by the ADA. The employee also claimed that her employer failed to accommodate her disability and likewise violated her rights under the FMLA by denying her the leave to which she was entitled.

After discovery in the case, the employer moved for a judgment in its favor arguing that it had not violated the ADA or the FMLA. The district court ruled in favor of the employer and ended the case. The employee appealed that decision.

Appellate Court’s Decision

Because the employee alleged that her termination violated the ADA’s prohibition against discharging an employee due to a disability, it was her burden to prove that the termination was due to the disability. In order to meet this burden, the employee must prove: (1) that she was disabled as defined by the ADA; (2) that she was still able to perform the essential functions of her job with or without a reasonable accommodation; and (3) a causal connection existed between the adverse employment action (the termination in this matter) and the disability. If all three factors are proven, the burden shifts to the employer to set forth a legitimate, nondiscriminatory, reason for the adverse action. If the employer does set forth a reason for the adverse action, the burden shifts back to the employee to show why the employer’s proffered reason was just pretext for the discrimination.

Applying the above factors, the appellate court began its analysis by noting that many of the employee’s duties required her to be physically present at the office of her employer. The appellate court stated that it has been consistently found that regular and reliable attendance is a necessary element of most jobs. Thus, an employee – like the employee in this matter – who cannot appear at work on a regular basis, cannot satisfy the essential functions of her job. The appellate court further noted that the employer established that attendance was an essential function of the employee’s job as it was clearly set forth in the employer’s written attendance policy. Finding that attendance was an essential function of the job and that the employee’s termination was in compliance with the employer’s written policy, the appellate court concluded that the employer had not violated the terms of the ADA and upheld the district court’s ruling.

Turning to the employee’s FMLA claim, the appellate court concluded that intermittent FMLA leave does not excuse an employee from the essential functions of the job. Finding that the employee could not complete an essential element of her job without an accommodation, the appellate court next analyzed whether the employer could reasonably accommodate the employee’s disability without facing an “undue hardship.” As noted by the appellate court, depending on an employee’s assigned duties and the employer’s needs, a reasonable accommodation could include part-time work or a modified work schedule. Here, the employee argued that a reasonable accommodation would have been for the employer to permit her to take additional FMLA leave beyond what was permitted. However, as the appellate court had already determined that attendance was an essential element of the employee’s job, the appellate court concluded that permitting the employee more leave away from work would not be a reasonable accommodation. Also, because the employee could not establish an ADA violation, her ADA retaliation claim failed too.

Turning last to the employee’s FMLA entitlement claim, the appellate court noted to succeed the employee must prove (1) that she was eligible for FMLA leave; (2) the employer was on notice of her need for FMLA leave; and (3) the employer denied the benefits to which the employee was entitled to under the FMLA. The appellate court found that the employee’s claim failed as she failed to properly notify her employer that she needed FMLA leave on several occasions. The appellate court also found that the employee claim failed because the employee sought leave for reasons unrelated to her FMLA approved illness.

Takeaway

This case shows the importance of having clear, written company policies that are consistently applied. The employer involved in this lawsuit was able to avoid ADA and FMLA liability by having procedures in place to ensure compliance with the appropriate laws and to make reasonable accommodations. Additionally, by having clear job descriptions for employee positions that set forth the essential requirements and functions of the job, including regular and reliable attendance, the employer was further shielded from liability. Employers should regularly review their policies, procedures, and handbooks to make sure they are updated under current law. Likewise, employers should regularly review and update job descriptions as warranted. Finally, employers should take steps, including training management and supervisory employees, to ensure that the policies, procedures, and handbooks are being consistently applied.

July 13, 2021

Court Enforces ADA’s Pre-Suit Exhaustion Rules Requiring Employees To Timely Assert EEOC Charges

By: R. Eddie Wayland, TCA Legal Counsel

The United States Court of Appeals for the Third Circuit (which has jurisdiction over Delaware, New Jersey, and Pennsylvania) recently addressed whether an employee could pursue a claim under the Americans with Disabilities Act (“ADA”) when the claim was not included in the original administrative charge filed with the Equal Employment Opportunity Commission (“EEOC”) and the subsequent amendment to add the required charge was untimely. The Third Circuit ruled that employees must still exhaust their administrative remedies under the ADA, which may require a timely amendment of charges, especially when the scope of the later charge is not within the scope of the original charge.

