Class Waivers in Arbitration Agreements are Enforceable!

June 25, 2018

This is really good news for employers across the country! Recently, the United States Supreme Court issued its long-awaited decision in three consolidated cases pending before it (NLRB v. Murphy Oil Co.; Epic Systems Corp. v Lewis; Ernst & Young LLP v. Morris) on the issue of whether a class action waiver provision in an employment arbitration agreement violates the National Labor Relations Act (“NLRA”) and is, thereby, unenforceable. There previously was a split of authority among the federal circuit courts on this issue, with the Fifth Circuit (along with Second and Eighth Circuits) in Murphy Oil holding that class action waivers do not violate the NLRA, and the Seventh and Ninth Circuits (in Epic Systems and Ernst & Young, respectively) holding that such provisions do violate the NLRA. Writing for the Court in a 5-4 opinion, Justice Gorsuch resolved this issue, holding that class action waiver provisions in employment arbitration agreements do not violate an employee’s right under the NLRA to engage in collective, concerted activity for mutual aid and protection, and that these provisions remain enforceable under the Federal Arbitration Act (“FAA”). The Court’s more specific holdings are as follows:
1. Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.
2. The Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select. The Act’s saving clause—which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract”—recognizes only generally applicable contract defenses, such as fraud, duress, or unconscionability, not defenses targeting arbitration either by name or by more subtle methods. By challenging the agreements precisely because they require individualized arbitration instead of class or collective proceedings, the employees seek to interfere with one of these fundamental attributes.
3. “The employees also mistakenly claim that, even if the Arbitration Act normally requires enforcement of arbitration agreements like theirs, the NLRA overrides that guidance and renders their agreements unlawful yet. . . . The employees ask the Court to infer that class and collective actions are ‘concerted activities’ protected by §7 of the NLRA, which guarantees employees ‘the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . , and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.’ But §7 focuses on the right to organize unions and bargain collectively. It does not mention class or collective action procedures or even hint at a clear and manifest wish to displace the Arbitration Act. It is unlikely that Congress wished to confer a right to class or collective actions in §7, since those procedures were hardly known when the NLRA was adopted in 1935. Because the catchall term ‘other concerted activities for the purpose of . . . other mutual aid or protection” appears at the end of a detailed list of activities, it should be understood to protect the same kind of things, i.e., things employees do for themselves in the course of exercising their right to free association in the workplace.’ . . . In another contextual clue, the employees’ underlying causes of action arise not under the NLRA but under the Fair Labor Standards Act, which permits the sort of collective action the employees wish to pursue here. Yet they do not suggest that the FLSA displaces the Arbitration Act, presumably because the Court has held that an identical collective action scheme does not prohibit individualized arbitration proceedings, see Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20, 32.’”

Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented. The majority characterized the dissenting arguments as policy arguments and reminded us all (thank you majority) that the role of courts is not to make policy, but to enforce the laws as written. “The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the Arbitration Act. Because we can easily read Congress’s statutes to work in harmony, that is where our duty lies.”
The Supreme Court’s opinion reverses unfavorable precedent in the Ninth Circuit (Ernst & Young v. Morris) and Seventh Circuit (Epic Systems v. Lewis), and reaffirms the important principles that arbitration agreements will, and must, be enforced according to their terms, and that laws (or judicial decisions) that seek to interfere with arbitration are preempted by the Federal Arbitration Act. Class action waiver provisions in arbitration agreements are enforceable and do not violate the NLRA.

This is a nice win for employers. It arguably cuts down on those huge settlements plaintiff attorneys have been demanding.

The Use of Profanity at Work Could Lead to Litigation!

June 18, 2018

The use of profanity in the workplace is unprofessional and the employer should have a policy prohibiting it. The reality is such language is so commonplace that it will get used despite any policy. So, let’s explore this a little deeper.

The issue is whether or not such language creates a “hostile work environment” under federal (and maybe state) anti-discrimination law?

There was a case out of the 11th Court Circuit of Appeals that differentiated between different types of profanity and I thought their rationale was appropriate for this article.

Let me caution you before you read any further. The language used below is explicit so stop now if you feel you may be offended. The Court gave the following disclaimer as well so I am in good company with my warning.

“We recite the profane language that allegedly permeated this workplace exactly as it was spoken in order to present and properly examine the social context in which it arose. We do not explicate this vulgar language lightly, but only because its’ full consideration is essential to measure whether these words and this conduct could be read as having created “an environment that a reasonable person would find hostile or abusive.”

The court’s decision focused on the difference between profanity of the general type, which it calls “general, indiscriminate vulgarity” (presumably, words like “sh**”), and “gender-specific, derogatory comments made about women on account of their sex.”

The court said that there was ample evidence that, as one of two female workers, the Plaintiff overheard coworkers used such gender-specific language to refer to or to insult individual females with whom they spoke on the phone or who worked in a separate area of the branch. Indeed, the court said that her male co-workers referred to individuals in the workplace as “bitch,” “f**king bitch,” “f**king whore,” “crack whore,” and “c**t.”

Generally speaking, this discussion by the Court is unique because such words are not really been used in the court system.

The context may illuminate whether the use of an extremely vulgar, gender-neutral term such as “f**king” would contribute to a hostile work environment. “F**king” can be used as an intensifying adjective before gender-specific epithets such as “bitch.” In that context, “f**king” is used to strengthen the attack on women, and is therefore relevant to the Title VII analysis. However, the obscene word does not itself afford a gender-specific meaning. Thus, when used in context without reference to gender, “f**k” and “f**king” fall more aptly under the rubric of general vulgarity that Title VII does not regulate….

The court then focused on the notion that what is important to decide if conduct is “severe or pervasive” to create a work environment is the entirety of the situation.

