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Top labor and employment developments in March 2018

April 6th, 2018  |  Lorene Park

By Lorene D. Park, J.D.

In case you missed Employment Law Daily’s in-depth coverage, here’s a brief recap of some of the key developments in the L&E community for March.

Some transgender individuals see gains in fighting discrimination:

First up, some in the transgender community may have cause to celebrate after a March 23 press release announced that President Trump has reversed course on his ban on transgender people serving in the U.S. military. After federal courts blocked the ban as unconstitutional, and following a memo and report by the Defense Secretary in consultation with the Homeland Security Secretary (as to the U.S. Coast Guard), which apparently fell short of fully supporting the ban, Trump revoked his August 25, 2017, Presidential Memorandum, “Military Service by Transgender Individuals.”

However, under the newly announced policy, there is a distinction between persons who are transgender and those diagnosed with gender dysphoria. Transgender persons are individuals whose gender identity differs from their biological sex. Gender dysphoria is a mental condition defined in the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders that affects some transgender individuals. People with gender dysphoria are said to experience significant mental anxiety and distress because their gender identity differs from their biological sex. For those with a history or diagnosis gender dysphoria, the new policy disqualifies them from both entry and retention in the military.

The new policy also disqualifies transgender persons who require or who have undergone gender transition. However, transgender persons with no history or diagnosis of gender dysphoria, who are otherwise qualified for military service, “may serve, like all other Service members, in their biological sex.”

Senior staff attorney for the ACLU, Joshua Block characterized the policy as “transphobia masquerading as policy.”

Also in March, the Sixth Circuit affirmed that transgender individuals are protected by Title VII. The court found it “analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex.” The employer, a funeral home, fired its funeral director after she disclosed she was going to have sex-reassignment surgery and would no longer dress like a man under its dress code, which required public-facing male employees to wear suits and ties and public-facing female employees to wear skirts. The court also held that the Religious Freedom Restoration Act provided no relief to the company owner as continuing to employ the funeral director would not substantially burden his religious exercise (EEOC v. R.G. & G.R. Harris Funeral Homes, Inc.).

The Sixth Circuit now joins the Second and Seventh Circuits in holding that LGBTQ individuals may be protected by Title VII. The Eleventh Circuit has ruled that sexual orientation discrimination per se is not covered under Title VII, however.

Other significant federal appellate decisions this month included . . .

2d Cir.: NLRB’s bargaining order inappropriate given changed circumstances. Granting review of an NLRB order, the Second Circuit held that substantial evidence supported the Board’s findings that the manner in which an employer tried to dissuade employees from voting to unionize, including its reinstatement of holiday pay and demotion of a pro-union employee, violated the NLRA. Though most components of the Board’s order of remedial relief were enforced, the appeals court refused to enforce the bargaining order because the Board failed to properly account for changed circumstances during the two-year period between the unfair labor practices and its decision, particularly given the significant employee and management turnover and the importance of employees’ free choice (Novelis Corp. v. NLRB).

5th Cir.: DOL’s ‘Fiduciary Rule’ vacated. A final rule (the Fiduciary Rule) promulgated by the Department of Labor in April 2016 expanding the definition of “investment advice fiduciary” conflicts with the text of ERISA and the Internal Revenue Code and is unreasonable under Chevron and the APA, the Fifth Circuit has held. It not only departs from the common law definition without good reason, said the appeals court, but it also breaks with 40 years of established regulatory interpretation. Because its provisions are not severable, the rule was vacated in its entirety. Chief Judge Stewart dissented (Chamber of Commerce v. U.S. Department of Labor).

7th Cir.: Successor liability claim revived under ERISA. A successor may be liable for a predecessor employer’s withdrawal from a multiemployer pension plan under ERISA, as amended by the Multiemployer Pension Plan Amendments Act, ruled the Seventh Circuit, remanding for further consideration. The successor’s use of the employer’s intangible assets—its name, goodwill, trademarks, customer data, trade secrets, phone numbers, and websites—plus its retention of principals to promote the successor to customers, weighed heavily in favor of successor liability (Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc.).

