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Supreme Court’s new expansive reading of FLSA is applied for first time by a Circuit Court

The Supreme Court held earlier this year in Encino Motorcars, LLC v. Navarro that the Fair Labor Standards Act (FLSA) should no longer be construed narrowly in favor of employees but should, instead, be given a “fair” reading based on its own language. The Supreme Court’s ruling has just seen its first application in a Circuit Court case, entitled Mosquera v. MTI Retreading Co., decided by the Sixth Circuit.

In Mosquera, the employee held an engineering degree but argued he spent less than 50% of his time doing work that required an engineering degree and should, therefore, not have been classified as a professional employee exempt from overtime. The Sixth Circuit disagreed. The Sixth Circuit noted the evidence that had been submitted in support of the employer’s summary judgment motion and dismissed the plaintiff’s own affidavit to the contrary, saying it was “unsubstantiated” and “self-serving.” The Sixth Circuit noted that, prior to Encino Motorcars, it would have looked on the plaintiff’s claim more favorably, interpreting the professional exemption “narrowly,” but under the Supreme Court’s new ruling, it was required to give the law a broader “fair” reading instead. Under the new approach to FLSA, the Sixth Circuit held the employer’s motion for summary judgment was “compelling” and as such, it held, the employee was properly characterized as a professional who was exempt from overtime.

Mosquera is no doubt the first in a long line of cases to come that will take a less “narrow” approach to interpreting FLSA.

Source:  Mosquera v. MTI Retreading Co. (6th Cir. 8/14/18).

Union Leader Salaries Soar

Issued just before the Supreme Court’s Janus decision, a survey of union leader salaries is a stunning bookmark to the Court’s blockbuster decision holding that public employees cannot be required to pay “fair share” fees, much less dues, to unions. The survey is based on public filings by the unions. It lists total compensation packages for the 10 highest paid union presidents, ranging from $449,852 to $792,483, which the survey notes is several times higher than the average salary for CEOs, $196,050, as reported by the U.S. B.L.S. Statistics like this are likely to continue to fuel right-to-work legislation and Janus-related litigation across the country.

Want to hear my thoughts on recent developments at the Supreme Court?

Great morning today discussing the resignation of Justice Kennedy and other recent developments.

Source: 850 KOA, Colorado’s Morning News.

Is this the end of unions in America? The Supreme Court’s “fair share” ruling in five questions

The Supreme Court ruled that unions cannot charge government workers a “fair share” representation fee, much less union dues. The decision may well be beginning of the end for America’s unions, at least as the political and social juggernauts that we’ve come to know.

  1. What’s a “fair share” fee? A “fair share” fee is like dues, but is less than dues. It’s just the portion of dues that represents the union’s cost of representing the workers. A “fair share” fee is often also referred to as a representation fee. Under this ruling a union cannot charge government workers either dues or even just a “fair share” fee.
  2. What was the Supreme Court’s reasoning? Because the First Amendment protects a person’s right to choose whether or not to speak in support of various things. The fact that a union might want to use money to support its political agenda for example might be important for the union, it might even be very helpful to the workers, but particular individuals may choose not to support that speech. Therefore the Supreme Court held that a union can’t force government workers to give it money if the worker doesn’t want to support the union’s speech.
  3. Why does this apply only to government workers? This case was decided under the First Amendment, which only applies as to governmental action. The First Amendment does not protect workers at private companies. This doesn’t mean private-company employees have no rights, they just don’t have First Amendment rights. Instead, they always have the right under federal labor law to refuse to pay full “dues” and instead can pay the reduced “fair share” representation fee, and in some states with right-to-work laws, they can even refuse to pay “fair share” fees.
  4. Why is this case so important? Many commentators think this case signals the end of unionism as America has known it for more than a century. Union representation has been steadily declining for decades. Unions represent only 34% of the government workforce and 6% of the private workforce, with many such private-company workers at construction companies that do work for the government. This case — having given government workers the right to refuse to pay even “fair share” fees — is likely to cause a precipitous decline in the revenue streams for unions overall — the Supreme Court noted these fees have aggregated to “billions of dollars” over the years. The decline in revenue streams is in turn likely to result in a greatly reduced ability for unions overall to support political movements.
  5. Can this decision be overruled by Congress? No, only the Supreme Court can decide what the Constitution does and does not permit, so only a future Supreme Court could reverse this decision.

