cbupdateshead.jpg

Labor and Employment Law Newsletter
November/December 1999

Articles:


The Fourth Pillar

Employers will create more formal internal dispute resolution mechanisms for resolving employee complaints in the coming years. Employers without these programs either will have small companies where everyone knows each other or will get nibbled to death by lawsuits. An "open door" policy will not suffice. Why?

Right now, many employers use three key employment "pillars" to avoid employment disputes: (1) the application and interview procedure,  (2) performance appraisal systems, and (3) "progressive" discipline.   Effective initial screening allows an employer to hire individuals whose expectations and skills fit into the company. Honest performance evaluations provide a company with a forum to advise an employee about the employer's expectations, give the employee an opportunity to fulfill those expectations, and when expectations are not met, a sound basis for termination. Appropriately tailored discipline permits an employee who fails to avoid certain undesirable behaviors with the chance to correct the behavior or face termination. Proper use of these basic employment processes minimizes the risk of employee perceptions of mistreatment and  unfairness, which leads to lawsuits, union organizing, and employee turnover.

There are several reasons why internal dispute resolution mechanisms will become a fourth basic pillar of employment practices. The combined effect of  increasing government created legal rights, a decrease in the size of the labor force, an increase in the education and skill levels required in the workforce, and continuing efforts by the courts to decrease the amount of employment litigation will lead employers to search for new ways to handle employment disputes. 

Litigation is already prohibitively expensive unless management principles are at stake. While insurance has been created and can be useful, employment litigation is not going to be routinely covered the way car accidents are -- the issues are fundamentally different. Employment litigation is about power relationships, individual "rights," and the employer's state of mind. For these reasons, insurers and employers will grapple over control of lawsuits. Further, some governmental bodies and courts  may not allow a company to avoid monetary liability for intentional acts of discrimination through the purchase of insurance.

Even if insurance were the long term  answer, courts are going to slow the flood one way or the other. So far the technique has been to employ procedural hurdles to raise the cost to employers, but several recent developments suggest a trend toward showing more respect for nonjudicial decision makers. Employers operating under increased demands for profit will have to accommodate more educated employees whose bargaining power will be enhanced by more legal rights and simple labor supply and demand. The clash of interests will have to be resolved somewhere.  Litigation of employment disputes is unpredictable and expensive. There has to be another way. And there is.

In union settings the grievance and arbitration procedure has functioned for years with moderate levels of employer dissatisfaction. The courts will not defer to arbitration procedures under collective bargaining agreements where "civil rights" are at stake. But the Supreme Court permits courts to defer to an arbitration agreement that is entered into by individual employees (rather than a collective bargaining agreement) and if the agreement specifically mentions the statutory rights that are arbitrable under the agreement. In a recent decision, the California appellate court found the employer acted lawfully in terminating an employee who refused to sign an arbitration agreement.

Use of an express arbitration agreement was apparently endorsed by two somewhat vague recent Supreme Court decisions. In those cases, involving claims of sexual harassment, the Court ruled an employer can avoid liability,  under certain  circumstances, even if harassment actually occurred by showing the employee unreasonably failed to use an appropriate complaint procedure provided by the employer. So if the employer provides an internal dispute resolution procedure which meets certain standards of fairness and the employee individually has agreed to use it for all disputes, including sexual harassment and discrimination claims, it appears the Supreme Court eventually will enforce these internal dispute agreements. If that happens, the decision of the arbiter is entitled to great deference and can only be overturned in the event it is "arbitrary and capricious."

Courts, juries, and employees expect employment due process from all employers. They expect employers to make decisions in a systematic, well-documented way. Using an internal dispute resolution mechanism will increase an employer's ability to meet these expectations, and hopefully reduce the risk of litigation. While the legal benefits of dispute resolution will become increasingly significant, they are collateral to the employee relations benefits. 

Those readers who attended the 1999 Labor Relations Symposium VIII may have attended our program on this subject. Please contact your Constangy attorney, Larry Bridgesmith in Nashville, or Townsell Marshall in Atlanta for more information.


