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Supreme Court to Resolve Circuit Split on Whether NLRA Prohibits Arbitration Agreements Containing Class Action Waivers

Development: On January 13, 2017, the Supreme Court granted certiorari in three cases involving the validity of the National Labor Relations Board’s (NLRB) position that Section 7 of the National Labor Relations Act (NLRA) prohibits arbitration agreements that require employment disputes to be arbitrated on an individual basis—thereby precluding class and collective actions. The Supreme Court’s ruling will resolve a circuit split that started with the D.R. Horton case, with the Second, Fifth and Eigth Circuits rejecting the NLRB’s position and the Seventh and Ninth Circuits siding with the NLRB.

Impact: The three cases have been consolidated for argument. Ordinarily, a decision would be expected by the end of June, although that may depend on whether the Supreme Court, which has been operating without a ninth justice, is at full strength. Additional analysis of this issue can be found in a Mayer Brown Class Defense Blog post.

Fifth Circuit Allows Emotional Distress Damages in FLSA Retaliation Lawsuits

Decision: In a case of first impression, the Fifth Circuit held on December 19, 2016, in Pineda v. JTCH Apartments, LLC (No. 15-19032), that prevailing plaintiffs in retaliation cases brought under the Fair Labor Standards Act (FLSA) may recover emotional distress damages. The plaintiff sued the owner of the apartment complex where he lived to recover overtime pay for maintenance work he performed at the complex. After receiving a notice to vacate his apartment shortly after filing his FLSA claim, the plaintiff amended his complaint to add a retaliation claim. Although the plaintiff prevailed at trial on both claims, the district court refused to instruct the jury on, or allow the jury to award, emotional distress damages on the retaliation claim.

On appeal, the Fifth Circuit held that the district court erred when it refused to instruct the jury that the plaintiff could recover emotional distress damages on his retaliation claim. Noting that several other circuits allow prevailing plaintiffs to recover emotional distress damages for retaliation under the FLSA, the Fifth Circuit agreed that the “expansive” language of the FLSA allowing “such legal or equitable relief as may be appropriate” includes the “compensation for emotional distress that is typically available for intentional torts like retaliatory discharge.” Accordingly, the Fifth Circuit remanded the case for a new trial on the plaintiff’s entitlement to emotional distress damages on his retaliation claim.

Impact: The Fifth Circuit joins the First, Second, Sixth, Seventh and Ninth Circuits in allowing FLSA retaliation plaintiffs to seek emotional distress damages. In addition to increasing the cost of defense by forcing the employer to investigate and litigate potentially complex and fact-intensive damages claims, the Fifth Circuit’s ruling increases the employer’s potential exposure because plaintiffs may now seek substantial emotional distress damages even when the underlying economic damages are limited.

States and Municipalities Enact a Riot of Employer Rules as 2016 Draws to a Close

Activity: Late 2016 saw a flurry of employment legislation at the state and local levels across the country covering diverse topics ranging from the minimum wage to employer firearms policies. Some examples of notable state and local developments include the following:

  • Los Angeles’s “Ban-the-Box” Ordinance. On December 7, 2016, Los Angeles Mayor Eric Garcetti signed a city ordinance banning some employers from asking job applicants about their criminal histories until after making a conditional offer of employment. Los Angeles joins San Francisco and New York in passing similar laws aimed at eliminating discrimination in the hiring process based on an applicant’s criminal record. Los Angeles’s ordinance took effect on January 22, 2017.
  • Ohio’s Minimum Wage Preemption and Firearms Legislation. On December 19, 2016, Ohio Governor John Kasich signed a bill prohibiting the state’s municipalities from raising the minimum wage above the state rate, which increased from $8.10 to $8.15 per hour on January 1, 2017. The law, passed in response to a scheduled vote in Cleveland to increase the local minimum wage to $15 an hour by 2020, became law along with bans on other proposed local restrictions on employers. About 22 states have passed similar preemption laws. On the same day, Governor Kasich also signed a bill prohibiting employers from restricting their employees from keeping permitted concealed-carry firearms in their vehicles while parked in employer parking lots. (Employers may still ban firearms in employer buildings.) Both laws are slated to take effect 90 days after the governor’s signature.
  • New York’s Revised Overtime and Minimum Wage Regulations. On December 29, 2016, the New York State Department of Labor adopted a final rule increasing the salary level at which an employer can claim an employee is exempt from the state’s overtime regulations to between $727.50 and $825.00 per week, depending on the employer’s size and location. The new salary thresholds went into effect on December 31, 2016. In addition, as a result of a state law approved in March 2016, new minimum wage rates also went into effect on December 31, 2016, increasing the hourly rates to between $9.70 and $11.00, depending on the employer’s industry and location, with increases of up to $15.00 as early as the end of 2018.
  • Washington DC’s Paid Family Leave Law. On December 20, 2016, despite opposition from Mayor Muriel Bowser, the Washington DC Council approved by a 9-4 vote a plan to guarantee eight weeks of paid leave to new parents, six weeks of paid leave for employees to care for sick family members and two weeks of paid leave for personal sick time. The act now moves to Mayor Bowser’s desk for signature or veto, after which it would move to the US Congress for final approval. Given the complexity of implementation, it is projected that the first benefits would not be paid out until some time in 2020.

Impact: The profusion of state and local legislation at the end of 2016 likely will continue as federal regulations and enforcement are expected to decline with the Trump administration. Companies with employees in multiple areas of the country should be vigilant about monitoring developments at the state and local levels in jurisdictions where they employ workers to make sure that they comply with the emerging patchwork of state and local laws.

