Author Archives: Holland & Hart

March 10, 2014

Safety Violation Or Too Much Intermittent FMLA Leave? Tenth Circuit Says Jury Must Decide Wyoming Employee’s FMLA and ADA Case

Did Solvay Chemicals fire long-time employee Steven Smothers because of a first-time safety violation or because the company was tired of his frequent absences due to an ongoing medical disability? The Tenth Circuit Court of Appeals recently ruled that Smothers provided sufficient evidence to suggest that Solvay’s stated reason for his termination was pretextual, allowing his claims for unlawful retaliation under the Family and Medical Leave Act (FMLA) and discrimination under the Americans with Disabilities Act (ADA) to proceed. Smothers v. Solvay Chem., Inc., No. 12-8013 (Jan. 21, 2014). The Court affirmed the grant of summary judgment on his state law claim for breach of an implied employment contract.

Medical Treatments and Severe Pain Lead to Frequent FMLA-Protected Absences

For eighteen years, Smothers worked as a surface maintenance mechanic in Solvay’s trona mine in Sweetwater County, Wyoming. The company considered him to be an excellent mechanic who did great work and got along with everyone. In 1994, Smothers injured his neck and developed degenerative disc disease in his spine. Over the next five years, Smothers had three surgeries to his neck as well as numerous other medical procedures. Despite treatment by a specialist, Smothers continued to have severe ongoing neck pain, severe migraine headaches and lower back problems. At times, Smothers was unable to work without pain treatments and he often was able to sleep only a few hours each night due to the pain.

Smothers asked for and was granted FMLA leave for intermittent absences caused by his condition. Managers and co-workers began to complain about his absenteeism, especially because he worked on the graveyard shift where there were fewer workers to absorb his absences resulting in increased overtime costs. Solvay’s production superintendent Melvin Wallendorf pressured Smothers to change to the day shift, but Smothers refused as the shift change would have cost him about $7,000 a year. Solvay’s human resources department advised Wallendorf that urging Smothers to switch shifts would violate the FMLA so Wallendorf stopped pressuring Smothers but did not stop complaining about his absences.

At one point, Wallendorf and Rick Wehrle, Smothers’ direct supervisor, gave Smothers a poor performance rating on his evaluation due to his absenteeism. In 2005 or 2006, Smothers applied for a promotion but was told that he was rejected because of his absences.

Safety Issue Explodes into Argument

In 2008, the graveyard crew conducted a routine maintenance acid wash to remove build up in its equipment. After a line ruptured, Smothers saw that a damaged “spool piece” had caused the problem and prepared to remove it. Another mechanic, Dan Mahaffey, suggested that Smothers wait for a line break permit, which is a form that certifies that employees have completed a checklist of precautions before a line can be safely disconnected. Smothers said that a permit wasn’t required because the line was already broken. Mahaffey and Smothers then argued. Mahaffey offered help on the repair which Smothers refused. Mahaffey took offense and accused Smothers of hypocrisy since Smothers had previously reported others for safety violations. Smothers made an offensive comment to Mahaffey and told him he did not want his kind of help. Smothers removed the broken piece and began the repair.

Mahaffey immediately reported the argument and Smothers’ removal of the spool piece without a line break permit to the area supervisor. Later that same day, three managers called Smothers in to discuss the safety violation. Although completing the line break permit may not have been absolutely necessary, Smothers later conceded that he should have locked out the pump valve before removing the part according to Solvay’s safety policies. Smothers apologized for not locking the pump valve before removing the piece and promised it wouldn’t happen again. Smothers was sent home pending an investigation.

Six managers were involved in deciding what to do about the argument and the safety violation. Three of the managers personally talked with Mahaffey about the argument but no one spoke to Smothers about it. About eight days later, Solvay fired Smothers. Smothers sued in Wyoming federal court, alleging, among other claims, unlawful FMLA retaliation, ADA discrimination and breach of an implied employment contract based on Solvay’s employee handbook.

