This appellate court decision means that
private employers who are subject to NLRB’s jurisdiction will NOT have to post
the poster on or before April 30.  It
will likely take several months to get a final decision by the Court of
Appeals.  Until then, employers need not
post the NLRB-mandated poster. (Note, though, that federal contractors are
required to post an almost identical poster under E.O. 13496).

As always, we will keep you up to date as
developments occur.

Overtime compensation is required irrespective of the method used to calculate
wages.  That is “common knowledge.”  Yet, mistakes are made.  I have seen numerous occurrences of
incorrectly computed overtime pay for commissioned employees.  It is also not rare for an employer to
initially compute the overtime wages correctly, and then obliterate the good
intentions by adding one final step.

Piece rates and job rates are as likely to involve the same mistakes, but I am focusing on
commissions because that arrangement is more common.  If you are utilizing any type of incentive
pay plan, my observations and suggestions should be useful.  In fact, some of the shortcomings that I will
describe often affect hourly-paid employees.

Before discussing common errors, let’s look at the correct way to compute overtime
compensation when employees are paid on a commission basis.  It is important to “keep it simple.”  When unnecessary nuances enter into the
equations, mistakes happen.  The Code of
Federal Regulations, Title 29 Part 778, at §§ 778.117 and 778.118, sets forth
some very straightforward rules regarding the computation of overtime wages
when commissions constitute all or part of the regular wages.  Part 778 (the overtime compensation CFR) may
be accessed at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:3.1.1.2.39&idno=29.

When an employee’s regular wages result from a commission plan, those wages are
typically compensation for all hours worked (not just the first forty) in the
workweek.  Therefore, the required overtime pay is the half-time premium.  As
overtime pay must be a multiple (at least time and one-half) of the regular
rate, it is necessary that the regular rate be determined each workweek.  A DOL opinion letter – www.dol.gov/whd/opinion/FLSANA/2008/2008_09_22_12NA_FLSA.htm – is an excellent example of the simplicity of properly computing overtime pay for a commissioned employee.

The FLSA record keeping rules (Part 516) correlate with the above explanations by
requiring, in part, that the records reflect, for each workweek and for each
employee,

• basis of pay (e.g.,
  “commission,” “piece rate,” “hourly,” etc.),
• the regular rate,
• total regular wages (for all
  hours worked), and
• overtime premium wages
  (half-time pay for overtime hours).

It is helpful, in developing an understanding of the overtime compensation
principles, to be knowledgeable of Part 778 in general, but particularly §§
778.100 through 778.308.  Especially
useful are the §§ 778.107 through §§ 778.109 explanations of “the regular
rate.”

These are examples of practices that lead to overtime back wage liabilities.

