Employment arbitration agreements that bar employees from filing class actions against their employers, and instead require cases to be brought separately, violate federal labor law, the National Labor Relations Board (“NLRB”) held this month. The decision is D.R. Horton, Inc. and Michael Cuda. 357 NLRB No. 184. In that case, Michael Cuda worked for D.R. Horton, Inc., a new home builder, as a supervisor for ten months. Two years after resigning, he filed an unfair labor practice charge alleging that D.R. Horton’s Mutual Arbitration Agreement unlawfully barred him from filing a collective claim on behalf of a class of employees.
The NLRB agreed, finding a “substantive right to engage in specified forms of associational activity” in the statutory language of Section 7 of the National Labor Relations Act (“NLRA”), which grants employees the right “to engage in…concerted activities for the purposes of collective bargaining or other mutual aid or protection…” 29 U.S.C. §157. D.R. Horton’s chief defense was that the Federal Arbitration Act allows for the enforcement of arbitration agreements “so long as the litigant can effectively vindicate his or her statutory rights through arbitration.” Gilmer v. Interstate/Johnson Lane Corp., 500U.S. 20, 28 (1991). In rejecting this argument and finding that the NLRA bars this common term of employment arbitration clauses, the NLRB effectively held that the NLRA trumped the FAA, and extended its own reach into territory typically governed by other federal law.
The Board held that the NRLA protected employees who signed these arbitration terms from losing their right to bring class actions, finding that the NRLA guaranteed employees access to these collective proceedings. Since this right was waived by D.R. Horton’s arbitration agreement, the NLRB found that the agreement was unlawful under the NLRA.
The Board nonetheless recognized some limits to its power over arbitration clauses, reasoning that, “an agreement requiring arbitration of any individual employment-related claims, but not precluding a judicial forum for class or collective claims, would not violate the NLRA, because it would not bar concerted activity.”
Amici curiae in this matter included the AFL-CIO, the United States Chamber of Commerce, the U.S. Secretary of Labor and the Equal Employment Opportunity Commission.Read More
An Employee Sexually Assaulted Twice within Four Days Loses Harassment Claim – Employers Must Move Fast, but Not that Fast.
Under Federal law, an employer can be held liable for sexual harassment among co-employees, regardless of whether one has supervisory authority over the other. However, the employer will not be held liable if it promptly responds in a reasonable manner to stop the harassment. Additionally, to sustain a Title VII claim, the plaintiff must allege that the employer allowed harassment that was severe or pervasive.
In Davis v. City of Charlottesville School Board, 2011 U.S. Dist. LEXIS 137875 (2011), the Charlottesville School Board (CSB) was not held liable under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000 et seq., for two instances of sexual harassment by one employee against another occurring four days apart on a Friday and Monday, nor was the employer held liable for transferring, but not firing the offender.
The plaintiff, Sheila Davis, was first assaulted on Friday, December 11, 2009, by Warren Mawyer when he attempted to touch her breast and asked her if they were real or not. Immediately after this incident, Davis notified the assistant principal. In the second incident, the following, Monday, Mawyer grabbed Davis’ breast. Davis fought back to protect herself and reported it to her supervisors, who transferred Mawyer to another work location. Davis obtained a warrant against Mawyer, who was convicted and sentenced to 60 days in jail.
Davis’ Title VII employment discrimination claim was dismissed, however, for failure to present facts to show that the CSB was liable for Mawyer’s harassment. Employer liability results when the employer becomes aware of discrimination, fails to take effective action to stop it, and the discrimination is “severe or pervasive so as to alter the conditions of employment and create an abusive work environment.”
The court ruled that Mawyer’s harassment could not be imputed to the CSB; that “the allegation that the CSB failed to act fast enough between a Friday and the following Monday is insufficient to constitute a violation of Title VII.”Read More
Terminating an Employee for Her Refusal to Have an Abortion Does not Contravene Virginia’s Public Policy
While Virginia strongly adheres to the employment-at-will doctrine, many employers have worried that the Virginia Supreme Court’s recognition of a public policy exception to this doctrine would make employers vulnerable to a host of wrongful discharge claims. However, a Federal Court has recently emphasized the narrowness of this public policy exception, refusing to expand its reach, even to a situation where the employer’s actions “offend[ed] the conscience of the Court.” The case is Shomo v. Junior Corp., Civil Action No.: 7:11-cv-508 (W.D.Va. Jun. 1, 2012), and the employee claimed she was wrongfully terminated because she refused to have an abortion.
The defendant Corporation owns and operates restaurants in the Virginia area. The President’s son is a co-owner and manager of one of these restaurants. According to the Complaint, in September 2010, a restaurant server became pregnant with the President’s son’s child. In October 2010, the son told the server that she would be fired if she did not terminate her pregnancy. On January 30, 2011, the President of the Corporation told the server that, although he was satisfied with her work, she was being fired because of her pregnancy.
