Court Rejects Employer’s Attempt at Two-Bites at the Same Apple When Challenging ULP

Last week, the Sixth Circuit rejected the attempt of a government contractor to avoid an unfair labor practice charge by claiming that it was a joint employer entitled to the benefit of the NLRA exemption for the federal government.  Bannum Place of Saginaw LLC, v. NLRB, No. 21-2664 (6th Cir. 7-14-22).   The employer first raised the argument -- that the federal Bureau of Prisons so regulated its operations under their service contract that the employer constituted a joint employer with the federal government – when the union sought recognition.  However, the employer failed to appeal the Regional Director’s decision rejecting the argument and the NLRB refused to entertain – or relitigate -- the issue when the same employer was then subject to an ULP Charge arising out of that same, or related, election. 29 C.F.R. § 102.67(g).  The Court agreed that courts will defer to the NLRB’s refusal to relitigate legal issues which the party could have but failed to appeal to the Board during the representation phase.  In any event, “because Congress has unambiguously limited the reach of the exemption in § 2(2) to governmental entities and wholly owned government corporations, this court will not extend the exemption to government contractors.”

The Court observed that the no-re-litigation rule only applies when the second proceeding is related to the representation issue when the argument was first raised and then not appealed.  However, the employer could not successfully argue that this ULP was unrelated to the earlier representation proceeding for the first time on appeal because the employer failed to raise the unrelatedness argument before in the underlying ULP proceeding.   The Court will only consider arguments that had first been made to the NLRB.

The employer also failed to point to any new circumstances that could have justified re-litigation of the issue during the ULP phase.

The employer then argued that its joint employer argument went to the NLRB’s statutory jurisdiction and could not be waived.   However, the Court found that this argument would likewise fail because the NLRA did not address joint employment and only exempted certain types of employers, including the federal government.  The Supreme Court had earlier rejected a similar argument by a hospital which claimed its lease with a state government made it a government subdivision.  Other circuit courts had likewise rejected arguments to expand the reach of the limited exemptions:

As the Tenth Circuit held, “because Congress has unambiguously limited the reach of the exemption in § 2(2) to governmental entities and wholly owned government corporations, this court will not extend the exemption to government contractors.”

. . .

In sum, even if Bannum’s contract vests in the BOP substantial control over Bannum’s daily operations, that does not transform the company from a covered employer into either a governmental entity or a wholly owned government corporation and thus beyond the Board’s reach.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

SEC Invalidates Severance Agreement Waivers Which Preclude Whistleblowers From Recovering Financial Bounties

In August, the Securities and Exchange Commission issued a Cease and Desist Order that employers cannot require an employee in a severance agreement to waive their right to collect a financial award from a government agency because such a provision removes the financial incentive for the employee to report illegal conduct by the employer.  Such provisions are common in severance agreements because the employer is paying an employee money to which the employee is not otherwise entitled in order to buy future peace and does not wish to have to pay the employee twice if the employee later pursues a claim with a government agency.  While the SEC decision and position are based on an unusual SEC regulation that only applies to publicly traded companies, employers should remain alert to other government agencies attempting to adopt a similar position. 

Following the Great Recession, Congress enacted stronger SEC whistleblower laws in the Dodd-Frank Wall Street Reform and Consumer Protection Act, including provisions providing for financial bounties to be paid to individuals who report corporate wrongdoing to the SEC.  The SEC then enacted regulations, including the following provision at 17 C.F.R. § 240.21F-17:

 Staff communications with individuals reporting possible securities law violations.

(a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement (other than agreements dealing with information covered by § 240.21F-4(b)(4)(i) and § 240.21F-4(b)(4)(ii) of this chapter related to the legal representation of a client) with respect to such communications.