Uncle Sam's Sweatshop

It seems the tables have turned for the Nation's top law enforcement agency. In a case that leaves you wondering which side to root for, the U.S. Court of Federal Claims recently granted "opt-in" class status to roughly 12,500 current and former United States Justice Department ("DOJ") attorneys who are seeking $500 million in back overtime pay in a lawsuit filed on November 25, 1998. So far, over 5,800 individuals have opted-in.

Under the Federal Employees Pay Act of 1945 ("FEPA"), employees who work more than eight hours per day or 40 per week, and whose hours are "officially ordered or approved," must be compensated with overtime pay.  Unlike the Fair Labor Standards Act, the FEPA does not have an exemption for attorneys.

The DOJ kept two sets of records. One required lawyers to state they worked 40 hours a week. The second set, detailed computerized time sheets, was used to measure the lawyers' efforts, to ask Congress for bigger budgets and even to bill legal fees to losing adversaries.

Documents obtained in discovery indicate DOJ knew it may be violating the law. Additionally, 16 days before the lawsuit was filed, one high-level DOJ official wrote in an internal memo "that it is problematic (some might use the term unconscionable) for the Department to continue to not pay its attorneys overtime knowing full well that the overtime statute applies." He went on to warn that "if the Department continues to ignore this problem, sooner or later, an intrepid attorney will develop a class action on this issue and major problems will result."

The hypocrisy is gnawing at the sense of fairness of more than just the plaintiffs. Editorial pages across the country have been lambasting DOJ for its refusal to comply with federal wage laws, even while it simultaneously enforces federal wage provisions against private citizens and corporations.  For example, in a November 6 Pittsburgh Post Gazette editorial entitled "Uncle Sam's Sweatshop," the editorial board noted "few things are as corrosive to the rule of law as hypocrisy on the part of law enforcement authorities - any hint that they may consider themselves above the law."

While private sector employers are not covered by the FEPA, lessons can be learned. An employer covered by the Fair Labor Standards Act ("FLSA") who fails to properly classify a group of employees could also be subject to a class action lawsuit. Significantly, the FLSA has its own unique class action rules, which are actually easier for plaintiffs to meet than the rules under which the DOJ plaintiffs brought their action.  Employers would be well advised to reexamine their exempt and non-exempt classifications throughout their workforce to ensure that overtime is being properly paid.


Have Employers Lost Their Freedom to Speak?

Many companies have undergone the "learning" experience of a union campaign. During a union campaign, the rules established by the National Labor Relations Board regulate specifically what an employer can and cannot say, along with when and how it can deliver its message. Outside of the union organizing context, however, employers usually are not barred from using any specific types of words. Employers have assumed that unlike the NLRB, a court cannot tell employers what specific words it can use because such interference by the government through its judicial arm is contrary to the First Amendment to the United States Constitution.  But a few courts have begun to dictate to employers specific words that cannot be said in the workplace.

Employers are certainly aware that permitting employees to make statements impugning an employee, whether based on race, sex, ethnicity, religion, age, or simply flawed character traits, has the potential to violate Title VII of the Civil Rights Act and other laws, but more importantly is a bad business practice. This point has been driven home by well-publicized damages awards in sexual harassment and other employment litigation. But courts have never told employers which specific words can and cannot be used in the workplace. Until now. 

In August, the California Supreme Court agreed that a court can direct an individual or its employer not to use certain words in the workplace. In that case, Aguilar v. Avis Rent a Car System, nine Avis employees sued Avis and two co-employees for racial/national origin discrimination and harassment. The employees proved at trial that Avis employees had used both generally offensive and specific ethnic epithets directed against the plaintiffs. 

In addition to awarding money damages, the trial court ruled the individual defendant "shall cease and desist from using any derogatory racial or ethnic epithets directed at, or descriptive of, Hispanic/Latino employees of Avis Rent A Car System."  The court further held that the employer "shall cease and desist" from allowing its employee to use any offensive epithets.  The appellate court agreed and ordered the trial court to come up with a list of the forbidden epithets. 

The California Supreme Court found this all to be perfectly appropriate.  The Court reasoned that because the jury found for the plaintiffs, the defendants' actions were unlawful and therefore could not be protected speech. In response to the argument that prohibiting future statements is a prior restraint on speech, the Supreme Court was untroubled. It held that because the statements restrained had already led to liability, they were really past and not future speech.

