Earlier this month, the United States Court of Appeals for the Second Circuit upheld a controversial NLRB decision—Mezonos Maven Bakery, 357 NLRB No. 47—regarding the award of backpay to undocumented aliens. Specifically, this case considered whether “undocumented workers who have engaged in fraud or criminal activity in violation of the Immigration Reform and Control Act (IRCA) in obtaining or continuing their employment are entitled to backpay where their employer…hired and retained them knowing they were undocumented.”
Finding that the instant matter was materially different from the Board’s decision in Hoffman Plastic, the administrative law judge initially found in favor of the employees. In Hoffman Plastic, the Board‘s holding precluded backpay in a scenario where the alien “violates the IRCA by presenting the employer with fraudulent documents,” and the “employer is unaware of the fraud.”
Specifically, the ALJ ruled that the instant matter was materially different from Hoffman Plastic because the employer—not the employee—violated the IRCA. As a result, the ALJ concluded that a backpay remedy was necessary. The Board, however, disagreed.
The Board Applies Hoffman Plastic
In August 2011, the Board declined to adopt the ALJ Order. According to the Board, Hoffman Plastic’s “holding is categorically worded” with “no distinction based on the identity of the IRCA violator.” As a result, Hoffman Plastic “broadly precludes backpay awards to undocumented workers regardless of whether it is they or their employer who has violated the IRCA. Indeed, “regardless of which party violated the IRCA, the result is an unlawful employment relationship.
A Matter of Public Policy
The Second Circuit Court of Appeals has weighed in as well, upholding the Board’s interpretation of Hoffman Plastic. In its decision, the Second Circuit places particular emphasis on public policy concerns: “Awarding backpay would ‘not only trivialize the immigration laws,” but would also “condone and encourage future violations.” Quoting Hoffman Plastic, the Second Circuit addressed the ALJ’s suggestion that aliens who did not present fraudulent documents but who are in the U.S. illegally, noting that it sees “no reason to think that Congress nonetheless intended to permit backpay where but for an employer’s unfair labor practices, an alien-employee would have remained in the United States illegally, and continued to work illegally, all the while successfully evading apprehension by immigration authorities. “
The Second Circuit did. However, remand the matter back to the Board for consideration of one additional issue: Whether to grant petitioners requested remedy of reinstatement contingent on the production of work authorization documents.
The Fourth Circuit Court of Appeals has joined the DC Circuit and Third Circuit in holding President Barack Obama’s recess appointments of three National Labor Relations Board members were unconstitutional.
The dispute arises from three NLRB appointments the President made on January 4, 2012—appointments made while the Senate was on a holiday break but still in session. Although the administration claimed that “the break qualified as a recess because there were not enough senators at work to conduct business,” the Fourth Circuit—in addition to previous holdings by the DC Circuit and the Third Circuit—disagreed. Specifically, the court held that “the framers of the Constitution meant to limit recess appointments to the period between congressional sessions, and that’s how it was done until a 1921 attorney general’s opinion.”
As a result of this decision, and the previous circuit court decisions, hundreds of NLRB decisions may possibly be invalidated.
The U.S. Supreme Court has agreed to hear the D.C. case.
Connecticut Legislature Restricts the Use of Non-Compete Agreements: Late last month the Connecticut General Assembly passed “An Act Concerning Employer Use of Noncompete Agreements” (the “Act”).
Effective October 1, 2013, the Act will dramatically alter how employers approach mergers and acquisitions. Specifically, under this new law: If, after a merger or an acquisition, an employee is being hired by, or continuing his or her employment with, the surviving entity, and the surviving entity intends to bind the employee to non-competition restrictions, then the employer must provide the employee with a written copy of the non-compete agreement and at least seven (7) days to consider signing the agreement.
While inconvenient for employers, the Act, on its face, isn’t particularly alarming. However, the practical implications are considerable. For example, as a result of this new law, employers may be forced to inadvertently give employees advance notice of possible business transactions, such as closings or consolidations. Ultimately, notice of plant closings resulting from mergers or acquisitions will be dictated by legislative fiat—not business necessity or the unique culture of each organization.
Furthermore, employers must also now consider the possibility that an existing employee might balk at signing a new non-compete agreement, thereby complicating—and perhaps even jeopardizing—a merger or acquisition.
Bottom Line for Employers: Effectively navigating a business merger or acquisition has never been easy. And with passage of the new Act, life for Connecticut’s employers just became a bit more complicated. For assistance in adhering to this new law, contact Bud O’Donnell.
On Tuesday, May 7, 2013, the United States Court of Appeals for the District of Columbia issued another decision against the National Labor Relations Board. This time, the court found that the NLRB had exceeded its authority when it issued the rule requiring employers covered by the National Labor Relations Act to post a notice informing workers of their right to unionize. (This same court, in January, 2013, invalidated the NLRB recess appointments made by President Obama; the NLRB has appealed that decision, Noel Canning v. NLRB, to the U.S. Supreme Court.)