In 2015, the SEC announced that it violated this regulation to require employees to first report to the Company any disclosure of confidential information before exercising their right to engage in whistleblowing to the SEC.  In August, it found that an Atlanta employer had a similar confidentiality provision in its severance agreements which stated, in part,  

Employee has not and in the future will not use or disclose to any third party Confidential Information, unless compelled by law and after notice to BlueLinx. * * * If the Employee has any question regarding what data or information would be considered by BlueLinx to be information subject to this provision, the Employee agrees to contact BlueLinx’s Legal Department in writing for written clarification.

and/or

[The Employee shall not] disclose to any person or entity not expressly authorized by the Company any Confidential Information or Trade Secrets….Anything herein to the contrary notwithstanding, you shall not be restricted from disclosing or using Confidential Information or Trade Secrets that are required to be disclosed by law, court or other legal process; provided, however, that in the event disclosure is required by law, you shall provide the Company’s Legal Department with prompt written notice of such requirement in time to permit the Company to seek an appropriate protective order or other similar protection prior to any such disclosure by you.

 . . . .

Employee further acknowledges and agrees that nothing in this Agreement prevents Employee from filing a charge with…the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other administrative agency if applicable law requires that Employee be permitted to do so; (however, Employee understands and agrees that Employee is waiving the right to any monetary recovery in connection with any such complaint or charge that Employee may file with an administrative agency. (Emphasis added.)

The SEC determined that:

by requiring its departing employees to forgo any monetary recovery in connection with providing information to the Commission, BlueLinx removed the critically important financial incentives that are intended to encourage persons to communicate directly with the Commission staff about possible securities law violations.

Restrictions on the ability of employees to share confidential corporate information regarding possible securities law violations with the Commission and to accept financial awards for providing information to the Commission, such as those contained in the Severance Agreements, undermine the purpose of Section 21F, which is to “encourage individuals to report to the Commission,” and violate Rule 21F-17(a) by impeding individuals from communicating directly with the Commission staff about possible securities law violations.

The employer resolved the dispute with the EEOC, paid a $265,000 penalty to the SEC and agreed to replace the offending paragraph with the following, which permitted departed employees to not only collect financial bounties awarded by the SEC, but to also accept financial compensation from the EEOC, NLRB, and OSHA:

“Protected Rights.  Employee understands that nothing contained in this Agreement limits Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”).  Employee further understands that this Agreement does not limit Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.  This Agreement does not limit Employee’s right to receive an award for information provided to any Government Agencies.”

One could argue that the SEC position only applies to waivers of bounties paid by the SEC, as opposed waivers of any right to receive any future or additional monies from the employer.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Injured Firefighter Collects Unemployment During Unpaid Sick Leave

Near the end of December, the Ohio Court of Appeals affirmed the award of unemployment compensation to an injured firefighter who was placed on unpaid sick leave after he exhausted light duty assignments upon reaching maximum medical improvement under the applicable bargaining agreement and after he was denied permanent disability compensation.  Akron v. Dir., Ohio Dept. of Job & Family Servs., 2015-Ohio-5376.  The Court agreed that he was able to work in light duty positions and that he had had been available for work while his union and the employer discussed other possible light duty assignments.   The Court rejected the employer’s argument that the employee had not been available for work because he had not searched for other jobs after being placed on unpaid sick leave.  The employee was not required to produce evidence of his job search activities unless the Director of Job and Family Services requested it and no such request was ever made or required to be made.   Finally, the Court rejected the argument that the employee’s right to unemployment compensation had been waived by the bargaining agreement because the agreement did not made his placement on an indefinite sick leave.

While the unemployment compensation statute precludes contractual waivers of unemployment benefits, the courts have recognized a common law waiver when a union negotiates termination benefits:  

When an employee has a termination package pursuant to a collective-bargaining agreement between [his] union and the employer, the employee is deemed to have accepted the benefits of the package, and waived [his] right to benefits, in return for [his] agreement to be terminated at a certain time. . .  . “The termination when a collective-bargaining agreement exists is deemed to have been for just cause, rendering the employee statutorily ineligible for unemployment compensation.

However, this exception did not apply in this case because the employee was not terminated in accordance with a collectively-bargaining retirement package.   Instead, he was placed indefinitely on unpaid sick leave.  “There is no indication as to how long Mr. Gardner could have remained on this leave status and no indication in the record that this leave status was required by the terms of any agreement between his union and the City.”   Accordingly, the Court refused “ to extend common law waiver to the circumstances present in this case, where there is no termination package at issue, where the leave at issue could last indefinitely, and where the leave at issue was not contemplated as part of any collectively bargained agreement in the record.”

