Waiving employee class and collective action lawsuits in the workplace

Employers hoping to avoid employees’ costly class action lawsuits under state and federal antidiscrimination statutes, as well as collective actions for minimum and overtime wages, should carefully consider the Supreme Court’s recent American Express decision.

In the case of American Express Company v. Italian Colors Restaurant, the Court upheld the enforceability of a contract provision requiring arbitration of disputes, and also waiving the right to litigate or arbitrate claims on a class action basis on behalf of multiple claimants. The case, which began with a lawsuit filed in New York City in 2003, was decided by the U.S. Supreme Court on June 20 by a vote of  5-3. Justice Sonia Sotomayor recused herself.

Italian Colors, a small Oakland, California, neighborhood bistro in the city’s Montclair district, and a group of other merchants who accept American Ex­press credit and debit cards for customer payments, had filed a class action lawsuit against AmEx for alleged violations of the federal antitrust laws.  The merchants argued that American Express used its monopoly power to force the merchants to ac­cept its cards from customers at rates approximately 30% higher than the fees charged by competing credit cards.

American Express argued that the dispute had to be resolved by arbitration, and that each aggrieved merchant had to assert its claim on an individual basis and not through a class action.  That position was based on a 1999 contract signed by the merchants.  The AmEx “Card Acceptance Agreement” included a mandatory arbitration provision stating, in part, that:

Claim includes claims of every kind and nature including, but not limited to, initial claims, counterclaims, cross-claims and third-party claims and claims based upon contract, tort, intentional tort, statutes, regulations, common law and equity. … YOU [the merchant] WILL NOT HAVE THE RIGHT TO PARTICIPATE IN A REPRESENTATIVE CAPACITY OR AS A MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION.  … There shall be no right or authority for any Claims to be arbitrated on a class action basis or on any basis involving Claims brought in a purported representative capacity on behalf of the general public, other establishments which accept the Card (Service Establishments), or other persons or entities similarly situated. Furthermore, Claims brought by or against a Service Establishment may not be joined or consolidated in the arbitration with Claims brought by or against any other Service Establishment(s), unless otherwise agreed to in writing by all parties.

In short, the AmEx mandatory arbitration agreement not only precluded a merchant from bringing an individual or class action lawsuit in court, it also precluded the merchant from having any claim arbitrated on anything other than an individual basis.

In an opinion written by Justice Antonin Scalia, the Court ruled in favor of American Express.  Courts must “rigorously enforce” arbitration agreements according to their terms, Scalia concluded. That principle applies even if the claimant’s cost for individually litigating or arbitrating his or her claim is prohibitively high and exceeds the potential recovery, and thus makes it impracticable to go it alone without joining with others,

The American Express decision reaffirmed the Court’s historical inclination to uphold the validity of arbitration agreements, as it had recently done in 2011 in the case of AT & T Mobility LLC v. Concepcion. There the Court preempted a 2007 California state supreme court decision that prohibited the enforcement of most class action waivers as “unconscionable”. The California decision, Gentry v. Superior Court, had involved a class action brought by employees who claimed that they had been unlawfully denied overtime pay. Subsequent California court decisions have concluded that the Concepcion doctrine also applies to workplace disputes because in that decision the Supreme Court “made no exception for employment-related disputes.”

While the American Express and Concepcion decisions were not employment disputes, in Gilmer v. Interstate/Johnson Lane Corp., the Court had previously enforced, in 1991, an arbitration agreement against a fired 62-year-old employee claiming workplace age discrimination against him. “Mere inequality in bargaining power … is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context,” the Court stated then.  Notably, the statute at issue there, the federal Age Discrimination in Employment Act of 1967, ex­pressly permits collective actions.

It must be noted that an important federal government administrative agency, the National Labor Relations Board, ruled in January of 2012 that a workplace agreement that waives an employee’s right to file joint, class, or collective claims concerning the terms and conditions of employment in any forum is unenforceable because violates the  employee’s federal right to engage in “concerted action”.

In D.R. Horton, Inc. and Cuda, the Board held that such agreements violate employee rights under the National Labor Relations Act. The provision at issue there provided in relevant part that: (1) all disputes and claims relating to the employee’s employment with the employer will be determined exclusively by final and binding arbitration; (2) the arbitrator may hear only the employee’s individual claims and does not have the authority “to fashion a proceeding as a class or collective action”; and (3) the employee waives the right to file a lawsuit or other civil proceeding relating to the employee’s employment with the employer. The status of this decision, which has been widely criticized, is not altogether clear, because only two of the five-member Board ruled, calling into question whether the decision will stand absent a quorum.

Given the marked trend in the Supreme Court’s jurisprudence in favor of arbitration and class action waivers, employers should consider having their existing as well as new employees sign agreements requiring them to arbitrate any claims arising from the employment relationship, and waiving the right to bring such claims on a class or collective action basis. This can be done through the employment application or a later document signed at the time a job offer is extended, or after employment has already commenced. While the enforceability of such class action waiver provisions has not been specifically decided by the Supreme Court in the employment context, the Court’s recent decisions point to their likely enforceability in a future case.

UPDATE: NLRB employee union rights poster rule thrown out in court

On June 14, 2013, the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia, also ruled that the National Labor Relations Board overstepped its authority by issuing a rule that would have required employers to post notices informing workers of their rights under federal labor law, including the right to unionize. That court covers the states of Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

Federal Appeals Court Protects Rights of Lactating Employees in the Workplace

In a precedent-setting decision that should be of interest all private sector employers, a federal appeals court has ruled that discharging a female employee because she is lactating or expressing breast milk in the workplace constitutes sex discrimination in violation of federal anti-discrimination laws.

The U.S. Equal Employment Opportunity Commission (“EEOC”), on behalf of employee

Donnicia Venters (“Venters”), had sued Texas companies Houston Funding II, Ltd. and Houston Funding Corp. (“Houston Funding”) in July of 2011.  The EEOC alleged that they had unlawfully discharged Venters, a new mother, because she was lactating and wanted to express milk at work. The EEOC alleged that Houston Funding had unlawfully discriminated against Venters based upon her sex, including her pregnancy, childbirth, or related medical conditions, by ending her employment.  According to the EEOC, the discharge violated Title VII of the 1964 Civil Rights Act, as amended by the Pregnancy Discrimination Act of 1978, which specifically protects against workplace discrimination based on an employee’s pregnancy.

In finding workplace discrimination in the Venters case, the federal Fifth Circuit Court of Appeals in New Orleans reversed the decision of the trial court, which had come to the opposite conclusion and ruled in favor of the employer. U.S. District Judge Lynn N. Hughes of the Southern District of Texas court in Houston had concluded in a February 2012 order that “lactation is not pregnancy, childbirth, or a related medical condition. Firing someone because of lactation or breast pumping is not sex discrimination. The law does not punish lactation discrimination”.

The Fifth Circuit covers the states of Louisiana, Mississippi, and Texas, but federal district courts in Florida often look to its decisions for guidance.

Venters had worked as an account representative/collector for Houston Funding from March 2006 until she was fired in February 2009. In December of 2008 she took a maternity leave of absence and ten days later gave birth to a girl. During one conversation with a male supervisor during her leave, Venters informed her employer that she was breastfeeding her baby and asked whether it might be possible for her to use a breast pump at work upon her return. Her request was peremptorily denied on the telephone by the supervisor.

Venters had suffered complications from her C-section and had to stay away from work slightly longer than anticipated.  In February of 2009 she called her employer to inform that her doctor had released her to return to work, and she mentioned again that she was lactating, and asked whether she could use a back room to pump milk.  After a long pause, she was informed on the phone that her position had been filled during her absence.  She then received a letter from her employer telling her that she was had been discharged due to “job abandonment”. The EEOC argued in court that the reason given by the employer was false and a pretext for discrimination.

The Fifth Circuit found in its May 30, 2013, decision that Title VII covers a “far range” of employment decisions “entailing female physiology”. Writing for a unanimous panel of three judges, Circuit Judge E. Grady Jolly stated: “We hold that lactation is a related medical condition of pregnancy. Lactation is the physiological process of secreting milk from mammary glands and is directly caused by hormonal changes associated with pregnancy and childbirth. Lactation is a physiological result of being pregnant and bearing a child.”

Accordingly, the Fifth Circuit vacated the trial court’s summary judgment order in favor of Houston Funding and sent the case back to Judge Hughes in Houston for a trial to be held.

"Now that the Fifth Circuit has reaffirmed the EEOC's long-standing position about the broad coverage of the Pregnancy Discrimination Act, we look forward to trying the underlying case," said Claudia Molina-Antanaitis, trial attorney in the EEOC's Houston District Office which filed the lawsuit.  "We hope this litigation sends a message to other women that discrimination based on pregnancy, childbirth, and related conditions is against the law and that the EEOC is here to help."

One of the six national priorities identified by the EEOC’s Strategic Enforcement Plan is for the Commission to address emerging and developing issues in equal employment law, including issues involving pregnancy-related limitations.

Besides the possibility of sex discrimination claims, private sector employers need to be aware that the federal wage and hour laws enforced by the U.S. Department of Labor now includes specific provisions protecting lactating non-exempt (i.e., hourly paid) employees in the workplace.  So do the state laws of some states. Failing to follow those provisions can also result in workplace claims.

Under the federal Fair Labor Standards Act of 1938 (“FLSA”), an employer must generally provide “reasonable break time for an employee to express breast milk for her nursing child for one (1) year after the child’s birth each time such employee has need to express the milk.”  Employers are also required to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.”

According to the Labor Department, a workplace bathroom, even if private, is not a permissible location.  The location provided must be functional as a space for expressing breast milk.  If the space is not dedicated to the nursing mother’s use, it must be available when needed in order to meet the statutory requirement.  A space temporarily created or converted into a space for expressing milk or made available when needed by the nursing mother is sufficient, provided that the space is shielded from view, and free from any intrusion from co-workers and the public. 

Employers are not required under the FLSA to compensate nursing mothers for breaks taken for the purpose of expressing milk.  However, where employers already provide compensated breaks, an employee who uses that break time to express milk must be compensated in the same manner that other employees are compensated for break time.  In addition, the FLSA’s general requirement that the employee must be completely relieved from duty during a break, or else the time must be compensated as work time, applies.

Employers with fewer than 50 employees may be exempt if they can establish an undue hardship. Whether compliance would be an undue hardship is determined by looking at the difficulty or expense of compliance for a specific employer in comparison to the size, financial resources, nature, and structure of the employer’s business. 

The employee lactation provisions were added to the FLSA by the Patient Protection and Affordable Care Act (“Obamacare”), and became effective on March 23, 2010.

According to the U.S. Centers for Disease Control and Prevention, approximately 75 percent of mothers start breastfeeding immediately after birth, but less than 15 percent of them are still breastfeeding exclusively six months later. As a part of the “Healthy People 2020 initiative”, the national goal is to increase the proportion of mothers who breastfeed their babies in the early postpartum period to 81.9 percent by the year 2020. 

The protection of lactating employees in the workplace at the state level varies greatly from state to state.  Forty-five states (including Florida), the District of Columbia, and the U.S. Virgin Islands have laws that specifically allow women to breastfeed in any public or private location, while 24 states (although not Florida), the District of Columbia, and Puerto Rico have laws related to breastfeeding in the workplace.

For example, the New York Labor Law states that employers must allow breastfeeding mothers reasonable unpaid break times to express milk, and make a reasonable attempt to provide a private location for her to do so.  It also prohibits employment discrimination against breastfeeding mothers. Similarly, the California Labor Code provides that employers need to allow a break and provide a room for a mother who desires to express milk in private while at work. And in Puerto Rico local laws provide that breastfeeding employees must have the opportunity to breastfeed their babies for half an hour within the full-time working day for a maximum duration of 12 months.

New form I-9 in effect now

A new official revised Employment Eligibility Verification Form I-9 is available (and required) for employers to use now, with a revision date of 03/08/13 located on the bottom left-hand corner of the form.

Employers should begin using this new form immediately. The new form and the instructions are available for free online at DOL.gov.

The key revisions to Form I-9 are:

• Additional data fields, including the employee’s foreign passport information (if applicable) and telephone and e-mail addresses; and
• Revising the layout of the form, and expanding the form from one to two pages (not including the form instructions and the List of Acceptable Documents).

A 60-day grace period has been provided, so that prior Form I-9 versions (08/07/09) and (02/02/2009) will no longer be accepted after May 7, 2013.

A Spanish-language version of the new Form I-9 and instructions is available for use in Puerto Rico only (although it can be used elsewhere as a guide for employee translation purposes). 

Employers are required to maintain Forms I-9 for as long as an individual works for the employer and for the required retention period for the termination of an individual’s employment, which is either three years after the date of hire or one year after the date employment ended, whichever is later.

Failure of an employer to ensure proper completion and retention of Forms I-9 may subject the employer to civil monetary penalties, and, in some cases, criminal penalties.

Employers do not need to complete the new Form I-9 for current employees for whom there is already a properly completed Form I-9 on file, unless re-verification applies.

A new 70-page Employer Handbook regarding the I-9 form is also available at the Department of Labor website.

NLRB employee union rights poster rule thrown out in court

I wrote last year about a controversial new rule by the National Labor Relations Board (NLRB) requiring private employers to post in their workplaces an 11x17-inch poster advising employees of their rights under federal law to form unions, strike, picket, etc. Under the rule an employer’s failure to post the required notice would have constituted an unfair labor practice.

The rule, enacted on August 30, 2011, had been expected to apply to nearly 6 million employers in the U.S., the great majority of which are small businesses. It never went into effect because litigation was promptly filed by several business groups challenging its validity.

As an update I can report that an important federal appellate court has just found that the NLRB acted illegally in enacting this rule, which the court ordered vacated.

On May 7, 2013, the Circuit Court of Appeals for the District of Columbia in Washington, D.C. found, in the case of National Association of Manufacturers v. NLRB, that Section 8(c) of the National Labor Relations Act precludes the Board from finding non-threatening employer speech to be an unfair labor practice, or evidence of an unfair labor practice, and that the Board’s new rule violated both prohibitions. The decision was heavily colored by First Amendment free speech principles, but was based on federal labor law and not on constitutional grounds.

“[T]he Board’s rule requires employers to disseminate [government] information, upon pain of being held to have committed an unfair labor practice,” wrote Senior Judge A. Raymond Randolph for a unanimous three-judge panel.  “But that difference hardly ends the matter. The right to disseminate another’s speech necessarily includes the right to decide not to disseminate it.”

“How … can it be an unfair labor practice,” continued Judge Randolph, “for an employer to refuse to post a government notice informing employees of their right to unionize (or to refuse to)? Like the freedom of speech guaranteed in the First Amendment, Section 8(c) necessarily protects—as against the Board—the right of employers (and unions) not to speak.”

In another, similar lawsuit, the United States District Court for the District of South Carolina ruled last year that the Board lacked authority to promulgate the rule. See Chamber of Commerce of the U.S. v. NLRB, 856 F. Supp. 2d 778 (D.S.C. 2012). The appeal in that case is now pending before the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia. 

It may well be that the U.S. Supreme Court will need to review this issue. But for the time being employers may ignore the poster rule until further notice. 

EEOC issues new guidances on disability discrimination at the workplace

The U.S. Equal Employment Opportunity Commission (EEOC) has issued four revised guidance documents regarding protection against disability discrimination, pursuant to the goal of the agency's Strategic Plan to provide up-to-date guidance on the requirements of antidiscrimination laws.

The documents address how the Americans with Disabilities Act (ADA) applies to job applicants and existing employees with cancer, diabetes, epilepsy, and intellectual disabilities. These documents are available free online on the agency's website at:

Cancer: http://www.eeoc.gov/laws/types/cancer.cfm

Diabetes:  http://www.eeoc.gov/laws/types/diabetes.cfm

Epilepsy:  http://www.eeoc.gov/laws/types/epilepsy.cfm

Intellectual Disabilities:  http://www.eeoc.gov/laws/types/intellectual_disabilities.cfm

"Nearly 34 million Americans have been diagnosed with cancer, diabetes, or epilepsy, and more than 2 million have an intellectual disability," said EEOC Chair Jacqueline A. Berrien. "Many of them are looking for jobs or are already in the workplace. While there is a considerable amount of general information available about the ADA, the EEOC often is asked questions about how the ADA applies to these conditions."

The revised documents reflect the changes to the definition of disability made by the ADA Amendments Act (ADAAA, effective since January 1, 2009) that make it easier to conclude that individuals with a wide range of impairments, including cancer, diabetes, epilepsy, and intellectual disabilities, are protected by the ADA. Each of the documents also answers questions about topics such as: when an employer may obtain medical information from applicants and employees; what types of reasonable accommodations individuals with these particular disabilities might need; how an employer should handle safety concerns; and what an employer should do to prevent and correct disability-based harassment.