D.C. Circuit Nixes Board Notice Posting Rule In National Association of Manufacturers v. NLRB

Once again, federal courts have halted efforts by the current National Labor Relations Board ("the Board") to expand its regulatory reach. Earlier this week, in National Association of Manufacturers v. NLRB, the Court of Appeals for the District of Columbia Circuit struck down the Board’s controversial attempt to require virtually all employers to post a notice advising employees about the requirements of the National Labor Relations Act ("the Act") and the sixty years of interpretations of the federal labor laws.

The Board’s notice-posting rule has had a long and contentious history.  The original petition was filed in 1993, but it was not until 2010 when the Board, by then with a majority of members appointed by President Obama, issued a proposed rule.  The final rule was published in August, 2011, and litigation challenging the Board’s authority began almost immediately.  As we have reported before, the Board had only mixed success.  One district court upheld the rule only in part, and another struck down the rule completely.  While those cases were on appeal, the posting requirement was stayed pending completion of judicial review.

In this week's opinion the D.C. Circuit court rejected the rule in its entirety. The unanimous ruling concluded that the rule interfered with employers’ free speech rights, by requiring them to offer a Board-mandated message with which they might not agree. Section 8(c) of the Act bars the Board from considering non-coercive employer speech as evidence of an unfair labor practice, but the Board’s rule would treat the failure to post its notice as an unfair labor practice.

Two of the panel’s three judges would have gone further, specifically rejecting the claim that the notice posting rule – never required in the previous sixty-four years of the Act – was authorized by Section 6 of the Act, which permits the Board to carry out the Act. The court readily concluded that while the notice-posting rule may be seen as “prophylactic,” there was nothing about it that was necessary to carry out the Act’s substantive provisions.

 

The Board has not yet reacted to this defeat, and what its next steps are remain unclear. Given the breadth of the Circuit court’s ruling, it appears doubtful that the Board could revise its rule to comply with the court’s analysis. Equally unknown is whether the Board will seek review by the United States Supreme Court.

 

For employers, at least one reaction does seem clear: it is unlikely that employers will be required to post the NLRB’s notice any time soon, if ever. The court vacated the rule, so the rule is simply without effect unless the court’s decision is reversed. (Federal contractors should remember, however, that they face an independent obligation to post a similar notice, as we reported.  That obligation remains in full force.  Moreover, the implications of the court’s opinion are potentially far-reaching, and the court’s analysis may call into question numerous posting requirements under other federal statutes.

If you have questions concerning the requirements to post federal labor law advice, or any other posting requirement, please contact your Stoel Rives labor & employment attorney.

Oregon Court of Appeals Upholds Enforceability of Employer Arbitration Agreement

In the recent case Hatkoff v. Portland Adventist Medical Center, the Oregon Court of Appeals affirmed enforcement of a company arbitration provision in an employee handbook requiring that a former employee bring his employment discrimination claims in binding arbitration. The Court’s opinion offers a straight-forward application of the law regarding the enforceability of arbitration agreements, and the outcome is probably not surprising.  Nevertheless, it contains a helpful and well-reasoned survey of the current state of Oregon law in this area, and provides another helpful case for Oregon employers interested in resolving employment disputes using arbitration or similar alternative dispute resolution (“ADR”) procedures. 

Arbitration Agreements Are Upheld Where They Are Not “Unconscionable”

Arbitration is a form of private ADR in which the parties agree to waive the right to go to court and instead adjudicate disputes privately before an arbitrator. In the employment context, arbitration can be a cost-effective and quicker alternative to litigation.  While the details of arbitration agreements can vary greatly, they may frequently be confidential (lawsuits are public proceedings), provide more limited procedures (especially with respect to discovery), require trial before a neutral arbitrator (not a jury), and provide a limited right to appeal. In general, Oregon courts, like most courts, uphold such employment arbitration agreements as long as they are not “unconscionable,” either procedurally (with respect to how the agreement was formed) or substantively (with respect to its terms).

The Oregon Court of Appeals applied this analysis to find Portland Adventist’s “Grievance and Arbitration Procedure” in an employee handbook was not unconscionable. It found the agreement was not substantively unconscionable, because while it did waive the right to a jury trial (like all arbitration agreements), it did not unreasonably limit the employee's rights or remedies that would be available in court. Interestingly, the Court specifically held that the fact the agreement required that employees file a complaint within 90 days of the complained-of employment action was not substantively unconscionable, even though the applicable statute of limitations was one year. The Court also went on to find the agreement was not procedurally unconscionable: the employee, a sales and marketing professional, signed multiple acknowledgments that he received the employee handbook containing the arbitration agreement and was aware of what he had signed.

Law On Arbitration Continues To Develop

Despite the fact that many cases come out similarly to Hatkoff and the law on arbitration agreements is generally favorable for employers, the enforceability of such agreements is routinely litigated in employment cases. For that reason, and also because the unconscionability analysis is very fact-specific and the outcome can be very different in each case, arbitration continues to be a “hot” and fluid area of employment law both in Oregon and around the country. 

Sometimes that fluidity leads to conflicts in the law, such as between courts and legislatures.  For example, since 2008 Oregon has had a statute, ORS 36.620(5), that prohibits employee arbitration agreements under certain circumstances where the agreement does not contain “magic words” provided in the statute, and where the employee does not have at least 72 hours advance written notice before starting work (the legislature lowered the advance notice requirement to 72 hours in 2011; it originally required 14 days). However, that Oregon statute itself may be unenforceable, because it may be preempted by a federal statute, the Federal Arbitration Act (“FAA”), that strongly endorses the use of arbitration and contains no such limitation.  Several federal district courts in Oregon have found that ORS 36.620(5) is preempted by the FAA, and have enforced arbitration agreements that did not provide the advance notice required by that statute, although no Oregon state appellate court has yet considered the issue (the agreement in Hatkoff preceded the Oregon statute, so it was not a factor in the analysis in that case).

Other potential conflicts exist not between state and federal law, but between different parts of federal law.  As we have blogged about previously , just such a conflict has been brewing between the U.S. Supreme Court and the National Labor Relations Board (“NLRB”) over whether arbitration agreements can include waivers of class action claims—the Supreme Court says they can; the NLRB says they violate federal labor laws allowing employees to engage in “concerted activity” relating to working conditions. We are waiting to see how the federal appellate courts resolve that conflict.

Ultimately, Hatkoff will likely stand, not as a departure from existing law, but instead as the latest in a series of federal and state cases over the past few years that are broadly supportive of employer efforts to utilize arbitration and ADR to resolve employment disputes.  But, as we've said, this continues to be an evolving area of employment law, so employers will need to stay tuned to new developments.

In the meantime, here are a few things employers should keep in mind when crafting arbitration agreements to maximize the chance they will be enforceable:

  • Make sure your arbitration agreement, whether a stand-alone agreement or part of a handbook, is clear, understandable, and well publicized.  Include the "magic words" in ORS 36.620 to make it expressly clear to employees that arbitration involves waiving some legal rights, especially the right to a jury trial.  Employees should sign acknowledgments that they have received and understand the agreement.  
  • If you have employees who don't speak English as a first language, have a translated version of the agreement to ensure it is understood.
  • Give new employees the 72 hour advance written notice required by ORS 36.620 wherever possible.  While some courts have found that statute is preempted and unenforceable, there's no guarantee every court will.
  • Under ORS 36.620, current employees can only sign arbitration agreements at the time of "bona fide" promotion or advancement.  Again, courts may find this requirement is also preempted and unenforceable, but if you can comply with it, all the better.  
  • Arbitrators are paid by the parties, unlike judges.  While in theory the parties can split the cost, the agreement should not impose costs on employees unreasonably in excess of what they would pay to file a lawsuit in court.  Many employers agree to pay a large portion, or even all, of the arbitration fees.
  • Specify the rules and procedures that will apply.  The American Arbitration Association's ("AAA") specific rules for employment arbitration are one option; other state or local arbitration forums are other (and sometimes cheaper) options.

Above all, work with your employment counsel in the crafting and implementation of the agreement.  Many enforceability pitfalls can be easily avoided with careful planning, but the devil can be in the details.  That is especially true for any state-specific rules or "gotchas," as arbitration agreements may be perfectly enforceable in some states but not in others.

Senators Propose Amendments To ADEA

On March 12, several senators introduced Senate Bill 2189, known as the Protecting Older Workers Against Discrimination Act, which would overturn a 2009 U.S. Supreme Court case, Gross v. FBL Financial Services Inc, that had made it more difficult for older workers to prove claims under the Age Discrimination in Employment Act ("ADEA").  Under the new bill, it would be much easier for employees to prove age discrimination in many cases.

In the Gross case, the Supreme Court held, by a 5-4 margin, that the “mixed motive” analysis of discrimination claims was not available under the ADEA, and that plaintiffs asserting age discrimination must prove that age was the “but for” cause of the adverse employment action.  The Supreme Court reasoned that the Civil Rights Act of 1991, which codified the mixed motive analysis in cases of race, sex, and other protected statuses, only applied to Title VII of the Civil Rights Act of 1964 and not the ADEA, which is a separate statutory scheme.  Under Gross, in ADEA cases the plaintiff was required to prove that age was the “but for” cause of the employment action, not simply a motivating factor.

This bill is sponsored by Senators from both parties (Sen. Harkin [D-IA], Sen. Grassley [R-IA], and Sen. Leahy [D-VA]), but exactly how much support it has remains to be seen.  Similar bills were introduced in both the House and Senate in 2009, but neither were voted on.  It remains to be seen whether this bill will gain traction or suffer a similar fate.

California Overtime Rules Apply To Work Performed In California By Out-Of-State Employees


The California Supreme Court has ruled that California’s daily overtime requirements apply to work performed in California by non-residents.  In Sullivan v. Oracle Corp., three employees of Oracle who were not residents of California worked as “instructors” and trained Oracle’s customers in the use of the company’s products.  Required by Oracle to travel, the plaintiffs worked primarily in their home states but also in California and several other states.  California is one of the few states that requires payment of daily overtime for hours worked in excess of eight in a day.  At issue in the case was whether these non-residents of California were entitled to daily overtime for days they worked in California.

In a unanimous decision, California Supreme Court held that the California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state employees, such that overtime pay is required for work in excess of eight hours in a day.  In reaching this conclusion, the Court noted California’s strong interest in applying its overtime law to all non-exempt workers, and all work performed, within the state’s borders.   The Court stated that to permit non-residents to work in California without the protection of the state’s overtime law would completely sacrifice, as to those employees, California’s important public policy goals of protecting health and safety and preventing the evils associated with overwork.  Additionally, not applying California law would encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market.

While not great news for employers, this decision provides guidance to multi-state employers about how to pay non-exempt employees who work occasionally in California.  However, the Court left some important questions unanswered.  First, the decision does not directly apply to employers that are based outside of California.  The Court specifically limited its holding to out-of-state employees working for California-based employers.  The question remains whether an employer based outside of California must comply with California’s overtime rules for those days its non-California employees work in California.  Even though the ruling does not specifically address this scenario, the reasoning the Court employed in reaching its decision leaves the door open for an argument that its holding applies to employers based outside of California.  Also, the Court was not asked to address, and did not address, whether other provisions of California’s wage law -- such as the contents of pay stubs, meal period requirements, the compensability of travel time, the accrual and forfeiture of vacation time, and the timing of payment to employees who quit or are discharged -- apply to work performed in California by non-resident employees.
 
California-based employers with non-exempt employees in other states who occasionally work in California should immediately confirm that all such employees are paid overtime in conformity with California law when working in California.