Background

The employee, who was hearing impaired, applied for and obtained a different position with the same employer. During his training for that position, the employee requested a two-way radio as an accommodation for his hearing impairment, but he was not provided with one. The employee completed his training, but the employer’s trainer refused to certify the employee’s ability to perform the required job duties. The employee was then transferred back to his previous position.

Approximately nine months after being transferred back to his original position, the employee filed a discrimination charge with the EEOC against the employer alleging discrimination under the ADA. The employee claimed that the employer denied his transfer to a new position because of his disability and his request for a reasonable accommodation. The employer responded to the claim by denying discrimination. Nothing developed from the claim. Seven months later, the employer terminated the employee for unrelated job performance reasons. The employee was allowed to return to work under a “last chance agreement” with the employer, but he was terminated again for the final time a few months later, due to a safety violation.

Approximately three months after the employee’s final termination, the employee mailed a handwritten letter to the EEOC alleging that the employer terminated him in retaliation for filing his discrimination charge. A year later, the employee filed an amended charge alleging both disability discrimination, which was the subject of the original charge, and retaliation, the issue first brought up in his handwritten letter.

Approximately four and a half years after the employee’s final termination, the EEOC issued a reasonable cause determination that the employee’s termination was retaliatory. The EEOC’s investigator found that the employer disciplined the employee more harshly for work rule violations and regulations than a non-disabled similarly situated employee. After unsuccessful settlement efforts, the EEOC issued a right-to-sue letter.

District Court’s Decision

The employee sued the employer in Pennsylvania federal court (“District Court”) alleging a single count of retaliation under the ADA. The employee’s complaint did not allege disability discrimination or failure to accommodate.

The District Court dismissed the case finding that the employee failed to exhaust his administrative remedies, which is a prerequisite to filing suit in federal court. Explaining its reasoning, the District Court stated that the ADA requires filing of an EEOC charge within 300 days of the challenged employment action to be timely. Even though the employee timely filed his original charge of discrimination, he did not file his amended charge alleging retaliation—the sole basis in his federal lawsuit—until 521 days after his final discharge from employment. The District Court also found that nothing prevented the employee from filing of an amended charge. Lastly, the District Court also held that the employee’s retaliation claim was not within the scope of his original EEOC charge for discrimination and therefore a timely amended charge was required.

Appellate Court’s Decision

On appeal, the Third Circuit agreed with the employer. The Third Circuit clarified that a later filed EEOC charge must fall “fairly within . . . the investigation arising from the initial charge” and “reasonably be expected to grow out of” the original charge to be timely and avoid the requirement of filing a new or amended charge. Where, as in this case, the two charges are too remote in time and substantively different, the subsequent investigation cannot reasonably be found to fall within the scope of the original charge, and the failure to timely file and/or amend the latter charge within the ADA’s required 300-day timeframe will constitute a failure to exhaust administrative remedies.

Takeaway

This case provides employers with a procedural ally in fights against EEOC charges: an employee’s failure to adhere to the ADA’s exhaustion rules can be fatal to his subsequent claim. This case also shows how long some of these ADA-related claims can be dragged out, and that employers must continue to stay aware of any claims made. Even with this ruling, however, it is an important reminder that employers should continue to deal with and act appropriately when faced with accommodation requests under the ADA to decrease such ADA suits altogether.

July 6, 2021

California’s AB5 to be Appealed to United States Supreme Court

Special Edition

By: R. Eddie Wayland, TCA Legal Counsel

As you may recall, we recently informed readers of the Ninth Circuit Court of Appeals’ (which oversees California, Oregon, Washington, Arizona, Nevada, Idaho, Montana, Alaska, and Hawaii) decision to overturn an injunction banning the enforcement of California’s AB5 against the trucking industry. AB5 is the California law that involves the factors and tests for determining independent contractor status in California. With that ruling, the State of California and its agencies were permitted to begin enforcement of AB5 against motor carriers. In a significant development since that ruling, the Ninth Circuit’s decision will be appealed to the United States Supreme Court and enforcement of AB5 has again been halted pending review by the Supreme Court.

Background

In 2019, California passed into law Assembly Bill 5 (“AB5”) which established the presumption that workers are employees unless: (A) the worker is free from the control and direction of the hiring entity; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business. As you may recall, at that time we informed readers of the dangers of AB5 and the negative impact it could have on the trucking industry, particularly those motor carriers who utilize owner-operators and independent contractor drivers. When AB5 was challenged in court, the federal district court held that AB5’s ABC test was in direct contravention of the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”), and granted an injunction preventing the enforcement of AB5.