• Many employers believe that
  employees paid on a commission basis are not subject to overtime
  compensation provisions.  The owner
  of a courier business (under DOL investigation) recently informed me that
  he had classified his owner/drivers as employees (not “independent
  contractors”) to avoid problems with the IRS, but that he assumed the commissions constituted
  total wages (no need to pay overtime compensation).
• It goes without saying that the
  record keeping rules (Part 516) require an accurate record of hours
  worked.  Employers must be
  especially diligent, when employees are paid on commission, in order to
  ensure that all hours worked are recorded.
  Failure to consider all hours worked when computing overtime wages
  obviously results in FLSA violations.
• The perception that regular wages are always just for forty hours
  and that overtime pay is time and one-half added to the perceived
  regular wages complicates the computation of overtime compensation for
  commissioned employees.  I have seen
  various types of errors occasioned by the misconceptions; the most
  detrimental are those that result in failure to pay any overtime
  compensation, even though the records reflect that overtime was paid.  One client had been creating an
  artificial “regular rate” to make the records appear that overtime pay had
  been added to commission earnings, but in reality the half-time premium
  was imbedded in the commissions (not legal, of course).
• A similar (but more formal)
  method is to boost the overtime hours by 1.5, divide total commissions by
  the new “total” of hours worked to obtain a (flawed) regular rate, and
  then show in the records that this rate was paid for the first forty hours
  and time and one-half this rate was paid for overtime hours.  Obviously, the result is false records
  and failure to pay any true overtime compensation.
• “Tinkering” with the results
  after overtime wages have been properly computed often obliterates the
  intended overtime pay.  This happens
  when an employer, intentionally or inadvertently, modifies the calculations
  of compensation.  One example is the
  use of a guaranty plan.  There are
  numerous variations of such an arrangement (always resulting in FLSA
  violations).  Here is an
  illustration: The employer had been paying 25% commission with no overtime
  pay.  After being investigated by
  DOL, and paying back wages, the employer came into compliance  by agreeing to pay half-time premium
  wages for all hours over forty.  The
  employer modified the commission plan, reducing the percentage to
  22%.  However, this employer made a
  serious mistake by advising the employees that he will see to it that they
  do not average less than the previously paid 25%.  Each workweek, after all commissions
  have been determined @ 22%, the employer follows the Part 778 rules in
  arriving at the regular rate and adding the half-time premium pay to the
  commission earnings.  Then the
  employer re-computes commissions at the old (now guaranteed) 25%
  rate.  If this yields less than the
  computed total wages, no change is made.
  If the 25% computation yields more than the wages computed @
  22% plus overtime pay, a pseudo bonus is added to increase the total pay
  to the desired level.  The half-time
  premium compensation that had been computed and added to the 22%
  commissions now becomes meaningless because the pseudo bonus ensures
  payment of the guaranteed commission rate.
  However, even in workweeks when there is no need for adjustment,
  overtime compensation has not truly been paid (because of the guaranty
  arrangement).  The “overtime pay” is
  now simply a part of the regular wages, increasing the regular rate.
• A subtle variation of the
  above-described guaranty plan is to base the guaranty on a period longer
  than a workweek.  For example, the
  employer might guarantee that the total pay for the year will yield a 25%
  average commission.  If necessary, a
  supplement will be added (at the end of the year) to achieve the desired
  percentage rate.  Again, the records
  do not reflect the facts, the methodology is wrong, and no actual overtime
  compensation has been paid.

All of the described practices result in a back wage liability.  In the first two examples, if the employer
has not been previously investigated by the Wage and Hour Division and there is
no evidence of willfulness, civil money penalty assessment is not likely.  Litigation (if it occurs) will probably
involve the basic two-year statute of limitations.  With regard to the other examples, DOL will
view the records as having been falsified, indicating willful violations.  Civil money penalties are likely.  If there is litigation by DOL or employee
plaintiffs, a three-year statute of limitations will be invoked.

Early on I suggested that, when computing overtime pay for commissioned employees, it is
best to “keep it simple.”  Doing so avoids the deviations and problems that I just described.

In summary, if your overtime computation methods for commissioned employees are less than
straightforward, you should make changes right away.

This article is focused on arrangements involving commission as the only method of
pay.  The same principles generally apply
if commissions are supplements (see Part 778, §§ 778.115 and 778.118).  If the commissions are paid other than
weekly, see §§ 778.119 and 778.120.  Piece rates and job rates are discussed in
Part 778 at §§ 778.111 and 778.112; however, the more detailed information (in
Part 778) regarding commissions will be helpful when analyzing compliance
procedures regarding piece rates or job rates.

The Wage & Hour Self-Audit Guide, in the Self Auditing section of www.BizKeys.com,
contains an overtime compensation section that covers the overtime basics, with
elaboration regarding various guaranty plans that result in violations.

                                                     BY: William G. Trumpeter, Esq.

                                                             Miller& Martin PLLC

                                                   btrumpeter@millermartin.com

   The court’s ruling in the National Association of Manufactures v. NLRB,  Civil Case No. 11-1629(ABJ) (USDC DC March 2, 2012) challenging the NLRB’s Notice posting rule is in and it is a split decision.  The bad news for employers is that the court has upheld the NLRB’s authority to issue a rule that requires employers to post the notice to employees informing them of their rights under the National Labor Relations Act.   The good news is that the Court struck down the portions of the rule that provided the failure to post the notice would be deemed an unfair labor practice and would also constitute grounds for tolling the short six-month statute of limitations applicable to unfair labor practice charges under the Act.

