Legal Blog

Labor and Employment Telebrief 3.26.14

LABOR & EMPLOYMENT TELEBRIEF By Howard B. Kurman, Esquire

March 26, 2014

CONTENTS:

  1. Supreme Court – Hobby Lobby Case – right of organizations to determine whether they will adhere to requirements of law due to alleged violation with religious beliefs
  2. NLRB – Regional Director’s March 10 order allowing two outside groups to intervene in post union election proceeding
  3. NLRB Press Release – Injunction against Hogan Transport, Inc. for anti- union activities
  4. Landrum-Griffin Act – 14 Republican State Attorneys General  urged the US DOL to withdraw its proposed rule narrowing the exception to attorneys’ giving advice during union  organizing campaign without being characterized as advisors or consultants
  5. EOC meeting – attention to social media issues (following example of NLRB)
  6. Executive Order – March 13, 2014 -– Updating and Modernizing Overtime Regulations
  7. Q & A

Howard Kurman: Okay, guys my clock says 9:02 and since my clock is the one that counts we are going to get started. Good morning everybody.  It’s Howard Kurman and as you know we do these telebriefs on the second and fourth Wednesdays of every month.  The next telebrief will be on Wednesday April 9th since that is the second Wednesday in April.  There are some really interesting developments to talk about this morning.  So let’s get right to it.  

  1.  Supreme Court – Hobby Lobby Case – At issue:  right of private corporations to determine whether they will comply with  ObamaCare if they feel the requirements violate their religious beliefs.

Many of you may know that yesterday at the Supreme Court there was a case that was argued that I think is at the intersection of employment law and constitutional law , which is the Hobby Lobby case. Essentially the case deals with the adverse interest of a private  corporation as opposed to its employees under the Obama Care Act.   The case that made its way to the Supreme Court involves two employers: Hobby Lobby, which is owned by Evangelical  Christians,  and a Pennsylvania cabinet maker called Conestoga Wood Specialties which is owned by Mennonites. The issue Both of these companies are arguing the same thing, that under Obama Care, an employer is obligated under its healthcare plan for employees to provide for all kinds of FDA approved contraceptive for women including IUDs and the day after contraceptive in emergency cases.  The argument on behalf of the companies in this case is that this requirement violates the bona fide religious beliefs of thesecorporations.  This is really the first case that makes its way to the Supreme Court where the issue is the alleged right of private corporations or shareholders to determine that they will or will not do certain things in abeyance or lack thereof of a law because of religious reasons. Analysis I think that it will be a very, very close case and probably will wind up being something that may be a swing vote by Justice Kennedy.  And while he is a conservative justice, I think that he would have a difficult time validating the religious beliefs which were being proposed in this particular case. Interestingly the solicitor general, Donald Verrilli, Jr., wrote in his brief something that I think is probably correct. He says allowing the corporation through either shareholder vote or board resolution to take on and assert the religious beliefs of its shareholders in order to avoid having to comply with a generally applicable law with a secular purpose is fundamentally at odds with the entire concept of incorporation. Significance Obviously this could have significant impact if the Supreme Court were to rule in favor of Hobby Lobby because you could theoretically have private companies taking the view that they will not provide, for instance, under the health care for vaccinations or for any other kind of medical treatment that they would view as religiously adverse in terms of their beliefs or their value systems.  So I think that this is a very significant case. Again it is really at the intersection of employment law and constitutional law and corporate law and I think the decision will  come down sometime in June. So stay tuned I will keep you abreast and I am sure you will probably know the same time as I do when this decision comes down in June. 2. NLRB – Regional Director’s March 10 order allowing two groups of employees to intervene in post union election proceeding – The Issue: whether or not a union election can be overturned by virtue of statements that are made not by the employer but by politicians and people outside the company for whom the union is attempting to organize. Talking about developments at the National Labor Relations Board as we frequently do, the regional director at the NLRB in  Tennessee, on March 10th issued an order allowing two groups of employees in an organization to intervene in the case that has been brought by the United Auto Workers where they have objected to the representation election that they lost at Volkswagen in Chattanooga Tennessee. I talked about this a couple of telebriefs ago where in a very significant loss for the UAW in Tennessee with Volkswagen was a fairly close election and the UAW filed objections to the election on the basis that politicians and other people outside of Volkswagen polluted the atmosphere with regard to the election that was going to be held and therefore the election (results) should be set aside. As you all know, it is not unusual for a union to contend that an employer has polluted the atmosphere to such an extent that a fair election cannot be held.  It is very unusual, perhaps unprecedented, for a union to contend that individuals who were not associated with the employer made statements that therefore polluted the atmosphere and deprived the employees of the right to have sort of a pristine atmosphere surrounding the election.  And in this case the regional director (sort of an unusual situation) has allowed employees to intervene in this post-election proceeding and one of the intervening parties is in the National Right to Work Legal Defense and Education Foundation.  This is a very, very anti-union group. They frequently help employees in de-certification elections and in de-authorization elections where employees are seeking to rescind a union authorization or a union security provision in a collective bargaining agreement. Significance So again, this is I think a significant case, probably a precedent setting case, where you have the issue of whether or not an election can be overturned by virtue of statements that are made not by the employer in question but by politicians and outsiders and people outside of the company for whom the union is attempting to organize. This will make its way through the processes of the board and I am sure whichever side loses it will go to the Federal Appellate Court which would be the next step.  A final decision on this could be a year or more away and frankly it is the kind of case that might even wind its way up to the Supreme Court and if it did my guess is given the current proposition of the Supreme Court I think that you would find the Supreme Court indicating that statements made by others outside of an employment context, that is so-called “strangers” to the process, would not overturn an election. 3. NLRB Press Release – Injunction against Hogan Transport, Inc. for anti- union activities still talking about the National Labor Relations Board, they put out a press release on March 24th and I will just read briefly the press release.  It says that in May 2013,  the drivers at Hogan Transport, Inc., which is the employer, a trucking company, began a union organizing campaign at their workplace in West Coxsackie, New York with the assistance of teamsters Local 294.  A majority of employees signed union authorization cards and the union filed a petition and sought to become the bargaining representative for the workers.  The employer responded by threatening employees with job loss, questioning employees about their union support, promising and granting wage increases, and discharging a pro-union employee. The press release goes on to say that as a result of the investigation of the unfair labor practice charges, the NLRB sought an injunction in Federal Court to return the discharged employee to work pending final resolution of the matter before the NLRB and to stop the employer from continuing to engage in unlawful conduct. Rulings by Federal Court Judge and NLRB Administrative Law Judge –in favor of employee on November 22, 2013 a District Court  Judge, a Federal District Court Judge, granted interim relief sought by the NLRB and ordered the  employer to stop firing employees because of their union activities, questioning employees about their union support, promising and granting wage increases to discourage union support and threatening employees with job loss if they continued to support the union. On February 26, 2014 an NLRB administrative law judge similarly found that the employer’s conduct violated the NLRA and he recommended to the board that the pro-union employee be permanently reinstated with full back pay and that the employer should be ordered to bargain with the union without an election because the employer’s course of conduct made a free and fair election impossible. Significance Now the reason I bring this to your attention as a statement of the board which was just two days ago is that  some of you may face union organizing campaign in the future. Obviously to those of you who have unions this is not new news, but those of you who face the union organizing campaign in the future will know that this is a prototypical case of an employer who has done all the things wrong:

  • They threatened employees with job loss.
  •  They questioned employees about union support.
  •  They promised wage increases if the union was defeated and
  • They discharged a pro-union employee.

