The Fifth Circuit Court of Appeals recently rejected the National Labor Relations Board’s holding regarding class action waivers in D.R. Horton v. NLRB – however, the court agreed with the NLRB’s decision in D.R. Horton in one respect.
In D.R. Horton and Michael Cuda, the NLRB held that an employer violated its employee’s rights under Section 7 of the National Labor Relations Act (NLRA) by requiring its employees to sign an arbitration agreement that prohibited employees from pursuing claims in a collective or class action. Among other things, Section 7 of the NLRA protects employees’ rights “to engage in other concerted activities for the purpose of collective bargaining mutual aid or protection.” 29 U.S.C. § 157. The NLRB interpreted this language to mean that an employee must be permitted to pursue claims collectively in either a judicial or arbitral forum and that an employer may not simultaneously foreclose collective or class actions in both judicial and arbitral forums.
On appeal, the Fifth Circuit rejected the NLRB’s position. The court held that the NLRB’s rule regarding class action waivers conflicted with the Federal Arbitration Act (FAA). Relying heavily on the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the Fifth Circuit explained that requiring a class mechanism in arbitration agreements is “an actual impediment to arbitration” and undermines some of the key purposes of the FAA by making arbitration slower, more formal, and more expensive. In addition, the Fifth Circuit analyzed the NLRA’s statutory text and legislative history and determined that it did not contain any congressional commands for the NLRA to override the FAA. Accordingly, the Fifth Circuit reversed the NLRB’s holding that an arbitration agreement with a class-action waiver violates the NLRA. In doing so, the Fifth Circuit joined with the Second, Eighth, and Ninth Circuits – all of which have reached the same conclusion.
At the same time, however, the Fifth Circuit agreed with another holding of the NLRB in the D.R. Horton case. Specifically, the Fifth Circuit agreed that the arbitration agreement at issue violated the NLRA because an employee could reasonably construe the agreement to prohibit him or her from filing an unfair labor practice charge with the NLRB. The agreement broadly stated that employees who signed it agreed to waive the right to “file a lawsuit or other civil proceeding,” but included no exception for NLRB unfair labor practice proceedings. Because the agreement appeared to prohibit unfair labor practice charges, the Fifth Circuit agreed that the NLRB was correct to order D.R. Horton to take corrective action to address this problem.
Takeaways: The D.R. Horton case is a good case for employers because it represents a growing consensus among federal circuit courts that employers may include class-action waivers in arbitration agreements without violating the NLRA. At the same time, the D.R. Horton case highlights the potential risks for employers in drafting arbitration agreements so broadly that they appear to prohibit an employee from filing an unfair labor practice charge with the NLRB. When drafting arbitration agreements, employers need to be careful to avoid giving the impression that an employee cannot seek relief from an administrative agency, such as the NLRB or EEOC.
Recently, the Occupational Safety and Health Administration, (OSHA) announced a proposed rule concerning injury and illness recordkeeping requirements for employers that would make public employee records about illnesses and injuries. 78 Fed. Reg. 67254 (Nov. 8, 2013).
OSHA Assistant Secretary Dr. David Michaels stated that the proposed rule would require employers with 250 or more employees to electronically submit illness and injury records to OSHA on a quarterly basis. Further, employers with 20 or more employees in certain industries with high injury and illness rates would have to electronically submit their injury and illness logs to OSHA electronically every year. OSHA’s intent is to then post the data on its website once personally indentifying information has been removed.
Michaels explained OSHA’s view that the newly proposed rule would allow employers to compare safety records against employers in similar industries. OSHA also says the other proposed rule will allow workers to know about the safety records of potential future employers.
Employers and business groups have expressed concerns about the proposed rule. Under current law, employers have to post summaries of illness and injury reports in a common area where employees can see them. OSHA also currently makes public raw numbers about incidents in workplaces without describing an injury or how it occurred. Business groups are likely to oppose the proposed rule because employers claim that company-specific raw injury data may be misconstrued or misused as the mere recording of an injury does not tell the entire story about how an injury occurred or whether an employer has a good safety program.