   What does this mean to employers?   Failing to post the notice will not automatically be deemed an unfair labor practice, but failure to post can have adverse consequences.  First, failure to post may be used as evidence of anti-union animus in cases in which animus is an element of the general Counsel’s burden of proof.  Second, although the Board struck down the portion of the rule stating that the NLRB could infer that the failure to post was good cause to toll the statute of limitations, it left open the question of whether the failure to post could be used to justify an equitable tolling of the statute of limitations in a case in which the Board contended and proved that the employee bringing the charge was unaware of his or her rights under the Act.  Third, Failure to post could be used by the Board as justification for overturning an election result in favor of an employer.   Election interference need not rise to the level of an unfair labor practice to result in an election reversal.   

   As it stands now, the Notice must be posted on April 30, 2012.  The teeth of the enforcement provisions of the rule, the creation of an unfair labor practice, have been filed down and the bite may not be as painful, but failing to post the notice may still have adverse consequences as outlined above. 

 If you would like more information concerning these proactive measures to remain union-free, please contact Bill Trumpeter at btrumpeter@millermartin.com or (800) 275-7303, ext. 318.

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations.  As always, readers should consult a qualified attorney for specific legal guidance.  Should you need assistance from a Miller & Martin attorney, please call 1-800-275-7303. 

That is probably a question that many readers  are asking, with all of the publicity about DOL, IRS, and states cracking down on employers who treat workers as “contractors.”

 There is a perception that this focus by enforcement agencies is new.  The joint effort and publicity are, in fact, new phenomena.  However, the DOL has consistently viewed FLSA employment relationship concepts broadly.  While in on-the-job training, after being hired by the DOL Wage and Hour Division (and prior to the intensive four-week classroom training), I was sent with investigators to observe.  On the very first case, I watched while the seasoned investigator interviewed a carpet installer at a furniture/flooring store.  On the way back to the office, I said “Mr. McClure, he referred to himself as an independent contractor.  Why is there an overtime problem? ”  Investigator McClure advised me that it will all be clear after I receive formal training, but – in the meantime – he assigned some reading material about the FLSA employment relationship.  My point is that DOL has never taken the position that merely designating a worker as an independent contractor destroys an otherwise applicable employment relationship, even when the worker furnishes tools, equipment, and a vehicle.

During my DOL career, I found that efforts to enforce the FLSA when the employer contended that the workers were “contractors” were made more difficult because of lack of interest by the IRS and state agencies.  Employers and their representatives were ready and willing to “fight the battle” with DOL because they believed that the laissez-faire approach of other agencies should be adopted by the DOL.  Some of those investigations resulted in litigation so that DOL could prevent continuing violations and collect the unpaid overtime wages.

The IRS and state agencies are now paying attention to the rampant misclassifications.  They realize that employers who misclassify workers are ignoring statutory payroll taxes, and that allowing employers to treat workers as “contractors” requires more resources to collect federal and state income taxes.  The recent joint agreement between the DOL and numerous state agencies will greatly reduce the expense of enforcement, as the agencies will be sharing information.  The publicity will result in more confidential complaints, helping the agencies to focus their investigations directly on employers who are alleged violators.

It is true that the various laws do not have identical definitions of “employ,” “employee,” and “employer.”  In the FLSA, the Congress made it a point to leave no doubt.  To employ is to “allow or permit” to work (paraphrased).  Of course, there are legitimate business dealings between independent entities or persons, so removed from employment that it is not arguable, but there are often unclear scenarios that must be resolved.  The Supreme Court established FLSA employment relationship guidelines during the 1940s, and the DOL has applied these principles since.

Why should you care?  If you are paying individuals or small crews via 1099 (in lieu of W-2), you are vulnerable to IRS and/or state tax agency enforcement.  If you are using “contractor” classification as an excuse to not pay overtime wages, you are a prime candidate for DOL or state employment law agency enforcement. 

Overtime back wages are not the only possible employment law outcome.  Minimum wage violations are sometimes evident because the costs of furnishing equipment (e.g., a courier driver’s delivery vehicle) may reduce the effective rate to less than the minimum wage.  FMLA violations may be retroactively asserted because the “contractors” bring you up to the fifty-employee thresholds.  ERISA violations might have occurred because of the misclassifications.  There are other possibilities, such as EEOC implications.

Even if all of your contractors are legitimately in their own businesses, you should be concerned about whether they are treating their workers as employees and complying with applicable laws.  The FLSA includes a “joint employment” concept that could extend your contractors’ obligations to you.  Their failure to pay overtime wages, for example, might become your liability.  Their illegal employment of minors could result in your being assessed a substantial civil money penalty (see the November 2011 BizKeys newsletter for an excellent article about the costs of child labor violations). 