What does this decision mean to your workplace? Hopefully, your company already has a "no harassment" policy  in effect, has provided training with regard to the policy, and has enforced the policy when the need has arisen.  If not, this holding reminds employers of the wisdom of creating and enforcing such a policy. We continue to see employers without policies or training, and continue to hear the argument that such training will "just encourage complaints."

The era of the employer believing it is protected by sticking its head in the sand is long over. Employers can now be held liable for discrimination regardless of actual knowledge of the offensive events. With this California decision, employers may face court interference into its future employment relationships.  The Aguilar decision alerts employers to be extra vigilant to anything that could be construed as harassment and to take immediate action, to document any incidents, and to create an atmosphere where workplace and worker's diversity is supported from the top down.


Culture Shock:  International Investment and Immigration

A recent study released by the Organization for International Investment in November 1999 asserts employers owned by foreign companies employ about 5% of the American workforce. Tennessee, North Carolina and South Carolina are among the five states with the greatest percentage of the workforce employed by foreign firms. Foreign investment brings immigration, as the investing firms bring their senior managers and their families into the United States.

At the same time, anyone observing the labor market knows there are more jobs than qualified employees. The number of immigrants, legal and illegal, coming into the United States continues to increase daily.   The new waves of immigrants are coming not just from Mexico and the Caribbean, but also from southeast Asia and the Middle Eastern countries.  As the economies of  Indonesia and Malaysia suffer and the rich Mideast countries turn away new "guest workers," the United States beckons powerfully with it strong economy and plentiful jobs.

The Southeast has seen a dramatic rise in the number of Muslim immigrants, bringing practices such as prayer five times a day, washing of hair and feet, dietary restrictions and sometimes clothing requirements.  No one has meaningful numbers, but observations and anecdotal evidence seem to show a clear trend. The number of Hispanic immigrants continues to rise. Immigrants from southeast Asia bring not only new religious practices, but distinctly different customs and social expectations. As different religious practices and cultures enter the workplace there will be a form of culture shock among the immigrants and the existing workforce.  We have noticed a strong increase in the number of employers confronting workplace issues as a result.

Meanwhile, the increase in foreign investment has brought new management expectations. Managers from Japan have expectations for employee reactions differing markedly from those of German or Italian managers, which differ in many respects from American managers.  American employees sometimes have difficulties adjusting, as do the managers. Adding to the complexity can be the families of the foreign managers, who often are experiencing serious culture shock, and usually do not have as much support structure as the expatriate manager. 

These changes in demographics will bring new challenges for the employer. Unless transferred managers receive some training in American laws and employment practices, the employer may have lawsuits from American employees as a result of management conduct that would be acceptable in the home country. While many countries have strong laws governing wages and layoffs, few countries have the type of individual rights to be enforced through private litigation found in the United States.  Similarly, the relative homogeneity of the religious practices in this country means new practices can and do result in surprise and sometimes antagonism.  Both trends create frictions the employer should address prospectively instead of waiting until problems surface. 

Over the next few years we will see an increase in workplace issues resulting from international investment and immigration. There will be charges and lawsuits. Because national pride and religion will be involved the issues will be emotional and difficult to defuse once ignited. Proactive employers will attract the best employees and have the fewest problems.  The trend is unavoidable, so let's prepare to deal with it.


Union Strategies:  Organizing to Avoid an Election

Today we view the secret ballot election to decide whether a union will represent employees as the cornerstone of industrial democracy. This was not always so, and if the labor unions succeed with their current strategy, it will not be so soon again.

From 1935 to 1974 the process of resolving questions concerning representation evolved from a hearing in which all manner of evidence was presented to show the employees in a bargaining unit wanted representation by a union to the current secret ballot election. The key concepts of insuring employees were given an opportunity to be fully informed before making the decision or that the decision should be made in a way protecting employee anonymity evolved slowly and uncertainly.  Finally, in 1974 the idea that the best way to determine whether employees wanted to be represented by a labor union was with a period of campaigning to permit education and a secret ballot election supervised by neutral government agents was fully accepted.