8th Cir.: NLRB determination that union ran exclusive hiring hall stands. The appeals court granted the Board’s application to enforce its ruling that a union furnishing labor for entertainment-venue employers ran an exclusive hiring hall in violation of the NLRA by, among other things, granting priority to its own members for job referrals and failing to remit certain bonuses for improper reasons (International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts, Local 151 v. NLRB).

10th Cir: Pecan ranch violated injunction against oppressive child labor. Children who gathered fallen pecans, ostensibly to donate to their church, were employees and not volunteers. The Tenth Circuit found that instead of working for their own personal reasons, they were coerced. Also, they were employees of a company that contracted with the grove owner, not of the church or an “independent contractor” hired to fulfill the contract. The court affirmed a ruling that the company and its president violated a 2007 injunction against oppressive child labor and an order to pay $200,000 to compensate the children (Acosta v. Paragon Contractors Corp.).

D.C. Cir.: Using election observer fired for brandishing toy gun didn’t taint election. The NLRB did not unreasonably discount two threats that an employer claimed tainted a union election—an alleged threat to call ICE if the union lost, and the union’s use of an election observer who had been fired four days earlier for threatening conduct involving an “airsoft” gun. Denying a petition to review the Board’s determination that the employer violated the NLRA by refusing to recognize the union, the D.C. Circuit held that absent evidence connecting the fired employee’s behavior to the election or to the union, or evidence that the union was responsible for ICE threats that could potentially coerce employees to vote for it, the Board did not abuse its substantial discretion in certifying the election results (Equinox Holdings, Inc. v. NLRB).

D.C. Cir.: T-Mobile violated NLRA by selectively bargaining on matters of its choosing. The D.C. Circuit in an unpublished opinion denied T-Mobile’s petition to review the NLRB’s decision that T-Mobile violated the NLRA, after receiving a decertification petition, by refusing to bargain with a union over a successor CBA but continuing to bargain on other matters of T-Mobile’s own choosing. Judge Sentelle dissented (T-Mobile USA, Inc. v. NLRB).

Sexual harassment cases continue to dominate headlines, including:

Trump not ‘above the law’: Defamation suit by sexual misconduct accuser proceeds. A New York state judge denied President Trump’s motion to dismiss or hold in abeyance (until the end of his term) a defamation suit by a woman who accused him of sexual misconduct in 2007, when she met with him seeking advice and employment opportunities after she was “fired” from The Apprentice. The court found no reason to delay a civil case concerning Trump’s purely private conduct just because he is president (Zervos v. Trump).

No sanctions claiming surveillance by Fox News in reprisal for harassment complaint. A federal court in New York refused to sanction a former Fox News commentator for a suit claiming federal wiretap and Stored Communications Act violations based on acts allegedly meant to punish her for filing a sexual harassment suit. The defense argued real individuals were behind the social media accounts she claimed were “sockpuppet” fronts by Fox, but the court refused to find her suit frivolous or in bad faith (Tantaros v. Fox News Network LLC).

$350K awarded to sergeant transferred 180 miles away after reporting sexual harassment. Applying a cat’s paw analysis, the Sixth Circuit held that ample evidence supported a jury’s finding that the Michigan Department of State Police was liable for the retaliatory transfer of a female police sergeant, sending her 180 miles from home after she reported sexual harassment by her supervisor (Mys v. Michigan Department of State Police).

Single same-sex incident of verbal threat, physical contact enough to survive dismissal. A male corrections officer’s claim that his male supervisor once massaged his shoulders and made sexually explicit and aggressive comments while doing so was enough to plausibly allege a Section 1983 harassment claim, given the coupling of unwanted physical contact with threatening verbal conduct (Perry v. Slensby).

Other noteworthy March decisions were off the beaten path:

Advertising ‘Lots of Mexicans’ ran afoul of Title VII. An employment agency violated Title VII by placing ads in a Chinese-language newspaper touting that it had “Lots of Mexicans,” since the ads unlawfully expressed a “preference” or “specification” for Mexicans or persons of Latino origin, a federal court in Illinois ruled, granting partial summary judgment to the state (State of Illinois v. Xing Ying Employment Agency).