In this most recent decision, National Association of Manufacturers v. NLRB, 717 F.3d 947 (2013), the court concluded that the NLRB’s rule was in violation of the National Labor Relations Act because it subjected an employer to an unfair labor practice for the failure to post this notice; and because it infringed upon the First Amendment right to free speech by forcing a company to disseminate a view that it did not agree with (i.e., the right to unionize).
Section 8(c) of the National Labor Relations Act grants employers the right to express “any view, argument or opinion, or dissemination thereof, whether in written, printed, graphic or visual form.” As long as there is no threat of reprisal, these communications are protected from being treated as unfair labor practices. The court stated that the NLRB’s rule violated Section 8(c) because “the right to disseminate another’s speech necessarily includes the right to decide not to disseminate it.”
While this decision represents another significant setback to the NLRB, the court’s decision also raises the possibility that its rationale could be extended to other federal notice-posting requirements that have been imposed on employers by various agencies (i.e., OSHA and the EEOC). It remains to be seen whether this decision will generate that type of litigation.
The DOL’s Wage and Hour Division has released a new FMLA Poster, which reflects the FMLA Final Rule to Implement Statutory Amendments. Changes to the FMLA regulations made in this Final Rule, including military caregiver leave for a veteran, qualifying exigency leave for parental care and the special leave calculation method for flight crew employees, become effective on March 8, 2013. (NB: Some provisions of the FY 2010 NDAA and the Airline Flight Crew Technical Corrections Act, such as the expansion of qualifying exigency leave to families of members of the Regular Armed Forces and the special eligibility hours of service requirement for flight crew employees, became effective as of the enactment date of those statutes. See 77 FR 8962 (Feb. 15, 2012)).
The new FMLA poster may be posted immediately, and must be posted to replace the existing FMLA poster by March 8, 2013.
One of my first jobs was that of a dishwasher. In the “back of the house,” I learned that cleanliness was most important to the servers—those who made the “big money.” I heard their talk, how attentive they need to be to their customers, and how every little effort counted toward the almighty tip. It was all about the tip. Every server hustled to be attentive, to run to their guests with extra forks, knives, spoons, plates and napkins.
From there, I became a cook’s assistant. As the restaurant showcased the kitchen in the “front of the house,” I could see the servers greeting guests, and doing everything in their power to be gracious and attentive. If the plates were not perfect in appearance, the server would carefully adjust the plate’s content for the best presentation. I was told, again, that it was all about the tip.
Next, I bussed tables. Not only did I clean and re-set the tables swiftly to help the servers turn the tables for more guests, but I filled water glasses and bread baskets. When I noticed a customer looking for their server, I would approach to see if I might be of assistance. Usually an extra plate, fork or napkin was the cure. Other times, the steak might need a bit more fire. Improving the guests’ dining experience trickled down to me: the servers showed their appreciation for my attentiveness by tipping out to me. Yes, I had come to appreciate that it was all about the tip.
My promotion to server was big—now I could earn tips. The small hourly wage reduced by the tip credit was important, but it paled in comparison to the tips. I worked hard and strived to be the best server in the restaurant. I worked with professional servers. For me, it was a job to get me through the end of high school, then college and then law school. Nevertheless, I saw the importance of guest service and winning the big tip.
It has been many years since I waited tables. The perpetual dream of forgetting to bring something to some table never goes away. Now, as an attorney, I represent the restaurant industry that taught me values such as guest attentiveness and the goal of prompt service.
Claims by some servers suggesting that many of their duties are not service-related or are “incidental” to service, so that they may void the tip credit and permit their counsel to recover fees in class actions, are troublesome. Have they forgotten what goes into securing the big tip? I haven’t.
Glenn Duhl represents restaurants and restaurant groups in defense of employment-related claims, including tip credit litigation under the Fair Labor Standards Act and corresponding provisions of state law.
In a critical new ruling, the National Labor Relations Board held that “union job targeting programs, including those funded in part by voluntary deductions from the wages of union members employed on State-funded public works projects, are clearly protected under Section 7 of the Act.” This latest ruling throws up yet another roadblock in front of contractors already contending with a stagnant economy and burdensome regulations.
Job targeting programs, also known as market recovery funds, are yet another one of the economic weapons organized labor can deploy against non-union contractors. As part of these programs, unions collect dues which are then used to subsidize “union friendly” contractors. Yet, job targeting programs aren’t just about keeping organized labor’s allies in business; these subsidies put non-union contractors on the defensive, as the union shops are able to lower the gap between union and non-union contractors.
In this case (J.A. Croson Company, 359 NLRB No.2, 2012), the collective bargaining agreement contained a dues-checkoff provision requiring member employers to “deduct and remit to the Union, pursuant to voluntary authorizations signed by unit employees, due in the amount of 1.75 percent of the employees’ gross wages as a “Market Recovery Assessment.” The money collected was then used to fund the union’s “job targeting program, which funneled money to unionized contractors. The purpose of this program was clear: to “lower union contractor’s overall costs to complete targeted projects, enabling union contractors to submit competitive bids.”
In response to the union’s job targeting program, J.A. Croson Company, an ABC member, filed a lawsuit charging that the wage deductions violated state law. The Ohio Supreme Court eventually held that this lawsuit was preempted by the National Labor Relations Act (Act), and an administrative law judge found that Croson’s lawsuit did not violate the Act. The Board, however, reversed the judge’s ruling, holding instead that union job targeting programs are “clearly protected by Section 7 of the Act.” Consequently, the Board also held that Croson’s state court lawsuit was preempted by the Act, and that Croson’s lawsuit did not garner First Amendment protection: Indeed, by merely filing the lawsuit, Croson violated Section 8(a)(1) by interfering with union activity.
As a result of the Board’s J.A. Croson Company decision, the playing field has, once again, been titled in favor of organized labor.
In the wake of Hurricane Sandy, a frequent question is whether an employer must pay wages to employees who did not work due to a storm closing. While you should consult with counsel for a specific answer in light of your pay policies and practices, there are two answers for salaried exempt and hourly non-exempt employees.
Employers do not have to pay non-exempt, hourly, employees when no work has been performed as, by definition, they are “hourly” and only to be paid for hours worked.
Employers must continue to pay salaried, exempt, employees if they work any time during a work week and are available to work the remaining days, whether they work or not. In other words, if the worksite is closed for less than a week, and a salaried exempt employee has worked part of the week, s/he must be paid for the week. As Hurricane Sandy hit at the beginning of the work week, if the employee did not work at all during the week, no pay is earned and none need be paid. See Conn. Regs. §§ 31-60-14, 15 (the employee need not be paid for any workweek in which s/he performed no work). However, be careful as some salaried, exempt employees may claim to have worked from home. If they did work at home, they would be due their salary for the week.
Other than what the law provides, there is one additional consideration: is not paying the employees for the storm closing going to hurt employee morale? That remains as a business decision that you will have to consider. If a written policy is currently in place that informed employees that they might not be paid during the week in which the employer is closed, this may not be as much of a concern. However, with employees returning to work after having been living without power, they may not fully appreciate that the storm also caused the employer to suffer financial losses. Day to day events in the workplace may be dangerous. Be safe!
When the United States Department of Labor (USDOL) announced its “Misclassification Initiative” in September, 2011, it was clear that employers utilizing independent contractors were doing so at their own peril. At a meeting of the Connecticut Bar Association’s Labor and Employment Law Section representatives from both the Connecticut Department of Labor (CTDOL) and the Hartford office of the United States Department of Labor confirmed that as the one-year anniversary of their partnership agreement approaches, both agencies are continuing to increase their joint efforts to identify and penalize those employers who misclassify – even inadvertently – employees as independent contractors.
The DOL Misclassification Initiative
On September 19, 2011, the U.S. Department of Labor, the Occupational Safety and Health Administrative (OSHA) and the Employee Benefits Security Administration (EBSA) entered into a memorandum of understanding with the Connecticut Department of Labor with the specific goal of pooling their resources to identify and pursue employers utilizing independent contractors. The CTDOL also formed its own Joint Task Force consisting of representatives from the Workers’ Compensation Commission, the Department of Consumer Affairs and the Department of Revenue Services; amongst others.
In addition, the USDOL also entered into a memorandum of understanding with the Internal Revenue Service (IRS) for “enhanced information sharing and other collaboration.”
The Impact Of The Misclassification Initiative On Connecticut Employers
The consequences of this collaborative effort are many. For example, instead of having just one agency knocking on your door following a complaint or random audit there may be joint visits with representatives from both state and federal agencies present.
Far more significant, however, is the sharing of information amongst all applicable state and federal agencies. Gone is the day when an employer might receive a CTDOL complaint, settle up with that agency for a minimal amount, revise its practices and be done with the matter. Now instead of just wage and hour exposure from the CTDOL complaint, you can assume that information regarding the complaint will be forwarded to numerous agencies so that an employer may find itself liable for unpaid payroll taxes, workers’ compensation penalties, unemployment payments and assessments and other penalties and fines in addition to wage and hour overtime payments. Interestingly, the representative of the USDOL noted that it does not automatically contact the IRS following every complaint but instead will look at each complaint on a case-by-case basis before also making a referral to the IRS. Frankly, by doing so, the USDOL can utilize the threat of potential IRS involvement as “leverage” in any investigation and related settlement discussions.