Another reason that you should be concerned is competition.  In 1938, the Congress enumerated several reasons for enactment of the FLSA.  One of those reasons was to prevent unfair competition.  In the DOL press release about the memorandum of understanding with the IRS and many states, one of the stated anticipated outcomes is to “level the playing field” among employers.  It is not fair for you to absorb the costs of treating your workers as employees while your competitors are avoiding the expenses of complying with tax and employment laws by treating workers as “contractors.”

The Wage & Hour Self-Audit Guide, in the Self Auditing section of www.BizKeys.com, contains an “Independent Contractor” topic.  That is a good place to start if you have classification concerns.  Also, see http://www.dol.gov/whd/workers/Misclassification/index.htm.

By: Morris Jennings

Wage and Hour Consulting Services

Last month’s “OFF THE CUFF” discussed the most common factors that trigger litigation or administrative legal action by DOL. This article is related, in that the actual types of legal action are reviewed.

The most common types of FLSA legal actions filed by DOL are:

• Suit to recover unpaid minimum wage and/or overtime compensation, plus liquidated damages (generally equal to the back wages)

• Injunctive action, to obtain both future and retroactive compliance

• “Hot goods” action*, seeking a civil injunction restraining the removal of goods for shipment in interstate or foreign commerce

• Suit to recover unpaid civil money penalties (if the defendant failed to contest the penalty assessment or has exhausted administrative appeals)

• Administrative legal actions may come into play subsequent to civil money penalty assessment. If the employer contests the assessment, a hearing is scheduled before a DOL administrative law judge.

*A “hot goods” action is usually filed when there is a need to quickly prohibit shipment of “tainted goods” by obtaining a temporary restraining order. This type of litigation is intended to pressure an offending employer to promptly achieve compliance and pay back wages under DOL supervision. It is possible for “hot goods” litigation to be filed under criminal provisions of the FLSA, but the usual approach is civil injunctive action. The injunction is normally sought against the offending employer (the producer of the goods). If the producer has already shipped the goods, the possessor of the goods (other than a common carrier or the ultimate consumer) may be sued to restrain further shipment into commerce.

Civil action that seeks a court order requiring payment of back wages reaches back three years when willfulness is proved. Absent willfulness, the standard FLSA two-year statute of limitations applies.

The FLSA includes a provision that allows the filing of criminal charges against an employer. The WHD District Directors instruct investigators to prepare the most egregious cases for criminal prosecution, based on WHD National Office policies. As criminal development of a case is done against the worst offenders, and the FLSA allows for imprisonment only after a second conviction, the case development includes sufficient evidence to also permit charges of violations of other federal criminal statutes (e.g., mail or wire fraud, peonage, or slavery). Conviction on such multiple counts may result in a prison term, even for first offenses.

The DOL Office of the Solicitor litigates only civil and administrative law cases. Criminal cases are prosecuted by the U. S. Department of Justice. It has been my experience that DOL believes civil litigation to be sufficient in most cases. FLSA criminal litigation is rare, but I see an occasional DOL news release about a conviction of an employer who had been charged with criminal violations of the FLSA (and usually other statutes).

In addition to the legal actions described above (that may be filed by the DOL Office of the Solicitor or the DOJ United States Attorneys), employees have a private right to file suit for recovery of unpaid minimum wage and/or overtime compensation, liquidated damages, court costs, attorney fees, etc.  

See http://www.dol.gov/elaws/esa/flsa/screen74.asp for a synopsis of how the DOL Wage and Hour Division enforces the FLSA.

The author, a former enforcement agent with the DOL Wage and Hour Division, offers consultation and technical guidance to attorneys and employers. You may contact him at Morris@FLSA-SCA.com or 866-895-3572.

 The fact that the agency possesses the ability to “haul employers into court” does not mean that it prefers to do so. Investigation, negotiation, and persuasion are the most efficient means of securing compliance and payment of back wages. Investigators and their superiors generally will attempt resolution “administratively” (the DOL term for enforcement procedures other than litigation).

