United States: A Review of Key Cases and New Laws Affecting Employers (US Employment Litigation Round-Up for November/December 2015)

A Review of Key Cases and New Laws Affecting Employers

Undeterred NLRB Continues To Attack Class Action Waivers

Decision: In the later half of 2015, the National Labor Relations Board has continued to attack class action waivers in accordance with its D.R. Horton and Murphy Oil USA decisions despite the fact that both decisions were reversed by the Fifth Circuit (and the NLRB's en banc petition in Murphy Oil USA was denied without recorded dissent).

On November 10, 2015, the Board held, in Amex Card Services Co., 363 NLRB No. 40, that American Express violated the National Labor Relations Act (the Act) by forcing its employees to sign arbitration agreements that included class action waivers. Then, on November 30, 2015, in U.S. Express Enterprises, Inc., 363 NLRB No. 46, the Board held that U.S. Express's arbitration agreement—which also included a class action waiver—ran afoul of the Act even though an opt-out provision allowed employees to pursue legal disputes through a class action by providing written notice to the employer.

In both decisions, the Board concluded that the respective arbitration agreement violated the employees' protected right to engage in concerted activity under D.R. Horton and Murphy Oil USA. The Board emphasized its view that arbitration policies that require individual arbitration rather than class actions violate the Act. In addition, the Board held in U.S. Express Enterprises, Inc., that even if an opt-out provision makes an arbitration agreement voluntary for each individual who does not opt out, any arbitration agreement that precludes collective action "is unlawful even if entered into voluntarily because it requires employees to prospectively waive their Section 7 right to engage in concerted activity." Thus, according to the Board, even a voluntary arbitration agreement is prohibited if it contains a class action waiver that requires claims to be arbitrated on an individual, rather than a class, basis.

Impact: To date, the only federal court of appeals to consider the issue has rejected the NLRB's view, as has the California Supreme Court. But the NLRB appears to persist in its policy of refusing to acquiesce in court rulings rejecting D.R. Horton and similar Board decisions. (We addressed this pattern more than a year ago when discussing the Murphy Oil USA case). Although the NLRB's stance on arbitration agreements containing class waivers has been reversed on several occasions, Amex Card Services Co. and United Express Enterprises, Inc., demonstrate that the Board will continue to push its interpretation of the Act until forced to do otherwise. Anecdotal evidence suggests that the Board is also using its position to forcefully persuade companies to abandon arbitration policies with class waivers in settlement of NLRB charges, under the radar.

Amex Card Services Co. and United Express Enterprises, Inc., represent potential opportunities for another federal court of appeals to weigh in because section 10(f) of the Act permits an aggrieved party to seek relief in the circuit where the alleged unfair labor practice took place (Ninth Circuit in Amex and Sixth Circuit in United Express Enterprises), where the party resides or transacts business (in the case of Amex, this could be almost any circuit), or the DC Circuit (which always has jurisdiction to hear NLRB challenges).That being said, given the NLRB's persistence, employers can reasonably expect that the NLRB will continue to apply D.R. Horton and Murphy Oil USA—making it necessary for employers to seek judicial review—for the foreseeable future unless the US Supreme Court intervenes in an appropriate case.

Missouri Appellate Court Clarifies Punitive Damages Standard

Decision: On November 10, 2015, in Diaz v. AutoZoners, LLC, No. WD77861, the Missouri Court of Appeals upheld a jury award of punitive damages against an employee's direct employer but reversed the verdict against the employer's parent company because that company did not qualify as an "employer" under Missouri law. In Diaz, the plaintiff sued her employer, AutoZoners, and its parent, AutoZone, Inc., under the Missouri Human Rights Act (MHRA), alleging that both companies failed to adequately respond to pervasive sexual harassment by a commercial customer and that they retaliated against her when she complained. The jury found both entities liable and awarded the plaintiff compensatory damages of $75,000. In addition, the plaintiff was awarded punitive damages in the amount of $1 million against AutoZoners and $1.5 million against parent company, AutoZone, Inc.

On appeal, the Missouri Court of Appeals drew an important line that precluded the parent company from being held liable for the subsidiary's acts. Although the parent, AutoZone, Inc., created the Store Handbook and Code of Conduct for its subsidiaries' employees, provided documents used for HR investigations and responded to the plaintiff's discrimination charge, the court concluded that the conduct "d[id] not demonstrate that AutoZone, Inc., was responsible for training employees; receiving, investigating, and responding to complaints; or disciplining noncompliant employees."