The server filed suit against her former employer, claiming among other things, that the Corporation wrongfully terminated her employment in violation of Virginia common law. Virginia adheres to the at-will employment doctrine, which means that if the contract is for an unspecified term, then either the employer or the employee can terminate their relationship at any time, for any reason, or for no reason at all. Based on the at-will employment doctrine, the Corporation filed a Motion to Dismiss. Meanwhile, the server argued that she fell within the recognized “public policy exception” to the at-will doctrine, which states that it is unlawful for an employer to fire an employee if the firing was contrary to the public policy of Virginia. Not surprisingly, the server argued that she was fired because she refused to abort her unborn child and this was contrary to Virginia public policy, and therefore unlawful.
Nonetheless, the court reiterated that such public policy exceptions, or “Bowman Claims” are very narrow. An employee bringing such claims must identify the sources of public polices allegedly violated with specificity. In this case, the server specifically argued that her termination was a violation of Virginia public policy because requiring her to have an abortion is effectively requiring her to commit battery, which is a criminal act, in order to keep her job. The court rejected this argument because the Corporation never required her to actually commit battery; and if the server had obtained an abortion, this would not have been considered a “battery.” Second, the employee argued that a Virginia statute prohibits denial of employment to any person who refuses to participate in abortion. However, the court held that this statute is geared more towards medical professionals, and requires an employee to state his/her objection to abortion in writing, but the server had not done so. Lastly, the server argued that the Corporation violated the Virginia Constitution’s policy of religious liberty by attempting to force the employee to have an abortion in contravention of her religious beliefs. The court rejected this final argument as well because it was not stated in the server’s complaint and because discrimination on the basis of religion is specifically outlined in the Virginia Human Rights Act (“VHRA”). An individual cannot bring a Bowman claim based upon a policy that is reflected in the VHRA. Thus, the server’s common law wrongful discharge claim was dismissed.
This case is another reminder that Bowman is a very narrow exception to Virginia’s employment at-will doctrine, and does not easily allow employees to file common law causes of action for wrongful discharge against their employers.Read More
Fourth Circuit Rules that an Employee Taking and Misusing Confidential Computer Data Does Not Violate the Computer Fraud and Abuse Act
In a recent decision that the court acknowledged would disappoint employers hoping to rein in rogue employees, the Fourth Circuit refused to apply the federal Computer Fraud and Abuse Act (“CFAA”) to workers who access computers or information in bad faith, or who disregard a technology use policy. That decision is WEC Carolina Energy Solutions, LLC v. Miller.
The CFAA is primarily a criminal statute designed to combat computer hackers. However, the statute also provides a civil remedy to a private party, such as an employer, who suffers damage or loss by reason of a violation of the statute. Employers have increasingly been relying on the statute to seek damages from former employees who accessed a computer without authorization or exceeded their authorized access. Typically, the central issue in such cases is whether the former employee was permitted to access the computer data when it was retrieved.
In the Miller decision, the employee allegedly downloaded information from the employer’s computer system while working there, then resigned and used that information to obtain a potential client for a competitor. While some courts have held that such conduct violates the CFAA because it violates the employee’s duty of loyalty, thereby terminating her agency relationship and automatically stripping her of any authority to access the computer, other courts have adopted a narrower approach. These courts have limited their interpretation of the CFAA, which prohibits computer access that is “without authorization” or “exceeds authorized authority.” They have held that the CFAA only applies to situations where an individual accesses a computer or computer data without actual permission. In affirming dismissal of the CFAA claim against the employee, the Fourth Circuit adopted this latter approach.
Noting that the CFAA does not define “authorization,” the court held that the ordinary meaning of “authorization” means “approved” or “sanctioned by,” and that an employee “exceeds authorized access” when he has approval to access a computer, but uses his access to obtain or alter information that falls outside the bounds of approved access. Thus, because the employee had authorization when she allegedly downloaded the computer data of her employer, she did not violate the CFAA, even if she kept that data and later used it for competitive purposes.
The court noted the problems that would logically follow if it were to interpret “authorization” more broadly. For instance, if “authorization” were broadly construed, an employee might be liable under the CFAA if the employee disregards his employer’s policy against downloading information so that he can work from home in order to meet deadlines set by his employer. Furthermore, the court rejected the cessation-of-agency theory adopted by some courts, noting that if the rule were taken seriously, it “would mean that any employee who checked the latest Facebook posting or sporting event scores in contravention of his employer’s use policy would be subject to the instantaneous cessation of his agency and, as a result, would be left without any authorization to access his employer’s computer systems.”
