Real March Madness at the NLRB: NLRB Finds That Scholarship Football Players at Northwestern University Can Unionize

Yesterday, Region 13 of the National Labor Relations Board issued a groundbreaking decision in holding that scholarship football players at Northwestern University are “employees” under the National Labor Relations Act and can be represented by a union, the College Athletes Players Association (CAPA), if they vote to do so.  The NLRB ordered an election to take place and ordered Northwestern to provide an Excelsior list of voters to the Board by April 2.  In reaching this conclusion, after analyzing the testimony of players, coaches and others, the Board held:

  1. The scholarship football players are not primarily students.
  2. The athletic activities of the scholarship football players do not constitute a core element of their educational degree.
  3. The athletic activities of the scholarship football players are supervised by individuals who are not members of the academic faculty and this fact militates against a finding that these individuals are merely students.

Based on these and other sub-factors described in detail in the decision, the Board concluded that the walk-on players were not employees, but that the scholarship players were employees and could participate in a union election.  This decision has the potential to cause major changes in the way college athletics are administered.  It is being closely watched not only by labor and employment law experts, but by colleges, the NCAA, ESPN and all sports media, and anyone with any interest in college athletics and/or amateur athletics.

Northwestern has already announced that it will appeal this decision to the entire National Labor Relations Board.  Under NLRB rules, this Board will only consider the appeal if Northwestern can establish one of the following conditions:

  1. That a substantial question of law or policy is raised because of (i) the absence of, or (ii) a departure from, officially reported Board precedent.
  2. That the Regional Director’s decision on a substantial factual issue is clearly erroneous on the record and such error prejudicially affects the rights of a party.
  3. That the conduct of the hearing or any ruling made in connection with the proceeding has resulted in prejudicial error.
  4. That there are compelling reasons for reconsideration of an important Board rule or policy.

This was a surprising ruling, as many experts expected that the CAPA was going to have a difficult time convincing the NLRB that the student-athletes were “employees” under the NLRA.   However, there is a long way to go before this becomes a reality.  Most expect vigorous appellate litigation by both sides, which will be well financed by interested parties.  In addition, it is reasonably likely that Congress may intervene and act to amend the NLRA in some way to make it clear that student-athletes are not covered.  Influential Republican Senator Lamar Alexander, who formerly was the President at University of Tennessee and served as the Secretary of Education under President George H.W. Bush has already weighed in on his outrage over the decision with a public statement:  “Imagine a university’s basketball players striking before a Sweet Sixteen game demanding shorter practices, bigger dorm rooms, better food, and no classes before 11 a.m. This is an absurd decision that will destroy intercollegiate athletics as we know it.”  We already know that President Obama is a big college basketball fan, so he may be more than willing to sign any bills to prevent college athletics from being turned on its head.

For a copy of this very interesting decision, please click here.

We will continue to keep you updated on this matter as it moves forward as there will certainly be more developments in the coming months.

Obama to Seek to Narrow Federal Overtime Exemptions

News media are widely reporting that President Obama intends this week to direct the Department of Labor to materially revise the Fair Labor Standards Act (FLSA) regulations pertaining to overtime exemptions so that fewer employees will qualify for an exemption from overtime.  Obama's move relies on his executive authority to revise the rules that carry out the FLSA.  Obama is relying on this executive authority to carry out his pro-worker agenda, as a means of sidestepping the need to pass actual legislation that likely would be blocked by Republicans in Congress.

While the details of the intended revisions have not yet been announced, it is reported that Obama will be urging at least two significant changes:  (1) an increase in the amount of minimum compensation that must be paid to an employee in order for the employee to qualify for exempt status (the minimum currently is $455 per week under the FLSA, and Obama is expected to direct that the minimum be substantially increased, with some urging that it be doubled); and (2) replacing the FLSA "primary duty" test with a more quantitative test that requires an employee to spend a certain percentage of his or her time (likely at least 50%) on exempt duties in order to qualify for exempt status.  These changes would substantially decrease the number of employees who qualify for overtime exemption under the FLSA, and would also likely substantially increase the number of wage and hour lawsuits (already soaring) filed against employers to challenge exempt status and seek unpaid overtime compensation.  Business groups are expected to vigorously oppose the intended overhaul of the regulations.