The court declined the opportunity to invalidate the $1 million punitive damages award against AutoZoners, determining that the award was not unconstitutionally excessive. Applying the guideposts articulated by the US Supreme Court in BMW of North America v. Gore, 517 U.S. 559 (1996), the Missouri Court of Appeals first held that the third guidepost—legislatively established penalties for comparable conduct—was "inconsequential," before addressing the other two guideposts: the degree of reprehensibility of the conduct and the ratio of punitive to compensatory damages.

The court opined that even without physical harm or active wrongdoing, "there was a sufficient degree of reprehensibility on the part of AutoZoners, LLC, to justify a sizeable award." The court based this decision almost entirely on the repugnance of the customer's conduct and the court's belief that the jury could have reasonably concluded that AutoZoner's managerial employees had an economic motivation to violate the company's zero-tolerance rule in order to maintain the customer's account. In effect, the court did not analyze the amount of the award or the ratio of punitive to compensatory damages, but simply blessed the jury's verdict based on conduct it found sufficient to justify a punitive damages award.

Impact: While Diaz is another example of a state appellate court paying little attention to the BMW due process guideposts, the silver lining for employers is that the decision provides a helpful precedent in screening a parent company from liability as an "employer." Courts have often given short shrift to such arguments, holding a corporate parent jointly liable even where it has no substantive involvement in its subsidiary's alleged misconduct.

Diaz also highlights the importance of a strong focus on combating punitive damages early in a case, before trial, during trial, and in all steps leading to appeal, since an errant punitive damages award has the potential to transform a trivial case into a significant risk for a corporate employer.

Jury Awards Ex-LA Times Sportswriter $7.1M in Wrongful Termination Suit

Verdict: On November 4, 2015, a California jury awarded former Los Angeles Times sports columnist T.J. Simers $7.1 million after finding the newspaper discriminated against him based on his age and disability. The jury deliberated for nearly two days after a six-week trial, ultimately awarding Simers $330,358 for past economic damages, $1.8 million for future economic damages, $2.5 million for past noneconomic damages, and $2.5 million for future noneconomic damages.

Simers worked at the Times for 22 years. After he suffered a transient ischemic attack, also known as a mini-stroke, the paper reduced his workload from three weekly columns to two and later asked him to accept a demotion that would take away his column entirely. The paper said that the demotion was due to poor performance, even though Simers had consistently received positive reviews, before the mini-stroke, during his long tenure at the Times. The paper also accused Simers of an ethical violation for failing to disclose an alleged conflict of interest, though an internal investigation allegedly cleared him of any ethical wrongdoing. The paper suspended Simers for the alleged ethical violation and issued a "final written warning" threatening termination, even though it had never given him a preliminary warning. Simers resigned in the wake of the warning and filed suit one month later.

Commenting on the verdict, the jury foreman explained that the jury's decision was based mostly on the fact that Simers had received consistently positive reviews from the newspaper until he suffered the mini-stroke and that the Times did not follow its own disciplinary policy when it failed to give Simers an initial warning before his final written warning.

The Times, for its part, argued that it had not constructively terminated Simers when it offered him a demotion. Two of Simers's editors testified that they had offered him the ability to keep his column if he acknowledged his ethical error. Simers allegedly refused to do so.

Impact: The $7.1 million verdict should remind employers that significant damage awards are possible even without punitive damages. Employers should be conscious of how an employment decision will be perceived in context. A rapid change in tenor regarding a distinguished employee following a conspicuous health event, appears to have influenced the jury. Even though the jury refused to award punitive damages, it allocated $5 million to past and future noneconomic damages for pain and suffering. Thus, employers should be aware of the possibility of an unanticipated damage award above and beyond the employee's compensation.

Desperate Housewives Actress Need Not Exhaust Administrative Remedies in Pursuing Wrongful Termination Claim Under California Labor Code Section 6310

Decision: On October 20, 2015, the California Court of Appeal held, in Sheridan v. Touchstone Television Productions, LLC, that an employee need not exhaust his or her administrative remedies before filing suit under California Labor Code section 6310, which prohibits retaliation against an employee who makes a bona fide complaint of "unsafe working conditions or work practices."

Touchstone hired actress Nicollette Sheridan in 2004 to play the character Edie Britt on the television series Desperate Housewives. The contract was for one season, with the option to renew each year for an additional six seasons. The contract was renewed for five seasons, but after Sheridan complained to Touchstone that Marc Cherry, the show's creator, struck her during a rehearsal in September 2008, Touchstone chose not to renew her contract for the sixth season. In April 2010, Sheridan sued Touchstone for, inter alia, wrongful termination, alleging that Touchstone fired her because of her complaint about the alleged battery, later amending to add a claim under section 6310. That claim was dismissed due to Sheridan's failure to exhaust administrative remedies, as required by the California Court of Appeal's opinion in MacDonald v. State of California. During the Sheridan case, the Labor Code was amended to specify that exhaustion was not required, and the MacDonald case was ordered de-published.