 On a completely different topic, Ohio has a new minimum wage poster for employers and wage for employees to coincide with the new year.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Employers Cannot Shorten FLSA/EPA Limitations Periods in Employment Agreements or Waivers

Yesterday, a unanimous Sixth Circuit reversed an employer’s summary judgment in a claim for unpaid overtime and unequal wages under the Fair Labor Standards Act (FLSA) and Equal Pay Act (EPA). Boaz v. FedEx Customer Information Services, Inc, No. 12-5319 (6^th Cir. 8-6-13).  First, the Court found that the employment agreement could not shorten the statutory limitations period from 2-3 years to 6 months because it constituted an invalid waiver of her FLSA and EPA claims.    Unlike other statutory claims, private settlement agreements or waivers of FLSA and EPA claims are not enforceable. Second, the Court found material factual disputes on the merits of her claims for unpaid overtime and unequal pay.  More interestingly, the Court made some observations about the perceived anti-competitive affects of various types of discrimination.

The plaintiff filed suit in April 2009 alleging that she had been paid less than a male co-worker performing the same job and that she had been denied overtime pay for jobs she held more than six months earlier (when she had been promoted to a new job).  “The statute of limitations for the FLSA is two years for non-wilful violations and three years for wilful ones. 29 U.S.C. § 255(a).”   As long ago as 1946, the Supreme  Court had held that “employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. “  The plaintiff’s employment agreement in this case provided in relevant part that:

 

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

The employer argued that employers are allowed to shorten the limitations period for claims brought under other statutes, like Title VII, and should be able to shorten the limitations period for claims brought under the FLSA.   However, the Court rejected that argument because, unlike the FLSA, employees are permitted to privately settle and waive their claims under Title VII.  In addition, in a startling observation, the Court stated:

Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36 (1987). An employer who refuses to hire African-Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.

The employer next argued that employees are allowed to waive their right to a judicial forum under the FLSA by signing arbitration agreements because the prohibition against private waivers has been held to only apply to substantive rights and not procedural ones.  However, the Court distinguished this precedent by noting that waiving the judicial forum still allows for the effective vindication of the employee’s claim, while the shortened limitations period in the plaintiff’s employment agreement “at issue here does the opposite.”  Therefore, because the limitations provision in the employment agreement operated as a waiver of her claims, “it is invalid.”

The Court held that this reasoning applied with equal force to the plaintiff’s EPA claims because Congress amended the FLSA in 1963 to include the EPA.   Moreover, in contrast to what the Court said (above) about the anti-competitive effects of Title VII, it made the following observation about the EPA:

Second, the Supreme Court’s rationale for barring waiver of FLSA claims appears fully applicable to claims under the Equal Pay Act. An employer who pays women less than a lawful wage might gain the same competitive advantage as an employer who pays less than minimum wage. Indeed the Court has said that “[t]he whole purpose of the [Equal Pay Act] was to require that the[] depressed wages [of women] be raised, in part as a matter of simple justice to the employees themselves, but also as a matter of market economics[.]” Corning Glass Works v. Brennan, 417 U.S. 188, 207 (1974).

The Court also rejected other potential bases to affirm the summary judgment.  For instance, the Court refused to credit the plaintiff’s deposition admission that she had been an exempt employee:

An employee’s subjective belief that her position was exempt from the FLSA, however, does not mean the position was exempt as a matter of law. Cf. Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 300–01 (1985) (witnesses’ testimony that they were volunteers was not dispositive of whether they were actually employees under the FLSA). Were it otherwise, an employer could obtain waivers of FLSA  claims  merely by having its employees sign a form stating that they are exempt. FedEx is therefore not entitled to summary judgment on this ground.

