Employment and Labor Regulations

Employment and Labor Regulations Chapter 15 Meiners, Ringleb & Edwards The Legal Environment of Business, 12th Edition

Chapter Issues • Employment-at-Will • Substance Abuse • Worker Health and Safety • Workers’ Compensation • General Regulation of Labor Markets • Major Labor Relations Acts • The National Labor Relations Board • Unionization • Collective Bargaining

At-Will Employment • Employers: Can hire and fire who they want • Employees: May quit when they want • Contracts can limits to at-will presumption • 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 • Dismissal: If firm dismisses employee in violation of public policy exception, employee may sue for wrongful dischargeor retaliatory discharge

CaseBallalatak v. All Iowa Agriculture Assn. • Ballalatakworked as a security supervisor. Two employees were injured in a work-related accident. Called Ballalatak and reported injury. Ballalatakdrove to scene, helped get men to hospital & filled out accident 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 without filing for workers’ compensation. Later, 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. Ballalataksued, saying he was fired for asking re: workers’ compensation duties to the injured workers. • Nowers claimed he fired him for insubordination. • District court dismissed suit. • Ballalatak appealed. (Continued)

CaseBallalatak v. All Iowa Agriculture Assn. • HELD: District Court judgment affirmed. • Usually employer may fire an at-will employee at any time. Exceptions are if discharge is contrary to public policy. Ballalatakclaims he was fired for raising concerns to his employer aboutworkers’ compensation claim rights. • Ballalatak argued public policy interests should extend to supervisors (him) who advocate such benefits for 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 aboutworkers’ compensation rights. • Ballalatak loses.

Noncompete Agreements • Employees sign not to leave employment and compete directly with employer. • Different states differ: • Some allow them absolutely • Some states allow court to imply reasonable terms in order to save the covenant in part • Other states will eliminate these agreements entirely • Others – common law governs, allowing if restraints are reasonable in time and extent of coverage. • Other states, like CA, say that almost every contract that restrains anyone from lawful business is void. • Employers must pay attention to individual state law in this area.

CaseZambelli Fireworks Manufacturing Co. v. Wood • Zambelli is one of the oldest & largest fireworks companies in the U.S.; does business in most states. • Wood was hired by Zambelli in 2001 to work as pyrotechnician and choreographerto produce fireworks displays with music • On the job, Wood learned of technical trade secrets, client lists, pricings, costs & contract terms. Zambellipaid 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 all legal fees & costs. (Continued)

CaseZambelli Fireworks Manufacturing v. Wood • Wood was 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. Wood resigned from Zambelli and went with Pyrotecnico. • 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

Substance Abuse • Alcohol the most commonly abused • 8% of workers are serious alcohol abusers • Another 3-8% of adults abuse or addicted to illegal or improperly dispensed drugs • One in eight of workers have substance abuse problem

A Costly Issue for Business • Total economic cost over $250 billion per year; cost to employers ~ $100 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 • Those who abuse alcohol, even if not under the influence – 70% greater chance of on-the-job injury • National Transportation Safety Board found that alcohol or other drug-impaired workers caused many RR accidents. • Alcohol or other drugs are a factor in 1/3 of all accidents involving truck drivers killed in accidents. • Insurance costs are about double for families with an alcoholic.

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 • Omnibus Transportation Employee Testing Act • Employers who operate aircraft, public transportation, or commercial motor vehicles must be tested for use of alcohol or illegal drugs. Pre-employment testing, random testing during employment and testing after accident

Employee Substance Abuse Policies • Pre-employment screening usually OK (many states say testing after job offer is extended) • Testing employees on annual basis or part of occasional physical exams usually legal. Examination must be voluntary ordirectly related to ability to perform job • Safety sensitive jobs • Random drug test. When announced as a condition of employment (Notification) • After accidents – OK • “Reasonable suspicion” – document this carefullyin employee file • Announced policy of such tests and safetyis an issue • 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 and Safety • Occupational Safety and Health Act of 1970 (OSHAct) created: • Occupational Safety and Health Administration (OSHA) • The Occupational Safety and Health Review Commission (OSHRC) • The National Institute for Occupation Safety and Health Council (NIOSH) • OSHRC reviews administrative cases brought by OSHA • NIOSH does studies to help set safety standards • Safety Inspections • Inspectors visit workplaces and respond to workers’ reports of problems • 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 may run from small fines to millions for multiple violations.

