California Court Says Professional Recruiters Are Exempt Commissioned Salespersons

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In Muldrew v. Surrex Solutions, a California court held this week that certain professional recruiters qualified for California’s commissioned salesperson exemption, thereby defeating their claim for alleged unpaid overtime wages.  Surrex Solutions is in the business of recruiting—locating qualified candidates to fill job positions for Surrex’s clients.  The plaintiffs in the case worked as recruiters for Surrex.  In that capacity, they located qualified candidates and tried to place them with Surrex clients.  Surrex’s clients paid Surrex a fee (generally a percentage of a placed employee’s annual compensation) if they hired a candidate proposed by Surrex.  Surrex in turn paid the recruiter a percentage of the fee as “commission.”  The plaintiffs in Surrex filed a lawsuit alleging that they worked overtime hours without being paid overtime compensation.  Surrex defended the suit on the ground that the recruiters were exempt commissioned salespersons and not entitled to overtime compensation under California law. 

California’s commissioned salesperson exemption provides an exemption from overtime pay for employees who earn more than one and one-half times the minimum wage and whose total compensation is derived more than 50% from commissions.  Courts have held that in order to qualify for the exemption, an employee must be principally engaged in sales duties and must be paid a percentage of the price of goods sold.  The plaintiffs in the case argued that they did not meet the test for exemption because they were not engaged in “sales” and their pay was not based on a percentage of the price of a product.  The court rejected both arguments.

First, the court held that the recruiters’ job duties constituted “selling” within the meaning of the exemption.  The recruiters’ job was essentially to locate and “sell” a candidate to Surrex clients.  The court further held that job duties such as researching candidates and meeting with them were directly related to and part of their sales duties.

Second, the court held that Surrex’s method of paying its recruiters satisfied the definition of “commission” pay.  Surrex placed two types of candidates with its clients:  employees and consultants.  If a candidate was hired as an employee by a Surrex client, then Surrex received a flat fee for the placement and in turn paid a percentage of that fee to the recruiter.  The plaintiffs conceded that this payment qualified as a “commission” for purposes of the exemption.  The plaintiffs, however, challenged the payment system used in the case of a consultant who was placed with a client. In the case of consultants, Surrex employed them and provided their services to clients based on hourly rates.  Surrex then paid the recruiter a percentage of the “adjusted gross profit” earned by Surrex (revenue minus Surrex’s costs associated with employing the consultant).  The plaintiffs argued that because the formula considered factors other than a straight percentage of the fee, it could not be considered commission pay.  The court rejected this argument, holding that the concept of commissions is broad enough to include a formula such as Surrex’s that takes into account a reduction for overhead in calculating commission pay.

Finally, the court rejected the plaintiffs’ argument that Surrex’s commission plan was not really a bona fide commission plan because it involved paying the recruiters a guaranteed draw against commissions.  The plaintiffs argued that the plan was designed in a way to ensure that recruiters would essentially earn close to the amount of the draw.  The court rejected this argument, holding that Surrex produced evidence showing that recruiters’ commission often far exceeded the draw amount.  The court held that this evidence was sufficient to support a finding that Surrex’s commission plan was a bona fide commission plan.

The Muldrow v. Surrex decision is a positive one for California employers, in that it rejects an overly restrictive interpretation of elements of the commissioned salesperson exemption.  Employers who rely on the exemption for certain employees are reminded, however, that satisfying the exemption is more complex than it seems.  Given the litigation climate in California concerning overtime exemptions, it is advisable to have commissioned salesperson classifications reviewed by counsel.

CDF Partners to Present Panel Discussion on Social Media

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On February 29, 2012, in conjunction with the Southern California Chapter of the Association of Corporate Counsel, CDF Partners Dan Forman and Mark Spring will be speaking on the topic of social media in the workplace.  Covered topics will include employee privacy and monitoring social media use, protection of trade secrets and confidential business information, social media and the hiring process, union organizing, and the NLRB's treatment of social media use as protected concerted activity.  The presentation will be held on the Queen Mary in Long Beach, with registration and cocktails beginning at 5:30 p.m. and the panel presentation following from 6:30-7:30 p.m.  For more detailed information, including registration information, click here.

Supreme Court Confirms Ministerial Exception to Discrimination Laws

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On January 11, 2012 the United States Supreme Court issued its decision in Hosanna-Tabor v. Equal Employment Opportunity Commission, confirming a “ministerial” exception to discrimination laws.

