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The Top 10 Labor and Employment Law Developments of 2011

Volume 10, Issue 18
December 22, 2011

Looking back at what was another roller coaster year for Nevada's employers and reflecting upon the challenges and changes presented, KZA offers its selection of the top ten most significant developments in the area of labor and employment law. As 2011 was full of significant changes brought about by numerous important court decisions and the Obama Administration's issuance of new rules and regulations targeting employers, our selection of the top developments was particularly difficult this year.

No. 10: Ninth Circuit Court Decides Employers Bear the Burden to Prove the Legitimacy of Reasons for Declining to Reinstate Employees After FMLA Leave

In Sanders v. City of Newport, the United States Court of Appeals for the Ninth Circuit clarified the rules used by the courts to evaluate "interference" claims under the Family and Medical Leave Act (FMLA) by employees when they are not reinstated at the end of their leave. The court held that employees do not need to prove that their employers lacked "reasonable cause" when they denied reinstatement, but only that they were entitled to FMLA leave benefits and that their employers did not provide such benefits. In doing so, the court explained that employers bear the burden of proving that employees would have been terminated even if FMLA leave was not taken. Thus, the Sanders case makes it easier for employees to litigate FMLA interference cases and reinforces the need for employers to involve well-trained human resources professionals and legal counsel in decisions related to the possible denial of post-FMLA leave reinstatement and to carefully document the related decision-making process. See KZA's April 29, 2011 Employer Report.

No. 9: Supreme Court Finds That Title VII's Anti-Retaliation Provisions Cover Third-Party Reprisals

The United States Supreme Court began 2011 by significantly expanding what constitutes actionable workplace retaliation by permitting a retaliation lawsuit by the fiancé of a female employee who had filed a sex discrimination charge, both of whom worked for the same employer. The company in that case terminated the fiancé three weeks after it received notice of the employee's charge of discrimination from the Equal Employment Opportunity Commission (EEOC). The Court reaffirmed its view of the wide breadth of the anti-retaliation provisions of Title VII of the Civil Rights Act of 1964 and observed that "a reasonable worker obviously might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired." Thus, the Court found that both individuals could maintain their own separate causes of action for retaliation. The Court also rejected the argument that requiring employers to prohibit reprisals against third parties will lead to difficult line-drawing problems concerning the types of relationships entitled to protection, and instead found that Title VII's anti-retaliation provisions are not reducible to a comprehensive set of clear rules. The Court stated that the significance of any given act of retaliation will often depend upon the particular circumstances and opined that firing a close family member will almost always meet the standard of being an "aggrieved person" entitled to the protections of Title VII, but the infliction of a milder reprisal on a mere acquaintance will almost never do so. See Thomas v. North American Stainless, No. 09-291.

No. 8: The NLRB's Battle Against Facebook Firings and Other Discipline for Employee Use of Social Media

Over the summer, the National Labor Relations Board (NLRB) further developed - and published - its playbook for crackdowns on employers who discipline or terminate employees who post comments critical of their companies or supervisors on Facebook and other social media websites. At issue in these situations is whether the employees' social media activity is part of their rights under Section 7 of the National Labor Relations Act (NLRA) "to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection" such that disciplinary action for engaging in such activities violates the NLRA.

The NLRB's new Acting General Counsel, on August 18, 2011, published a report in which he explained the rationale used to issue complaints in 14 cases where companies took disciplinary actions in response to employee internet postings critical of their companies and/or supervisors. This report makes for an illuminating read. It is clear the NLRB's General Counsel's Office has a very lenient standard for judging what constitutes protected concerted activity and favors extending protection to most online employee criticisms that touch upon, in any way, their working conditions or pay issues and where it can be argued the criticisms are "on behalf of" other employees. Employee social media posts will also often be considered "protected" even if they are profane or have the potential to harm the company. Moreover, the NLRB's General Counsel's Office is also closely scrutinizing employers' social media/blogging policies and taking issue with quite a few as being "overbroad."

Even companies with non-unionized workforces are susceptible to this type of NLRB action, as an employee can engage in "protected concerted activity" without a union's involvement. The potential for protected conduct should always be considered when disciplining employees for social media posts and in developing social media policies.

No. 7: The Obama Administration's Activist Department of Labor

In 2011, the Department of Labor (DOL) was consistently aggressive in the wage and hour area with a particular focus on whether overtime exemptions are being properly applied and narrowing the interpretations of such exemptions. The DOL also introduced a new smartphone application to help employees more easily track wages and hours worked and to use such information in filing claims against their employers. See KZA's May 11, 2011 Employer Report.

