Predicting a win for the praying football coach

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Nationwide injunction of federal employee vaccine mandate has ended

In a 2-1 decision the 5th Circuit has ended the nationwide injunction of the President's Executive Order that mandates COVID-19 vaccination for all executive branch employees, subject to medical and religious exceptions. Feds for Medical Freedom v. Biden (5th Cir 04/07/2022) [PDF]

Several plaintiffs claimed that the President exceeded his authority, and sued in federal district court. The district court found that the plaintiffs were likely to succeed on the merits of their claim and that the equities favored them. It therefore preliminarily enjoined enforcement of the Order nationwide.

The 5th Circuit (2-1) reversed, holding that the Civil Service Reform Act of 1978 (CSRA) precluded the district court's jurisdiction.

The court pointed out that the CSRA distinguishes between employees against whom an agency has taken "final adverse action" and those for which adverse action is merely "proposed." Only those against whom an agency has taken "final adverse action" are entitled to judicial review.

The court said: "Critically, in this case, any adverse action against the plaintiffs remains 'proposed.' They are thus entitled to 'notice, representation by counsel, an opportunity to respond, and a written, reasoned decision from the agency' under § 7513(b), not administrative review under § 7513(d). In other words, the plaintiffs are 'employees to whom the CSRA denies statutory review.' Congress intended 'to entirely foreclose judicial review to' such employees."

The DISSENT argued that the "CSRA does not cover pre-enforcement employment actions, especially concerning 2.1 million federal civilian employees. The district court, therefore, had subject-matter jurisdiction to hear plaintiffs’ claims."

No "look through" when confirming or vacating arbitration award

The U.S. Supreme Court held that a federal court could not "look through" an arbitration award to the underlying dispute to determine if it had jurisdiction to confirm or vacate the award. Badgerow v. Walters (US Supreme Ct 03/31/2022) [PDF]

An employee sued in state court to vacate an arbitration award in favor of an employer on a wrongful termination claim. The employer then removed the case to the federal trial court which granted the employer's request to confirm the award. The Supreme Court reversed because the federal court lacked subject matter jurisdiction.

The Federal Arbitration Act (FAA) authorizes a party to an arbitration agreement to petition a federal court to vacate or confirm an arbitration award.

However, the FAA itself does not create subject matter jurisdiction. That must be based on diversity of citizenship or a federal question.

When someone petitions to compel arbitration under FAA § 4, the federal court will “look through” the petition to the “underlying substantive controversy.” That's based on specific §4 language: A party to an arbitration agreement may petition for an order to compel arbitration in a “United States district court which, save for [the arbitration] agreement, would have jurisdiction” over “the controversy between the parties.”

 It is FAA §§ 9 and 10 that apply to confirming or vacating an existing arbitration award. Those sections contain none of the same statutory language. Therefore, the "look through" approach does not apply.

Bottom line: As a result, federal courts will look through to the underlying controversy when asked to compel arbitration, but not when asked to confirm or vacate an existing arbitration award.

No McDonnell Douglas in California whistleblower cases

The 9th Circuit asked the California Supreme Court to clarify whether McDonnell Douglas is the proper framework for evaluating California whistleblower retaliation claims.

The California Court held that a plaintiff need not satisfy McDonnell Douglas's framework. Lawson v. PPG Architectural Finishes (California 01/27/2022) [PDF]

Lawson sued in federal court claiming he was fired because he blew the whistle on his employer's fraudulent practices, in violation of the protections codified in Labor Code section 1102.5. The federal trial court granted summary judgment for the employer because Lawson could not satisfy all of the steps in a McDonnell Douglas Corp. v. Green 411 U.S. 792 (1973) analysis.

The answer to the certified question: "Section 1102.6 provides the governing framework for the presentation and evaluation of whistleblower retaliation claims brought under section 1102.5. First, it places the burden on the plaintiff to establish, by a preponderance of the evidence, that retaliation for an employee's protected activities was a contributing factor in a contested employment action. The plaintiff need not satisfy McDonnell Douglas in order to discharge this burden. Once the plaintiff has made the required showing, the burden shifts to the employer to demonstrate, by clear and convincing evidence, that it would have taken the action in question for legitimate, independent reasons even had the plaintiff not engaged in protected activity."

