Employment Law and Labor Regulations

Chapter 16

Employment-At-Will• Free Market Concept• Employers: Can hire and fire who they want• Employees: Work-at-will/quit when they want• Contractual and statutory limits to at-will• Public Policy Exceptions:

– Refusing to commit an illegal act– Important public duty (jury duty)– Public right (filing for workers’ compensation)– “Whistle Blowing”– Contracts in violation of public policy, i.e.

exculpatory agreements– If firm dismisses employee in violation of public

policy, employee may sue for wrongful discharge or retaliatory discharge (torts)

Brown v. Soh (within text)

• Brown worked for Skip Barber Racing School; offers advanced driving classes for the public in restricted area

• Everyone, including instructors, signed liability waiver to hold school harmless for any injuries incurred.

• Covered “all liability” for employees injured on job• Client, Soh, driving with an instructor• Ran into Brown in restricted area, waving flag to signal drivers• Brown sued school; trial court granted summary judgment to

school since he had signed a liability waiver. Brown appealed.• HELD: Reversed and remanded.• Exculpatory agreements are rejected in the employment context

due to public policy considerations if too strong.• Employer had advantage in bargaining strength against employee

– “take it (the adhesion contract of exculpation) or leave it” situation for employment and waiver too broad.

• If employers allowed to have broad waivers of liability, incentive by employers to manage risk at the workplace is reduced

Ballalatak v. All Iowa Agriculture Assn.

• Ballalatak worked as supervisor for Hawkeye Downs.• Two employees were injured on job; called Ballalatak and reported injury.• Ballalatak drove to scene, helped get men to hospital & filled out report.• Later, general manager, Nowers, told the 3 men to meet with him before returning to

work.• Told the men their medical expenses would be taken care of.• Injured men told Ballalatak they were concerned they would not receive workers’

compensation benefits.• Ballalatak told Nowers the workers had rights to benefits. • Nowers fired him.• Ballalatak sued, saying he was fired for arguing about workers’ compensation duties

to the injured workers. • Nowers claimed he fired him for insubordination.• District court dismissed suit.• Ballalatak appealed. (Continued)

Ballalatak v. All Iowa Agriculture Assn., cont.

• HELD: Affirmed. Usually employer may fire an at-will employee any time.

• Exceptions are if discharge is contrary to public policy.

• Ballalatak claims he was fired for raising concerns about workers’ compensation claims. Public policy interests should extend to supervisors who advocate benefits/rights of other employees.

• Court protects employees exercising their own statutory rights.

• Ballalatak was not fired to secure his own right.

• Nor was he fired for refusing to violate workers’ compensation law.

• Fired for his attempt to ensure his employer did not violate statutory right of other employees.

• Iowa law does not protect internal advocates for other employees.

• Law also does not protect employee who asserts other employees may contact an attorney re: workers’ compensation rights.

Noncompetition Agreements• Employees sign not to leave employment

and compete directly with employer.• Different states differ

– Some generally allow them– Some states allow courts to imply

reasonable terms to save the covenant in part

– Other states will eliminate most such agreements entirely

– Others – common law governs, allowing if restraints are reasonable in time and extent of coverage.

• Employers must pay attention to individual state law in this area.

Zambelli Fireworks Manufacturing Co. v. Wood

• Zambelli is large fireworks company working in most of U.S.

• Wood was hired by Zambelli to as pyrotechnician and choreographer. Execute fireworks displays with music

• Wood learned trade secrets, client lists, pricings, costs & contract terms.

• Zambelli paid for Wood to become a certified trainer for the Pyrotechnic Guild International

• Noncompete agreement signed in 2005 said that if Wood left Zambelli, he

– would not work for a competitor in the U.S. for 2 years

– would not solicit former clients

– would not disclose or use trade secrets

– AND if there was litigation and Zambelli prevailed, Wood would pay legal fees & costs

Zambelli Fireworks Manufacturing v. Wood, cont.

