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ALJ dismisses OFCCP individual sexual orientation bias claim due to voluntary compliance, rejects jurisdictional claims

March 24th, 2017  |  Cynthia L. Hackerott

A DOL ALJ has dismissed, due to the defendant company’s agreement to comply with the agency’s request for an on-site investigation, what is apparently the OFCCP’s first enforcement action based on an individual complaint of sexual orientation discrimination. In a previous decision issued ten days before the dismissal, the ALJ rejected arguments by the defendant, AccuWeather, Inc. that it was not a federal contractor subject to the OFCCP’s jurisdiction. (OFCCP v AccuWeather, Inc., March 13, 2017, DOL OALJ Case No 2017-OFC-11)

Weather forecasting service AccuWeather, Inc. of State College, PA provides a wide-range of enterprise solutions to media, business, government as well as news, weather, content and video for third party websites. According to the OFCCP’s administrative complaint, filed on or about January 19, 2017, the agency received a complaint from a former AccuWeather employee alleging that she was subjected to a hostile work environment and ultimately terminated due to her sexual orientation. She also claimed that a Vice President of AccuWeather called her derogatory names on the basis of her sexual orientation, and that this VP, along with people who worked under him, interfered with her work performance by cutting her out of communications and refusing to follow her instructions.

On-site investigation access denied. On October 25, 2016, the OFCCP sent a letter to the contractor to schedule an on-site complaint investigation starting on November 8, 2016. On November 2, the contractor send a letter responding that it would not permit the agency to conduct an on-site complaint investigation because it asserted that the company was not a federal contractor. The OFCCP discussed the issue with the company via phone on November 2 and 10, but the company reaffirmed that it was denying access, and it’s legal counsel reiterated this position in a November 10 letter.  That same day, the OFCCP issued a Notice to Show Cause why the agency should not initiate enforcement proceedings. On December 15, the company’s legal counsel sent a letter responding to the Notice to Show Cause by reaffirming the company’s refusal to produce requested documents and or permit access to its facility to conduct an on-site investigation In the complaint, the OFCCP asserts that this denial violated Executive Order (EO) 11246.

Contracts at issue. In its answer to the administrative complaint, AccuWeather maintained its assertion that it is not a federal contractor subject to OFCCP jurisdiction, arguing that it fell under the exemption at 41 CFR Sec. 60-1.5(a)(1) for contractors that hold government contracts of less than $10,000. The company requested dismissal of the complaint on that basis. The OFCCP countered, as it had also alleged in the complaint, that AccuWeather had federal contracts totaling in excess of this threshold amount, specifically, with the Defense Logistics Agency (DLA) for $11,845 (effective May 20, 2015, with a completion date of May 23, 2020) and the Department of the Navy for 74,107.41 (effective June 24, 2015, with a completion date of June 20, 2018). On March 3, ALJ Richard A. Morgan issued an order finding that the OFCCP had proper jurisdiction in this case because AccuWeather, Inc. was a federal contractor within the meaning of the EO 11246 and its implementing regulations.

As to the DLA contract, to which the defendant acknowledged it was a party, it argued that contract did not exceed $10,000 because the base amount of the contract was $2,369 for the first year, and the additional three years of option contract in the amount of $2,369 per year should not be considered as aggregate in valuing the contract. The base value of the Navy contract was $23,976 with two subsequent option year extensions, the first valued at $24,695 and the second valued at $25,436. AccuWeather did not deny that this contract exceeded the $10,000 jurisdictional threshold. Yet, the defendant asserted that it was not a party to the Navy contract because AccuWeather, Inc. was not a party to that contract, but rather, the specified contract was between a related company, AccuWeather Enterprise Solutions (AWES), and the Navy.

Jurisdiction established. The ALJ, however, found that the alleged distinctions between AccuWeather, Inc. and AWES were neither noted or accepted by the contracting representative of the Department of the Navy who issued the Navy contract to “AccuWeather, Inc.”  Based on the evidence submitted by the parties, the court pointed out that the contractor-identifying “Commercial and Governmental Entity” (CAGE) number belonging to AccuWeather, Inc. was also used on all the Navy contract documents, and that CAGE number was assigned only AccuWeather, Inc. Indeed, AWES was not registered in the System for Awards Management as a government contractor. Further, there was no acknowledgement by the government contracting agency of a modification to the Navy contract subsequent to AWES’ claimed scratching out of AccuWeather, Inc. on the contract and handwriting in AWES. As the OFCCP’s counsel pointed out, if this alleged scratch out could be  viewed as a request to modify the contract, that modification was never agreed to in writing by the government. Moreover, the option year one modification of the Navy contract was sent to AccuWeather, Inc. and signed by a representative “on behalf of AccuWeather, Inc.”