Today the labor unions have made it clear they do not like the secret ballot election as the cornerstone of industrial democracy.  Several strategies have emerged to avoid the commonly accepted election.  First, in 1995 John Sweeney, President of the AFL-CIO, made organizing his top priority.  In 1997 the "right to organize" campaign was announced, with two basic propositions.  First, representation by a union was a "fundamental right."  Second, employers should have no right to participate in the process of deciding whether employees will be represented by a union.

The AFL-CIO in October of this year voted to devote 30% of its resources to organizing, to double the number of organizers trained through the AFL-CIO Organizers' Institute to 300, to engage allies in the communities to bring pressure on employers and to increase work on analysis of promising targets. 

We see three main strategies.  First, get currently unionized large employers to agree to "neutrality" in organizing efforts at their subsidiaries.  Second, use community pressure to persuade employers to recognize the union.  Third, seek long term changes in the labor laws to eliminate the secret ballot election and replace it with card checks.

Unions have had a surprising amount of success persuading companies with which they have bargaining relationships to promise to remain "neutral" during organizing efforts at nonunion subsidiaries and affiliated companies.  Most remarkably, Daimler Chrysler has promised the United Auto Workers its U.S. subsidiaries will be "neutral" during organizing efforts; will not make negative comments about the union; and that access to employees on non-work areas on non-work time will be permitted. 

Similarly, AT&T agreed with the Communications Workers that its subsidiaries will be "neutral" and will recognize the union on the basis of union cards signed by members of the appropriate bargaining unit.  Levi Strauss made similar agreements with UNITE several years ago.  Several Levi's plants have been closed since then. Thus, what we see is a union effort concentrating on employers where they already have at least a foothold combined with efforts to pressure employers into letting unions speak without opposition.

The "corporate campaign" approach is a favorite of the unions. As one union spokesperson put it, "unions need to challenge management in the work place, in the community, in the board room, and on Wall Street."  In short, unions want to find an employer's pressure points and apply the pressure.  When there are possible legal issues with a company, such as safety, wage and hour, sexual and racial harassment, the unions will attempt to exploit these issues.  When a company is susceptible to economic pressure, such as a consumer boycott, a union will use this tactic.  Where a community may be supportive of employees' efforts, a union will rally the community behind its organizational attempt.  If a company is subject to pressure from lending institutions or shareholders, whether individual or institutional,  unions will go in that direction. As the union spokesperson put it, "unions really need to determine where their power lies and how to wield it to their best advantage."

The third part of the strategy is long term changes in the labor laws.  Shortening the period between petition and election, tightening restrictions on what employers can say and do during campaigns, finding facts in a way favorable to the side of labor and encouraging the use of mail balloting where possible are a few of the minor ways the law governing organizing can be tilted to the side of unions without actually changing the law.  But the target is bigger than incremental change.  Democratic presidential candidates have gone out of their way for organized labor .  The Clinton-Gore positions on labor issues during the Seattle World Trade Organization talks clearly show strong support of organized labor positions.  Bill Bradley has announced he is open to legally requiring card check recognition.   

Unions will push strongly for labor law reform and an amendment to the National Labor Relations Act requiring Board certification of a union which obtains authorization cards from a majority of the employees in an appropriate bargaining unit.  Even absent the ability to push through legislative change, unions will continue to develop and refine strategies to put pressure on employers to recognize a union on the basis of authorization cards.

What does this mean for employers?  An employer who wishes to keep one or more of its facilities union-free must also develop a strategy.  The strategy should have both short-term and long-term goals. It should address the entire employment and community environment. A comprehensive strategy would address such items as communications; compensation; benefits; working conditions; affirmative action; training, development, education, and personnel planning; policies and procedures; and public affairs, including community relations.  We encourage our clients to involve Constangy, Brooks & Smith as a partner in developing their strategy and as a resource to ensure that the company is in compliance with the various laws. 

Employers' best defense is a good offense -- a well thought through strategy to ensure a favorable employee relations environment, careful and attentive implementation of the strategy and assuring compliance with the many laws and regulations governing the workplace.  The cornerstone of industrial democracy is the secret ballot election.  Employers can avoid it in the best possible way -- good preventive labor relations.