In announcing this highly controversial 5-4 decision, the majority recognized the impact its ruling is likely to have on unions.

We recognize that the loss of payments from nonmem­bers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members. But we must weigh these disadvantages against the consider­ able windfall that unions have received under Abood for the past 41 years. It is hard to estimate how many bil­lions of dollars have been taken from nonmembers and transferred to public-sector unions in violation of the First Amendment. Those unconstitutional exactions cannot be allowed to continue indefinitely.

In contrast, the dissent noted that, in order to reach this result, the majority had overruled more than 40 years of precedent.

There is no sugarcoating today’s opinion. The majority overthrows a decision entrenched in this Nation’s law—and in its economic life—for over 40 years. As a result, it prevents the American people, acting through their state and local officials, from making important choices about workplace governance. And it does so by weaponizing the First Amendment, in a way that unleashes judges, now and in the future, to intervene in economic and regulatory policy.

Right or wrong, this case is now the Supreme Court’s ruling and likely to have a major impact on unionism in America.

Source: Janus v. AFSCME, case no. 16-1466 (6/27/18).

SCOTUS rules for baker in Masterpiece Cakeshop

By 7-2, the Supreme Court ruled for the baker in the Masterpiece Cakeshop case. All seven of the judges that formed the majority were struck by comments from the Colorado Civil Rights Commissioners that evidenced an anti-religious bias among the Commissioners when they decided the case. The Supreme Court called those comments “inappropriate,” “dismissive,” and “disparag(ing) of religion.”

What were these unacceptable comments? Well, in short, they included what can only be described as a gratuitous rant by one Commissioner about how, in her opinion, “religion has been used to justify all kinds of discrimination throughout history, whether it be slavery, whether it be the holocaust … we can list hundreds of situations.” It really didn’t help when the Commission, faced with three different cases involving bakers who refused to sell anti-gay marriage cakes, held for each of those bakers. The Supreme Court held that, pulling that all together, it seemed the Commission had made its decision not on the evidence and law but “the government’s own assessment of offensiveness.”

Along those lines, Justice Gorsuch, in his concurrence, noted that, if the government could make decisions on the basis of what it deems offensive, freedome of speech and expression would be lost. This is the oft-recognized principle that the only speech that really needs Constitutional protection is offensive speech.

The Constitution protects not just popular religious exercises from the condemnation of civil authorities. It protects them all.

In reversing based on the Commission’s own bias, the Supreme Court never reached the underlying question whether/when does a baker/florist/other expressive craftsman have a First Amendment right to refuse to sell their good/service to a consumer for religious reasons. Instead, the Supreme Court held that the baker had at least been entitled to a fair hearing of that issue, and that the Commission’s own bias had stripped him of that right.

(T)he delicate question of when the free exercise of his religion must yield to an otherwise valid exercise of state power needed to be determined in an adjudication in which religious hostility on the part of the State itself would not be a factor in the balance the State sought to reach. That requirement, however, was not met here. When the Colorado Civil Rights Commission considered this case, it did not do so with the religious neutrality that the Constitution requires.

Justice Kennedy — who has been the Court’s champion of both gay rights and speech rights, as well as religious liberty rights — wrote the majority opinion. He acknowledged that the Court was dodging the real question of how to balance those rights.

The outcome of cases like this in other circumstances must await further elaboration in the courts….

Still, his opinion suggested how he thought the Court should rule in future cases.

Some examples of cases where he suggested future bakers/florists/etc. might lose on the merits included the following:

  • A baker who “refused to sell any goods or any cakes for gay weddings”

Some examples of future cases where bakers/etc. might win included the following:

  • A “refusal to put certain religious words or decorations on the cake”
  • A “refusal to attend the wedding to ensure that the cake is cut the right way”
  • A “refusal to sell a cake that has been baked for the public generally but includes certain religious words or symbols on it”

We may not have to wait long to find out how the Supreme Court will rule on the underlying issues. A similar case — involving a florist from Washington — is already pending a decision by the Supreme Court whether to hear the appeal in the fall.

Separate opinions in Masterpiece Cakeshop seemed to preview how the Justices might vote:

  • Justice Gorsuch wrote suggesting that he is likely to rule broadly for future bakers/florists/etc.
  • Justice Thomas wrote along such lines as well, though his opinion suggested concern over the concept of even trying to protect the rights of a gay couple in this type of circumstance.
  • Justices Kagan and Breyer, who joined the majority in this case, suggested they would lean split on future cases, ruling against bakers/etc., where there is no evidence of anti-religiouis bias among the state agencies.
  • Justice Ginsburg joined by Justice Sotomayor wrote to express their concerns that the anti-religious comments by the Commission, while unacceptable, were simply not so substantial as to warrant reversal; they would have ruled on the merits, and in doing so, for the gay couple who wished to buy the cake.

That means future cases are likely to have 4 Justices inclined to rule for and 4 Justices inclined to rule against the bakers/florists/etc., and as was expected here, Justice Kennedy is likely to be the swing vote. Expect to see him flesh out his balancing test based on those examples.

As for future cases, Justice Kennedy gave one word of warning — frankly simply restating the concern most of America seemingly has had and had hoped the Supreme Court would wrestle with in this decision — that these rights must be balanced such that religious liberty is not so broadly defined that it becomes an easy excuse for discrimination:

And any decision in favor of (a future) baker would have to be sufficiently constrained, lest all purveyors of goods and services who object to gay marriages for moral and religious reasons in effect be allowed to put up signs saying “no goods or services will be sold if they will be used for gay marriages,” something that would impose a serious stigma on gay persons.

Readers of course will note that this concern exists not only as to LGBTQ individuals (which is all that quote discusses) but also individuals on the basis of race, gender, age, etc., and, yes, even religion. It simply cannot be the law that a business may refuse to do business on the grounds that a consumer is of a different race, color, gender or even religion.

Readers should also note that this line of cases isn’t just about consumers, and it certainly isn’t about just cakes. This line of cases has potential to touch all aspects of American life. It cannot be, for example, that a business has a right to refuse to hire someone simply because they assert a religious belief against that person’s sexual orientation, gender preference, race, gender, religion, etc.

Source: Masterpiece Cakeshop, Ltd. v. C.C.R.C., case no. 16-11 (Sup.Ct. 6/4/18).

Supreme Court upholds mandatory pre-dispute arbitration agreements, even when they bar class/collective actions

In a 5-4 decision the Supreme Court may have given employers — at least in some states — to block class and collective actions. The Court ruled that mandatory pre-dispute arbitration agreements are enforceable under the Federal Arbitration Act (FAA), even in employment cases, and even as a block against class/collective actions. The Court had previously so ruled in the context of consumer contracts. In this case, the Supreme Court extended that ruling to employment agreements.

This ruling means companies can now lawfully require — at least under federal law — both consumers (as a condition of buying their product or service) and now employees (as a condition of working for the company) to agree,

  • Before any dispute ever arises,
  • To submit any future possible disputes to arbitration,
  • Instead of litigating them in court, and
  • Unless otherwise spelled out in the arbitration agreement, to waive any future rights to participate in class or collective actions.

In extending its ruling to employment cases, the Court rejected the argument that the National Labor Relations Act protects an employee’s right to join class/collective actions.

Perhaps of greatest importance the Court signaled a sharp curtailing of precedent holding that courts must defer to administrative agencies. That principle is called Chevron deference (after the Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.). Chevron deference has become highly controversial and is seen by conservative legal theorists as the chief vehicle for creation of the so-called administrative state. Here the issue of Chevron deference was raised because the National Labor Relations Board had held that the statute it oversees, the National Labor Relations Act, does include protection for class/collective actions and therefore should have rendered illegal the agreement at-issue. Over a heated dissent, the Supreme Court rejected the argument that the Board’s interpretation of the NLRA was entitled to deference. Whether this portends an end to Chevron deference or will prove an isolated ruling remains to be seen.

A “collective” action is like a class action. Some laws, notably, some wage-hour laws (such as minimum wage and overtime laws) permit “collective” actions instead of class actions. Simply put, the difference is that in a class action, the judge declares the existence of a class, and class members opt out of the class if they do not wish to participate; whereas, in a collective action, members must opt in to join the class.

Employers that have previously been concerned about stepping into the waters of mandatory pre-dispute arbitration agreements may now wish to consult with counsel about doing so. Employers should remember that, although this is a strong case for employers, it does not necessarily apply to claims brought under state laws, and some states, notably both New York and California, have taken strong positions against this type of agreement.

Source: Epic Systems Corp. v. Lewis, case no. 16-285 (5/21/18)

Under the Supreme Court’s new “fair reading” doctrine, will FLSA exemptions be interpreted more broadly?

Historically courts have interpreted the overtime exemptions in FLSA (the Fair Labor Standards Act) narrowly in favor of employees. This “narrow construction” doctrine has made it difficult to treat employees who may be exempt as such unless they clearly fit an exemption. Now, the Supreme Court has rejected the “narrow construction” doctrine, ruling that it has not been “a useful guidepost for interpreting FLSA.”

The Supreme Court held that FLSA’s overtime obligations consist of two basic chunks of statutory language: The first requires employees to be paid overtime; the second chunk of language is a series of exemptions from that general rule. The Supreme Court held that FLSA provided courts with no basis for giving the first chunk of language any greater significance than the second chunk, in other words, to read the overtime requirement broadly at the expense of having to read the exemptions narrowly. Instead the Supreme Court held, both chunks of language should be given equal importance. The Supreme Court called this a “fair reading.”

Those exemptions are as much a part of theFLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”). We thus have no license to give the exemption anything but a fair reading.

Having rejected the narrow-construction doctrine, and instead applying its fair-reading doctrine, the Supreme Court then held that, in this case, service advisors at the car dealership in question qualified for an overtime exemption under FLSA’s special exemption for salesmen at car dealerships.

It is likely this ruling will have substantial impact in all FLSA overtime cases. It will not be limited to the FLSA’s exemption for salesmen at car dealerships. Rather the fair-reading doctrine will substantially expand the reach of all of FLSA’s overtime exemptions.

Source: Encino Motorcars, LLC v. Navarro, case no. 16-1362 (2018).

To be a Dodd-Frank whistleblower, individual must complain to SEC

Dodd-Rank is the nation’s leading securities-related whistleblower law. What if an individual complains, not to the SEC, but to the company at-issue, is a mere internal complaint to the company sufficient to trigger Dodd-Frank’s protections? In a unanimous 9-0 decision, the Supreme Court, after reviewing the text of Dodd-Frank itself, held the answer was clear: Congress wrote Dodd-Frank to protect only complaints to the SEC. Therefore a complaint to the company at-issue, alone, is insufficient to trigger Dodd-Frank’s protections.

The case is also notable for the absence of analysis regarding Chevron deference. Chevron deference is the legal term used to refer to the practice of courts deferring to agency interpretations of statutes. Here, while Dodd-Frank itself clearly required a complaint to the SEC, the SEC had interpreted the language more broadly, saying that a complaint to a company alone should also be protected. The concept of Chevron deference has become quite controversial, and commentators anticipated this might be the case by which the Supreme Court revisited the topic. However, the Supreme Court, having decided the language of the statute itself was clear, had no opportunity to do so. The continuing viability of Chevron deference remains an issue for another case to resolve.

Source: Digital Realty v. Somers, case no. 16-01276 (Sup. Ct. 2/21/18).

Supreme Court holds deadline for appealing a federal lawsuit is not jurisdictional

Prior case law had suggested and many litigators had assumed that the deadline for filing an appeal in a federal lawsuit is jurisdictional, meaning it cannot be waived or extended and must be met at the risk of losing an otherwise meritorious appeal. In a recent case, the appellant requested and received, before her deadline to appeal, a 2-month extension of the deadline to appeal. That extension was one month more than the federal rules allow. Those federal rules are adopted by the courts, specifically the Supreme Court, they are not laws made by Congress.

The appellate court held that the deadline for her to appeal was jurisdictional and therefore the lower court had lacked authority to extend it so long. Accordingly the appellate court dismissed her appeal.

A unanimous Supreme Court disagreed. While the rule is in fact a rule, and failure to file a timely appeal still generally will warrant a dismissal, the Supreme Court held that  the deadline is not jurisdictional. It is merely a rule of court. It may be extended. To be jurisdictional, the Supreme Court held, it would have had to have been the product of Congressional legislation; the Supreme Court held it does not itself have the authority to create jurisdictional deadlines in its own rules. Accordingly, the dismissal of the appeal was vacated.

Source: Hamer v. Neighborhood Housing Services of Chicago, No. 16-658 (U.S. Nov. 08, 2017), Court Opinion

Supreme Court review over benefits liability likely in union jurisdictional disputes

Sometimes, companies sign collective bargaining agreements (CBA), not realizing that each promises the same work to different unions. In this case, the employer allegedly signed one CBA that promised forklift and skidster work to the Operating Engineers and another CBA that promised the same work to Laborers. This can create a jurisdictional dispute; in other words, it can lead the two unions to argue over the work.

Under section 10(k) of the National Labor Relations Act (NLRA), the National Labor Relations Board (NLRB) has authority to decide which union gets the work in a jurisdictional dispute.

In this 10(k) case, the Board decided that the Operating Engineers not the Laborers had the better claim to forklift and skidster work. Despite the Board’s ruling, the Laborers sued the company for benefits under its collective bargaining agreement. In effect, the Laborers argued that the Operating Engineers could have the work, but the company should have to pay benefits to both unions’ trust funds. The law that governs liability for benefits is the Employee Retirement Income Security Act. The Laborers argued that the Board’s 10(k) authority only extends to determinations of which union has the better claim to the work under the NLRA, not to which union is entitled to benefits under ERISA.

The Circuit Courts are split on the issue. The Third, Ninth, District of Columbia and now Sixth Circuits hold that the Board’s 10(k) ruling governs the ERISA claim, meaning the losing union has no claim to the work under the NLRA or for benefit payments under ERISA. The Seventh Circuit has held otherwise.

The split in Circuit Courts foretells possible Supreme Court review, especially because, here, even as it joined the majority of other Circuits, the Sixth Circuit did so over a strong dissent.

Employers with multiple CBAs should carefully review the way each of their agreements describes covered work. Overlapping descriptions should be clarified.

The case was Orrand v. Hunt Construction Group, Inc., — F.3d — (6th Cir. 2017).

Supreme Court holds that trial court analysis of EEOC subpoena’s enforceability is entitled to discretion, not de novo review.

In a decision that probably surprised no one except the often-reversed and reversed-in-this-case Ninth Circuit, the Supreme Court held that a trial court, not an appellate court, is in the best position to review the particulars of a subpoena.

Interestingly, the decision, which can be seen as reinforcing the EEOC’s ability to issue subpoenas – or at least reducing judicial scrutiny over EEOC subpoenas – was technically a loss for the EEOC. The EEOC had issued a subpoena for contact information for employees who’d taken a certain test, nationwide. The company objected, and the trial court agreed with the company, holding the EEOC’s nationwide request was overly broad. The EEOC then appealed to the Ninth Circuit, which ruled it could review the trial court’s ruling de novo (from scratch) without having to give the trial court any deference. The Supreme Court disagreed and sent the case back to the Ninth Circuit. Now, the EEOC will decide if it still wants the information, and if so, it will have the heavy burden of proving not only that  it is entitled to the information but that the trial court was so wrong when it decided otherwise that it abused its discretion.

While the EEOC lost the Supreme Court case, companies should be mindful of the overarching lesson: The EEOC has broad subpoena power, and a trial court may now be the only judicial body with substantial authority to hear a challenge to an EEOC subpoena.

For an example of how EEOC subpoenas are analyzed for enforceability, see this posting.

The case was McLane Co., Inc. v. EEOC, — S.Ct. — (4/3/17/).