Therefore, even assuming that there were significant distinctions between AccuWeather Inc. and AWES based on the services that they provide as well as legal distinctions in the formation and operation of these companies, the ALJ found no evidence to support that these distinctions were made known to, or acknowledged by the representatives of the government agency that prepared the Navy contract or the DLA contract. “At the very least, there was a blurring of these distinctions by the defendant which was never adequately clarified by the defendant and was never corrected or acknowledged by the contracting agency,” the ALJ wrote.

Finding that OFCCP jurisdiction was established under the Navy contract, the court deemed it  unnecessary to address whether the DLA contract fell within the $10,000 exemption and whether the value of the option extensions should be considered in the aggregate.

Case dismissed due to voluntary compliance. Since the defendant did not allege any defense to the complaint outside of the jurisdictional issue, the ALJ ordered the parties to address whether the hearing scheduled for March 21, 2017 should go forward. On March 9, the OFCCP informed the court that the company had agreed to comply with the OFCCP’s requested on-site investigation, and as such, a hearing in the case would not be necessary. The following day, AccuWeather confirmed to the court that it had scheduled an on-site investigation in compliance with the OFCCP’s request. Accordingly, on March 13, the ALJ dismissed the complaint due to AccuWeather’s voluntary compliance, thereby cancelling the March 21, 2017 hearing date.

Sexual orientation discrimination enforcement background. Sexual orientation and gender identity were expressly added to the categories protected from discrimination under EO 11246 on July 21, 2014, when President Obama signed EO 13672 (79 FR 42971- 42972), which applies to covered contracts entered into or modified on or after April 8, 2015, the effective date of the OFCCP’s regulations (79 FR 72985-72995) promulgated under EO 13672). On March 17, 2015, pursuant to the Paper Reduction Act, the Office of Budget and Management (OMB) approved the information collection requirements necessary for implementation of those regulations.

On April 16, 2015, the OFCCP issued Directive 2015-01, entitled “Handling Individual and Systemic Sexual Orientation and Gender Identity Discrimination complaints,” to establish the agency’s policy on accepting and investigating individual and systemic complaints based on gender identity or sexual orientation. The policy set forth in this directive provides that the OFCCP will accept and investigate individual and systemic complaints that allege discrimination on the basis of sexual orientation and gender identity against a federal contractor or subcontractor. It will analyze each complaint to determine whether the alleged discrimination occurred on the basis of sexual orientation or gender identity, as well as on the basis of sex, and will coordinate with, and refer complaints to, the EEOC on a case-by-case basis.

Scope of sex discrimination rules. In addition, the OFCCP published a final rule on June 15, 2016 (81 FR 39108-39169) to replace the guidelines at 41 CFR Part 60-20 with new sex discrimination regulations. While EO 11246, as amended by EO 13672, now covers explicitly covers both sexual orientation and gender identity bias, the final sex discrimination rule reflects the OFCCP’s view that adverse treatment of employees based on failure to conform to particular gender norms and expectations about their appearance, attire, or behavior is unlawful sex discrimination. In contrast, courts have not generally recognized claims based on sexual orientation as cognizable under Title VII. The OFCCP says that it enforces the nondiscrimination obligations under EO 11246 by following Title VII and the case law principles that have developed interpreting Title VII, and the agency notes, in the preamble to the final rule, the weakness of federal court support for the proposition that Title VII’s prohibition against sex discrimination encompasses sexual orientation discrimination not based on sex stereotyping. (The most recent case of note on this point is the Eleventh Circuit’s March 10, 2017 decision in Evans v Georgia Reg’l Hosp.)

Recent enforcement developments. At the end of January 2017, the Trump White House issued a statement indicating that President Obama’s EO 13672 will remain in force. The statement was issued in light of speculation that the Trump Administration might back off of the prior administration’s efforts to advance and protect the rights of the lesbian, gay, bisexual, transgender, and queer community.