FMLA Claim Bolstered By Disparate Treatment and Previous Retaliatory Acts

The trial court granted summary judgment to Solvay on Smothers’ FMLA and ADA claims. On appeal, the Tenth Circuit decided that Smothers presented enough evidence for a trial about whether Solvay’s real reason for his termination was his use of FMLA leave or his disability. Smothers provided evidence that other employees who committed similar safety violations were not fired. Five of the six decision-makers who fired Smothers were also involved in at least one decision in which a similarly situated employee was treated more favorably after violating the same or comparable safety rules. Smothers also pointed to the negative comments, negative performance rating, failure to promote and pressure to change shifts because of his FMLA-protected absences as evidence that the safety violation was a pretext for firing him for his FMLA leave. Moreover, Smothers showed that the decision-makers had failed to sufficiently investigate the argument he had with Mahaffey, basing their decision almost entirely on Mahaffey’s version of events. The Court decided that a reasonable jury could find that Solvay’s investigation into the quarrel was not fair or adequate. Based on this evidence, the Court found that there were issues of fact on whether Solvay’s termination reasons were pretextual and reversed the dismissal of Smothers’ FMLA retaliation claim.

Smothers Was Disabled Under ADA

Smothers also asserted that his firing was in violation of the ADA. He presented evidence that his medical condition was an impairment that substantially limited a major life activity, specifically his ability to sleep. Because the facts would allow a reasonable jury to conclude that Smothers’ sleep was substantially limited, Smothers satisfied his burden of establishing a prima facie case of disability discrimination. As with the FMLA claim, the Court found sufficient evidence that Solvay’s stated termination reasons may have been a pretext for disability discrimination. Therefore, the Court reversed the dismissal of Smothers’ ADA claim as well.

No Breach of Implied Contract Based on Employee Handbook

Smothers also alleged that Solvay violated the terms of its employee handbook, giving rise to a claim for breach of implied contract under Wyoming law. The Court disagreed. Wyoming recognizes a claim for breach of implied contract if an employer fails to follow its own required procedures, such as the procedures laid out in an employee handbook. Solvay’s handbook contained a four-step progressive disciplinary process, with termination as the last step. But it also contained a provision that allowed Solvay to terminate an employee immediately for a serious offense, including a safety violation. Because the discipline policy unambiguously gave Solvay the discretion to fire employees who violate safety rules, the Court found that Solvay’s decision to terminate Smothers for violating a safety rule did not violate the terms of the employee handbook. Therefore, the appeals court upheld the trial court’s dismissal of Smothers’ breach of implied contract claim.

Back To Court They Go

We don’t know whether Smothers or Solvay will prevail if this case goes to trial but we do know that the appellate court thought that some of the evidence about the actions of Solvay managers could demonstrate that Solvay acted with a discriminatory motive:

Supervisors and co-workers gave Smothers a hard time about taking FMLA-protected leave.
Solvay failed to properly investigate all sides in the quarrel, accepting one employee’s version of events as fact.
The decision-makers treated Smothers more harshly than other similarly-situated employees who had violated similar safety rules.
Managers and supervisors considered Smothers’ FMLA absences when providing his performance evaluation and rejecting him for a promotion.

Evidence of these actions prevented Solvay from obtaining a grant of summary judgment on appeal. While Solvay may dispute Smothers’ evidence when the case actually goes to trial, this case stands as a lesson about the kinds of supervisory comments and actions that can feed into a discrimination claim, and a good reminder of how carefully employers must manage employees with injuries or disabilities.

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March 6, 2014

SOX Whistleblower Protection Extends to Employees of Private Contractors, According to Supreme Court

By Jude Biggs and Jeff Johnson

On March 4, 2014, the U.S. Supreme Court ruled that employees of private contractors and subcontractors who contract with public companies are protected under the whistleblower provisions of the Sarbanes-Oxley Act of 2002 (SOX). Lawson v. FMR LLC, 571 U.S. ___ (2014). The ruling means that private employers who have a contract with a public company may not retaliate against their employees who report a potential fraud. As pointed out in the dissenting opinion, the holding by the six-justice majority creates the potential for increased litigation as it offers private sector employees another avenue to bring retaliation claims. In addition, it implies private sector employers with such contracts may need to strengthen their corporate compliance and complaint procedures to discover and fix problems early.

Whistleblowers Reported Potential Fraud In Mutual Fund Operations

Two former employees of private companies that contracted to advise and manage mutual funds filed separate administrative complaints alleging retaliation under 18 U.S.C. §1514A, the whistleblower provision of SOX. The mutual funds themselves were public companies, but they did not have any employees. Instead, the funds contracted with private companies to handle the day-to-day operation of the funds, including making investment decisions, preparing reports for shareholders and filing reports with the Securities and Exchange Commission (SEC).

