SCOTUS will decide FAA vs. PAGA arbitration case

UPDATE: As I expected, the US Supreme Court has held (8-1) that the Federal Arbitration Act (FAA) preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under California's Labor Code Private Attorneys General Act (PAGA). Latest blog post HERE.

The US Supreme Court has agreed to decide whether the Federal Arbitration Act (FAA) requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under California's Private Attorney General Act (PAGA).

The case is Viking River Cruises v. Moriana (US Supreme Ct cert granted 12/15/2021) [Briefs].

I expect a decision by summer.

Moriana sued under PAGA on behalf of the state and all other similarly situated employees, alleging various Labor Code violations.

Moriana had agreed to submit any dispute to arbitration and the agreement required her to waive any right to bring a class, collective, representative, or private attorney general action.

The trial court denied the employer's motion to compel arbitration; the California Court of Appeal affirmed. Moriana v. Viking River Cruises (California Ct App 09/18/2020) (unpublished) [Opinion]

The US Supreme Court has held that the FAA requires arbitration agreements to be enforced as written – including terms that prohibit class or collective arbitrations.

However the California Supreme Court (see Iskanian v. CLS Transp, 327 P.3d 129 (Cal. 2014)) held that a waiver of the right to pursue PAGA actions violates California public policy and is unenforceable.

The California court's reasoning is that a PAGA suit involves a dispute between the employer and the state rather than between the employer and the employee.

The employer's view is that this is a "transparent effort to avoid the FAA's preemptive effect," and "conflicts with this Court's cases, which squarely hold that states may not categorically place specific claims beyond the FAA's reach by conceptualizing them as particularly intertwined with state interests."

I don't see how the employee can prevail in this case. The Federal Arbitration Act preempts state law. For the California courts to say that a waiver of the right to pursue PAGA actions violates California public policy simply sets up a direct conflict between state law and federal law. And federal law is the supreme law of land. So the employer should win this one.

(And why am I going on record to predict a Supreme Court outcome?)

HHS's vaccination mandate: Nationwide injunction is reduced to 14 states

The Secretary of Health and Human Services issued an interim rule that requires facilities that provide health care to Medicare and Medicaid beneficiaries to ensure that their staff, unless exempt for medical or religious reasons, are fully vaccinated against COVID-19. Fourteen states sued to enjoin enforcement of the rule, and the trial court issued a NATIONWIDE temporary injunction. The federal defendants moved the 5th Circuit to stay the nationwide preliminary injunction.

The 5th Circuit made two rulings in Louisiana v. Becerra (5th Cir 12/15/2021) [PDF]:

(1) The HHS Secretary has not made a strong showing of likely success on the merits because the rule was a "novel assertions of authority," especially in light of BST Holdings v. OSHA, 17 F.4th 604 (5th Cir. 2021), which stated that "The Mandate's … promulgation grossly exceeds OSHA's statutory authority." Therefore, the court denied a stay as it applies to the 14 plaintiff states.

(2) The court granted a stay as to the order’s application to any jurisdictions other than the 14 plaintiff states. "The district court here gave little justification for issuing an injunction outside the 14 States that brought this suit. It stated that 'due to the nationwide scope of the CMS Mandate, a nationwide injunction is necessary due to the need for uniformity' and noted that 'there are unvaccinated workers in other states who also need protection.' Lacking is either the constitutional uniformity principle in [Texas v. United States, 809 F.3d 134, 188 (5th Cir. 2015)] or that case’s concern that patchwork rulings would undermine an injunction limited to certain jurisdictions."

Governor's COVID-19 orders expressed public policy exception to at-will employment

 When can an at-will employee challenge an employment termination? One way is to show that the termination was a violation of public policy.

Ha! Judges don’t always agree on what is a “public policy.”

A nurse – an at-will employee – filed an action for wrongful discharge alleging that the employer terminated her in violation of public policy. Ho v. Tulsa Spine & Specialty Hosp (Oklahoma 12/14/2021) [PDF].

She claims she was fired because she declined to come to work without adequate and appropriate personal protective equipment or to provide nursing services for elective surgeries when, to do so, was a violation of the Governor's executive order banning such surgeries.

The trial court dismissed her case because she was an employee-at-will and failed to state a claim.

The Oklahoma Supreme Court reversed (5-4).

The court said that in order to establish a public policy exception "the plaintiff must identify an Oklahoma public policy goal that is clear and compelling and is articulated in existing Oklahoma constitutional, statutory or jurisprudential law."

