Labor and Employment Update - Summer 2014

Generally, the United States Constitution requires Senate confirmation of presidential appointments.  However, the Recess Appointments Clause of the Constitution permits the President to make “temporary” appointments by allowing him to “fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”  

On January 4, 2012, the President filled 3 vacancies on the National Labor Relations Board while the Senate was on a 3 day intra-session break, punctuated by “pro forma” sessions.  Thereafter, the Board entered a decision in a labor dispute involving Noel Canning, a Pepsi bottler in Washington state.  Noel Canning appealed the Board’s decision, arguing that the Board lacked the requisite quorum to act because the President’s recess appointments were invalid.  The D.C. Circuit agreed with Noel Canning and ruled that the President’s recess appointments of the 3 Board members were invalid.  In making its decision, the D.C. Circuit found that the Senate was not in a “recess” as contemplated by the Constitution’s Recess  Appointments Clause at the time the President made the 3 appointments.  As such, the Board had no quorum and no authority to act when it rendered its decision in the Noel Canning case.  

The Board appealed the D.C. Circuit’s decision to the Supreme Court, which then affirmed the D.C. Circuit’s decision (although based on different reasoning).  The Supreme Court held that while the Recess Appointments Clause does allow for intra-session appointments to vacancies that arise before a recess, the Clause does not allow for appointments made during a short 3 day break between pro-forma sessions.

Based on the Supreme Court’s ruling, all decisions issued by the Board during the time in which the 3 appointed members were participating (January 4, 2012 through July 31, 2013) are invalid, as the Board did not have the necessary 3 member quorum to act.  Hundreds of cases were decided by the Board during that time period, and several are of particular note to employers:

• D.R. Horton (January 2012) – Board held that the employer violated the National Labor Relations Act by maintaining a mandatory arbitration policy that required all disputes be arbitrated on an individual basis, thereby precluding class or collective treatment of claims;
• Banner Estrella Medical Center (July 2012) – Board struck down a rule prohibiting employees from discussing ongoing investigations of misconduct with other employees, ruling that the employer must show a legitimate justification for such confidentiality that outweighs the employees’ rights under the Act;
• Costco Wholesale Corp. (September 2012) – Board held that the company’s social media policy violated the Act because it provided for discipline, including possible termination, of employees who posted materials that could be deemed damaging to the company, that could defame a person, or that otherwise violated the company’s rules.   The Board found that the policy was overbroad as it could be read by employees as a total ban on making comments critical of the company or their working conditions, which are protected rights under the Act;
• Flex Frac Logistics, LLC (September 2012) – Board held that a confidentiality agreement the employer required its employees to sign was unlawfully overbroad in violation of the Act as it prohibited employees from disclosing, among other things, personnel information to persons outside the company. The Board found that employees could reasonably construe this language as prohibiting them from discussing their wages and other terms and conditions of work with non-employees such as union representatives;
• Finley Hospital (September 2012) – Board held that an employer who negotiates a wage increase with a union must continue to offer such wage increase after the collective bargaining agreement expires and during renewal negotiations;
• Iron Tiger Logistics (October 2012) – Board reversed precedent and held that an employer is required to respond to a union’s request for information, even when such information may be irrelevant;
• Hispanics United of Buffalo, Inc. (December 2012) – Board found that the employer violated the Act by firing 5 employees for comments that they posted on Facebook after learning that a co-worker criticized their work performance. The Board found that the posts constituted protected activity under the Act;
• Alan Ritchey, Inc. (December 2012) – Board concluded that employers must bargain with the union before imposing discretionary discipline on employees during the period after the union has become the bargaining representative, but before the parties have agreed to a first contract;
• Piedmont Gardens (December 2012) – Board overruled longstanding precedent exempting witness statements obtained during an employer’s internal investigation from disclosure to the union; and  
• WKYC-TV (December 2012) – Board overruled longstanding precedent and concluded that an employer is obligated to continue deducting union dues after the expiration of a collective bargaining agreement that includes a dues check-off clause.

While the Supreme Court’s ruling has invalidated all decisions rendered by the Board during the time period of January 2012 through July 2013, including those summarized above, some of the decisions may still ultimately be “saved.”  The Board may rely on the “de facto  officer” doctrine which confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person’s appointment to office is deficient.   Furthermore, the Board’s General Counsel, Richard Griffin, has stated that while the invalidated cases do not have precedential value, the Board’s position is that the reasoning behind those cases should be considered persuasive and adopted.  