The Court found material factual disputes in the employer’s remaining arguments about comparative employees and affirmative defenses.  Therefore, the case was remanded back to the trial court.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Pre-2002 ERISA Plan Need Not Inform Beneficiary of Shortened Statute of Limitations to Seek Judicial Review

Last week, the Sixth Circuit Court of Appeals affirmed the dismissal of an ERISA claim brought more than eight years after the plaintiff’s claim for long-term disability had been denied because the Plan only permitted claimants three years to seek review in federal court.  Engleson v. Unum Life Ins. Co. of Am., No. 12-4049 (6^th Cir. 7-3-13).  The Court rejected the plaintiff’s argument that ERISA at that time required the Plan to disclose the shortened limitations period in its claim denial letters or the summary plan description.  It was not until 2002 that the Plan was required to disclose information in claim denial letters about the claimant’s right to seek federal court review. “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.” Finally, the Court rejected the plaintiff’s waiver and equitable tolling arguments.
 

According to the Court’s opinion, the plaintiff had filed his LTD claim in August 2001, but it and his subsequent appeal were denied, most recently in November 2001.  He filed a new claim in August 2008, which was granted.  He then sought review of his 2001 claim and when it was denied again, he filed suit in federal court in December 2009. The district court concluded that “[t]he plan requires participants to file an ERISA claim within “3 years after the time proof of claim is required.” Therefore, his lawsuit was untimely in March 2005.  

The Sixth Circuit rejected the plaintiff’s contention that the 2000 version of 29 C.F.R. § 2560.503-1(f) required the Plan to disclose the shortened statute of limitations in its claim denial letters.   Instead, the Court “construe[d] the phrase “appropriate information” as requiring only the disclosure of information pertaining to internal processes, not judicial review.”  (emphasis in original).  The ERISA regulations were amended effective January 1, 2002 at 29 C.F.R. § 2560.503-1(g)(1)(iv) to require the disclosure of “a description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action” to challenge adverse benefit determinations.” 

Moreover, the Court rejected the plaintiff’s argument that the Plan’s 2008 invitation to submit additional information about his 2001 claim and then refusal to reconsider the 2001 claim re-started the limitations period.  “When an adverse benefit determination is justified in the first instance and later denials are premised on the initial reason, there has been a “full and fair review” that satisfies § 1133 and its regulations.”

The plaintiff also argued that the SPD did not comply with 29 C.F.R. § 2520.102-3 because it failed to disclose the shortened statute of limitations for seeking judicial review even though it was required to address “applicable time limits” and remedies for the claimant to seek redress of claims.  “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.”  Instead, the Court interpreted the regulation’s general phrase “applicable time limits” to extend “only to the terms that precede it, i.e., time limits need only be disclosed with respect to the processing of claims.” 

Mindful of this interpretation, we conclude that Unum’s SPD complied with the regulation. The SPD provided “applicable time limits” as to certain parts of the claims process, such as the plan administrator’s obligation to provide a claim response within 90 to 180 days and the claimant’s right to seek plan documents by filing suit in federal court after 30 days of noncompliance. Unum complied with the requirement of disclosing the time limits for the “remedies available under the plan for the redress of claims” by (1) explaining the internal appeals process; and (2) noting the claimant’s right to “file suit in a state or federal court” for claims that have been denied or ignored.

In addition, the Court rejected the claimant’s common law waiver argument based on the Plan’s  offer reconsider his 2001 claim if he submitted additional information. 

As there is no established federal common law in this circuit that governs the question of whether a plan administrator has affirmatively waived a contractual limitations provision, we “look to state-law principles for guidance.”  . . . While contractual limitations periods are generally enforced irrespective of state law so long as they are reasonable . . .  the present case does not raise the question as to whether the period is reasonable, but whether the period was waived.

The Court had previously relied on Hounshell v. American States Insurance Co., 424 N.E.2d 311, 314 (Ohio 1981) where 

“[a]n insurer . . . loses the right to assert its contractual statute of limitations if, ‘by its actions or declarations, it evidences a recognition of liability under the policy, and the evidence reasonably shows that such expressed recognition of liability and offers of settlement have led the insured to delay in bringing an action on the insurance contract.’”  . . .  An insurer’s decision to reconsider the validity of a claim, however, “does not constitute a waiver of the limitations clause.