Cheryl Perich worked as a “called” teacher for Hosanna-Tabor Evangelical Lutheran Church and School.  The term “called” means that she underwent a religious “commission” to teach for the school.  Perich developed narcolepsy and began the 2004-2005 school year on disability leave.  In January 2005 she notified the school principal that she would be able to report to work in February.  The principal responded that he had already hired another teacher to work in February.  The principal also expressed concern that Perich was not ready to return to the classroom.  The Church offered to pay a portion of Perich’s medical insurance costs in exchange for her resignation.  Perich refused to resign and told the principal she had spoken with an attorney and intended to assert her legal rights.  The Church then terminated Perich for insubordination and disruptive behavior.

Perich next filed a charge with the Equal Employment Opportunity Commission alleging she was terminated in retaliation for threatening to file a lawsuit in violation of the Americans with Disabilities Act.  At the District Court level Hosanna-Tabor argued that the lawsuit was barred by the “ministerial” exception to the ADA provided by the First Amendment.  The District Court agreed and granted summary judgment in Hosanna-Tabor’s favor.  The Sixth Circuit Court of Appeals vacated that decision because it found that Perich was not a minister under the exception.

The U.S. Supreme Court overturned the Court of Appeals’ decision and held that there is a ministerial exception to the ADA and that Perich was included within that exception.  The Supreme Court explained that the Free Exercise and Establishment Clauses of the First Amendment provide a “ministerial” exception to the ADA.  The Court wrote that imposing an unwanted minister on a religious group infringes on the group’s right to shape its own faith and mission through its appointments.  The Court further explained that Perich was a minister because she had a significant amount of religious training followed by a formal religious commissioning by the school, she held herself out as a minister, and her job duties included conveying the Church’s message in religious instruction.  Therefore, the Court concluded that Perich fell within the “ministerial” exception and could not make a discrimination claim against Hosanna-Tabor.

The Court’s ruling is a positive one for religious organizations.  It assures them a greater freedom to make employment decisions.  However, the Court did not provide much guidance regarding what organizations qualify as a “religious organization” or which employees would qualify as “ministers” to fit within the “ministerial” exception.  Organizations that have concerns about whether they fit within this exception may want to consult with counsel before relying on the exception in making employment decisions.

Confusion Surrounds California’s New Wage Notice

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As we previously posted on this blog, a new California law was passed in October requiring California employers, effective January 1, 2012, to provide new hires with a written notice containing certain wage and other information.  The new law is codified as Labor Code section 2810.5 and requires employers to provide newly hired non-exempt employees with the following  categories of information (in one self-contained writing):

1. The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission or otherwise, including any rates for overtime;

2. Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;

3. The regular payday designated by the employer;

4. The name of the employer, including any “doing business as” names used by the employer;

5. The physical address of the employer’s main office or principal place of business, and a mailing address, if different;

6. The telephone number of the employer;

7. The name, address, and telephone number of the employer’s workers’ compensation insurance carrier; and

8. Any other information the Labor Commissioner deems material and necessary.

Employers are required to begin providing the foregoing information to non-exempt new hires effective January 1.  If there are changes to any of the information provided, written notice of the change must be provided to employees within 7 calendar days.  The information must be provided in the language normally used by the employer to communicate employment-related information.  The new law exempts from the notice requirement State workers and most unionized employees covered by the terms of a collective bargaining agreement, as well as employees who are exempt from overtime.

While the foregoing seems fairly straightforward to apply, some confusion has arisen over the eighth category of prescribed information listed—“any other information the Labor Commissioner deems material and necessary.”  The Labor Commissioner waited until late December to post anything substantive about this new law and has since revised its position at least once regarding the scope of the new law, leaving employers with less than clear guidance over compliance.  Under the new law, the Labor Commissioner is charged with creating a template that employers may (but are not required to) use to comply with the new notice requirement.  The Labor Commissioner waited until almost the end of December to publish this template, which is available here.  Interestingly, the Labor Commissioner’s template includes several additional categories of information (beyond those enumerated in the actual statute):

1. The employee’s hire date and position;

2. The business form of the employer (e.g. corporation, partnership, LLC, etc.);

3. Specified information about other businesses or entities the employer uses to hire employees or to administer wages or benefits;

4. Whether the employee’s employment agreement is written or oral; and

5. The employer’s workers’ compensation policy number.

Adding more to the confusion, the Labor Commissioner also posted (at the eleventh hour) some “Frequently Asked Questions” about the new law, including guidance stating that the notice needed to be provided to all current employees, not just to new hires as indicated in the statute.  It appears that the Labor Commissioner’s office then realized it had overstepped its authority in exceeding the scope of the statute by extending its coverage to current employees, so the Labor Commissioner (without explanation) revised the FAQ to delete this reference.  The most current FAQ published by the Labor Commissioner’s office is here.  Employers should review both the template and FAQ.

