Monthly Archives: August 2013

August 29, 2013

DOJ Will Not Challenge State Marijuana Legalization Laws – New Federal Enforcement Policy Unlikely to Affect Colorado Employers

On August 29, 2013, the U.S. Department of Justice (DOJ) announced that it will not challenge the state ballot initiatives in Colorado and Washington that legalize the possession and use of small amounts of marijuana under state law. The DOJ makes clear, however, that marijuana remains an illegal drug under the federal Controlled Substances Act. This clarification means Colorado employers may still enforce their drug-free workplace policies and take appropriate action when an employee or applicant tests positive for marijuana.

DOJ Expects States to Enforce Strict Regulatory Schemes

In its August 29, 2013 Guidance Regarding Marijuana Enforcement, the DOJ identifies eight enforcement priorities for federal law enforcement and prosecutors, such as preventing distribution of marijuana to minors, preventing the diversion of marijuana from states where it is legal to other states, and preventing drugged driving and the exacerbation of other public health consequences of marijuana use. The DOJ states that it expects that states and local governments to not only establish, but also enforce robust controls in their marijuana regulatory schemes to meet its federal objectives. The guidance instructs federal prosecutors to review marijuana cases on an individual basis, weighing all available information and evidence but to no longer “consider the size or commercial nature of a marijuana operation alone as a proxy for assessing whether marijuana trafficking implicates the Department’s enforcement priorities . . .” The DOJ further stated that if states fail to develop or enforce a strict regulatory scheme and the stated harms result, federal prosecutors will step in to enforce federal marijuana priorities and may challenge the regulatory schemes in those states.

Courts in Colorado Uphold Employer Terminations for Employee Marijuana Use

In April 2013, the Colorado Court of Appeals ruled that terminating an employee who tested positive for marijuana following his off-duty, off-premises use of medical marijuana did not violate Colorado’s lawful activities statute. Coats v. Dish Network LLC, 2013 COA 62. Brandon Coats, a quadriplegic who obtained a license to use medical marijuana under Colorado’s Amendment 20, was fired for violating his employer’s drug policy after testing positive for marijuana. Coats asserted that he never used marijuana on his employer’s premises, was never under the influence of marijuana at work and never used marijuana outside the limits of his medical marijuana license. He sued his employer, Dish Network, alleging that his termination violated Colorado’s lawful off-duty activities statute, CRS § 24-34-402.5(1), which prohibits an employer from discharging an employee for engaging in “any lawful activity off the premises of the employer during nonworking hours.”

The Coats court looked to the plain meaning of the term “lawful” in the statute and decided that “for an activity to be ‘lawful’ in Colorado, it must be permitted by, and not contrary to, both state and federal law.” Because marijuana was, and remains, illegal under federal law, the court held that marijuana use is not a “lawful activity” under the Colorado lawful activities statute and therefore, the employer did not violate the statute when it terminated him for testing positive for marijuana.

Earlier this week, the federal district court in Colorado ruled that enforcement of a drug-free workplace policy is a lawful basis for an employer’s decision to terminate an employee who tests positive for marijuana, whether from medical or any other use. Curry v. MillerCoors, Inc., No. 12-cv-2471 (Order Granting Motion to Dismiss, D.Colo. Aug. 21, 2013). In granting the employer’s motion to dismiss, the federal court rejected all of the former employee’s claims related to his medical use of marijuana that resulted in a positive drug test and his termination under the employer’s drug policy. Significantly, the court dismissed his disability discrimination claim under Colorado’s anti-discrimination statute as a matter of law, finding that it was lawful for the employer to discharge the employee under its drug-free workplace policy despite the employee’s allegation that he was terminated because of using medical marijuana to treat disabling medical conditions. Judge John L. Kane wrote “anti-discrimination law does not extend so far as to shield a disabled employee from the implementation of his employer’s standard policies against employee misconduct.” In dismissing the employee’s claim for violation of Colorado’s lawful activities statute, Judge Kane relied on the Coats decision and similarly ruled that because marijuana use is illegal under federal law, the employee’s medical marijuana use was not a “lawful activity” under the statute.

DOJ’s Announcement Should Not Change Workplace Decisions

The DOJ’s announcement of relaxed marijuana enforcement in states that have legalized marijuana does not alter employers’ ability to enforce their drug-free workplace policies. On the contrary, because the DOJ reinforced that marijuana remains an illegal drug under federal law, the analysis used by courts in Colorado to uphold termination decisions based on positive drug tests should continue to apply. Employers should create or revise their drug policies to state that use of any drug that is illegal under state or federal law will violate the policy. Employers then should enforce their policies in a consistent and uniform manner, regardless of the legalization of marijuana use in Colorado.

Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

August 26, 2013

Ninth Circuit Joins Growing Trend – Declines to Follow D.R. Horton and Upholds Arbitration Agreement Prohibiting Class Claims

By Jeffrey T. Johnson

On August 21, 2013, the Ninth Circuit Court of Appeals, in Richards v. Ernst & Young, LLP, Case No. 11-17530, became the third federal Circuit – together with the Second and Eighth – to reject the National Labor Relations Board’s (NLRB’s) controversial D.R. Horton decision, which held that an arbitration agreement requiring an employee to waive his or her right to bring class claims violated the National Labor Relations Act. The Richards Court also rejected the plaintiff’s argument that Ernst &Young had waived its right to arbitrate her claims by waiting to seek arbitration until after discovery and several rulings by the court. Therefore, the Court held that the arbitration agreement between Richards and Ernst &Young was enforceable, even though it precluded class arbitration.

Federal Courts of Appeal Reject NLRB’s D.R. Horton Decision

Decided in January 2012, the NLRB’s D.R. Horton ruling attempted to thwart efforts by employers to reduce their risk of class action claims through the use of arbitration agreements containing a class/collective action waiver. In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012). Despite D.R. Horton, employers have continued to argue for the enforceability of such agreements, and like Ernst & Young, have often prevailed in court. In fact, the overwhelming majority of courts that have considered the enforceability of mandatory arbitration agreements with class waivers subsequent to the D.R. Horton decision have rejected the NLRB’s reasoning and refused to follow its holding.

In addition to numerous district courts so ruling, the Ninth Circuit becomes the third federal appellate court to reject D.R. Horton. In January 2013, the Eighth Circuit Court of Appeals held that a class arbitration waiver in the employer’s mandatory arbitration agreement did not preclude arbitration of the employee’s claims under the Fair Labor Standards Act (FLSA). Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013). The Eighth Circuit found that without a congressional mandate under the FLSA indicating that a right to engage in class actions overrides the mandate of the Federal Arbitration Act in favor of arbitration, the NLRB’s rationale in D.R. Horton must be rejected.

Earlier this month, the Second Circuit Court of Appeals also upheld an arbitration agreement containing a class action waiver in another FLSA case brought against Ernst & Young in New York. Sutherland v. Ernst & Young LLP, No. 12-304-cv, 2013 U.S. App. LEXIS 16513 (2d Cir. Aug. 9, 2013). Despite the employee’s argument that the class action waiver removed the financial incentive for her to pursue a claim under the FLSA, the Court ruled that the arbitration agreement must be enforced. Like the Eighth Circuit, the Second Circuit declined to follow the D.R. Horton decision.

NLRB ALJ’s Bound by D.R. Horton Precedent

Despite employer victories in court, arbitration agreements with class action waivers are still being invalidated by the NLRB and its Administrative Law Judges (ALJs). Just this week, an NLRB ALJ found that the employer violated the NLRA with its mandatory class waiver arbitration agreement of employment claims. Despite the employer’s attempt to distinguish its agreement from the one at issue in D.R. Horton and to point out how courts have rejected the D.R. Horton rationale, the ALJ stated that he was bound by the D.R. Horton decision and required to apply it unless it is overturned by the Supreme Court or reversed by the NLRB itself.

Fifth Circuit to Decide D.R. Horton Appeal

The D.R. Horton decision is currently on appeal in the Fifth Circuit. Union and non-union employers alike will be watching to see whether the Fifth Circuit will follow the other circuits that have rejected the NLRB’s rationale, and overturn the D.R. Horton ruling. If, on the other hand, the Fifth Circuit affirms the D.R. Horton decision, the split between the Circuit Courts could result in the Supreme Court taking up the issue. We will continue to monitor these cases and keep you informed.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

August 20, 2013

NLRB Judge Strikes Down Employer’s Dress Code Following “Slave” Shirt Discipline

By Brian Mumaugh

What is wrong with an employer’s dress code that prohibits clothing that displays vulgar or obscene phrases, remarks or images which may be racially, sexually or otherwise offensive as well as clothing that displays words or images that are derogatory to the Company? It is overly broad and interferes with employees’ Section 7 rights under the National Labor Relations Act (NLRA or Act) to engage in union and/or protected concerted activity, according to an Administrative Law Judge (ALJ) for the National Labor Relations Board (NLRB). The ALJ’s review of the dress code came after the employer disciplined an employee who wore a T-shirt with the word “slave” on it next to a picture of a ball and chain and the employee’s time clock number. Dismissing the employer’s argument that the shirt would be racially offensive to visitors who toured its facility, the ALJ found that the employer violated the Act by sending the employee home without pay to change his “slave shirt.”