OSHA Proposes Ergonomics Standard, But Opposition Could Delay A Final Version

On November 23, 1999,  nine years after OSHA began a nationwide program to reduce ergonomic hazards, the agency finally issued its proposed ergonomics standard.  OSHA Assistant Secretary Charles Jeffress says the Agency plans to issue a final standard before the end of next year.  However, considering the controversial nature of ergonomics and the strong opposition already expressed by both industry groups and members of Congress, this seems unlikely. Based on past experience, we expect the process to take several years.  

Nevertheless, a final standard likely will be based for the most part on the record created next year.  For that reason, it is imperative that interested employers participate fully in the rulemaking process by filing their comments on the proposal by the February 1, 2000, deadline and by participating in the hearings on the proposed rule scheduled for late February, March, and April 2000.

The proposed standard is very similar to the draft ergonomics standard widely-released earlier this year.  The proposed standard requires the ergonomics program to address six "basic program elements" (namely, (1) management leadership and employee participation, (2) hazard information and reporting, (3) job hazard analysis and control, (4) training, (5) MSD (medical) management, and (6) program evaluation).  If neither a recordable case nor persistent symptoms are reported, then only the first two program elements are required

Opponents of the proposed standard argue, that once employee concern is heightened by the "hazard information and reporting" required for manual handling and manufacturing production jobs (and for other jobs after a single covered MSD is reported), the scope of the proposed requirements would rapidly expand to cover most of the rest of the workplace.  Employers thus would ultimately have to implement, the argument goes, an extensive and burdensome ergonomics program that is "triggered" by a single case.

Unlike the earlier draft, however, the proposed standard offers a "Quick Fix" alternative to setting up a full ergonomics program.  If the employer implements ergonomic controls within 90 days of the employee's first reporting the covered MSD, and if within the next 30 days the employer determines that the controls have eliminated the hazard, then no further action is required.  This "Quick Fix" method of avoiding the program requirements, however, cannot be used again for a second covered MSD occurring in the same job within three years of the first case, unless different physical work activities and conditions are involved.

Finally, one of the most potentially controversial provisions of the proposed standard is the "work restriction protection" requirement.  Under the proposal, while an employee is recovering from a covered work-related MSD, the employer must provide both necessary work restrictions and, for up to six months, 100% pay and benefits.  For employees who must be removed from work entirely, pay can be cut to 90%, but full benefits must continue.  According to the proposal's opponents, requiring employers to guarantee that full, or nearly full, pay and benefits continue for six months would encourage many employees to lodge false MSD reports and otherwise attempt to take unfair advantage of the compensation protection.

Remember, the final standard will be prepared based on the record created during the upcoming comment and hearing period.  If you want to be heard, then the time to participate is now.


"Watch Your Wallet" -- OSHA Proposes New Standard Requiring Employers to Pay for Personal Protective Equipment

OSHA recently published a Proposed Rule on Employer Payment for Personal Protective Equipment (PPE) that may have a dramatic effect on some employer's policies and practices.   Under the new proposal (issued in April 1999), employers would be required to pay for all PPE required by OSHA standards, except for "safety toe protective footwear" and "prescription safety eyewear" that meet three conditions: (1) the employer allows the shoes or eyewear to be worn off- site; (2) the footwear or eyewear is not rendered unsafe for off-site use by work activities, such as if the shoes were contaminated at work with a toxic substance like lead; and (3) the footwear or eyewear is not designed specially for on-site use.  Although not required to pay for these two classes of PPE, OSHA makes clear in the explanation of its proposed standard that the payment for safety toe footwear and prescription safety eyewear can be a subject for negotiation between management and labor and that the proposed standard is not intended to affect the terms of any collective bargaining agreements.  Nor does this proposal in any way require employers to reimburse employees who choose to wear personally-owned PPE, not required by an OSHA standard.

OSHA held its first public hearing on the proposed PPE rule in August 1999.  Although officially the proposal is expected to be finalized by the end of the calendar year, it is more likely that the final rule will not be issued until sometime next Spring.


Reason Prevails

A federal court jury awarded $5,000 to a woman admitting she never told management about sexual harassment although she knew company policy provided any harassment should be reported to a member of management.  The judge threw out the verdict.  No word yet on an appeal.