Additionally, the DOL is paying special attention to the classification of workers as independent contractors by increasing its investigations of those individuals to whom companies issue IRS 1099 forms and examining whether the workers are misclassified and should be treated as employees entitled to overtime. To that end, on September 21, 2011, the DOL and the Internal Revenue Service entered into a plan to work together on these so-called "misclassification" cases.

The DOL also made sweeping changes to its long-standing interpretation of the reporting requirements of the Labor-Management Reporting and Disclosure Act (LMRDA). On the books since 1959, the LMRDA has long required employers, labor relations consultants and attorneys to report to the DOL certain "persuader activity" - actions undertaken to persuade employees not to vote for a union. The failure to report such persuader activity can result in civil and criminal penalties.

As addressed in KZA's September 27, 2011 Employer Report, these changes require reporting to the DOL many types of tasks performed by attorneys and company personnel when faced with a union organizing campaign. This includes such things as: (a) training of supervisors or employer representatives to conduct individual or group meetings designed to persuade employees; (b) preparation of materials; and (c) any other actions, even those without direct contact between the lawyer or consultant and the employees, if persuading employees is an object, direct or indirect, of the person's activity pursuant to an agreement or an arrangement with an employer. Although the statute provides an exception for the usually confidential attorney "advice," the DOL wants to considerably narrow that exception. Even the American Bar Association has protested the DOL's actions. For its part, KZA is involved with the Worklaw® Network's efforts to oppose the DOL's new persuader rules. See Worklaw® Networks' Comments to the DOL.

No. 6: New Nevada Law Prohibits Discrimination on the Basis of Gender Identity or Expression

On May 24, 2011, Nevada became the 14th state to enact laws prohibiting employment discrimination on the basis of an individual's gender identity or expression. The new law, which became effective on October 1, 2011, makes it unlawful for employers to refuse to hire, discharge or otherwise discriminate against any person with respect to the terms, conditions and privileges of employment based on "gender-related identity, appearance, expression or behavior of a person, regardless of the person's assigned sex at birth." An aggrieved individual has the right to file a charge of discrimination with the Nevada Equal Rights Commission (NERC). See KZA's May 26, 2011 Employer Report.

As a result, NERC also released revised anti-discrimination posters in both English and Spanish. Companies can also purchase all-in-one posters from various commercial suppliers.

No. 5: Supreme Court Rejects State Law Challenges to Class Action Waivers

Through the use of arbitration agreements, a number of companies have sought to control their exposure to costly litigation by employees, former employees and consumers. Many such agreements include waivers of the right to bring class actions, requiring employees and consumers to arbitrate only their individual claims. Not surprisingly, this has resulted in considerable amounts of litigation, with plaintiffs contending it is difficult to find an attorney willing to file a lawsuit for small claims on any basis other than a class action. The courts of some states have been hostile to class action waivers and even to arbitration in general. Businesses have fought back, invoking the protections of the Federal Arbitration Act ("FAA"), which was enacted by Congress many years ago to foster arbitration as an alternative to costly litigation in the crowded court system. In response, the plaintiffs' bar has tried to invoke an exception to the FAA where, due to state law, an arbitration agreement is unenforceable under normal contract rules.

On April 27, 2011, in AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held the FAA required enforcement of an arbitration agreement with a class action waiver contained in a cellular telephone service contract. Lower courts had refused to require arbitration and allowed the class action to continue, applying an earlier California court decision that classified the agreement as "unconscionable" because, among other things, it required individual arbitration of small monetary claims. The Supreme Court held that state laws and court decisions specifically prohibiting enforcement of arbitration agreements and class action waivers are inconsistent with the federal FAA.

The AT&T Mobility decision has now been relied upon by lower courts to enforce agreements to arbitrate individual employment claims and bar class action lawsuits. However, there remain unresolved issues as to the extent to which such class action waivers can be enforced and what procedural elements must be present in the arbitration plan when the rights at issue are based on federal statutes, such as those pertaining to employment discrimination. The arbitration plan used by AT&T Mobility provided numerous procedural protections for the individuals and was apparently viewed by the majority of the justices of the Court as fair to the plaintiffs. Thus, care must be taken to provide fairness in the language of any arbitration agreement.

Additionally, there is an open issue in Nevada as to the continued viability of the March 31, 2011 Nevada Supreme Court decision in Picardi v. Eighth Judicial District Court. InPicardi, the Court declined to enforce an arbitration agreement in a retail installment contract because it contained a class action waiver. Since AT&T Mobility, however, at least one lower court in Clark County has dismissed a Nevada state law wage and hour class action case, requiring the employee to arbitrate his individual claims.

