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Recent weeks continue to see a spate of significant decisions and regulatory developments. Below are some of the more notable developments.
Significant Court Decisions Affecting Employers
1. Supreme Court Holds That Pension Plans Established By Church-Affiliated Hospitals Are Exempt From ERISA
The Supreme Court has held that ERISA’s exemption for “church plans” includes benefit plans that are established by church-affiliated hospitals and healthcare facilities and managed by internal employee pension committees. Advocate Health Care Network v. Stapleton, — S.Ct. — 2017 WL 2407476 (June 5, 2017). The Court rejected the plaintiffs’ argument that the church exemption only applies to plans that were established by a church.
2. Sixth Circuit Holds That Class-Action Waivers In Employment-Related Arbitration Agreements Violate NLRA
In National Labor Relations Board v. Alternative Entertainment, Inc., — F.3d —, 2017 WL 2297620 (6th Cir. May 26, 2017), the Sixth Circuit held that employment-related arbitration agreements that include a class-action waiver violates Section 7 of the National Labor Relations Act. The Sixth Circuit concluded that the Federal Arbitration Act and the NLRA are compatible and do not conflict because the FAA’s “saving clause” does not make arbitration agreements more enforceable than other contracts. The Sixth Circuit reasoned that the NLRA prohibits class-action waiver provisions in arbitration agreements “on grounds that would apply to any contractual provision, and thus triggers the FAA’s saving clause.” Id. at *5. The Sixth Circuit panel’s decision also emphasized that the right to collective action in the NLRA is a substantive right rather than a procedural right. A vigorous dissent argued, among other points, that there was no NLRA “exception” in the FAA, or vice versa. The Sixth Circuit joins the Seventh Circuit and Ninth Circuit in holding that class-action waivers in employment-related arbitration agreements violate the NLRA. The Fifth Circuit and the Eighth Circuit have held that such provisions do not violate NLRA. On January 13, 2017, the Supreme Court granted certiorari to resolve this circuit split.
3. Second Circuit To Reconsider En Banc Whether Title VII Includes Discrimination On The Basis Of Sexual Orientation
The Second Circuit has granted a petition for re-hearing en banc to re-examine whether Title VII encompasses discrimination on the basis of sexual orientation. The Second Circuit also has invited the EEOC (which has taken the position that Title VII does encompass sexual orientation), to file a brief on this issue. An en banc decision by the Seventh Circuit recently held that Title VII encompasses sexual orientation. In March, an Eleventh Circuit panel held that Title VII does not encompass sexual orientation. A petition for rehearing en banc is still pending in that case.
4. Eleventh Circuit Rejects Joint Employer Claim
The Eleventh Circuit recently addressed a complex joint employer issue in Scott v. Sarasota Doctors Hospital, Inc., — Fed.Appx. —, 2017 Fed.Appx. 2471198 (11th Cir. June 8, 2017). In that case, the plaintiff doctor was a hospital-based primary care physician who was officially employed by EmCare, but who worked at Sarasota Doctors Hospital (“the Hospital”). EmCare and the Hospital shared responsibilities for hiring and overseeing the plaintiff’s work. Although an EmCare manager initially reviewed the plaintiff’s qualifications and recommended that she be interviewed, only the Hospital interviewed per for a position. EmCare was responsible for the plaintiff’s pay, benefits, tax withholdings and malpractice insurance, but the Hospital had the authority to order the plaintiff’s removal, and EmCare was contractually obligated to comply with the Hospital’s request. There was also evidence that the Hospital supervised her and controlled her activities. Nevertheless, the Eleventh Circuit held that there was sufficient evidence for a jury to conclude that the Hospital was not a joint employer of the plaintiff, and affirmed the district’s denial of the plaintiff’s motion for new trial.
Significant Administrative And Regulatory Action
1. Labor Secretary Signals That DOL Will Pursue Modification Of 2016 Overtime Rule
Secretary of Labor Alexander Acosta testified before a House Subcommittee last week and signaled potential changes to the 2016 final rule increasing the threshold salary level for white-collar overtime exemptions from $23,600 to $47,476. Acosta testified that the DOL intends to file a Request for Information within the next few weeks to seek information in connection with the 2016 final rule and the salary level. Acosta testified that the manner in which the salary level of $47,476 was determined “created a shock to the system.” Acosta also stated that it is a “problem” when the salary level is not updated “because life gets a lot more expensive.” During his confirmation hearing in March, Acosta stated that the increase to $47,476 was excessive and indicated that he was open to a more modest salary increase “somewhere around $33,000.”
Based on these comments, it appears that the DOL may be contemplating issuing a notice of proposed rulemaking that may propose a more modest adjustment in the salary level and perhaps removal of the automatic salary adjustment provision contained in the 2016 final rule.