You cannot get a more adverse manner of behaving contrary to the NLRA than was exhibited in this case by Hogan Transport, Inc., a company that I hope has no representatives on this phone call. Take Away- TO DO  The reason I bring it up is that if you are involved in a union organizing campaign, you have got to be very, very careful about what you do and if  your act of misconduct is so serious you will not even get to an election because the board will order you to recognize the union and to bargain with the union. 4. Labor Management and Disclosure Act (aka Landrum-Griffin Act) – latest development in Obama Administration’s  attempt to narrow the exemption that allows attorneys to give advice eto clients in midst of union organizing campaign without risk of having to be characterized as adviser. Talking about further union organizing  campaigns and activity I know I mentioned to you I think it was in the last telebrief the fact that the Department of Labor has for the time being shelved its proposed rule whereby it would narrow the advice exception under the Labor Management Reporting and Disclosure Act, the so called Landrum-Griffin Act, and remember what I said was that it used to be and still is the law that attorneys can give advice to clients in the midst of a union organizing campaign without the risk of having to be characterized as an advisor or a consultant under the Labor Management Reporting and Disclosure Act implicating itself and its client, the employer, and having to report all kinds of financial information. The Department of Labor under Obama has seen fit to try and promulgate a rule which would totally obliterate that kind of distinction.  And significantly last week 14 Republican State Attorneys General urged the United States Department of Labor to withdraw its proposed rule which would narrow that exemption under the Labor Management Reporting and Disclosure Act again arguing the same thing, that the American Bar Association has argued which is compelling attorneys and companies to reveal financial information with regard to the labor advice given to a particular company would violate the attorney-client privilege and therefore it is my opinion that this particular act or this particular proposed regulation will have a very difficult time being enacted by the Department of Labor down the road. 5. March 12 – EEOC  – Paying attention to social media issues – invitation to HR law attorney to address issues re: social media. We talked a lot on these telebriefs about social media and its impact on the workplace.  I wanted to letyou know that on March 12th, just a couple of weeks ago, the EEOC held a  meeting at which they invited a panel of employment law attorneys to address many issues in conjunction with social media, including recruitment and hiring, harassment and records retention and discovery.  I told you in the past that the National Labor Relations Board has paid a lot of attention and still is paying a lot of attention to the role of social media and the rights of employers to take disciplinary action against employees for various posting of pictures or statements on their particular Facebook pages or Twitter accounts etc. Now we have another governmental agency the EEOC, which seems to have caught onto the National Labor Relations Board’s attention to this and, therefore, I do not know how it will implicate the social media but I do know that they will be paying attention to that.  So whether they would be looking at this issue in the context of charges that are brought to the agency by individual employees or pattern and practice cases, again it implicates the fact that employers will have to be very vary and very careful about their use of postings by employees on social media sites before they take any kind of adverse action against those employees. 6.    Executive Order – March 13, 2014 – Updating and Modernizing Overtime Regulations  On March 13th President Obama executed an executive order, whose title was “Updating and Modernizing Overtime Regulations.”  It was dated March 13, 2014 and in it he says that “the Fair Labor Standards Act provides basic rights and wage protections for American workers including federal minimum wage and overtime requirements.  Most workers covered under the act must receiveovertime pay of at least one and half times the regular pay rate for hours worked in excess of 40 hours per week.  However, regulations regarding exemptions from the acts overtime requirement particularly for executive, administrative and professional employees, often referred to as “white collar exemption”  have not kept up with our modern economy.  Because these regulations are outdated, millions of  Americans lack the protections of overtime and even the right for minimum wage.  Therefore, I(meaning President Obama, hereby direct you to propose revisions to modernize and streamline the existing overtime regulations.  In doing so you shall consider how the regulations could be revised to update existing protections consistent with the intent of the act address the changing nature of the workplace and simplify the regulations and make that easier for both workers and businesses to understand and apply. Now, I really think the political issue behind this directive from the President is that it is probably a back door attempt to get a  significant increase in wages paid to employees.  Because after all, if you eliminate the white collar exemptions for many people who were classified that way, they are going to by necessity be paid time and half for any hours worked over 40.  And the import of any kind of a change in the DOA regulations for the white collar exemptions will be the drastically reduced numbers of those employees who were currently classified as exempt, either as professionals, as executives or as administrators. As you know under the Fair Labor Standards Act particularly Section 13A1 of the Fair Labor Standards Act it provides an exemption for administrative executive professional and outside employees and under Section 13A17 for some computer professional employees.  The fact of the matter is that the salary test under the white collar exemption has not been changed since 2004 when the Bush administration changed the prior level of $155 a week to $455 a week, which, as you know is very insignificant because $455 a week equates to about $24,000 a year. Significance – Likely Consequence So, in my view what will happen is, the attempt will be to raise that $455 per week to something more realistic in terms of a professional or managerial or an administrative salary may be to $600 or more a week, which would take a worker up past the $30,000 a year mark.  