Jackie Hosang Lawson was the Senior Director of Finance for a private advisory firm that contracted to provide services to the Fidelity family of mutual funds. Lawson alleged that she suffered a series of adverse employment actions that resulted in her constructive discharge after she raised concerns about certain cost accounting methods being used with the funds. She alleged that she believed that expenses associated with operating the funds were being overstated.

The second petitioner, Jonathan M. Zang, was a portfolio manager for a different division of the company that advised Fidelity mutual funds. Zang alleged that he was fired after he expressed concerns about inaccuracies contained in a draft SEC registration statement concerning some of the mutual funds.

After pursuing their administrative complaints, both whistleblowers filed retaliation lawsuits under §1514A in federal court in Massachusetts. Their employers, collectively referred to as FMR, moved to dismiss the suits, arguing that §1514A only protects employees of public companies, and because FMR is a private company, neither plaintiff had a viable claim under §1514A. The District Court denied FMR’s motion to dismiss. FMR sought an interlocutory appeal to the First Circuit, which reversed, ruling that §1514A only refers to employees of public companies, not a contractor’s own employees. The Supreme Court agreed to hear the case to resolve a division of opinion on the issue. The question before the Supreme Court was whether the SOX whistleblower provision shields only those employed by a public company itself, or also shields employees of privately held contractors and subcontractors who perform work for the public company.

“Employee” Presumes an Employer-Employee Relationship Between the Retaliator and the Whistleblower

Section 1514A provides: “No [public] company . . ., or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].” FMR argued that the prohibition against retaliating against “an employee” meant an employee of the public company. The Court (in an opinion by Justice Ginsburg) disagreed. It looked at the provision as stating that “no . . . contractor . . . may discharge . . . an employee” and found that the ordinary meaning of “an employee” in that context was the contractor’s own employee. The Court stated that contractors are not ordinarily in a position to take adverse actions against employees of the public company for which they contract so to interpret the provision as FMR did would “shrink to insignificance the provision’s ban on retaliation by contractors.” The Court rejected FMR’s argument that Congress included contractors in §1514A’s list of governed parties only to prevent companies from hiring contractors to carry out retaliatory terminations, such as the “ax-wielding specialist” portrayed by George Clooney in the movie “Up in the Air.” The majority believed that Congress presumed that there must be an employer/employee relationship between the retaliating company and the whistleblower.

Purpose of SOX Supports Extending Whistleblower Protections to Employees of Private Contractors

The Court emphasized that SOX was enacted to safeguard investors in public companies and to restore trust in the financial markets after the collapse of Enron Corporation. The Court found that because outside professionals, such as accountants, lawyers and consultants, have great responsibility for reporting fraud by the public companies with which they contract, such employees of contractors and subcontractors must be afforded protection from retaliation by their employers when they comply with SOX’s reporting requirements. The fear of retaliation was a major deterrent to the employees of Enron’s contractors in reporting fraud. Consequently, the Court’s reading of §1514A extending whistleblower protection to the employees of private contractors is consistent with the purpose for which SOX was enacted.

Mutual Fund Industry Should Not Escape Ban on Retaliation

Because virtually all mutual funds are structured as public companies without any employees of their own, the Court expressed the need to protect the employees of the investment advisors who are often the only firsthand witnesses to shareholder fraud in the mutual fund industry. To rule otherwise, said the Court, would insulate the entire mutual fund industry from §1514A.

Dissent Worries About Opening the Floodgates to More Retaliation Claims

Justice Sotomayor, joined by Justices Kennedy and Alito, dissented from the majority, believing that the Court’s holding creates an “absurd result” that subjects “private companies to a costly new front of employment litigation.” According to Sotomayor, the Court’s ruling means that any employee of an officer, employee, contractor or subcontractor of a public company, including housekeepers, nannies and gardeners, can sue in federal court under §1514A if they suffer adverse consequences after reporting potential fraud, such as mail fraud by their employer’s teenage kids. The majority dispels this concern, stating that there is “scant evidence that [this] decision will open any floodgates for whistlelowing suits outside §1514A’s purposes” given that FMR did not identify a single case in the past decade in which an employee of a private contractor had asserted a §1514A claim based on anything other than shareholder fraud. Still, the dissent believes that only employees of a public company should be protected from retaliation for whistleblowing activities under §1514A.

Private Employer Take-Aways

Despite the majority’s reassurances that employers will not see a substantial increase in new whistleblower retaliation cases, only time will tell if they are right. Private employers who contract with public companies should review their employment policies to ensure that employees are protected from retaliation as a result of reporting concerns or unlawful activities involving the public companies with whom they do business. Employers also should train their managers, supervisors and human resources professionals on this new development so that decision-makers do not inadvertently expose their company to the risk of a whistleblower retaliation claim under §1514A.

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March 5, 2014

NLRB GC Identifies Initiatives and Policy Concerns

By Steve Gutierrez

Richard Griffin, General Counsel for the National Labor Relations Board (NLRB) recently issued a memorandum that identifies his initiatives and the areas of labor policy and law that are particularly concerning to him. The memo informs the NLRB regions which cases must be submitted to the Division of Advice at the Board’s Washington, D.C. headquarters so that the General Counsel’s office may “provide a clear and consistent interpretation of the [National Labor Relations] Act.”

The list of mandatory advice cases is split into three categories: (1) matters that are particularly concerning to the General Counsel and involve his initiatives; (2) cases involving difficult legal issues that are relatively rare in the regions and issues where there is no established precedent or the law is changing; and (3) cases that have traditionally been submitted to headquarters for legal advice. A look at the issues identified in the first two categories provides employers with useful insight into areas that will be targeted for further legal scrutiny and possible reversal of existing labor precedent.

General Counsel Initiatives and Issues of Labor Policy Concerns

GC Griffin points out a dozen labor issues that are top initiatives for him, including the following:

The applicability of Weingarten rights in non-unionized settings. (Weingarten rights provide union employees the right to have a union representative present during an employer’s investigation interview that could result in disciplinary action against the employee. In 2004, the NLRB ruled that non-union employees are not entitled to have a representative present during such meetings. IBM Corp., 341 NLRB 1288 (2004)).
Whether employees have a right to use an employer’s e-mail system for union-related communications and the standard concerning discriminatory enforcement of company rules and policies. (In 2007, the NLRB established a narrow standard for discrimination regarding company rules about solicitation and communications, ruling that an employer could make distinctions in its rules that might adversely affect employees’ NLRB Section 7 rights so long as the policies (and enforcement of the policies) did not discriminate along union-related lines. Register Guard, 351 NLRB 1110 (2007)).
Whether a “perfectly clear” successor must bargain with a union before setting the initial terms of employment. (The NLRB takes the position that in cases when it is obvious that a new employer that acquired a unionized workplace will retain all of the employees in the bargaining unit, the successor employer is obligated to bargain even over the initial terms of employment – the so-called “perfectly clear” exception.)
Whether an employer violates the NLRA when it acts with an unlawful motive in hiring permanent strike replacements. (Under NLRB precedent going back to 1964, the employer’s motive for replacing economic strikers is essentially irrelevant. Hot Shoppes, 146 NLRB 802 (1964). The GC is likely looking for an appropriate case to overrule this long-standing decision so that an employer’s desire to defeat the economic strikers’ rights to reinstatement will be deemed unlawful.

Additional issues that are on the GC’s list include cases where the possible remedies for unfair labor practices related to an organizational campaign include access to nonwork areas, access to the employer’s electronic communications systems and equal time for the union to respond to captive audience speeches.

Difficult Labor Issues or Cases Without Clear Precedent

Griffin also instructs the regions to submit to headquarters cases that involve difficult legal issues or those without clear, established legal precedent. Some of those issues include:

Mandatory arbitration agreements with class action waivers not resolved by D.R.Horton
Cases involving “at-will” provisions in employer handbooks that are not resolved by existing advice memoranda.
Cases concerning undocumented workers where the issues are unresolved.
Union access to lists of employee names and addresses during an organizing campaign where the employees are widely dispersed or have no fixed work location.
The validity of partial lockouts.
Cases involving novel conduct, such as excessive use of loudspeakers, coordinated “shopping” or corporate campaigns.

Don’t Be The Precedent Setting Case

Employers should review and become familiar with the GC’s list of priority issues. If any of the noted issues arise in your workplace, you’d be wise to consult with legal counsel early on because if the NLRB gets involved, the regional directors and officers will be forwarding your case to Washington for advice from the GC’s office. Proper handling of the matter from the start may help avoid your case being the conduit for the GC to establish new precedent that furthers his initiatives.

A copy of the memorandum may be found here.

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February 20, 2014

EEOC Challenges Separation Agreements

By Mark Wiletsky

If you use standard separation agreements to secure a release and waiver of claims from employees who are laid off, fired, or who otherwise threaten a claim, you might want to review your agreement. In a lawsuit filed recently in Illinois federal court, the EEOC alleges that a company with national operations interfered with its employees’ right to file charges with the EEOC and state fair employment practices agencies by conditioning the employees’ receipt of severance pay on signing an overly broad separation agreement.