So what does this mean for California employers?  Probably not much.  California employers are already subject to more narrow overtime exemption laws under California law.  To qualify for exemption in California, an employee (among other things) must be paid a guaranteed salary of at least $640 per week (rising to $800 per week in 2016) and must spend more than 50% of his or her weekly work time on exempt duties.  Thus, the changes being contemplated by the White House are already in effect in California, and the Obama administration appears to be looking to California's laws as guidance in revising the FLSA's overtime exemptions.  This is not good news for employers.

Oral Argument Scheduled In Iskanian v. CLS Transportation

The California Supreme Court has scheduled oral argument for April 3, 2014 in Iskanian v. CLS Transportation, a case involving the enforceability of class/representative action waivers in employment arbitration agreements under California law.  The Iskanian court ruled that California's "Gentry" test for invalidating class action waivers was no longer good law in light of the United States Supreme Court's decision in AT&T Mobility v. Concepcion, and that employers may not be compelled to arbitrate on a class wide basis where they have not specifically agreed to do so.  The Iskanian court also held that the contractual waiver of the right to pursue a PAGA representative action in arbitration was similarly enforceable.  Finally, the Iskanian court rejected the NLRB's D.R. Horton decision invalidating class action waivers in arbitration agreements on the ground that such waivers violate the NLRA.  Our prior posts on the Iskanian case are here.  Following oral argument in April, a decision by the California Supreme Court should issue by early July.  California employers that have, or are considering, employment arbitration agreements will want to stay tuned for this key decision.

Important Employment and Immigration Cross Over Issues

Employers are faced with a plethora of employment and immigration cross over issues.  Here’s a list of 7 important tips:   

  1. Don’t include the I-9 with the job application.  You can only request that the I-9 be filled out once the applicant has accepted a job offer.
  2. Make sure you have a completed I-9 on file for every employee at your company.
  3. Keep the I-9’s in binders rather than the employee’s HR file.  Have one set of binders for active employees and one set for terms.
  4. Employers have begun to see more instances where an employee has recently legalized their status and presented a work permit and new social security number.  When the employee was originally hired they presented what were presumed to be valid work authorization documents. Now the employee comes forward and says my real name is different, and here is my new SSN and work permit.  In such a case, fill out a new I-9, attach a memo explaining the situation and a copy of the new work permit and social security card, and staple all of this to a copy of the old I-9.  Usually, the employer must terminate the old name in their HR information system and process the new one as a new hire.  In such a case, the original old I-9 can go into the term binder along with a copy of the memo as well.
  5. Anytime you are presented with a discrepancy in the employee’s SSN (i.e. a mis-match letter from any government agency), call the employee in to verify there isn’t a simple typographical error on the original hire paperwork.  If not, send them to the Social Security Administration and ask them to bring back verification of their SSN.  If no verification is forthcoming within 30 to 60 days, contact legal counsel re probable termination.
  6. If an undocumented employee files a labor/employment based claim with the employer, and the employer subsequently discovers that the employee is undocumented, the employee must be terminated since they are not work authorized.  However, the employer will be liable for the employment claim that led to the discovery of the undocumented status.
  7. When making a job offer to an H-1B or similar non-immigrant visa holder, indicate on the job offer letter that the job is still terminable at will despite the fact that you are petitioning for them for x number of years on the visa petition.  Also indicate that you are under no obligation to sponsor the employee for permanent residency, but even if you decide to do so in the future, it won’t alter the terminable at will relationship.

For more information, please contact Greg Berk, Chair of the CDF Immigration Practice Group.