Due to the uncertainty of the ultimate impact of the Supreme Court’s decision, employers are encouraged to speak to their labor and employment counsel to determine what actions, if any, should be taken with regard to decisions issued by the Board during the relevant time period.

TWO RECENT ADA DECISIONS TEACH EMPLOYERS THAT THEY MUST EVALUATE ACCOMMODATION REQUESTS ON A CASE-BY-CASE BASIS

A pair of recent decisions involving the Americans With Disabilities Act may surprise and concern many employers.  At first blush, they appear to require employers to accommodate an employee’s disabilities by allowing him or her to steal from the employer and to work from home indefinitely regardless of the pertinent job duties.  A careful reading of the opinions, though, shows that they are actually far less controversial.  Indeed, the courts rendered their decisions essentially based on their application of a rule that really should not be a new concept to employers, which is that, under the ADA, employers are required to evaluate accommodation requests on a case-by-case basis and provide an accommodation to an otherwise qualified employee who suffers from a disability–if that accommodation does not create an undue burden to the company under the particular facts.

In the first case, EEOC v. Walgreen Co., the United States District Court for the Northern District of California held that a jury reasonably could determine that Walgreens violated the ADA when it terminated an employee it knew was diabetic for allegedly violating its legitimate company policy – a no tolerance policy against stealing food from the company.  In that case, the employee, Josephina Hernandez, admitted to opening and eating from a $1.37 bag of chips from a store shelf without first paying for it.  Presumably most, if not all, employers would think that Ms. Hernandez undisputedly could lawfully be terminated for this.  To be sure, Walgreens thought so.  

When Ms. Hernandez sued Walgreens for terminating her, Walgreens justified its decision by arguing that Ms. Hernandez stole the chips,  and that allowing her to steal could never be considered a reasonable accommodation.  Walgreens pointed to the EEOC’s own guidelines  to support its position, which guidelines state, “An employer never has to excuse a violation of a uniformly applied conduct rule that is job-related and consistent with business necessity.  This means that an employer never has to tolerate or excuse violence, threats of violence, stealing, or destruction of property.”

Also, Walgreens contended that terminating an employee for stealing (as it terminated Ms. Hernandez) was consistent with business necessity because the policy related to Walgreens’ effort to decrease the over $350 million a year that the company experienced in losses due to employee theft.  Further, Walgreens argued that Ms. Hernandez knew of the anti-grazing policy and that employees consistently had been fired for violating it.  Finally, Walgreens asserted that it could not be liable for failure to provide a reasonable accommodation because Ms. Hernandez never proactively asked to be permitted to eat food off the shelves without paying for it.  

In evaluating these seemingly reasonable arguments, however, the court held that Walgreens did not establish that Ms. Hernandez violated its no grazing policy or that the EEOC guidance even applied.  Walgreens did not prove that Ms. Hernandez “stole” the chips because she testified that she planned to pay for them and that she eventually did pay for them.

Second, Walgreens did not prove that it was even possible under the circumstances for Ms. Hernandez to proactively ask for the accommodation in question.  Ms. Hernandez testified that she needed to eat the chips before paying for them to stabilize a sudden hypoglycemic attack she began to experience while working, which attack was incident to her long-standing diabetic condition.  

Third, Walgreens failed to “address what is ‘consistent business necessity’ in the context of an employee suffering a hypoglycemic attack.”  Indeed, the facts were so unique that the Court held that a jury should decide if penalizing an employee in this situation served a legitimate business purpose.

Fourth, to the extent Ms. Hernandez’s violation of Walgreens’ allegedly neutral uniformly applied anti-grazing policy was necessitated by her disability, the court followed Ninth Circuit precedent (which is not in accord with all circuits) when it held that relying on a “disability-caused” act of misconduct “is by its very nature not a legitimate nondiscriminatory reason under the ADA.”

Finally, the Court rejected Walgreens’ argument that the EEOC should be precluded from taking action against the company when the company relied on the EEOC’s guidance quoted above.  Notably, the Court held that the guidance could not be used as a defense because it had not been published in the Code of Federal Regulations.  Even if it had, though, the Court emphasized that the EEOC qualified the concept of “business necessity” in the guidance “as it applied to a particular employee.”