 The WHD investigators and managers operate under established litigation policies and priorities. Certain types of cases are much more likely to trigger litigation early on, while the investigator and WHD District Office management will have some degree of discretion in others. Examples of cases that fit the WHD “potential litigation” criteria are:

1.  Repeat offenders (i.e., violations have been asserted in one or more previous investigations)
2.  Falsification or concealment of records, or misrepresentation of facts (reflecting monetary or child labor compliance when there actually are violations)
3.  Refusal to achieve prompt compliance after being informed of the results of an investigation 
4. Refusal to pay back wages

 If the back wage total is not substantial and any child labor violations are not “serious” or extensive, a repeat offender can usually avoid litigation (if records have not been falsified or concealed, or facts misrepresented) by displaying full cooperation, achieving prompt compliance, and paying back wages. It is a virtual certainty, however, that there will be administrative legal action (civil money penalty assessment). In exchange for agreeing to not file suit, the WHD may require that the employer sign a stipulation of compliance.

Falsification or concealment is how an employer “can write his/her own ticket” to a U. S. District Court. Such cases not only fit the “potential litigation” criteria for civil litigation, they may be elevated into the criminal category. Even so, such an employer might be able to persuade the WHD to refrain from development of the case for criminal prosecution, or filing a civil suit, by agreeing to comply, pay back wages, and sign a stipulation of compliance.

An employer who does not agree with WHD assertions of violations may elect to have a court decide whether violations have actually occurred and whether current practices must be modified. Therefore, refusal to comply is not ordinarily considered for criminal action (absent falsification or other potentially criminal factors). However, when an employer does not agree to comply with the investigator’s instructions regarding how to achieve compliance, civil litigation is essentially automatic. There are exceptions. DOL often avoids filing suit if the outcome is in doubt, such as when there is an unsettled question of law. The WHD District Director mails notification letters to affected employees (advising them of their right to sue for back wages, liquidated damages, court costs, attorney fees, etc.).  

Even though DOL has elected to not pursue a “refusal to comply” case through the courts, civil money penalties may be assessed (if violations were repeated or willful). When the employer is subsequently reinvestigated, civil money penalty assessment is extremely likely (if violations have continued).

When an employer agrees to achieve compliance, but declines voluntary payment of back wages, litigation is a possibility. When back wages are substantial, there is a strong probability that DOL will file suit. If the total back pay liability is insubstantial, and none of the other “potential litigation” elements are present, DOL is ordinarily inclined to close the case and mail notification letters to affected employees.  

FLSA litigation by DOL generally extends back three years. The statute of limitations period will ultimately be two years if the court does not find that the violations were willful.

It is possible, in most cases, for an employer to disagree with the assertions of violation, yet avoid or postpone litigation. The following suggestions should be helpful.

First, it is important to ensure that you are in compliance (preferably long before the WHD investigator comes a’ knocking on your door). See the FLSA self audit area of BizKeys. If you are prepared for an investigation, there will probably not be any assertions of violations.

If violations are asserted:

• Listen carefully to the investigator’s presentation, and make meticulous notes. You will not receive a written report.
•  Ask for clarification and explanations if you do not understand why certain practices are being held to be non-compliant.
•  If it is not clear to you that the investigator’s position is correct, request citations in the statute and/or regulations supporting his/her position.
•  At the conclusion of the conference, you have four options: 

                                      Refuse to comply 

                                     Agree to comply  

                                    Do not agree to comply, but request time to consider and research the matter (a week will usually be allowed)

                                    Inform the investigator that you wish to schedule a “second level” conference with WHD District Office management (this will usually be the Assistant District Director who is the immediate supervisor of the investigator             

•   If you have agreed to comply, and if litigation is not already a certainty, the investigator will ask you to agree to pay back wages.
• If you have asked for time to consider the matter (no compliance agreement yet), feel free to raise the back wage issue. However, it is probable that the investigator will not discuss back wages without a compliance agreement.

• Use your time wisely while evaluating your situation. The first step should be to confer with an experienced FLSA consultant and/or engage the services of an employment law attorney. Inform your attorney or advisor that your immediate quandary is whether or not to “agree to comply” and that you need prompt assistance; this cannot be “put on the back burner.” Keep in mind that you have not yet promised the WHD that you will achieve compliance; under those circumstances, litigation can happen quickly.

• I do not recommend, in most cases, that the employer ask to meet with District Office management prior to performing independent research and securing technical advice and assistance.