On February 21, 2017, the OFCCP published a renewed notice (82 FR 11245-11246) seeking comments regarding its request for OMB approval to update the OFCCP’s complaint form, to add “sexual orientation” and “gender identity” as protected bases, among other updates. The renewed notice notes that “additional substantive information” on this request is contained in its earlier, related notice published on July 1, 2016 (81 FR 43254- 43261). The earlier notice included a supporting statement, a copy of the proposed revised form, and a corresponding instruction sheet. The comment period for the July 2016 notice closed on August 30, 2016. Written comments on the renewed notice are due by March 23, 2017.

The agency reports in the supporting statement that it received 790 complaints from individuals in fiscal year (FY) 2013, 699 complaints in FY 2014, and 769 complaints in FY 2015. Therefore, on average, the OFCCP receives about 753 individual complaints annually.

As previously discussed in an Employment Law Daily piece last year regarding the OFCCP’s sex discrimination regulations, a potential legal impediment to OFCCP enforcement of protections on the basis of sexual orientation or gender identity, such as those included in EO 13672 and its implementing regulations, is the fact that Congress has not explicitly delegated legal authority to the President to protect employees from discrimination based on sexual orientation or gender identity, according to John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in Los Gatos, California.

[Author’s note: This story was originally published in the Employment Law Daily email newsletter on March 20, 2017]

Is the NLRB a bit too union-friendly?

March 21st, 2017  |  Lorene Park

By Lorene D. Park, J.D.

The NLRB was put under the microscope at a February 14 hearing of the House Subcommittee on Health, Employment, Labor, and Pensions, chaired by Representative Tim Walberg (R-Mich.). Most panelists at the hearing, titled “Restoring Balance and Fairness to the National Labor Relations Board,” aligned with the view that the Board in recent years has lost its balance, leaning away from employers and business and more toward employees and unions. Among other actions considered “troubling,” the subcommittee discussed the NLRB’s advancing an ambush election rule and “expanding its joint employer standard.”

Board rulings. Meanwhile, the Board has issued a number of arguably employee- and union-friendly rulings recently. For example, in a February 22 decision, it found that an acting regional director did not err in overruling, without a hearing, Jacmar Food Service’s objections to the solicitation of union authorization cards. That same day, the Board ruled that a nursing home management company unlawfully threatened to “call the cops” after housekeeping staff protested their “rehiring” as probationary workers at the starting wage, with no seniority, and demanded to contact the union.

On February 23, the NLRB opined that Hawaiian Telecom, Inc., acted unlawfully when it ceased providing employees health benefits when they went out on a strike—their eligibility for benefits had already accrued and the employer lacked a legitimate business justification for discontinuing benefits. On February 24, the Board ruled that Verizon’s code of conduct rule restricting the use of personal employee information violated the NLRA because it could be reasonably understood as an attempt to keep employees from discussing the terms and conditions of employment.

In a March 8 ruling, the NLRB found that a country club violated the NLRA when it hired “summer employees” instead of recalling full-time “regular employees” from a seasonal layoff, and unilaterally contracted out bargaining unit work without giving a union notice and an opportunity to bargain over the changes. The Board found no basis to conclude that the union waived its right to bargain by agreeing to a management rights clause, nor was the employer’s conduct permissible under a reasonable interpretation of the CBA.

In the appellate courts. Appearing before federal appellate courts, the Board met with mixed results on the gateway issue of who is covered as an employer or employee under the NLRA. The Fifth Circuit upheld a ruling that an employer and subsidiary constituted a “single employer” and could be liable for denying parent company employees access to the subsidiary’s facilities for handbilling. However, the Sixth Circuit found that substantial evidence did not support the NLRB’s ruling that charge nurses at a long-term care facility were statutory employees (instead of supervisors) and were entitled to elect a union as their exclusive bargaining representative.

In a March 3 opinion, the D.C. Circuit found that the NLRB erred by holding, contrary to recent court precedent, that FedEx drivers were employees under the NLRA. Because the appeals court had previously ruled that single-route FedEx drivers working out of Wilmington, Massachusetts, were independent contractors, not employees, the NLRB could not rule, on a materially indistinguishable factual record, that single-route FedEx drivers located in Hartford, Connecticut, were statutorily protected employees, not independent contractors.

The NLRB also faced challenges beyond that gateway issue. For example, the Sixth Circuit ruled that, contrary to a Board opinion, a general complaint about reductions in employee benefits was not a request to bargain about an employee-recognition program. The recognition program was not the only issue raised by the union rep and the monetary effect was less than four dollars per union member per year. The NLRB also erred, in the Seventh Circuit’s opinion, when it ordered Columbia College Chicago to reimburse a union for negotiation expenses in connection with a successor bargaining agreement.