In the second case referenced above, EEOC v. Ford Motor Co.,  the Sixth Circuit held that a jury should decide if Ford failed to provide a reasonable accommodation to the plaintiff, Jane Harris, when it refused to allow her to telecommute on an as-needed basis to accommodate her Irritable Bowel Syndrome.  Similar to Hernandez,  the Court held that the employer could not show that the requested accommodation was unduly burdensome.  Instead, Ford attempted to rely on broad statements in other cases that regular attendance is an essential function of most positions.  The Sixth Circuit pointed out that, when the courts “first developed the principle that attendance is an essential requirement of most jobs, technology was such that the workplace and an employer’s brick-and-mortar location were synonymous.”  Given advances in technology, “attendance at the workplace can no longer be assumed to mean attendance at the employer’s physical location.”

Accordingly, Ford was required to show that, under the specific facts, Ms. Harris either could not perform the essential functions of her position with or without the accommodation or that the requested accommodation was an undue burden.  In finding that Ford did not meet its burden, the court rejected many of Ford’s arguments of undue burden because they would have been pertinent only if Ms. Harris had asked to work unpredictable hours and “off hours.”  This was not Ms. Harris’ requested accommodation, as she seemed to be able to work when she was needed.  She simply needed to do that work at home.  Just as the Sixth Circuit in this opinion seemed to underscore the requirement that an employer not rely on broad workplace rules to deny an accommodation without due consideration of the facts, the court similarly declined to impose a rule that applied in all situations.  The court clarified that it did not intend to hold that all employers for all positions must provide telecommuting as a reasonable accommodation.

Bottom line:  These cases caution employers that they should not blindly apply their seemingly legitimate policies to deny accommodation requests.  Instead, employers should, before denying such a request, consider each request on a case-by-case basis and be able to show that, based on the particular facts, allowing the accommodation would cause an undue burden to the company and/or that denying the request serves a legitimate business purpose even given the specific circumstances.  If an employer cannot make this showing, it is possible a court would find that the employer violated the ADA, regardless of the accommodation the employee needed. 

By:  Lee D. Moylan
lmoylan@klehr.com   

NON-COMPETE?  NOT SO FAST

In May,  the Superior Court of Pennsylvania ruled in Socko v. Mid-Atlantic Systems of CPA,  Inc. that a restrictive covenant entered into after employment has already commenced is unenforceable if not supported by separate valuable consideration.

David Socko began working for Mid-Atlantic, a basement waterproofing business, in 2007.  When he was hired, he signed an employment contract containing a two year covenant not to compete.  He subsequently resigned in February 2009, but in June 2009 he was rehired and signed a new employment agreement containing a covenant not to compete.  In December 2010, while still employed by Mid-Atlantic, Socko signed a third employment agreement, which superseded all prior employment agreements.  Like the first two, the third agreement contained a covenant not to compete.  After resigning from Mid-Atlantic in January 2012, Socko accepted employment with a competitor of Mid-Atlantic.  A month later, Mid-Atlantic sent a copy of the 2010 covenant to the new employer and threatened litigation.  Socko was terminated ten days later.  

In April 2012 Socko brought suit, seeking a declaration that the 2010 covenant was unenforceable because it was not supported by sufficient consideration. Mid-Atlantic contended that because the agreement included the language “intending to be legally bound,” the Uniform Written Obligations Act (“UWOA”) required enforcement, even in the absence of consideration.

The Superior Court began its analysis by noting the conflicting decisions of the Federal Courts in the Eastern and Western District of Pennsylvania on this issue.  Finding the reasoning in neither case to be persuasive, the court recognized that non-competition agreements are disfavored in Pennsylvania, as they are “viewed as a trade restraint that prevents a former employee from earning a living.”  The court then explained the evolution of restrictive covenants and the breadth of Pennsylvania case law analyzing the same.

In reaching its ruling, the Superior Court rejected Mid-Atlantic’s assertion that invoking the UWOA’s language “that the parties intend to be legally bound” constitutes adequate consideration for the agreement.  Rather, the Superior Court found that language inapplicable to restrictive covenants because, unlike other contracts, the value of the consideration is a factor in determining the enforceability of restrictive covenants.  Therefore, when an existing employee signs a new employment agreement with a restrictive covenant, the employee must receive a corresponding benefit or a change in job status for the covenant to be enforceable.  The court did not delineate what consideration would be acceptable; however, the consideration must be more than continued employment, nominal consideration (such as one dollar), or a “seal” on the contract.

Socko has implications for Pennsylvania employers who have entered, or plan to enter into, non-compete agreements and restrictions with employees or former employees.  If not part of the employment agreement at the time of hire, restrictive covenants imposed later, even as part of a new employment agreement, will not be enforceable in the absence of increased benefits or a change in employment status.  However, Socko does not impact the enforceability of agreements entered into at the start of employment, because in that situation, the employer’s offer of employment is deemed sufficient consideration.