Because of the split between the federal circuit courts on breadth of this increasingly important statute, this issue may ultimately have to be addressed by the Supreme Court. Until then, employers in Virginia now face more difficulties in suing former employees under the CFAA.Read More
As a recent lawsuit shows, an employer can generally discipline an at-will employee for such conduct, and may even bring legal action against him or her. (Employment at will is the default and most common employment relationship, allowing termination for any reason or no reason.) Before reacting, however, an employer should take care to avoid several common pitfalls. Important legal considerations apply that employers should know about before they take action against an employee who has posted grievances online.
• Claims of Illegal Actions. First, if the employee complains of illegal actions by the employer, the employer should proceed cautiously. Federal whistleblower and retaliation laws protect employee complaints of unlawful conduct such as discrimination or harassment, unsafe working conditions, or fraud in servicing government clients. Generally speaking, posting such claims on the internet instead of notifying the employer weakens the employee’s protection and, in certain circumstances, may even justify discipline or discharge. Nevertheless, to protect against liability, employers should consult legal counsel to investigate the claims and to guide their response to the employee’s claims.
• Complaints about Terms of Employment. Second, if the employee complains about terms of employment like pay, hours, or hiring or firing decisions, federal labor law likely protects the employee. The National Labor Relations Act protects employees who communicate with other employees about their terms of employment at the company. Several large companies have had to change their social media policies at the insistence of the National Labor Relations Board so that they do not discourage acts of employee solidarity. Nevertheless, with appropriate legal advice, employers can often effectively counter such online complaints about working conditions within the limitations imposed by federal labor law.
• Anonymous Complaints or Re-Posts. Third, an employer must cautiously approach situations in which it merely suspects an employee of posting anonymous complaints, or in which it learns that the employee has “Like”-d, “Re-Tweet”-ed, or forwarded links to complaints by others. A local federal court decision recently held that employees of a public official are not protected from discipline for “Like”-ing his opponent on Facebook. Yet a Federal law passed in the 1990s, the Communications Decency Act, protects most users from legal liability for re-posting web content. While employers may generally discipline or discharge employees who re-post or forward others’ criticisms, this immunity limits the types of legal action an employer may take. Additionally, these protections also apply to internet providers and thus create obstacles to proving who posted anonymous complaints online.
Given the complicated legal landscape surrounding employee online conduct, employers should seek legal assistance in confronting these situations, and implement effective technology use and social media policies. With this guidance, employers can prevent harm to their businesses and protect themselves against potential legal liability from employee online complaints.
This is intended for educational purposes only, and is not intended to provide legal advice nor is it intended to create an attorney client relationship with the recipient of this email.Read More
Every employer knows that the Fair Labor Standards Act requires that nonexempt employees be paid the federal minimum wage for all time worked and that they receive overtime pay for all hours worked in excess of 40 hours per week. Employers are also keenly aware of the need to maintain time records that document the employee’s hours. If employees are not paid for all time worked, significant monetary liability can result.
Some employers have adopted policies requiring their employees to take 30 minute breaks. In accordance with this break policy, employers may choose to automatically deduct a 30 minute break from the employee’s daily hours. But what happens if the employee disregards the employer’s break policy and opts to work through lunch? This situation was recently addressed in Quickley v. University of Maryland Medical System Corporation, et al. where a hospital found out that giving employees a little extra freedom to control their workday cost may potentially come at a high cost to the employer.
In Quickley, the hospital employees clocked in at the beginning of a shift and clocked out at the end of their shift. The employees did not clock out for lunch, but the hospital maintained a policy of automatically deducting 30 minutes per day to account for lunch. If the employee worked through lunch, it was up to the employee to notify the hospital so that the 30 minute break would not be deducted from their hours.
The plaintiff in Quickley sued the hospital over the automatic 30 minute deduction, claiming that she was “suffered or permitted to work” during her lunch and that the hospital must pay her for it regardless of its break policy. In its defense, the hospital argued that the automatic deduction of time did not violate the FLSA and that the employees had the responsibility of informing it that they were working through their meal break period.
The court agreed with the hospital that the automatic deduction of time was not a per se violation of the FLSA, but noted that this was not the real issue. An automatic deduction of time is permissible, but it is incumbent on the employer to ensure that the employees are not, in fact, working during that time. When the employer shifts the burden to the employee to report time worked during meal breaks, the employer must make that responsibility clear to the employee and must make every effort to facilitate the employee’s reporting opportunities.