Board has to explain shift in analysis. On March 7, the D.C. Circuit ruled that the NLRB erred in departing from its own precedent to follow a similar shift in the National Mediation Board’s (NMB) jurisdictional analysis concerning claims brought by airline baggage handlers. Vacating an NLRB order that found a union’s effort to represent airline baggage handlers was governed by the NLRA rather than the Railway Labor Act (RLA), the D.C. Circuit explained that under long-settled NMB precedent concerning RLA jurisdiction (to which the NLRB has historically deferred), the airlines had sufficient control over baggage handlers’ employment with a contractor, so the RLA governed. The NLRB erred in concluding otherwise. While the NMB may have recently shifted its jurisdictional test without explanation, the NLRB had to justify its change: “an agency cannot avoid its duty to explain a departure from its own precedent simply by pointing to another agency’s unexplained departure,” the court said.

Take-away. With these recent examples in mind, there may be some support for House panelists’ view that the Board is less balanced than perhaps it should be in its decisionmaking; favoring employees and unions. And while things may change under the Trump administration, the Board will have to explain any departure from precedent. This could be interesting . . . .

Court ruling addresses multiple issues presented when contractor declares bankruptcy, includes enforcement actions previously publicized by the OFCCP

March 16th, 2017  |  Cynthia L. Hackerott

Only a small sliver of the OFCCP’s pending administrative claims, and potential administrative claims that might result from a pending compliance review, against chicken producing giant Pilgrim’s Pride Corporation (PPC) remained following the close of the company’s bankruptcy case, a federal bankruptcy court in Texas has ruled. The OFCCP could not pursue claims seeking relief in the form of economic-loss damages (lost wages, interest, front wages, and fringe benefits) against the company and the OFCCP requests for equitable instatement relief (i.e. the hiring of qualified individuals allegedly unlawfully denied employment) to the extent they arose from discrimination or other prohibited actions of the employer that occurred prior to the effective date of the PPC’s bankruptcy plan. In addition, the agency’s requests for cancellation, termination, and suspension of contracts, and the request for declaration of ineligibility against the reorganized company—to the extent such requests relied on alleged discriminatory or other prohibited actions by PPC that occurred prior to the effective date of the plan—were either disallowed or discharged claims themselves or were simply “backward-looking”  efforts to collect disallowed or discharged claims. Thus, the OFCCP was barred from pursuing those claims further. However, to the extent that agency’s requests for relief arose from discrimination or other prohibited actions of PPC that occurred after the bankruptcy plan went effective, such requests for relief did not constitute disallowed or discharged claims, and the OFCCP was free to pursue any such requests for relief. The court also ruled that the OFCCP’s requests to prospectively enjoin PPC from failing to comply with Executive Order (EO) 11246 and its implementing regulations were not claims that were disallowed or discharged in PPC’s bankruptcy case. Thus, the OFCCP was allowed to pursue such “forward-looking” relief against the company. (In re Pilgrim’s Pride Corp, February 15, 2017, Mullin, M.)

Bankruptcy case. On December 1, 2008, the company filed its bankruptcy case, and on May 18, 2009, the OFCCP filed its claim in that case alleging contingent and unliquidated claims against PPC based on the company’s alleged discriminatory hiring and employment practices from “July 20, 2005 to Present” at several of it processing plants, including two Texas plants in Mount Pleasant and Lufkin. On July 21, 2009, the bankruptcy court entered its claims objections procedure order. PPC and its affiliated debtors filed the bankruptcy plan on November 17, 2009; the court confirmed the plan and entered its confirmation order that became effective on December 28, 2009. After the plan went effective and pursuant to the claims objections procedure order, the company filed their objection to the OFCCP’s claim. On September 23, 2011, the court granted  the objection and disallowed the claim. The bankruptcy case was ultimately closed on September 14, 2015.