• Wood later hired by Pyrotecnico, a major competitor.• Signed an agreement he would not take or use an Zambelli

information or trade secrets• Pyrotecnico agree to pay his salary for two years if needed because

of covenant with Zambelli & also would cover legal expenses.• Zambelli sued to enforce covenant not to compete.• District Court held agreement was enforceable under Pennsylvania

law; enjoined most technical work by Wood.• Wood and Pyrotecnico appealed.• HELD: District Court decision affirmed.• Zambelli had a legitimate business interest in its goodwill & Wood’s

specialized training & skills.• Agreements are upheld when restrictions are reasonable to protect

employer’s interests.

Anti-Raiding Covenants

• Employees required to sign an agreement they will not recruit fellow employees for another company when they leave their current place of employment

• Varies from state to state– Some courts hold clauses in violation of public policy

• Is an illegal restraint on competition– Other courts hold the as enforceable– New York court held that once employee leaves place of employment,

continued restraints are not favored• Exception: to protect things, i.e. trade secrets

– California & Texas have held that covenants limited in time & coverage are enforceable

– In Missouri, legislature specifically held such covenants legal

Consequences of Consequences of Substance AbuseSubstance Abuse

• Reduced productivity & higher insurance expenses cost employers over $250 billion per year

• Safety Issues ~ workers under influence of alcohol or other drugs are 3.6 times more likely to be injured or to injure another

• Federal Railroad Administration found over 10 years that 28 RR accidents killed 37 people & caused millions of dollars damages due to alcohol or drug-impaired workers

• National Transportation Safety Board found alcohol or other drugs factor into 1/3 of accidents involving truck drivers killed on the highway

• Insurance costs are about double for families with an alcoholic• Issue Spotter: “What Attitude Toward Drinking and the Office?” –

Re: office parties and other festivities

Drug-Free Workplace Act• Requires all companies of more than

$25,000 worth of business with the federal government to certify they have “drug-free” workplace: – Publish policy statement– Establish drug awareness program– Make known availability of program– Require employees to notify

employers of any drug related convictions

General Employee Substance Abuse Policies

• Pre-employment screening usually OK (many states say testing after job offer is extended)

• Safety sensitive jobs• Notification• Voluntary nature – employee knew of policy• After accidents – OK• Reasonable suspicion – document in employee file• Use Certified Labs for drug testing results• Give all employees copy of company policy and keep a signed

receipt from employee• Make policy clear• Check with attorney

Worker Health & Safety

• Occupational Safety and Health Act of 1970 (OSHAct) created Occupational Safety and Health Administration (OSHA), the Occupational Safety and Health Review Commission (OSHRC) and the Natl. Inst. for Occupation Safety and Health Council (NIOSH)

• OSHRC decides administrative cases brought by OSHA• NIOSH does studies to help set safety standards• Safety Inspections• Over 7 Million workplaces: only small fraction inspected annually • 4th Amendment prohibits searches without warrant (but warrants

are usually easy to get)• Marshall v. Barlow’s Inc. (OSHA inspectors routinely obtain

administrative warrants that don’t require show of probable cause; the warrant requirement is not difficult.)

Penalties imposed under Section 17 of OSHA

• A willful or repeated violation – up to $70,000 per violation

• A serious violation – up to $7,000 per violation• A non-serious violation – up to $7,000 per violation• Failure to correct a violation (or knowingly make

false statement in OSHA records ) – up to $7,000 per day

• A willful violation resulting in death of an employee may result in criminal penalties imposed

R. Williams Construction Co. v. Occupational Safety & Health Review

Commission

• Williams dug a 12’ deep trench at construction site. Employees regularly cleaned up submersible pump at bottom of trench.

• Two workers entered trench with no supports. Trench collapsed – killed one and seriously injured other worker.

• OSHA inspected: Cited company for 1) failing to instruct employees about safety and 2) failing to properly build and maintain trench.