Although employers are not required to use the Labor Commissioner template as a form notice, they are advised to make sure that any written notice they create includes all categories of information indicated on the Labor Commissioner template.  To be clear, it appears that the Labor Commissioner does have the authority (prescribed by the express language of the statute) to broaden the categories of information that must be provided in writing to new hires.  At this time, the notice must only be provided to new hires and not to current employees.  However, changes to any of the information provided in the new hire notice will need to be provided to current employees within 7 calendar days of the change.

Employers should note that although the new law does not provide for any specific penalties for non-compliance, it appears that the law can be enforced through California’s “catch-all” penalty provision, known as the Private Attorneys’ General Act (PAGA).  PAGA allows for recovery of substantial penalties for non-compliance with provisions of the Labor Code.  Employers should review the Labor Commissioner template and guidance and ensure that they have a compliant notice in place, if they have not already done so.  Employers are advised to include language in their notice to make clear, as applicable, that the employment relationship is at will and that nothing in the notice should be construed as creating a contract of employment or for the promise of any particular term or condition of employment, and that the employer has the right to change the terms and conditions of employment at any time with both employer and employee having the right to terminate the employment relationship with or without cause or advance notice.  Employers should also monitor the Labor Commissioner website from time to time in the event there are changes to the content of the notice requirement that may be prescribed by the Labor Commissioner.

NLRB Enters Fray on Non-Union Employment Arbitration Agreements

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Last week the increasingly controversial NLRB issued a decision holding that class action waivers in employment arbitration agreements (non-union) violate employees' rights to engage in protected concerted activity under the NLRA.  The case involved a national homebuilder, D.R. Horton, Inc.  Like many employers, D.R. Horton several years ago started requiring its employees, as a condition of employment, to agree to resolve any employment-related disputes by way of binding arbitration.  Also like most similar agreements, D.R. Horton's agreement contained a class action waiver provision--a provision that precludes arbitration of collective or class claims.  There has been much litigation both in California and on the federal level concerning the enforceability of class action waivers, the most recent important decision being that of the United States Supreme Court in AT&T Mobility v. Concepcion.  In the AT&T Mobility case, the Supreme Court upheld the validity of class action waivers in consumer arbitration agreements, holding that the Federal Arbitration Act (FAA) preempted a California state law invalidating such class action waivers in consumer agreements.  Although the AT&T Mobility case was not an employment case, its reasoning may be applied to similarly support the enforceability of class action waivers in employment arbitration agreements.  There have been numerous legislative efforts both in California and in the United States Congress to bar mandatory arbitration agreements in the employment context but none of these legislative efforts have succeeded to date.  With the NLRB's decision in D.R. Horton, it appears the NLRB is now presenting a new attack on the validity of such agreements, at least insofar as the agreements contain a class action waiver. 

In the D.R. Horton case, the employees were required to sign an agreement to arbitrate any and all employment disputes arising between them and the company.  The agreement included a provision indicating that arbitration proceedings had to be conducted individually and not on a collective or classwide basis.  Notwithstanding this provision, an employee by the name of Michael Cuda advised the company that he intended to initiate arbitration of a claim for unpaid overtime on behalf of himself and all similarly situated employees who were allegedly misclassified by the company.  D.R. Horton took the position that the demand for arbitration was invalid because the arbitration agreement precluded class claims and mandated that any claim in arbitration be pursued individually.  Cuda filed an unfair labor practices charge with the NLRB, alleging that the class action waiver provision violated the employees' rights under the NLRA.  The NLRB agreed.

The NLRB first held that the arbitration agreement violated the NLRA because its scope could be interpreted by employees as precluding them from filing unfair labor practice charges with the NLRB.  If this were the sole finding of the NLRB, it would not be much cause for alarm because employers with mandatory arbitration agreements could simply revise them to clarify that the agreement does not prohibit the filing of unfair labor practice charges with the NLRB.  Most administrative claims (for example, EEOC claims and claims filed with similar state agencies) are already exempted from the scope of arbitration agreements by virtue of applicable law.   The NLRB did not so limit its holding, however.   Instead, the NLRB went on to hold that the agreement's class action waiver further violated employees' rights to engage in concerted activity to improve the terms and conditions of employment on matters such as wages, hours and working conditions.  According to the NLRB, an individual pursuing a lawsuit on behalf of other employees is one such means of concerted activity:  "Clearly, an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7."