The injury and illness data that is to be made public by the proposed rule won’t include information that explains how the injury occurred, such as whether an employee acted in an unsafe manner or failed to follow the employer’s safety rules. The incomplete information OSHA intends to make public may allow competitors, plaintiff’s lawyers, unions, and others to distort this information and wrongly label employers as unsafe or as “bad actors.” Further, given recent problems with federal government’s health care website and database under the Affordable Care Act, it is not much of a stretch to imagine that proprietary or personal information might inadvertently be disclosed to the public.
OSHA’s proposed rule changes will dramatically alter the potential for OSHA citations and fines as well. Under current law, employers must report the death of an employee, or the in-patient hospitalization of three or more employees, within eight hours of learning of the fatality or hospitalizations. But employers are not required to immediately report other illnesses or injuries. Mandatory quarterly reporting of injuries and illnesses will allow OSHA to learn of significant injuries soon enough to get an inspection team to an employer’s facility before the six month statute of limitations for issuing a citation has expired.
Minnesota OSHA (“MN OSHA”) essentially follows OSHA’s recordkeeping requirements. Thus, it seems likely that any proposed recordkeeping changes adopted by OSHA will also be adopted by MN OSHA for Minnesota employers.
Employers and other interested parties have until February 6, 2014 to submit written comments on the proposed rule. Employers may also voice their concerns at a public meeting that OSHA will hold in Washington, D.C. on January 9, 2014. OSHA must take employer comments into consideration before issuing a final rule.
Takeaways: Employers should pay attention to this proposed rule change on recordkeeping requirements. Concerned employers may want to consider submitting written comments on the proposed rule, or may want to contact any trade or industry groups they are a part of to consider possible joint comments on the proposed rule. If the recordkeeping changes are adopted in their current form, employers will need to be even more vigilant to ensure that they have good safety programs in place to reduce the risk of workplace injuries, and to ensure that OSHA recordkeeping is done correctly and timely to minimize the risk of OSHA citations and fines.
Generally no – employers cannot require employees to pool their tips in Minnesota, but there are a few exceptions to this rule. Here’s what employer’s need to know about the tip-pooling rules in Minnesota:
General Rule: The general rule in Minnesota is that “[n]o employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees.” Minn. Stat. § 177.24, subd. 3.
Voluntary Tip Pools: The law does not prevent employees from voluntarily sharing gratuities with other employees, provided there is no employer coercion. If employees decide to share their tips voluntarily, an employer generally cannot participate in the arrangement, except that the employer may: (i) upon the request of employees, safeguard gratuities to be shared by employees and disburse shared gratuities to employees participating in the agreement; (ii) report the amounts received as required for tax purposes; and (iii) post a copy of Minnesota’s tip-pooling law for the information of employees. Minn. Stat. § 177.24, subd. 3.
The Banquet Exception: Another exception to the tip-pooling rule applies to banquets or similar food and cocktail service events. With respect to this exception, the law states that “[w]hen more than one direct service employee provides direct service to a customer or customers in a given situation such as banquets, cocktail and food service combinations, or other combinations, money presented by customers, guests, or patrons as a gratuity and divided among the direct service employees is not a violation of [Minnesota's tip-pooling statute].” Minn. R. § 5200.0080, subp. 8.
Takeaways: In most cases, employers cannot require employees to share tips in Minnesota. The two primary exceptions to this rule are: (i) when employees voluntarily agree to share tips; and (ii) when tips are shared among direct service employees at banquets or similar food and cocktail events.
Minnesota’s recently enacted “ban-the-box” legislation will take effect on January 1, 2014. Here’s what employers need to know about the law:
What the Law Requires: The law provides that most public and private employers “may not inquire into or consider the criminal record or criminal history of an applicant for employment until the applicant has been selected for an interview by the employer or, if there is not an interview, before a conditional offer of employment is made to the applicant.” S.F. No. 523 (to be codified at Minn. Stat. § 364.021).
How the Law is Enforced: The statute authorizes the Minnesota Department of Human Rights to impose fines for violations of the law. There is no private right of action for individuals to initiate lawsuits.
Are There Any Exceptions? The law includes an exception for “employers who have a statutory duty to conduct a criminal history background check or otherwise take into consideration a potential employee’s criminal history during the hiring process.” For instance, the law does not apply to school districts or the Department of Corrections. In addition, the law allows law enforcement agencies, fire protection agencies, and certain licensing agencies to inquire about certain kinds of offenses. The law is also clear that it does not supersede any legal requirements to conduct criminal history background checks for certain kinds of employment.