While there may be alternatives to waiving a right than as discussed in Hounshell, the Court required “more than mere relinquishment—the waiver must be “a clear, unequivocal, and decisive act of the party against whom the waiver is asserted.”  The Plan’s “December 2008 letter lacks the clarity, directness, and decisiveness that the general waiver rule demands.”  More importantly, it “says nothing about waiving the limitations period.”

Finally, the Court rejected the equitable tolling argument on the grounds, among other things, that the plaintiff was not diligent in pursuing his rights.  Moreover, there was no evidence of bad faith.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Enforces Employee’s Waiver of USERRA Claims

This morning, the federal Sixth Circuit Court of Appeals affirmed summary judgment in favor of an employer in a claim brought under USERRA on the grounds that the plaintiff had signed a waiver of all claims, including those based on "veteran status" in his separation agreement. Wysocki v. IBM, No. 09-5161 (6^th Cir. 6/16/10). The plaintiff alleged that he had been terminated on account of his military service in Afghanistan. In particular, he claimed that IBM refused to provide him training to update his job skills when he returned to work and then terminated him without cause. The Court found that his USERRA claim was waived in his separation agreement even though it did not specifically refer to USERRA.

IBM responded to the complaint with a motion to dismiss, which the court converted to a summary judgment motion. The plaintiff argued that USERRA claims were not waivable under 38 USC § 4302(b). The Court reviewed the statutory text at 38 U.S.C. § 4302, which establishes that:

(a) Nothing in this chapter shall supersede, nullify or diminish any Federal or State law (including any local law or ordinance), contract, agreement, policy, plan, practice, or other matter that establishes a right or benefit that is more beneficial to, or is in addition to, a right or benefit provided for such person in this chapter.

(b) This chapter supersedes any State law (including any local law or ordinance), contract, agreement, policy, plan, practice, or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter, including the establishment of additional prerequisites to the exercise of any such right or the receipt of any such benefit.

. . . .

While § 4302(b) supercedes any law, plan or agreement that "reduces, limits, or eliminates in any manner any right or benefit provided by this chapter," its application is limited by § 4302(a), which exempts any law, plan or agreement that is "more beneficial to, or is in addition to, a right or benefit provided for such person in this chapter" from the operation of § 4302(b). Therefore, the critical inquiry is whether the Release is exempted from the operation of § 4302(b) by § 4302(a), because the rights it provided to [the plaintiff] were more beneficial than the rights that he waived.

While some authorities and courts have contended that USERRA rights may not be waived, the Sixth Circuit cited legislative history to the contrary. "Clearly, the ability to waive their USERRA rights

without unnecessary court interference, if they believe that the consideration they will receive for waiving those rights is more beneficial than pursuing their rights through the

courts, is both valuable and beneficial to veterans." It also concluded that veterans should be able to decide for themselves whether the consideration they are receiving for a release is more valuable than their USERRA rights. Therefore, it found that waivers were not conceptually barred by the USERRA statute and could be enforced, as was the plaintiff's waiver enforced in this case.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Job Applicants Did Not Knowingly Waive Limitations Period or Judicial Review of Claims

This morning, the Sixth Circuit issued an opinion reversing summary judgment in favor of an employer which had required all job applicants to agree to a six month statute of limitations for all employment claims and to waive their right to file a lawsuit (in favor of non-union labor-management internal grievance review board). Alonso v. Huron Valley Ambulance, Inc., No. 09-1812 (6^th Cir. 2010). The Court determined that the plaintiffs' signatures on the forms were not knowing and voluntary sufficient to waive their statutory rights under the circumstances of the case. Surprisingly, the Court did not address the substantive or procedural safeguards which existed or were lacking in the employer's dispute resolution process. Instead, it focused almost exclusively on how the information was haphazardly presented to the plaintiff employees during the application process. In particular, the plaintiffs were not given enough detail about the process until more than a month after they were hired (and had signed the agreements) and were never given the opportunity to revoke the agreements.