The NLRB held that neither the FAA nor the Supreme Court's decision in AT&T Mobility compelled a different conclusion.  The Board held that the FAA does not require enforcement of arbitration agreements where a party is precluded from vindicating substantive rights protected by statute.  The NLRB reasoned that the class action waiver impairs employees' substantive right to band together to improve working conditions as set forth in Section 7 of the NLRA.  The NLRB similarly distinguished the AT&T Mobility case, reasoning that it did not involve the compatibility of two federal statutes (the FAA and the NLRA) and harmonizing their purposes.  Instead, the AT&T Mobility case involved the issue of federal law (the FAA) preempting a state law disfavoring enforceability of arbitration agreements. 

The NLRB did not go so far as to say that all employment arbitration agreements violate the NLRA.  The NLRB instead said that agreements prohibiting employees from pursuing collective or classwide relief in any forum violate the NLRA.  So long as the agreement allows employees to pursue collective/classwide relief in some forum--arbitral or judicial--it will not violate the NLRA.  This is of course of little practical utility to employers utilizing arbitration agreements. 

Does the NLRB's D.R. Horton decision mean that employers should stop including class action waivers in their arbitration agreements?  Not so fast.  It should be expected that the NLRB's decision will be appealed to the Eleventh Circuit Court of Appeals and possibly further reviewed by the United States Supreme Court.  This is amidst much other controversy surrounding the current NLRB and many of its other recent actions.  There is so much current uncertainty regarding the NLRB and the validity of its recent actions that employers should stay tuned and monitor continuing developments on this front.         

Three New NLRB Members Added By Obama as Recess Appointments

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On January 4, President Obama appointed Democrat Sharon Block (currently works at DOL and is former Labor and Employment Counsel for Senate HELP Committee under Senator Edward Kennedy), Republican Terence Flynn (former Crowell and Moring attorney and current counsel to NLRB Board Member Brian Hayes) and Democrat Richard Griffin (General Counsel for IUOE) to the NLRB as recess appointments in order to fill the vacancies recently created by Wilma Liebman's retirement, the expiration of Craig Becker's term as well as an existing Republican vacancy.  This move is very controversial and brings great uncertainty to the situation.

History

The great men who founded our nation did not anticipate that Congress would remain in session almost all year long.  As a result, they allowed the President to bypass the confirmation process and make interim "recess" appointments during periods when the Senate was unavailable to play their important role of vetting and confirming (or denying confirmation) of presidential appointees.  The theory was that this would avoid having critical posts left vacant for many months while the Senate was in recess.  Presidents have often used this loophole as a way to put nominees that they believe could not pass the hurdle of Senate confirmation into key posts.  Presidents as far back as Washington have used recess appointments.  In fact, William Brennan was appointed to the United States Supreme Court by President Eisenhower through a recess appointment (although he was subsequently confirmed). 

Last year, in the United States Supreme Court case of New Process Steel, the Court held that the NLRB needed at least three members in order to have a quorom and decide cases.  Last week, Obama used recess appointments to ensure that the NLRB maintained a quorom, but at the same time sidestepped Senate Republicans who had deadlocked the nomination process.  Although the recent disputes between Congressional Republicans and the NLRB are more complex to explain than this blog allows, the dispute really boils down to an interpretation of the NLRB's role.  Congressional Republicans view the NLRB's role to be a "union neutral" government agency that is designed to enforce the NLRA and help regulate union-management relations in the United States.  The Democratic members of the Obama NLRB, starting with former chairperson Wilma Liebman, have taken the view that the NLRA was enacted to promote unionization and that therefore the NLRB is an agency that should be looking to promote unionization and is a "pro-union" government body. 

Unprecedented Controversy

Many prior recess appointments have caused controversy.  However, the actions of Obama on January 4 have raised the bar even further, for the following reasons:

1.    There is a real question as to whether the Senate was in recess on January 4.  The Senate was holding "pro forma" sessions during the holiday break in an attempt to prevent Obama from being able to make recess appointments.  Obama ignored this fact and made the recess appointments anyway.  If the Senate was not in recess legally speaking, then these appointments are void.  The legal test that is considered the proper measuring test for this analysis is whether the adjournment of the Senate is of such duration that the Senate cound not receive communications from the President as a body in making appointments.  Many feel the President's unilateral declaration that Congress was in recess is wrong and improper, and that these appointments do not pass constitutional muster.  This question will likely have to be answered by the court system.