On appeal, the Ninth Circuit disagreed, and we provided an update on that ruling. The Ninth Circuit held that, among other reasons, AB5 was not preempted by the FAAAA because AB5 is “a generally applicable labor law that impacts the relationship between [a] motor carrier and its workforce, and does not bind, compel or otherwise freeze into place a particular price, route, or service of a motor carrier at the level of its customers[.]” Accordingly, the Ninth Circuit found that AB5 was not preempted and, by extension, the injunction against AB5’s enforcement was improper.

Appellate Court’s Most Recent Ruling

When the Ninth Circuit overturned the injunction banning the enforcement of California’s AB5, it allowed the State of California and its agencies to begin enforcement of AB5 against motor carriers. As a matter of procedural formality and requirement, that decision was appealed to the full Ninth Circuit requesting a rehearing. That request was denied, opening the door for the decision to be appealed to the United States Supreme Court.

In an important development, AB5 will be appealed to the Supreme Court. Because of the appeal, the Ninth Circuit has granted a motion to keep the injunction barring the enforcement of AB5 against the trucking industry in place pending the Supreme Court’s decision on whether to hear the case. If the Supreme Court chooses to hear the case, the injunction will remain in place until the Supreme Court’s ruling on of the case. If the Supreme Court declines to hear the case, the injunction will be lifted immediately allowing the State of California and its agencies to begin enforcement of AB5 against motor carriers.

Takeaway

The Ninth Circuit’s decision reinstates the temporary injunction while the request for Supreme Court review is pending. This decision stops the state of California from enforcing AB5 at this time. While this is a temporary victory, the battle continues. The Supreme Court must agree to hear the case, and then it would rule on the merits of the dispute. If the Supreme Court decides to rule upon this case, the court’s ultimate decision will have a substantial impact on the trucking industry. We will continue to update readers as this case proceeds and developments arise.

June 24, 2021

Employer Allowed to Use Prior Salary as a Factor in Setting an Employee’s Salary

By: R. Eddie Wayland, TCA Legal Counsel

The United States District Court for the Eastern District of Virginia recently determined that an employer could use an employee’s prior salary as a factor in setting the employee’s starting salary and that doing so may be used as a defense to an Equal Pay Act (“EPA”) claim.

Background

The Employer used new hires’ prior salary history to set their starting salaries. The Employer stopped using prior salary history to determine a new hire’s salary in 2019. The employees alleged that the Employer’s past practice of using pay history to determine a new hire’s salary perpetuates the alleged gender wage gap and violates the EPA. Several current and former female employees filed a lawsuit seeking damages to remedy the wage disparity they allegedly experienced prior to 2019.

District Court’s Decision

The EPA prohibits gender-based discrimination by employers resulting in unequal pay for equal work. In order to establish a case under the EPA, an employee bringing the lawsuit must show that the employer paid different wages to an employee of the opposite sex for equal work on jobs requiring equal skill, effort, and responsibility, and are performed under similar working conditions. If an employee can show those circumstances are present to establish a case under the EPA, the employer has several defenses that it can assert to justify the wage differential, including that the differential is based on “any other factor other than sex.”

The employer in this lawsuit asserted that it may rely on prior salary history as “any other factor other than sex” in defense against the employees’ claims. In their attempt to show that the Employer could not rely on prior salary history as a defense, the employees pointed to a recent decision from the Ninth Circuit Court of Appeals, which has appellate jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. In that decision, the Ninth Circuit held that the salary associated with an employee’s prior job does not qualify as “a factor other than sex” that can defeat a claim under the EPA.

Because the Employer was a Virginia employer, and this case was brought in Virginia, the District Court applied existing case law from the Fourth Circuit Court of Appeals, which has appellate jurisdiction over Virginia, Maryland, West Virginia, North Carolina, and South Carolina. In the Fourth Circuit, employers are not prohibited from relying on an employee’s prior salary history in setting a new hire’s salary or as a defense to an EPA claim. Therefore, the District Court found that the Employer could rely on prior salary as a defense to the employees’ EPA claim.

Takeaway

There are two important and distinct takeaways from this case. First, this case is an important reminder that laws are different by jurisdiction and state. While employers in the Fourth Circuit may rely on an employee’s prior salary history under the federal EPA, employers in the Ninth Circuit may not. Some States may even have their own laws that prevent an employer from considering prior salary history. This is a controversial topic that has seen a lot of judicial and legislative activity over the past few years. Employers must be aware of the differences in employment laws in the States and judicial districts where they operate. An assumption that because an employment practice is okay in one State must mean it is okay in another State would be inaccurate.