Administrative actions. The following day, the OFCCP filed with the DOL’s Office of Administrative Law Judges (OALJ) the first of three administrative complaints against the reorganized company. The first suit (ALJ Case No 2015- OFC-11),  alleged that PPC  systematically discriminated against qualified African-American, Caucasian, and female applicants for entry-level laborer and operative positions at its chicken plant in Athens, Alabama. Shortly thereafter, on October 2, 2015, the agency sued Pilgrim’s Pride again alleging that the contractor systematically discriminated against qualified African-American applicants seeking entry-level jobs as laborers and operatives at its chicken plant in Marshville, North Carolina (ALJ Case No 2016-OFC-1). In the third suit, filed on May 19, 2016 (ALJ Case No 2016-OFC-5), the OFCCP alleged that PPC systematically discriminated against female, African American and white jobseekers at its Mount Pleasant, Texas processing facility. In each of the complaints, the OFCCP sought both monetary and equitable relief, including: lost wages, interest, front wages, and fringe benefits, including but not limited to, retroactive seniority; the hiring of qualified individuals allegedly unlawfully denied employment; cancellation of all government contracts with the reorganized company; debarment of the company from future government contracts; and a permanent injunction against the company from alleged continuing violations of EO 11246. All of the allegations were based on actions that occurred prior to PPC’s bankruptcy filing.

Pending investigation. Meanwhile, the OFCCP is also currently conducting a compliance review into PPC’s hiring and employment practices at its Lufkin, Texas plant from January 1, 2007 to September 19, 2008 (i.e. also prior to PPC’s bankruptcy filing) that may have been in violation of EO 11246 and its implementing regulations. If and when the OFCCP chooses to file another complaint against PPC for any violations found in the Lufkin investigation, the agency would likely seek similar relief as that sought in its previous three complaints, the bankruptcy court noted.

Relief sought by the debtor company. Arguing that the actual and potential claims and relief sought in the three administrative complaints and the Lufkin compliance review have been disallowed in PPC’s bankruptcy case or discharged by PPC’s bankruptcy plan and confirmation order, the company filed a motion asking the court to: (a) enforce to order granting the objection; (b) enforce the plan and confirmation order; and (c) declare that the claims and relief sought in the three administrative cases and potentially sought pursuant to the Lufkin compliance review are barred and should be dismissed. The court granted this motion for the most part, denying it only as to the OFCCP’s “forward-looking” claims for relief.

“Claims” under the Bankruptcy Code. First, the court analyzed whether the OFCCP was asserting any “claims,” as defined by the bankruptcy code, against the company that could have been disallowed or discharged in the bankruptcy case. To that end, it relied upon the Fifth Circuit’s 1995 unpublished ruling in Vega v. Rexene Corp. In Vega, an employeewho was terminated before his former employer filed its Chapter 11 bankruptcy case but before its plan was confirmed—brought Title VII and the Texas Commission on Human Rights Act claims against the employer. Despite receiving notice of the employer’s bankruptcy filing, he waited until after the employer’s plan was confirmed to sue the reorganized company in federal district court. The Vega court ruled that the employee’s post-petition, pre-confirmation monetary damages and equitable reinstatement claims were discharged by the employer’s confirmed plan. That court rejected the employee’s assertion that reinstatement was an equitable remedy, and thus, not a dischargeable “claim.” It distinguished an injunction to prevent ongoing or future harm of the type that is not dischargeable because the relief cannot be converted into a monetary obligation (such as pollution) from the type of relief that can be converted into a monetary obligation, such as the employee’s request for reinstatement, which was an alternative to monetary front pay under Title VII (and was, therefore, discharged under the employer’s plan).

“Backward-looking” relief dischargeable . . . Applying Vega, the bankruptcy court here concluded that the economic-loss monetary damages sought in the OFCCP’s administrative actions (lost wages, interest, front wages, and fringe benefits) all constituted potentially dischargeable claims to the extent they arose from discrimination that occurred prior to confirmation of the plan. Further, equitable instatement relief (i.e. the hiring of qualified individuals allegedly unlawfully denied employment) arising from pre-confirmation discrimination also constituted a potentially dischargeable claim because such equitable relief is an alternative to front pay, the bankruptcy court determined. Although not specifically addressed in Vega, the OFCCP’s request for cancellation of all government contracts with the reorganized PPC and for debarment from future government contracts also constituted either claims themselves or are simply “backward-looking” efforts to collect discharged claims, at least to the extent that the OFCCP relied on discrimination that occurred prior to PPC’s plan confirmation.

…but “forward-looking” relief not dischargeable. In contrast, the OFCCP’s final requested remedy, to enjoin the reorganized PPC from failing to comply with EO 11246 and its implementing regulations in the future constituted a “forward-looking” effort by the agency to prevent ongoing or future discrimination. Pursuant to Vega, such a post confirmation and forward-looking equitable request for relief is not convertible into a monetary obligation and, therefore, does not constitute the type of “claim” that was or could have been disallowed in PPC’s bankruptcy case or discharged by the plan and confirmation order. Therefore, the OFCCP was not barred from pursuing such equitable “forward-looking” relief against the reorganized PPC, the bankruptcy court ruled.