2.    Most recess appointees (although certainly not all) were, like Craig Becker, somehow nominated or at least floated by Congress before being given a recess appointment.  The new NLRB appointments were never previously nominated or floated by Congress or Congressional leadership and thus, are completely unvetted. 

3.    The NLRB's actions in (a) filing a complaint against Boeing for moving its Dreamliner plant to South Carolina, a right to work state, (b) engaging in rulemaking procedures to modify the election process to make it easier for unions to get certified, and (c) enacting rules to require additional postings for employers has commenced an unprecedented battle between Republican members of Congress and the NLRB.  Obama making these recess appointments with this battle in the background is the equivalent of dropping 1,000 gallons of gasoline on an already expanding campfire and only escalates the situation.  Certain Congressional Republicans are on a mission to shut down the NLRB.  Certain NLRB Members and many in the union community are determined above all else to win this battle with the Republicans in Congress or, if not, to do whatever in their power to implement a pro-union anti-employer agenda as long as they can, in part to send a message to the Congressional Republicans as part of this battle.

What Does This Mean and Where is This Heading?

These recess appointments are likely to lead to the following consequences:

1.    This is going to be a hot election topic as Republicans will use the pro union NLRB position to try to alienate anti-union and union neutral voters from reelecting Obama, while Democrats will attack Republicans for improperly using political gamesmanship to prevent the President from filling important NLRB posts.

2.    If Congress and the President/NLRB cannot find another solution (unlikely in this election year and with the current environment), there is going to be great uncertainty on the status of the NLRB and its power until the United States Supreme Court rules on whether these appointments were consitutional.  Such a ruling will take many months and probably will not occur until after the election in November.

As a result, it appears as if this is heading to another Court battle similar to the one in New Process Steel.  Sometime in the near future, the existing NLRB is going to issue a decision that has a material adverse impact on an employer or group of employers.  I would expect that after that happens, a lawsuit (or even series of lawsuits) will be filed challeging the decision on the grounds that three of the five NLRB members were appointed in a manner that violates the United States Constitution and that therefore the NLRB did not have a quorom to issue the decision according to New Process Steel, and, as a result, the NLRB decision is void. 

Thus, for 2012, no matter which side of the fence you sit on, you should expect great uncertainty and increased controversy in the regulation of labor-management relations in our country.

California Supreme Court Issues Long Awaited Administrative Exemption Decision

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Today the California Supreme Court issued its decision in Harris v. Superior Court (Liberty Mutual Insurance Co.), a case addressing whether insurance claims adjusters qualify for the administrative exemption under California law.  The Court's decision focused solely on the issue of the "administrative/production worker dichotomy" and whether employees who fall on the "production" side can qualify for the administrative exemption.  [By way of background, the administrative/production worker dichotomy is a doctrine whereby the court looks at the employee's duties as compared to the business of the employer.  If the employee's work centers on "producing" the product or service the company chiefly exists to provide, then the employee is a production worker.  Thus, in the insurance context, if the company is solely in the business of adjusting claims, the claims handlers who provide that very service are production workers.]  The lower court held that because the claims adjusters at issue serviced individual claims and did not provide advice on general policies or operations of the company, they were production workers and could not qualify for the administrative exemption as a matter of law. 