The court found that the Legislature "expressly delegated" to the Governor the authority to issue temporary emergency executive orders relating to emergencies such as the COVID crisis, and these orders established a "public policy of curtailing infectious disease."

Four dissenting Justices wrote three opinions essentially arguing that the public policy exception should be narrowly drawn and that the Governor's orders were not clear and compelling and not an articulation of "constitutional, statutory or jurisprudential law."

Massachusetts likes the FLSA standard for determining joint employer status

Jinks v. Credico (Massachusetts 12/13/2021) [PDF] is one more court case trying to set up the rules for deciding whether an entity is a joint employer of an individual, and Massachusetts opted for the FLSA test.

Plaintiffs were salespersons directly retained by DFW Consultants, an entity with which Credico subcontracted to provide regional direct sales services for its national clients. They claimed that Credico violated the independent contractor statute (G. L. c. 149, § 148B) by misclassifying them as independent contractors rather than employees, and that it violated the wage laws. The trial court granted summary judgment to Credico; the Massachusetts Supreme Judicial Court affirmed.

The court held that the statute (G. L. c. 149, § 148B) which sets forth the standard to classify an individual as an employee or an independent contractor for purposes of the minimum wage and overtime statutes does NOT establish the standard to determine whether an entity is that individual's joint employer for purposes of those laws. The court said:

"Instead, we borrow the test applied to determine joint employer status under the Fair Labor Standards Act (FLSA), from which the Massachusetts wage laws derive. Pursuant to that test, whether an entity is a joint employer of an individual is determined by considering the totality of the circumstances of the relationship between the individual and the entity, guided by a framework of four factors: whether the entity (1) had the power to hire and fire the individual, (2) supervised and controlled the individual's work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records."

"The record, when considered in view of the aforementioned factors as a whole, does not support the conclusion that the plaintiffs had a reasonable expectation of proving that Credico exercised the type of control over their employment necessary to conclude it was their joint employer."

SCOTUS grants certiorari in important arbitration case

The US Supreme Court granted certiorari on December 10 in an important arbitration case. Southwest Airlines v. Saxon [Briefs] raises the issue: Whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate “transportation workers” exempt from the Federal Arbitration Act.

There seems to be a direct conflict between at least two federal Circuit Courts on this issue. The 7th Circuit holds that they are “transportation workers” exempt from the Federal Arbitration Act. Saxon v. Southwest Airlines (7th Cir 2021). The 5th Circuit holds that they are not exempt. Eastus v. ISS Facility Servs, 960 F.3d 207 (5th Cir 2020).

It's the 7th Circuit case that caught the Court's attention.

The 7th Circuit describes the situation this way:

"Latrice Saxon is a ramp supervisor who manages and assists workers loading and unloading airplane cargo for Southwest Airlines Company. After she brought a lawsuit against her employer, Southwest invoked the Arbitration Act. Saxon asserted that she was an exempt transportation worker, but the district court found her work too removed from interstate commerce and dismissed the case.

"We reverse. The act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood at the time of the Arbitration Act's enactment in 1925. Airplane cargo loaders, as a class, are engaged in that commerce, in much the way that seamen and railroad employees were, and Saxon and the ramp supervisors are members of that class. It therefore follows that they are transportation workers whose contracts of employment are exempted from the Arbitration Act."

The Court has not announced when oral arguments will be scheduled, but I expect we'll get a decision before summer.

The up-coming return of NLRB "micro-units."

The NLRB's policies ebb and flow with each change of occupancy at the White House. One important issue has to do with determining an appropriate unit for collective bargaining when a union petitions for an NLRB election.

In Specialty Healthcare, 357 NLRB 934 (2011), the Board announced a major break from the past, one which allows relatively small groups of employees to be declared an appropriate unit even though a larger group might be even more appropriate.

Here's how the Board put the new approach:

"[W]hen employees or a labor organization petition for an election in a unit of employees who are readily identifiable as a group (based on job classifications, departments, functions, work locations, skills, or similar factors), and the Board finds that the employees in the group share a community of interest after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit, despite a contention that employees in the unit could be placed in a larger unit which would also be appropriate or even more appropriate, unless the party so contending demonstrates that employees in the larger unit share an overwhelming community of interest with those in the petitioned-for unit."

Unions rejoiced. Employers moaned.