Secondly, the court’s decision is a reminder that it is important to have clear and uniform policies for deciding salary. Employers should regularly review all of their policies, including policies regarding setting new hire salaries and raises, to help ensure that they are based on permissible neutral factors, while also ensuring they conform to the applicable laws.

June 15, 2021

Updated Guidance on Mask Wearing by the CDC and OSHA

By: R. Eddie Wayland, TCA Legal Counsel

On May 13, 2021, the Centers for Disease Control and Prevention (“CDC”) announced that fully vaccinated individuals no longer need to wear a mask or practice social distancing in any setting. In response, the Occupational Safety and Health Administration (“OSHA”) adopted (by reference) the CDC’s May 13 guidance. While these announcements are a welcome relief, because the CDC’s announcement offers no specific guidance for employers, many employers are left questioning what the best practices are for proceeding to a mask-less workplace.

CDC Announcement

In short, the May 13 announcement indicates that fully vaccinated people can now resume activities without wearing masks or physically distancing, except where required by federal, state, or local laws, rules, and regulations, including local business and workplace guidance. Specifically, fully vaccinated people can now:

Resume domestic travel and refrain from testing before or after travel or self-quarantine after travel;
Refrain from testing before leaving the United States for international travel (unless required by the destination) and refrain from self-quarantine after arriving back in the United States;
Refrain from testing following a known exposure, if asymptomatic, with some exceptions for specific settings;
Refrain from quarantine following a known exposure if asymptomatic; and
Refrain from routine screening testing if feasible.

There are several caveats to this announcement, however. First, the CDC announcement states that some business settings may choose to continue to require masks and social distancing. Additionally, those in healthcare setting have no choice—they need to continue to follow previous guidance regarding masks and social distancing regardless of vaccination status. Additionally, there is the concern of business guests. While the CDC’s announcement included an accompanying chart indicating that many day-to-day activities are considered “safest” – including dining at an indoor restaurant, visiting a hair salon, shopping at an uncrowded retail store, and more – the chart is designed with the vaccinated visitor in mind and not for the business actually hosting those guests.

For employers considering relaxing or eliminating mask mandates and social distancing protocols for those who are fully vaccinated, there are several considerations to take into account before proceeding:

Local laws and regulations may still require employers to enforce such rules regardless of vaccine status.
OSHA (discussed below)
States with their own OSHA equivalents may also have different standards to consider and these State agencies could step in, as necessary.

In order to loosen restrictions, some employers will need to know who is vaccinated, which will require employers to inquire about and potentially track the vaccine status of your employees to determine whether someone is fully vaccinated. The Equal Employment Opportunity Commission (“EEOC”) has specifically stated that employers may inquire about employee vaccination status without violating the Americans with Disabilities Act (“ADA”). Specifically, employers are legally allowed to request proof of vaccination, such as by requiring their employees to provide a copy of the completed CDC-issued vaccine card or a vaccination status printout from the health care provider that provided a vaccine. Such a request, on its own, is unlikely to reveal information about a disability, and is therefore not a prohibited disability-related inquiry. Importantly, some of employees may have legitimate medical or religious reasons for abstaining from the vaccine. Employees who are unvaccinated and can be required to continue wearing masks and maintain social distancing could have a claim for retaliation if they are harassed or discriminated against in violation of federal safety laws or other legal principles.

OSHA Announcement

On May 18, 2021, OSHA adopted (by reference) the CDC’s May 13 guidance for fully vaccinated individuals in many non-healthcare settings. Specifically, OSHA announced that employers should “refer to the CDC guidance for information on measures appropriate to protect fully vaccinated workers.”

Since early 2021, OSHA has taken an aggressive position with regard to ramping up COVID-19 workplace health and safety enforcement, which often appears to conflict with CDC guidance. OSHA has not yet issued specific regulations relating to COVID-19 or infectious diseases more generally. OSHA purportedly has drafted a COVID-19 emergency temporary standard (ETS), which has not yet been released.

On January 29, 2021, OSHA issued COVID-19 guidance. With respect to vaccinated employees, OSHA stated that “workers who are vaccinated must continue to follow protective measures, such as wearing face covering and remaining physically distant, because at this time, there is not evidence that COVID-19 vaccines prevent transmission of the virus from person to person.” This prior guidance from OSHA appears to conflict with CDC’s May 13 update. Yet, while the OSHA website still requires vaccinated employees to continue to mask and social distance, OSHA has added a banner at the top of the webpage indicating that the CDC’s May 13 guidance will trump OSHA’s vaccinated employee guidance while OSHA reviews its own measures, and that new guidance from OSHA is forthcoming.