CaseCaterpillar logistics Services, Inc. v. Solis • Caterpillar Logistics handles parts orders for Caterpillar products. Employees locate parts; put them on conveyor belt; pack parts in boxes to ship. Each employee handles ~ 650 parts per day. Work requires repetitive hand, wrist, elbow & shoulder movements. • A month after MK began working she had elbow pain. • Diagnosis indicated swelling in ligaments & tendons and around joint. Company MD put her on leave for 3 months. Same problem after she returned to work. Transferred her to position that required less movement – that took care of the problem. • Caterpillar Logistics had a review panel of 5 specialists in musculoskeletal disorders determine if MK’s injury was work-related. Concluded problem was prior to MK’s going to work, and not work-related. • Dept. of Labor disagreed. Assessed a $900 fine for failing to report work-related injury. • Administrative Law Judge upheld penalty. • OSHRC upheld decision, which became the final decision of the Secretary of Labor. • Caterpillar filed to review the order. (Continued)

CaseCaterpillar logistics Services, Inc. v. Solis • There was competing evidence re: reason for injury. There is no need for “tedious opinions” or “an avalanche of detail” butdoes require agency to test its hypothesis against competing hypotheses. • Here it ignored strong indications that its favored witness got things wrong. Record does not show an elevated incidence of epicondylitis among the workers in the packing department. • Statistical significance and frequency to imply a causal role of workplace conditions were not performedand ALJ disregarded experience of Caterpillar and did not find one way or the other re: this statistical significance. • Agency failed to consider what Caterpillar’s actual experience was – Commission never discussed the subject. • Secretary’s decision is vacated. Caterpillar Logistics wins.

Workers and Toxic Substances • OSHA standards concern safety. • Health standards have also been issued. • Protection from asbestos, vinyl chloride, coke-oven emissions, and other industrial carcinogens • “Must adequately insure to the extent feasible . . . that no EE will suffer material impairment of health or functional capacity.” • See Exhibit 15.1

Workers and Toxic Substances • Hazard Communication Standard (HazCom) • Issues exposure limits for some specific toxic substances • Chemical producers and users conduct a “hazard determination” of chemicals they use/produce • Where these chemicals are used, employers must have: 1. A written plan that includes • List of hazardous chemicals in workplace • Manner in which safety data sheets, chemical labels, and worker training about chemical safety is handled • Description of how employees will be trained for non-routine tasks (e.g. chemical spills or explosions) 2. Labels for chemical containers 3. Material Safety Data Sheets (MSDS) 4. Employee Training Programs

Cyber Law“SOCIAL MEDIA RULES IN THE WORKPLACE” • Policies making clear that organization has the right to access e-mails that come to company computers or accounts • Software scans e-mails for red flag words – sex, guarantee, social security number, etc. • Reduces: • Lost work time • Litigation from harassment from e-mails with sexual content • Loss of information that should be secure • Maryland: First state to ban employers from requesting access to social media account • Some employers ask for voluntary access to social media but do not insist. • Remember: Everything once posted, even if removed, can be retrieved later.

Workers’ Compensation • States enact worker’s comp. laws to provide employer paid insurance for work-related accidents • Reduced payments from tort damages to a schedule • Sometimes employees prefer to sue for 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 and Incentives • Obligations to employees, NOT independent contractors • Companies pay premiums based on injury claims records – vary widely among states and occupations • Different states have different systems, rules, payout histories • Usually worker receives 2/3 of their gross wages as disability income • As low as $500 in some states to over $1,500 in others • Benefit Categories: • Death • Total disability • Permanent partial disability • Temporary partial disability • Medical expenses