Proposed Amendments to CFRA Regulations Published

On February 21, 2014, California's Department of Fair Employment and Housing Council (FEHC) published proposed amendments to the California Family Rights Act (CFRA) regulations.  These regulations are intended to clarify some aspects of the existing regulations and also to adopt many of the recent amendments to the federal FMLA regulations to make the two acts more consistent.  The proposed amended regulations touch on almost every aspect of the CFRA process, addressing, among other things, length of service/eligibility issues, the certification process and timeframes for responding to employee requests for CFRA leave, computation of amount of leave entitlements, key employee issues, clarification of reinstatement rights, maintenance of health and other benefits during leave, retroactive desingation of leave, and the interplay between CFRA leave and California pregnancy disability leave. The proposed regulations make clear that same-sex spouses are covered under CFRA and make clear that the FMLA regulations apply to CFRA leave "to the extent not inconsistent" with the CFRA regulations.  Importantly, there remain some areas where CFRA administration will continue to differ from FMLA administration.  Among other things, pregnancy disability is not covered under CFRA and, therefore, a California employee who is otherwise eligible for leave under CFRA/FMLA will be eligible for up to four months of leave for pregnancy disability AND up to twelve weeks of additional leave for baby-bonding under CFRA.  The proposed regulations make clear that a California employer is required to maintain the employee's group health benefits for this whole time period (and not just up to 12 weeks).  Some other notable differences between CFRA and FMLA are that the medical certification and scope of permissible medical inquiry are narrower under California law than under FMLA, and the circumstances under which an employer can seek re-certification are narrower under California law.  The proposed regulations provide a sample medical certification that California employers can use.  (In this author's opinion, the proposed certification is insufficient as it relates to intermittent leave needs).

Employers covered by CFRA should carefully review the proposed regulations and consider whether to submit comments and/or proposed revisions.  The full text of the proposed amended regulations is available here.  There is a public comment period through June 2, 2014.  Comments can be submitted via email to FEHCouncil@dfeh.ca.gov.  There will also be two public hearings on the proposed amended regulations:  10:00 a.m. on April 7, 2014 at UC Irvine School of Law, and 10:00 a.m. on June 2, 2014 at the California Public Utilities Commission Main Auditorium in San Francisco.  For more information, see the DFEH website here.

Ninth Circuit Issues Another Employer-Friendly Decision on CAFA Removals

Yesterday the Ninth Circuit issued its decision in Rea v. Michaels Stores, reversing a remand order and finding that the defendant employer’s removal of the case to federal court under the Class Action Fairness Act (CAFA) was proper.  In line with its decision last year in Roth v. CHA Hollywood Medical Center, the Ninth Circuit reaffirmed that a defendant’s removal options are not limited to the two 30-day windows specified in the federal removal statute.  As long as the defendant has not run afoul of either 30-day removal window (meaning that no pleading or other paper revealed on its face that the action was removable), the defendant may remove at any time based on its own information and investigation.  The Ninth Circuit also reaffirmed its holding last year in Rodriguez v. AT&T Mobility Services, that the preponderance of evidence standard (and not the legal certainty standard) applies to CAFA removals and that allegations in a complaint purporting to limit the amount in controversy to under $5 million are not binding and do not prevent removal under CAFA.

Applying these principles to the Michaels Stores case, a wage and hour class action alleging misclassification of store managers, the Ninth Circuit held that the employer’s removal was timely, even though it was filed years into the litigation and not within 30 days of any initial or subsequent pleading.  The court also held that Michaels had sufficiently demonstrated that the amount in controversy “could exceed $5 million” based on evidence that Michaels expected its managers to work 45 hours per week, along with deposition testimony of putative class members stating that they in fact regularly worked 45 or more hours per week.  Extrapolating these overtime hours to the number of employees in the putative class resulted in alleged overtime damages exceeding $5 million.  The court held that this evidence (particularly in the absence of any contrary evidence) was sufficient to meet the employer’s burden of proving by a preponderance of the evidence that the amount in controversy requirement was met.  For these reasons, the Ninth Circuit held that the district court’s order remanding the case to state court was erroneous.

Notably, while the plaintiff’s petition for review of the remand order was pending before the Ninth Circuit, the litigation proceeded on remand in the state court, resulting in a class being certified.  The plaintiff argued before the Ninth Circuit that this grant of class certification turned the Complaint’s non-binding allegation limiting recovery to under $5 million into a binding allegation, thereby precluding CAFA jurisdiction.  The Ninth Circuit rejected this argument, reasoning that post-removal developments are not relevant to assessing whether removal was proper at the time the removal was filed and that such subsequent developments do not defeat an otherwise proper removal.

The Rea v. Michaels Stores decision is helpful for employers defending wage and hour class actions in California state courts but seeking to remove those actions to federal court.  The full decision is available here.

H-1B Work Visa Can Be Filed on April 1

The U.S. Department of Homeland Security will accept new H-1B visa filings on April 1 for a start date of Oct 1.  H-1B work visas are for foreign national employees that are college degreed professionals such as software developers, engineers, chemists, scientists, financial analysts, etc.  The annual quota of 85,000 visas applies to first time H-1B’s, not to extensions with the same company or transfers to other companies.

It is suggested that employers query their departments to see if they have a need for such a visa for either a possible new hire or to keep a valued current foreign national employee work authorized.  This year's quota is expected to fill up relatively fast.

Many employers have valued foreign national employees working on a one-year work permit after college (known as Option Practical Training or OPT).  Since the OPT will expire, it’s important that the H-1B visa be explored to allow them to remain work authorized. Some employees are eligible for a one-time extension of their OPT (based on their STEM education in science, technology, engineering, and math), but eventually will still need the H-1B visa.

For more information, please contact Greg Berk, Chair of the CDF Immigration Practice Group.

NLRB Continues Reliance on D.R. Horton to Attack Employment Arbitration Agreements

As many predicted, the Fifth Circuit’s recent invalidation of the NLRB’s D.R. Horton decision has not caused the NLRB to revise its enforcement position on the subject of class action waivers in employment arbitration agreements.  The NLRB basically takes the position that, unless overruled by the United States Supreme Court (as opposed to a circuit court of appeal), Board decisions (such as D.R. Horton) remain in effect and are binding on the NLRB’s administrative law judges (“ALJ”).  A decision last week from an ALJ in Leslie’s Poolmart, Inc. and Keith Cunnigham evidences the NLBR’s continued adherence to its D.R. Horton decision and policy.  Indeed, the Leslie’s Poolmart decision actually expands D.R. Horton by holding that an arbitration agreement that was silent on the issue of class and collective claims still violated Section 7 of the NLRA by interfering with employees’ rights to engage in collective, concerted activity for mutual aid and protection.    

In Leslie’s Poolmart, employees were required to sign an arbitration agreement upon hire, whereby they agreed that they would arbitrate any employment-related disputes.  The agreement said nothing about whether an employee could pursue class or representative relief in arbitration.  Notwithstanding his agreement to arbitrate, employee Cunningham filed a class action lawsuit in California state court against Leslie’s, alleging various wage and hour violations.  Leslie’s removed the case to federal court and then filed a motion to compel arbitration of Cunningham’s individual claims and requested that the class claims be dismissed.  The court granted the motion (with the exception of a PAGA claim, which the court held was exempt from individual arbitration). 

Not to be deterred, Cunningham filed a charge with the NLRB alleging that Leslie’s arbitration agreement and efforts to enforce it violated section 7 of the NLRA.  Last week, a NLRB ALJ agreed.  The ALJ held that she was still bound by D.R. Horton regardless of the fact that the Fifth Circuit effectively overruled the decision.  The ALJ further held that D.R. Horton applied even though the arbitration agreement in this case (unlike the one at issue in D.R. Horton) did not expressly preclude arbitration of class or representative claims.  The ALJ reasoned that even though the agreement did not expressly foreclose class claims, it effectively foreclosed such claims because the employer required all employees to sign the agreement and responded to court actions by making motions to compel individual arbitration and to dismiss any class allegations.  Thus, the ALJ found that the agreement interfered with employees’ ability to engage in collective concerted activity.  The ALJ further held that a single employee's filing of a class action claim (even without active participation of any other employee) constituted protected concerted activity.  The ALJ ordered Leslie’s to rescind its arbitration policy and/or to revise it to make clear that employees can pursue class claims either in arbitration or in court.  The ALJ further ordered Leslie’s to file a motion with the district court requesting that it vacate its order compelling Cunningham to arbitrate his individual claims.  The January 17, 2014 Leslie’s Poolmart decision is available in full on the NLRB’s website here.

Unless and until the United States Supreme Court overrules D.R. Horton, it appears, at least for now, that some plaintiffs' class action lawyers may continue using unfair labor practice charges as a last ditch effort to try to avoid dismissal of their class claims.  Given the wide rejection by courts of the NLRB's D.R. Horton decision, the ultimate success of this type of tactic is doubtful. 

Collective Bargaining Agreement May Define When Overtime Pay Is Owed, Along With the Rate

Yesterday a California court issued a favorable decision for employers regarding overtime pay obligations for employees covered by a collective bargaining agreement.  In Vranish v. Exxon Mobil Corp., the plaintiffs, who were unionized production and maintenance workers at Exxon’s Santa Ynez facility, filed a putative class action against Exxon, alleging that Exxon failed to fully pay them overtime compensation required under California law.  Pursuant to the applicable CBA, the plaintiffs regularly worked an alternative workweek schedule of seven 12-hour shifts, followed by a period of seven days off.  Also pursuant to the CBA, the plaintiffs were paid overtime compensation at the rate of one and one-half times their regular rate of pay for hours worked in excess of 40 per week or 12 hours per day.  Overtime was not paid for hours worked between 8 and 12 in a workday.

Plaintiffs sued, alleging that Exxon’s failure to pay them overtime for hours worked between 8 and 12 in a workday was a violation of California’s daily overtime pay requirement set forth in California Labor Code section 510.  The court rejected this argument, holding that the daily overtime provision of section 510 did not apply to plaintiffs because they were covered by a valid CBA and sections 510 and 514 exempt employees covered by a CBA containing its own overtime pay provisions.  Plaintiffs did not dispute that the CBA was valid or that it  provided for payment of overtime compensation in certain circumstances.  However, plaintiffs argued that the CBA’s overtime provision was nonetheless in violation of California law because it did not provide for daily overtime for hours worked between 8 and 12 per day.  According to plaintiffs, the exemption for employees covered by a CBA only applies if the CBA provides for overtime compensation at least at the rates and in the circumstances set forth in section 510.  The court rejected this argument, citing the Division of Labor Standards Enforcement Policy Manual as well as opinion letters wherein the DLSE agreed that the parties to a CBA are free to negotiate and agree on the circumstances under which overtime pay is triggered and the rate at which it will be paid.  As a result, section 510’s specific overtime requirements do not apply to employees covered by a valid CBA that contains its own overtime pay provisions.

The court alternatively held that even if plaintiffs’ interpretation of the CBA exemption was correct, Exxon still would not be liable for overtime compensation because the plaintiffs worked a validly adopted alternative workweek schedule providing for 12-hour shifts and, as such, were not eligible for overtime compensation for hours worked between 8 and 12 in a workday.

The full decision is here.

California District Court Denies Class Certification Due to Inadequate Class Counsel

This month, a San Francisco district court denied class certification in Lou v. Ma Laboratories, ruling that class counsel was inadequate due to their simultaneous involvement in two class actions against Ma Laboratories, a global distributor of computer components.  The Lou case alleged FLSA and wage and hour claims, such as failure to pay overtime, failure to provide off duty breaks, failure to timely pay final wages, failure to keep accurate wage statements, and unfair competition.  Similarly, Tian v. Ma Laboratories alleged nearly identical California wage and hour violations. 

Before certifying a class, courts must consider whether the attorneys representing a proposed class are adequate.  In doing so, a court will analyze (a) whether there are any conflicts of interest between counsel, the named plaintiffs or other class members, and (b) whether counsel can vigorously prosecute their case on behalf of the class.  In federal court, Rule 23(A)(4) requires class counsel to “fairly and adequately protect the interests of the class.” 

Ultimately, the court found a conflict of interest existed due to the attorneys’ simultaneous representation of two classes against the same defendant on many of the same claims.  Given this conflict, class counsel could not fairly and adequately represent the interests of the class.  The Lou court noted that class counsel “wield great power” in their strategic decisions concerning litigation and settlement and the class deserved “to be championed by its counsel unencumbered by their duties to other clients.”  As a result, this denial of class certification for inadequacy of class counsel can be viewed as a victory for employers defending against multiple class actions in California for similar claims.