HIGHLIGHTS FOR THE MONTH OF JANUARY 2009

By: Elizabeth Torphy-Donzella

RECENT DEVELOPMENTS

Labor and Employment Agenda of the 111th Congress

With Democrats controlling both branches of the government for the first time since 1992, employers can expect a “healthy dose” of bills aimed at the workplace. At the head of the pack is the Lilly Ledbetter Fair Pay Act, which was passed by both the House and the Senate and was signed into law by President Obama on January 29, 2009.

The “Lilly Ledbetter Fair Pay Act of 2009”

The Fair Pay Act extends the time for employees to bring pay discrimination claims under the federal anti-discrimination laws by treating as a new independent violation each paycheck that is issued after an alleged discriminatory decision affecting compensation. The law is intended to reverse the Supreme Court decision that rejected Ms. Ledbetter’s claim of pay discrimination under Title VII of the Civil Rights because it was not filed within 180 days of the alleged unlawful employment practice. Ms. Ledbetter had claimed that discrimination years earlier toward her by a sexist supervisor had caused her pay in the years thereafter to be lower than it would have been but for the discrimination. The Court rejected Ms. Ledbetter’s claim that each paycheck that she received after the unlawful act constituted a new violation that “kept the clock running” on the statute of limitations.

The bill provides that an unlawful employment practice occurs with respect to discrimination in compensation when the individual becomes subject to the discrimination and when an individual is affected by the discriminatory practice. Hence, as noted above, a new violation occurs with each new paycheck that is “affected” by the original discriminatory Act. Clearly, this new scheme means that employers will have to defend decisions that may, in some cases, have been made years earlier by supervisors who are long departed. In addition, any decision that impacts pay (such as a failure to promote, an alleged discriminatory evaluation, or a job transfer) essentially will not have a statute of limitations so long as the employee remains on the payroll. Because the legislation states that the Ledbetter decision was at odds with Congress’ intent, Congress has made this law retroactive to claims of compensation discrimination that were pending on or after May 28, 2007 (the date the Ledbetter decision was issued). This bill was the first bill to pass both the Senate and the House and was signed by President Obama on January 29, 2009. It will apply to claims under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act.

Although it has always been the case that employers should take measures to ensure that all decisions affecting compensation are based on legitimate and non-discriminatory factors, these efforts should be redoubled. In addition, ensuring that decisions are well documented will be more important. Scrupulous retention of records also will be critical. To the extent possible, companies should maintain contact information of former supervisors so that they can be contacted, if needed, to defend decisions that they made while employed.

Pending Legislation

Paycheck Fairness Act

A bill that died in the Senate in the 110th Congress, but that has been reintroduced in the 111th Congress, is the so-called “Paycheck Fairness Act.” Currently, employers defending against Equal Pay Act (“EPA”) claims can prevail by proving that a disparity in pay between male and females in a job is based on “any factor other than sex.” The new legislation would raise the burden of proof in defending gender-based pay discrimination claims by requiring employers to prove that a disparity in pay is based on “a bona fide factor other than sex, such as education, training or experience.” The bill further provides that the employer must prove that this factor is (1) not based on or derived from a sex-based differential in compensation; (2) job related; and (3) consistent with business necessity. Even if the employer meets this burden, the defense is lost if an employee provides evidence that an alterative employment practice exists that would serve the same purpose without producing the pay disparity and the employer has refused to adopt the practice. Enhanced remedies (such as punitive damages) would also be added as would new (and plaintiff friendly) class action standards. President Obama was a cosponsor of this legislation in the 110th Congress so doubtless will sign the bill if it reaches his desk.

Title VII Fairness Act

Another “fairness” proposed law is the Title VII Fairness Act, which would create a new (and exceedingly vague) standard to determine when the statute of limitations begins to run on a discrimination claim. It provides that if the plaintiff demonstrates that she did not have, and could not have been expected to have, enough information to support a “reasonable suspicion of discrimination” on the date on which an unlawful employment practice occurred, the statute of limitations begins to run on the date when such reasonable suspicion arose. This standard could permit individuals to bring claims years after the alleged act of discrimination. It would amend all of the major federal anti-discrimination laws (not just Title VII).