What Employers Need To Do: Employers need to begin complying with the ban-the-box law on January 1, 2014. The first thing that employers need to do is to make sure that any paper or online employment applications do not ask any questions about an applicant’s criminal history. In addition, because most background checks include information about an applicant’s criminal history, most employers will need to wait until an applicant has been selected for an interview or offered conditional employment before conducting a background check.
In HR circles, there has been a growing discussion of “stacked employee ratings” by which management determines pre-set percentages of employees to be rated in the categories of “excellent,” “good,” “fair” and “poor,” or similar such rankings. It is somewhat like the beloved grading curve in school. Like the grading curve, stacked employee ratings are designed to force specificity in evaluations and avoid “grade inflation.”
It’s a hot topic and one where considerations of effectiveness, employee morale, and fairness bear consideration. Microsoft recently ended its “hated” stacked employee rating system. But other employers continue to use and improve this system at least on a pilot basis. Stacked employee rating HR software programs are beginning to appear on the market.
From a legal perspective, a well designed stacked rating system could help prove up legitimate, non-discriminatory bases for employee discipline better than a more easily “fudged” traditional performance review. Some legal considerations for Minnesota employers considering stacked employee ratings include:
- Maintaining employee privacy rights by following clear segregation of personnel records and separate supervisor files as allowed by Minnesota law.
- Determining what to do with the “bottom” rankers: It is potentially risky to pursue discipline for just some of the “bottom” rankers, but not others, without raising concerns about protected category discrimination.
- Weighing the possibility of disparate impact discrimination when a rating system codifies employee placement in categories and thereby influences the terms and conditions of employment, such as raises or promotions.
Takeaways: These concerns are not to say that stacked employee ratings are illegal or even legally inadvisable. But “nothing is new under the sun,” and the traditional legal pros and cons used to analyze all employment policies need to be weighed and reviewed before embarking on a stacked employee rating system. Right now, I would give the concept a C+/B-.
Many employers encourage employees to seek community leadership positions so as to enhance the company’s public profile. Indeed, for some senior executives, this can be an employer expectation. But does this “doing good” present some employer risks?
It can. For example, a prominent employee’s service on a non-profit board can identify the employer with the mission of the non-profit, which may or may not suit the company’s business strategy. That is why many employers require a senior executive to obtain prior approval before accepting a non-profit board membership.
Also, a senior employee on a board of a non-profit that is a customer or client of the employer may run into conflicts of interest issues that could result in the employer losing the non-profit’s business. Or worse, the failure to make proper disclosure could expose the employer to the enforcement powers of the Attorney General or IRS, both of which keeps a close eye on conflict abuses. That is why a policy underscoring the importance of compliance with conflict disclosures when serving on non-profit boards may be an important protection for the employer.
And what if the non-profit becomes involved in a scandal or litigation? Can a senior executive membership on the non-profit’s board expose the employer to risks? Normally not, since the non-profit is a free-standing corporation. But one can conceive of scenarios (such as when a company itself “appoints” a board member; or in a company-sponsored foundation, or service as trustees of charitable trusts) in which there could be a potential legal complications or exposure. One important safeguard in Minnesota is the state law that provides immunity from any claims of negligence for non-profit directors who are uncompensated. That is why making sure there are no unusual ties between the employer, employee and the board is an important policy. There should also be a policy on any compensation earned for non-profit service.
Takeaway: There are good reasons for an employer to consider carefully an employee non-profit board service policy since good intentions do not count for everything. Legal counsel can be of material assistance in this regard.
On October 31, 2013, the Internal Revenue Service got into the Halloween spirit by giving what at first appears to be nothing but a treat to health flexible spending account participants. The IRS, in Notice 2013-71, modified the “use it or lose it” rule that applies to health flexible spending accounts. While this change may appear at first to be nothing but good news, an employer must review and understand the new “use it or lose it” rule, to avoid being tricked.
Under the new rule, an employer’s health flexible spending account may allow up to $500 of a participant’s health FSA to be carried over into the next year. A plan may allow a carryover limit of less than $500, or may not allow any carryover at all. But if an employer wants to add a carryover feature to its health FSA, there are a few rules that must be followed, including:
- The carryover cannot exceed $500;
- The carryover only applies to a health FSA (i.e., not to a dependent care FSA);
- The carryover does not reduce the maximum amount that generally applies to health FSAs ($2,500 for 2013 and 2014);
- A carryover may not be permitted with a grace period; a plan may have a carryover feature, or a grace period, but not both;
- Amounts carried over must be used in the subsequent plan year, or forfeited by the end of the subsequent year;
- A plan must be amended to allow the carryover before the end of the first year in which the carryover will be allowed, except an employer can administer the plan with a carryover for the 2013 plan year without having to formally amend the plan until 2014; and
- A carryover in a general-purpose FSA may result in an individual being ineligible to contribute to a health savings account for the entire year that the amounts are carried over to.
Takeaway: The new carryover feature will certainly be welcome news to many employers. However, considering that the IRS announcement did not occur until most employers were in, or near, their annual enrollment period, it may make sense for an employer to wait until 2014 to implement the new feature, especially if the employer’s plan already has a grace period, which would need to be eliminated if the carryover feature is adopted. Nonetheless, it is a new feature that every employer with a health FSA should at least consider.
It’s said “lawyers reach for forms like babies reach for bottles” and that is true. But it is equally true for employers and HR Officials. Many important employment policies and forms are “off the shelf” and a form for almost every conceivable situation is usually just two-clicks away. Sometimes they work just fine.
But when is it a bad idea to “go generic”? Here are some examples of problems commonly encountered by employers and employment counsel:
- Forms that ignore specific state laws regarding personnel file access, post-termination process and leave requirements. This is especially problematic for multi-state employers.
- Contracts that have termination and other provisions that do not fit the projected possibilities for specific important key employee hires.
- Non-compete and non-solicitation agreements and policies that are not tailored to the actual legitimate business interests of the employer and, thereby, difficult to enforce or even illegal in certain states.
- Separation agreements that release too much or too little or fail to incorporate consideration and rescission provisions necessary for enforceability.
- Evaluation forms that are so broadly written and removed from the specific job description as to be virtually useless or even counter-productive in subsequent disciplinary matters.
- Out-of-date application forms (for example, a form that in Minnesota hasn’t “banned the box” regarding arrest or conviction records).
- Confidentiality policies that are vague or unrelated to the employer’s actual proprietary information relevant to its products or services.
Takeaway: In these and many other situations, the ease of low-cost generic forms may well be offset by costly complications in interpretation and enforcement. It is worth thinking about “de-forming” and seeking cost-effective legal review of policies and contracts meant to address important legal aspects of the employment relationship.
It depends – Minnesota’s drug and alcohol testing statute imposes a number of conditions on an employer’s ability to terminate an employee for a positive drug or alcohol test. Here’s what employers need to know about the statute’s requirements:
- General Requirements for Drug Testing: Minnesota law permits an employer to administer drug tests of employees only pursuant to a written policy that complies with certain statutory requirements. Among other things, the statute requires that when an employee tests positive for drug or alcohol use: (i) the result must be confirmed by a “confirmatory test;” (ii) the employee must be given written notice of the right to explain the positive test, for example, by identifying any medications the employee is taking or providing other information concerning the reliability of the test; and (iii) the employee may request a “confirmatory retest” of the original sample at the employee’s own expense.
- First Time Positive Test By a Current Employee: If the positive test result was the first time that the employee tested positive, the law requires that, before terminating the employee, the employer must generally provide the employee with an opportunity to participate in counseling or treatment, whichever is more appropriate, as determined by a certified chemical use counselor or a physician trained in the diagnosis and treatment of chemical dependency. The employee may be terminated only if he or she refuses to participate in counseling or treatment or if he or she fails to complete the program successfully. This rule does not apply if the employee has tested positive for the employer before.
- Health and Safety Exception: If an employer believes that it is reasonably necessary to protect the health or safety of the employee, co-employees, or the public, an employer may temporarily suspend an employee who tests positive or transfer him or her to another position at the same rate of pay pending the outcome of the confirmatory test and, if requested, the confirmatory retest. If the employee is suspended without pay, and the confirmatory test or retest comes back negative, the employee must be reinstated with back pay.
- Withdrawal of Job Offer for Job Applicants: If a job applicant receives a job offer contingent on passing a drug and alcohol test, the employer must verify a positive test result with a confirmatory test before withdrawing the job offer. Unlike current employees, however, the employer does not need to offer the job applicant an opportunity to participate in counseling or treatment before withdrawing the job offer.
See generally Minn. Stat. § 181.953.
Takeaway: When an employee or job applicant tests positive on a drug and alcohol test, employers should make sure that they have complied with all statutory requirements before terminating the employee or withdrawing a job offer.
On October 31, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjusted amounts for certain retirement plan limitations and limitations affecting certain fringe benefits. On May 2, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjustments affecting health savings accounts, and on October 31, 2013, the Social Security Administration announced the 2014 cost-of-living adjustments related to Social Security benefits.
A list of the most significant of these cost-of-living adjusted amounts is available here.
There are a lot of loose terms in the world of employment law. Terms such as “at-will”, “contract”, “progressive discipline” and other common terms have meaning that many of us think we know, but when pressed may get a little vague. A very common such term in the termination context is “just cause” termination.
Usually, “just cause” is a provision in an employment contract. It differentiates the basis for a termination from that of a reduction in force or simple exertion of at-will employment rights by requiring a reason for a termination. In a pure at-will employment situation, employers do not have to provide a reason for termination unless there is a request made by statute. In an employment contract with a just cause provision, the employer articulates the basis for the cause in order to terminate the contract without notice, and/or provide different, or reduced or no severance benefits.
The meaning of “just cause” in an employment contract should be distinguished from the meaning of “just cause” in a union setting. Most collective bargaining agreements require “just cause” for discipline and discharge. If a union files a grievance over the termination of a union member, the employer typically has the burden to show “just cause” existed for the termination during a labor arbitration hearing. In the union context, “just cause” is a term of art that labor lawyers and labor arbitrators understand has a certain meaning, which can be very different from the meaning of “just cause” in an employment contract.
In the employment context, “just cause” is protection for the employer (who can avoid severance in a severe misconduct situation) and for the employee (who obtains severance unless there is demonstrable just cause). More senior executives require this protection. Some contracts simply use the term in an undefined manner and apparently rely upon, one would say charitably, the “common opinion of mankind.” Good luck enforcing that one in court.
A well-drafted just cause provision in an employment contract lists the bases for termination in ways that are objectively definable. That’s easier said than done, of course. In extreme situations, such as conviction of a felony or misappropriation of funds, the definition can be set forth in a very straight-forward way. But in situations that sound in dissatisfaction with the employee’s performance, disputable subjective elements can creep in. That is why it is common to see in a just cause provision notice and opportunity to cure provisions that will allow the employer to spell out the reasons for the termination and demand reasonable cure and, thereby, create a clear and objective record. Of course, this may not work according to plan since the employee can dispute the reasons or only partially comply or other such complications. But the best advice is not to “go generic”, but to work with legal counsel in drafting just cause provisions that fit the specifics of a particular executive employment situation.
Takeaway: As Carl Sandberg said, “Be careful how you use strong words.” “Just cause” is a term that requires careful and specific articulation in the employment contract in order to have meaning and value in determining the employer’s rights and obligations in executive employment terminations. The best advice is to seek advice.
Generally no, but there are limited circumstances where an injury that occurs while an employee is commuting may be covered by workers’ compensation laws.
In Minnesota, the general rule is that workers’ compensation applies to injuries that occur to an employee “while engaged in, on, or about the premises where the employee’s services require the employee’s presence as a part of that service at the time of the injury and during the hours of that service.” Minn. Stat. § 176.011, subd. 16.
The exceptions that may cause an injury that occurs while the employee is commuting to be covered by workers’ compensation include:
- When the employer regularly furnishes transportation to employees to and from the place of employment, and the employee is injured while being so transported;
- When the employee is traveling between two portions of his or her work premises; or
- If a portion of the employee’s work is performed at home, situations may arise in which an injury that occurs during the trip between the employee’s home and his employer’s premises may fall within the scope of workers’ compensation coverage.
See Kahn v. State, 289 N.W.2d 737, 742 (Minn. 1980).
Takeaway: In most cases, if an employee is injured while commuting to or from work, the injury will not be covered by workers’ compensation laws. However, if any of the exceptions listed above apply, the injury may be subject to workers’ compensation laws.