But more significantly I do not think  it is going to be the salary test that is going to be the major impact here because frankly if employees are not making $30,000 a year in my opinion it is hard to justify calling them an exempt manager or a professional or an administrator. Rather I think the true test and the true impact will be on the duties test under either the administrative or the professional or the executive exemption and I think that what you will see is a movement afoot to pay much more attention to the percentage of work that is done by the particular employee that can be classified as exempt.  So, for instance if you have an exempt executive, with the new regulation, if they are ever enacted, not only will have an increased salary test associated with it but you will see that the regulations will specify may be even in sort of a percentage basis that in order to be classified as an exempt manager or executive that person is going to have to substantially perform executive duties perhaps more than 50%.  Right now as you know there is not a percentage test.  The only test is that the primary duty of that person is the performance of executive duties and responsibilities.  The fact of the matter is what will happen is that this proposed rule, when it comes through the Department of Labor, will be published in the federal register.  At that time everybody will have the right to comment on that or submit proposed comments.  You can bet the Chamber of Commerce, The National Association of Manufacturers etc., will have substantial comments on this particular rule.  Then it will go through a hearing process and it may be frankly a year to before the Department of Labor will ever make it a final rule. I think the take away for all of you and I know I have preached this many times in the past.  Is that you ought to be taking a look at your job descriptions and how people are classified as either exempt for professional purposes, exempt as an administrator or exempt as an executive.  And you want to be really looking at whether or not in those cases, it is not the salary that you are going to be examining and that will cause problems, because after all I am sure they are all going to be making more than $455 a week, rather you should be looking at and ascertaining whether or not the predominant duty : In the case of an executive is the management of the enterprise or part of the enterprise and that that  person has substantial obligations and the use of independent judgment and discretion to hire and fire or to make effective recommendations to do so. In the case of an administrative employee that that person has the ability and does in fact use independent judgment and discretion on a regular basis and In the case of a professional employee that that person really is engaged in a recognized professional activity calling for advanced study or advanced knowledge or a degree, because if in fact there is some variant of this proposed rule that is enacted. The Department of Labor in addition to coming after companies for the misclassification of individuals as either independent contractors or employees will be scrutinizing under a microscope whether or not you have appropriately classified people or workers as exempt under the professional executives or administrative exemptions. So, I have no doubt that the intent of Obama in this case was to increase wages by taking people off of these exemptions and making them eligible for overtime thus increasing their salaries to a point that may be significant for employers.  So to be proactive, I think that you want to get out there and take a look at your job descriptions.  If you have got questions about them or whether they would be classified as exempt, I would be happy to help you out with that, but it is something that you ought to be getting out in front of in a very short order.  Because even though it will take a long time for the Department Of Labor to enact it and it may be enacted in a form which is a little different frankly than is proposed or may be contemplated by either Obama or the Department of Labor it makes sense to be out front of this now and to take a good look at your job descriptions which may not frankly have been examined in the recent past. So there is a lot of government stuff going on, it is not hard to understand, we are in a very politicized environment, very kind of adversarial environment where you have Obama and his administrative agencies being extremely proactive and pro-employee and pro-union. As always I am happy to take any questions that somebody would have either in this format or privately at my phone number 410-209-6417 or email hkurman@offitkurman.com. Any questions or comments? Anne:  Howard this is Anne, I think you are really right to point out the activism of Obama and the Department of Labor because even if this move fails the particular rule making change, the Department of Labor is becoming increasingly activist and looking especially in the service industries for people who are not being paid overtime that they probably should be getting under the Fair Labor Standards Act.  Probably every one of us on this call is vulnerable to that. Howard Kurman:  I totally agree with you, and I think that from my stand point nobody should wait for the Department of Labor to enact this.  I think you want to be in front of it and Anne I think your advice is absolutely right. Anne:  Well, it is also you know everything is fine as long as everybody is happy with each other but all any of us needs is one angry employee who was on the edge here who has been terminated or disciplined to shed light on may be some iffy practices and I am always concerned about my company in that. Howard Kurman:  Yeah, you know it really does not even have to be somebody who is an ex-employee or disgruntled employee. Frankly it can just be the subject of a random audit as we have talked about from the Department of Labor.  So you know a word to the wise – take a good look at your job descriptions. Anne:Thanks Howard. Howard Kurman:  If there are no questions or comments, hopefully we will see you in a couple of weeks and you should be getting some information about the May conference that will have the executive breakfast is being expanded to half a day session and you will get some information about that.

 About Howard Kurman

Independent ContractorHoward K. Kurman is an employment attorney and chair of the firm’s Labor & Employment Practice Group. Mr. Kurman regularly counsels clients on all aspects of proactive employment/labor issues. He represents employers ranging in size from as small as 20 employees to those employers with geographically disparate locations consisting of over 4,000 employees. Mr. Kurman assures, through regular contact with his clients, that they promulgate and maintain the most effective employment policies that will, to the extent possible, minimize their legal exposure in today’s litigious workplace. Mr. Kurman offers advice on employee handbooks, employment agreements, and covenants not to compete as well as confidentiality and non-disclosure agreements. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn.