Specialty Healthcare returns: “Overwhelming community of interest” once again

The NLRB has returned to its prior “overwhelming community of interest” test, as set forth in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934 (2011), overruling PCC Structurals, 365 NLRB No. 160 (2017), and The Boeing Co., 368 NLRB No. 67 (2019). American Steel Construction, Inc., 372 NLRB No. 23 (12/14/2022) [PDF].

Where a party argues that a proposed bargaining unit must be expanded to include additional employees, the Board will place the burden on that party to show that the excluded employees share an “overwhelming community of interest” to mandate their inclusion in the bargaining unit.

The Board's majority opinion says this policy "better reflects traditional Board precedent, better achieves consistency with Supreme Court precedent, and better promotes the policies of the Act."

Two dissenting Members say "our colleagues advance no valid justification for taking this step."

NLRB expands make-whole remedies

In a major policy shift, the NLRB will now ensure that workers who are victims of labor law violations are compensated for all “direct or foreseeable pecuniary harm” suffered as a result of those unfair labor practices. Thryv, Inc., 372 NLRB No. 22 (12/13/2022) [PDF].

The standard make-whole remedy for labor law violations will now include the loss of earnings and benefits, out-of-pocket medical expenses, credit card debt, or other costs that are a direct or foreseeable result of the unfair labor practices.

The General Counsel will be required to present evidence in the compliance proceeding proving the amount of the financial harm, that it was direct or foreseeable, and that it was due to the unfair labor practice. The respondent employer or union would then have the opportunity to rebut that evidence.

This change will apply in every case in which the Board’s standard remedy would include make-whole relief for employees. The Board will apply this remedy retroactively to all cases currently pending.

Minimum wage for non-convicted incarcerated individuals?

The 9th Circuit has certified the following question to the California Supreme Court:

Do non-convicted incarcerated individuals performing services in county jails for a for-profit company to supply meals within the county jails and related custody facilities have a claim for minimum wages and overtime under Section 1194 of the California Labor Code in the absence of any local ordinance prescribing or prohibiting the payment of wages for these individuals?

Ruelas v. County of Alameda (9th Cir 11/01/2022) [PDF].

Plaintiffs are or were pretrial detainees, detainees facing deportation, or federal detainees confined in Alameda County’s Santa Rita Jail. Plaintiffs are or were performing industrial food preparation services and cleaning for defendant Aramark Correctional Services, LLC (“Aramark”), pursuant to a contract between Aramark and Alameda County. Aramark is a private, for-profit company. This contract was enabled by California Proposition 139, which legalized public-private partnerships of this kind.

Plaintiffs allege that Aramark employs detainees in the Santa Rita Jail without compensating them. Alameda County has not enacted a local ordinance providing for compensation to county detainees for services performed.

Arbitration: Manifest disregard of the law

Will a court vacate an arbitration award because it is in manifest disregard of the law? Some courts will, but not in Oregon.

After terminating him, Patrick Johnson's former employer sought a preliminary injunction enjoining him from competing with the employer, soliciting its customers, or disclosing confidential information.

However, the matter went to arbitration. The arbitration panel found that the employer failed to prove Johnson breached the employment agreement, and that the employer willfully withheld wages and made wrongful deductions from Johnson's final paycheck.

The employer sought to vacate the arbitration award, arguing that the panel exceeded its authority in that the award was in manifest disregard for the law. The trial court refused to vacate the award, and the Oregon Court of Appeals affirmed. Floor Solutions v. Johnson (Oregon Ct App 10/19/2022) [PDF].

The court rejected the employer's argument that a manifest disregard of the law standard is incorporated into ORS 36.705(1)(d).

The court said, "because the Oregon legislature adopted the [Revised Uniform Arbitration Act (RUAA)] and did not codify the manifest disregard standard as a basis to vacate an arbitration award, we conclude that the legislature's intent was consistent with the RUAA drafters' intent."

Therefore, ORS 36.705(1)(d) does not incorporate a “manifest disregard of the law” standard as a basis to find that an arbitrator or arbitration panel exceeded its authority.

Independent contractors vs. anti-trust laws

A fascinating petition for a writ of certiorari has been filed in the US Supreme Court. The case is Confederación Hípica de Puerto Rico, Inc. v. Confederación de Jinetes Puertorriqueños, Inc. [Petition and Briefs] Of course, there's no telling whether the Court will grant certiorari and decide this case.

In Puerto Rico, jockeys are independent contractors, and horse owners hire jockeys on a race-by-race basis. When a group of 37 jockeys demanded higher pay, they refused to race for three days, and the racetrack had to cancel races. The racetrack sued the jockeys, alleging that the they engaged in a group boycott in violation of federal antitrust law. However, the 1st Circuit [Opinion] ruled that the jockeys' actions were not subject to the ant-trust laws due to the "labor exemption."