In PCC Structurals, Inc., 365 NLRB No. 160 (2017), the Board rejected the Specialty Healthcare approach, and returned to the previous standard for determining an appropriate unit – an approach that typically favored wall-to-wall units rather than smaller departmental units.

Now the Board is clearly on the path toward restoring the Specialty Healthcare approach or something quite similar. On December 7 in American Steel Construction 371 NLRB No. 41 (2021) [PDF] the NLRB invited the filing of briefs (due January 21, 2022) in order to afford the parties and interested amici the opportunity to address the following questions:

1. Should the Board adhere to the standard in PCC Structurals, Inc., 365 NLRB No. 160 (2017), as revised in The Boeing Company, 368 NLRB No. 67 (2019)?

2. If not, what standard should replace it? Should the Board return to the standard in Specialty Healthcare, 357 NLRB 934 (2011), either in its entirety or with modifications?

It’s really only a matter of time before the Board returns to Specialty Healthcare or something quite similar.

Cert petition: Is an airline ramp supervisor exempt from the Federal Arbitration Act?

UPDATED December 10, 2021. The US Supreme Court has granted certiorari in this case.
See https://rossrunkel.com/blog/scotus-grants-certiorari-in-important-arbitration-case

Southwest Airlines has filed a petition for certiorari at the US Supreme Court in which the issue is whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate “transportation workers” exempt from the Federal Arbitration Act. Southwest Airlines v. Saxon [Briefs]. There seems to be a direct conflict between at least two federal Circuit Courts on this issue. The 7th Circuit holds that they are “transportation workers” exempt from the Federal Arbitration Act. Saxon v. Southwest Airlines (7th Cir 2021). The 5th Circuit holds that they are not exempt. Eastus v. ISS Facility Servs, 960 F.3d 207 (5th Cir 2020).

It's the 7th Circuit case that is awaiting the Court's decision on whether to grant review. The 7th Circuit describes the situation this way:

"Latrice Saxon is a ramp supervisor who manages and assists workers loading and unloading airplane cargo for Southwest Airlines Company. After she brought a lawsuit against her employer, Southwest invoked the Arbitration Act. Saxon asserted that she was an exempt transportation worker, but the district court found her work too removed from interstate commerce and dismissed the case.

"We reverse. The act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood at the time of the Arbitration Act's enactment in 1925. Airplane cargo loaders, as a class, are engaged in that commerce, in much the way that seamen and railroad employees were, and Saxon and the ramp supervisors are members of that class. It therefore follows that they are transportation workers whose contracts of employment are exempted from the Arbitration Act."

Which ever way the Supreme Court might decide this case (assuming they decide it at all), it's important to have some uniformity around the country.

A simple paid suspension is not an adverse employment action

The 11th Circuit joined several other Circuit courts in holding that a simple paid suspension is not an adverse employment action for purposes of a race discrimination claim. Davis v. Legal Services Alabama (11th Cir 12/02/2021) [PDF]. The other Circuits are 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, and Federal Circuits.

Davis, who is Black, was executive director of Legal Services Alabama (LSA), a non-profit, for about a year before he resigned and sued claiming race discrimination. Prior to his resignation, LSA placed him on paid leave pending investigation of complaints by some of his subordinates and colleagues. LSA's stated reasons for the investigation involved spending decisions, not following policies when hiring, creating new initiatives without Board approval, and creating a hostile work environment for some employees.

The 11th Circuit pointed out that a paid suspension "can be a useful tool for an employer to hit 'pause' and investigate when an employee has been accused of wrongdoing. And that is particularly so in a case like this one—where the employee under investigation is in charge of all the employees who are the witnesses. As a practical matter, employers cannot expect employees to speak freely to investigators when the person under investigation is looking over their shoulders. Employers should be able to utilize the paid-suspension tool in good faith, when necessary, without fear of Title VII liability."

Davis argued that the manner in which his suspension was handled, and the circumstances that accompanied it, combined to amount to an adverse employment action. But the court disagreed.

Here are Davis' claims and the court's responses:

(1) LSA disclosed the suspension to an individual who had opposed Davis' earlier political campaign. However, Davis offered no evidence that LSA purposely hired that individual because of the bad blood between him and Davis.

(2) The suspension occurred days before a high-profile LSA reception with the state bar, yet there was no evidence that LSA intentionally timed the suspension with the state bar event to embarrass Davis.