CaseLong v. Superior Senior Care, Inc. • Long was an in-home certified nursing assistant (CNA) working for Superior Senior Care. Company had 5 employees in its office and 100 independent contractors. Clients would contact Superior; it would post requirements to match CNAs with clients. • Superior received fee for referral service; clients deposit funds in an escrow account with Superior; CNAs paid from escrow account. Long was told her pay would be $10/hour. Duties based on client needs. She didn’t have to take any assignment – could choose. General duties: cooking, house cleaning, laundry, helping clients shower and move around. • Was assisting a client move from wheelchair to bed when client “went limp” – became dead weight. Her back popped as she struggled to help client. In pain, received a back brace at hospital, but eventually couldn’t work. (Continued)

CaseLong v. Superior Senior Care, Inc. • Filed for workers’ compensation. Superior said she was independent contractor, not employee. • Administrative Law Judge held Long was an employee. • Commission reversed – that she was an independent contractor – not eligible for worker’s compensation. • Long appealed. • Whether an person is an employee or independent contractor depends on facts of each case. • Here, Long was acting as an independent contractor. • Held: Affirmed.

Family and Medical Leave • Family & Medical Leave Act (FMLA). Applies to private employers with 50+ employees and 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 • Incapacity due to pregnancy • Incapacity or treatment for chronic, serious health condition • Absence from multiple treatments & recovery for surgery or condition that results in more than 3-day period of incapacity left untreated • Exempts “key” employees –10% highest paid that would cause economic harm to employer

CaseCallison v. City of Philadelphia • Callison worked for city. Diagnosed with anxiety caused by stress. Used a lot of sick leave; was placed on Sick Abuse List. Required to get medical certification for all sick days; subject to penalties for violations. 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. Often not home. Suspended for failure to follow policy. Callisonsued, saying he was not subject to discipline while on FMLA leave. Said discipline by the City was retaliatory. Trial court held for City. Callisonappealed.

CaseCallison 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.

General Regulation of Labor Markets • Family & Medical Leave • Hiring Legally • Federal Minimum Wage Requirement • Occupational Licensure & Regulation • Warning Employees of Plant Closings • Employee Retirement Plans

Hiring Legally • For every person hired, employer must have an I-9 form on file. • Documents must be presented for proof of identity and employment eligibility • General New Employment Procedure • 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 (U.S. Citizenship and Immigration Services electronic verification system) (USCIS) • Program has had 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 – Can be large for sloppy record keepers

Federal Minimum Wage and Tax 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 as of 2009 • Some states like California, have high min. wages • Some state laws cover employers exempt from federal law • See International Perspective “Flexibility in Labor Markets”

Occupational Licensure and Regulation • Few controls at federal level – most restrictions by states • Usually a state commission determines entry criteria such as formal education or apprenticeship or by testing • Ability through certificate to practice as lawyer, doctor, nurse, dentist, veterinarian, barber, architect, psychologist, dog groomer, beekeeper, massage parlor operator, etc. etc. etc. • Employees in contact with children/other vulnerable people often undergo criminal background check • Laws range from affecting how businesses provide reference to when employees paid their final pay check • Many states require time off to employees to vote and to attend parent-teacher conferences • Importance of state laws • Many small to medium size firms unaware of details of laws – often unwittingly violate them.

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 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.

Employee Retirement Plans • Employee Retirement Income Security Act (ERISA) • Guarantees expectations of retirement plan participants – protects benefits after reasonable length of employment • Vestingrequirements – participants receive benefits after certain length of employment • Mandatory vesting – 3 different options established by ERISA • Protectsworkers in case of closing – will still get their benefits • Statutes are complexinvolving lengthy regulator filings for pension & benefit plans – need for expert guidance

Major Labor Relations Acts • Norris-La Guardia Act of 1932 • Only major law passed before the NLRA. Ended court intervention when employers plead to stop strikes and other union activities as a violation of antitrust law. No court injunctions in nonviolent labor disputes such as strikes, belonging to a union, publicizing a labor dispute, picketing, etc. • Declared that every worker “have full freedom of association, self –organization, and designation of representatives of his choosing to negotiate terms and conditions of his employment.” • Prohibits employers requiring employees to sign yellow-dog contracts – agree to NOT join a union or risk being fired if they do • 1935 Wagner Act (NLRA): Right of workers to unionize; created National Labor Relations Board (NLRB). • Monitors unfair labor practices. Issues few rules – prefers development through dispute resolutionprocess • Board’s decisions can vary with political makeup – outcome of proceedings various over time more than most agencies

