LaborSphere, Author at Laborsphere

No More No-Gossip Policies?

A National Labor Relations Board (NLRB) administrative law judge ruled recently that the “no-gossip” policy of Laurus Technical Institute, a for-profit technical school located in Georgia, broke federal law because it was overly broad, ambiguous and restricted employees from discussing or complaining about any terms and/or conditions of employment, even though nothing in Laurus’s policy directly addressed discussions about wages, hours or other employment terms and conditions.

Kate Gold, partner in the Los Angeles office, recently told Human Resource Executive Online during an interview on the topic of the Laurus decision and no-gossip policies for employers, “Though the NLRB has been focused on other policies that could violate an employee’s right to engage in protected concerted activity — such as social media or confidentiality policies — no-gossip policies can be especially problematic.”

Kate went on to say “I would not include it among the top 10 or even the top 20 essential policies an employer should include in a handbook or policy manual, such as an at-will, anti-harassment or reasonable accommodation policy. However, given the type of concern raised by a no-gossip policy, there could be other employer policies that are problematic for the same reasons. The issue raised by an overbroad no-gossip policy is whether it constitutes an unlawful restriction on an employee’s right to engage in protected concerted activity under Section 7 of the National Labor Relations Act.”

For the full text of the article click here.

New Jersey’s Whistleblower Law Is Not An End Run Around Labor Law Preemption

New Jersey’s Appellate Division has rejected two Atlantic City nightclub workers’ attempts to artfully plead their way around preemption under the National Labor Relations Act (NLRA) and the Labor Management Relations Act (LMRA) by alleging a whistleblower claim under New Jersey’s Conscientious Employee Protection Act (CEPA). The case was brought by two “Tipped Floor Euros,” i.e., alcoholic beverage servers, who alleged retaliation and constructive discharge following their complaints regarding tip-pooling, wage payments and being forced to perform duties prohibited by the collective bargaining agreement (CBA). The case is O’Donnell v. Nightlife, et al. (April 17, 2014).

In rejecting the plaintiffs’ CEPA claims, the Appellate Division took a narrow view of the whistleblower statute, citing the standard that the conduct complained of must “pose a threat of public harm, not merely private harm or harm only to the aggrieved employee.” [Opinion, p. 11, available here, citing Mehlman v. Mobil Oil Corp., 153 N.J. 163, 188 (1988)] The Appellate Court agreed with the trial court that most of the plaintiffs’ complaints alleged violations of the CBA, not violations of law, and accordingly, not violations of CEPA.

The Appellate Division also took a broad view of preemption under the NLRA and LMRA. The Court gave credit to plaintiffs’ attempts to “artfully phrase” the language in the complaint – alleging that failure to pay the share of the nightly tip pool constituted “fraud” and failure to pay full minimum wage for non-tipped work constituted a “violation of [New Jersey] wage and hour laws.” However, the Appellate Division ultimately ruled that such state causes of action are presumptively preempted under NLRA and LMRA and were appropriately dismissed as preempted because they each ultimately asserted violations of the CBA or claims that required interpretation of the CBA.

Accordingly, based on this precedent, a unionized employee’s remedy lies not under CEPA but through the union grievance procedure and the relief available under Sections 7 and 8 of the NLRA.

Philadelphia Pregnancy Accommodation Law: Notice Requirement Begins on April 20, 2014

On January 20, 2014, Philadelphia Mayor Michael Nutter signed into effect an amendment to the city’s Fair Practices Ordinance: Protections Against Unlawful Discrimination that expressly includes pregnancy, childbirth, or a related medical condition among those categories protected from unlawful discrimination.