(3) LSA compiled a narrative of reasons for the suspension in the suspension letter. To this, the court said, "And it is perfectly reasonable that LSA would compile its reasons for the suspension in a document to give to Davis to avoid any accusations of arbitrariness."

(4) LSA placed a guard in the building in the aftermath of the suspension, but there was no evidence that placing a guard in the building after a suspension was out of the ordinary for LSA.

Davis also argued that because he was the executive director, he served as the public face of LSA, so the paid suspension was more adverse to him than it would be to a low-level employee. However, the court pointed out that, "Davis has offered no authority, and we have found none, 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."

Supreme Court will decide whether employee must show prejudice when asserting employer waived right to arbitrate.

The US Supreme Court granted certiorari to decide "Does the arbitration-specific requirement that the proponent of a contractual waiver defense prove prejudice violate this Court's instruction that lower courts must 'place arbitration agreements on an equal footing with other contracts?' AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)."

The case is Morgan v. Sundance Inc (US Supreme Ct cert granted 11/15/2021) [Briefs]

Oral arguments will be scheduled at a later time.

The 8th Circuit reversed the district court's denial of the employer's motion to compel arbitration of Morgan's FLSA claims. Morgan v. Sundance, Inc. [Opinion]

The employer waited 8 months after Morgan filed her claims to file its motion to compel arbitration under a written arbitration agreement. During that time, the employer answered without asserting a right to arbitration, participated in a settlement conference, and filed a motion to dismiss, which the district court denied after taking it under advisement for 4 months. The 8th Circuit held the employer did not waive its right to arbitrate because its motion was not on the merits and Morgan was not prejudiced by the delay.

Arbitration agreement enforced (2-1)

[Watch the video]

When I see the 9th Circuit split 2 to 1 on whether an arbitration agreement is enforceable, that catches my attention. Martinez-Gonzalez v. Elkhorn Packing (9th Cir 11/03/2021) [PDF].

A farm laborer signed an arbitration agreement, then he quit his job, and then he filed a lawsuit claiming wage violations.

The trial court found that the arbitration agreement was unenforceable. Two reasons. One: economic duress. Two: undue influence.

Now this is a question of contract formation — forming the arbitration contract — and that's a question of California state law.

The 9th Circuit pointed out that this guy had just traveled up from Mexico, and he was dependent on the employer for his housing, and he'd already started working. And then the employer gathered 150 of these workers in a hotel parking lot, gave them an orientation, lined them up and said sign these documents.

All of that did not show that the employer committed a “wrongful act.” A wrongful act is required in order to upset that agreement.

And this guy had alternatives. He could have asked if he needed to sign. And nobody told him that he would be fired if he didn't sign. So, there's no economic duress.

As far as undue influence goes, this guy was not what we would call a vulnerable person. He had an education. He'd worked all his life. He was experienced. And the employer did not exert any excessive pressure on him.

The dissent is pointing out that the other two judges are completely disregarding the extensive fact-finding that was made by the trial court. They just ran roughshod over all those fact-findings.

But 2 is greater than 1. So this case is going to go to arbitration.  

US Supreme Court denies religious challenge to Maine's vaccine mandate

The US Supreme Court has denied an emergency request to block implementation of Maine's requirement that all healthcare workers be vaccinated. Does v. Mills (US Supreme Ct 10/29/2021) [PDF].

Maine's mandate allows an exemption for those who produce a doctor's statement indicating that immunization "may be" medically inadvisable, but there is no exemption based on religious belief. Maine does not dispute that its rule burdens the exercise of sincerely held religious beliefs. The applicants explain that receiving the COVID-19 vaccines violates their faith because of what they view as an impermissible connection between the vaccines and the cell lines of aborted fetuses. More specifically, they allege that the Johnson & Johnson vaccine required the use of abortion-related materials in its production, and that Moderna and Pfizer relied on aborted fetal cell lines to develop their vaccines. This much, the applicants say, violates foundational principles of their religious faith.

Justice Gorsuch, joined by Justices Thomas and Alito, dissented from the denial. They argued that Maine is discriminating against workers who have religious objections to the COVID vaccines, saying "Maine's decision to deny a religious exemption in these circumstances … borders on the irrational."

Justices Barrett and Kavanaugh concurred in the denial of an injunction, saying the case should not be resolved using the Court's emergency docket – "on a short fuse without benefit of full briefing and oral argument."