Major Labor Relations Acts • 1947 Taft-Hartley Act ~ Labor-Management Relations Act: (Amended NLRA) Employers have right to go to NLRB – protects employers. Unions are prohibited from: • Coercing employees to support union • Refusing to bargain in good faith with employers • Carrying outcertain kinds of strikes “secondary boycotts,” charging “excessive” union fees, or “featherbedding” • Going on strikeduring 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

The National Labor Relations Board • 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 • 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 generally“pro-labor” or “pro-management.” • Presidential appointment to the Board can be politically sensitive

Unfair Labor Practice Complaints • Examples of employer conduct violating NLRA • Threateningemployees with loss of jobs or benefits if they join or support a union • Threateningto close a plant if employees vote for unionization • Questioningemployees about union activities • Promisingbenefits to employees if the do NOT support a union • Givingemployees worse assignments for participating in protected activities • Examples of union conduct violating NLRA • Threateningemployees with loss of job if they don’t support the union • Refusingto help employees with grievances who have criticized union leaders • Engagingin picket line misconduct, such as threatening non-strikers • Strikingover 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

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.

Agency Shops • When Union is selected to be collective bargaining agent, workers who join payunion dues • Agency Shops – Majority of employees vote to be 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 • May do this under strict requirements • States pass right-to-work lawsthat prohibit agency shops. Have right to work without joining a union, even ifmajority of workers voted for union • Use of agency fees to support union political activities must be explained, and escrow account for amounts when dispute pending re: use of fees for this purpose.

Collective Bargaining • Union is exclusive bargaining agent for employees • Collective bargaining covers whole process from initial contract negotiations up through contract administration • Set forth terms of contract for a given period • Most collective bargaining agreements contain dispute resolution clauses (grievance arbitration clauses) • NLRA requires Good Faith Bargaining • Certain mandatory subjects, i.e., wages, hours, other terms and conditions of employment, etc. • Can back up positions with strike by union orlockout by employer

CaseTeamsters Local Union No. 523 v. NLRB • Interstate Brands makes/distributes bakery products • Different distribution system handled different products • Employer consolidated distribution – sales distributors & reps would handle all product lines. Meant union would now represent all distribution workers, rather than only some workers • Rammage had been a Dolly Madison sales rep for 15 years before consolidation (was not represented by union) • Now he was represented by union, but placed at bottom of seniority list • This gave preference to workers that union had represented before • Result: Rammage was “endtailed” to bottom of distribution system • Lost his regular route; was demoted • He complained to NLRB that union & employer were engaged in “unfair labor practice” • Board held in Rammage’s favor. Union appealed. (Continued)

CaseTeamsters Local Union No. 523 v. NLRB • HELD: Affirmed. • When there is a unit merger, union and employer are not permitted to “dovetail the seniority of employees while endtailing” previously unrepresented employees.” • The fact that Rammage was endtailed PLUS demoted (because he was not in the Union) suggests Union caused Employer to discriminate against him • Rammage wins.

To promote productive collective bargaining, Congress provided certain activities to be protected. Concerted Activities: Employer & union must be able to back up positions Union can strike; employer can lock outworkers Each side may do other activities to place pressure on the other side Protected Activities: Right to engage in concerted activities for mutual aid or protection i.e. Most union organizing efforts or refusal to work due to unreasonable hazards or concerns re: working conditions Unprotected Activities: Threats or acts of violence not protected Employers may fire employees for insubordination, disobedience or disloyalty unless activity is part of protected concerted activity Primary boycott(strike against employer whose collective bargaining agreement is in question) is legal Secondary boycott(when union uses economic pressure to force others to stop doing business with an employer not directly involved in primary labor dispute) is illegal Concerted Activities

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 Lockout is usually a defensive move Okay if in an effort to promote settlement or protect plant or its materials 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, then the employer can hire new workers and keep using existing union workers who cross picket lines. Employer Economic Responses

Employment and Labor Regulations