The statutory labor exemption states: “No court of the United States * * * shall have jurisdiction to issue any restraining order or temporary or permanent injunction in a case involving or growing out of a labor dispute.”

The Norris-LaGuardia Act defines a "labor dispute" as “any controversy concerning terms or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employer and employee.”

The racetrack's position is that the labor exemption applies only to employees, and not to independent contractors.

The 1st Circuit, however, ruled that the “critical distinction in applying the labor-dispute exemption” is that “disputes about wages for labor fall within the exemption,” regardless of whether the work is that of independent contractors.

Prediction: I think the jockeys will win if the Court actually decides this case. Remember New Prime v. Oliveira (US Supreme Court 2019) [PDF]. That was a Federal Arbitration Act case in which the Court held that certain independent contractors (not merely employees) were exempt from the Act because the Act’s term “contract of employment” refers to any agreement to perform work – as understood in 1925. Norris LaGuardia was enacted in 1932 and I think "terms or conditions of employment" will also apply to independent contractors.

NLRB: Dues checkoff continues after CBA expires

The NLRB now holds that employers may not unilaterally stop union dues checkoff after a collective-bargaining agreement expires. Valley Hospital Medical Center, Inc. (10/03/2022) [PDF].

This issue has had a long and tortured history.

Bethlehem Steel (1962) held that an employer was free to end dues checkoff upon contract expiration.

Lincoln Lutheran (2015) held dues checkoff to be subject to the general statutory rule requiring employers to maintain most terms and conditions of employment after contract expiration to facilitate bargaining for a new agreement.

Valley Hospital I (2019) permitted employers to stop checkoff when a contract expires.

Valley Hospital Medical Center, Inc. (10/03/2022) (on remand from the 9th Circuit) reverses Valley Hospital I and returns to the rule that an employer, following contract expiration, must continue to honor a dues-checkoff arrangement established in that contract until either the parties have reached a successor collective-bargaining agreement or a valid overall bargaining impasse permits unilateral action by the employer.

NLRB will again change the rules on finding joint employment relationships

Here we go again.

The NLRB – as expected – proposes to again change its joint-employer rule so that two companies may be held to be joint employers when one's control over the other's workers is indirect rather than direct, or is simply reserved and not exercised.

[Text of proposed rule]

The rule just bounces back and forth depending on which political party has been able to appoint NLRB Members.

Under the Republicans, in order to find a joint employer relationship one company had to be directly and immediately exercising control over the wages, hours, and working conditions of another company’s employees.

Now the Democrats have their turn, and plan to expand the rule so it includes situations where the control is indirect rather than direct, and even when the right to control is reserved but not actually exercised.

Comments on this proposed rule must be received by the NLRB on or before November 7, 2022. Comments replying to comments submitted during the initial comment period must be received by the Board on or before November 21, 2022.

"Local delivery drivers" are not engaged in interstate commerce, so they're not exempt from arbitration.

Douglas Lopez was a local delivery driver for Cintas Corporation. That means he picked up items from a Houston warehouse (items shipped from out of state) and delivered them to local customers. When Lopez sued claiming a violation of the Americans with Disabilities Act, the employer moved to compel arbitration.

Lopez argued he was exempt from arbitration because he belongs to a "class of workers engaged in foreign or interstate commerce" under § 1 of the Federal Arbitration Act.

The 5th Circuit held in favor of the employer, so Lopez's claim will go to arbitration. Lopez v. Cintas Corp (5th Cir 08/30/2022) [PDF].

The court followed the analytical path set out in Southwest Airlines v. Saxon, 142 S. Ct. 1783 (2022).

First, the court defines the relevant “class of workers” that Lopez belongs to. Lopez belongs to a "class of workers" – "local delivery drivers" – that picks up items from a local warehouse and delivers those items to local customers, with an emphasis on sales and customer service.

Second, the court determines whether that class of workers is “engaged in foreign or interstate commerce.” The court pointed out that these drivers "take items from a local warehouse to local customers; these drivers enter the scene after the goods have already been delivered across state lines." "Once the goods arrived at the Houston warehouse and were unloaded, anyone interacting with those goods was no longer engaged in interstate commerce."

SEC issues rules on executive pay vs. financial performance

12 years after Congress told the SEC to adopt a rule, the Commission on April 25 adopted amendments to its rules to require registrants to disclose information reflecting the relationship between executive compensation actually paid by a registrant and the registrant’s financial performance.

Specifically, the amendments require registrants to provide a table disclosing specified executive compensation and financial performance measures for their five most recently completed fiscal years. With respect to the measures of performance, a registrant will be required to report its total shareholder return (TSR), the TSR of companies in the registrant's peer group, its net income, and a financial performance measure chosen by the registrant.

Using the information presented in the table, registrants will be required to describe the relationships between the executive compensation actually paid and each of the performance measures, as well as the relationship between the registrant’s TSR and the TSR of its selected peer group.