• 3 serious violations ($7,000 each); 1 willful violation ($70,000) = $91,000 total in fines.

• ALJ held hearing; heard employees testify of minimal safety training and little control over the trench.

• Managers claimed there was adequate safety. (Continued)

R. Williams Construction Co. v. Occupational Safety & Health Review

Commission, cont.

• ALJ downgraded willful violation to serious & reduced total fines to $22,000 – company had a good history.

• Williams appealed to the Commission, which was denied.• Williams appealed to Appeals Court.• HELD: Affirmed. Williams failed to instruct employees in

proper safety measures.• Williams made no effort to ensure employees not to enter

trench on day it collapsed.• Employees should not be expected by management to

take greater care to avoid placing themselves in danger.• If this such risk is placed on employees, it “misconstrues

the purpose of the OSHA safety standards.”

Hazard Communication Standard (HazCom)

• “Worker-Right-To-Know Laws” re: employee exposure to hazardous chemicals

• Chemical producers and users conduct a “hazard determination” of chemicals they use/produce

• Written Communication Standard• Labels for chemical containers• Material Safety Data Sheets (MSDS)• Employee Training Programs

– Concerning requirements under the law– Training to detect hazards and protect themselves in

emergency actions

Workers’ Compensation • Provide something for both workers & employers

• States enact worker’s comp. laws to provide employer paid insurance for work-related accidents

• Payment by schedule; not tort suit that might provide more $

Objectives:

1) provide benefits to work-accident victims regardless of fault

2) provide a certain remedy and relieve hassles of tort litigation

3) protect public and private charities from undue burden

4) reduce fees to lawyers and expert witnesses

5) encourage ER safety w/accident rating based premium

6) provide open communication of accident for future safety

Benefits & Incentives• Obligations to employees, NOT independent contractors• Companies pay premiums based on injury claims records –

vary widely among states• Different states have different systems, rules, payout histories• Most states don’t restrict amount or length of benefits• Worker may receive 2/3 of gross wages as disability income

– As low as $400 in some states to over $1,000 in others• Benefit Categories:

– Death– Total disability,– Permanent partial disability– Temporary partial disability– Medical expenses

Question: Is the system flawed?

Many run in the red

Family & Medical Leave Act: FMLA

• Private employers with 50+ employees• All government jobs• 12 weeks unpaid leave

– After childbirth or adoption– To care for seriously ill child, spouse or parent– In case of employee’s own serious illness

• Pertains to “serious health condition”– More than 3 consecutive days of incapacity &

treatment for condition involving 2 or more treatments, including exams; or one treatment with continuing prescription medicine or special equipment

– Includes pregnancy– Absence from multiple treatments & recovery for

surgery or condition that results in more than 3-day period of incapacity left untreated

•

Family & Medical Leave Act: FMLA

• Exempts “key” employees –10% highest paid that would cause economic harm to ER

• Special rules apply for military caregiver situations

• Many states have laws applying to employers not covered by the federal statute

• May be required to certify visits to doctors OR obtain “fitness for duty” evaluation regarding returning to a specific job

Callison v. City of Philadelphia • Callison worked for city for two years. Diagnosed with

anxiety caused by stress at home and on the job.• Used a lot of sick leave; was place on Sick Abuse List.• Required to get medical certification for all sick days;

subject to penalties for violations of policy.• Employee on sick leave must call hotline if leaves home.• Sick-leave investigator calls homes to see if employees

are there.• Callison took 3 months FMLA leave.• City checked on him. He often was not home.• Suspended for failure to follow policy.• Callison sued, saying he was not subject to discipline

while on FMLA leave. Said discipline by the City was retaliatory.

• Trial court held for City. Callison appealed.

Callison v. City of Philadelphia

• HELD: Affirmed.• City did not engage in prohibited acts by their

policies.• There is no right in the FMLA that employee is

“left alone” when under the Act.• Employers may check to ensure employees on

leave do not abuse their leave, especially if they are on the employer’s Sick Abuse List.