Today, the California Supreme Court reversed, holding that the lower court erred in applying the administrative/production worker dichotomy so simplistically and using it to hold that claims adjusters were non-exempt as a matter of law.  The Court did not go so far as to eliminate the administrative/production worker analysis, but made clear that this analysis was not dispositive of whether an employee qualifies for the administrative exemption.  The Court emphasized that this was the error of the lower court.  The lower court relied heavily on an earlier decision, Bell v. Farmer's Insurance Exchange, which had similarly applied the administrative/production worker dichotomy to find that claims adjusters were non-exempt production workers.   The Supreme Court today held that the lower court's reliance on Bell was misplaced, given that the Bell case dealt with an older version of the applicable Wage Order--a version that provided very little guidance on the meaning of an administrative employee, justifying the court in that case in resorting to guidance outside the Wage Order (such as caselaw and opinion letters on the administrative/production worker dichotomy) to interpret the exemption.  In contrast, in this case, the applicable Wage Order (4-2001) contains much more explanation of the administrative exemption and also specifically incorporated several federal regulations interpreting the exemption.  As such, the starting point for analyzing the exemption should simply be the express language of the Wage Order and referenced regulations, and not the judicially created administrative/production worker dichotomy.  Notably, the Court declined to decide whether the claims adjusters at issue actually qualified for the administrative exemption.  However, the Court cited with approval several federal cases finding claims adjusters to be administratively exempt.  The Court noted that an employee's role in "servicing" a company, such as a claims adjuster does, may well be exempt if sufficiently important and the employee's duties involve the regular use of discretion and independent judgment.  The Court suggested that an employee does not have to advise the company on its overall policies or operations in order to meet the test for exemption.  Nonetheless, the Court made clear that its ruling was limited to holding that the lower court erred in finding that the "production" worker analysis barred exempt status as a matter of law.  The Court held that the trial court on remand would have to undertake a factually intensive analysis of the claims adjusters' actual duties (regardless of whether deemed "production" duties) and determine whether they meet the test for exemption as defined in the Wage Order and the regulations incorporated therein.

The Court's decision in Harris is a positive one in that it limits both the application and importance of the administrative/production worker dichotomy--a doctrine that has been used by many courts to find employees did not qualify for the administrative exemption.  However, the Court's decision falls short in providing much specific guidance (and certainly not any bright lines) on how to define or apply the administrative exemption.  It seems clear that determination of exempt status will continue to necessitate an individualized fact-intensive inquiry based on the circumstances involved in any particular case.  The full text of the Harris case is available here. 

Labor Commissioner Publishes Optional Notice for Employer Use to Comply With Wage Theft Protection Act

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Effective January 1, 2012, California employers will have to comply with newly enacted Labor Code section 2810.5(a).  This new law, known as the Wage Theft Protection Act of 2011, requires employers to provide employees with written information at the time of hire concerning wages and related information.  California's Labor Commissioner was tasked with creating a template employers may use to provide the required information.  The Labor Commissioner has just published the optional template, which is available here.  For more information on the requirements of the new law, click here and here.

NLRB—A Summary of a Very Busy 2011—And What About 2012?

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The NLRB was very busy in 2011, taking many actions to try to make it easier for unions to organize and bolster worker rights.  This post summarizes some of the key NLRB developments over the past year as we head into 2012.

New Posting Requirement

During 2011, the NLRB unsuccessfully tried to implement a new posting requirement.  In August, the Board enacted a rule requiring all employers covered by the National Labor Relations Act (most union and non-union employers) to post an 11 x 17 inch poster informing employees of their rights under the NLRA.  The Board required that the poster be posted by November 14, 2011.  Republicans in Congress and many business groups objected vigorously to the posting requirement, including filing lawsuits seeking to enjoin implementation.  GOP members of Congress introduced legislation to outlaw the poster and several business groups filed lawsuits claiming the NLRB did not have the power to enact the poster requirement.  The NLRB then decided to postpone the date of implementation from November 14, 2011 until January 31, 2012.  The Board claimed this was to allow more time to educate employers about the poster, but it was pretty clear the lawsuits and uproar were the real reasons for the delay. 

Last week, a federal judge in Washington DC, who is presiding over lawsuits brought by the NFIB and National Association of Manufacturers, asked the NLRB to delay implementation for a second time.  The NLRB followed by announcing that it will honor that request and further postpone implementation until April 30, 2012.  The NLRB's announcement is available here. Therefore, there is nothing that employers need to do in January.  Ultimately, whether or not the poster requirement ever gets implemented will likely be determined by the court system based on the outcome of the lawsuits by the NFIB and National Association of Manufacturers. 

Amendment of Election Rules

The NLRB has been discussing and debating comprehensive election reform for more than eighteen months, ever since it became clear that the Employee Free Choice Act was not going to garner enough Senate votes in Congress.  The NLRB publicly declared that current rules do not allow unions a fair chance to succeed and that they desire to tilt the playing field more toward the unions in the election process. 