A registrant will also be required to provide a list of three to seven financial performance measures that it determines are its most important performance measures for linking executive compensation actually paid to company performance. Smaller reporting companies will be subject to scaled disclosure requirements under the rules.

The final rules will become effective 30 days following publication in the Federal Register. Registrants must begin to comply with the new disclosure requirements in proxy and information statements that are required to include Item 402 executive compensation disclosure for fiscal years ending on or after December 16, 2022.

Pregnancy: Light duty for on-the-job injuries but not for pregnancy is not discriminatory

The EEOC sued Walmart claiming that the denial of temporary light duty to pregnant employees violated the Civil Rights Act and the Pregnancy Discrimination Act.

The trial court granted summary judgment to Walmart, and the 7th Seventh Circuit affirmed. EEOC v. Wal-Mart Stores East (7th Cir 08/16/2022) [PDF]

Walmart had a pretty simple policy. It offered temporary light duty to employees who were injured on the job, but did not offer similar light duty to employees who were pregnant or who were injured outside of their work for Walmart.

The EEOC argued that by accommodating all workers injured on the job, and denying all pregnant women a similar accommodation, Walmart engaged in sex discrimination.

Walmart offered evidence that the purpose of its policy is to implement a worker’s compensation program that benefits Walmart’s employees while limiting the company’s “legal exposure” and costs of hiring people to replace injured workers.

The 7th Circuit said, "Offering temporary light duty to workers injured on the job pursuant to a state worker’s compensation law is a 'legitimate, nondiscriminatory' justification for denying accommodations under the TAD Policy to everyone else, such as individuals not injured on the job, including pregnant women.”

Finally, the court said, "the burden shifts 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.'" The court concluded that the EEOC could not carry that burden.

First time: Gender dysphoria recognized as a disability

The 4th Circuit is the first federal appeals court (on a 2-1 vote) to recognize gender dysphoria as a disability. Williams v. Kinkaid (4th Cir 08/16/2022) [PDF].

The case involves a person incarcerated in a county jail, yet this has a message for employees and employers because the relevant statutory language is identical.

Kesha Williams, a transgender woman with gender dysphoria, spent six months incarcerated in the Fairfax County Adult Detention Center. According to her complaint, prison deputies initially assigned her to women’s housing, then quickly moved her to men’s housing when they learned that she was transgender. There, she claims she experienced delays in medical treatment for her gender dysphoria, harassment by other inmates, and persistent and intentional misgendering and harassment by prison deputies.

The Americans with Disabilities Act (ADA) specifically excludes "transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, gender identity disorders not resulting from physical impairments, [and] other sexual behavior disorders."

The trial court held that the exclusion for “gender identity disorders not resulting from physical impairments” applied to Williams’ gender dysphoria and barred her ADA claim, and dismissed the ADA and Rehabilitation Act claims. The 4th Circuit disagreed.

The 4th Circuit described a shift in medical understanding, explaining that a diagnosis of gender dysphoria, unlike that of “gender identity disorder[],” concerns itself primarily with distress and other disabling symptoms, rather than simply being transgender. Thus, "as a matter of statutory construction, gender dysphoria is not a gender identity disorder."

The court also found that Williams' "gender dysphoria nevertheless falls within the ADA’s safe harbor for 'gender identity disorders . . . resulting from physical impairments.'" "Williams’ complaint, as it stands, permits the plausible inference that her condition 'result[ed] from a physical impairment.'"

The dissent agreed with the trial court – saying that "since 'gender identity disorders not resulting from physical impairments' are excluded from the ADA, the district court appropriately dismissed Williams’ ADA claim."

NLRB consent order won't get court enforcement, citing Article III

NLRB orders are not self-enforcing. The Board must go to a federal Circuit Court to obtain an enforcement order.

The 4th Circuit (2-1) is now saying that when the NLRB and the charged party stipulate to a settlement agreement, courts lack jurisdiction to enforce a Board order that reflects the terms of the settlement. NLRB v. Constellium Rolled Products (4th Cir 08/05/2022) [PDF].

This is based on the court's interpretation of Article III of the Constitution, which limits the judicial power to "cases and controversies."  The court found that the parties lacked "adverseness."

The Board's General Counsel issued a complaint against an employer. Later, the employer and union entered a Formal Settlement Stipulation. By signing the agreement, the employer effectively withdrew its answer to the complaint before the Board and agreed to stipulated facts. The Stipulation also included proposed terms for a Board order.

The employer agreed, upon entry of the Board’s order, to “immediately comply with the provisions of the order.” The employer also agreed that when the Board sought a judgment in federal court enforcing its order, the employer would waive all defenses and consent to the entry of that judgment.

