HIGHLIGHTS FOR THE MONTH OF MARCH 2009

By: Kraig B. Long

RECENT DEVELOPMENTS

First Circuit Issues A Deterrent Against Overbroad Confidentiality Provisions Under The National Labor Relations Act

The Court of Appeals for the First Circuit recently affirmed the National Labor Relations Board’s decision that a confidentiality provision, which employees could reasonably construe to prohibit them from discussing their wages and compensation with “other parties,” violated the NLRA.

Facts of the Case: In Northeastern Land Services, LTD v. NLRB, a staffing agency that supplied temporary workers to the natural gas and telecommunications industries terminated an employee in October 2001 for failing to comply with the confidentiality provision in his employment contract that required him not to disclose the terms of his employment to outside parties. The executive vice president for the staffing agency testified that the employee was terminated because he complained to the client for whom he was working that he was not being paid on time, and further tried to involve the client in his pay dispute with the staffing agency. The staffing agency paid its employees directly. At the heart of the case was the two-sentence confidentiality provision that stated: “Employee . . . understands that the terms of this employment, including compensation, are confidential to Employee and the [staffing agency]. Disclosure of these terms to other parties may constitute grounds for dismissal.”

The employee filed an unfair labor practice charge, alleging that the staffing agency violated section 8(a)(1) of the NLRA for maintaining and enforcing an unlawful confidentiality provision that discouraged employees from engaging in protected concerted activities and for terminating his employment based on this provision. The staffing agency argued that the provision did not prohibit employees from discussing the terms of employment among themselves, and that the provision was never enforced in opposition to union activity. The staffing agency asserted that mere broad wording, without evidence of actual chilling of union activity, was insufficient to violate section 8(a)(1). The ALJ found that the confidentiality provision did not violate section 8(a)(1) because it did not go so far as prohibiting discussions of terms and conditions of employment among fellow employees. The Board reversed the ALJ’s decision, and ordered reinstatement of the employee with full back pay and that any references to his discharge be deleted from his personnel files.

The Court’s Ruling: On appeal, the First Circuit upheld the Board’s decision, agreeing that the provision was overbroad and could reasonably be construed by employees to preclude them from discussing their compensation with union representatives. The First Circuit further affirmed the Board’s finding that the employee’s termination was unlawful, despite the staffing agency’s claim that it would have discharged the employee even in the absence of an unlawful reason. The First Circuit held that it did not matter that the employee could have been discharged for a lawful reason. Where discipline is imposed pursuant to an overbroad rule, the Court held that the discipline is per se unlawful.

Lessons Learned. The First Circuit noted that this case provided “a cautionary tale for employers about the risk of maintaining and enforcing a broad confidentiality clause.” The court suggested that if the staffing agency wanted to prohibit employees from discussing wages and compensation with company clients in order to protect confidential information, then its provision had to be narrowly tailored to that goal. An overbroad confidentiality provision is a per se violation of the NLRA.

Employee's Profanity During Labor Negotiations Is Not Protected Activity Under the National Labor Relations Act

In Media General Operations, Inc. v. NLRB, the Court of Appeals for the Fourth Circuit held that a union employee who used profane and offensive language when talking about the company's bargaining tactics during labor negotiations forfeited the protection of the National Labor Relations Act.

Facts of the Case: When the collective bargaining agreement between the Tampa Tribune newspaper and the union expired, the parties began negotiating the terms of a new contract. During negotiations, the vice president of the newspaper sent a series of letters to the pressroom employees, who were represented by the union, describing the contract negotiations from the company's perspective. A union employee, in response to a supervisor's questions as to how he was doing, responded that he was "stressed out" as a result of the letters that the vice president had been sending and stated further: "I hope that fucking idiot [the vice president] doesn't send me another letter. I'm pretty stressed, and if there is another letter you might not see me. I might be out on stress." The employee later apologized for his remarks. He failed to show up for work the next day, claiming that his absence was due to taking a sleeping pill to calm down after reading the vice president's response. For missing work, the employee was suspended for two days without pay. Three days after he returned to work, the employee was discharged for using threatening, abusive and harassing language at work in violation of department rules. The employee filed charges with the National Labor Relations Board alleging, among other things, that he was terminated for engaging in protected concerted activities in violation of sections 8(a)(1) and 8(a)(3) of the NLRA. The ALJ ruled in favor of the newspaper, but the Board reversed, holding that the union employee's remarks were protected despite being profane and derogatory.