Earlier this month, the Board published its final election reform rules.  The good news for employers is that many of the original provisions proposed by the NLRB were not included in this rule.  For example, the original proposed rule included a provision that would have required employers to give unions all employees’ email addresses and telephone numbers before the election to allow the union to more easily communicate with and organize the employees.  This and several other provisions were omitted in the final rule.  However, the amended rules still definitely will accelerate campaign times and make it easier for the unions to succeed.  The primary changes to NLRB election procedures under the new rule, which is scheduled to take effect on April 30, 2012, include:

(a) Quicker elections as a result of the elimination of the current requirement that voting cannot take place until 25 days after an NLRB regional director issues a Direction of Election;
(b) Eliminating many pre-election appeal rights which were sometimes used by employers improperly to delay elections;
(c) Giving more discretion to the regional director in election matters by giving the NLRB discretion not to review regional director decisions, where currently such review is mandatory.

More information regarding the NLRB's Final Rule, published on December 22, as well as the original proposal is available here from the NLRB website. 

NLRB v. Boeing

In April 2011, Lafe Solomon, Acting General Counsel for the NLRB, issued a complaint against Boeing Company.  The NLRB alleged that Boeing’s decision to open a new plant and assemble its new 787 Dreamliners in South Carolina, a right to work state, violated the National Labor Relations Act. The complaint contended that Boeing improperly transferred union work fom its unionized plant in Seattle to a non-union South Carolina facility in retaliation for the union employees’ prior strikes in Seattle. 

This complaint took a lot of heat in the press and from Republicans in Congress who claimed the NLRB should not be interfering with companies' choices about where to open factories, even when the choice is based on unionization.  However, the NLRB stood firm and refused to withdraw the complaint.

In December, the Machinists Union, on whose behalf the complaint was filed, asked the NLRB to withdraw the complaint after its members ratified an extension of the collective bargaining agreement in Seattle that includes wage increases of 2% a year, improved pension benefits, and provisions that help guarantee the construction of the smaller 737 airliner in Seattle.  Boeing declared victory.  The union declared victory.  The NLRB then took all the credit for the parties' new collective bargaining agreement, announcing:  "After we issued the complaint in April, and as the trial began in June, the parties came to realize that their mutual success required a new approach. The result is a contract that helps guarantee their success and creates job security for workers. I am pleased that the collective bargaining process has succeeded and that the parties have begun a promising new chapter in their relationship."   

What remains to be seen is whether the NLRB will take similar actions in the future when the next employer decides to open a new plant in a right to work state in response to a difficult existing union relationship. 

NLRB Gets Active With Social Media

2011 saw the rise of NLRB complaints against unionized and non-union employers for attempting to regulate their employees' online and social media posts about work.  More specifically, in 2011, the NLRB issued many complaints against employers who fired or disciplined employees for posting negative/derogatory comments about management on Facebook, Twitter and other social media websites.  In these complaints, the NLRB has taken the position that the activities of the employees was protected concerted activity as that term is defined by section 7 of the National Labor Relations Act.  During the summer this blog posted several entries related to this activity. 

The NLRB has yet to set forth a bright line test to help employers determine when they have gone over the line in the view of the Board.  However, in August, the NLRB did publish a comprehensive report on its actions related to social media.  The report summarizes fourteen different NLRB matters and explains the position taken by the NLRB and the rationale for the NLRB's decision.  A review of the report definitely helps the reader get a better understanding for how the NLRB will analyze Facebook and other social media postings in making the determination as to whether or not they constitute protected concerted activity.  The NLRB will likely stay very active in this high profile area and union and non-union employer sare advised to review the report before making determinations on discipline for derogatory social media postings (or at least consult an attorney who has read the report) and keep up with the NLRB's activities in this area in 2012.  A copy of the 24 page report is available from the NLRB here. 

What to Expect in 2012?

It is very difficult to predict what the NLRB will do in 2012 to continue their pro-union agenda for several reasons:

First, it is an election year and politics will play a role.  Obama realizes he will need continued support from unions and their members to give him the best chance of being re-elected.  However, he also has to realize that if the NLRB acts too aggressively, it could sway moderate voters in the middle towards the Republican side and it is clear that part of the Republican strategy this election is to villify the NLRB's actions during Obama's first term.  It is unclear how this will play out.

Second, the Supreme Court has ruled that the NLRB needs at least three members to act.  The Board currently has three members, but later this week, on December 31, Board Member Craig Becker's recess appointment expires, leaving the Board with two members.  Obama recently nominated two new NLRB members, but most believe that Congress is not inclined to confirm these nominations.  It is questionable whether Obama will again sidestep Congress by attempting to name then through recess appointments as he did with Becker.  Republican lawmakers have already written letters to Obama urging him not to use the short recess to do this.  It is unclear whether Obama is more concerned about relations with the Senate GOP or whether he feels that a recess appointment is the only way to avoid having an NLRB that is unable to function due to having insufficient numbers. 

Third, there is the question of the pending lawsuits against the NLRB.  There are several lawsuits pending to stop the implementation of the mandatory poster rule.  Last week, the U.S. Chamber of Commerce also filed a lawsuit seeking to stop the implementation of the amended election rules.  In addition, Republican Senator Mike Enzi declared his intention to challenge the amended election rules under the Congressional Review Act.  The outcome of these lawsuits and actions will certainly shape the activities of the NLRB in 2012. 

Of course, we will continue to update you on these and other NLRB developments that affect California employers as they occur during 2012.

Court Favorably Resolves Claims for Reporting Time and Split Shift Pay

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This week, a California court summarily adjudicated claims for reporting time pay and split shift pay brought by former employees of AirTouch Cellular.  The employees claimed that AirTouch owed them reporting time pay for having to show up to scheduled meetings that were less than 2 hours long.  The employees also claimed that AirTouch failed to pay them split shift pay on days when they worked split shifts.  The trial court threw out the claims and awarded attorneys' fees to AirTouch under Labor Code section 218.5.  A California appellate court agreed with the trial court's rulings on the reporting time and split shift claims, but reversed the award of attorneys' fees.

As for the reporting time pay claim, the facts were undisputed that on certain occasions the employees were required to attend scheduled meetings that were less than two hours in length, and that was their entire "work" for the day.  The plaintiffs claimed that California's wage orders required AirTouch to pay them for a minimum of two hours as reporting time pay.  The court disagreed, holding that reporting time pay is only required where an employee is furnished with less than half the scheduled day's work.  Because the employees' scheduled day was two hours or less, as long as the employees were furnished and paid for at least half of that time, no additional reporting time pay was owed.

As for the split shift claim, the facts were similarly undisputed that the employees on occasion worked a split shift.  However, the parties disputed whether a split shift premium was owed in the circumstances.  California's wage orders state as follows:  "When an employee works a split shift, one hour's pay at the minimum wage shall be paid in addition to the minimum wage for that workday..."  AirTouch's position was that because the employees' regular wages were well over the minimum wage, they were paid more than the minimum wage for all hours worked plus one additional hour and, as a result, there was no requirement to pay an additional split shift premium.  The court agreed, endorsing the following example: 

"As an example, on November 26, 2005, Krofta worked a total of eight hours.  Because he was making $10.58 per hour at the time, he was paid a total of $84.64 (8 x $10.58).  The minimum wage at the time was $6.75, so a minimum wage worker would be paid wages of $54 (8 x $6.75) plus, pursuant to subdivision 4(C), one additional ―hour‘s pay at the minimum wage, for a total of $60.75 ($54 + $6.75).  AirTouch contended that since subdivision 4(C) by itself required no greater payment for the workday than $60.75, the pay for an employee who earned more than that amount (like Krofta) would not be affected.  We agree that this analysis, which was followed by the trial court, is correct."

The court's analysis of these split shift and reporting time pay issues is favorable for California employers confronting these claims.  Notably, the court also issued a favorable ruling on the validity of another employee's release of claims.  The employe had signed a general release in favor of AirTouch and AirTouch argued that the release barred the employee's claims for reporting time and split shift pay.  The employee argued that Labor Code section 206.5 invalidated the release.  The court disagreed, holding that Labor Code section 206.5 only invalidates a release of wage claims where the entitlement to wages is undisputed.  Because the employee's reporting time and split shift claims were far from conceded by AirTouch, the claims were in dispute and could be included in the scope of an otherwise valid general release.

While the court issued favorable rulings on the foregoing issues, the court also issued an unfavorable ruling on the issue of an employer's ability to recover attorneys' fees for defeating a wage claim.  The trial court had awarded AirTouch its attorneys' fees under Labor Code section 218.5's fee shifting provision.  The appellate court reversed, holding that section 218.5 did not apply and that claims for reporting time pay and split shift pay fall under Labor Code section 1194 (which applies to actions to recover minimum wage and overtime compensation).  Because Labor Code section 1194 has a one-way fee shifting provision (entitling only a prevailing employee to recover fees and not a prevailing employer), the court held that AirTouch was not entitled to recover its fees. 

This author predicts more litigation and court decisions regarding all of these issues addressed by the court in the AirTouch case.  We will continue to keep you posted of such developments.  In the meantime, the Aleman v. AirTouch case is available here.