NLRB Issues a Series of Employer-Friendly Decisions

Q.  I heard there have been some significant National Labor Relations Board decisions recently. What do I need to know about them?

A.  Over the past few months, the Board’s Republican majority has issued a series of employer-friendly decisions. They involve various topics, including expansion of employer property rights, classification of workers as independent contractors, and the scope of a proper petitioned-for unit.  These decisions demonstrate it is likely the Board will continue to overturn union-friendly precedent and issue decisions that allow employers more business flexibility.

Below is a summary of some of these key opinions.

Protection of Employer Property Rights Expanded

The Board has issued a series of decisions that expand an employer’s property rights in connection with non-employee union activity. For example, in Bexar County Performing Arts Center Foundation d/b/a Tobin Center for the Performing Arts (368 NLRB No. 46), the Board analyzed whether a property owner violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by barring the off-duty employees of an on-site contractor from leafleting on its property.

The majority determined that contractor employees generally are not entitled to the same Section 7 access rights as the property owner’s own employees. In reaching this decision, the Board adopted a new standard, holding that a property owner may exclude from its property off-duty employees of an on-site contractor seeking access to the property to engage in Section 7 activity unless (1) those employees work both regularly and exclusively on the property, and (2) the property owner fails to show that they have one or more reasonable alternative means to communicate their message without trespassing on the employer’s property (i.e. use of adjacent public property, newspapers, radio, television, billboards, and social media).

Soon after the Bexar County decision, the Board went a step further in Kroger Limited Partnership I Mid-Atlantic (368 NLRB No. 64), ruling that businesses may lawfully limit the rights of non-employee union supporters to access company property that otherwise is open to the public.  Specifically, it found that Kroger did not violate the NLRA when it removed non-employee union supporters from the parking lot of a Kroger store even though the store permitted civic and charitable organizations to solicit and distribute in the parking area and in front of the store.

In reaching this decision, the Board noted that based on precedent, to establish that a denial of access to non-employee union agents was unlawful, a party must prove that an employer denied access to other non-employee union agents while allowing access to other non-employees for activities similar in nature to those in which the union agents sought to engage. The majority further stated that, consistent with this standard, an employer may deny access to non-employees seeking to engage in protest activities on its property while allowing non-employee access for a wide range of charitable, civic, and commercial activities that are not similar in nature to protest activities.  The Board found that Kroger’s actions were lawful because Kroger had a fundamental property interest in its premises that allowed it to exclude the Union’s solicitor and because the Union’s solicitations were not sufficiently similar in nature to other on-premises charitable, civic or commercial activities that Kroger had previously allowed.

These decisions are demonstrative of the trend toward allowing an employer greater flexibility to regulate non-employee access to the employer’s property under the NLRA. In light of these decisions, employers may distinguish between non-employee activities they will allow and will not allow on their premises.

Worker Misclassification Not a Violation

Proper classification of workers is a fundamental issue under federal labor laws because only statutorily defined “employees” are covered under the NLRA. Under Section 2 of the Act, independent contractors are specifically excluded from the protections afforded to employees.   Employee vs. independent contractor classification issues often arise in the context of determining who is eligible to vote in a union election and in evaluating whether certain workers are protected by Section 8(a)(1) of the NLRA.

In Velox Express, Inc. (368 NLRB No. 61), the Board addressed whether an employer’s misclassification of drivers as independent contractors was a violation of Section (8)(a)(1).  Velox Express operated a courier service and engaged drivers that it classified as independent contractors.  It terminated one of its drivers who, in turn, filed an unfair labor practice charge with the NLRB contesting the lawfulness of her discharge and alleging that her former employer also violated the NLRA by misclassifying her and her coworkers as independent contractors.

The full Board unanimously adopted the Administrative Law Judge’s conclusion that Velox Express failed to establish that its drivers are independent contractors. However, the Board reversed the judge and dismissed the allegation that Velox Express independently violated Section 8(a)(1) by misclassifying its drivers as independent contractors.  It held that an employer’s misclassification of its employees as independent contractors, standing alone, does not violate the NLRA.  The Board explained that an employer’s communication to its workers of its legal opinion that they are independent contractors does not, in and of itself, inherently threaten that those employees are subject to termination or other adverse action if they exercise their Section 7 rights or that it would be futile for them to engage in union or other protected activities.  The communication of that legal opinion is therefore privileged by Section 8(c) even if the employer is ultimately mistaken.

This case is one of a few recent case developments by the Board which positively affects employers faced with independent contractor issues. It demonstrates that this current Republican majority does not disfavor independent contractor relationships.  As a result of this decision, employers who genuinely believe their workers to be independent contractors may share that belief with their workers, even if it ultimately turns out to be wrong, without fear of being prosecuted by the Board’s General Counsel, provided the statements are not expressly or implicitly linked to the workers’ engaging in NLRB protected activities.

Limits to “Micro-Unit” Strategy

In The Boeing Company (368 NLRB No. 67), the Board clarified the traditional community-of-interest test for determining whether “micro-units” of employees within a larger workforce can organize on their own.   In that case, the union attempted to utilize a “micro-unit” strategy to target a petitioned-for unit made up of only two job classifications from a significantly larger workforce.  The Board concluded that the petitioned-for unit was not an appropriate unit for purposes of conducting a union election.

The Board set forth a clarifying, three-step analysis for determining whether a petitioned-for unit is appropriate. Under that analysis, the Board will consider:

  • Whether the members of the petitioned-for unit share a community of interest with each other;
  • Whether the employees excluded from the unit have meaningfully distinct interests in the context of collective bargaining that outweigh similarities with unit members; and
  • Guidelines the Board has established for appropriate unit configurations in specific industries.In reaching its decision, the Board found that the mechanics in the petitioned-for unit did not share an internal community of interest and did not have sufficiently distinct interests from those employees excluded from the petitioned-for unit. The Board also concluded that there were no appropriate-unit guidelines specific to the employer’s industry.This decision is an indication that smaller units will face increased scrutiny and may be easier for employers to challenge.

Leigh McMonigle

Comments on Social Media about an Employee’s National Origin Could Lead to Allegations of Discrimination

Q: Over the summer, I saw that President Trump tweeted that four minority Democrat congresswomen should “go back” to where they came from. What Human Resources lessons can be learned from the President’s tweet?

A: In July 2019, President Trump tweeted that certain Democrat congresswomen “who originally came from countries whose governments are a complete and total catastrophe, the worst, most corrupt and inept anywhere in the world” should “go back” to the “totally broken and crime infested places from which they came.” The President affirmed that he was referring to Representatives Ayanna Pressley (D-MA), Ilhan Omar (D-MN), Alexandria Ocasio-Cortez (D-NY), and Rashida Tlaib (D-MI).  All are U.S. citizens, all are minorities, and only one was actually born outside the United States.

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination and harassment on the basis of race, color, sex, religion, and national origin. As many commentators have noted, U.S. Equal Employment Opportunity Commission (EEOC) guidance specifically provides that the following types of conduct are examples of harassment based on national origin: “insults, taunting, or ethnic epithets, such as making fun of a person’s foreign accent or comments like, ‘go back to where you came from,’ whether made by supervisors or by co-workers.”  If particularly severe or pervasive, such conduct could rise to the level of unlawful harassment. However, a company does not need to wait for an employee’s conduct to become illegal before taking action.

While we do not take a position on the politics of the current administration, the President’s tweets, if made by a manager or coworker, could be considered a Title VII violation or a violation of a company’s nondiscrimination and anti-harassment policies. In fact, there are numerous cases where companies faced significant liability as a result of employee comments similar to those made by the President.  In just one example from 2012, a California medical center paid nearly $1 million to settle a national origin discrimination suit where Filipino-American hospital workers alleged that they were told to “go back to the Philippines.” See also Cerezo-Martin v. Agroman, 213 F. Supp. 3d 318 (D.P.R. 2016) (denying defendant’s summary judgment motion as to plaintiff’s hostile environment claim where there was evidence that plaintiff was repeatedly told “to ‘go back to [his] country’ and to stop taking jobs away from Puerto Ricans.”); Brewster v. City of Poughkeepsie, 447 F. Supp. 2d 342 (S.D.N.Y. 2006) (trial court refusing to overturn jury verdict for plaintiff on a national-origin based hostile environment claim where there was testimony that defendant’s employees said to plaintiff “Speak English. Go back to your own country if you want to speak Spanish. You’re in our country.”

In addition, the fact that discriminatory comments may be made outside of the workplace on social media neither insulates an employer from liability nor protects an employee who may have violated company policies.

But wait—what about free speech?

Despite what many employees may think, in nearly all instances, the First Amendment does not apply in the private sector workplace and workers are afforded no protection for their speech—especially speech that is harassing or discriminatory.

If an employee or supervisor in your workplace makes comments similar to those made by the President, your Human Resources Department should conduct a thorough investigation and then take prompt remedial action—up to and including termination—if it is determined that company policies were violated. Failure to act could result in your company facing an EEOC charge or lawsuit for national origin-based discrimination or harassment. One of the best ways to prevent discriminatory comments and behavior from occurring in the workplace is through preparation and training. The attorneys in Pepper Hamilton’s Labor and Employment Practice Group are here to help you update non-discrimination and anti-harassment policies, provide training to employees and managers, assist with investigations, and provide advice when employees make insensitive remarks.

Lee Tankle

New York Now Prohibits Hairstyle Discrimination

Q: I heard New York prohibits employers from discriminating based on hairstyle.  What does that mean?

A: In July 2019, New York State passed legislation that amended the definition of race under the New York State Human Rights Law (“NYSHRL”) to include “traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.” “Protective hairstyles” include, but are not limited to, braids, locks, and twists.  The legislation became effective upon signing.

Although employees previously could allege that employer grooming and dress code policies were discriminatory based on race, the burden was on the employee to show the link between the prohibited hairstyle and race. The legislation eases this burden by making the connection explicit.

The New York state legislation follows the lead of New York City, which released legal enforcement guidance in February 2019 that specifically prohibits workplace grooming policies that may discriminate against Black people, and more generally prohibits workplace grooming policies that target communities of color, religious minorities, or other communities protected under the New York City Human Rights Law. For more details on New York City’s enforcement guidance, please see our previous post here.

California recently passed similar legislation, which goes into effect on January 1, 2020. The Creating a Respectful and Open Workplace for Natural Hair Act (“CROWN”) amends the definition of race under the Fair Housing and Employment Act to include “traits historically associated with race, such as hair texture and protective hairstyles,” including “braids, locks, and twists.”  CROWN also amends California’s Education Code to prohibit such discrimination in public schools.

To ensure compliance with these laws, employers should review personal appearance and grooming policies to ensure they are facially neutral and are applied in a uniform manner. For example, in a workplace where hair must be tied back for hygienic and/or safety reasons, a policy should simply state that hair longer than a certain length must be tied back, rather than prohibiting or calling out specific styles.  As another example, employers must ensure that a policy that requires “professional” hairstyles is not written or enforced in a manner that disproportionately affects people of any particular race.

Jessica Rothenberg

Agreement Between the Parties Dictates Whether a Third Party Bonus Should be Included in the Calculation of Overtime Pay

Q.  A client of my company asked whether it could offer production bonuses to our employees who deliver their work product prior to the deadline.  Does the FLSA require my company to account for these third-party bonuses when calculating the regular rate of pay for overtime purposes?

A.  The answer to your question depends on the particular circumstances, according to the Third Circuit. In a case of first impression, Secretary U.S. Department of Labor v. Bristol Excavating, the Third Circuit Court of Appeals addressed the question of whether an employer must treat bonuses provided by third parties as “remuneration for employment” when calculating employees’ overtime rate of pay.

The defendant in the case, a small excavation company, contracted with a natural gas company to provide equipment, labor, and other services at a number of drill sites in Pennsylvania. At the drill sites, the defendant’s employees frequently worked twelve-hour shifts, often for two-week periods without a day off.  The natural gas company maintained a bonus program by which its own employees received “Pacesetter” bonuses for completing their work quickly, along with other safety and efficiency-related bonuses.  Following inquiries by the defendant’s employees, the gas company offered to extend the program to the defendant’s employees and the defendant acquiesced.  The defendant agreed to handle the administrative chores necessary for its employees to receive the bonuses, specifically, by rolling the bonuses into its regular payroll process and distributing payment to its employees after making the routine payroll deductions.  However, the defendant did not include the bonus payments from the gas company when calculating the regular rate of pay for overtime purposes.

The U.S. Department of Labor (DOL) audited the defendant’s offices as part of a routine inspection to assure that it was properly calculating overtime compensation. The auditor determined that the bonuses should be added to the calculation of the employees’ regular rate of pay.  When the company refused, the DOL filed suit, alleging that the company violated the FLSA’s overtime provisions.

Under the Fair Labor Standards Act (“FLSA”), employers must pay employees one-and-a-half times their regular rate of pay for all hours worked above 40 in a work week. “Regular rate” includes “all remuneration for employment paid to, or on behalf of, the employee.”  However, “remuneration for employment” is not defined in the overtime provisions or elsewhere in the FLSA.

The DOL asserted that employers must include bonuses from third parties in the regular rate of pay when calculating overtime pay, regardless of what the employer and employee may have agreed. Agreeing with the Department of Labor, the district court concluded that the incentive bonuses should have been included in the regular rate of pay because they were remuneration for employment and did not qualify for any of the statutory exemptions.

On appeal, however, the Third Circuit decided otherwise. The court held that a third-party payment qualifies as a remuneration for employment only when the employer and employee have effectively agreed that it will.  In the absence of an explicit agreement between the parties, the courts should look for an implicit agreement based on a holistic consideration of the particular facts of each case.  Factors for the court to consider include: (i) whether the specific requirements for receiving the payment are known by the employees in advance of their performing the relevant work; (ii) whether the payment itself is for a reasonably specific amount; and (iii) whether the employer’s facilitation of the payment is significantly more than serving as a pass through vehicle.  The more involved an employer becomes in facilitating the bonus or dictating its terms, “the clearer it becomes that the employer is invested in the arrangement in a way that could be called an implicit agreement with the employees.”

With these points in mind, if your company does not wish to include third-party bonuses in the regular rate of pay calculation for overtime purposes, the employer should have the employee agree in writing that such bonuses do not qualify as remuneration for employment. In addition, employers should analyze each payment carefully to ensure that it satisfies the Third Circuit test.  In any event, the less involvement the company has in facilitating bonus payments, the better, given that “an employer’s role in initiating, designing, and managing the incentive bonus program will likely be of high importance.”  We recommend consulting with counsel about how the Third Circuit’s decision in Bristol Excavating applies to your specific situation.

Rogers Stevens

 

New DOL Overtime Rule Takes Effect January 1, 2020

Q.  Has the salary threshold increased for exempt status under the Fair Labor Standards Act?

A.  On September 24 — more than five years after the Obama administration first proposed updating the overtime regulations of the Fair Labor Standards Act (FLSA) — the U.S. Department of Labor (DOL) released the final version of its long-anticipated rule expanding overtime eligibility for certain employees making less than $35,568 per year. The final rule is largely unchanged from the proposed rule released in March 2019, and the dollar amounts for the exemptions are lower than those in the rule published by the Obama administration in May 2016 — a rule that was enjoined shortly before it was scheduled to go into effect.

For more information, click here.

Christopher J. Moran and Lee E. Tankle