February 2013 U.S. Labor and Employment Update

by Dechert LLP

The end of 2012 and the first part of 2013 have been active periods in the labor and employment area. Among the significant developments in recent months are the continued development of federal law concerning the validity of arbitration agreements containing class action waivers, the potential invalidation of all of the decisions of the National Labor Relations Board issued in 2012, decisions concerning novel issues arising under the Fair Labor Standards Act (“FLSA”) and the Pregnancy Discrimination Act, and the Supreme Court’s grant of certiorari in a case presenting a long-standing issue concerning the compensability of time spent “changing clothes” under the FLSA. These and other recent developments are discussed below.

Supreme Court to Address “Changing Clothes” under the FLSA

On February 19, 2013, the Supreme Court granted a writ of certiorari in Sandifer v. United States Steel Corp., No. 12-417. In the case, the Court will review a Seventh Circuit decision, 678 F.2d 590 (7th Cir. May 8, 2012), in which the Court of Appeals held that time spent by employees changing into and out of protective work clothes and travel time to and from the locker room was not compensable time under the Fair Labor Standards Act (“FLSA”). The FLSA excludes from the definition of “work” “any time spent in changing clothes or washing at the beginning of the workday which was excluded from measured working time...by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.” 29 U.S.C. § 203(o). According to the Court of Appeals, the term “clothes” within this definition includes clothing that has a protective function, such as “flame-retardant pants and jacket, work gloves, metatarsal boots…a hard hat, safety glasses, ear plugs, and a ‘snood’ (a hood that covers the top of the head, the chin, and the neck). This decision is in conflict with the Sixth and Ninth Circuit rulings that personal protective equipment differs from “clothes” subject to § 203(o) and employees therefore may be entitled to compensation for time spent donning and doffing.

A critical question before the Supreme Court is likely to be the degree of deference to be afforded to the Department of Labor’s interpretation of the FLSA. In its decision, the Seventh Circuit was critical of the DOL’s frequent changes of position, ostensibly based on political views, concerning the meaning of § 203(o). Specifically, the court stated that “[i]t would be a considerable paradox if before 2001 the plaintiffs would win because the President was a Democrat, between 2001 and 2009 the defendant would win because the President was a Republican, and in 2012 the plaintiffs would win because the President is again a Democrat. That would make a travesty of the principle of deference to interpretations of statutes by the agencies responsible for enforcing them...”

First Appellate Court Decision on FLSA’s Nursing Mother Provision

Recently, the Court of Appeals for the Eleventh Circuit became the first federal appellate court to interpret the nursing mother provision of the FLSA. In Miller v. Roche Surety & Casualty Co., 2012 WL 6698786 (11th Cir. Dec. 26, 2012), the court affirmed a district court’s dismissal of the employee's claims as a matter of law and held that the employer neither denied the employee breaks nor retaliated against her for requesting breaks in violation of the FLSA.

A 2010 amendment to the FLSA, § 207(r)(1) requires an employer to provide an employee with a reasonable break time to express breast milk for her nursing child for one year after the child’s birth each time the employee has a need to do so, and a place other than a bathroom, shielded from view and free from intrusion from co-workers and the public, to be used for the break(s). Section 215(a)(3) of the Act prohibits an employer from retaliating against an employee because she has filed a complaint involving the FLSA.

Plaintiff Danielle Miller worked for Roche, a bail bond surety company in Florida. After her pregnancy, Miller was free to take the nursing breaks she needed, as well as a one-hour lunch break. Her break time was not counted or timed, and she was never criticized for taking a break. Miller chose to express breast milk in her own office rather than in any of several empty offices available for her use, and she taped folders to her office window for privacy. She neither informed Roche that she was using her office nor asked for a different location for the breaks. On one occasion, contemplating having to spend a day working at a remote location, Miller sent Roche’s president an email inquiring as to a location where she could use her breast pump while working there. Sometime after sending the email, Miller was terminated. She then sued, claiming Roche had not given her a time and place to express breast milk in violation of § 207(r)(1), and had violated § 215(a)(3) when it terminated her employment after she asked for a time and place to do so.

The Eleventh Circuit ultimately rejected these claims, holding that Miller’s own testimony established that she had been given necessary breaks for expressing breast milk in a private location, at her leisure and without criticism, and that based on the evidence a reasonable jury could not find that Roche denied Miller breaks in violation of § 207(r)(1). The court also held that because Miller’s email to the president, who was her supervisor, did not constitute the filing of a complaint, she had not suffered retaliation under
§ 215(a)(3).

