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Top labor and employment developments for June 2017

July 6th, 2017  |  Lisa Milam-Perez

The Supreme Court closed out a rather anti-climactic term, employment law-wise, in June. However, the month offered numerous significant developments, including a steady stream of welcome news for employers from the Department of Labor. We also saw forward movement on solidifying a Trump NLRB and a significant win for the president on his travel ban, thus far the defining issue of his presidency. Here, an overview of June’s biggest developments in labor and employment law:

DOL “guidances” revoked. With new Labor Secretary Alexander Acosta now settled in at the helm, the Department of Labor has set about undoing much of the Obama DOL’s regulatory actions. On June 7, Acosta announced that the DOL has withdrawn its 2015 and 2016 informal guidance on joint employment and independent contractors. Administrator’s Interpretation No. 2015-1, issued on July 15, 2015, took the position that most workers are employees under the FLSA, not independent contractors. Administrator’s Interpretation No. 2016-1, issued January 20, 2016, advised that the test for joint employment uses the same expansive “suffer or permit to work” language found in the FLSA—“the broadest definition that has ever been included in any one act,” as the Supreme Court observed. The DOL said its use of this “ensures that the scope of employment relationships and joint employment… is as broad as possible.” In issuing the documents, the Obama DOL said it was responding to the evolving nature of workplace relationships—the rapidly growing “gig” economy and increasingly “fissured workplace”—and looking to ensure that the nation’s statutory employment protections continue to apply to as broad a swath of workers as intended. However, opponents contended these issuances exceeded the agency’s statutory authority and imposed potential barriers to job growth. The rollback was a welcome relief to employers—and to businesses that found themselves at greater risk of liability under the sweeping definition of “employer” under the Obama DOL.

Opinion letters are back! On June 27, DOL announced that it will reinstate its practice of issuing opinion letters, which had been on hiatus under the Obama administration. Opinion letters are official written opinions issued by the Wage and Hour Division in response to specific requests from employers (and far less so, employees) addressing how the law applies in a particular set of circumstances. The Obama DOL had issued (very) occasional “Administrator’s Interpretations” instead; these were meant to offer broad guidance to the regulated community as to how the agency would apply and interpret the law (see, for example, the now-revoked joint employer and independent contractor guidances). This came as more good news for employers, who have long sought such guidance as to how the law applies in specific circumstances.

Overtime revamp revamped. In a brief filed June 30 in the Fifth Circuit, the current arena for the legal challenge to the DOL’s revised overtime rule, the agency made it clear that it will vigorously defend its right to establish a salary level for purposes of defining who qualifies as exempt from overtime under the FLSA’s “white collar” exemptions. However, the agency indicated that it will not defend the $913 per week salary level ($47,476 annually, for full-time workers) set by the Obama administration, after a federal district court enjoined the rule from taking effect. The DOL has asked the appeals court to resolve only the threshold question of the agency’s statutory authority to set a salary level, “without addressing the specific salary level set by the 2016 final rule.” Days earlier, the DOL on June 27 announced it had sent a pending request for information on the overtime rule to the Office of  Management and Budget for review, giving the public yet another opportunity for comment—and signaling that a significant revamp of the revised regulation was in the works.

Persuader rule purged. In a June 12 Federal Register notice, the Office of Labor-Management Standards formally announced that it intends to rescind its much-maligned “persuader” rule, officially deemed “Interpretation of the ‘Advice’ Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act.” The rulemaking “reinterpreted” the advice exemption (which exempts from statutory reporting and disclosure requirements the work of labor relations consultants unless they communicate directly with employees to persuade them concerning union organizing). The rule also revised OLMS Forms LM-10 and LM-20, documents that must be filed when an employer engages a labor relations consultant to undertake efforts to persuade employees regarding whether to vote for union representation. The rule was scheduled to take effect April 2016, but a federal court enjoined the measure last June, calling it “defective to its core.” The court later made the injunction permanent. The DOL appealed that decision to the Fifth Circuit, but on June 2, the agency filed a motion to hold in abeyance its appeal, noting its intention to commence notice-and-comment rulemaking on a move to rescind the rule and adding that it was seeking expedited review at the OMB.

NLRB nominations announced. President Trump nominated two individuals to round out the five-member NLRB. On June 19, he announced his choice of Marvin Kaplan to serve as NLRB member for the remainder of a five-year term expiring August 27, 2020. Kaplan is currently chief counsel of the Occupational Safety and Health Review Commission (OSHRC). Before that, he spent nearly seven years as counsel, first to the House Oversight and Government Reform Committee, and then to the House Education and the Workforce Committee, where he was responsible for labor and employment oversight and policy. Kaplan began his public service in 2007 as a special assistant in the DOL’s Office of Labor-Management Standards. On June 27, the president nominated William J. Emanuel, currently a shareholder at Littler, to fill the final vacancy. Emanuel has extensive experience representing employers in traditional labor matters, including NLRB cases, collective bargaining, labor arbitrations, union election campaigns, strikes and picket lines, and litigation concerning union access to employers’ private property. House and Senate Republicans leaders of the Congressional labor committees lauded the picks. Senate HELP Committee Chair Lamar Alexander (R-Tenn.) promised the committee would move promptly on the nominations.

Undoing “quickie” elections. On June 14, Alexander introduced the Workforce Democracy and Fairness Act, which would amend the NLRA to roll back the Obama-era’s so-called “quickie election” rule. Opponents have taken issue with several aspects of the revised representation election procedures, which took effect in April 2015. The Senate bill, S. 1350, would undo the revised election rule’s problematic features, which sharply curtailed the time in which employers can respond to a union organizing campaign and the extent to which they can raise pre-election challenges. Among other provisions, the bill mandates that no union election will be held in less than 35 days; provides employers at least 14 days to prepare their case to present before a NLRB election officer; requires the NLRB to determine the appropriate bargaining unit and address any questions of voter eligibility before the union is certified; and gives employers at least seven days to provide a list of employee names and one additional piece of contact information chosen by each individual employee, protecting workers’ privacy.

In even bigger news, the House Committee on Education and the Workforce advanced three bills on June 29 that would dramatically alter federal labor law in 22-16 votes. The Workforce Democracy and Fairness Act (H.R. 2776) would roll back the NLRB’s revised election procedures as well as the Board’s new standard for recognizing “micro” bargaining units. (Here: a fact sheet on the bill.) The Employee Privacy Protection Act (H.R. 2775) reverses Obama Board policies giving unions greater access to employee contact information during union organizing campaigns. (The committee released a fact sheet.) The Tribal Labor Sovereignty Act (H.R. 986) would amend the NLRA to clarify that it does not apply to any enterprise or institution owned and operated by an Indian tribe and located on tribal land. (Here, one more fact sheet.)

DOJ switches sides on class waivers. In a rare move, the Justice Department has switched sides in a case pending before the Supreme Court. Here, the flip-flop came in an amicus curiae brief filed by the solicitor general on June 16 in NLRB v. Murphy Oil USA, Inc. (No. 16-307), along with two other cases, Epic Systems Corporation v. Lewis (No. 16-285) and Ernst and Young LLP v. Morris (No. 16-300).  The High Court had granted certiorari in January to address whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violate the NLRA. The solicitor general represented the NLRB on its petition for certiorari and its reply to Murphy Oil’s response, arguing in favor of the Board’s position on arbitration agreements. In the subsequent amicus brief, however, the solicitor general is now arguing against the Board in Murphy Oil, and in support of the employers in Ernst & Young and Epic Systems. On the same day, the NLRB announced that the acting solicitor general has authorized the Board to represent itself in the Murphy Oil case. How vigorously the reconfigured, Republican-majority NLRB will pursue its case, however, remains to be seen.

Supreme Court lifts travel ban. The Supreme Court on June 26 granted certiorari to review Fourth and Ninth Circuit decisions affirming injunctions against Sections 2(c), 6(a), and 6(b) of President Trump’s second “travel ban,” and also granted in part the Trump administration’s request to stay the injunctions in the meantime. Finding that the balance of equities changes depending on whether a foreign national has a relationship to a person or entity in the United States, the High Court narrowed the injunctions. EO 13780 “may not be enforced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States. All other foreign nationals are subject to the provisions,” the High Court ruled in its June 26 per curiam decision in Trump v. International Refugee Assistance Project.

Trump initially issued EO 13769, the so-called “travel ban,” on January 27. Among other things, the measure suspended for 90 days admission to the United States by individuals from seven majority-Muslim countries. A federal court in Washington enjoined enforcement in part, and the Ninth Circuit refused to stay that order. On June 12, the Ninth Circuit largely affirmed the nationwide preliminary injunction against Sections 2 and 6 of the revised travel ban. Two weeks later, however, the High Court handed the Trump administration a major win.

DHS rescinds DAPA program. The Trump administration on June 15 rescinded the Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) program, erasing a path for undocumented aliens with a U.S. citizen or lawful permanent resident child to be considered for deferred deportation action. DHS Secretary John F. Kelly signed a memorandum rescinding the November 20, 2014 memorandum that created the DAPA program because, as the administration sees it, there is no credible path forward to litigate the currently enjoined policy. A DHS release announcing the rescission described the details of the DAPA program. In short, the program sought to implement immigration reform measures proposed by President Obama in November 2014 after reform efforts had stalled in Congress. But the program had been blocked by a federal district court. A preliminary injunction also blocked the proposed expansion of a similar program, Deferred Action for Childhood Arrivals (DACA), initially implemented in 2012, which expanded work authorization for recipients for three years versus two years.

Church-affiliated plans dodge ERISA oversight. A pension plan maintained by a church-affiliated hospital qualifies as a church plan even if not established by a church, and, therefore, is exempt from ERISA regulation, the U.S. Supreme Court ruled, reversing decisions by the Third, Seventh, and Ninth Circuits. The decision addressed a recent wave of litigation challenging the view of the federal agencies responsible for administering ERISA (Advocate Health Care Network v. Stapleton, June 5, 2017). The petitioners before the Court were church-affiliated nonprofits that run hospitals and other healthcare facilities, and offer defined benefit pension plans to their employees. Those plans were established by the hospitals themselves—not by a church—and are managed by internal employee benefits committees. The federal agencies read the ERISA provisions at issue as exempting such plans from the statute’s mandates. However, the district courts handling the cases agreed with the employees’ position that a church plan must be established by a church for the plan to be exempt from ERISA. Three courts of appeals affirmed those decisions. But the Supreme Court reversed. It was not disputed that under ERISA, a “church plan” need not be maintained by a church; it may instead be maintained by a principal-purpose organization. At issue, however, was whether a plan maintained by that kind of organization must still have been established by a church to qualify for the church-plan exemption. The High Court agreed with the hospitals that the relevant statutory provision intended to bring within the church-plan definition all pension plans maintained by a principal-purpose organization, regardless of whether a church first established them.

Appellate jurisdiction over class cert denials. In a non-employment class action lawsuit, a unanimous Supreme Court ruled that circuit courts lack jurisdiction under 28 U.S.C. §1291 to review orders denying class certification (or an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice. The High Court held that the voluntary dismissal did not qualify as a “final decision” within the meaning of Section 1291, and that allowing the use of the tactic by plaintiffs would undermine Section 1291’s firm finality principle, which was designed to guard against piecemeal appeals. It also would subvert the balanced solution that FRCP 23(f) put in place for immediate review of class action orders. (Microsoft Corp. v. Baker, June 12, 2017). Plaintiffs in putative class actions cannot transform a tentative interlocutory order into a final judgment within the meaning of Section 1291 simply by dismissing their claims with prejudice while preserving the right to “revive” those claims if the denial of class certification is reversed on appeal, the High Court held. Even more than the “death-knell” doctrine discussed in detail in its opinion, the Court found that the voluntary-dismissal tactic invites protracted litigation and piecemeal appeals. Therefore, it reversed and remanded the Ninth Circuit’s judgment.

Circuit scuffle over representative proof. Responding to a Supreme Court order that vacated its prior opinion and remanded for further consideration in light of Tyson Foods, Inc., v Bouaphakeo, the Sixth Circuit found that the High Court’s Tyson decision did not compel a different resolution in this case, and that Tyson’s ratification of the Mt. Clemens legal framework and validation of the use of representative evidence supported its original decision. Once again, the appeals court affirmed the certification of an FLSA collective action, and agreed with the lower court that sufficient evidence supported jury verdicts in favor of cable company technicians who challenged the employer’s time-shaving policy (Monroe v. FTS USA, LLC, June 21, 2017). A vigorous dissent by Judge Stranch called into question the use of representative evidence, particularly here, where there were ostensibly “three different ways in which the employer violated the FLSA.” In her view, the plaintiffs should have broken their suit into subclasses. Instead, the court took an “all-or-nothing approach to certifying the collective in this case,” and forced the jury to deliver a classwide verdict—to decide whether the employer was liable to everyone in the class or no one, “when the truth lies somewhere in the middle.”

Deepening split on tip credits. The Eleventh Circuit, in an unpublished decision, held that a class of valet parking employees whose tips were diverted could not sue their employer under FLSA, Section 203(m) because the employer did not avail itself of the tip credit. The plaintiff alleged that the employer illegally diverted a portion of the tips. However, she did not contend that the employer used tips as a credit against the minimum wage, or that it failed to pay minimum wage or overtime. She argued, nonetheless, that tips are the property of employees—regardless of whether the employer takes a tip credit—and so the tips were not the employer’s to divert. However, the appeals court held that Section 203(m) does not require employers to return tips to employees if it does not take the tip credit. Therefore, the FLSA provided no relief for the tip diversion (Malivuk v. Ameripark, LLC, June 9, 2017). Weeks later, the Tenth Circuit weighed in, agreeing with the Eleventh Circuit and rejecting the Ninth Circuit’s contrary holding. More emphatically, the Tenth Circuit held the DOL exceeded its authority when it implemented a regulation categorically prohibiting employers from retaining tips regardless of whether they avail themselves of the tip credit. The underlying suit was brought by a catering employee whose employer pocketed the gratuities added by customers when paying the final bill after catering events. Here, too, the caterer did not take the tip credit—in fact, the server earned well above the minimum wage—so the tip-credit provision did not apply, and she had no beef. The DOJ had filed an amicus brief in the case to defend the DOL regulation, to no avail (Marlow v. The New Food Guy, Inc., June 30, 2017).

A circuit split is deepened as to the DOL’s authority to regulate tips when the tipped employees earn more than the minimum wage. Currently a petition for certiorari is pending in the Supreme Court in a challenge to the DOL’s policy brought by the National Restaurant Association and several state associations. “It is becoming clearer that the Supreme Court will need to step in to declare what the law is (and is not),” said Paul DeCamp, a Principal in the Washington, D.C., office of Jackson Lewis (and the DOL’s Wage and Hour Administrator during the Bush administration). DeCamp is lead counsel for the National Restaurant Association in the case.

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