Family Fairness Act of 2009

The Family Fairness Act would eliminate the requirements under the Family and Medical Leave Act that employees have actually worked 1250 hours in the 12 months preceding a leave request to be eligible for leave. If passed, all that an employee would need to establish for FMLA eligibility would be one year of service.

Labor Relations First Contract Act of 2009

This bill would amend the National Labor Relations Act to mandate binding arbitration where a union and company cannot agree on a first labor contract within 60 days of certification of the union as the employees’ representative. It would empower a federal mediator to make a final choice for the parties on any contract terms upon which the parties cannot agree, which would be a radical departure from the current system. It is one component of broader legislation that is expected to be introduced soon (the “Employee Free Choice Act” discussed below).

Expected Legislation

Employee Free Choice Act (“EFCA”)

The EFCA was blocked by the Republicans in the Senate in 2007 and “died” there. The EFCA would significantly change the way in which unions organize employees by mandating card-check recognition and would make first contracts subject to binding mediation on any terms on which the parties could not agree. Employee free choice would no longer be expressed through secret ballot elections and employer bargaining rights would be significantly compromised. Not surprisingly, these changes to the National Labor Relations Act are “priority one” for organized labor. Employer groups are vigorous in their opposition to the EFCA. Senate Majority Leader Harry Reid has stated that he expects the legislation to be taken up in early summer 2009.

The “Respect” Act

The “Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (‘Respect’) Act would narrow the NLRA’s definition of supervisor, thereby expanding the population of potential workers who may be organized by unions. By way of background, supervisors, as members of management, are not subject to union organizing because employers are presumed to have a right to expect management to carry out a company’s directives. Union representation is recognized as inconsistent with this duty of loyalty. The legislation would significantly restrict the definition of supervisor by removing from the statutory definition duties that currently give rise to supervisor status – such as assigning duties and responsibly directing others – and mandating that individuals “hire, transfer, suspend, lay off, recall, promote, discharge, reward, or discipline other employees” to be NLRA “supervisors.” This legislation, like the ECFA, would alter established labor law fundamentally.

Family Leave Legislation

Legislation aimed at expanding family leave rights that did not make it through the 110th Congress is expected to be introduced again. We expect to see at least the following: The “Family and Medical Leave Expansion Act” would have lowered the employee threshold for FMLA coverage from 50 to 25. It would also have granted leave for domestic violence-related matters and 24 hours of leave per year to attend school related activities. The “Family Leave Insurance Act” would have set up a mechanism for income replacement while employees are on leave (through a scheme of government subsidized benefits and/or payroll taxes). The “Healthy Families Act” would have require companies with 15 or more employees to provide seven days of paid sick leave with benefits to employees working 30 hours or more per week (and a prorated amount to those working less).

Sexual Orientation/Gender Identity Protection

Title VII does not currently protect against discrimination based on sexual orientation or gender identity. Past attempts to expand the law to reach this classification (and also add transgendered persons to the list of protected classes) through the Employment Non-Discrimination Act of 2007 failed. Employers can expect that such protections will be added to Title VII by the 111th Congress. President Obama supports such amendments.

Successor Employer Has A Duty to Bargain With A Predecessor Union

When a company acquired an ongoing business and began operating with a majority of the employees of the acquired company, it refused to recognize the union that had represented the employees and, instead, recognized the union that represented company employees at the company’s other locations. The U.S. Court of Appeals for the D.C. Circuit held that this violated the National Labor Relations Act.

Facts of the Case: In Dean Transportation Inc. v. NLRB, a school bus operations company took over a facility that provided school bus service to public schools in Grand Rapids, Michigan. This occurred when the school systems, which had employed the drivers, decided to outsource their operations. The school system and Dean entered into a contract that required Dean to use its best efforts to maintain the existing routes and to offer incentives to the existing drivers to encourage them to apply for jobs with Dean. It also required Dean to comply with certain rules of operation for the school system that were different than Dean’s arrangements elsewhere. At the end of the school year, the school system laid off the drivers and Dean took over the facility and equipment. By the start of the new school year, Dean had hired a majority of the prior drivers and other support employees and assumed responsibility for servicing the same bus routes using the same equipment as had its predecessor. Dean then announced that it was recognizing the union that represented its other employees as the exclusive bargaining representative of the acquired facility’s employees. In response, the union that previously represented the facility’s employees demanded recognition. Dean refused, and that union filed an unfair labor practice charge alleging an unlawful refusal to bargain. The NLRB found that Dean was a “successor employer” with an obligation to bargain with the existing union and ordered Dean to do so. Dean appealed and the NLRB cross appealed for enforcement of its order.

The Court’s Ruling: The D.C. Circuit enforced the NLRB’s order that Dean bargain with the facility employees’ existing union. The court explained that an employer qualifies as a “successor employer” with a duty to bargain with a predecessor’s union when there is a “substantial continuity” between the two enterprises. Where a majority of employees work under the same working conditions, doing the same jobs, with the same supervisors and for the same body of customers, the company is a legal successor and must recognize an incumbent union. That clearly was the case with Dean’s acquisition of the facility. Dean also justified its refusal to recognize the union because it claimed that the single site was not an appropriate bargaining unit. Dean argued that it had, in effect, merged the facility into its bargaining units elsewhere (in labor law terms an “accretion”). The court rejected these arguments because single site units are frequently appropriate, particularly where, as here, there is a long bargaining history with another union at the site. In addition, two “critical factors” that determine whether a unit should be accreted are exchange of employees and common day-to-day supervision, which the court found to be absent in this case.

Lessons Learned. Frequently, the focus during a business acquisition is on the corporate law aspects of the transaction without attention to existing labor agreements. In many cases, a company can control whether it takes on existing bargaining obligations by the way it structures the transaction and implements its operations. Labor counsel should be consulted when talks begin to acquire a business or when planning a merger in order to avoid unexpected – and costly – surprises in the area of labor relations.

TAKE NOTE

Labor Management Relations Act. The U.S. Court of Appeals for the Fourth Circuit (which governs Maryland, Virginia, West Virginia and the Carolinas) recently ruled that a company did not violate the Labor Management Relations Act (“LMRA”) by agreeing to certain rules that were helpful to a union during a “card check” organizing drive. In Adcock v. Freightliner, a group of employees filed suit claiming that their employer had violated the LMRA (which prohibits a company from paying or providing other “things of value” to a union) by giving a union access to the plant to solicit employees, requiring employees to attend a presentation by the union during paid working hours, and refraining from making negative statements about the union. These arrangements were part of a “card check agreement” which outlined the ground rules for an organizing campaign after which the company would recognize the union if it obtained a majority of employees’ signatures on union authorization cards. The court reasoned that the LMRA was meant to root out bribery and other corrupt practices involving payments between employers and unions, not to outlaw agreements to give unions’ easier access to employees (which, the court noted, could make an organizing drive more peaceful and orderly). The Court also noted that the National Labor Relations Act, which prohibits certain employer assistance of unions, was the appropriate forum for the employees’ claim (and had, in fact, been used previously by the employees but the NLRB rejected their claims).

WARN Act. Companies with 100 or more employees are required to give at least 60 days notice of a plant closing or mass layoff if the employment loss affects a sufficient number of workers. There are, however, instances in which the duty to give notice is excused. A recent case explained when the “unforeseen business circumstances” exception applies. In Gross v. Hale-Halsell Co., a wholesale grocery business failed over the course of several months to satisfy the needs of a longtime customer that represented over 40 percent of its revenues. Although a firm decision to end the relationship was not made, the customer was considering severing the relationship. At the same time, the wholesaler was trying to get a working capital loan from a bank and believed the loan would go through. By the following month, however, the customer advised that it was ending the relationship and the bank refused to approve the loan. Within days, employees were notified that the business would be closing and they were laid off. The employees sued, claiming that the company had failed to give them the required 60 days notice of the closing under WARN. They argued that an unforeseeable business circumstance that would excuse 60-days notice requires a “sudden, dramatic, and unexpected action or condition outside the employer’s control.” Because the wholesaler’s troubles started in the months before the actual decision to close, they contended that a jury could find that the exception did not apply. The court disagreed with the employees, noting that the unforeseen business circumstances exception focuses on the whether the company used “commercially reasonable business judgment” in its actions; the company did not need to predict events perfectly. Here, the court ruled that it was not until the longtime customer notified the wholesaler of its decision to place its business elsewhere and the wholesaler was denied the loan that it was reasonable to conclude that closure was the only option. The employer met the “unforeseeable business circumstance” exception to WARN.

ADEA. A recent case from the U.S. District Court for the District of Maryland held that a pension plan that required older new hires to contribute more toward a pension plan than younger new hires did not violate the Age Discrimination in Employment Act. In EEOC v. Baltimore County. the County had a pension system that was funded by employee and employer contributions. The percentage contribution varied from employee to employee base on age. New hires in their twenties, for example, paid a lower percentage contribution for this mandatory benefit than did new hires in their fifties. Similarly, the County contributed more toward the relative cost of the benefit for older workers than for younger workers, because the former were closer to retirement. The EEOC sued on behalf of older workers, claiming that this scheme constituted age discrimination in violation of the ADEA. The Court granted summary judgment in favor of the County and dismissed the suit. It held that, although age was the basis for the different contribution rates, it was not a motive for the scheme (what is required to give rise to a discrimination claim). The contribution rates were based on the number of years a new hire had to reach retirement age and how long it would take to accumulate sufficient reserves to fund the new hire’s life annuity. As such, it was based on economic considerations rather than age.

E-Verify Mandate for Federal Contractors Put On Hold. The rule requiring federal contractors to use E-verify (the internet-based system used to verify employee eligibility to work in the U.S.) has been further extended from February 20, 2009 to May 21, 2009. As was explained in our January 20, 2009 E-Lert, the DOL had agreed to extend the effective date of the rule from February 2 to February 20, 2009 in response to a lawsuit that sought to block the rule. Citing a need to consider the rule further, the Obama administration has decided to postpone the effective date to May 21, 2009. Given that both employer and employee advocacy groups have opposed mandatory use of E-verify, the rule may ultimately be rescinded.

New I-9 Form Reminder. Employers must begin to use the new I-9 form beginning February 2, 2009. Our January 12, 2009 E-Lert provides a full discussion of the revised I-9.

TOP TIP

The Case For Updating Position Descriptions

The revised regulations interpreting the Family and Medical Leave Act create an incentive for employers to have up-to-date and accurate position descriptions. Job descriptions also have benefits when dealing with claims under the Americans with Disabilities Act. The revised FMLA regulations state that an employer that will require an employee to provide a fitness for duty certification to be returned to work must notify the employee of this requirement when the leave is designated as FMLA leave. If the employer also wishes to require the employee’s healthcare provider to certify that the employee is medically able to resume his/her duties, the initial designation also must list the employee’s essential job functions. An accurate description of job duties is obviously important in this context, and a written job description is an efficient means of identifying essential functions, but only if it is up-to-date and accurate. In addition, job descriptions can be useful in the Americans with Disabilities Act context in order to establish what the “essential job functions are.” They can help companies frame the dialogue when discussing accommodations and can be used in litigation to prove what job functions have been considered “essential” without regard to any lawsuit.

Job descriptions should accurately and succinctly reflect:

• Essential functions: The functions that the job exists to accomplish and those that must be carried out in order to fulfill the duties.

• Marginal functions (part of the job but that may be done by others) may be included, but must be identified as marginal.

• Reporting Relationships.

• Required Skills and Education.

• Working conditions (such as ability to withstand temperature for outdoor jobs), physical requirements (such as ability to lift, climb, stoop, bend, walk, sit), and the frequency required of same. These may also fall under the “essential functions” heading.

• A qualifier that management retains the right to assign and reassign duties as deemed necessary and that the features of the job may change over time.

Job descriptions should be reviewed periodically to ensure that they capture changes that occur over time. Drafters also should take care not to include physical or other requirements that could violate anti-discrimination laws. Legal counsel should review job descriptions to make sure that they do not raise these concerns

For greater clarification of any of these issues, you may contact any Shawe Rosenthal attorney.

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