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Significant Changes for Employers – Federal Cases & Regulations

It’s been quite a year in employment and labor law and it’s a typical mixed bag for employers. It’s tempting to just say, “You win some and you lose some.” Let’s get started.

Cases:

Wal-mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). This was a significant opinion by the U.S. Supreme Court addressing class action employment claims. In this case, there was a proposed class of 1.5 million female employees who were alleging sex discrimination. The Supreme Court held that it would not permit a class action of that size to proceed. This was a win for employers.

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 131 S.Ct ___, 2012). This was a unanimous opinion by the U.S. Supreme Court barring a lawsuit by a minister against his church. The US Supreme Court unanimously held that the Establishment and Free Exercise Clauses of the First Amendment bar lawsuits brought by ministers against their churches when the minister alleges that they were terminated in violation of employment discrimination laws. In doing so, the Supreme Court recognized a ministerial exception allowing churches to operate without interference into church governance. This was considered a win for employers.

Wolfe Electric, Inc. v. Duckworth, 266 P.3d 516 (Kan. 2011). This was a Kansas Supreme Court opinion addressing whether the Kansas Uniform Trade Secrets Act (KUTSA) protects both trade secrets and confidential information. The employer in this case got damages and an injunction against a former employee who, it was alleged, took both trade secrets and confidential information of his employer. The Kansas Supreme Court reversed the verdict finding that the KUTSA does not provide a cause of action for theft of confidential information. This was a narrowing of the scope of the KUTSA and considered a loss for employers.

Regulatory Changes

NLRB

What one branch of government (the courts) gives, another (the executive branch) takes away. Certainly, the National Labor Relations Board has not gone quietly into that good night. First, the NLRB issued guidance for its regional offices on prosecuting employers who discipline employees for use of social media. Likening Facebook, Twitter and Linked in to the proverbial water cooler, the NLRB takes the position that comments by employees may well be protected under the National Labor Relations Act. Thus, employers who wish to discipline an employee for comments made on Facebook, for example, should tread lightly.

Not resting on its laurels, the NLRB then promulgated several new rules each of which was met with litigation to stop it. The first of these was entitled “Notification of Employee Rights under the National Labor Relations Act.” The Final Rule was originally planned to be effective as of November 14, 2011. Under the Final Rule, employers are required to post a large (11” x 17”) notice informing employees of their rights to organize under the National Labor Relations Act (“NLRA”). Failure to post this poster could be used by the NLRB as evidence of union animus. Federal contractors already have posting requirements for this notice.

There are two separate lawsuits in the federal courts challenging this rule. In one case, the court held that the NLRB could not require the poster and in the other ruling the court held that the NLRB did not have the authority to issue requirement. The NLRB has withdrawn the rule pending the litigation. Stay tuned for this one to come up again. Consider this a short term win, but possible long term loss for employers.

A second rule on so-called “quickie elections” went into effect on April 30, 2012. This rule, also the subject of federal litigation to stop it, was presumably designed to reduce unnecessary litigation during NLRB elections sought by labor unions. However, the primary impact of the rule is to dramatically reduce the time period between the filing of a petition and a union election. Typically, employers could expect up to six weeks from the time of the filing to an election. This time is typically used to educate employees on the pros and cons of union representation. The new rule reduces the time to three weeks from petition to election making it hard for employers to have time to react. This was definitely a loss for employers.

OFCCP

The Labor Department’s Office of Federal Contract Compliance Programs (OFCCP) issued a proposed Rule that would require federal contractors to set a hiring goal of having 7 percent of their workforce would be people with disabilities. This rule was published in the Federal Register on December 9, 2011 and would strengthen the requirements in Section 503 of the Rehabilitation Act. This is not final as we go to press, but stay tuned. Again, this is considered a loss for employers.

OFCCP also issued a proposed Rule to strengthen affirmative action requirements of federal contractors and subcontractors for veterans protected under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974. Veterans protected by VEVRAA include those with disabilities and those recently discharged as well as those who served during a war, campaign or expedition for which a campaign badge is authorized. The proposed rule was published in the April 26, 2011 edition of the Federal Register but has not yet become final. Another loss for employers here.

EEOC

The U.S. Equal Employment Opportunity Commission’s proposed RFOA regulation has now taken effect. The EEOC announced the new regulation designed to reduce the ability of an employer to avoid liability under the Age Discrimination in Employment Act. The Act protects individuals 40 years old or older by prohibiting employers from treating those individuals differently “because of” their age. Employers can be found liable under the ADEA where a plaintiff can show that even a facially neutral policy has a disparate impact on protected individuals over the age of 40. One way for employers to avoid liability has been to argue that the facially neutral policy is based on a “reasonable factor other than age” (RFOA).

The EEOC has changed an employer’s ability to use this RFOA defense. In November 2011, the EEOC issued a new regulation limiting the ability of employers to use the defense by requiring that the RFOA must be objectively reasonable when viewed from the position of a reasonable employer under like circumstances. Under the new regulation, a court or jury evaluating an employer’s RFOA defense will analyze all of the facts and circumstances surrounding an employer’s decision to implement a particular policy, not just the policy itself. This evaluation will almost certainly revolve around an inquiry into the business necessity of the challenged policy. Thus, although the Supreme Court has expressly disavowed the use of the business necessity test in ADEA disparate impact cases, the EEOC appears to have crafted a rule requiring that very result. Again, the regulation became final on April 30, 2012. It is another loss for employers.

The EEOC on April 25 issued guidance for employers who are hiring and the ability to consider arrest and conviction records. The Guidance, aptly titled Enforcement Guidance on Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 is not binding on employers. However, the guidance is considered best practice and will be used by the EEOC in its litigation. The released guidance report assumes that excluding applications based on criminal records has a disparate impact on protected classes under Title VII. In view of its position that criminal records are often incomplete and inaccurate, the EEOC’s Guidance recommends that employers not make inquiries about convictions on applications. Further, the EEOC recommends that if an inquiry is made, they should be limited only to those instances when they are job-related. Again, this is not binding but strongly recommended.

It’s an election year so who knows what could happen next.