The Board approved the Formal Settlement Stipulation and issued an order reflecting its terms. A week later the Board petitioned the 4th Circuit to enter a consent judgment against the employer reflecting the order’s terms.

The court would have none of that, saying, "we lack jurisdiction to exercise judicial power when it would have no real consequences for the parties and would only rubberstamp an agreement the parties memorialized in writing and consummated before ever arriving on a federal court’s doorstep."

The court's summary: "In sum, the parties agree on every relevant question potentially before this Court. That agreement led the parties to resolve this dispute among themselves before ever coming to federal court, leaving nothing for this Court to do that would have real consequences in the world. And the Board agrees that [the employer] has complied with the order and continues to do so. There is nothing meaningful for this Court to do. Because this suit lacks adverseness, we lack jurisdiction."

The DISSENT argued that "the NLRB has a sufficient interest in the enforcement of its order to support our jurisdiction."

Impending death of the "adverse employment action" requirement

Update: The 5th Circuit has vacated the opinion described below and granted an en banc rehearing, to be scheduled. Hamilton v. Dallas County (5th Cir 10/13/2022) [PDF].

I would think that a clear-cut policy of assigning employee shifts based solely on gender would be a violation of Title VII. Actually an easy, open-and-shut case.

But not so in the 5th Circuit. Hamilton v. Dallas County (5th Cir 08/03/2022) [PDF].

Nine female detention service officers working at the Dallas County Jail alleged that days off were assigned based on gender – men get both weekend days, and women get one weekend day and one day during the week.

The trial court smacked them down on a Rule 12(b)(6) motion, and the 5th Circuit affirmed.

Why? Because – according to 5th Circuit precedent – this is not an "adverse employment action." In the 5th Circuit, “[a]dverse employment actions include only ultimate employment decisions such as hiring, granting leave, discharging, promoting, or compensating,”

So the three-judge panel was stuck with that rule, even though the panel said, "Surely allowing men to have full weekends off, but not women, on the basis of sex rather than a neutral factor like merit or seniority, constitutes discrimination with respect to the terms or conditions of those women’s employment."

In the end, the panel called for en banc review "to reexamine our ultimate-employment-decision requirement and harmonize our case law with our sister circuits’ to achieve fidelity to the text of Title VII."

Clearly the outcome is wrong. The US Supreme Court has often reminded lower courts that it is their job to apply statutes the way they are written, and not to add burdens that are not derived from the statute the way Congress wrote it.

I look forward to seeing an en banc decision in this case.

LawMemo employment law Alerts

Once a week LawMemo posts an Alert focusing on a recent employment law decision. The archive is HERE.

Here’s a list from the last few months:

08/02/2022 - "Cat's paw" theory allows discrimination plaintiffs to get to a jury

07/26/2022 - No intolerable working conditions? No constructive discharge.
07/19/2022 - App-based drivers: Jury will decide whether employees or contractors
07/12/2022 - Banning "Black Lives Matter" masks violated the 1st amendment
07/05/2022 - SCOTUS: States have no sovereign immunity in USERRA suits (5-4)

06/28/2022 - 1st amendment bars termination of coach for post-game prayers
06/21/2022 - FAA requires PAGA plaintiff to arbitrate her individual claim
06/14/2022 - Defamation: belief that fired employees "were jerks" won't prove actual malice
06/07/2022 - Unanimous SCOTUS: Airline ramp supervisor is exempt from the FAA

05/31/2022 - SCOTUS: Waiver of right to arbitrate does not require proof of prejudice
05/24/2022 - "First one of you tries to unionize … I’ll send you back to the salt mine."
05/17/2022 - Severely disabled janitors are employees
05/10/2022 - ADA impairment need not be permanent or have long-term effects
05/03/2022 - Arbitration agreement in employee handbook is unenforceable

$6 million non-economic damages is "shockingly excessive"

A man got fired by IBM, he sued claiming wrongful termination and retaliation, and a jury found in his favor.

The jury awarded him about $5 million in economic damages and $6 million in non-economic damages.

Applying Washington law, the 9th Circuit reversed the non-economic damages award, finding that $6 million was "shockingly excessive." Kingston v. IBM (9th Cir 08/01/2022 [PDF].

Quoting from some Washington court decisions, the court said the $6 million non-economic damages award is “so excessive as to strike mankind, at first blush, as being, beyond all measure, unreasonable and outrageous.”

The reasoning was this: "Although we do not question that Kingston suffered psychological distress because of his termination, his distress does not appear to have been significantly greater than what anyone might suffer from being fired. Based on the evidence presented at trial, $6 million is shockingly excessive. It also far exceeds the amounts that Washington courts have upheld in similar cases—so far as we have been able to determine, no Washington court has upheld an award of greater than $1.5 million in non-economic damages in a wrongful-termination case."

So, the case goes back to the district court for a reduction of the non-economic damages award "to an amount supported by the record and consistent with Washington law."