by Robert J. Hollingsworth
While the NLRB’s new Employee Rights Notice has recently generated substantial media attention, there are two other developments at the NLRB that could have a far greater impact on employers, especially smaller employers who are not prepared to deal with union organizing.
On December 16, 2011, the NLRB approved new election rules to be effective on April 30, 2012. These new rules are sometimes colorfully described as the “Ambush” or “Quickie” Election Rules. By streamlining the processing of election cases, the NLRB under these new rules plans to hold elections within about 10 to 21 days from the date of the petition for election is filed. This “streamlining” is largely achieved in two ways: (1) by deferring most of the traditional pre-election issues (e.g., whether a particular employee is an exempt supervisor who cannot vote in the election) until after the election; and (2) by eliminating the practice of scheduling elections 25-30 days after the Regional Director directs an election.
To be sure, there has been significant criticism of these new election rules. At least one lawsuit has been filed challenging the rules. But so far we are not aware that any court has blocked these rules from taking effect on April 30, 2012.
The other related development at the NLRB is its recent recognition of “micro” bargaining units. Historically, the Board has favored larger bargaining units where the employees share a community of interest. In recent rulings, however, starting with Specialty Healthcare, 357 NLRB No. 83 (August 21, 2011), the Board has recognized the “micro” bargaining unit requested by the union, even though the petitioned-for bargaining unit could be appropriately placed in a larger unit. As long as the smaller unit is identifiable as a group (e.g., by job title, classification, etc.), the Board will approve this smaller group unless the employer opposing the smaller unit demonstrates that employees in the larger unit share an “overwhelming” community of interest with those in the unit petitioned-for by the union. In other words, the union will get the bargaining unit it wants even though a larger unit would be equally or even more appropriate than the smaller unit.
In sum, the NLRB will allow unions to organize smaller bargaining units that previously would have been viewed as inappropriate because of the community of interest with those in the larger unit. The effect of this will be to allow unions to nibble at employers with organizing focused on small bargaining units. Organizing smaller units will also be easier and less expensive for unions. Once a union gains a foothold by organizing a micro unit, the union can then turn its attention on other smaller units in the workplace or could go after the larger bargaining unit.
Together the quickie election procedures and the unions’ ability to organize micro units present a formidable problem for any employer, particularly small or unprepared employers who do not have a union avoidance program in place. Conducting an election campaign—obtaining professional advice, training supervisors, gathering information for the campaign, meetings and communications with employees—in less than three weeks will be overwhelming for unprepared employers.
Employers should therefore consider whether they are ready for a union election. If you are not ready, seek professional advice. Cors & Bassett attorneys have many years of experience dealing with union organization efforts.
by David J. Schmitt
The City of Cincinnati today announced that it will be the first major US city to choose a 100% green electricity supply. The purchase of its energy through an aggregation process through First Energy Solutions will save the average household $133 per year. A portion of this green energy will come from solar energy credits produced from the Cincinnati Zoo solar canopy project built by local company the Melink Corporation.
Cincinnati hopes its energy supply will soon be cheaper and greener. The city said Thursday it will be the first major city in America to choose a 100 percent "green” electricity supply for its eligible residents and small businesses while saving as many as 53,000 households money through the city’s Government Aggregation Program. Read more.
by Susan R. Bell
On March 30, 2012, and consistent with the Supreme Court’s decision in Meacham v. Knolls Atomic Power Laboratory, 554 U.S. 84 (2008), the EEOC issued its final ruling setting forth the “reasonable factors other than age” (RFOA) affirmative defense available to employers in disparate impact cases under the Age Discrimination in Employment Act (ADEA). The rule will take effect April 30, 2012.
“Disparate impact” discrimination is the one form of discrimination where proof of a specific intent to discriminate is not required. Consequently disparate impact analysis is used, for example, to challenge employer policies (e.g., a height requirement) that appears neutral on its face but has a disparate impact on certain protected groups (e.g., women could be disproportionately affected by a height requirement).
Employers have the burden of both production (i.e., presenting the necessary evidence) and persuasion (i.e., the burden of proving the defense) when presenting a RFOA defense in a disparate impact case. The EEOC notes that the standard of proof for a RFOA defense is higher than a rational-basis standard. According to the EEOC, equating the RFOA defense with a rational-basis standard would wrongly merge ADEA disparate-treatment and disparate-impact standards of proof: “If an employer attempting to establish the RFOA defense were only required to show that it had acted rationally, then the employer would merely be required to show that it had not engaged in intentional age discrimination.”
The final rule defines a RFOA as a factor that “is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.” The decision as to whether an employer has made an employment decision based on a non-age factor “must be decided on the basis of all the particular facts and circumstances surrounding each individual situation.” The rule further provides a non-exhaustive list of factors to be considered in determining whether an employment practice is based on a RFOA, including:
- The extent to which the factor is related to the employer’s stated business purpose;
- The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination;
- The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
- The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
- The degree of the harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.
Notably, this list consists of factors, not essential elements. These factors merely describe the most common characteristics of what the EEOC considers to be reasonable practices. Accordingly, the defense is not automatically established simply because one or more of the factors have been proven. In addition, there could even be a situation in which the defense is satisfied absent any of the factors.
In order to present a successful RFOA defense, a prudent employer must take reasonable steps to ensure that its supervisors are not given unbridled discretion to make policy-based decisions based on subjective criteria, which could allow supervisors’ biases and stereotypes to affect the decision-making process. Rather, employers should make sure that its supervisors are properly trained and that the supervisors are exercising their discretion in a way that does not violate the ADEA. For example, when asking supervisors to evaluate employees or applicants based on subjective criteria that are subject to age-based stereotypes, such as productivity, flexibility, willingness to learn, and technological skills, a prudent employer would instruct its supervisors to look specifically at objective measures of those specific skills that are actually used on the job.
You can find the rule here:
Robert J. Hollingsworth
Court Blocks NLRB Employee Rights Notice Posting Requirement
On April 17, 2012, the Court of Appeals for the District of Columbia temporarily blocked implementation of the NLRB's new rule requiring private sector employers to post the NLRB's Employee Rights notice. Additionally, on April 13, 2012, a federal district court in South Carolina ruled that the NLRB lacked authority to promulgate the notice rule. In light of these rulings, the NLRB announced that it "will not implement the rule pending resolution of the issues before the court."
The fate of the posting rule is now unclear. While federal courts have the authority to decide whether the posting rule is valid, even if the rule is ultimately upheld by the courts, the fate of the rule may still be decided by the presidential election in November. If the election results in a Republican majority appointed to the NLRB, the Board could scrap the notice rule.
Stay tuned. We will report new developments and details as they become available.
by Matt Parrish
On April 5, 2012, the President signed the Jumpstart Our Business Startups Act into law. This new law significantly changes the landscape for securities offerings commonly referred to as ‘crowdfunding’. Although it has received less public attention, the new law also increases the threshold that triggers a company to register and begin periodic reporting under the Securities Exchange Act of 1934 (the “Exchange Act”). This new law should significantly increase the flexibility of equity compensation plans maintained by large, privately-held companies.
The Exchange Act previously required a company to register and file periodic public reports with the SEC if the company had greater than $10,000,000 in total assets and had a class of equity securities with 500 or more holders of record. In 2007, the SEC by rule made an exemption from the registration and periodic reporting requirements for certain compensatory stock options held by more than 500 holders. In early 2012, the SEC acknowledged a similar exemption for compensatory restricted stock units. While these exemptions provided a means by which companies could issue certain types of equity compensation to more than 500 holders, some companies found the exemption requirements and limitations undesirable and instead focused their efforts on strategies to stay below the 500 holder threshold.
Under the threshold of the new law, a company must register and begin periodic reporting under the Exchange Act if it has greater than $10,000,000 in total assets and has a class of equity securities held of record by 2,000 or more persons or by 500 or more persons who are not accredited investors. More importantly, holders that receive their securities pursuant to an employee compensation plan in a transaction exempt from registration under Section 5 of the Securities Act of 1933 will not count towards the holder threshold. With proper planning, companies should now be able to issue a class of compensatory equity securities to any number of holders. Furthermore, companies should not be limited to using stock options or restricted stock units to do so.
The new law becomes effective immediately and requires the SEC to adopt ‘safe harbor’ rules that will assist companies in structuring their employee compensation plans to take advantage of these changes.
by Sara Straight Wolf
“HELP! I just got a letter from some company out west claiming my new product name infringes their trademark! What can I do? It would be so expensive to have to change the name of our product after we have put so much money into promoting it!”
Quite often trademark attorneys receive calls like this from clients who have adopted a trademark for their product or business, and after using the trademark for some time, they receive a cease and desist letter from another business claiming that they have infringed that other business’ registered trademark or common law trademark.
A person gains rights in a trademark through use. Generally, the first person to use a name or mark in connection with particular goods or services has priority in the mark. That person is referred to as the “prior user” or “senior user.” A person using a trademark later in time is called a “junior user.”
A trademark does not need to be registered with any state or federal agency to be a valid trademark; if a person has used a name or mark in connection with goods or services and continues to use the name or mark, that name or mark becomes a common law trademark.
If another person is using the same (or a very similar) name or mark in connection with goods or services, that person is guilty of trademark infringement if the person was the second to use the name or mark (the “junior user”), if the goods or services are similar, and if the use of the same mark by these two different businesses is likely to cause confusion. The first inquiry of your trademark attorney will be to find out whether you were the first to use the trademark. The next inquiry will be to look at the products or services bearing the name or mark.
For example, if a business uses the mark “Pampers” in 2012 as a trademark for baby booties and bibs, then Procter & Gamble, who owns the trademark “Pampers” for paper baby diapers, could win a trademark infringement lawsuit against the second person. Since both the senior user and the junior user are using the mark on products that are for babies, even though the products are not identical, the senior user would win the trademark infringement lawsuit. If the junior user was using the mark “Pampers” for fishing gloves, or for automotive motor oil, then it would be very much harder for Procter& Gamble to prove likelihood of confusion in the mind of the ordinary consumer about the source of these very different products. It is harder to win a trademark infringement lawsuit when the products are very different and they have different types of consumers, and when the businesses advertise in different places.
In summary, the first to use the trademark in connection with particular goods or services has priority. Your trademark attorney has to review your use of its trademark, determine when you first used the trademark, and review the claim of the other business. If the other business has registered the trademark, the registration will list a date of first use. In general, the first user has rights in the trademark. The trademark attorney will then determine whether your goods or services are likely to be confused with the claimant’s goods or services, and whether an ordinary consumer would think the goods came from the same source or manufacturer.
Your trademark attorney can advise you whether the business sending you a cease and desist letter has overreached, and whether the business claiming infringement is being too protective of its trademark under the legal standards for trademark infringement. If that is the situation, most likely you and the business that sent the cease and desist letter can reach an agreement so that each party will use the same or similar mark in a manner that is restricted to its own products, and sometimes the agreement will specifically disclaim use by one party on the other party’s type of products or services.
By Joseph S. Burns
The Virginia State Police (the “VSP”), according to the Virginia ACLU, could be running foul of federal law and the U.S. Constitution by requiring trooper applicants to provide access to their social media accounts during the hiring process. Indeed, the ACLU of Virginia’s Legal Director asked that state police discontinue the practice, described as "shoulder surfing." "Absent a concrete reason to believe that a potential employee is engaged in wrongdoing of which his Facebook account is likely to contain evidence, these communications are simply none of the VSP's business," the Legal Director Stated. "Looking at this information is akin to opening an applicant's mail or listening in on his telephone calls. Such eavesdropping intrudes on the privacy of not only the job applicant, but his online friends and correspondents."
A spokesperson for the VSP confirmed that it had been contacted by the Virginia ACLU, noting that “we will continue our existing hiring practices,” and that “… our investigative background process is necessary and appropriate for the job our applicants are expected to do and the authority granted to such individuals upon being hired on to the Virginia State Police."
In addition to possibly violating the Fourth Amendment’s protection from unreasonable searches and seizures, along with the First Amendment’s right to freedom of speech, the ACLU cautioned that the VSP might be violating the Stored Communications Act, a federal statute that prohibits one from intentionally accessing stored electronic communications. This dispute raises important questions about the breadth of pre-employment background checks, and just how far a local government may go in screening new hires.
There is far more to come on this issue. Check back soon as we follow and provide further developments and updates.