Category Archives: employers

Seventh Circuit Opinion Clarifies What Language is Necessary for Collective Bargaining Agreements to Require Arbitration of Statutory Claims

Contributed by Allison Sues, July 14, 2017

The seventh circuit recently clarified under what circumstance a collective bargaining agreement may restrict an employee’s access to a judicial forum for purposes of resolving statutory claims. In Vega v. New Forest Home Cemetery, the appellate court reversed the lower court’s dismissal of a Fair Labor and Standards Act (FLSA) claim brought by a former employee who had not complied with the grievance process provided in his collective bargaining agreement (CBA).

Luis Vega filed an FLSA lawsuit claiming New Forest failed to pay him for 54 hours of work. Vega was a union member and therefore subject to the union’s CBA which included a mandatory grievance process culminating in arbitration. The district court dismissed Vega’s claim because he had not exhausted his contractual remedies under the CBA.

contract 2

Hand signing contract on white paper

The seventh circuit heard the appeal to answer a straightforward question: “Does the collective bargaining agreement require Vega to resolve his FLSA minimum wage claim through the specified grievance process, or does it allow him to ask a court to resolve that claim regardless of whether he has exhausted his contractual remedies?”

In answering this question, the seventh circuit confirmed several key points:

  1. An employee’s contractual obligations under a CBA are independent from an employee’s statutory rights, such as those under the FLSA, and therefore, a CBA cannot waive an employee’s statutory rights.
  2. However, a contractual agreement to arbitrate a statutory claim does waive that statutory right. Accordingly, a CBA can compel a union employee to pursue statutory claims through arbitration instead of in court.
  3. But, an arbitration provision in a CBA will only operate to compel arbitration of individual union member’s statutory claims if its intent to do so is stated in “clear and unmistakable terms.”

The court concluded that Vega’s CBA did not state in sufficiently “clear and unmistakable terms” that the grievance system, culminating in arbitration, was the exclusive remedy for alleged FLSA violations or pay disputes, and therefore, Vega’s failure to pursue a grievance was irrelevant and he was allowed to pursue his claim in court.

To add clarity, the court provided examples:

  • An arbitration provision that lists a variety of statutory claims and states that all such claims “shall be subject to the grievance and arbitration provision […] as the sole and exclusive remedy for violations” constitutes an explicit waiver of access to a judicial forum.
  • On the other hand, arbitration provisions merely stating that disputes as to any provision of the agreement, pay, or working conditions must be resolved through arbitration is not a clear and unmistakable waiver, because an employee could read the provision as covering only disputes over the CBA requirements themselves as opposed to statutory violations.

Employers should take care when drafting mandatory arbitration provisions to ensure that provisions intended to mandate arbitration of statutory claims are stated in sufficiently “clear and unmistakable terms.”

For Employee to Be Compelled to Pursue FLSA Claims Pursuant to Contract Grievance Procedures, Language of CBA Must be Clear and Unmistakable

Contributed by Carlos Arévalo, June 6, 2017

On May 15, 2017, the seventh circuit ruled that unless the language in a collective bargaining agreement (“CBA”) explicitly states that the employee must resolve his statutory and contractual rights through the grievance procedures in the contract, an employee is free to file suit in court to resolve his statutory claims.

36419114 - hand about to bang gavel on sounding block in the court room

Judge holding gavel 

After being terminated from employment, Luis Vega, a seasonal employee at Forest Home Cemetery, attempted to collect unpaid wages by resorting to the grievance procedures of his CBA.  When these efforts proved futile, Vega filed a Fair Labor Standards Act (FLSA) claim in the United States District Court for the Northern District of Illinois. Vega’s employer filed a motion to dismiss based on Vega’s failure to exhaust the grievance procedures in the CBA. Judge Charles Norgle agreed with the employer’s argument and entered judgment against Vega.

On appeal before the seventh circuit, the employer asserted that the CBA, by establishing a grievance procedure to resolve disputes over pay, compelled Vega to go through said procedure to resolve his FLSA claim. This argument prompted the question of whether the terms of the CBA required Vega to resolve his FLSA wage claims through its grievance procedures, or whether Vega could pursue a FLSA claim in court even if he had not yet exhausted his contractual remedies.

Writing for the court, Judge Ilana Rovner ruled in Vega’s favor reversing the district court ruling. In the decision, the court noted that an employee has statutory as well as contractual rights and that the former are independent from any rights under the union contract. Moreover, citing 14 Penn Plaza LLC v. Pyett, a 2009 Supreme Court case, the court also stated that an agreement to arbitrate statutory claims is enforceable against an aggrieved employee if the language of the agreement to that end is “clear and unmistakable.” In Vega’s case, the court found that generalized language regarding pay disputes was insufficient and that the agreement could not be read to compel an employee to resolve his rights under FLSA through the grievance process. Accordingly, Vega did not have to exhaust his contractual remedies.

The Vega decision clearly establishes that employers looking to have statutory claims resolved through arbitration grievance procedures must pursue explicit language to that end. However, before doing so, employers should carefully consider if arbitration represents the best method for resolution of such claims. Grievance procedures may be suitable for resolution of some statutory rights, but not for others. And while arbitration may expedite claims and even limit remedies, vacating unfavorable awards can be an unsurmountable task. Bottom line, before bargaining for such language, employers should consult counsel to determine the proper course of action.

Does Your Workplace Wellness Program Comply With Existing Laws?

Contributed by Allison Sues, May 23, 2017

The National Business Group on Health’s Eighth Annual Survey on Corporate Health recently revealed the growing prevalence of workplace wellness programs. Many such programs are expanding their aim to not only better the physical health of employees, but also to improve employees’ emotional health and financial security.

employee wellness

Words “Employee Wellness” with a red circle around it

Employers should be cautious that health and wellness programs, particularly those dealing with the physical and emotional health of employees, do not run afoul of existing laws. Many employers offer employees health promotion and disease prevention activities, commonly including programs aimed at smoking cessation, weight management, and physical activity challenges. Any wellness program that asks participants to provide personal medical information or submit to health testing should comply with the Americans with Disabilities Act (ADA), Genetic Information Nondiscrimination Act (GINA), and the Health Insurance Portability and Accountability Act (HIPAA).

Looking closer at the ADA, it generally prohibits employers from making disability-related inquiries or requiring employees to submit to medical exams. The statute exempts wellness programs from this prohibition, stating that employers may “conduct voluntary medical examinations, including voluntary medical histories that are part of an employee health program available to employees at that worksite.” 42 U.S.C. § 12112(d)(4)(B). EEOC regulations confirm that wellness programs must be voluntary, confidential, and reasonably designed to promote health or prevent disease.  29 C.F.R. § 1630.14 (d)(1)-(4).

  • Wellness programs must be used only to improve the health of participating employees. A wellness program is reasonably designed to promote health or prevent disease if it has a reasonable chance of bettering the health of participants, is not overly burdensome, and is not a subterfuge for violating the ADA or any other law.
  • Employers must be able to show how they utilize any collected medical information to better participants’ health. A wellness program will raise suspicion if it collects employee health information through questionnaires, testing, or screening without providing any results, follow-up information, or advice designed to improve the participant’s health.
  • Wellness programs that collect employee health information must be voluntary. This means that employees may choose not to participate in the wellness program without suffering any retaliation or adverse action, including denial of coverage under a group health plan.
  • An incentive-based program may still be deemed voluntary. Use of a financial reward, financial penalty, or other incentive to encourage participation in a wellness program does not render the program involuntary if the maximum incentive does not exceed regulatory thresholds. For employers offering a group health plan, incentives must not exceed thirty percent of the total cost of coverage for the employee (including both contributions from employer and employee).
  • Employers must provide employees with notification about the wellness program. The notification must describe all personal medical information that will be collected and how it will be used. The notification must also explain what measures the employer will take to ensure the information is not improperly disclosed.

Responding to and Preparing for Pending Legislation

Contributed by Noah A. Frank, May 9, 2017

As the Trump administration looks to unburden employers through the rollback of employment-related regulations and Executive Orders, one of the likely results will be an increase in state and local employment legislation and regulation—especially in so-called “blue states.”

16306823 - 3d illustration of scales of justice and gavel on orange background

scales of justice and gavel on orange background

Employers have long been forced to consider state and local laws—in addition to federal—regulating their workforces. Many state and local laws already serve to increase employee protections over and above those contained in federal law counterparts—i.e., adding additional protected classes to EEO laws, or making such laws apply to smaller employers. However, since January 20, 2017, there has been a significant increase in proposed legislation and regulation at the state and local level. Such activity is especially prevalent in Illinois, and the proposed changes would place additional and significant burdens and restrictions on Illinois employers.

One such piece of proposed legislation—an amendment to the Illinois Equal Pay Act (HB2462)—already has been passed by the Illinois House of Representatives. Among other changes, the bill would prohibit employers from seeking wage and salary history from job applicants. The bill is similar to a Philadelphia ordinance we discussed previously. The bill must be passed by the Illinois Senate before advancing to the Governor.