The Court’s Ruling: The Court of Appeals disagreed with the Board’s decision, calling the employee’s comment an “ad hominem attack” on the company. While the Fourth Circuit noted that the comment was made in the context of a discussion regarding the labor negotiations and in a “semi-private” office, the Court held that McMillen’s outburst was “so egregious” that it was not worthy of protection under the NLRA. The Court stated further the employee had not read the vice president’s letter when he made the profane comment and that the vice president’s letters were a lawful exercise of the company’s rights. The Court held that these factors further divorced the employee’s comments from the context of the ongoing labor dispute.

Lessons Learned. The Fourth Circuit acknowledged that “in the heat of discussion” employees may use strong language to express their position, but noted that the “Act’s protections are not limitless, however, and where they do not reach, employers cannot be compelled to tolerate language or behavior that undermines workplace discipline.”

No Age Discrimination in Redistribution of Terminated Employee's Former Duties To Existing Workforce

The Sixth Circuit Court of Appeals recently held that an employer did not discriminate against a 57-year old manager based on his age when it terminated his employment and redistributed the manager’s duties rather than hiring a significantly younger replacement.

Facts of the Case: In Harmon v. Earthgrains Baking Cos., the plaintiff had been employed for twenty-eight years as a district manager and never once received a negative comment in his file. In 2006, the manager’s newly hired, 32-year old supervisor gave the manager his first negative performance evaluation, and months later the manager was terminated for performance issues. As part of a corporate restructure that had been in the works before the manager was terminated, the company redistributed the manager’s former duties among existing managers. The manager sued the company, alleging age discrimination.

The Court’s Ruling: On appeal, the Sixth Circuit affirmed the district court’s decision in favor of the company, and held that the manager failed to establish a prima facie case of age discrimination because he could not prove that he was replaced by a significantly younger individual. The Court held that a person is not “replaced” for purposes of an age discrimination claim “when another employee is assigned to perform the plaintiff’s duties in addition to other duties, or when the work is redistributed among existing employees already performing related work.” The Court noted that because the reassigned duties remained in place for almost three years, and the company did not hire a new employee to fill the vacancy left by the manager, there was no evidence that the company’s actions were a “temporary ruse” designed to defeat the manager’s age discrimination claim. The Sixth Circuit went on to hold that “where an employer redistributes a terminated employee’s work among existing employees and does not replace the discharged employee, we must presume that the employer acted for legitimate business reasons. That is so because the business incentives underlying such a maneuver are readily apparent.”

Lessons Learned. To minimize allegations of age discrimination, employers must make fair and balanced decisions, without regard to age, at all stages of the employment relationship. If a reduction in force is unavoidable, employers must ensure that older workers are not singled out. The criteria used to select whose position is restructured or who is downsized should not be tied to stereotypes, for example, or to performance documentation that is overly subjective.

TAKE NOTE

FMLA Rights. Two cases addressing employee FMLA rights and alleged employer interference of those rights were decided recently.

In the first case, the Court of Appeals for the Second Circuit held that an employee who was terminated while she was out on approved FMLA leave could not establish an FMLA interference of rights claim because the employee was not cleared by her doctor to return to work at or before the twelve weeks of leave expired. In Roberts v. The Health Association, the employee was terminated on June 8, 2004, after having been out of work for approximately ten weeks on FMLA leave. At the time of her discharge, the employee’s doctor had noted that the employee would not be able to return to work before July 19, 2004, which date was after the end of the twelve weeks of leave that the employee was entitled to under the FMLA. The Second Circuit held that although the employer “likely violated the FMLA” when it terminated the employee while she was out on leave, the employee was not prejudiced by the early termination because she was unable to return to work at the conclusion of the twelve weeks of leave. The court further noted that the employer had paid the employee for twelve weeks’ worth of benefits, which would have been all the employee was entitled to under the FMLA.

In the second FMLA case, the Fourth Circuit Court of Appeals reiterated that “magic words” are not necessary to invoke the protections of the FMLA. In Dotson v. Pfizer, the plaintiff-employee advised human resources that he intended to use his accrued vacation time to adopt a child in Russia. For the most part, the employer permitted the employee to use his accrued leave intermittently during the adoption process. Less than three weeks after the employee and his wife returned from Russia with their adopted child, however, the employee was terminated. The employee sued, claiming that his employer interfered with his rights to the FMLA leave and discharged him in retaliation for exercising those rights. The case went to trial and the jury returned a verdict in favor of the employee and awarded him more than $722,000 in damages and attorneys’ fees. On appeal, the Fourth Circuit affirmed the jury’s verdict. The Court rejected the employer’s argument that because the employee never applied for FMLA leave or exercised his FMLA rights, the employer could not have intended to retaliate against the employee. The Court held that when an employee mentions that leave is needed for some FMLA-covered absence (like to adopt a child), it is the employer’s responsibility to inquire further about whether the FMLA applies and whether the leave classified as FMLA-protected.

