April 2016
Justice Scalia’s Death Scuttles Current Effort to Outlaw Union Fees
Prior newsletters (July and October 2015) discussed the important case of Friedrichs v. California
Teachers Association. Justice Scalia was widely viewed as the swing justice in that case. In earlier cases
he had recognized that free ridership is a problem when the union is forced to represent workers but
cannot require them to pay for that representation. After oral argument, however, many thought
Justice Scalia would side with other conservative justices and vote to overturn Abood v. Detroit Board of
Education and outlaw union fees for representation in the public sector. We may continue to speculate
but his death resulted in a 4-4 decision. An equally divided court leaves the lower court decision intact.
The Ninth Circuit found union fees constitutional based on the Supreme Court’s 1977 Abood decision so
holding. The reprieve for public sector unions is temporary, however, for the same organizations that
have brought the many other constitutional challenges to union fees have other cases in the pipeline.
Additionally, the organization representing the plaintiffs in Friedrichs has indicated that when a
replacement for Justice Scalia is appointed, it will ask the Court to rehear the case. Since the Republican
Senate has pledged to block any appointment to the Court before the elections, this highlights the
importance of the outcome of the presidential and senatorial elections in 2016 for both unions and
opponents of union fees.
For more information see here.
Fiduciary Rule Finalized
In the most recent issue of the newsletter we discussed the proposed rule from the Department
of Labor requiring pension investment advisors disclose their commissions on various investments they
are recommending, denominating the advisors as fiduciaries. A fiduciary must put the best interests of
the client first. This effort at increasing transparency regarding fees is designed to help employees make
sound investment decisions for their retirement assets. As noted by the Department of Labor, the rules
regarding retirement investments were made when most employees were covered by defined benefit
pension plans and the investment decisions were made by pension plan trustees and their advisers.
Today most employees have defined contribution plans and are required to make their own decision on
investments. The risk of a bad investment is no longer on the employer; it is on the employee. The
Department of Labor, after some changes in response to comments received during the comment
period, has finalized the rule. The rule will take effect in April 2017. For more information about the
rule, see information from the Department of Labor. Congressional efforts to overturn the rule
continue, however.
Trial by Formula or Representative Evidence?
Two cases decided by the Supreme Court regarding the rights of workers to bring class action
suits seem at first glance to point in different directions.
In Wal-Mart, Wal-Mart Stores, Inc. v. Dukes, 564 U. S. 338 (2011), the Justices held that workers
who banded together claiming gender discrimination were not permitted to act as a single class. Their
conclusion was that Wal-Mart could not defend itself against any individual claimant because the
discrimination claim was based on statistical analysis of broad data patterns, and that each individual
needed to bring her own unique case. “Trial by formula” is inadequate to prove that employees in the
class suffered from a common policy of discrimination, a prerequisite for a class action lawsuits; perhaps
further, this may indicate the Supreme Court’s disinclination to support class action suits against
employers.
The recent decision in Tyson Foods, Inc., v. Bouaphakeo, previewed in the October newsletter,
shows that the Court is not entirely averse to class actions in employment or to statistical analysis as
evidence. Tyson workers in a pork processing plant were paid from the time the first hog came to their
workstation until the last hog left it. This meant that time spent “doffing and donning” protective gear,
cleaning up, and walking to their workstations was uncompensated, despite extending their workweek
beyond 40 hours in the majority of cases.
Because Tyson’s records did not include documentation of the uncompensated time, Tyson
employees hired an industrial relations expert, who videotaped and calculated average doffing and
donning times for two different categories of workers. Tyson’s defense was that this statistical analysis
of average time was impermissible grounds for class action following Wal-Mart.
The Court held that the use of “representative evidence” was appropriate in this case. Tyson’s claim
that it cannot defend against any individual plaintiff is based on its own lack of documentation, but the
burden of collecting that evidence is on the company which has a legal duty to keep records of time
worked.
It remains to be determined by a lower court how the $2.9 million award will be disbursed.
While the decision was relatively narrow, it was a rare victory for plaintiffs in a class action case
before the Roberts Court. And it reemphasizes for employers the importance of keeping time records.