• You may subsequently ask to meet with District Office management even if the investigator has allowed some time for you to make a decision.

• If you ultimately schedule a meeting with District Office management (i.e., a “second level” conference), your employment law attorney should be present (in my opinion).

• Convincing the Assistant District Director that the investigator is incorrect will not be an easy task. It is futile to schedule this meeting unless you are quite certain that there are clear errors in the investigator’s assertions.

 The preceding discussion concerns an employer’s probable options when future compliance is in question. The same options are generally available when the dispute concerns payment of back wages. The focus should be to avoid leaving the impression that you are refusing to pay back wages, but that you question the validity of asserted facts, application of the law, or accuracy of computations. If an employer and his/her advisors prepare compelling arguments and present them to the Assistant District Director, there is a possibility that back wages will be reduced. The assertion that back wages are owed, however, will not be dropped unless WHD District Office management is persuaded that the investigator erroneously asserted violations. This is rare, but it happens.

Something to keep in mind – if the investigator refuses to allow you to devote a week or so to ponder the allegations (an immediate decision regarding compliance and/or voluntary payment of back wages is demanded), engage the services of an employment law attorney without delay. The investigator has probably been instructed to submit the case file for “hot goods” action. That type of litigation, and others, will be discussed in next month’s “OFF THE CUFF.”

In summary -

Investigators do make mistakes. They are under time constraints, often leading to failure to fully consider all of the facts or to thoroughly research the law. Do not be reluctant to ask questions, request time to consider your options, seek professional guidance, and/or meet with WHD District Office management. Until you are prepared to suffer the consequences, do not inform the WHD representatives that you will not comply and/or pay back wages. Make it clear that you intend to reach resolution, and the WHD District Office management will usually allow you to present your arguments.

Even when a case meets one or more of the “potential litigation” criteria, the WHD may opt to decline litigation in order to conserve its resources or for the reasons previously mentioned. Civil money penalties (if warranted) will be assessed, and employees will be notified (via letters) of their private right to sue. Such notifications often lead to a very inconvenient, time-consuming, and expensive outcome for the employer. It is usually preferable to nail down the best deal you can get from the WHD, achieve compliance, and pay back wages. This reduces the probability of plaintiffs’ collective action suits.

If back wages are being paid as a result of an investigation, and the investigator does not make available the official receipt forms, you should request them. The form number is WH-58.

This article refers to WHD procedures and employer options in typical FLSA investigations. There are sometimes exceptions or unusual circumstances. Further, this is not intended to be an exhaustive treatise on the subject.

I mentioned the possibility that you might be asked to sign a stipulation of compliance. Another document that you will be pressured to sign is a “Summary of Unpaid Wages.” I recommend that you not sign either document until your employment law attorney has advised you to do so.

http://www.dol.gov/whd/regs/compliance/whdfs44.htm is a fact sheet that explains how a typical investigation proceeds.

Next month’s “OFF THE CUFF” will discuss the various types of legal actions utilized by the DOL Wage and Hour Division in order to ensure FLSA compliance, collect back wages, and/or to collect civil money penalties.

The author is retired from an enforcement career with the DOL Wage and Hour Division. You may contact him at Morris@FLSA-SCA.com or 866-895-3572.

   The National Labor Relations Board (“the Board”) recently held that an employer violates the National Labor relations Act (“the Act”) by announcing during a union organizing campaign that it hired a bi-lingual human resources manager to improve workplace communications.  The Board found that the hiring was made to address an issue of poor employee communications that existed in the workplace.  The hiring was presented as an improvement in working conditions allowing employees to better communicate with managers.  The Board reasoned that the violation was committed by announcing the change as an improved working condition.  Presumably, hiring a bi-lingual manager would have been legal if the employer had not made a big fuss over it and presented it as a solution to an employee grievance.  What employers should take away from this is that if a campaign issue involves the hiring or firing of management personnel to appease employees, do not make the change and tell employees it was done to remedy their dissatisfaction.  If the change is made and the employees figure it out on their own, the same benefit will be attained.  The case is Newberg Eggs, Inc., 357 NLRB No. 171. 

Decision on Work Rules:

   The Board has ruled that a work rule stating: “unauthorized soliciting of contributions on company premises” was prohibited violated Section 8(a)(1) of the Act because it was not limited to working time and because it expressly restricted protected activity.  Even though it was limited to solicitation of contributions, a solicitation of contributions to support an incipient organizing drive, to help a fired fellow employee, and for many similar purposes is protected. 

   A rule subjecting employees to discipline for the “inability or unwillingness to work harmoniously with other employees” was, also, found to violate the Act because the rule was sufficiently imprecise such that it could encompass any disagreement or conflict among employees, including those related to discussions and interactions protected by Section 7.  The Board’s precedent for finding a violation was a case holding that a rule prohibiting “loud, abusive or foul language” was a violation because it did not define abusive or insulting language.  Good thing the Board doesn’t have jurisdiction over kindergarten children. 

   Employers will be glad to know, however, that work rules prohibiting “leaving a department or the plant during a working shift without a supervisor’s permission” and “stopping work before a shift ends or taking unauthorized breaks” are valid, but a rule that simply prohibits “walking off the job” is a violation because employees will think that they are not permitted to strike since the term “walk out” is commonly used as a synonym for a strike.  The case is 2 Sisters Food Group, 357 NLRB No. 168.

 Back Pay to Undocumented Immigrants:

   The Supreme Court ruled in Hoffman Plastics Compound v. NLRB that the Board cannot award back pay to employees who were not authorized to work in the U.S.   The current Board does not like this decision and is doing what it can to limit it.   Recently, the Board ruled that a Respondent employer cannot raise a defense to back pay liability based on an employee’s legal work authorization status unless the employer can show facts at the stage in which it is called upon to raise all of its defenses that the employee was not allowed to lawfully work in the country.   In some cases, this ruling will result in undocumented workers receiving back pay awards even though the Hoffman decision prohibits that result.  Member Hayes dissented and stated that Congress, not an administrative agency, is the appropriate body to re-write the law if it disagrees with the Supreme Court.  The case is Flaum Appetizing Corp., 357 NLRB No. 162.   Given that the Board will prohibit an employer from inquiring into lawful work status unless it knows for certain at the time it has to file its answer that the employee is here illegally, it is fairly certain that the Board will not make any independent inquiry of anyone. 

 For more information or any questions concerning labor law or related issues, please contact Bill Trumpeter at 423-785-8318.   The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations.  As always, readers should consult a qualified attorney for specific legal guidance.  Should you need assistance, please call 1-800-275-7303.ext 318

Unless you want a union, do not accept the cards or the petition from the individual.   What he wants you to do is accept the cards and say that it looks like the employees want a union.   If you do that, you may very well have granted recognition  to the union as your employees’ exclusive bargaining agent. 

If presented with such a situation, tell the person presenting you with the cards or petition that you do not believe that a majority of your employees would voluntarily designate a union as their exclusive representative and that if the union wants to waste its time it should file a petition with the National Labor Relations Board (NLRB) and ask for a secret ballot election so your employees can make a voluntary, uncoerced decision in the privacy of a voting booth. 

The next thing you should do is call your labor lawyer because you are already behind the eight-ball and will have a lot of campaigning to do to reverse the momentum the union will have established.   

For more information or any questions concerning labor law or related issues, please contact Bill Trumpeter at 423-785-8318

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations.  As always, readers should consult a qualified attorney for specific legal guidance.  Should you need assistance, please call 1-800-275-7303.ext 318.

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• The National Labor Relations Act provides for a pre-election hearing to determine whether there exists a “question of representation” to be resolved by an election. Currently, parties can raise issues at the hearing that are not relevant to that question, which can result in unnecessary, expensive, and time-consuming litigation for the Board and all parties. The first proposed amendment gives the hearing officer authority to limit the hearing to matters relevant to the question of whether an election should be held.
   
• Most cases involve only routine issues based on well-known principles of Board law. In such cases, regional directors can reach a fair and sound decision based on the record from pre-election hearing, including closing arguments. Parties may currently file briefs after the hearing, but the briefing adds nothing to the regions’ decision-making process in such routine cases and substantially increases the parties’ litigation costs. The second proposed amendment authorizes the hearing officer to decide whether to permit briefing depending on whether the case presents issues that would benefit from it.
   
• The Board’s current rules require parties to file two separate appeals to seek Board review of pre-election issues and issues concerning the conduct of the election, respectively. Appeals concerning pre-election issues must be filed before the election, and are often subsequently mooted by the results of the election. The third amendment reduces unnecessary litigation by consolidating the two appeals into a single post-election procedure and by avoiding altogether appeals of issues that become moot as a result of the election.
   
• The fourth amendment follows directly from the third, by ending the practice of delaying the scheduling of elections to permit time for a pre-election appeal. (In any event, even under the current rules, the delay does not serve its stated purpose because the Board typically permits the election to be conducted and directs that the ballots be impounded while it considers the appeal.)
   
• In keeping with the effort to avoid multiple appeals in a single case, the fifth amendment would narrow the circumstances in which a request for special permission to appeal to the Board would be granted. Such permission would be granted only in extraordinary circumstances when it appears that the issue addressed in the appeal would otherwise evade review. (Board review would remain available following the election on all issues for which permission to appeal was denied or not sought.)
   
• The sixth amendment would simplify appeal procedures and avoid litigation of appeals that do not present a serious issue for review. It would do this by giving the Board discretion to hear and decide any appeals to the election process, whether they concern pre-election or post-election issues. 

     What this means to employers is that the time between the filing of the petition and the holding of the election will be substantially reduced.   Employers wishing to remain union free will have to be proactive.   Supervisors and management should be trained to recognize early warning signals of possible union activity and be  equipped  with information as to what they can and cannot do in such circumstances.  Work rules and policies need to be reviewed for legality and implemented before the union comes knocking.

     The current Board’s labor law reform has occurred through issuance of decisions in unfair labor practice cases that overrule employer-friendly precedent in favor of labor unions, aggressive use of discretionary injunctive procedures, enhanced remedial measures, and controversial rule-making efforts such as the new quickie election rules and the notice posting rule that was adopted earlier this year.

For more information or any questions concerning labor law or related issues, please contact Bill Trumpeter at 423-785-8318

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations.  As always, readers should consult a qualified attorney for specific legal guidance.  Should you need assistance, please call 1-800-275-7303.ext 318.

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The 3-to-1 decision in Specialty Healthcare and Rehabilitation Center of Mobile finds that Certified Nursing Assistants at a nursing home may comprise an appropriate unit without including all other nonprofessional employees. It overrules the Board’s 1991 decision in Park Manor, which had adopted a special test for bargaining unit determinations in nursing homes, rehabilitation centers, and other non-acute health care facilities.  The majority stated that the appropriate unit determinations for  employees in non-acute care medical facilities will be subject to the same “community of interest” standard  traditionally applied at other workplaces.  The NLRB ruled that where an employer argues that a proposed unit inappropriately excludes certain employees, the employer will be required to prove that the excluded employees share “an overwhelming community of interest” with employees in the proposed unit.  

In dissent, Member Brian Hayes stated that he would adhere to Park Manor. “which established a balanced legal standard maintained in non-acute care health care unit cases without controversy for 20 years (and without any objection from the party seeking review in this case).” 

He also disagreed that the majority’s statement of the community of interest test was consistent with precedent.  In his view, “the majority accepts as the definitive standard for unit determinations in all industries an ‘overwhelming community of interest’ test that will make the relationship between petitioned-for unit employees and excluded co-workers irrelevant in all but the most exceptional circumstances.

As Member Hayes points out, the test approved by the majority not only impacts cases in the non-acute health care area, but all employers.  If the “overwhelming community of interest” standard, which the majority says is “existing” law, is followed, it would mean that in almost all cases, the union’s petitioned for unit will likely be deemed appropriate, despite the fact that Section 9(c)(5) of the Act itself says that the extent of the union’s organizing is not controlling.  While extent of organizing may be considered as a factor, when this majority says that the employer will have to prove an “overwhelming community of interest” of employees outside the union’s proposed unit in order to get them in the unit, that is code for meaning the employer loses.   This decision could result in a union going in any company and picking off distinct groups of employees in a plant or office, petitioning for an election in that small unit, then moving on to the next group.  Couple this decision and the NLRB’s expected issuance of the proposed ”quickie election” rules and employers will have little opportunity to defend against the fracturing of its workforce into many small units of employees who have a community of interest among themselves, to the exclusion of other employees who will also be impacted by the decisions of the unit petitioned for by the union.    The standard set forth by the majority effectively eliminates Section 9(c)(5) from the Act.