While many cities, counties, and taxing districts (like airports and special economic zones) already have passed mandated sick leave laws, a bill requiring statewide paid sick leave has advanced from the Illinois House to the Senate (HB2771). This proposed legislation, similar to the Chicago and Cook County Earned Sick Leave Ordinances, would apply to nearly every employer in the state and mandate up to five paid sick days per employee. Employees would accrue one hour of leave per 40 hours worked, with an employee becoming eligible to take such leave after 180 days of employment. While the purpose of this bill is to provide some paid leave to employees at the marginal edges, unintended consequences likely could be that employers further restrict hiring, or will be less willing to keep or train marginal employees past the 180-day mark, in order to avoid additional costs associated with providing such mandated leave. This could result in an increase in gig and contingent labor.

Examples of other bills pending in Illinois include HB2802, requiring employers with 25 or more employees within a regional transit area to provide a transportation benefit program, and SB1720, amending the Illinois Wage Payment & Collection Act to increase criminal and other penalties for violation of federal, state, and local wage and hour laws.

What is an employer to do?

First, without employers voicing their concerns, organized labor and other purported workers’-rights groups have the ears of their legislators. Call, email, and mail your representatives.

Second, evaluate your benefits, including your vacation and other leaves. Consider how they will be impacted by proposed mandated benefits, such as paid sick/family leave, transportation benefits, and minimum wage laws.

Third, review your employment and pay policies. With increased scrutiny and penalties in the wage and hour arena, it is imperative that employers take steps to properly classify employees/independent contractors and exempt/nonexempt workers, prohibit off-the-clock work and missed meal breaks, and mandate early reporting by employees of any wage and hour errors.

Finally, consult experienced employment counsel to develop a dynamic, strategic plan to keep your business ahead of the curve—rather than scrambling to react to a government audit or charge, or a civil lawsuit.

It’s Internship Time!

Contributed by Carlos Arévalo, April 27, 2017

56243229 - interns wanted internship training trainee concept

Interns sitting next to a sign that says “Interns Wanted”

It’s that time of the year when college students will come knocking looking for a job or an internship. Depending on the nature of an organization’s business, an unpaid intern might be a great idea. But before organizations start engaging summer intern help, they need to make sure that they are complying with the Department of Labor (DOL) requirements, which include the following six factor test:

  • The internship is similar to training that would be offered in an education environment;
  • The internship experience is for the benefit of the intern;
  • The internship is not displacing a regular employee;
  • The training provided by the employer to the intern may impede employer’s operations;
  • The intern is not expecting a permanent position at the conclusion of the internship; and
  • Both the employer and intern understand that there is no compensation.

Assuming all of these apply, the Fair Labor Standards Act (FLSA) is not triggered and the intern need not be paid minimum wage or overtime. While there are limited exceptions applicable to local government agencies or those who volunteer their time without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations, the six-factor test is generally applicable to most organizations.

In 2015, however, the federal second circuit court issued a decision in a case involving an unpaid intern for the award winning movie Black Swan. There, the court established a more employer-friendly test heavily focused on training, integration of coursework and receipt of academic credit, accommodation to the intern’s academic calendar and the duration of the program as it related to beneficial learning. The court also emphasized that a clear understanding must exists that there is no expectation of compensation. This test was subsequently adopted by the eleventh circuit in August 2016. To date, the DOL has not amended the six-factor test.

Thus, as organizations develop internship programs, special care must be taken to ensure that it is the intern who is drawing the benefit from the program as opposed to the company. In other words, the focus should be on the intern attaining valuable and useful skills and experience in his chosen discipline instead of the company aiming to receive “free labor.” To avoid slipups, interns should not be engaged in menial tasks that can be performed by clerks or other administrative personnel already on board. Such tasks might include making copies, fetching coffee, delivering mail or running errands. Rather, interns should be assigned to career related tasks – for instance an IT intern might assist staff in performing backup and maintenance functions or update user and technical documentation.

Congress has made it clear that its intent is not to discourage volunteerism or to prevent willing individuals from attaining skills and training by serving as unpaid interns. Nevertheless, managers in charge of internship program development should be mindful of the DOL requirements and consult experienced counsel to ensure compliance and design internship programs that truly benefit participants.

The Cat’s Paw Theory Burns Another Employer

Contributed by Amanda Biondolino, April 4, 2017

The “Cat’s Paw Theory” in discrimination cases is based upon a fable in which a clever monkey tricks an unwitting cat to pull chestnuts from a fire, so that the monkey can make off with the chestnuts without burning himself. Courts have applied the “cat’s paw theory” to hold employers liable for discrimination where the decision maker was not biased or based the decision on discriminatory animus, but was influenced by a supervisor or co-worker who was biased or took actions based on discriminatory intent. Just as the unsuspecting cat is left nursing his burnt paws in the fable, an employer can be left nursing its bottom line, having incurred legal liability after being duped into doing someone else’s dirty work.

Workplace investigation

Businessman reviewing documents with magnifying glass

In Fisher v. Lufkin Indus., Inc., No. 15-40428, 2017 WL 562444 (5th Cir. 2017), the U.S. Court of Appeals for the Fifth Circuit recently applied the “Cat’s Paw Theory” to revive an employee’s retaliation claim, finding the employer violated federal law when it fired the employee for selling pornographic DVDs on company time. How is it possible that an employer can face legal liability for terminating an employee who undoubtedly engaged in offensive conduct?  The answer – the black employee was protected from unlawful retaliation for having complained a month prior that he was subjected to race discrimination by a white supervisor who called him “boy”, and the DVD sales were uncovered during a sting operation hatched by a disgruntled co-worker and supervisor who were upset with the employee for complaining about discrimination.

Spurned advances, differing politics, racial prejudices – the workplace is rife with potential powder kegs of animosity that make it difficult to know if your employees are legitimately bringing issues to your attention, or deliberately trying to sabotage a co-worker. Thus, when a company or HR department learns of a work rule violation, especially when it involves an employee who has made a complaint of discrimination, instead of immediately enforcing the rules and disciplining or terminating an employee, HR should make sure to conduct its own independent investigation or review of the alleged work rule violation. The reason for this is that an independent investigation or review can break the causal connection between the protected activity and the adverse employment action that allows the “cat’s paw theory” to be applied.

In the Fisher case, the court held the ad-hoc investigation was carried out by a biased co-worker and supervisor, and was undoubtedly motivated by a retaliatory animus. A prudent employer would not have been so quick to act on the findings of this sting operation, but would have stepped back and “investigated the investigation.” If it had done so, it would have likely discovered that ulterior motives were at play.  In the Fisher case, because the investigation would not have taken place but for the co-worker and supervisors’ desire to retaliate against the complaining employee, the investigative findings that could otherwise have justified termination were “inextricably tied” to the retaliatory animus, and were off limits to the employer.

What if the other employees did not undertake a sting operation, but simply “tipped-off” HR as to the complaining employee’s nefarious conduct?  Can HR undertake an investigation and discipline its employee if needed, or does the employee’s complaint of discrimination, regardless of merit, forever protect him or her from any adverse actions?  The answer is that an employer must be allowed to even handedly enforce its work rules.  As such, an employer should always conduct an independent investigation with neutral investigators entirely separate and distinct from any taint of the initial protected activity. Otherwise, you may just get burned.

Protests Planned for March 8 Are Not A Reason to Deviate from Normal Attendance Policies

Contributed by Suzanne Newcomb, March 3, 2017

11058926 - protesters crowd landscape background illustrationThe organizers of January’s Women’s March on Washington and similar “sister” marches across the country are calling for women to “take the day off from paid and unpaid labor” on March 8, 2017.  Promoted as a “Day Without A Woman” and an “International Women’s Strike,” the protests are scheduled to coincide with International Woman’s Day.

While we do not anticipate the level of participation to be on the scale of the January marches, employers will likely experience higher than normal employee absences and should plan accordingly. As a general rule:

  • Have a backup plan to ensure necessary work gets done in the event you experience an abnormally high number of call-ins on March 8.
  • Do not draw attention to the issue or address the protests in advance. Do not threaten or make generalized statements that could be construed to have a gender bias.
  • Do not highlight the reason for the absence, question motives, or engage in debate about the proprietary of engaging in this type of protest.
  • Apply your standard attendance policies for call in and vacation request procedures. If a participating employee’s absence would ordinarily result in an assessment of points or discipline, act accordingly. Similarly, if a request for time off would otherwise be granted, then it should be granted in this situation.
  • Do not include terms or references such as, “protest,” “strike,” “boycott,” or “women’s march” when issuing disciplinary action or denying requests for time off pursuant to the terms of your standard attendance policy. Such references are unnecessary and could aggravate the situation.

In short, remain calm and follow standard operating procedures.