For the Tyson opinion and related commentary see here
Mooting Potential Class Actions Derailed – For Now
The Court also decided Campbell-Ewald v. Gomez, another case related to class actions that was
previewed in the October newsletter. That case asked whether an unaccepted offer of complete relief
to the plaintiff mooted the case, meaning the court could no longer hear it. The Court decided it did
not, ruling that an unaccepted offer had no effect, even if it would completely compensate the plaintiff
if accepted, and the case could proceed. The significance of the case is for class actions; had the court
ruled that the case was moot, a defendant could prevent class actions by offering relief to the named
plaintiff before the court certified a class. Each individual case could be mooted upon filing, preventing
a class action from ever ripening. The Court left a potential loophole, however, by stating that it was not
addressing the situation where the defendant deposited the funds for complete relief in an account for
the plaintiff and the court entered judgment for the plaintiff. Certainly some defendant will attempt to
exploit this loophole and we will likely see this question back at the Court.
For the Campbell-Ewald opinion and related commentary see here
Gathering Momentum: Minimum Wage and Paid Leave Laws
Two more states, New York and California, recently increased their minimum wages to $15 per
hour, implemented gradually. New York’s route to $15 takes a variety of paths for different industries in
different geographic areas and they arrive at the goal at different times. Workers in fast food and those
working for employers in New York City with 11 or more employees arrive first, in 2018. The gradual
implementation is designed to minimize the effects on employment.
The New York minimum wage boost was part of a budget bill that also included the most
generous paid family leave law in the country. The New York law offers up to 12 weeks of paid family
leave for birth or adoption of a child or to care for an ill family member. Like the minimum wage the
leave will be phased in, beginning in 2018. The plan is paid for through employee payroll deductions.
New York joins California, New Jersey and Rhode Island in adopting paid family leave. A law has been
passed in Washington state also, but not yet implemented. San Francisco also recently enacted a paid
leave ordinance.
California’s law also raises the minimum wage to $15 per hour by 2022. For smaller employers,
with 25 or fewer employers, the wages rise more slowly, reaching $15 per hour by 2023. The governor
can pause the increases for a year if economic growth slows. The legislature enacted the bill after a
referendum to do the same qualified for the ballot. Twenty-nine states and the District of Columbia
now have higher minimums than the federal Fair Labor Standards Act.
The Fight for $15 movement, which is pressing for a $15 per hour minimum wage using periodic
strikes and demonstrations as well as other forms of activism, seems to be gathering momentum and
reaching some significant victories. Critics, however, argue that increasing mandates such as the
minimum wage and paid leave will raise employer costs and reduce employment, particularly for low
paid workers.
For information about the New York minimum wage law, see here and for the paid family leave law, see
here.
For information about the California law, see here.
For information about the existing state paid leave laws, including New York, see here and for
information about existing state minimum wages, see here.
Focus on Transgender Workers
Legal treatment of transgender individuals has been in the news of late, largely focused on state
legislation to regulate the use of bathrooms. In the area of employment discrimination, case law
regarding discrimination against transgender individuals has developed in recent years.
While early decisions did not find discrimination against transgender individuals unlawful, more
recent cases in both the federal district courts and courts of appeals have found discrimination on the
basis of transgender status constitutes sex discrimination under both Title VII and the equal protection
clause of the constitution, which applies to government employers. The EEOC has reached the same
conclusion. For government employers, the finding that transgender discrimination is sex discrimination
is significant because the government faces a higher burden to justify actions based on sex. The theory
of the courts is that employers acting on the basis of transgender status are acting based on the
employee’s failure to conform to the stereotypical norms for the sex the employee was assigned at
birth. The Supreme Court has recognized that sex stereotyping constitutes sex discrimination, although
it has not addressed its application in a case involving a transgender individual.
Although the Supreme Court has not ruled directly on this issue, it does appear that the tide has
turned in the lower courts toward finding discrimination against transgendered individuals to be
unlawful sex discrimination.
Editor:
Co-Editor:
Ann Hodges
University of Richmond
School of Law
28 West Hampton Way
Richmond, VA 23173
Lisa Allen
University of Richmond
School of Law
28 West Hampton Way
Richmond, VA 23173