The History of the “Slave Shirt”

Mark Gluch was a long time employee of automotive parts manufacturer Alma Products Company and a vigorous supporter of the union representing his bargaining unit. The 2012 incident that gave rise to this case occurred when Gluch wore the “slave shirt” to work during a period of contentious negotiations for a new union contract. The origin of the shirt, however, dated back to 1993 when company employees developed and paid for the “slave shirts” to send the company a message during an earlier round of difficult contract negotiations. The shirts resurfaced in 1996 when the bargaining unit employees wore them while picketing during a strike. Immediately following the strike, as many as 30% of the unit employees wore the “slave shirts” to work on any given Friday. No discipline or policy infraction was noted or enforced at that time.

Company Seeks to Avoid Racially Offensive Shirt

When a new president and CEO, Alan Gatlin, took over for Alma Products in 2005, he noticed employees wearing the “slave shirt.” Finding the shirts to be racially offensive, he felt embarrassed that customers and visitors to the facility would see employees wearing the shirt and be offended. He testified that in his view, the shirts did not reflect well on the Company with customers as they tried to get new business. Gatlin asked the human resources manager to draft a dress code policy which was implemented in early 2006. The dress code policy did not specifically reference the “slave shirt” but included general prohibitions against clothing that displayed “vulgar/obscene phrases, remarks or images which may be racially, sexually or otherwise offensive and clothing displaying words or images derogatory to the Company . . .” The policy also stated “[i]f you are uncertain whether an article of clothing is appropriate under this policy, follow the old adage of better safe than sorry and refrain from wearing it at work.”

After implementing the dress code in 2006, it appears that employees seldom wore the “slave shirt” to work. However, during difficult union contract negotiations in April 2012, Gluch and other employees began wearing pro-union shirts and pins and Gluch wore the “slave shirt” to work. Gluch’s supervisor gave Gluch the option of removing the shirt or turning it inside out so that the writing would not be visible. When Gluch refused to do so, he was sent home without pay for wearing the shirt.

ALJ Rejects Company’s Concerns About Racial Discrimination

The union filed an unfair labor practice charge claiming, among other things, that the policy and the Company’s enforcement of the policy, violated the Act. The Company argued that the shirt’s “slave” reference was offensive to African-Americans due to the history of slavery in the United States. Noting that an important buyer from Chrysler was African-American as was a new production supervisor at the facility, the Company asserted that it was entitled to discipline Gluch for wearing the racially offensive shirt. The ALJ rejected this argument, stating that the NLRB has repeatedly found employees to be protected even when they displayed messages that likened their working conditions to those of a slave. The ALJ noted that the dictionary definition of “slave” does not reference race, but instead focuses on the condition of servitude or being subject to a person or influence. In addition, given the shirt’s history that it had been worn to work over the past two decades as support for the union, the ALJ determined that it would not be seen as carrying a racial message. Moreover, the Company had a policy prohibiting racial discrimination since the 1990s, yet had failed to take any action to prohibit wearing the “slave shirt” as racially offensive prior to Gluch’s wearing of the shirt in 2012.

Key to the ALJ’s analysis of the dress code policy was its general prohibition of words or images that are derogatory to the Company. The ALJ found that the policy interfered with employees’ Section 7 activity, such as protected statements to coworkers, supervisors or third parties who deal with the Company, because it would prohibit employees from objecting to their working conditions and seeking the support of others in improving them. The dress code policy was found to be unlawfully overbroad because it prohibits all communications derogatory to the company regardless of whether the words are racially or sexually discriminatory or are protected as concerted activities under the National Labor Relations Act. In addition, by directing employees to be “safe” not “sorry,” the ALJ stated that the policy directs employees to construe the prohibition on derogatory comments such that it prohibits Section 7 activity.

Dress Code Policies That Do Not Restrict Section 7 Activity

With the NLRB (and its ALJs) striking down a variety of employer policies relating to both union and non-union employees, it is difficult to draw a bright line to determine which policies pass scrutiny and which do not. That said, employers can learn lessons from this recent decision that may help keep their dress code policy away from NLRB review. First, use specific examples of acceptable versus unacceptable attire rather than general statements that require interpretation. Second, if your workplace warrants different dress standards for different segments of employees (e.g., public-facing employees vs. behind the scenes employees), make those standards clear and justified by business necessity. Third, if you include a statement that prohibits derogatory words or images on clothing, include a statement that communications protected by Section 7 are permissible under the dress code. Finally, enforce your policy in a uniform and consistent manner, so that all dress code violations are treated similarly regardless of the employee or supervisor involved.