Relying on the U.S. Supreme Court’s decision in Kasten v. Saint-Gobain Performance Plastics Corp., 131 S. Ct. 1325 (2011), the court noted that although the filing of a complaint under § 215(a)(3) need not be in the form of an official complaint, or even in writing, it must put the employer on notice that an employee is lodging a grievance. The complaint must be sufficiently clear for a reasonable employer to understand that the employee is asserting his/her FLSA rights and calling for protection of them. Miller’s email to her supervisor simply asking about a location for expressing breast milk in the future and neither alleging or intimating that Roche had violated § 207(r)(1) did not meet these notice standards.

Courts Continue Trend in Favor of Class Waivers in Arbitration Agreements

In January 2012, the National Labor Relations Board (“NLRB”) issued its controversial decision in D.R. Horton, 357 N.L.R.B. No. 184 (Jan. 3, 2012), holding that the National Labor Relations Act (“NLRA”) prohibits mandatory arbitration policies that require an employee to waive his or her right to participate in a class action. Two recent decisions—Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013) and Miguel v. J.P. Morgan Chase Bank, N.A., 2013 WL 452418 (C.D. Cal Feb. 5 2013)—are the latest to limit the impact of D.R. Horton and uphold the validity of arbitration provisions containing class action waivers.

In Owen, the Eighth Circuit reversed a district court decision and held that a former nursing home employee must arbitrate her Fair Labor Standards Act (“FLSA”) claims—even though the arbitration provision included a waiver that foreclosed her FLSA collective action. First, the Eighth Circuit determined that, even though the FLSA identifies the “right” to become a party plaintiff, because it also gives the employee the power to waive participation, the statute did not evince a “contrary congressional command” precluding collective action waivers. Second, the court rejected the plaintiff’s argument that the legislative history of the NLRA created a command to override the Federal Arbitration Act (“FAA”) in the context of labor relations. Congress, the court noted, reenacted the FAA nine years after the FLSA, which indicates that it intended for its arbitration protections to remain intact. Finally, the court ruled that D.R. Horton “carries little persuasive authority” in the circumstances presented because the NLRB’s holding was limited to arbitration agreements which bar all protected concerted action. The court noted that the Mandatory Arbitration Agreement in the case at hand did not bar complaints to administrative agencies like the Department of Labor or the Equal Employment Opportunity Commission (“EEOC”). In addition, nothing prevented any agencies from investigating and potentially filing suit on behalf of a class of employees if it was necessary. The appeals court also determined that—even if D.R. Horton addressed an arbitration agreement like the one in the case at hand—the court “would owe no deference to its reasoning” because “the Board has no special competence...interpreting the Federal Arbitration Act.”

The court in Miguel reached a similar conclusion, noting that the Arbitration Agreement in that case explicitly stated that the employee is not precluded from filing a charge with the EEOC. The Miguel court also cited the Eighth Circuit’s determination in Owen that courts do not owe deference to the reasoning in D.R. Horton, while pointing out that “every district court in [the Ninth] [C]ircuit to consider the decision has declined to follow it.”

Fourth Circuit Rules That Pregnancy Discrimination Act Does Not Require Preferential Treatment

In a much debated case, the Court of Appeals for the Fourth Circuit recently concluded that the Pregnancy Discrimination Act (“PDA”) does not require employers to provide special accommodations to pregnant employees. See Young v. United Parcel Service, Inc., 2013 WL 93132 (4th Cir. Jan. 9, 2013). The case arose after Peggy Young, a UPS delivery driver, took leave in July 2006 to try a third round of in vitro fertilization, which was ultimately successful. Young subsequently gave UPS notes from both her physician and her midwife stating that she should not lift more than twenty pounds during her pregnancy. Noting that the company identified the ability to lift up to seventy pounds as an essential function for all drivers, a UPS manager informed Young that she could not return to work with the lifting restriction in place and was not eligible for light duty. Pursuant to UPS policy, light duty was only available to employees with work-related injuries, those with an ADA covered disability, and those who had lost their DOT certifications. Young remained on an extended leave throughout her pregnancy, receiving no pay and ultimately losing her medical coverage. Following the birth of her child in April 2007, Young returned to work for UPS. She subsequently sued UPS, alleging, among other things, claims of disability and pregnancy discrimination. The district court granted summary judgment to UPS.

On appeal, the Court of Appeals for the Fourth Circuit quickly disposed of Young’s disability discrimination claim, finding that Young offered no evidence suggesting that UPS believed her pregnancy substantially limited any of her major life activities. Turning to the “heart of Young’s appeal,” the court held that UPS did not violate the PDA through its policy limiting light duty work and not making it available to pregnant workers. Citing statutory language, both Young and the American Civil Liberties Union, which joined as an amicus, contended that the PDA requires an employer to provide pregnant workers with light duty if it does so for any other workers “similar in their ability or inability to work,” even if the company does not do so for all non-pregnant employees. The court rejected this argument, holding that interpreting the PDA in this manner would require employers to afford preferential treatment to pregnant workers in the form of accommodations and light duty work “regardless of whether such status was available to the universe – male and female – of non-pregnant employees.” The court explained that while “an explicit policy excluding pregnant workers” would violate the PDA, “no such policy exists here.” Instead, the court concluded that by limiting light duty to certain categories of employees, UPS crafted a “pregnancy-blind policy” which did not evidence discriminatory animus toward pregnant workers and did not run afoul of the PDA. Summary judgment was, therefore, affirmed in favor of UPS on Young’s pregnancy discrimination claim.

While the Young decision is a victory for employers, employers should nevertheless exercise caution when evaluating requests for accommodation by pregnant employees. While pregnancy itself is not considered a disability under the ADA, certain pregnancy-related impairments – even though temporary – may constitute disabilities for which reasonable accommodations must be made. Furthermore, late last year, the EEOC declared in its draft strategic plan that the accommodation of pregnant employees will be one of its enforcement initiatives going forward. Congress is also considering a bill, known as the Pregnant Workers Fairness Act, which, if passed, would require employers to provide reasonable accommodations to pregnant employees and those with limitations following childbirth.

D.C. Circuit Invalidates Recess Appointments to NLRB; Status of Board Law Uncertain

On January 25, 2013, the D.C. Circuit held in Noel Canning v. NLRB, --- F.3d ----, 2013 WL 276024 (D.C. Cir. 2013), that President Obama’s attempted recess appointments of Sharon Block, Terence Flynn and Richard Griffin to the National Labor Relations Board (“NLRB”) in January 2012 were invalid because the Senate was not in “recess” within the meaning of the Recess Appointments Clause of the U.S. Constitution at the time of the appointments. According to the court, “Recess” within the meaning of the Constitution is limited to the recess between sessions of the Senate and therefore the Recess Appointments Clause does not allow appointments during “recesses” or “breaks” in the Senate’s business if it otherwise remains in a continuing session. In reaching this conclusion, the D.C. Circuit explicitly disagreed with the Eleventh Circuit’s decision in Evans in Stephens, 387 F.3d 1220 (11th Cir. 2004), which held that “recess” includes intrasession recesses. Further, the court held that the appointments were invalid because the Recess Appointments Clause only applies to vacancies that “happen” during “the Recess,” and, even if the Senate did go into recess, the Board vacancies filled by the President did not “arise” during such recess. Accordingly, because, pursuant to the Supreme Court’s decision in New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635 (2010), the Board must have a quorum of at least three members in order to act, the court held that the Board’s finding that Noel Canning engaged in an unfair labor practice (as well as all of the other decisions of the Board following the purported appointments) was null and void.

Board Chairman Mark Gaston Pearce responded to the D.C. Circuit’s decision by stating that the Board considers Members Block and Griffin to have been validly appointed (Member Flynn resigned in mid-2012) and will continue to issue decisions: “The Board respectfully disagrees with today’s decision and believes that the President’s position in the matter will ultimately be upheld. It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeals. In the meantime, the Board has important work to do. The parties who come to us seek and expect careful consideration and resolution of their cases, and for that reason, we will continue to perform our statutory duties and issue decisions.” It is anticipated that the issue addressed in Noel Canning will ultimately be decided by the Supreme Court. In the meantime, President Obama has re-nominated Members Block and Griffin, while a bill has been filed in the Senate that would prevent the board from issuing decisions by prohibiting it from using federal funds for functions that require a quorum of board members.

District Court Rejects EEOC’s Use of “Race Raters” to Assign Race in Expert Analysis

In recent years, the Equal Employment Opportunity Commission (“EEOC”) has been aggressively challenging employers’ use of credit reports in background checks for job applicants, asserting that such use has a disparate impact on minority applicants. However, the EEOC’s efforts recently suffered a significant setback when the United States District Court for the Northern District of Ohio granted Kaplan Higher Education Corp.’s motion to exclude testimony of an EEOC expert and granted summary judgment in favor of Kaplan on the EEOC’s Title VII disparate impact claims. See EEOC v. Kaplan Higher Education Corp., 2013 WL 322116 (N.D. Ohio Jan. 28, 2013).

The EEOC alleged that Kaplan’s use of credit checks as part of background checks for job applicants has a disparate impact on African American applicants, in violation of Title VII. Kaplan began including credit checks in their hiring process for certain positions, particularly those related to financial aid, after discovering breaches of their systems when business officers misappropriated student payments in 2004. (Interestingly, discovery in the case revealed that the EEOC itself does credit checks on job applicants for 84 out of the 97 positions available at the EEOC based on the notion that “overdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.”) The EEOC’s disparate impact argument against Kaplan hinged on statistical analysis provided by Dr. Kevin Murphy. Dr. Murphy analyzed the hiring rate of a sample of potential applicants. In order to determine the race of the applicant pool, the EEOC subpoenaed DMV records of the applicants from 38 states and the District of Columbia. Several states provided DMV records that did not disclose the person’s race. Accordingly, Dr. Murphy assembled a team of five “race raters,” who looked at what Dr. Murphy considered to be the clearest image of an applicant, and visually classified each applicant as African-American, Asian, Hispanic, White or Other. The race raters’ qualifications included advanced degrees in academic areas including cultural anthropology, education, human development, psychology and economics, and some multi-racial experience.

Both Kaplan and the district court questioned the reliability of the “race raters;” Kaplan noting that the race raters had no prior experience in visual race classification and that the presence of names on the identification cards may have biased the racial identifications. The court noted that the EEOC’s own guidelines discourage employers from visually identifying an individual’s race. Because the EEOC offered no evidence that the use of race raters has or could be tested, has an established error rate, or has been subject to peer review, the court excluded Dr. Murphy’s analysis under the Daubert standard. The district court also barred as untimely Dr. Murphy’s supplemental reports finding a disparate impact in hiring practices even excluding all the applicants who were subject to the race raters. Because the EEOC failed to produce any other evidence of disparate impact, the district court granted summary judgment on the Title VII claim for Kaplan.

Host of New Laws Prohibit Employers from Demanding Disclosure of Social Media Passwords

In their efforts to screen job applicants, many employers have “googled” applicant names and reviewed various public social media profiles to help determine whether an applicant is actually a good fit with the organization and to ensure a company’s safety and integrity. More recently, some companies have begun to request user names and passwords to be able to log in and view a social media account that is otherwise designated as “private” or restricted. Civil liberties groups, the users of social media like Facebook and Twitter, and numerous politicians have begun to resoundingly criticize this practice, likening the requests to asking for an applicant’s house keys or a diary.

In response to this growing opposition, there has been significant legislative activity. In May 2012, Maryland was the first state to pass legislation making it unlawful for employers to compel employees or applicants to disclose social networking user names and passwords. Maryland’s law prevents employers from taking disciplinary action against employees or from not hiring applicants who refuse to disclose personal online information. Employers, however, are allowed to investigate employees who use a personal account for business purposes to ensure they comply with legal and regulatory requirements.

Michigan, Illinois and California have also enacted similar legislation. Michigan’s law took effect in December, 2012, while Illinois’ and California’s law became effective January 1, 2013. All three states ban employers from requesting passwords and account information, but they permit employers to use publicly available social networking information. Illinois also allows employers to monitor employees’ email or electronic equipment owned by the employer, and to set workplace policies on the use of social networking sites. A number of other states have gotten on the proverbial bandwagon. Most recently, Nebraska introduced legislation (Legislative Bill 58) on January 10, 2013 and Texas referred legislation to committee (S.B. 118) on January 29, 2013 making it unlawful to request user names and passwords, or to request access to, private social media accounts. Massachusetts, Minnesota, Missouri, New York, Ohio, Pennsylvania, South Carolina and Washington also introduced such laws, all at various stages of the legislative process.

At the federal level, no law expressly restricts an employer’s right to require an applicant or employee to disclose user name and password information like the state laws noted above. However, in May, 2012, Senators Charles Schumer (D-N.Y.) and Richard Blumenthal (D-Conn.) issued public letters to the Equal Employment Opportunity Commission and Department of Justice asking these agencies to investigate whether the practice violates any federal law. The senators argued that the practices were “unacceptable invasions of privacy” and allowed an employer access to information that would otherwise be impermissible to consider, such as religion, age, marital status, or pregnancy status.

In May, 2012, the federal Social Networking Online Protection Act (SNOPA) was introduced in the House of Representatives. This bill states that it is “[a] bill to prohibit employers and certain other entities from requiring or requesting that employees and certain other individuals provide a user name, password, or other means for accessing a personal account on any social networking website.” The bill, which would have been the first national legislation on the matter, died when Congress adjourned at the end of 2012. Representatives Eliot Engel (D-NY) and Jan Schakowsky (D-IL) and Michael Grimm (R-NY) have now reintroduced this legislation.

Given the rapid rise of laws restricting employer access to social media log-in information, as well as the wealth of information on these sites that is otherwise impermissible to consider, employers would be well advised to proceed with caution when doing any on-line screening.

This update was authored by Alan Berkowitz, Thomas Johnson II, J. Ian Downes, Jennifer Burdick, Linda Dwoskin, Kate Ericsson, Melissa Squire, and Jane Patullo.

For more information about our labor and employment group, please visit our website.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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