Not surprisingly, another critical component of the DOL misclassification initiative is the amount of personnel and other resources devoted to conducting independent contractor-related audits and complaints. As the USDOL represented noted, over 350 additional investigators have been hired nationwide with several of those assigned to the USDOL Connecticut offices. Further, these investigators (many of whom are also lawyers) are all being supplied with laptops and other technological assistance so that they can complete their audits quicker and therefore, initiate even more audits. The USDOL representative also noted that approximately forty percent (40%) of the Hartford offices’ investigators are involved in what he described as “directed investigations,” meaning that investigators will target a particular industry or even a large project and conduct an investigation – even absent a complaint. Some of the industries receiving the most attention are: construction, healthcare, restaurant, motor carriers, payroll services and nail salons.
As the CTDOL representative noted with regard to investigations that are initiated by complaints, it is not merely disgruntled individuals filing complaints. Rather, she noted that approximately fifty percent (50%) of the complaints are generated by upset competitors! Apparently, in these difficult economic times when work is scarce, what better way to place a competitor at risk than by “dropping a dime” with the CTDOL that the competitor is alleged to be utilizing independent contractors.
Finally, all of this increased focus and effort has resulted in the collection of increased overtime wages, payroll taxes and fines and penalties or worse. For example, the CTDOL recently issued stop work orders to twenty-three (23) construction contractors in only a one-month period – February 27 to March 30! Big Brother is not only watching, but also acting.
Bottom Line For Employers
So what options do Connecticut employers have when faced with this onslaught of federal and state resources in attempting to prudently and lawfully operate their businesses with independent contractors.
First, employers must realize that the ostrich “head-in-the-sand” approach will no longer be effective in minimizing their exposure. So, if an employer is going to utilize independent contractors, it must conduct an analysis of whether or not the independent contractor satisfies the applicable legal standards. For certain agencies such as the USDOL, IRS and Connecticut Department of Revenue Services and Connecticut Workers’ Compensation Commission this means satisfying what is essentially variations of the more traditional common law “right of control” test. Unfortunately for those issues within the CTDOL’s jurisdiction, employers are required to satisfy the far more rigorous so-called “ABC” test contained in Connecticut General Statutes Section 31-222(a)(1)(B). In fact, a scenario could arise in which an employer satisfies the “right of control” test but not the “ABC” test, thereby at least limiting its exposure to CTDOL’s wage and unemployment tax obligations.
In conducting its analysis, employers can also utilize labor and employment counsel, not only to participate in the analysis but also to prepare, if appropriate, an opinion letter explaining why the proposed independent contractor arrangement satisfies, or at least would appear to satisfy, all applicable legal standards. Reliance on such letters will not only assist in defending any complaints, but also should at least constitute a good faith defense, precluding any claim that the employer “willfully” disregarded the applicable independent contractor standards. Such a scenario is significant because the DOL can seek damages for three (3) years prior to the date of a complaint for willful violations instead of just two (2) years for non-willful violations.
Finally, the CTDOL representative noted that employers concerned about whether or not their use of independent contractors complies with all legal requirements could voluntarily contact the CTDOL for a review. While the agency does not have a formal amnesty plan like the IRS, the representative noted that by voluntarily contacting it, employers will not only obtain a detailed response regarding their use of independent contractors but also they will minimize their exposure in the event it is determined that they have misclassified individuals as independent contractors instead of employees. Employers contemplating engaging a voluntary audit should, of course, consult with legal counsel before doing so.
The appropriate use of independent contractors can certainly contribute significantly to an employer’s effective operations and bottom line. Their use has always involved some risk but with state and federal governments looking for ways to increase tax revenues in these difficult economic times, the risks of utilizing independent contractors has never been greater – a scenario likely to continue for the foreseeable future as a result of the “misclassification initiative.”
Terence Flynn, a Republican, nominated to the Board by President Obama has resigned from the National Labor Relations Board (NLRB) effective July 24, 2012. In the interim, Flynn has recused himself from all agency activities.
Flynn was one of three recess appointments made by the Obama Administration.As the constiutitonality of these appointments remains suspect, each one is currently being contested in court. Specifically, the lawsuit filed against these appointments claims that, becayse Congress was technically in session when the appointments were made, the Administration lacks the authority to make an "interm" appointment.
Flynn’s resignation now leaves the NLRB with three Democratic appointees, and just a single Republican. Considering the current political climate in our nation's capital, its unlikely the President will make another appointment before the 2012 election. And should the President buck conventional widsom and make a new appointment, the odds of such an appointment being Republican are almost zero.
Flynn’s resignation sets the stage for another political battle between the administration and the Congress over a NLRB appointee. This new battle will continue even as litigation over the temporary appointment continues in the court.
It is unlikely we will see a resolution of this issue until after the elections this Fall.