No. 4: NLRB Requires Employers to Post New Employee Rights Notice

In late summer, the NLRB issued a regulation requiring private sector employers to post an 11x17-inch notice informing employees of their rights under the NLRA. This notice is a one-sided statement of the legal protections afforded to employees who engage in union organizing activities and other protected concerted activities, including voicing complaints about terms and conditions of employment. Posting is required where other workplace notices are typically posted and on internet or intranet sites if the company customarily posts employee notices on such sites regarding personnel rules or policies. In addition, companies with a substantial number of employees who are not proficient in English must post the Notice in the language(s) spoken by those employees.

Glaringly absent from this notice is any information as to employees' other rights - to decertify or withdraw from third-party union representation, to seek relief for a union's failure to represent employees fairly, or to object to payment of union dues or fees for political purposes.

After its passage by the Democratic majority of the Board, outrage from the business community resulted in delaying the deadline for posting. The posting deadline is now January 31, 2012.The poster may be found on the NLRB's website.

To learn about your company's rights under the new posting rule, you are invited to a free webinar to hear KZA's Gregg Kamer and other distinguished management-side labor lawyers from member firms of the Worklaw® Network, the international network of premier management-side labor and employment law firms. This webinar is Thursday, January 12, 2012 from 10:30 a.m. to 11:30 a.m. PST. See also KZA's December 16, 2011 Employer Report.

No. 3: Supreme Court Disapproves of Massive Sex Discrimination Class Action Against Wal-Mart

Three female employees filed one of the largest class actions on record, contending their employer, Wal-Mart, discriminated against female employees in pay and promotions. At Wal-Mart, such decisions are generally consigned to local store managers and regional managers, who exercise their broad discretion with only limited corporate oversight. Both a federal district court in Northern California and the Ninth Circuit Court approved a nationwide class action, notwithstanding the thousands of individual decision-makers and possibly millions of individual employment decisions that applied many different standards.

In a much-heralded decision on class action law, the U.S. Supreme Court ruled the case could not proceed as a nationwide class action. For a class action to proceed, there must be questions of fact or law common to the class. The common contention also must be of a nature that it is capable of class-wide resolution, such that making a decision on its truth or falsity will resolve an issue that is central to all class members' claims. This, the Court held, was not possible nationwide, as a lawsuit could not resolve at once millions of employment decisions without what it called "some glue" holding them together. See Wal-Mart v. Dukes, No. 10-277.

This decision should put the brakes on the recent trend toward increasingly larger employment class actions that force many companies into expensive settlements because the costs and risks of litigation are prohibitively high. However, the Court's ruling does not kill all class actions. Courts will continue to certify class actions where a plaintiff is able to point to a specific practice or policy that is discriminatory and show that the common contention is capable of class-wide resolution.

No. 2: NLRB Shortens Union Election Process and Limits Employers' Rights

On December 21, 2011, the NLRB adopted a resolution to substantially modify its union representation election rules that, while purporting to streamline procedures, will speed up the time in which it takes to have a union representation election. While not directly changing the rule as to how quickly an election must be held, the Board has taken action to eliminate what its majority (Democrat) members have labeled as "wasteful litigation" that "serve[s] no purpose," which includes gutting employers' opportunities to file pre-election challenges and to seek pre-election appeals. See KZA's December 21, 2011 Employer Report.

No. 1: Supreme Court Adopts "Cat's Paw" Liability Standard for Employment Discrimination Cases

Adopting a standard that will no doubt apply in all cases where the decision-maker's motivation is an issue, on March 14, 2011, the U.S. Supreme Court decided that an employer is liable for discrimination when an ultimate employment decision, such as a termination, is influenced by an action of a biased supervisor, even in situations where the employer's unbiased human resources department conducted an independent investigation that resulted in termination or another adverse employment decision. Discussed in our March 14, 2011 Employer Report [link], this decision specifically examined the non-discrimination provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), which protects employees with military obligations. However, this ruling will no doubt apply to most other anti-discrimination statutes, including Title VII of the Civil Rights Act of 1964, that prohibit actions in which "a motivating factor" is the employer's discriminatory or retaliatory animus. See KZA's March 14, 2011 Employer Report and Staub v. Proctor Hospital, Case No.09-400.

Under this new standard, legitimate future decisions will be tainted if based in whole or in part upon prior discriminatory discipline or decisions. As such, this decision should prompt all employers to carefully review their procedures for discipline and investigation of workplace matters, by assessing every recommended disciplinary action using solid human resources management practices.

As always, KZA's attorneys are available to answer clients' questions about these and other labor and employment issues.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.