Eleventh Circuit Rejects EEOC Position, Finding That ADA Reasonable Accommodation Requirements Do Not Mandate Job Reassignment of Disabled Employees

Decision: On December 7, 2016, in EEOC v. St. Joseph’s Hospital, Inc., the Eleventh Circuit rejected the position of the Equal Employment Opportunity Commission (EEOC) that the Americans with Disabilities Act of 1990 (ADA) requires employers to reassign qualified individuals to a vacant position as a reasonable accommodation so long as the individual is minimally qualified for the position. In its decision, the Eleventh Circuit held that even disabled employees in need of a reasonable accommodation must compete with other qualified candidates for the vacancy.

In St. Joseph’s, the plaintiff was a nurse who needed to use a cane. The cane posed a safety hazard in the psychiatric ward where she worked, so she was given the opportunity to apply for other jobs, but without any preference due to her disability. After not obtaining any other position, her employment was terminated and the EEOC brought suit on her behalf. At summary judgment, the trial court held as a matter of law that the ADA does not mandate reassignment without competition and determined that there were genuine issues of material fact as to whether the plaintiff was entitled to reassignment to specific positions. After a jury trial that resulted in a defense verdict and a court-mandated mediation that did not result in a reinstatement, the EEOC appealed the trial court’s summary judgment that the ADA does not mandate reassignment. On appeal, the Eleventh Circuit concluded that the ADA does not mandate noncompetitive reassignment because the statute states that reasonable accommodations “may include,” among other things, “reassignment to a vacant position,” and the use of “may” implies that reassignment will be reasonable in some circumstances but not others.

Impact: This decision adds to the existing circuit split regarding the question whether the ADA requires reassignment without competition. The Eleventh Circuit’s decision is consistent with decisions from the Fifth and Eighth Circuits but is contrary to the decisions of the Seventh, Tenth, and DC Circuits, which agree with the EEOC’s position. The Sixth Circuit has held that an employee needing reasonable accommodation is not entitled to “preferential treatment” in reassignment.

EEOC Focuses on ADA Protections for Mental Health Issues

Development: The Equal Employment Opportunity Commission (EEOC) recently issued a resource document explaining the rights of workers with mental health conditions under the Americans with Disabilities Act of 1990 (ADA). The guidance reminds applicants and employees that the ADA prohibits discrimination and harassment at work because of a mental health condition like depression or post-traumatic stress disorder. The guidance also explains that the ADA may require that employers provide reasonable accommodations to employees with mental health conditions, including altered break and work schedules, quiet office space, specific shift assignments, permission to work from home or unpaid leave. In a related press release, the EEOC explained that the document is “part of an ongoing series of publications providing individuals with medical conditions or work restrictions with user-friendly explanation of their rights,” while noting that EEOC charges of discrimination based on mental health conditions are on the rise.

Shortly after issuing this resource document, the EEOC finalized regulations requiring all federal agencies to set as benchmarks that 12 percent of their workforce will consist of individuals with disabilities and 2 percent will be individuals with “targeted” or severe disabilities such as blindness, deafness and psychiatric disabilities. The regulations also require federal agencies to provide personal assistance services to employees who require such assistance in order to be at work or participate in work-related travel, including, for example, assistance with eating and using the restroom. In a related press release, EEOC Chair Jenny Yang said that, “[i]ncreasing employment rates for individuals with disabilities is a national priority for the federal government.”

Impact: These developments at the EEOC signal that disability discrimination will be an ongoing area of focus for the agency. Employers should review their disability and reasonable accommodation policies and practices to ensure that they comply with the most recent pronouncements from the EEOC.

California Supreme Court Rules That On-Call Rest Periods Are Not Permissible

Decision: In Augustus, et al. v. ABM Security Services, Inc., security guards filed a putative class action against their employer, claiming that it had failed to provide them with uninterrupted rest periods as mandated by California law because they were required to keep their radios and pagers on during rest breaks, to remain vigilant, and to respond to emergencies. The trial court awarded a class of more than 14,000 guards approximately $90 million in damages for missed meal period premiums. The court of appeal reversed the decision, ruling that on-call rest periods do not violate California law.

A split California Supreme Court disagreed, holding that “state law prohibits on-duty and on-call rest periods. During rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time.” The Court explained that “a rest period means an interval of time free from labor, work, or any other employment-related duties.” Accordingly, an employer cannot meet its rest period obligations by requiring employees to remain on-call because the employee is forced to remain “vigilant[] and at the ready,” which indicates a “broad and intrusive degree of control.” The Court explained that its ruling does not circumscribe “an employer’s ability to reasonably reschedule a rest period when the need arises.” Indeed, if a rest period is interrupted, an employer can provide another rest period to replace one that was interrupted or pay the premium for the missed rest break, but such interruptions “should be the exception rather than the rule.” In sum, California law requires employers to “relinquish any control over how employees spend their [rest] break time, and relieve their employees of all duties—including the obligation that an employee remain on call” because “[a] rest period, in short, must be a period of rest.”

Impact: The Court’s decision resolves ambiguity regarding the requirements of California’s rest period statutes and provides employers with more clarity regarding their obligations to employees. Because the decision likely presents significant practical challenges for many employers, particularly those in industries where employees must be able to quickly respond to emergencies, some creativity will be needed to ensure both compliance with the law and public safety at the same time.

New I-9 Form Takes Effect

Development: Effective January 22, 2017, employers must use the revised version of Form I-9, Employment Eligibility Verification, released by the US Citizenship and Immigration Services (USCIS) in November 2016. Among other modifications, the revised, online form contains pop-up informational icons and error-checking capabilities.

Impact: Employers should keep in mind that despite the form’s new electronic capabilities, they are still required to keep hard copy signed and dated forms. Additional information about the new Form I-9 will be presented at Mayer Brown’s upcoming webinar USCIS I-9 Form for Employment Eligibility Verification: What You Need to Know.