Today’s Labor Updates:
Labor board limits employers’ ability to replace striking workers
Seventh Circuit Invalidates Class and Collective Action Waivers in Arbitration Agreements
French Labor Unions Call for New Strikes Ahead of Euro 2016
Brazil crisis dims outlook for oil reforms
Labor board limits employers’ ability to replace striking workers
By Sean Higgins (@seanghiggins) • 6/2/16 4:25 PM
The National Labor Relations Board is limiting the circumstances when employers can replace striking workers.
The ruling will give labor unions added leverage over businesses by making it even harder for employers to push back against a strike while staying within the law.
The case involves a basic tension in federal labor law. On the one hand, workers cannot be fired for striking, which is a protected legal right. However, an employer can hire permanent replacements for them if necessary to keep the business going. Employers and unions have long wrangled over which was which during strike.
Generally, striking workers could challenge their replacement only if there was clear evidence of an “independent unlawful purpose” to undermine their labor rights, such as an admission of that by the employer. Otherwise, management typically had the benefit of the doubt. That was a precedent set by the federal labor enforcement agency in a 1964 case called Hot Shoppes Inc.
Under Tuesday’s ruling, the board reinterpreted that decision and lowered the standard to say that intent to violate labor rights can be inferred from the employer’s actions or the actions of the employer’s representatives. “It is difficult to imagine that the [prior] board intended the phrase ‘independent unlawful purpose’ to exempt retaliation for exercising a fundamental [worker] right, and we decline to give it so strained a reading,” the board said.
The ruling came in the case America Baptist Homes of the West and Service Employees International Union. It involved the permanent replacement of striking workers in 2010 by an assisted living facility. A three-member panel of the board voted 2-1 in the case that the employer’s actions were illegal. Chairman Mark Gaston Pierce and Kent Hirozawa, both Democratic members, voted for the union.
The board’s sole Republican member, Philip Miscimarra, filed a lengthy dissent saying the decision undermined the ability of employers to hire replacement workers. “I disagree with my colleagues’ decision because they effectively invalidate an economic weapon that the Supreme Court declared lawful more than 75 years ago,” Miscimarra wrote.
“Under the majority’s decision today, if the employer hires permanent replacements, it appears that any evidence of anti-strike animus will render unlawful the employer’s actions, resulting in potentially debilitating back pay liability,” Miscimarra added.
Legal observers have agreed. Benjamin Sachs, a professor of labor law at Harvard University, said the decision gives a whole new tool to challenge employers’ actions.
“How big an impact will the new decision have? By reinvigorating the ‘independent unlawful purpose’ test, the case makes motive matter again. That’s a big deal,” Sachs wrote in the Onlabor.com, a blog he co-founded.
Joshua Parkhurst, a New York labor lawyer, said the ruling would force companies to think twice before hiring replacements. “The decision may be a significant change to employers who took advantage of the limited guidance provided by the board and court decisions, which allowed for nearly unfettered use of permanent replacements,” he said.
Seventh Circuit Invalidates Class and Collective Action Waivers in Arbitration Agreements
Winston & Strawn LLP – Derek G. Barella, Shane W. Blackstone, Julie M. Capell, Michael S. Chamberlin, John M. Dickman and Sébastien Ducamp
USA June 1 2016
On May 26, 2016, the U.S. Court of Appeals for the Seventh Circuit became the first federal circuit court to hold, consistent with the National Labor Relations Board’s view in D.R. Horton, Inc., that an employer could not enforce an agreement requiring an employee individually to arbitrate his wage and hour claim, because doing so would violate his rights under the National Labor Relations Act (NLRA). To date, all other federal circuit courts that have considered similar disputes have reached a contrary result, setting up a circuit split that may be cited as a basis for seeking Supreme Court review.
BACKGROUND – THE NLRB’S D.R. HORTON PRECEDENT, INVALIDATING CLASS OR COLLECTIVE ACTION WAIVERS IN ARBITRATION AGREEMENTS, AND THE FEDERAL CIRCUIT COURTS’ REJECTION OF D.R. HORTON AND APPROVAL OF CLASS ACTION WAIVERS
Perhaps more than at any point in its 80-year history, the National Labor Relations Board (NLRB or Board) has come under fire in recent years for various actions that have been perceived as hostile to employer and business interests. And on few subjects has the criticism been louder than with respect to the current Board majority’s persistent adherence to the view that arbitration agreements requiring employees to waive employment-related class and collective actions are unlawful – therefore, unenforceable – under the NLRA. The Board has held to this view despite its rejection by five federal circuit courts.
Employers have long favored arbitration agreements as practical tools to mitigate exposure to costly and risky employment litigation, while providing employees a speedy and responsive forum to address workplace disputes. As a substitute for litigation, arbitration is often cheaper and faster, affords greater confidentiality, and is generally considered a more predictable alternative to trial by jury. These perceived benefits were magnified when the Supreme Court ruled in 2011, in AT&T Mobility v. Concepcion, that the Federal Arbitration Act (FAA) preempts state laws that prohibit contracts from requiring arbitration of disputes while disallowing class-wide arbitration.
With its 2012 decision in D.R. Horton, Inc., the NLRB has tried to stymie employer efforts to require individual arbitration of employment claims. The Board instructed in D.R. Horton that “an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator . . . is engaged in conduct protected by Section 7 [of the NLRA].” Thus, the Board held, arbitration agreements requiring claims to be arbitrated only on an individual basis violate the Act.
The Board has consistently applied D.R. Horton to invalidate arbitration agreements purporting to require waivers of employee rights to pursue employment-related class and collective actions, regardless of whether the agreements allow employees to “opt out” of the waivers. However, until last week, the Board’s decisions in D.R. Horton and its progeny have been curbed by the federal courts, which have consistently rejected the Board’s view, and instead upheld class and collective action waivers. The Fifth Circuit, in particular, refused to enforce the Board’s decision in D.R. Horton itself, holding, contrary to the Board, that the NLRA contains no congressional mandate establishing employee rights to engage in collective actions. Therefore, the Fifth Circuit concluded, the FAA and its clear mandate in favor of arbitration have priority.
Late last year in Murphy Oil USA, Inc., the Fifth Circuit issued a similar decision, again declining to enforce a Board order that would have struck down a mandatory arbitration agreement. The Second, Eighth, Ninth, and Eleventh Circuits have followed the Fifth Circuit in rejecting the Board’s view on this issue.
THE SEVENTH CIRCUIT’S DECISION IN LEWIS V. EPIC SYSTEMS CORP., ACCEPTING THE NLRB’S POSITION AND CREATING A CIRCUIT SPLIT ON THE ISSUE
Last week, in Lewis v. Epic Systems Corp., the U.S. Court of Appeals for the Seventh Circuit became the first circuit court to agree with the NLRB and hold that an employer could not enforce an agreement that required an employee individually to arbitrate his or her wage and hour claim, because doing so would violate his rights under the NLRA.
The matter arose when Epic Systems, a health care software company, implemented an arbitration policy mandating that wage and hour claims be brought only through individual arbitration, and that employees waived their right to participate or receive money from “any class, collective, or representative proceeding” concerning such matters. The company did not request or require formal acceptance of this policy by the employees, but stated that employees were “deemed to have accepted the agreement” by continuing to work at Epic. The company did not allow employees the option of opting out of the arbitration provision.
Later, employee Jacob Lewis sued Epic in federal court, alleging he and his fellow software writers were improperly denied overtime pay as a result of being incorrectly classified as exempt under the Fair Labor Standards Act (FLSA) and Wisconsin law. Epic moved to dismiss the action and to compel individual arbitration. The district court denied Epic’s motion, and the Seventh Circuit affirmed.
Contrary to every other circuit to consider the issue, the Seventh Circuit agreed with the NLRB that Epic’s mandatory arbitration program “runs straight into the teeth of Section 7 [of the NLRA].” According to the Seventh Circuit, the NLRA’s legislative history and purpose evince a clear intent to include representative, class, and collective actions as within the scope of “concerted activity” protected by the Act. Moreover, even if Section 7 were considered to be ambiguous in this regard – and the Seventh Circuit emphasized it was not – the Board’s interpretation of the statute as protecting employee rights to engage in representative, class, and collective actions was entitled to Chevron-level deference.
Then, having determined that representative, collective, or class legal proceedings constitute Section 7 activity, the Seventh Circuit had little trouble declaring that Epic’s agreement, which purported to “stipulate away employees’ Section 7 rights,” was unenforceable.
The Seventh Circuit acknowledged in Lewis that its decision goes against the weight of authority, specifically referencing a Ninth Circuit decision holding that an arbitration agreement mandating individual arbitration may be enforceable where the employee has the right to opt out of the agreement without penalty. The Epic agreement included no such opt out provision, however, so the Seventh Circuit determined it had “no need” to resolve any possible differences with the Ninth Circuit’s approach.
The Seventh Circuit likewise acknowledged the Fifth Circuit’s contrary decision in D.R. Horton. Unlike the Fifth Circuit, however, the Seventh Circuit found “no conflict between the NLRA and the FAA, let alone an irreconcilable one.” Rather, the Seventh Circuit reasoned that the FAA’s “savings clause,” which confirms that arbitration agreements are enforceable “save upon such grounds as exit at law or in equity for the revocation of any contract,” avoided any such conflict.
Thus, far from conflicting with the FAA, the Seventh Circuit observed that the NLRA is pro-arbitration. In fact, the Seventh Circuit surmised that “it is entirely possible that the NLRA would not bar Epic’s [mandatory individual arbitration] provision if it were included in a collective bargaining agreement.” Nor would Epic’s agreement have run afoul of the NLRA if it had “permitted collective arbitration.” But, neither circumstance was present—Epic’s agreement was not collectively bargained and it did purport to restrict class or collective claims. Therefore, it violated the NLRA and could not be enforced.
IMPLICATIONS OF LEWIS, IN THE SEVENTH CIRCUIT AND BEYOND
Notably, the Seventh Circuit panel that decided Lewis circulated its opinion to all active judges on the Seventh Circuit, but “[n]o judge wished to hear the case en banc.” As a result, the panel decision in Lewis is final, and Epic’s only potential recourse is a petition to the Supreme Court, citing the split in circuit authority as a basis for review on certiorari. And with a continued vacancy on the high Court following Justice Scalia’s passing, this scenario sets up the same political chess match that pundits have envisioned with respect to other contested legal issues.
In the meantime, employers in the Seventh Circuit (Illinois, Indiana, and Wisconsin), should consider that mandatory class action waivers in certain arbitration agreements may not be enforced by federal courts in their circuit. One significant limitation to the Seventh Circuit’s holding in Lewis (as well as to the Board’s in D.R. Horton), is that the decisions are grounded in protecting against involuntary waivers of Section 7 rights under the NLRA. To that end, the decisions are limited in their application to “employees” who have such rights under the NLRA. Individuals who do not qualify as “employees” – with “supervisors” and “managers” being the most notable exclusions – do not have Section 7 rights. As a result, Lewis and D.R. Horton are not applicable to arbitration agreements with such “non-employees.”
Additionally, it remains to be seen whether the inclusion of an “opt out” clause, or the provision of separate consideration for the agreement, may yield a different result, even with respect to arbitration agreements applicable to employees. And, given the Seventh Circuit’s level of deference to the Board in Lewis, it similarly remains to be seen whether the Seventh Circuit might change its view if potential future changes in the composition of the Board lead the agency to overturn D.R. Horton.
For now at least, employers in the Seventh Circuit should review their mandatory arbitration agreements (to the extent they have them), paying particular attention to whether the agreements purport to restrict class or collective actions and if so, whether employees can “opt out” without losing employment. Employers in other circuits should continue to expect that agreements requiring individual arbitration of employment-related claims will not pass muster before the NLRB, but may nevertheless be enforceable under the current law of their circuit.
French Labor Unions Call for New Strikes Ahead of Euro 2016
VOA News
May 31, 2016 10:08 AM
France is bracing for new strikes this week after President Francois Hollande refused to abandon a government labor reform proposal that has sparked months of intensifying strikes and protests throughout the country.
Some French labor unions, including the powerful General Confederation of Labor (CGT), have called for new strikes in the coming days that will target trains, the Paris subway system, ports and possibly airports.
A transport strike just days before the opening of the 2016 European football championships on June 10, which are expected to attract millions of foreign visitors to France, would add to problems caused by last week’s blockade of fuel depots.
At least 11 of France’s 58 nuclear power plants were hit with unplanned outages when workers joined the strikes.
A few hundred protesters blocked commercial transportation trucks in a transit area near Marseille for a few hours on Tuesday.
Last week, French Prime Minister Manuel Valls suggested possible “changes” or “improvements” to the bill that would make it easier for employers to hire and fire workers and weaken the power of unions, but insisted the government will not abandon it.
Meanwhile in neighboring Belgium, public sector workers halted public transportation in a work stoppage over budget cuts on Tuesday, increasing pressure on a government already battling prison guard and rail strikes.
Brazil crisis dims outlook for oil reforms
31 May 2016, 5.01 pm GMT
Rio de Janeiro, 31 May (Argus) — A fresh series of political scandals are sidelining oil sector reforms that investors had hoped would be swiftly enacted under Brazil´s interim government.
Two newly appointed ministers in the cabinet of interim President Michel Temer were forced to resign over the past week, emboldening oil industry labor unions to threaten strike action.
Temer, who took over for suspended President Dilma Rousseff on 12 May, is still expected to marshal through landmark reforms to open Brazil’s oil industry to more foreign companies, but the early days of his administration have been dominated by high-profile scandals.
Yesterday, transparency and control minister Fabiano Silveira resigned after audio leaked of him criticizing the widespread Lava Jato investigation into systemic corruption at state-controlled oil company Petrobras. Romero Jucá stepped down as planning minister a week ago after he said in a separate leaked audio that the new government could help “staunch the bleeding” caused by Lava Jato.
Both of those discussions, and apparently many more, were secretly recorded by Sergio Machado, former chief executive of Petrobras’ transportation subsidiary Transpetro, as part of a plea deal with federal prosecutors.
The resignations expose the fragility of Temer’s transition government and call into question his ability to muster support for unpopular reforms and belt-tightening measures to resuscitate the economy.
Labor unions in the oil sector plan a 24-hour strike for 10 June. The work action is mainly aimed at toppling a proposal that would eliminate a mandate for Petrobras to hold a minimum 30pc operating stake in all future sub-salt projects. Its short duration suggests there will be little practical impact on Petrobras´ operations, but further labor strife seems likely.
A bill that would enact the change has already passed the senate and is now under consideration in the lower congressional house. Temer is expected to sanction the legislation should it pass in the congress.
Militants of Rousseff’s Workers Party (PT) appear invigorated by the missteps that have marred Temer’s first days in office and shortened the odds that she could overcome an impeachment trial in the senate.
Rousseff’s second four-year mandate was suspended by the senate earlier this month on charges she illegally airbrushed 2014 accounts ahead of her re-election, claims she denies. The senate has 180 days to conclude the trial, but support for a conviction has waned in the wake of recent scandals.