According to the Court's opinion, all employees were required to sign job applications which contained the following provisions:

The last page of the application contained a section preceded by the phrase, "PLEASE READ THE FOLLOWING BEFORE SIGNING." The section contained, among other things, notice of an internal grievance procedure for employment related disputes, and a six-month limitations period for any employment-related claims. The internal grievance procedure provision provided:

Any dispute arising out of or in connection with any aspect of my employment by the Company, or termination thereof, including by way of example but not limitation, disputes concerning alleged civil rights violations, breach of contract or tort, shall be exclusively subject to review by the Grievance Review Board. Any decision of the Review Board shall be binding to both parties, and enforceable in circuit court.

Additionally, the statute of limitations provision provided:

I further recognize that if employed by the Company, I agree, in partial consideration for my employment, that I shall not commence any action or other legal proceeding relating to my employment or termination thereof more than six months after the termination of my employment and agree to waive any statute of limitations to the contrary.

Once employees were hired, they were given a procedural manual during orientation. The manual describes the four-step grievance process and directs them to an internal policy, which, among other things, provides that "The Grievance Review Board's decision will be final and binding on both the employee and the company."

One of the plaintiffs was ultimately terminated for allegedly falsifying military leave and taking (prescription) drugs which put him in an altered mental state. He utilized the grievance process and then after his termination was upheld, he filed a lawsuit under USERRA, OSHA's whistleblower statute and an unnamed federal statute prohibiting retaliation for filing EEOC Charges. His wife (and co-worker) did not utilize the grievance procedure, but filed a similar lawsuit alleging harassment, and retaliation.

Although the plaintiffs challenged the employer's dispute resolution process on a number of grounds (including USERRA's absence of limitations period and waiver provisions), the Court only addressed whether the plaintiffs' waiver was knowing and intelligent:

Here, Appellants were educated and gave no indication that they did not understand the waivers they were signing, and they successfully used the grievance process on multiple occasions prior to contending that they did not knowingly and intelligently waive their right to a judicial forum. The waiver, however, did not include any information regarding the Grievance Review Board or the procedures that would be used in place of a judicial proceeding. The initial waiver, signed as part of the four-page employment application, read:

Any dispute arising out of or in connection with any aspect of my employment by the Company, or termination thereof, including by way of example but not limitation, disputes concerning alleged civil rights violations, breach of contract or tort, shall be exclusively subject to review by the Grievance Review Board. Any decision of theReview Board shall be binding to both parties, and enforceable in the circuit court.

Plaintiffs alleged "that they were not given any further information regarding the Grievance Review Board until they received an Employee Handbook at Orientation, nearly a month after they were hired. The Employee Handbook outlined the Grievance Review Board procedures in general terms as a four-step process. The Handbook instructed employees to reference Administrative Policy #415, which was located online. That Policy, in turn, provided a detailed explanation of how the Grievance Review Board operated."

At the time the [plaintiffs] signed waivers of their rights to a judicial forum, they had no idea what the Grievance Review Board process entailed. They were never informed of their right to revoke their waiver. They were not given any documentation regarding the process until almost a month after they began their employment with HVA. Even then, the document they were given described the process in general terms, and pointed them to a website where they could find additional, more detailed information. They cannot be said to have knowingly and voluntarily waived their right to a judicial forum when they were not informed of the alternative procedures until a month after they began working for HVA. Cf. Seawright, 507 F.3d at 971 (explaining extensive efforts taken by defendant employer to inform employees of new dispute resolution procedures before requiring employees to waive all rights to a judicial forum).

The court rejected the provisions shortening the statute of limitations on the same grounds.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Court of Appeals Affirms SERB Finding that Cincinnati Assistant Fire Chiefs Are Not Managers.

Yesterday, the Franklin County Court of Appeals affirmed a SERB ruling that Assistant Fire Chiefs were not management level employees and, thus, could join the IAFF bargaining unit. Cincinnati v. State Emp. Relations Bd., 2009-Ohio-5782. While the trial court noted that there was some evidence in the record supporting the City’s argument (that its four Assistant Chiefs were managers), it concluded that it must presume the correctness of the SERB factual findings when they were supported by substantial evidence. The Court of Appeals concluded that it could only reverse the factual conclusions for an abuse of discretion, which it did not find. In particular, the evidence showed that many of the Assistant Chief’s former management and administrative duties were transferred to the new Executive Officer hired in July 2007 and who began to act as the Chief in his absence (rather than the Assistant Chiefs).