Order granting the objection disallowing the Texas plant claims enforceable. Second, the court examined whether the OFCCP had sufficient notice of PPC’s bankruptcy case and if the OFCCP was properly served with relevant notices issued therein such that any filed bankruptcy claims were disallowed and any unfiled bankruptcy claims were discharged by the plan and confirmation order. The court detailed the various forms of notices it issued and authorized in the bankruptcy case. The first notice relevant here was the notice of the claims’ bar date, which, in part, directed all governmental units to file proofs of claim by June 1, 2009. In compliance with that notice, the OFCCP filed its claim in PPC’s bankruptcy case on May 18, 2009. At the time, the bankruptcy court’s local rules did not provide procedures for filing and serving omnibus claims objections; therefore, PPC filed its “Motion of the Debtors for Approval of Procedures for Objecting to Claims and for Notifying Claimants of Such Objections” (the claims objections procedures motion) and served it on the U.S. Attorney for the Northern District of Texas.

On July 21, 2009, the court entered its claims objections procedure order, and pursuant to the requirements of that order, the reorganized PPC filed their objection to the OFCCP’s claim and served it, along with, the corresponding hearing notice to the designated notice recipient listed in the claim on the U.S. Attorney for the Northern District of Texas. Because no response was filed to the objection, the court entered its order granting the objection and disallowed the OFCCP’s claim.

Rule 4 service as to Texas cases. Accordingly, the company asserted that because the OFCCP’s claim in the bankruptcy case, which included the two Texas processing plant cases, was disallowed, the OFCCP was barred from pursuing the claims pertaining to the Mount Pleasant action and any potential action resulting from the Lufkin compliance review.  The OFCCP, however, argued that the order granting the objection was void because PPC did not also serve the objection and hearing notice on the U.S. Attorney General pursuant to Federal Civil Rule 4.

Disagreeing with the agency, the court found that the claims objections procedures order governed service of omnibus claims objections filed in the bankruptcy case, and that order did not require service pursuant to Federal Civil Rule 4. As such, the court ruled that PPC complied with the claims objections procedures order, and by doing so, the company provided the OFCCP with good, adequate, and sufficient notice of the objection and hearing notice.

Because the claims that the OFCCP is currently pursuing in the Mount Pleasant action and those it might potentially assert as a result of the Lufkin investigation are the same claims that were disallowed by the order granting the objection in the bankruptcy case, the court found that the OFCCP was “prohibited from continuing its impermissible collateral attack” on the order granting the objection. Therefore, the agency was barred from asserting such previously disallowed claims against the reorganized company, and must dismiss such claims in the Mount Pleasant action and cease pursuing such claims in the Lufkin compliance review.

OFCCP actions pertaining to plants not included in bankruptcy case claim. The OFCCP’s administrative claims currently pending against PPC regarding the Athens, Alabama and Marshville, North Carolina plants were not asserted or filed as proofs of claim in the bankruptcy case. Nevertheless, the OFCCP Southeastern regional office had initiated compliance investigations concerning PPC’s pre-petition hiring and employment practices at or about the time PPC filed its bankruptcy case.

The company contended that, because the OFCCP  irrefutably had actual notice of PPC’s bankruptcy case, as evidenced by the claim that was timely filed (which included the Texas cases), the agency should have filed any and all claims it could have asserted, including any and all claims relating to the pre-petition hiring and employment practices at the Athens and Marshville plants. Given that the OFCCP did not do so, those claims were discharged by the plan and Confirmation order.

Yet, the OFCCP countered that it was not properly served with formal notice of PPC’s bankruptcy case and that several of its six regional offices, including its Southeastern regional office, did not have formal or actual knowledge of PPC’s bankruptcy case until long after the plan went effective. Even though the OFCCP’s Southwest and Rocky Mountain regional office (covering Texas) had actual notice, that notice could not be imputed to the entire OFCCP and all of its other regional offices, the agency argued.

The court, however, did not see it that way. Through one of its regional offices, the OFCCP timely filed the claim concerning at least seven of PPC’s plants located in three states, including the two Texas plants, the court pointed out. On top of that, the OFCCP acknowledged that PPC was the largest chicken processor in the United States, was one of the leading suppliers of chicken products to the United States Department of Agriculture, and was providing chicken products to government installations and offices under a number of government contracts. Thus, given the extensive contracts PPC had with the U.S. government, and the active investigations pending against PPC when it filed its bankruptcy case, any and all monetary and equitable claims that the OFCCP did assert, or could have asserted, with respect to any and all active and possible PPC plant investigations were also discharged by the plan and confirmation order, the court ruled. Consequently, the court barred the OFCCP from pursuing any such claims, including, but not limited to, the monetary and equitable claims and requests for relief asserted in the Athens, the Marshville, and the Mount Pleasant administrative actions as well as any potential claims resulting from the Lufkin compliance review.

Estoppel. Finally, the court rejected the OFCCP’s argument that the reorganized PPC was equitably estopped from making its bankruptcy disallowance of claims and discharge arguments because it waited too long to assert them in the pending administrative actions. According to the OFCCP, PPC, both before and after it was reorganized through the bankruptcy case, delayed for years before raising the bankruptcy defenses in the pending administrative actions. However, the court pointed out that the OFCCP knew that PPC filed bankruptcy, and the agency knew or should have known that PPC sought and obtained a discharge in its bankruptcy case. Also, the agency knew or should have known that its filed claim would be reviewed, would be subject to potential objections, and ultimately would be treated in PPC’s bankruptcy case. Thus, the OFCCP could not have reasonably relied on the company’s alleged silence to assume that it was abandoning the benefits of the bankruptcy court’s order granting its objection to the OFCCP’s claim and of PPC’s discharge under the plan and confirmation order.

[Update:  On March 3, 2017, the OFCCP notified ALJ Stephen R. Henley that it was withdrawing the administrative complaint filed against PPC regarding the Mount Pleasant, Texas processing facility (OALJ Case No 2016-OFC-00005). Following the parties joint stipulation that the matter be dismissed, the ALJ issued an order dismissing the case on March 13, 2017.]

Employer may violate minimum wage if tip credit applied to hours not tip-credit eligible

March 14th, 2017  |  Ron Miller

As a server for a popular chain of family dining restaurants, the employee’s pay, including tips invariably exceeded the minimum wage. Even so, she argued that she did not receive the minimum wage for every hour that she worked. The employee pointed out that there were some activities for which she did not generate any tips from customers, such as brewing coffee or tea, rolling silverware, wiping down tables, setting tables, cutting and stocking fruit, stocking ice, taking out trash and sweeping floors. Because the employer took the tip credit for all hours that she worked, she contended that her “cash wage” for those hours was only $4.98 per hour (the wage paid by the employer to its tipped employees). Did the employee have a viable claim for an FLSA minimum wage violation?

In Romero v. Top Tier of Colorado LLC, the Tenth Circuit ruled that the fact that an employee did not allege that she failed to receive the minimum wage when including all the tips she received as a server, did not preclude her from stating a claim for a minimum wage violation The appeals court rejected a district court’s conclusion that “if [a] tipped employee makes enough [in tips] to meet the minimum wage,” then the employer has necessarily complied with Section 206(a) of the FLSA. To the extent an employee’s tips are relevant in determining whether an employer has satisfied its minimum-wage obligations under Section 206(a), the threshold question is whether the employer can treat those tips as wages under Section 203(m).

In dismissing the employee’s minimum wage claim, the district court relied on the undisputed fact that she never alleged that she earned less than the federal minimum wage of $7.25 an hour. However, the district court declined to address the employee’s argument that the employer impermissibly treated her tips as “wages.” The Tenth Circuit concluded that the district court should have first resolved whether the employer was entitled to treat her tips as wages under Section 203(m).

“Non-tipped” tasks. The employer took advantage of the “tip credit” and paid the employee a “cash wage” of $4.98 per hour and then used some of her tips to cover the gap between that cash wage and the federal minimum wage. But the tip credit only applies to “tipped employees,” and during some of the hours she worked, the employee performed “non-tipped” tasks. Reasoning that she wasn’t a “tipped employee” under Section 203(m) for at least some of the hours she spent performing non-tipped tasks, the employee asserted that the employer should have paid her a cash wage of at least $7.25 an hour for those hours. She alleged that the employer was not entitled to take the tip credit for any of the hours she spent performing non-tipped tasks. Additionally, she asserted that the employer wasn’t entitled to take the tip credit for those hours “in excess of [20 percent] of her regular workweek” that she spent performing non-tipped tasks.