In Quickley, the court noted that based upon the pleadings it appeared that the employer did not provide an easy mechanism for the employee to inform the employer of the need to credit portions of the meal period back to the employee. While this is not the end of the case for the employer, and the employer may still be able to prove that it did, in fact, provide the employee with reasonable ways of reporting work during meal periods, the employer now faces the prospect of prolonged litigation in order to prove that it did not violate the FLSA.Read More
The answer to this question will largely depend on the size of your business.
The Patient Protection and Affordable Care Act of 2010, commonly referred to as Obamacare, goes into full effect in 2014; however, employers are already struggling to comply with its many mandates, some of which are already in effect.
Starting in 2014, every individual with annual income over $9,500 for whom health insurance is considered affordable based on family income must be insured or face a penalty. Individuals can turn to government-run “insurance exchanges” for coverage, and low-income employees may receive tax credit subsidies if their employers provide no health insurance, or unaffordable/insufficient health insurance. (“Unaffordable” health insurance requires an employee to pay premiums or co-pays of more than 9.5% of wages, and insufficient benefits fail to cover at least 60% of costs). The Government will finance these subsidies, however, by penalties assessed against the individuals’ employers if they have 50 or more full-time employees (or part-time equivalents).
Medium-to-Large Businesses. Under Obamacare, many medium-to-large businesses will need to adjust health insurance or staffing to comply with the law’s requirements. Obamacare requires businesses with 50 or more employees to offer affordable and sufficient health care coverage to each full-time employee or pay a penalty. This penalty is assessed if even one full-time employee receives a subsidy. The penalty varies depending on whether the employer offers no health insurance, or unaffordable/insufficient insurance. If it provides no health insurance, the penalty equals the total number of full-time employees, minus 30, times $2,000. If it provides unaffordable or inadequate insurance, the penalty is the lesser of either (i) the total number of full-time employees, minus 30, times $2,000; or (ii) the number of subsidized employees times $3,000.
For example, if a 50-person employer provides no health insurance and only two full-time employees receive government subsidies, then that employer would be charged $40,000 in penalties. If it provides unaffordable or insufficient insurance, it would only pay $6,000 in penalties (2 x $3,000 = $6,000, which is less than 20 x $2,000 = $40,000).
Despite these penalties, however, the likely increases in health care costs under Obamacare may make it cheaper for medium-to-large companies to stop providing health care coverage to employees. Obamacare will increase health insurance costs because it will add millions of people to Medicaid (including households below 133% of the Federal Poverty Level), which will likely cause hospitals and doctors to increase costs for private insurers. Additionally, Obamacare imposes expensive new mandates on employer benefits, including:
1. requiring that employee dependents remain covered until age 26;
2. eliminating caps of annual and lifetime reimbursement limits; and
3. imposing new burdens on employers when it comes to reporting costs, including that employer-sponsored insurance report costs on employees’ W-2 Forms beginning in the 2012 tax year.
For many medium-to-large employers, the best course of action will be to adjust wages and staffing. Many employers hovering at the 50-employee threshold can lower their workforce size to below 50 employees by replacing full-time positions with part-time employees. (Obamacare does not penalize employers for uninsured employees working less than 30 hours per week.) Employers can also use independent contractors to stay under the 50-employee threshold. Alternatively, employers can increase salaries or provide alternative benefits to prevent employees from receiving a government subsidy, rather than provide insurance, or reduce wages to recoup any penalties paid. The National Federation of Independent Business provides a useful resource in analyzing the impact of the law.
Small Businesses. Employers with fewer than 50 full-time employees or their equivalent are exempt from penalties, and thus have less incentive to provide health insurance to employees in 2014 and after. To counter this dynamic, the law provides that businesses with 25 employees or less that do provide insurance can qualify for a tax credit if their employees’ average wages are below $50,000. Currently this tax credit is 35 percent (set to increase to 50 percent in 2014). In addition, small businesses with up to 100 employees will have access to government-based Small Business Health Options Program (SHOP) Exchanges to expand their purchasing power with insurance companies. Nevertheless, many small businesses will likely find it cheaper and easier to leave employees on their own to buy insurance through the government-run exchanges.
Increased Medicare Withholding. After December 31, 2012, employers will also be required to withhold additional Medicare tax from the wages of high-earning employees. The Medicare tax is set to increase from 1.45 percent to 2.35 percent for an employee who receives wages of more than $200,000. Businesses are only required to withhold this additional tax if the employee receives over $200,000 from that employer. (Businesses need not consider a spouse’s earnings or earnings from a second job.) This additional tax also applies to wages over $250,000 for joint filers, and wages over $125,000 for separate filers who are married.
To ease the impact of these changes, employers should seek legal guidance and discuss with a qualified employment lawyer the effect of Obamacare’s provisions on their businesses.
This is intended for educational purposes only, and is not intended to provide legal advice nor is it intended to create an attorney client relationship with the recipient of this email.Read More