Lawson claimed his boss began ordering him to intentionally mistint slow-selling paint products – that is, to tint the paint to a shade the customer had not ordered – and he reported that to the company's hot line. Later, he was fired.

The federal district court applied the three-part burden-shifting framework laid out in McDonnell Douglas Corp. v. Green 411 U.S. 792 (1973), and found that Lawson failed to satisfy the third prong in that he failed to produce sufficient evidence that the company's stated reason for firing him was pretextual.

The 9th Circuit observed that California's appellate courts had not followed a consistent practice, and asked the California Supreme Court to clarify.

The California court said: By its terms, section 1102.6 describes the applicable substantive standards and burdens of proof for both parties in a section 1102.5 retaliation case: First, it must be “demonstrated by a preponderance of the evidence” that the employee’s protected whistleblowing was a “contributing factor” to an adverse employment action. (§ 1102.6.) Then, once the employee has made that necessary threshold showing, the employer bears “the burden of proof to demonstrate by clear and convincing evidence” that the alleged adverse employment action would have occurred “for legitimate, independent reasons” even if the employee had not engaged in protected whistleblowing activities.

ERISA plan fiduciaries lose at US Supreme Court – unanimously

Current and former employees sued claiming ERISA plan fiduciaries violated their duty of prudence by, among other things, offering needlessly expensive investment options and paying excessive recordkeeping fees.

The 7th Circuit held that these allegations fail as a matter of law, in part based on the court's determination that employees' preferred type of low-cost investments were available as plan options. In the 7th Circuit's view, this eliminated any concerns that other plan options were imprudent.

The US Supreme Court vacated and remanded. Hughes v. Northwestern University (US Supreme Ct 01/24/2022) [PDF]

The fiduciaries administer retirement plans on behalf of current and former Northwestern University employees. The plans are defined-contribution plans governed by the Employee Retirement Income Security Act of 1974 (ERISA), under which each participant chooses an individual investment mix from a menu of options selected by the plan administrators.

The employees claimed that the fiduciaries violated ERISA’s duty of prudence required of all plan fiduciaries by: (1) failing to monitor and control recordkeeping fees, resulting in unreasonably high costs to plan participants; (2) offering mutual funds and annuities in the form of “retail” share classes that carried higher fees than those charged by otherwise identical share classes of the same investments; and (3) offering options that were likely to confuse investors.

The 7th Circuit erred in relying on the participants’ ultimate choice over their investments to excuse allegedly imprudent decisions by the fiduciaries.

Determining whether the employees state plausible claims against plan fiduciaries for violations of ERISA’s duty of prudence requires a context-specific inquiry of the fiduciaries’ continuing duty to monitor investments and to remove imprudent ones as articulated in Tibble v. Edison Int’l, 575 U. S. 523.

Tibble concerned allegations that plan fiduciaries had offered “higher priced retail-class mutual funds as Plan investments when materially identical lower priced institutional-class mutual funds were available.” The Tibble Court concluded that the plaintiffs had identified a potential violation with respect to certain funds because “a fiduciary is required to conduct a regular review of its investment.”

Tibble’s discussion of the continuing duty to monitor plan investments applies here. The employees allege that the fiduciaries' failure to monitor investments prudently—by retaining recordkeepers that charged excessive fees, offering options likely to confuse investors, and neglecting to provide cheaper and otherwise-identical alternative investments—resulted in the fiduciaries failing to remove imprudent investments from the menu of investment offerings. In rejecting the employees' allegations, the 7th Circuit did not apply Tibble’s guidance but instead erroneously focused on another component of the duty of prudence: a fiduciary’s obligation to assemble a diverse menu of options.

But the fiduciaries' provision of an adequate array of investment choices, including the lower cost investments plaintiffs wanted, does not excuse their allegedly imprudent decisions. Even in a defined-contribution plan where participants choose their investments, Tibble instructs that plan fiduciaries must conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options. If the fiduciaries fail to remove an imprudent investment from the plan within a reasonable time, they breach their duty.