ADR for Unfair Labor Practice Disputes. The National Labor Relations Board recently announced that it will make permanent its pilot Alternative Dispute Resolution (ADR) program, which has been a successful venture in promoting settlement of unfair labor practice cases pending before the Board. Since the pilot program’s inception in December 2005, forty-four (44) cases have been processed through the program and 60% of those cases were settled successfully. Chairman Liebman stated that the Board’s ADR program “may be particularly useful where traditional settlement negotiations are likely to be unsuccessful or have already been unsuccessful.” Participation in the ADR program is voluntary, and the parties can withdraw from the program at any time. The parties can request an administrative law judge to serve as the neutral for the settlement discussions, which can be conducted in-person, by telephone or through videoconference. Settlement discussions are confidential, and there is no communication between the program and the Board about specific cases submitted to ADR. Settlements are still subject to approval in accordance with the Board’s existing procedures for approving settlements. There are no fees or expenses to participate in this program. For a link to the NLRB’s Press Release, click here.

EEOC Subpoena Power. The Court of Appeals for the Seventh Circuit recently held that the EEOC has the authority to refuse to permit a charging party to withdraw a charge of discrimination, and can instead, enforce a subpoena issued to the employer as part of its continued investigation. In EEOC v. Watkins Motor Lines, the employer shipping company had experienced three incidents of employee-on-employee murder or attempted murder, and decided in June 2004 to not hire any individual convicted of a violent crime. Not long after this new policy was implemented, the company rejected Lyndon Jackson’s application for employment because of his criminal record. Jackson filed a charge of discrimination with the EEOC and an investigation was opened to determine whether the policy had a disparate impact on minority applicants and, if so, whether the policy was consistent with business necessity. The company did not cooperate with the investigation and refused to respond to the EEOC’s subpoena seeking information and documents. In January 2006, the company reached a settlement with Jackson that required him to withdraw his charge of discrimination with the EEOC. Jackson withdrew his charge, but the EEOC decided to press ahead with its investigation and sought to enforce the subpoena by filing suit against the company. In March 2008, the district court denied the EEOC’s motion to enforce the subpoena, holding that the EEOC should have permitted Jackson to withdraw his charge and that its refusal to do so was arbitrary. In reversing the district court’s ruling, the Seventh Circuit held that once a valid charge has been filed, “the EEOC rather than the employee determines how the investigation proceeds,” even if the employee later attempts to withdraw the charge. The Court noted that settling with a single employee (or prospective employee) does not stop the EEOC from exercising its authority to continue its investigation, particularly when the EEOC is investigating allegations of systemic or class-wide discrimination.

TOP TIP

Furloughing Exempt Employees

In this down economy, many employers are looking for ways to cut costs without having to permanently lay off their experienced workforce. Furloughs and short-term layoffs are easiest to implement with non-exempt employees because, under federal and most state wage and hour laws, non-exempt employees must be paid only for the actual hours they work. Furloughing exempt employees is more difficult.

The Department of Labor, however, recently issued three opinion letters that provide guidance on the effect of short-term reductions in hours on an employee's exempt status under the Fair Labor Standards Act (FLSA). The three opinion letters all address whether an employer can permit exempt employees to use accrued vacation or paid time off (PTO) leave during a short-term layoff, but dock employees who have no accrued vacation or PTO available.

The opinion letters provide that an employer may make deductions from an employee's accrued leave during a short-term layoff without affecting the employee's exempt status, provided that the employee is paid his guaranteed salary during the time off. An employer, however, cannot dock the pay of an exempt employee who does not have available accrued vacation or PTO for any day that no work was performed without affecting the employee's exempt status.

The opinion letters provide several acceptable options for short-term reductions affecting exempt employees:

• An employer can require exempt employees to take mandatory unpaid time off a full workweek at a time without jeopardizing the employee's status, because the FLSA regulations provide that exempt employees "need not be paid for any workweek in which they perform no work."
• An employer can refuse to pay an exempt employee's completely voluntary decision to take time off for personal reasons, other than for illness or disability, without affecting the employee's exempt status.
• An employer can change an exempt employee's regular workweek schedule with a corresponding change in salary (e.g., reducing the workweek from five days to four days), without affecting the exempt status, so long as the exempt employee's salary does not fall below FLSA's minimum weekly salary requirement of $455. The DOL opinion letters, however, make clear that day-to-to-day or week-to-week changes to an employee's regular work schedule are inconsistent with exempt status under FMLA and could result in reclassification of the employee.

Whenever making adjustments that will result in a decrease in wages for exempt employees, it is imperative that employers make sure that such changes do not result in an unwitting reclassification of the exempt employee into nonexempt status.

To view the DOL opinion letters, click the following three links: FLSA2009-2, FLSA2009-14, FLSA2009-18.

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

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