In the meantime, in the litigation challenging the 2016 final rule, the Department of Justice’s appeal to the Fifth Circuit (filed by the Obama administration) challenging a Texas district court’s preliminary injunction blocking enforcement of the rule is in a holding pattern. Since President Trump took office, the DOJ has been granted three extensions of time to file a reply brief in support of the appeal, with the latest extension giving the DOJ until June 30, 2017 to file a reply brief.
2. DOL Withdraws Controversial Guidance Statements Concerning Joint Employers And Independent Contractors
The DOL issued a press release last week announcing the withdrawal of two controversial guidance statements issued during the Obama administration. First, the DOL rescinded its guidance regarding joint employers under the FLSA and the Migrant and Seasonal Agricultural Protection Act. In the guidance, the DOL took the position that “[t]he concept of joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” Second, the DOL rescinded its guidance regarding the classification of independent contractors as employees under the FLSA. The guidance stated that “most workers are employees under the FLSA’s broad definitions.”
These two guidance statements have been removed from the DOL website. The press release stated that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” During his confirmation hearing in March, Secretary Acosta expressed his view that the “direct and immediate” control standard (which is considered the traditional standard) should be utilized in determining when an entity is an employer. Secretary Acosta also expressed his preference for issuing opinion letters as opposed to the guidance statements. Accordingly, it is possible that the DOL will further clarify its views on both the joint employer and independent contractor issues in opinion letters.
3. DOL Proposes To Rescind “Persuader” Rule
In addition, the DOL published in the June 12, 2017 Federal Register its proposal to rescind regulations that would have required employers to file public reports with the DOL when they use consultants, including lawyers, to provide labor law advice for the purpose of persuading employees in connection with union organizing and collective bargaining. This “persuader” rule would have required consultants to provide details as to the services and advice provided and the amount received. The “persuader” rule was enjoined by a Texas district court in November 2016. The purported purposes of the proposed rescinding of the “persuader” rule is to give the DOL an opportunity to further consider the effects of the rule on the regulated parties. Comments on the proposed rescinding of the “persuader” rule are due by August 11, 2017.
Significant Federal and State Legislative Action Affecting Employers
1. GOP Introduces Employee Rights Act
On May 25, 2017, Republican Congressional leaders introduced the Employee Rights Act, which provides for substantial revisions to the National Labor Relations Act and other labor laws. Among the proposed changes, the legislation would provide for an election within a maximum of three years after there has been turnover of more than 50 percent of a bargaining unit, to determine whether the bargaining unit still wants to be represented by a union. The legislation also would require unions to obtain permission from members to utilize union dues for any purpose not directly related to the union’s collective bargaining or contract administration functions. This provision of course is intended to undermine the union’s political activities. In the last session, 33 Senators and 137 House members co-sponsored the legislation.
2. Pennsylvania Enacts Pension Reform Legislation
On June 8, 2017, the Pennsylvania legislature enacted sweeping pension reform. Democrat Governor Tom Wolf is expected to sign the legislation today. Under the bill, most state employees and all school employees hired after January 1, 2019 will receive half of their pension benefits from an existing defined benefit plan and half from a new defined contribution plan. Employees hired after January 1, 2019 will also have the option of taking all of their retirement benefits from the defined contribution plan. In addition, current employees will be allowed to opt in to the hybrid pension arrangement. The measure was intended to alleviate the estimated $71 billion in unfunded liability in the state’s pension plans.
3. New Jersey Assembly Passes Bill That Would Prohibit Questioning Employees Regarding Salary History
On May 22, 2017, the New Jersey Assembly passed legislation that would prohibit employers from asking an employee about his or her salary history. The measure would need to be approved by the New Jersey Senate and signed by Republican Governor Chris Christie As of April, at least seven other states were considering similar measures – Illinois, Maine, Maryland, New York, Pennsylvania, Rhode Island and Vermont. Massachusetts, New York City and Philadelphia have already enacted similar measures.
Significant Opinions On Labor Issues
1. NLRB Ruling On Worker Recording Ban Upheld
The Second Circuit affirmed a NLRB ruling that invalidated Whole Foods’ policies prohibiting employees from making recordings at work. The Second Circuit concluded that the rule could be read as preventing employees from recording activity that is protected by Section 7 of the NLRA.
2. NLRB Ruling Requiring Employer To Disclose Witness Statement Affirmed
The DC Circuit affirmed an NLRB ruling compelling an employer to turn over a witness statement requested by the union in connection with the termination of an employee who was charged with sleeping on duty. The Court affirmed the Board’s finding that the witness who provided the statement was not assured that the statement would be kept confidential. Significantly, the opinion discusses the Board’s decision to overrule prior precedent and to enforce prospectively a rule applying a balancing test rather than providing absolute protection to witness statements obtained on the basis of an assurance of confidentiality.
3. NLRB Reverses Termination Based On Text Message
A divided NLRB decision reinstated an employee who was terminated after a manager sent him a text message with a question about his union sympathies.