House Joins Senate in Passing Resolution to Disapprove New NLRB Election Rule

Last week, the U.S. House of Representatives voted 232-186 in favor of passing a resolution to disapprove the National Labor Relations Board’s (“NLRB’s”) new “quickie election” rule, which becomes effective April 14 and is expected to give unions a decided “edge” in winning union representation elections. The House’s vote comes as no surprise and follows a similar March 4th vote by the Senate also disapproving the NLRB’s election rule. The White House has announced that President Obama will veto the joint Congressional resolution.

A Republican-led Congress came out strongly against the new rule when the NLRB finalized the election rule in December 2014. Dubbing it an “ambush election” rule, Congress quickly sought to disapprove the new election rule under the Congressional Review Act, with top Republicans on the Senate Labor Committee citing major concerns such as the speed in which elections would progress and privacy issues arising from forced disclosure of employee personnel information.

Upon passing the resolution (S.J. Res. 8), House Education and the Workforce Committee Chairman John Kline (R-MN) stated “The board’s ambush election rule will stifle employer free speech, cripple worker free choice, and jeopardize the privacy of workers and their families. The House and Senate have firmly rejected this radical scheme.”

Lawsuits have also been filed to challenge the legal sufficiency of the NLRB’s election rule. On January 5, the US Chambers of Commerce filed a complaint against the NLRB over the election rule in the DC Federal District Court. This is the same court that struck down the NLRB’s prior attempt to implement new election rules in 2011. At that time, the U.S. District Court held that the rule had been finalized without a necessary quorum of at least three validly appointed NLRB Members. Business groups in Texas, including the Associated Builders and Contractors of Texas, Inc., filed suit in a federal court in Texas also challenging the NLRB’s new election rule.

Despite attack on two fronts, the NLRB shows no signs of withdrawing or postponing the election rule’s effective date. To the contrary, the NLRB actively is moving forward with implementation efforts, and began training all NLRB regional office employees on the new rule beginning March 16. Regional offices will offer educational meetings to labor practitioners from March 23 through April 13. Likewise, employers should begin to prepare for implementation of the new election rule, by reviewing and updating labor relations policies and practices for responding to a likely increase in union organizing campaigns.

California Enacts AB 1897 Which Means Greater Liability For Employers Who Use Labor Contractors

On September 28, 2014, California Governor Jerry Brown announced the signing of Assembly Bill 1897, which amends California Labor Code section 2810 by creating a new Labor Code section 2810.3.

The new law targets businesses that obtain or are provided “workers to perform labor within its usual course of business from a labor contractor.” The statute’s definition of “labor contractor” excludes bona fide nonprofits, bona fide labor organizations, apprenticeship programs, hiring halls operated pursuant to a collective bargaining agreement, and motion picture payroll services companies.

Once AB 1897 becomes effective, private employers will be unable to deny liability for labor contractor’s failure to pay all required wages[1] or to secure valid workers’ compensation coverage for contract workers. Employers using the labor services will now “share with the labor contractor all civil legal responsibility and civil liability for all workers supplied” to the company. This liability is imposed without consideration for whether the business had knowledge about the purported violations and irrespective of whether the client employer and labor contractor are joint employers. The statute expressly provides that it does not limit any other theories of liability or requirements established by other statutes or common law.

As a result, employers should be especially cautious in selecting a staffing agency. Companies intending to use labor contractors should evaluate the agency before partnering with it to determine whether the contractor complies with all relevant labor laws. Contracts for labor services should now be entered in with an eye towards limiting the risk of retaining non-compliant contractors.

Aside from performing careful due diligence prior to retaining labor services, there are some practical steps a business can take to minimize its exposure under the new law. While the statute provides that any waiver is contrary to public policy and is unenforceable, a company may contract with a staffing agency for indemnification for the agency’s failure to pay required wages or secure valid workers’ compensation coverage. Thus, it will be important for employers to revise labor service contracts to protect their interests against failures of staffing agencies to comply with the Labor Code.