To start, the Court noted that “public employees” have the right under Ohio Revised Code 4117.03 to join unions unless they are, among other things, “management level employees” as defined by 4117.01. In turn, § 4117.01(L) defines a management level employee as "an individual who formulates policy on behalf of the public employer, who responsibly directs the implementation of policy, or who may reasonably be required" on the public employer's behalf "to assist in the preparation for the conduct of collective negotiated agreements, or have a major role in personnel administration."

After the Executive Officer position was created in 2007, the Assistant Chiefs testified that they no longer filled in for the Chief and could not authorize purchases. While they presided over grievance hearings and could recommend disciplinary action, their recommendations had to be first approved (and could be changed) by the Chief, the Law Director and the City Manager. They could not settle grievances on their own authority. While they implement and enforce the bargaining agreement, all interpretation is left to the Human Resources Department. Admittedly, the Assistant Chiefs review District Chiefs (who in turn review Captains, who review Lieutenants, etc.). There was also evidence that they had no control over setting policy, although they could make recommendations.

While Assistant Chiefs had participated on the management team in bargaining negotiations in 2001 and 2003, they thereafter refused to participate on the grounds that they were IAFF members (even though not part of the bargaining unit). Therefore, they did not meet the statutory definition under that clause, either.

The Court rejected the City’s argument that the Assistant Chiefs outrank the Executive Officer at a fire scene because the Department followed “incident command” where the ranking officer was in Charge, whether it was the Chief, the Assistant Chief, the District Commander, Captain or Lieutenant. In contrast with the management level Captains in Twinsburg Fire Fighters, Local 3630 v. SERB, the Cincinnati Assistant Chiefs never or rarely “recommended changes to the Standard Operating Procedures and Guidelines that were adopted, updated the personnel manual, . . . re-wrote the driver's training manual without needing approval of the content, . . . enforced discipline, were in charge of fire safety programs and safety committees, and represented management during contract negotiations.”

Finally, the Court rejected the City’s argument that the Assistant Chief’s testimony should be disregarded when they accepted the benefits of a contract (which then became a City Ordinance) which gave them a 16% raise on account of their non-bargaining unit and fiduciary status. The Court agreed with the trial court that the analysis was governed by Revised Code 4117 instead of a written agreement between the parties.

Insomniacs can read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5782.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Union’s Waiver of 30-Year Retired Employee’s Benefits Without Notice or Consent Protected Assets of Bankrupt Employer.

Today, the Sixth Circuit issued a decision in which it held that the statutory and severance claims of a 30-year retired employee of bankrupt LTV Steel had been waived by the employee’s former union even though he received no notice of the waiver, never consented to it, and had been explicitly excluded from receiving compensation under the waiver agreement. McMillan v. LTV Steel, Inc., No. 07-4370. Although federal law is pretty clear that unions no longer represent retired employees in negotiations, the employee was deemed to have waived that compelling legal argument when he failed to raise it in support of his claims before the bankruptcy or district courts. The Sixth Circuit also refused to disturb the district court’s conclusion that the employee’s actual claim for pension and 401(k) benefits was with the Pension Benefit Guaranty Corporation (PBGC) since it had assumed control of the employer’s retirement benefits when it filed for bankruptcy.

According to the court’s opinion, the plaintiff retiree worked for 30 years in a UWSA unit for LTV Steel. The UWSA and LTV had negotiated both a defined contribution plan (i.e., a 401(k) plan to which both the employee and employer contributed) and a defined benefit plan (i.e., pension). In 1999, the UWSA and LTV reorganized the retirement benefits to eliminate future pension contributions (and limit future payouts to a $10,000 lump sum), and to transfer employer contributions from the 401(k) plan to the pension plan. About a year later, LTV filed for bankruptcy protection, issued a WARN notice a few months later and eventually permanently closed the retiree’s plant. The plaintiff retiree worked at reduced pay at other LTV plants, but remained out of work beginning in August 2001. Under a USWA negotiated agreement, he had the option to transfer (without seniority) to another plant, to remain on layoff status, to accept retirement or to take severance. The plaintiff elected to retire in December 2001 and take his $10,000 pension lump sum. While the opinion is ambiguous on this point, this amount was apparently never paid.