This will not be the end of this case. There will be a petition for a writ of certiorari, following the normal procedures.

NLRB General Counsel on Student Athletes

Today, National Labor Relations Board General Counsel Jennifer Abruzzo issued a memorandum to all Field offices providing updated guidance regarding her position that certain Players at Academic Institutions (sometimes referred to as student athletes), are employees under the National Labor Relations Act, and, as such, are afforded all statutory protections.

This can be a real game-changer.

NLRB nomination: David Prouty

The President has announced his intent to nominate David Prouty to fill an up-coming vacancy at the National Labor Relations Board. The vacancy will arise in late August when William Emanuel’s term expires.

Prouty’s LinkedIn profile: “David Prouty is the General Counsel of Service Employee International Union (SEIU) Local 32BJ, the largest labor union for property service workers in the country with over 175,000 members.

“He served as General Counsel of the Major League Baseball Players Association (MLBPA) from 2013 – 2017 and as Chief Labor Counsel of the MLBPA from 2008 – 2013. Prior to June 2008, Mr. Prouty was General Counsel of UNITE HERE, the union formed by the 2004 merger of UNITE, the Union of Needletrades, Industrial and Textile Employees, with HERE, the Hotel Employees and Restaurant Employees International Union, and was General Counsel of UNITE from 2001 - 2004.

“Before his appointment as General Counsel of UNITE, Mr. Prouty was Southern Regional Counsel for UNITE and its predecessor union, the Amalgamated Clothing and Textile Workers Union (ACTWU), for fifteen years and litigated many of the union’s landmark organizing cases including Fieldcrest Cannon, S. Lichtenberg, Tultex and Kmart.

“He was the Union Co-Chair of the ABA’s Committee on Practice and Procedure before the NLRB from 2007 – 2010; was a member of the NLRB Union Advisory Panel from 1997 to 1998; is a Fellow of the College of Labor and Employment Lawyers, and is a member of the Peggy Browning Fund’s Advisory Board.

“Mr. Prouty graduated from Walter Johnson High School in Bethesda, Maryland in 1976; received his AB magna cum laude from Bowdoin College in Brunswick, Maine in 1980; worked as a researcher and organizer for the American Federation of State, County and Municipal Employees (AFSCME) from 1980 to 1983; and received his JD cum laude from Harvard Law School in 1986.”

SCOTUS: Union access rule is a "taking"

[Watch the 90-second video]

California has a regulation that grants labor organizations a "right to take access" to an agricultural employer’s property in order to solicit support for unionization.

The US Supreme Court holds (6-3) that this appropriates a right to invade the growers’ property and therefore constitutes a per se physical taking. Cedar Point Nursery v. Hassid (US Supreme Ct 06/23/2021). [PDF]

That obligates the government to provide the owners with just compensation.

This is true even though the regulation does not allow for permanent and continuous access 24 hours a day, 365 days a year. A physical appropriation is a taking whether it is permanent or temporary. The duration of the appropriation bears only on the amount of compensation due.

The Court declined to adopt the theory that the access regulation merely regulates, and does not appropriate, the growers’ right to exclude.

Three Justices would hold that this was a "regulation" which requires the use of a complex balancing test to determine whether there has been a compensable taking.

Get vaccinated or get fired

[Watch the 1:40 minute video]

Can the boss require you to get vaccinated or you're going to lose your job? A federal judge in Texas says, yes. Bridges v. Houston Methodist Hospital (S.D. Texas 06/12/2021) [PDF].

A hospital in Houston announced that everybody had to get vaccinated or they're going to get fired. So, a bunch of employees got up a lawsuit and they brought four claims, all of which were rejected by the judge.

First, they claimed wrongful termination. But in Texas, that means … it has to be an employee who has refused to commit an unlawful act. And that's not what was involved in this fact situation.

Second, they argued that the vaccine has not been fully approved by the Food and Drug Administration. And of course that's true. But that has no effect whatsoever on what a private employer can do in terms of requiring its employees to be vaccinated.

Third, they said there's a federal law that provides protection for humans that are involved in trials. But  the judge said, well, this wasn't a trial. This was requiring people to get vaccinated — period.

Fourth, they brought up the Nuremberg Code, which was designed to get at the Nazi medical experiments during the late 30s and early 40s. And the judge, of course, found that “reprehensible.”

So in Texas at least the employer can require employees to be vaccinated or they're going to lose their jobs and find work somewhere else.