Current law already prohibits employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, if the employer knows or should know that the agreement does not include sufficient funds. However, the new law is designed to extend liability to employers in nearly all industries for a labor contractor’s failure to pay wages or provide adequate workers compensation. The statute exempts the following from coverage:

A business with fewer than 25 workers (which includes “those hired directly by the client employer and those obtained from, or provided by, any labor contractor”);
A business with five or fewer workers supplied by a labor contractor or labor contractors at any given time; and
The state or any political subdivision of the state, including any city, county, city and county, or special district.[2]

AB 1897 goes into effect on January 1, 2015.

If you have any questions concerning this alert, please contact one of the authors listed above or any other member of Drinker Biddle’s Labor &Employment Group.

[1] The statute provides that the term “wages” shall have the same meaning provided by Section 200 and “and all sums payable to an employee or the state based upon any failure to pay wages, as provided by law.” Labor Code section 200 in turn defines “wages” as including “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.

[2] AB 1897 was revised significantly from when it was originally proposed. All these exemptions were added through revisions. Also, the enacted version removed language that would have created shared liability for “[t]he failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings as required by the Unemployment Insurance Code.”

Hot Topics in Federal Agency Enforcement

Join our friends on the California HR team on Wednesday, July 30, from 10:00 – 11:00 a.m. Pacific (1:00 p.m. Eastern), as they provide a complimentary one-hour webinar on current hot topics that may impact employers not just in California, but also nationwide, as they deal with Federal agency enforcement plans.

Presented by:
Kate S. Gold, Partner, Labor & Employment
Bruce L. Ashton, Partner, Employee Benefits & Executive Compensation
Philippe A. Lebel, Associate, Labor & Employment
Ryan C. Tzeng, Associate, Employee Benefits & Executive Compensation

Date: Wednesday, July 30, 2014
Time: 10:00 a.m. Pacific (1:00 p.m. Eastern)
Location: Webinar (Dial-in details and Outlook calendar link will be sent with registration confirmation)

Topics to be discussed during the one hour webinar will include:

The EEOC’s Strategic Enforcement Plan and its impact on employment separation agreements and releases
What the DOL and IRS are looking for when they audit your retirement plan… and what you should do about it
The Department of Labor’s modernization of the FLSA overtime exemptions
Strategies for surviving a DOL investigation or IRS audit of your retirement plan
The National Labor Relations Board’s focus on employee rights to engage in concerted activity, and the impact on employer confidentiality agreements, social media policies, and arbitration agreements

There will be an opportunity at the end of the program to ask questions.

*CLE Information: This program has been approved by the California State CLE Board for 1.0 substantive credit hour.

Questions? Please contact Liz Jutila at Liz.Jutila@dbr.com

Defending and Preventing Employment Litigation – 2014 Edition

Drinker Biddle proudly announces the release of the 2014 edition of Defending and Preventing Employment Litigation. Written and updated for 2014 by Labor & Employment Group partners Gerald S. Hartman and Gregory W. Homer, Defending and Preventing Employment Litigation is a must have reference for employment lawyers, in-house employment counsel, general counsels, and human resources professionals. The one-volume annually updated manual provides insight on preventing, preparing for, and managing employment litigation in discussing all types of discrimination, harassment, wage, leave and wrongful discharge claims.

The 2014 edition of Defending and Preventing Employment Litigation retails for $385. Drinker Biddle has arranged a special discount rate of 20% off the retail price for friends of the firm. To purchase your copy of Defending and Preventing Employment Litigation click here.

UWOA Exception Does Not Apply to Noncompete Agreements in Pennsylvania

The Pennsylvania Superior Court recently reaffirmed Pennsylvania’s longstanding position that employers must provide valuable consideration to employees who enter into noncompete agreements. In a case of first impression, the court held that a statement in a noncompete agreement with an existing employee that the parties “intend to be legally bound,” as set forth in the Uniform Written Obligations Act (“UWOA”), does not constitute adequate consideration.