The Court of Appeal reversed the trial court's decision, holding that the plain language of the statute did not require exhaustion. The panel considered the post-amendment language expressly stating that exhaustion was not required, stating that the amendment simply clarified the existing statutory intent.

Impact: The Court of Appeal's decision highlights the effect that amendments to the Labor Code may have on pending cases when seen as clarifying, rather than changing, existing statutory language.

Third Circuit Adopts "Predominant Benefit" Test For Meal Breaks Under FLSA

Decision: On November 24, 2015, in Babcock, et al. v. Butler County, a divided Third Circuit panel adopted the "predominant benefit" test to determine whether a meal period is compensable under the Fair Labor Standards Act (FLSA). The test weighs the benefits the employer and the employees receive from the break.

The case arose from a collective action brought by a corrections officer who alleged that she and other prison guards were owed overtime pay by their employer, Butler County, because 15 minutes of their one-hour meal break were unpaid and during the break the guards had to remain on call for emergencies and were not allowed to leave the prison without express permission. The district court dismissed the case, agreeing with the county's arguments that the meal period was not compensable work because the guards received the predominant benefit of the meal period.

On appeal, the Third Circuit refused to adopt the "completely relieved from all duties" test and agreed with the district court's application of the "predominant benefit" test. Doing so, the panel found that the guards were not primarily engaged in work duties during the break and also noted the existence of a collective-bargaining agreement that required guards be partially compensated with overtime pay if their break is interrupted by work.

The dissent (Circuit Judge Joseph A. Greenaway Jr.) stated that the majority had misapplied the "predominant benefit" test because the officers have to be prepared to work at a moment's notice and are subjected to other restrictions that "greatly limit their movement." Judge Greenaway rejected the majority's focus on the fact that the guards could ask for permission to leave the prison and would be compensated if work interrupted their break.

Impact: This decision clarifies the applicable test in the Third Circuit. While the rejection of the "completely relieved from all duties" test is a positive development for employers, the "predominant benefit" test is based heavily on the facts at issue and—as is evident from the disagreement between the majority and the dissent—facts are subject to varying interpretations. Employers would benefit from reviewing meal break practices to identify and address circumstances that are vulnerable to interpretation as benefitting the employer.

Ninth Circuit Deems HR Director's Reports FLSA Complaint Under US Supreme Court's Kasten "Fair Notice" Standard

Decision: On December 14, 2015, in Rosenfield v. GlobalTranz Enterprises, a divided Ninth Circuit panel clarified the standard for determining whether an employee has "filed any complaint" in order to trigger the anti-retaliation provisions of the Fair Labor Standards Act (FLSA).

The plaintiff in the case had held managerial positions in the defendant's human resources department before being terminated. She alleged retaliation as a result of her repeated reports that the company was not complying with the FLSA. The district court granted summary judgment for the defendant, holding that, although the plaintiff had "consistently and vigorously" raised the issue of potential FLSA violations, she had never "filed any complaint" for purposes of the FLSA's anti-retaliation provision.

Ninth Circuit Judges Susan B. Graber and Alex Kozinski reversed the district court decision, applying the "fair notice" test announced by the US Supreme Court in Kasten v. Saint-Gobain Performance Plastics Corp. Under that test, the FLSA's anti-retaliation provision is triggered when a complaint is "sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection." Examining the record, the majority held that a jury could find the plaintiff's reports sufficient to give fair notice of potential liability for retaliation. Critically, the majority noted that ensuring compliance with FLSA was not part of the plaintiff's regular duties, so her superiors understood, or should have understood, that she was asserting her rights of anti-retaliation protection under the FLSA.

The dissent (US District Judge Dee V. Benson, sitting by designation), argued that the panel should not have applied the "fair notice" test because Kasten applied only to oral complaints made by non-managerial employees. Instead, following a rule established by sister circuits in cases predating Kasten, Judge Benson stated that it must be shown that the complaining employee stepped outside of his or her normal role to file some type of formal, adversarial complaint, and that there was nothing in the record here to conclude that the plaintiff had done so.

Impact: The majority's decision explicitly avoids a bright line rule for determining when an employee has "filed any complaint" for FLSA purposes, explaining that the determination must be made on a case-by-case basis. Employers should be careful to avoid the appearance of retaliation when any employee, whether managerial or rank-and-file, raises concerns about FLSA compliance.

Originally published December 29, 2015.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions