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Arbitration Agreements Waiving Employees' Rights to Class & Collective Actions are Enforceable

Posted on Tue, Apr 22, 2014 @ 09:27 AM

by Jack B. HarrisonJack B. Harrison

On March 21, 2014, the U.S. Court of Appeals for the Eleventh Circuit, in Walthour v. Chipio Windshield Repair, LLC, et al., joined four other Circuit Courts of Appeals in holding that an arbitration agreement that waives the right of an employee to bring a class or collective action under the Fair Labor Standards Act (“FLSA”) is enforceable.  In so holding, the Eleventh Circuit joined the Second, Fourth, Fifth, and Eighth Circuits in giving employers support regarding the enforceability of class and collective action waivers.

In Walthour, the employees had signed arbitration agreements with their employer, under which they agreed to arbitrate all claims arising out of their employment and to pursue claims only individually, rather than collectively or as a class.  Additionally, the agreement at issue specifically waived the ability of the employees to bring a class action in the arbitration context.   However, even in the face of the agreement, once the employees’ employment ended, the employees brought a collective action against the employer under the FLSA.  In this lawsuit, the employees alleged that the employer failed to pay them the required minimum wage and overtime and failed to maintain records required by the FLSA.  The employer then filed a motion to compel arbitration based on the agreement that the employees had signed.  The federal district court granted the motion, a decision that was then appealed to the Court of Appeals.

After reviewing the language of the FLSA, its legislative history, and Supreme Court precedents interpreting the FLSA, the Court of Appeals dismissed the argument made by the employees that the right to bring a collective action under the FLSA is a non-waivable substantive right, concluding that there was no “congressional command” under which the FLSA had overridden the requirement of the Federal Arbitration Act (“FAA”) that collective action waivers in arbitration agreements were to be enforced.

Based on the FAA’s “liberal federal policy favoring arbitration agreements,” the Court of Appeals concluded that the agreements in question were enforceable under the FAA.  Based on multiple Supreme Court precedents (American Express Co. v. Italian Colors Rest. (2013); AT&T Mobility LLC v. Concepcion (2011); Gilmer v. Interstate/Johnson Lane Corp. (1991)), the Court of Appeals concluded that it was compelled to “rigorously enforce arbitration agreements according to their terms.” (quoting American Express Co. v. Italian Colors Rest.).

The importance of this decision for employers is that the Eleventh Circuit's decision in Walthour is consistent with decisions by other Courts of Appeals and with recent Supreme Court decisions regarding the enforceability of arbitration agreements that include waivers of class and collective actions by employees.  However, prudent employers should note that the NLRB continues to take the position that waivers such as this violate the rights of employees to engage in protected activity in concert under the National Labor Relations Act.  As a result, the NLRB continues to bring charges for unfair labor practice against employers that include class and collective action waivers in their arbitration agreements.

Tags: FLSA, US Court of Appeals, Federal Arbitration Act, NLRB

More Guidance on Background Checks from EEOC and the FTC

Posted on Mon, Apr 14, 2014 @ 11:42 AM

by Jack B. HarrisonJack B. Harrison

The U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) jointly released two documents regarding the use of background checks in the workplace on March 10, 2014.  These two documents, one aimed at employers and one aimed at employees and job applicants, can be located on the EEOC’s website.  The documents are titled: Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know.  While these documents offer very little new guidance, they do serve to remind employers of the “best practices” to be followed in the use of background checks in the employment context.

The documents do make it clear that “it’s not illegal for an employer to ask questions about an applicant’s or employee’s background, or to require a background check.”  However, they also caution employers that the use of background checks must comport with the federal Fair Credit Reporting Act (FCRA), if the background information is being obtained from a consumer reporting agency (CRA), as well as Title VII of the Civil Right Act of 1964.

Among the guidance offered employers in these documents is the following:

  • In all cases, make sure that you're treating everyone equally. It's illegal to check the background of applicants and employees when that decision is based on a person's race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, asking only people of a certain race about their financial histories or criminal records is evidence of discrimination.
  • Except in rare circumstances, don't try to get an applicant's or employee's genetic information, which includes family medical history. Even if you have that information, don't use it to make an employment decision. (For more information about this law, see the EEOC's publications explaining the Genetic Information Nondiscrimination Act, or GINA.) Don't ask any medical questions before a conditional job offer has been made. If the person has already started the job, don't ask medical questions unless you have objective evidence that he or she is unable to do the job or poses a safety risk because of a medical condition.
  • Apply the same standards to everyone, regardless of their race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, if you don't reject applicants of one ethnicity with certain financial histories or criminal records, you can't reject applicants of other ethnicities because they have the same or similar financial histories or criminal records.
  • Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. For example, employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and does not accurately predict who will be a responsible, reliable, or safe employee. In legal terms, the policy or practice has a "disparate impact" and is not "job related and consistent with business necessity."
  • Be prepared to make exceptions for problems revealed during a background check that were caused by a disability. For example, if you are inclined not to hire a person because of a problem caused by a disability, you should allow the person to demonstrate his or her ability to do the job - despite the negative background information - unless doing so would cause significant financial or operational difficulty.
  • Any personnel or employment records you make or keep (including all application forms, regardless of whether the applicant was hired, and other records related to hiring) must be preserved for one year after the records were made, or after a personnel action was taken, whichever comes later. (The EEOC extends this requirement to two years for educational institutions and for state and local governments. The Department of Labor also extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000.) If the applicant or employee files a charge of discrimination, you must maintain the records until the case is concluded.
  • Once you've satisfied all applicable recordkeeping requirements, you may dispose of any background reports you received. However, the law requires that you dispose of the reports - and any information gathered from them - securely. That can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it can't be read or reconstructed. For more information, see "Disposing of Consumer Report Information? Rule Tells How" at http://www.business.ftc.gov/documents/alt152-disposing-consumer-report-information-rule-tells-how.

Both the EEOC and FTC have made it clear that enforcement of Title VII and the FCRA remains a top priority.  Thus, employers who make use of background checks should review their processes, policies, and procedures to ensure that they comply with these laws.  Additionally, prudent employers should also review their respective state’s laws regarding the use of background checks to ensure that they are in compliance with those laws as well.

Tags: Employment Law, Background Checks, FCRA, CRA

Voluntary Job Transfer = Adverse Employment Action? Maybe.

Posted on Wed, Apr 02, 2014 @ 10:21 AM

by Jack B. HarrisonJack B. Harrison

Can a lateral employment transfer, specifically one requested by an employee, be an adverse employment action that triggers potential liability for an employer under federal antidiscrimination laws?  In a recent decision, Deleon v. Kalamazoo County Road Commission, the United States Court of Appeals for the Sixth Circuit held that such a lateral transfer, even where initially requested by an employee, may be considered an adverse employment action when the terms and conditions of the transfer are intolerable.  In setting forth this standard, the Court of Appeals stated, a “transfer may constitute a materially adverse employment, even in the absence of a demotion or pay decrease, so long as the particular circumstances present give rise to some level of objective intolerability.”

In Deleon, the plaintiff was a fifty-three year old Hispanic male of Mexican descent.  He worked as an Area Superintendent for the defendant.  In this job, the plaintiff supervised road maintenance activities and repairs.  In 2008, the employee applied for the position of Equipment and Facilities Superintendent, which would have been a lateral transfer.  The plaintiff applied for this job because he believed that the position of Equipment and Facilities Superintendent would provide him with a better potential for career advancement.  The posting for the open position specifically described the working conditions in the position as “primarily in the office and in garage where there is exposure to loud noises and diesel fumes.”  While the plaintiff did not initially receive the position, the individual who did receive the position left it shortly thereafter. Upon not initially receiving the position, the plaintiff complained to his supervisors.  However, in 2009, the plaintiff was transferred to the Equipment and Facilities Superintendent position.  Shortly after receiving the position he had originally sought, the plaintiff began to complain about the diesel fumes and alleged that he suffered from bronchitis and sinus headaches as a result of the working conditions.  Ultimately, the employee was hospitalized for adverse health effects and stress that he attributed to his working conditions.  The plaintiff then took eight months of FMLA leave. When he was cleared to return to work, he discovered that his employer had already terminated him because he had exhausted his leave.

Following this, the plaintiff sued the employer asserting claims for race, national origin, and age discrimination.  In his Complaint, the plaintiff claimed that the job transfer was an adverse employment action, in that he was set up to fail.  In granting summary judgment to the employer, the District Court determined that transferring an employee to a position the employee applied for was not an adverse action.

On appeal, the Court of Appeals stated that generally reassignments without changes in salary, benefits, or title would not be considered an adverse employment action.  However, the Court of Appeals indicated that a job transfer could perhaps be considered an adverse employment action where it constitutes a constructive discharge.  Under this analysis, the Court of Appeals noted that for an employee to show that he/she had been constructively discharged as a result of a job transfer, the employee must show that the working conditions in the new position would be objectively intolerable to a reasonable person.  In this specific case, the Court of Appeals determined that the plaintiff had effectively shown that his working conditions were objectively intolerable.

In dissent, Judge Sutton describes the very difficult position employers now face.  As Judge Sutton stated: “Whatever the correct interpretation of the employment retaliation laws may be, they surely stop at this line: imposing liability on employers whether they grant or deny an employee’s request for a transfer.”  Judge Sutton further described the Hobson ’s choice now facing employers, where an employer gives an employee exactly what the employee requests, a job transfer, yet under the majority’s analysis, the employee may still have a cognizable claim. According to Judge Sutton, “It follows under the majority’s analysis that, when the employer denies what the employee wants, he also has a cognizable claim.”  

As a result of this decision, employers, defending a discrimination or retaliation claim, cannot simply assert that the employee previously requested the new position as an absolute defense to liability in a case where the employee is alleging that a transfer represents an adverse employment action.  It is possible that the employer in this case may appeal to the United States Supreme Court asking it to weigh in on this important issue.  Employers should follow these important developments and keep them in mind as they transfer employees laterally, even at the employee’s request.

Tags: Adverse Employment Action, Court of Appeals, Deleon v. Kalamazoo County Road Commission