In the meantime, LTV eventually sold all of its assets in December 2001, but the sale proceeds were only sufficient to pay secured creditors and not to pay administrative claims or unsecured creditors, such as the plaintiff and other retirees. Accordingly, PBGC assumed LTV’s pension obligations. The UWSA then renegotiated the CBA with LTV and eliminated, among other things, the previously promised severance pay. Nonetheless, six months later, the USWA filed an administrative claim with the bankruptcy court for LTV’s failure to pay severance pay, WARN Act liability, retiree benefits, etc. The UWSA settled its claim with LTV in December 2003 for $15M, but the settlement expressly did not benefit retirees such as the plaintiff who worked at his original plant or were laid off prior to November 2001. In the 2003 settlement, UWSA waived any and all other claims it could make arising out of any bargaining agreement. The plaintiff received no notice of the USWA administrative claim and did not receive notice of, or consent to, the 2003 settlement.

Nonetheless, the plaintiff filed his own administrative claim against LTV in 2002 for over $300,000 (for unpaid wages, pension benefits and 401(k) payment) and it was denied by the bankruptcy court. The plaintiff eventually reached an unsecured settlement with Copperweld -- one of LTV’s subsidiaries -- for the full amount, but retained his right to pursue his claim against LTV. In 2004, he filed another administrative claim for over $40,000 for his unpaid 401(k) contributions, severance pay and other benefits.

The bankruptcy court found that the 401(k) contributions were transferred to the pension fund in 1999 and were now being administered by PBGC and not LTV. The Sixth Circuit agreed that the plaintiff should be limited to asserting a claim against the PBGC. In addition, the bankruptcy court found that collateral estoppel from the Copperweld settlement estopped the plaintiff from pursuing the same amount from LTV, despite his reservation of rights to pursue claims against LTV. The Sixth Circuit found that the plaintiff’s claims were not entitled to administrative priority status because the liability arose before LTV filed for bankruptcy and did not relate to retiree healthcare benefits.

Finally, his claim for severance benefits and WARN Act payments were deemed waived by the USWA in 2003 even though he received no proceeds from that $15M settlement, received no notice of the claim or settlement, and never consented to the settlement. Indeed, the law is clear that unions cannot negotiate on behalf of retirees because they are no longer union members. However, even though the bankruptcy court erroneously concluded that the USWA was acting as his agent, the plaintiff never raised the issue of agency to the bankruptcy or district courts, but rather, focused on his lack of notice and consent to the settlement. Therefore, the Sixth Circuit determined that he could not belatedly raise the agency argument even if the lower courts had erred. Moreover, if the UWSA had been his agent, it had authority to waive his WARN Act and severance pay claims on his behalf – even without notice or consent. Therefore, those claims were also dismissed.

Insomniacs can read the full court decision at http://www.ca6.uscourts.gov/opinions.pdf/09a0040p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court Awards Employee Damages When Employer Violated Written Contract By Decreasing His Pay Rate.

Last month, the Trumbull County Court of Appeals affirmed an award of $42,116.38 in damages plus interest to a former employee who sued for breach of a written contract when, upon the advice of its accountant and based on poor economic conditions, his former employer decreased the plaintiff’s salary below $75,000/year in breach of his employment agreement. Sloan v. Shafer Commercial & Indus. Servs. Inc., 2008-Ohio-4765. The employer had also decreased the salaries of the other officers and laid off employees at the same time. Although the plaintiff objected to the wage cut, he continued to work for the employer for another 33 months. The court rejected the employer’s various arguments that, among other things, the plaintiff waived his contractual rights by continuing to work at the reduced pay, that he was guilty of laches for waiting three years to file his claim, and that he should be estopped from challenging the wage cut three years later. In particular, the court found the employee did not waive his contractual rights by continuing to work after the pay cut. While the employer might have had a good argument that the contract had been mutually modified by the parties, the court refused to consider this argument on appeal because the employer failed to raise that argument before the trial court.


Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/11/2008/2008-ohio-4765.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.