Justice Kennedy’s retirement will create ideological consequences, but what about in the Labor and Employment arena? How have the recent Supreme Court decisions changed the landscape in employment law? Has the NLRB changed its tune regarding handbook policies? These questions and more are discussed below in Pappas & O’Connor’s 2018 Summer Labor & Employment Update.
WHAT DOES JUSTICE KENNEDY’S RETIREMENT MEAN IN THE LABOR & EMPLOYMENT CONTEXT?
With many of the labor and employment issues determined by the Supreme Court and NLRB guidance being overshadowed by Justice Kennedy’s retirement, it is important to look back to look forward. Kennedy’s retirement will have broad ideological consequences, but in relation to labor and employment issues – – not as much. In the most recent term, Kennedy stayed consistent and voted with conservative justices in Janus v. AFSCME Council 31 and Epic Systems Corp. v. Lewis. Kennedy also sided with the conservative justices in significant past cases, including in Wal-Mart Stores, Inc. v. Dukes in 2011, a decision that narrowed the definition of the commonality requirement of class actions. Yet, in one analysis by BNA, he was thought to be more even handed in employment discrimination cases. Kennedy’s retirement may have the most impact with respect to civil rights issues, where Kennedy was the author of many of the Court’s opinions protecting the rights of the LGBTQ community.
SUPREME COURT RULING ON UNION FEES ISSUE
In what the Washington Post deemed the “biggest labor case of the century,” the Supreme Court has issued its ruling in Janus v. AFSCME, the high-profile case involving labor laws, fair share fees, and the First Amendment. How will this impact labor and employment laws, and what does this mean for you and your business? If you are in the private sector, this decision has little, if any, immediate consequence. If you are in the public sector arena, it has a far reaching impact.
Janus v. AFSCME is a case that explores the controversy of fair share fees in Illinois. A fair share fee is a fee paid to the union by members of a bargaining unit who have not joined that union for services and benefits that the union has negotiated for all members of the bargaining unit. The fair share fee is required by the agency shop provision of the collective bargaining agreement.
Fair share fees have been criticized by some as a violation of the First Amendment. Many non-union bargaining unit members argue it is unconstitutional to require payment for a group with whom the member does not identify. The public sector unions disagree, arguing that the fees are constitutional because they prevent free riders: non-union bargaining unit members who benefit from the union’s services but are not required to pay for the services.
Janus v. AFSCME was initiated in February 2015 by Illinois Governor Bruce Rauner, who filed suit in Chicago challenging the constitutionality of the collection of fair share fees. In May 2015, the U.S. District Court dismissed Rauner from the case and granted Mark Janus the right to intervene.
Janus is a child support specialist with the Illinois Department of Healthcare and Family Services. Though not a member of the AFSCME union, Janus was nevertheless subjected to union fair share fees that were automatically deducted from his paycheck. Janus filed suit as he did not believe AFSCME represented his views and thus believed the collection of such fair share fees to be a violation of his First Amendment free speech rights under the Constitution.
In February 2016, Justice Antonin Scalia passed away and President Trump nominated Justice Neil Gorsuch who was confirmed in April 2017. The Supreme Court, having a full nine-justice bench, agreed to consider Janus v. AFSCME in September 2017 and the case was argued in February 2018.The outcome of this case was highly anticipated.
On June 27, 2018, in a 5-4 decision, the Supreme Court ruled in favor of plaintiff Mark Janus, ruling that, “neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay.” The Court ruled that compelling the payment of fair share fees from workers who choose not to join the union representing them is a violation of the worker’s free speech rights. Further, the Court stated its previous decision upholding such fees was wrongly decided and is now overruled, concluding “the judgment of the United States Court of Appeals for the Seventh Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.”
The ruling could potentially diminish labor unions’ membership and political power. For public sector employers with workers who have chosen not to join their union, it is essential to understand how this ruling will affect wages and payments.
CLASS ACTION WAIVER CASES BEFORE THE SUPREME COURT
In a decision that has a much broader impact on the private sector, Epic Systems Corp v. Lewis, the Supreme Court held individual arbitration agreements with a waiver of class action rights enforceable. Practically speaking, if you are an employer with a significant non-exempt workforce, and do not currently have your employees sign arbitration agreements, you should strongly consider doing so immediately.
In 2014, Epic Systems Corporation (hereafter, Epic) a Wisconsin health care software company, created a new employee policy requiring employees to arbitrate claims and requiring that arbitrations be individual rather than by class action or collective action. Epic notified its company via an email that stated employees were, “deemed to have accepted this Agreement if they continued to work at Epic.”
In February 2015, Jacob Lewis, a technical writer for the company who had previously agreed to the terms within the new employee policy, brought a collective action suit with other technical writers, challenging Epic’s alleged failure to follow federal and state overtime laws. In an attempt to dismiss the lawsuit, Epic filed a motion contending Lewis was prevented from taking collective action because of the company’s individual arbitration agreement.
The district court found the waiver unenforceable, ruling that the individual arbitration agreement violated Sections 7 and 8 of the National Labor Relations Act (NLRA). Section 7 of the NLRA states, “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Further, Section 8 of the NLRA protects employees from any employer action that, “interferes with, restrains, or coerces employees in the exercise of the rights guaranteed in Section 7” and proscribes the action as “an unfair labor practice.”
Epic appealed and argued that the court erred in prohibiting the enforcement of the agreement under the Federal Arbitration Act (FAA) and further argued the FAA overrides the NLRA. The United States Court of Appeals for the Seventh Circuit affirmed the district court’s decision, “because it precludes employees from seeking any class, collective, or representative remedies to wage-and-hour disputes, Epic’s arbitration provision violates Sections 7 and 8 of the NLRA. Nothing in the FAA saves the ban on collective action.”
The Supreme Court
The case was brought to the Supreme Court after being consolidated with two other cases, Ernst & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil USA, Inc., which resulted in a conflict among appellate courts on this issue.
On a 5-4 vote, the Supreme Court reversed the ruling of the Seventh Circuit and found that under the FAA, arbitration agreements must be enforced. Further, the Court found the rights granted to employees in the NLRA did not conflict with the enforcement requirement under the FAA as the NLRA does not mention class or collective action procedures.
This decision allows businesses to enforce arbitration agreements similar to that of the agreement Epic created. For employers with workforces that lend themselves to wage and hour class or collective actions, implementing arbitration agreements may be particularly appropriate.
NEW GUIDANCE FROM NLRB LESSENS THREAT OF SCRUTINY OF HANDBOOKS
On June 6, 2018, the National Labor Relations Board released a memorandum on how it will interpret whether employers’ workplace rules violate workers’ labor rights. The board overruled a prior decision that placed limits on employer handbook policies that could be “reasonably construed” by workers to limit their right to engage in protected concerted activity—so-called Section 7 of the National Labor Relations Act (NLRA) rights. The memo states “ambiguities in rules are no longer interpreted against the drafter” and generalized employment policies and provisions “should not be interpreted as banning all conceivable worker activity protected by law.”
The following are examples of rules provided in the memo that the Board deemed lawful:
Category 1: Rules that are Generally Lawful to Maintain
- Civility Rules
E.g.: “Behavior that is rude, condescending or otherwise socially unacceptable is prohibited.”
- No-Photography Rules and No-Recording Rules
- Rules Against Insubordination, Non-cooperation, or On-the-job Conduct that Adversely Affects Operations
- Disruptive Behavior Rules
- Rules Protecting Confidential, Proprietary, and Customer Information or Documents
- Rules against Defamation or Misrepresentation
- Rules against Using Employer Logos or Intellectual Property
- Rules Requiring Authorization to Speak for Company
- Rules Banning Disloyalty, Nepotism, or Self-Enrichment
Category 2: Rules Warranting Individualized Scrutiny
Possible examples include:
- Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment and do not restrict membership in, or voting for, a union
- Confidentiality rules broadly encompassing “employer business” or “employee information”
- Rules regarding disparagement or criticism of the employer
- Rules regulating use of the employer’s name
- Rules generally restricting speaking to the media or third parties
- Rules banning off-duty conduct that might harm the employer
- Rules against making false or inaccurate statements
Category 3: Rules that are Unlawful to Maintain
- Confidentiality Rules Specifically Regarding Wages, Benefits, or Working Conditions
- Rules Against Joining Outside Organizations or Voting on Matters Concerning Employer
Although Category 1 and 2 rules may be lawful, it is essential to note that in The Boeing Company Decision, the Board made clear, “that merely maintaining a facially lawful rule does not determine whether the rule was applied lawfully. Thus, [the memo explains] simply because a rule falls in Category 1 does not mean an employer may lawfully use the rule to prohibit protected concerted activity or to discipline employees engaged in protected concerted activity.” Employers may have been granted more leniency when establishing rules, but the application of those rules still must be lawful.
ILLINOIS – MORE REGULATIONS FOR THE WORKPLACE
The Illinois Legislature has been at it again with:
- House Bill 4572. Passed both houses, expanding those employers regulated by the Illinois Human Rights Act from more than 15 employees to more than 1. Rauner has yet to sign it.
- Senate Bill 20. Passed both houses allows Complainants to opt out of the IDHR procedure within 60 days after filing a charge with IDHR to commence an action in Circuit Court. The Bill also increases the time to file a charge from 180 days to 300. Rauner has yet to sign it.
- Pending Bills. Also, even though the Legislature is in turmoil with its own sexual harassment allegations, they have reacted by floating bills that expand who may bring a claim, what constitutes sexual harassment and that expand time to file charges from 180 days to 2 years.
- Amendment to Nursing Mothers in the Illinois Workplace Act. Illinois employers are required to provide nursing mothers with “reasonable break time” to express milk for their infant children, “each time the employee has the need to express milk for one year after the child’s birth.” The previous version of the Act specified that the break time “must, if possible” run concurrently with any break time already provided. The revised bill replaces that requirement with the break time “may” run concurrently with any break time already provided. Further, the revised bill prohibits employers from reducing a nursing employee’s compensation for any hours used expressing milk or nursing. Rauner has yet to sign it.
- Executive Order 18-08. On June 20, 2018, Governor Rauner issued an executive order to eliminate the backlog of over 1,000 cases involving anti-discrimination and equal opportunity complaints at the Illinois Human Rights Commission. According to Rauner, “The Human Rights Commission will have 60 days to create an 18-month plan to eliminate the thousands of backlogged cases that prevent taxpayers from receiving due process, and the assistance they need in their cases.” Executive Order 18-08 mandates coordination between the Bureau of Administrative Hearings, IHRC, and IDHR which includes:
- Drafting or amending legislation, administrative rules, and internal policies to streamline the transfer and administration of cases between IDHR and IHRC.
- Tracking and transparently reporting on backlogs.
- Developing a shared case management system with the Illinois
- Department of Innovation and Technology (DoIT).
- Surveying parties appearing before IDHR and IHRC.
- Participating in training, including Rapid Results training.
- An annual report from the Bureau on the success of coordination and other process improvements, to be filed with the governor and the General Assembly.