Chinese parent company’s ‘pop-up’ screen may bind subsidiary. A user agreement with a noncompete, which appeared as a pop-up screen when a U.S. subsidiary’s employee used the Chinese parent’s IP platform, contained ambiguities in whether it applied to him or only to the parent’s Hong Kong employees, ruled a federal court in Michigan, allowing him to proceed on his claim that subsidiary breached the pop-up agreement by refusing to pay him for 24 months after his employment ended (Grant v. Johnson Electric North America, Inc.).

Employer may be liable for falling prey to W-2 phishing email. Refusing to dismiss negligence and breach of contract claims against an employer that provided confidential employee information in response to a phishing email, a federal court in North Carolina found the employees sufficiently alleged a duty to safeguard the information and a breach. Identity theft and deceptive trade practices claims also advanced (Curry v. Schletter, Inc.).

Fear that obesity could lead to other conditions supports regarded-as ADA claim. Under the majority view that obesity is an ADA impairment only if caused by an underlying physiological condition, a federal court in Illinois found that an applicant rejected for a safety-sensitive job due to obesity could not show an actual disability—but he could proceed on his ADA regarded-as claim because BNSF admitted it rejected him for fear that he would develop sleep apnea, diabetes, or heart disease, and suddenly become incapacitated (Shell v. Burlington Northern Santa Fe Railway Co.).

Putative class plaintiffs cite online employer reviews to show similarly situated others. Though a “close call,” a federal court in Louisiana conditionally certified an FLSA collective action by employees seeking unpaid wages and overtime from a labor contractor. They satisfied the limited preliminary burden of showing similarly situated employees by pointing to online reviews with similar complaints (Horton v. Global Staffing Solutions LLC).

Exotic dancers’ antitrust claims against strip club trade groups survive. Exotic dancers’ claims that industry trade groups for Ohio adult entertainment clubs unlawfully conspired to impose a “tenant system” on dancers survived a motion to dismiss antitrust and civil conspiracy claims. The claims are part of the dancers’ wage suit under the FLSA and Ohio law challenging their status as independent contractors and the club’s use of “lease agreements,” under which they have to pay $50 per night in “rent” to the clubs as purported “lessees” in order to perform there (Hogan v. Cleveland Avenue Restaurant, Inc. dba Sirens).

Agency enforcement actions that came to fruition in March included:

Motel managers go to prison for exploiting alien labor. Two motel managers were sentenced to a year and a day in prison for alien harboring for financial gain. The DOJ reported that they harbored an undocumented Indian national at a Super 8 Motel for over a year, during which he worked long hours performing manual labor. They promised to pay him but instead claimed to apply his pay to a debt he owed.

$1M in penalties after severe injuries at auto parts plant. OSHA announced that auto parts manufacturer Sunfield Inc. agreed to a settlement that includes a $1 million penalty and to hiring a safety and health coordinator to resolve violations found at an Ohio plant after two employees were severely injured by moving machine parts. The plant lacked adequate power press guarding and hazardous energy control procedures, said the agency.

Two years in prison and $749K in restitution for wage fraud. After a DOL investigation, a federal court in New Jersey sentenced a member of the International Longshoremen’s Association to prison time and ordered him to pay restitution for fraudulently collecting nearly $500,000 a year in pay. False timesheets credited him up to 16 hours of overtime each day when he actually spent as little as eight hours per week at the job site.

Pharmaceutical CEO gets a year and a day in prison over kickbacks. A federal court in Texas sentenced a former CEO of Pharmaceutical Technologies, Inc. (PTI), to one year and one day in prison for paying illegal kickbacks in an effort to steer pharmacy benefit plans to the company, the DOL announced. PTI agreed to pay over $8.5 million to avoid prosecution.

And finally, a couple of big settlements:

$45M settlement of equal pay suit against Family Dollar Stores. In a long-running and hard-fought class action alleging female Family Dollar Store managers were paid less than their male counterparts for the same work, a federal court granted final approval of a $45 million settlement (Scott v. Family Dollar Stores, Inc.).

$16.75M settlement preliminarily approved in FLSA suit against Kellogg. A federal court in Washington preliminarily approved a $16.75 million settlement in a suit by former territory managers and sales reps claiming Kellogg misclassified them as exempt and denied overtime in violation of the FLSA (Thomas v. Kellogg Co.).