The city law covers employers who do business in Philadelphia through employees or who employ one or more employees. Before this amendment, employers’ obligations under city, state, and federal antidiscrimination laws only required them to treat employees with pregnancy-related issues no worse than any other disabled employee with respect to accommodations. Now employers are not only prohibited from denying or interfering with an individual’s employment opportunities on the basis of pregnancy, childbirth, or related medical conditions, but employers also are required to make reasonable accommodations on these bases to an employee who requests it. The legislation’s non-exhaustive examples of reasonable accommodations include restroom breaks, periodic rest for those who stand for long periods of time, assistance with manual labor, leave for a period of disability arising from childbirth, reassignment to a vacant position, and job restructuring. Employers have an affirmative defense under the law for failing to accommodate an employee if such accommodations would cause an undue hardship.

Employers should take note that this law increases the burden on them to provide reasonable accommodations, since examples like reassignment and job restructuring have traditionally not been required under similar federal and state laws that mandate accommodations for individuals with disabilities. Thus, employers should review their policies and other written materials regarding employee accommodations to ensure that they reflect the increased protections afforded by the amendment. Employers were required to provide written notice to its employees of the protections under this amendment by April 20th or post the notice conspicuously at its place of business in an area accessible to employees. The Philadelphia Commission on Human Relations has provided a model notice to employees, which can be found at: http://www.phila.gov/HumanRelations/PDF/pregnancy_poster.pdf.

Supreme Court Expands Scope of Sarbanes-Oxley Whistleblower Protections

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

Supreme Court Expands Scope of Sarbanes-Oxley Whistleblower Protections

The Issue: My company is not publicly traded, but provides services to companies that are. Do Sarbanes-Oxley whistleblower protections extend to our employees?

The Solution: Yes.

Analysis: Enacted in the wake of the Enron and Worldcom scandals, the Sarbanes-Oxley Act imposes increased reporting standards on publicly-traded companies and the outside accountants, consultants, and lawyers supporting them. Section 1514A prohibits public companies, or their contractors or agents, from using adverse employment action, threat, or harassment to retaliate against “an employee” who blows the whistle (internally or externally) on perceived violations of the Act, SEC regulation, or any other federal law relating to shareholder fraud. Though civil remedies are largely coextensive with California’s employee anti-retaliation provisions, federal claims brought under section 1514A are exempt from arbitration and entail potential criminal penalties, including up to ten years of jail time for the responsible decision-makers.

In Lawson v. FMR LLC, decided in early March, the Supreme Court significantly expanded the scope of section 1514A’s protection, extending it to employees of service providers to public companies. The plaintiffs in Lawson were accountants formerly employed by FMR, a private contractor that prepares SEC filings for publicly traded mutual funds. They were allegedly terminated for raising concerns to their superiors regarding accounting and reporting methodologies used by FMR. FMR argued that the case should be dismissed because section 1514A, titled “Whistleblower protection for employees of publicly traded companies,” regulates private contractors only to the extent they are used to retaliate against public company employees, and does not shield a private contractor’s own employees.

The Supreme Court disagreed. Reversing the First Circuit, the Court held that, “based on the text of 1514A, the mischief to which Congress was responding, and earlier legislation Congress drew upon, . . . the provision shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors.” Though this expansive interpretation could generate a wide range of potential plaintiffs (a fact duly noted in the dissent), the Court indicated that professional service providers, such as the accountant plaintiffs in Lawson, are the intended and most likely beneficiaries.

Accordingly, private companies providing professional services to publicly traded clients should ensure they have appropriate procedures in place for responding to employee questions or complaints that may be regarded as “whistleblowing.” Failure to do so may expose them to federal remedies above and beyond those already imposed by California law.

Are College Football Players on Scholarships “Employees?” An NLRB Regional Director Says “Yes”

On March 26, 2014, the National Labor Relations Board’s Regional Director (RD) in Chicago ruled that Northwestern University’s football players who receive scholarships are “employees” under the National Labor Relations Act and have the right to form a union. The potential implications of this ruling are significant. If the decision is not overturned by the National Labor Relations Board (NLRB) or a federal court, every private college and university in the country that has scholarship athletes could face the unionization of athletes in sports that generate significant revenue. Public universities could also be affected under state labor laws.