In Socko v. Mid-Atlantic Systems of CPA, Inc., the employer argued that its noncompete agreement with a former employee was enforceable because the agreement expressly stated that the parties “intend to be legally bound.” The former employee entered into the agreement after he began working for Mid-Atlantic Systems of CPA, and he did not receive any benefit or change in job status in exchange for signing the noncompete. The employer argued that the language itself sufficed to enforce the agreement because Section 6 of Pennsylvania’s UWOA prevents the avoidance of a written agreement for lack of consideration if the agreement contains an express statement that the signer intends to be legally bound.

The court rejected the employer’s argument, pointing to Pennsylvania’s established view of restrictive covenants as a disfavored restraint of trade and significant hardship on bound employees. Accordingly, Pennsylvania courts have long held that noncompete agreements must be supported by valuable consideration, even though other types of contracts may be upheld by continuation of at-will employment, contracts under seal, or nominal consideration.

Employers seeking to enforce noncompete agreements in Pennsylvania are now on notice that language stating that “the parties intend to be legally bound” will not relieve them of the requirement to provide actual and valuable consideration to employees in exchange for execution of the agreement. If an employee signs the agreement at the start of employment, then the consideration is the job itself. When the employment relationship already exists, however, employers must provide consideration in the form of benefits—such as raises or bonuses—or a change in job status, i.e., a promotion.

Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

Editor’s Note: The following post appears in the latest issue of the California HR Newsletter.

Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

The Issue: Today, many employers rely on labor contractors or temporary employment agencies to sustain their operations. Occasionally, however, labor contractors fail to comply with labor laws and regulations by failing to (1) pay wages; (2) report and/or pay all required contributions and personal income tax withholdings; and (3) secure workers compensation for subcontractors. In such cases, are employers liable to subcontractors for these types of violations of their labor contractors?

The Solution: Historically, for the most part, no. However, California Assembly Bill (“AB”) 1897, a proposed law currently before the Assembly, would impose joint liability on employers for the violations of their labor contractors.

Analysis: On April 24, 2014, AB 1897 was passed by the state Assembly’s Labor and Employment Committee and will soon be considered by the Assembly’s Committee on Appropriations. The bill would greatly expand an employer’s duties by requiring employers to share with their labor contractors all responsibility and liability for the following: the payment of wages, the failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings, and the failure to obtain valid workers’ compensation coverage. This could have a significant impact on employers who depend on labor contractors for any number of functions, e.g., to fill seasonal or short-term work schedules, cover for employee absences, avoid layoffs, and pre-screen employees.

While the law currently prohibits employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, if the employer knows or should know that the agreement does not include sufficient funds for the contractor to comply with laws or regulations governing the labor or services to be provided, AB 1897 would expand liability for the above mentioned violations to all industries and all individuals who contract for labor or services. This bill would impose seemingly strict liability on any individual or entity that obtains or uses subcontractors from a labor contractor to perform work “within the usual course of business of the individual or entity.” As such, if AB 1897 were to pass, it would particularly burden small businesses, those without dedicated human resource or legal departments, due to their heavy reliance on contract and temporary employees.

The silver lining is that AB 1897 would not prohibit employers from agreeing to any otherwise lawful remedies against labor contractors for indemnification from liability created by acts of the labor contractor. Employers cannot, however, shift to labor contractors any of their responsibilities under the California Occupational Safety and Health Act. Labor contractors will also have the same opportunity to contract with employers for indemnification. Furthermore, the bill will provide that any waiver of its provisions is contrary to public policy and unenforceable. If AB 1897 becomes law, employers should be especially cautious in selecting a labor contractor and determine what level of contractor evaluation may limit their risk for non-compliant contractors. Unwary employers face the danger of liability for a labor contractor’s failure to meet these requirements.