The 7th Circuit’s exclusive focus on investor choice elided this aspect of the duty of prudence. The court maintained the same mistaken focus in rejecting the employees’ claims with respect to recordkeeping fees on the grounds that plan participants could have chosen investment options with lower expenses.

The US Supreme Court vacated the judgment below so that the 7th Circuit may reevaluate the allegations as a whole, considering whether the employees have plausibly alleged a violation of the duty of prudence as articulated in Tibble under applicable pleading standards. The content of the duty of prudence turns on “the circumstances . . . prevailing” at the time the fiduciary acts, 29 U. S. C. §1104(a)(1)(B), so the appropriate inquiry will be context specific.

US Supreme Court argument on two vaccine mandates scheduled for January 7

In a surprise move, the US Supreme Court announced that it will hear oral arguments on January 7 on whether the government will be able to enforce two vaccine mandates while those mandates are being challenged in court.

Mandate # 1 is a rule from the Occupational Safety and Health Administration requiring employers with more than 100 employees to require their employees to be fully vaccinated or be tested weekly. The 5th Circuit put the rule on hold last month. Then there were several cases pending in several federal Circuit courts, so these were all consolidated and sent to the 6th Circuit. Surprisingly, the 6th Circuit dissolved the 5th Circuit's stay, so that rule is still in effect.

Mandate # 2 is a rule from the Department of Health and Human Services requiring facilities participating in Medicare and Medicaid programs to require their workers to be vaccinated (with medical and religious exemptions). Lower courts have blocked that rule in about one-half of the states.

OSHA's vaccine rule is reinstated (2-1)

On December 17 the 6th Circuit (2-1) dissolved the 5th Circuit's stay of OSHA's rule that employers with 100 or more employees require COVID vaccinations or weekly testing. Mass. Building Trades Council v. OSHA (6th Cir 12/17/2021) [PDF].

After the 5th Circuit issued its stay of the rule, a large number of similar challenges pending in multiple federal Circuit courts were consolidated and transferred to the 6th Circuit. That court ruled that the challengers (1) "cannot establish a likelihood of success on the merits" and (2) "have not shown that any injury from lifting the stay outweighs the injuries to the Government and the public interest."

The dissent is of the opinion that "The Secretary of Labor lacks statutory authority to issue the mandate."

SCOTUS will decide: USERRA v. state sovereign immunity

On December 15 the US Supreme Court granted certiorari to decide whether Congress abrogated state sovereign immunity when it enacted the Uniform Services Employment and Re-employment Rights Act (USERRA). Torres v. Texas Dept of Public Safety (US Supreme Ct cert granted 12/15/2021) [Briefs].

States have sovereign immunity – not only due to the 11th amendment, but also because “immunity from suit 'is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today ... except as altered by the plan of the Convention or certain constitutional Amendments.'” Alden v. Maine, 527 U.S. 706 (1999).

Torres sued a state agency under USERRA, claiming that the agency's failure to offer him a job that would accommodate his disability violated USERRA.

The Texas Court of Appeals held that the suit was barred by sovereign immunity.

The Texas court relied heavily on Alden v. Maine. In that case state employees sued the state in state court alleging violations of the Fair Labor Standards Act (FLSA). The Supreme Court held that the case should be dismissed on the ground of sovereign immunity:

"We hold that the powers delegated to Congress under Article I of the United States Constitution do not include the power to subject nonconsenting States to private suits for damages in state courts. We decide as well that the State of Maine has not consented to suits for overtime pay and liquidated damages under the FLSA."

The Texas court pointed out that USERRA was enacted pursuant to Article I of the constitution (not Section 5 of the 14th amendment), and said that Alden v. Maine makes it clear that nonconsenting state cannot be sued in their own courts for alleged USERRA violations.

Torres is arguing that USERRA was enacted under Congress's war powers, and that even though they are listed within Article I, they are both “plenary and exclusive,” and were never exercised individually by the states.

I look forward to seeing a decision before summer.

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.