The RD found that the university, through the football program, exerts significant control over the football players. During the six-week training camp immediately before the season, athletes are given daily itineraries that dictate football-related activities for that day. During training camp, the players spend between 50 and 60 hours every week engaged in football-related activities. In season, the players spend between 40 and 50 hours per week in practice, travel and playing games. The coaching staff sets all of the details for away games and the activities of the players throughout the trip. During the off season, players are expected to spend 12 to 25 hours of work on football activities. In addition, the players must follow rules set by the coaching staff, including regulations concerning personal conduct, alcohol and tobacco use, and internet conduct and protocol.

The economics of college football played a large part in the RD’s decision. From 2003-2012, the football program generated almost $235 million in revenue for the university through ticket sales, TV deals, merchandise and licensing agreements. For their football services, the players receive tuition, fees, books, and room and board for up to five years. These benefits have a monetary value up to $76,000 per year and $380,000 over five years. The players do not receive a paycheck, but the RD found that the players “nevertheless receive a substantial economic benefit for playing football.” Another significant fact was that each season the players had to sign a “tender” for their scholarships, which the RD determined to be “an employment contract.” According to the RD, “it is clear that the scholarships that players receive are in exchange for the athletic services being performed” since the scholarships are tied to the players’ athletic performance; the scholarships can be revoked if players quit the team or violate team rules. On the other hand, the RD found that walk-on players were not employees because they do not receive scholarships or any other economic benefit from the school.

Northwestern can appeal this decision to the NLRB in Washington D.C. and the legal battle could go on for several years. In the meantime, the RD will schedule an election for the scholarship football players to vote on being represented by the College Athletes Players Association (CAPA).

Among the several questions/issues raised by this decision are:

Would scholarship athletes in sports that generate little or no revenue be considered employees?

As employees, are the football players entitled to minimum wage and overtime pay?

Are they covered by the Occupational Safety and Health Act and other employment-related laws?

Will this decision impact college graduate assistants, who are not employees under current NLRB law?

This unprecedented ruling is consistent with other recent Labor Board decisions establishing new law or reversing long-standing decisions, which make the National Labor Relations Act more favorable to labor unions. This agenda is unlikely to change in the near future.

U.S. Supreme Court Ruling in Quality Stores Clarifies That Severance Pay is Taxable—in Most Cases

On Tuesday, March 25, 2014, the U.S. Supreme Court, in an 8-0 decision, ruled in Quality Stores, Inc., et al., 12-1408 that severance payments made to employees who are involuntarily terminated are taxable wages under the Federal Insurance Contributions Act (FICA). The Court reversed the Sixth Circuit Court of Appeals ruling in favor of Quality Stores, which was seeking a $1 million tax refund based on its argument that severance payments were not covered by FICA and were excluded from taxation based on the Internal Revenue Code. The Court’s ruling resolved a split between the Sixth Circuit and the Federal Circuit, and ended a legal battle with more than $1 billion at stake in potential tax refunds to employers involved in 11 separate cases with more than 2,400 refund claims.

Quality argued that its severance payments to terminated employees were actually supplemental unemployment compensation benefits (SUB), which are not considered “wages” under the Internal Revenue Code. According to the company, “a SUB payment is a type of payment that—although made by an employer to [its] former employee—nonetheless does not meet the statutory definition of ‘wages’ because it is not remuneration for services.” The Court noted that the severance payments were made only to employees and were based on employment-driven criteria including the position held, the employee’s length of service with the company and salary at the time of termination. Relying on the “broad definition of wages under FICA,” the Court ruled that severance payments to employees who are terminated involuntarily are taxable under FICA.

However, in its decision the Court noted IRS revenue rulings that severance payments tied to the receipt of unemployment compensation benefits “are exempt not only from income tax withholding but also FICA taxation.” Thus, employers appear to continue to be able to make severance payments that are exempt from income tax withholding and FICA through a carefully crafted structure linking the severance payments to the employee’s receipt of unemployment compensation benefits.

If you have any questions about the impact of this decision, please contact Mark Nelson or Alejandra Lara, or any other member of the Labor & Employment Group.