Here, the employee alleged that she was employed in two occupations: one that generated tips and one that didn’t. She also alleged that she spent more than 20 percent of her workweek performing “related but nontipped work.” Consequently, she argued that the employer impermissibly treated a portion of her tips as “wages” for minimum wage purposes by taking the tip credit for hours that were not tip-credit eligible.

The district court correctly stated the general rule that an employer satisfies the minimum wage so long as, after “the total wage paid to each [employee] during any given week is divided by the total time [that employee] worked that week, the resulting average hourly wage” meets or exceeds $7.25 an hour. But, it could not apply the general rule to the employee’s claim without first determining what “total wage” the employer actually paid her. The district court could not make that determination without evaluating whether the employer took the tip credit for hours that weren’t tip-credit eligible.

‘Blacklisting rule’ torpedoed in Senate and sent to Trump to bury

March 7th, 2017  |  Pamela Wolf

On March 7, the Senate approved a resolution rolling back the Federal Acquisition Regulation and Department of Labor’s related guidance implementing President Barack Obama’s Executive Order on Fair Pay and Safe Workplaces—the so-called “blacklisting rule.” The 49-48 vote fell strictly along party lines, with Republicans favoring the measure and Democrats and two Independents voting against it; three Republicans did not vote. H.J. Res. 37 now heads to President Trump’s desk for signature. While Trump has proven difficult to predict, the fact that the resolution abolishes a regulation lines up with his aggressive deregulation agenda, and so he will likely approve it.

The final rule that will be undone if Trump signs the resolution of disapproval, among other things, requires prospective contractors to disclose violations of 14 basic workplace protections from the last three years, including those addressing wage and hour, safety and health, collective bargaining, family and medical leave, and civil rights protections. It also bars federal contractors from enforcing mandatory pre-dispute arbitration agreements as to workers’ claims of sexual assault or civil rights violations. Additionally, H.J. Res. 37 will prevent implementation of the entire rule, including the paycheck transparency requirements that were not previously enjoined.

Unnecessary and unhelpful? Senators Ron Johnson (R-Wis.), chairman of the Senate Homeland Security and Governmental Affairs Committee and Lamar Alexander (R-Tenn.), chairman of the Senate Committee on Health, Education, Labor, and Pensions (HELP), applauded the passage of the resolution.

“Overturning this harmful rule will reduce the regulatory burden plaguing our economy,” Johnson said in a statement. “This rule could potentially be used to blackmail innocent businesses during labor negotiations. The Obama administration admitted that this rule would cost at least $398 million each year to comply with, but failed to quantify any benefit whatsoever. Repealing this rule is a step in the right direction by providing the regulatory relief that is necessary to unleash the American economy so that it can realize its full potential.”

“The Senate today did the right thing by overturning the harmful Obama Administration ‘blacklisting’ regulation that could have prevented our nation’s federal contractors from receiving a federal contract for an alleged labor violation before any wrongdoing has been proven,” Alexander added. “I’m urging President Trump to sign this legislation as soon as possible.”

Federal contractor violations. Democrats pushed hard against the resolution, noting that in 2013, the HELP Committee conducted an investigation which found that nearly 30 percent of the companies that received the most severe penalties for worker safety and wage law violations were federal contractors.

A report released by Senator Elizabeth Warren (D-Mass.) on the day of the vote showed that 66 of the federal government’s 100 largest contractors have been caught breaking federal wage and hour laws. In addition, more than a third of the 100 largest penalties levied by OSHA since 2015 were issued to companies that held federal contracts.

Senator Patty Murray (D-Wash.), Ranking Member HELP Committee, speaking on the Senate floor, said: “For too long, the government has awarded billions of taxpayer dollars to companies that rob workers of their paychecks and fail to maintain safe working conditions. This rule helps right that wrong. Under this rule, when a company applies for a federal contract, they will need to be upfront about their safety, health, and labor violations over the past three years. That way, government agencies can consider an employer’s record of providing workers with a safe workplace and paying workers what they have earned—before granting or renewing federal contracts.”

“When workers arrive on the job, they deserve to know that they will be treated fairly; they will be provided with safe and healthy workplaces; their right to collective bargaining will be respected; and that they will be paid all of the wages they have rightly earned,” Murray continued. “And businesses that contract with the government should set an example when it comes to each of these concerns—and taxpayer dollars should only go to businesses that respect these fundamental worker protections.”

H.J. Res. 37 uses a procedural move under the Congressional Review Act that permits Congress to pass a resolution of disapproval to prevent, with the full force of the law, a federal agency from implementing a rule or issuing a substantially similar rule without congressional authorization.