August 14, 2013

DOL Updating FMLA Guidance to Reflect DOMA Decision

By Brad Cave

New Labor Secretary, Tom Perez, indicated that the Department of Labor (DOL) has updated departmental guidance regarding spousal leave provisions of the Family and Medical Leave Act (FMLA) to reflect the Supreme Court’s recent decision that struck down certain provisions of the Defense of Marriage Act (DOMA). As the DOL updates its policies, employers too need to examine and update their FMLA policies. Here is what you need to know.

Unconstitutionality of DOMA Means FMLA Spousal Leave Applies to Legally Married Same-Sex Couples

The Supreme Court’s decision in United States v. Windsor focused on Section 3 of DOMA which defined “spouse” as a husband or wife of the opposite sex for purposes of federal laws or regulations. Because of that definition, legally married same-sex couples were not entitled to federal benefits or rights. As a result, FMLA leave benefits did not extend to employees needing time off to care for a same-sex spouse with a serious health condition.

In finding Section 3 of DOMA unconstitutional, the Court stated that the regulation of marriage traditionally rests exclusively with the states and the federal government violates equal protection principles by denying rights and benefits to same-sex couples who are legally married under state law. The result is that federal rights and benefits, including FMLA spousal leave benefits, now apply equally to state-sanctioned same-sex couples and heterosexual couples.

DOL Implementing Court’s Decision

Secretary Perez affirmed the availability of spousal leave under the FMLA based on same-sex marriages. He indicated that the DOL has removed references to DOMA from some of its guidance documents and will continue to take steps to implement the Court’s Windsor decision.

When Do Employers Need to Recognize Same-Sex Marriages for FMLA Purposes?

With some states legally recognizing same-sex marriages and others not, a key question for employers is which state’s law applies for FMLA spousal leave purposes? According to the DOL’s 2009 FMLA regulations, “spouse” means a husband or wife as recognized by the state where the employee resides. This means that the employer must determine if same-sex marriages are lawful in the state where the employee requesting FMLA leave lives, not where the employer is located or where the employee actually works. At present, 13 states plus the District of Columbia recognize same-sex marriages as lawful: California, Connecticut, Delaware, Iowa, Massachusetts, New Hampshire, Maine, Maryland, Minnesota, New York, Rhode Island, Vermont and Washington.

Some groups are urging the DOL to adopt a rule that would recognize FMLA rights based on the state where the marriage was celebrated, not the state of residency. Although the DOL has not yet proposed any rule changes on this issue, we will keep an eye on it and will let you know if any changes to the marriage recognition rules are proposed.

Update Your FMLA Policy for Same-Sex Spousal Leave

If you have employees living in one or more states that recognize same-sex marriages (or in the District of Columbia), update your FMLA policy, forms and practices to incorporate spousal leave benefits for recognized same-sex marriages. This includes FMLA leave for an employee who needs to care for a same-sex spouse with a serious health condition, leave because of a qualifying exigency due to the employee’s same-sex spouse being on “covered active duty” and FMLA military caregiver leave for an employee who needs to care for a same-sex spouse who is a “covered servicemember” or “covered veteran.” Be sure to look at the state where the employee resides when determining whether same-sex marriage is deemed lawful and recognized for FMLA purposes. If you use an FMLA tracking mechanism, make sure the system properly tracks for same-sex spousal leave. As always, train your managers, supervisors and human resource professionals on this change in FMLA benefit coverage.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

August 12, 2013

EEOC Slapped with Order to Pay $4.6 Million for Pursuing Unreasonable and Groundless Discrimination Claims

By Mark Wiletsky

When a former employee sues for discrimination or retaliation, the employer generally is unable to recover its fees or costs for defending the lawsuit, even if the employer prevails. That was not the case, however, in a recent class action brought by the agency tasked with enforcing federal anti-discrimination laws, the Equal Employment Opportunity Commission (EEOC). A federal court recently slammed the EEOC with over $4.6 million in attorneys’ fees, costs and out-of-pocket expenses after finding that the EEOC’s pattern or practice class action claim and 153 of the individual discrimination claims were unreasonable or groundless. EEOC v. CRST Van Expedited, Inc., No. 07cv95 (N.D. Iowa, August 1, 2013).

EEOC Sued Employer Alleging Sexual Harassment

In September 2007, the EEOC filed a lawsuit against trucking company, CRST Van Expedited, Inc. (CRST) alleging that the company’s lead drivers and team drivers subjected female employees to sexual harassment and created a sexually hostile environment in violation of Title VII. The EEOC filed its action on behalf of employee Monika Starke and a class of similarly situated female employees.

After almost a year of discovery in the case, the EEOC was pressed to identify the total number of harmed individuals making up the purported class. In October 2008, the EEOC identified 270 allegedly aggrieved female employees. When the EEOC failed to make all of the individuals available for deposition by a court-ordered deadline, the District Court barred the EEOC from pursuing claims on behalf of those 99 individuals who were not deposed.

CRST filed multiple motions for summary judgment to get the remaining claims dismissed before trial. First, CRST succeeded in getting the EEOC’s pattern or practice claim dismissed, which meant that the EEOC was left to pursue harassment claims only on behalf of individual employees. CRST then hammered away at all of the individual claims and succeeded in getting them all dismissed for a multitude of reasons, ranging from lack of evidence that some individuals had suffered severe or pervasive harassment to some individuals not reporting any harassment to the company. Significantly, the Court dismissed 67 of the individual claims because the EEOC had failed to exhaust administrative prerequisites by failing to investigate or attempt conciliation of the claims. Having dismissed all claims against CRST, the District Court found that CRST was the prevailing party and was entitled to recover its attorneys’ fees and costs, which exceeded $4.5 million.

EEOC Appeals and Keeps Two Claims Alive

The EEOC appealed the dismissal of 107 of the claims to the Eighth Circuit Court of Appeals. The Eighth Circuit reversed the dismissal of the claims on behalf of two female employees and consequently found that CRST was no longer the prevailing party entitled to recover its attorneys’ fees and costs. The case was sent back to the District Court for continuation of those two claims.

District Court Awards Millions in Attorneys’ Fees, Costs and Expenses

After the case was sent back to the District Court, the EEOC voluntarily dismissed one of the two remaining claims because it had failed to exhaust the administrative prerequisites as to her claim. CRST agreed to settle the remaining claim for $50,000 and the parties asked the Court to dismiss the case in its entirety as a result of the settlement. CRST then asked to recover its attorneys’ fees, costs and expenses for the claims on which it prevailed.

In order to recover its attorneys’ fees, costs and expenses, CRST needed to show that it was the prevailing party for purposes of Title VII and that the EEOC’s claims were frivolous, unreasonable, or without foundation. The Court ruled that CRST was the prevailing party on the EEOC’s pattern or practice claim and on 153 of the EEOC’s individual claims. CRST was not the prevailing party, however, for the claim it settled, for the three claims withdrawn by the EEOC and for 98 claims that the Court dismissed as a discovery sanction against the EEOC. The Court then ruled that the EEOC’s failure to exhaust Title VII administrative prerequisites of investigation and conciliation for 67 of the individual claims was unreasonable. It further ruled that the EEOC’s pattern or practice claim was unreasonable as it was based only on anecdotal evidence. In total, the Court found that 153 of the individual claims as well as the pattern or practice claim were unreasonable or groundless.

After discounting the total amount of CRST’s attorneys’ fees, costs and out-of-pocket expenses to reflect those claims for which CRST was not the prevailing party, the Court ordered the EEOC to pay CRST $4,694,442. This award represented $4,189,296 in CRST’s attorneys’ fees, $91,758 in costs and $413,387 in out-of-pocket expenses for expert witness fees, travel expenses, delivery fees, and similar expenses.

While the EEOC performs an important function and pursues meritorious cases, the case against CRST shows that employers can and should fight back when the EEOC brings a frivolous case. Significantly, this is not the first time a court has awarded fees against the EEOC or rejected its claims. Last year, the Tenth Circuit (which covers Colorado) slapped the EEOC with attorneys’ fees and costs in EEOC v. TriCore Reference Laboratories, No. 11-CV-2096 (10th Cir. 2012), affirmed summary judgment against the EEOC in EEOC v. The Picture People, Inc., No. 11-CV-1306 (10th Cir. 2012), and the court affirmed a district court’s decision that the EEOC’s administrative subpoena was overbroad in EEOC v. Burlington Northern Santa Fe Railroad. We also recently discussed a letter sent by nine state Attorney Generals, in which they criticized the EEOC’s lawsuits and position concerning employers’ ability to use background checks to screen employees with a criminal record. Hopefully, these losses, fee awards, and criticisms will cause the EEOC to more thoroughly evaluate which cases have merit before subjecting employers to the high cost and aggravation of defending meritless claims.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.