• Internal call-in policy does not diminish protections of the FMLA.

Hiring Legally• For every person hired, employer must have an I-9 form on file.• Documents must be presented for proof of employment eligibility –

even if U.S. citizen– Must accept documents that “appear valid”

• Balance verification of employee and yet avoid discrimination– Deals with the I-9 system and documents specified on the I-9 form

• Also use E-Verify program of U.S. Citizenship and Immigration Services electronic verification system (USCIS)– See USCIS website for details – www.uscis.gov– Program has had numerous difficulties with accuracy– Many federal contracts require E-Verify use – Some states (i.e. Arizona & Mississippi) also require E-Verify

• Can’t hire illegal immigrants• Fines & criminal Penalties

– $375 to 3,200 for first offence per alien– $4,300 – 16,000 for 3rd and subsequent offences– Also penalties for failing to properly complete I-9 forms

Federal Minimum Wage Requirements

• Initiated in 1938 – as part of Fair Labor Standards Act

• Averages about 50% of the average manufacturing wage

• Minimum wage of $7.25/hour since 2009• Some states like California have higher

minimum wages• Some state laws cover employers exempt

from federal law• Employers must pay FICA tax of 7.65%• Employers pay workers’ compensation

insurance, and unemployment insurance taxes– Based on number of former employees

claiming benefits

Occupational Licensure and Regulation

• Licensing requirements at federal and (mostly) state level

• Usually a state commission determines entry criteria– I.e. formal education– Sometimes apprenticeship– Testing

• Ability through certificate to practice as lawyer, doctor, nurse, dentist, veterinarian, barber, architect, psychologist, dog groomer, beekeeper, massage parlor operator, etc. etc. etc.

Warning Employees of Plant Closings

• Worker Adjustment and Retraining Notification Act (WARN)• Employers with 100+ full-time employees must give advance

notice of plant closing or mass layoff if 50+ employees affected.• Notice given directly to each affected EE 60 days in advance of

closing or layoff.• Notices also sent to collective bargaining agents, local elected

officials, and state labor departmental officials.• Notices must be for permanent termination and reduction in

work time of 50% or more for 6 months or longer.• EE’s who do not receive proper notice may sue for up to 60 days

back pay, benefits, interest & attorney’s fees.• Local government may sue company for up to $500/day for each

day there was no notice.• Some states have plant closing requirements beyond federal

requirements.

Retirement PlansRetirement Plans• Employee Retirement Income Security

Act (ERISA)• Guarantees expectations of retirement

plan participants – protects benefits after reasonable length of employment

• Vesting requirements – participants receive benefits after certain length of employment

• Mandatory vesting – 3 different options established by ERISA

• Protects workers in case of company closing – will still get their benefits

• Statutes are complex involving lengthy regulator filings for pension & benefit plans – need for expert guidance

Major Labor Relations Acts

1932 Norris-La Guardia Act: • Federal Courts can’t issue injunctions in nonviolent

labor disputes – insures right to strike, picket, quit work, etc.

• Prohibits “yellow-dog contracts” (requiring employees to agree not to join a union as condition of job)

• 1935 Wagner Act (National Labor Relations Act; NLRA): Right of workers to unionize; created National Labor Relations Board (NLRB). – Monitors unfair labor practices– Board’s decisions can vary with political makeup –

outcome of proceedings varies over time more than most agencies

Major Labor Relations Statutes

• 1947 Taft-Hartley Act ~ Labor-Management Relations Act: (Amended NLRA) Employers have right to go to NLRB – protects employers. Unions are prohibited from:– 1) coercing employees to support union– 2) refusing to bargain in good faith with employers– 3) carrying out certain strikes “secondary boycotts,” charging “excessive” union fees,

or “featherbedding”– 4) going on strike during 30-day “cooling off” period or during 60-day period ordered by

the President.

• 1959 Landrum Griffin Act ~ Labor-Management Reporting & Disclosure Act: (Amended NLRA) Increased reporting, regulation of internal union affairs; protects union members from improper actions by leaders through:– monitoring leadership– union member bill of rights

National Labor Relations Board: NLRB

• Administrative agency created to monitor unfair labor practices and assure that union representation elections are fair

• Jurisdiction: labor dispute that “affects interstate commerce”

• About 30,000 cases a year, most are unfair labor charges

• “Unfair labor practices” – actions that impede the goals of the NLRA

• Hearing is before administrative law judge (ALJ)– Is an employee of the

NLRB– Issues an order

• Order is final unless one party files an exception

National Labor Relations Board: NLRB

• If exception filed, appeal is heard by Washington panel of 3 NLRB members– Sometimes the entire

board may hear an appeal

• If one party refuses to accept board’s decision, case will be referred to U.S. Court of Appeals– For enforcement or

review of order

• In rare instances case may go the U.S. Supreme Court for final review

• Presidents are either “pro-labor” or “pro-management”

• Presidential appointment to the Board usually politically sensitive

See also http://www.nlrb.gov

Unfair Labor Practices

• Examples of employer conduct violating NLRA– Threatening employees with loss of

jobs or benefits if they join or support a union

– Threatening to close a plant if employees vote for unionization

– Questioning employees about union activities

– Promising benefits to employees if the do NOT support a union

– Giving employees worse assignments for participating in protected activities

• Examples of union conduct violating NLRA– Threatening employees with loss

of job if they don’t support the union

– Refusing to help employees with grievances who have criticized union leaders

– Engaging in picket line misconduct, such as threatening non strikers

– Striking over issues unrelated to employment terms and conditions

NLRB Remedies

• Posting a notice in the workplace• Issuing a cease and desist order• Providing back pay for lost

wages• Reinstating dismissed workers• Issuing an order to bargain with

the union; but cannot force bargain

Unionization• Representation Elections

• Employees sign authorization cards - need 30% to go to NLRB for an election

• Campaign – by union and management

• NLRB supervised election:– More than 50% vote yes?– If so, union certification is granted

– Is exclusive bargaining agent for all employees. If not, union fails.

• Can also have 30% call for election to decertify union

• NLRB and courts do not permit access to company property by outside organizers.

See Exhibit 16.2

Agency Shops

• When Union elected to be collective bargaining agent, workers who join pay union dues

• Agency Shops – Employees represented by Union– members pay union dues– non-members pay agency fees (a little lower than

union dues)– Unions give $ to support political activities, including

candidates• 23 states have right-to-work laws that prohibit agency

shops. Even if majority of workers voted for union, workers can refuse to join or pay agency fees.

Collective Bargaining• Union is exclusive bargaining agent for employees• Collective bargaining covers whole process from initial contract negotiations up

through contract administration– Most collective bargaining agreements contain dispute resolution clauses (grievance

arbitration clauses)

• Grievance arbitration– Disputes resolved by an internal grievance procedure– If results not satisfactory, disputes heard by outside labor arbitrator (chosen under

contract)– Each side can veto nominees – result is that both sides see arbitrator as fair– Right to grieve is an issue belonging to union, not workers– If employee unhappy; sue union for violating “duty of fair representation”

• NLRA requires Good Faith Bargaining– Certain subjects mandatory, i.e., wages, hours, other terms and conditions of

employment, etc. – Can back up positions with strike by union or lockout by employer

Employer Economic Responses

• Employers may not retaliate against employees for engaging in protected activities

• Have right to use some economic pressure• May lock out employees until dispute with union

is settled– Legal if evidence of bad intent is not shown, such as

trying to break the union – Lockout is usually a defensive move and okay if in an

effort to promote settlement• Replacement of employees by non-union workers

can be okay– If collective bargaining agreement expires with no

agreement to a new contract and union calls for strike, the ER can hire new workers and keep using existing union workers who cross picket lines.