With respect to enforcement, OSHA looks to its guidance to determine whether hazards are “recognized” and whether employers’ health precautions are sufficient to abate the hazards. Due to OSHA’s adoption by reference of CDC’s May 13 update, it is not likely that OSHA will try to establish liability based on alleged exposures from vaccinated, asymptomatic employees.

Takeaway

Although this return to some semblance of normalcy is a relief after over a year of lock-downs and restrictions, employers should remain cautious in revising policies. Considerations must be given to the numerous issues that may arise surrounding loosening COVID-19 restrictions. Also, it is important to remember, however, that CDC and OSHA guidance are merely guidance. Applicable state and local requirements and regulations continue to be a significant consideration. Employers should also consider various potential discrimination issues and privacy expectations, among others, when implementing new changes and requirements. Ultimately, the solutions will vary greatly based on individualized needs and circumstances of each employer.

June 1, 2021

Ninth Circuit Allows Enforcement of California’s AB5 against Motor Carriers

By: R. Eddie Wayland, TCA Legal Counsel

Ninth Circuit Allows Enforcement of California’s AB5 against Motor Carriers

The Ninth Circuit Court of Appeals (which oversees California, Oregon, Washington, Arizona, Nevada, Idaho, Montana, Alaska, and Hawaii) recently overturned an injunction banning the enforcement of California’s AB5, which involves the factors and tests for determining independent contractor status in California. With this ruling, the Ninth Circuit has allowed the State of California and its agencies to bring enforcement of AB5 against motor carriers.

Background

In 2019, California passed into law Assembly Bill 5 (“AB5”) which established the presumption that workers are employees unless: (A) the worker is free from the control and direction of the hiring entity; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business. As you may recall, at that time we informed readers of the dangers of AB5 and the negative impact it could have on the trucking industry, particularly those motor carriers who utilize owner-operators and independent contractors. Shortly after AB5 was passed, we applauded the district court’s decision enjoining the State of California from enforcing AB5, and provided readers with an update on this development. This law is back in the limelight, with the Ninth Circuit’s decision overturning the district court injunction.

District Court Case

When AB5 was challenged in court, the federal district court held that AB 5’s ABC test eliminates the historical owner-operator model, in direct contravention of the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”), and granted an injunction preventing the enforcement of AB5. The FAAA is a federal deregulation measure with broad preemption characteristics that forbids any state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property.” The district court found that the FAAAA “likely preempts ‘an all or nothing’ state law like AB 5,” which has categorical applications. The district court concluded, “there is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking.”

Appellate Court Case

On appeal, the Ninth Circuit disagreed. The Ninth Circuit held that AB5 was not preempted by the FAAAA because AB5 is “a generally applicable labor law that impacts the relationship between [a] motor carrier and its workforce, and does not bind, compel or otherwise freeze into place a particular price, route, or service of a motor carrier at the level of its customers[.]” The Ninth Circuit went on to hold that AB5 “merely” affects the classification of workers, and any potential increase on motor carriers’ costs of doing business would represent only an indirect, remote, or tenuous relation to prices, routes, and services offered, because the law only affects the carrier’s relationship with its workforce, not its consumers. The Ninth Circuit concluded that AB5 can be differentiated from laws that would “compel[] a motor vehicle carrier to a certain result in its relationship with consumers, such as requiring a motor carrier ‘to offer a system of services that the market does not provide’ or that ‘would freeze into place services that carriers might prefer to discontinue in the future,’ and ‘that the market would not otherwise provide.’” On these bases, the Ninth Circuit found that AB5 was not preempted and, by extension, the injunction against AB5’s enforcement was improper.

Takeaway

While a request for Supreme Court review of this decision will almost certainly follow, at this time, motor carriers who operate in California must be prepared to act in accordance with AB5. Once the injunction is formally lifted by the district court (which is expected to come sooner than later), the State of California and its agencies will be free to enforce AB5, unless and until the Supreme Court (or a full Ninth Circuit) says otherwise. All motors carriers, but particularly those who utilize the owner-operator model and are operating in California, should carefully reevaluate the classification of their drivers in light of these developments.

April 18, 2021

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