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US Employment Litigation Round-Up for August 2017

Recent Cases and New Laws Affecting Employers
15 September 2017
Mayer Brown Newsletter

Seventh Circuit Issues Ruling on Concrete Injury and Article III Standing in FCRA Action

Decision: On August 1, 2017, in Groshek v. Time Warner Cable Inc. (Case No. 16-3355), the US Court of Appeals for the Seventh Circuit held that the plaintiff job applicant failed to allege facts demonstrating a real, concrete appreciable risk of harm resulting from Time Warner’s alleged violation of the Fair Credit Reporting Act (FCRA). The plaintiff alleged that when he applied for a job with Time Warner, the company’s disclosure that it intended to obtain a consumer report about him violated FCRA because it did not appear in a stand-alone document but rather included extraneous information such as a liability release. In holding that the plaintiff lacked Article III standing to pursue his claim, the court rejected the plaintiff’s arguments that he suffered concrete informational and privacy injuries, noting that Time Warner did not withhold any information from the plaintiff and, because the plaintiff admitted that he signed the disclosure form, he could not maintain that he suffered an injury to his privacy. The court concluded that the plaintiff presented “no factual allegations plausibly suggesting that he was confused by the disclosure form or the form’s inclusion of a liability release, or that he would not have signed it had the disclosure complied with [FCRA].”

Impact: The Seventh Circuit’s recognition that a mere procedural violation of FCRA, without more, is not a concrete injury provides an important opportunity for employers to establish a defense against a plaintiff’s Article III standing.  Further, the court’s rejection of the plaintiff’s argument that a bare procedural violation can constitute a sufficiently concrete informational or privacy injury provides employers in the Seventh Circuit with a significant defense to FCRA claims.



NLRB Upholds Employer Confidentiality Policy

Decision: On August 14, 2017, in an unexpected decision, the National Labor Relations Board (“NLRB” or “Board”) upheld an employer’s confidential information policy. In Macy’s, Inc., 365 NLRB No. 116 (2017), the Board unanimously held that Macy’s confidentiality policy, which prohibited employees from divulging marketing plans, pricing strategies, social security and credit card numbers, and other confidential information, did not reasonably “chill” employees in the exercise of their right to engage in protected concerted activity under Section 7 of the National Labor Relations Act (NLRA). The Board emphasized that the NLRA does not protect employees who divulge information that their employer lawfully may conceal and that sensitive information like social security and credit card numbers would be of no valid use to an employee in appealing to customers regarding employees’ work-related concerns.

Impact: Given the substantial number of workplace policies that the NLRB has struck down in recent years, the Board’s decision was welcomed by employers. While the employees and the NLRB’s general counsel argued that Macy’s policy was overbroad in light of recent Board precedent, the Board found that Macy’s policy specifically defined the confidential information to which it applied and could not be reasonably construed to prohibit protected Section 7 activity. Given the Fifth Circuit’s recent ruling reversing the Board’s decision and upholding a policy requiring employees to maintain a positive work environment in T-Mobile, Inc. v. NLRB, No. 16-60284 (5th Cir. July 15, 2017), and the likely confirmation of additional Republican nominees to the Board in the near future, this decision may be the start of a trend.


District Court Orders EEOC to Reconsider Wellness Program Regulations

Decision: On August 22, 2017, the federal district court for the District of Columbia ordered the Equal Employment Opportunity Commission (EEOC) to reconsider two regulations relating to the financial incentives that employers can offer to employees for participating in employer-sponsored “wellness” programs. The Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) prohibit employers from requiring employees to provide medical or genetic information. Prior to 2016, the EEOC had taken the position that the ADA and GINA prohibited employers from offering wellness program financial incentives if the program also required employees to provide medical or genetic information. According to the agency, such financial incentives were “coercive” and so rendered the disclosures involuntary. In 2016, the EEOC promulgated new regulations revising its interpretation of when disclosures of medical or genetic information were voluntary and allowing employers to provide incentives in connection with wellness programs that required the disclosure of ADA- or GINA-protected information, subject to certain limitations. The American Association of Retired Persons (AARP) filed suit challenging these regulations. The court ruled that the EEOC had failed to adequately explain and support the revised regulations and so held the regulations invalid, remanding to the EEOC for reconsideration of the regulations. The court declined to vacate the rules for the time being to avoid “disruption and confusion.” AARP v. EEOC, 16-cv-2113 (D.D.C. Aug. 22, 2017)

Impact: For now, the EEOC’s regulations remain in effect so wellness programs designed in reliance on them will be found to comply with the ADA and GINA. However, employers should continue to monitor developments in this area as the EEOC reconsiders its regulations because the EEOC may revise its view on the propriety of financial incentives associated with wellness programs.