“Words and conduct that are sufficiently gender-specific and either severe or pervasive may state a claim of a hostile work environment, even if the words are not directed specifically at the plaintiff…. It is enough to hear co-workers on a daily basis refer to female colleagues as “bitches,” “whores” and “c**ts,” to understand that they view women negatively, and in a humiliating or degrading way. The harasser need not close the circle with reference to the plaintiff specifically: “and you are a ‘bitch,’ too.”

The court reasoned that “Evidence that co-workers aimed their insults at a protected group may give rise to the inference of an intent to discriminate on the basis of sex, even when those insults are not directed at the individual employee.”

But what if the workplace just had a lot of profanity?

Then, the court stated that might not be enough. “If the environment portrayed by [the Plaintiff at the Company] had just involved a generally vulgar workplace whose indiscriminate insults and sexually-laden conversation did not focus on the gender of the victim, we would face a very different case. However, a substantial portion of the words and conduct alleged in this case may reasonably be read as gender-specific, derogatory, and humiliating.”

For employers, the case is a reminder than a hostile work environment need not have pornography in the workplace to satisfy the standard; words can be enough depending on the context and the pervasiveness of it.  Employers should be mindful that profanity in the workplace — particularly when it is sexually-laden and directed at or around others — can have serious legal ramifications.

One last point: The employer here argued that the environment existed before the employee joined too and that it was not, therefore, directed to the Plaintiff.  The court easily dismissed that argument.   Once [the Plaintiff] entered her workplace, the discriminatory conduct became actionable under the law. Congress has determined that [the Plaintiff] had a right not to suffer conditions in the workplace that were disparately humiliating, abusive, or degrading.”

There you have it! Let’s curtail as much as the inappropriate language as we can. It could open the door to litigation.




The I-9 Form: 7 Critical Factors

June 11, 2018

Recently, the Trump administration announced that it has doubled the number of worksite investigations and audits conducted by Immigration and Customs Enforcement. Its express goal is to make sure businesses are not employing people who are in the U.S. illegally.

What is such an audit? Simply, it’s a review of business records, specifically I-9s.

What do you need to know about the I-9 Form? Here are seven important things that should be noted:

  1. I-9s are low-hanging fruit for any employer. The government makes the form available online, complete with instructions to how to fill it out.
  2. You must complete an I-9 at the beginning of employment for every employee you hire (except for employees hired on or before Nov. 6, 1986, who are continuing in their employment and have a reasonable expectation of employment at all times). It does not apply to independent contractors (but be wary of who is, and is not, a bona fide independent contractor).
  3. An employer’s I-9 obligations do not depend on the citizenship of the employee. All employees means all employees, regardless of citizenship or nationality.
  4. All employees also means all employees regardless of tenure or length of service. The obligation to retain an I-9 for each person hired applies from the date of hire, even if the employment ends shortly thereafter or if the hired employee never completes work for pay.
  5. Employers must retain I-9s for the later of three years from the date of hire, or one year from the date of termination. You can choose to retain them on paper, microform (really), or electronically.
  6. You may choose to copy or scan documents an employee presents when completing an I-9. Making photocopies of an employee’s document(s), however, does not take the place of completing or retaining the I-9 itself. If you choose to retain copies of an employee’s documents, to avoid a Title VII violation you must do so for all employees regardless of actual or perceived national origin or citizenship status.
  7. The Department of Homeland Security, the Department of Labor, and the Immigrant and Employee Rights Section of the Department of Justice are all authorized to inspect an employer’s I-9 forms.

Note: Jim is now live on LA Talk Radio! Sundays 3 pm PST. His first show aired June 10, 2018 and is now archived for your listening enjoyment. His focus was domestic terrorism and its impact on America and the workplace.

Two More Unfavorable Wage & Hour Decisions That Have a Serious Impact!

June 4, 2018

Last week, two California courts continued the “anti-employer” trend, issuing two more unfavorable PAGA (Private Attorney Generals Act) decisions.  The first, and most significant, is Huff v. Securitas Security Services USA, Inc., in which the court held that a PAGA plaintiff who allegedly suffers a single Labor Code violation can sue the employer on a representative basis and seek to recover penalties not only for that violation but for all other Labor Code violations allegedly suffered by other employees (even though not suffered by the plaintiff himself).  This is completely contrary to traditional rules of standing (which require a plaintiff to actually be injured by the alleged violation upon which they are suing) and is just another example of how absurd the PAGA landscape in California has gotten.

In the second case, Raines v. Coastal Pacific Food Distributors, the court held (similar to an earlier case, Lopez v. Friant & Associates case) that a PAGA plaintiff alleging wage statement violations does not need to prove injury or a knowing and intentional violation in order to recover PAGA penalties for the violation, even though these are both elements required to prevail on a claim for a wage statement violation under the wage statement law itself (Labor Code 226).

In issuing these unfavorable decisions, some of these courts have acknowledged that employers raise valid unfairness arguments and/or policy arguments for why PAGA should not operate the way that it does.  However, these courts note that these are issues for the legislature, not the courts.  To that end, however, there have been countless bills introduced to reform PAGA in the California legislature.  Each year, these bills are killed in committee, seemingly due to opposition from big labor and plaintiffs’ attorneys.  As a result, until the legislature decides to do the right thing and reform PAGA, California employers will have to continue fighting shakedown PAGA lawsuits, while employers throughout the rest of the country, who aren’t burdened by litigation-fueling laws like PAGA, look on with justifiable relief that they don’t have operations in the Golden State.

Be on your toes with respect to the wage & hour laws. These PAGA claims are killing employers and you have to tighten up your policies and procedures! Questions? Contact me.