Ninth Circuit Holds That Labor Code Prohibits Six Consecutive Days of Work Only within Set Workweek

Decision: On August 3, 2017, in a published opinion, the US Court of Appeal for the Ninth Circuit affirmed dismissal of a proposed class action against Nordstrom Inc. in Mendoza et al. v. Nordstrom Inc. et al., case number 12-57130. Employees Christopher Mendoza and Meagan Gordon claimed that Nordstrom required some of its employees to work more than six consecutive days in a row in violation of California Labor Code sections 551 and 552. The Ninth Circuit, following guidance from the California Supreme Court on three certified questions, held that the labor code prohibited employers from requiring their employees to work more than six consecutive days only during a set workweek, not any six days in a row. On stipulated facts, neither of the lead plaintiffs worked more than six days in any one workweek, so dismissal was warranted.

Impact: While the Ninth Circuit’s decision, and the California Supreme Court opinion on which it is based, provide some much needed clarity on the application of the day of rest requirement, employers likely will continue to see actions arising out of the requirement when appropriate class representatives can be found. California employers therefore should ensure that their scheduling policies comply with Labor Code sections 551 and 552.


California Court of Appeal Upholds Car Dealership’s Arbitration Clause over the California DLSE Process for Unpaid Wages

Decision: On August 21, 2017, in Oto, LLC v. Ken Kho, the California Court of Appeal for the First Appellate District (Court of Appeal) upheld a mandatory arbitration agreement, reversing the trial court’s determination that the agreement was substantively unconscionable because it deprived the employee of the advantages of a relatively quick, inexpensive method for resolving wage claims using the California Labor Commissioner’s hearing procedure without providing an accessible and affordable alternative. The plaintiff auto mechanic signed an “Employment At-Will and Arbitration” agreement three years into his employment. The agreement was drafted in seven-point font in one long and dense paragraph and called for the parties to agree to arbitrate their disputes before a retired superior court judge under ordinary pleading, discovery and evidence rules. After signing the agreement, the employee filed a wage claim with the California Division of Labor Standards Enforcement (DLSE). In response, the employer filed a petition to compel arbitration in court. The Court of Appeal upheld the arbitration agreement because it was not both procedurally and substantively unconscionable. The court held that the arbitration agreement was procedurally unconscionable to an “extraordinarily high” degree because it was presented to the employee years after his employment commenced on a take-it-or-leave-it basis and because it contained legalistic language that was set in a small font within a single block. However, the agreement was not substantively unconscionable because the arbitration clause was not one-sided and did not overly favor the dealership given that all claims between the parties were subject to arbitration, and the employer would pay for the arbitration. 

Impact: The Court of Appeal’s opinion will be helpful to employers seeking to arbitrate wage claims brought before the DLSE. The court’s decision also reinforces the need for employers to confirm that both the manner in which arbitration agreements are drafted and presented to employees is fair and enforceable. Given the ever-changing legal landscape in this area, employers should regularly review and revise their arbitration agreements to reflect the recent case law, which often, as here, provide concrete guidance on what type of language and substantive provisions are enforceable.

Authors

  • Lori A. Zahalka
    T +1 312 701 7921
  • Corwin J. Carr
    T +1 312 701 8015
  • Grant T. Miller
    T +1 213 229 5130
  • Richard E. Nowak
    T +1 312 701 8809
  • Ruth Zadikany
    Associate
    T +1 213 621 3916

Related People

  • Marcia E. Goodman
    T +1 312 701 7953
  • John Zaimes
    T +1 213 229 9545
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