According to the EEOC, five separate paragraphs (which are commonly found in separation agreements) are improper:

Cooperation: Employee agrees to promptly notify the Company’s General Counsel by telephone and in writing if the employee receives a subpoena, deposition notice, interview request or other process relating to any civil, criminal or administrative investigation or suit.
Non-Disparagement: Employee will not make any statements that disparage the business or reputation of the company or any of its officers or employees.
Non-Disclosure of Confidential Information: Employee agrees not to disclose to any third party or use for him/herself or anyone else Confidential Information without the prior written authorization of the company.
General Release of Claims: Employee releases company for any and all causes of action, lawsuits, charges or claims, including any claim of unlawful discrimination, that the employee may have prior to the date of the agreement.
No Pending Actions; Covenant Not to Sue: Employee represents that he/she has not filed or initiated any complaints prior to signing the agreement and agrees not to initiate or file any actions, lawsuits or charges asserting any of the released claims.

Disclaimer Allowing Workers to Bring Claims to the EEOC Not Enough

Recognizing that employers may not prevent workers from filing charges with the EEOC or participating in EEOC or state agency investigations, the paragraph containing the covenant not to sue contained a sentence stating “[n]othing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.” In its complaint, the EEOC says this disclaimer is insufficient as it is contained in only one of the paragraphs that contain limits on the employees’ rights.

What does this mean for employers?

It’s important to remember that the Court has not agreed with the EEOC’s allegations—and, in fact, it might reject them outright. Regardless, the risk of such actions is enough to justify a closer look at your standard separation or release agreement. Even an agreement that has been repeatedly reviewed and revised can likely be improved for clarity. Make sure the agreement is understandable, does not contain excessive “legalese,” and it should not contain provisions that interfere with an employee’s right to file a charge with the EEOC or state agency.

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February 19, 2014

Utah Rejects Multi-Employer Worksite Doctrine: General Contractor Not Responsible for Occupational Safety of All Workers on Worksite

By Cole Wist (formerly of Holland & Hart) and Trey Overdyke

In a significant break from federal rulings, the Utah Supreme Court recently rejected the multi-employer worksite doctrine as incompatible with the Utah Occupational Safety and Health Act (UOSH Act). Hughes General Contractors, Inc. v. Utah Labor Comm., 2014 UT 3. Generally, the multi-employer worksite doctrine makes a general contractor responsible for the safety of all workers on a worksite, including the safety of employees of subcontractors and other third parties. In rejecting the legal doctrine (which has developed under the federal Occupational Safety and Health Act (OSH Act)), the Utah Supreme Court held that Utah’s state occupational safety and health law regulates conduct between employers and employees and does not permit a general contractor to be held liable for the safety violations of a subcontractor.

General Contractor Appealed Safety Violations by Subcontractor

Hughes General Contractors oversaw a construction project at Parowan High School involving over 100 subcontractors. One of the subcontractors, B.A. Robinson, performed masonry work on the project. The Utah Occupational Safety and Health Division found that scaffolding used and erected in connection with the masonry work violated the UOSH Act. The UOSH compliance officer determined that Hughes was responsible for the safety conditions for B.A. Robinson’s employees under the multi-employer worksite doctrine. The Division cited and fined both Hughes and B.A. Robinson for the scaffolding violation.

Hughes contested the citation, arguing against the legal viability of the multi-employer worksite doctrine under the UOSH Act. An Administrative Law Judge upheld the citation under the doctrine and the Utah Labor Commission’s Appeals Board affirmed. The Appeals Board looked at the governing Utah statute, section 34A-6-201, found that it “mirrored its federal counterpart” and applied federal case law that recognized the multi-employer worksite doctrine to hold Hughes liable for the safety violations of a subcontractor. Hughes appealed to the Utah Court of Appeals which asked the Utah Supreme Court to decide the applicability of the multi-employer worksite doctrine under the UOSH Act.

Workplace Safety Obligations Extend Only to Employers under the UOSHA

Similar to its federal OSHA general duty clause counterpart, the UOSH Act requires each Utah employer to provide “a place of employment free from recognized hazards that are causing or are likely to cause death or physical harm to the employer’s employees and comply with the standards promulgated under this chapter.” Utah Code § 34A-6-201(1). At the trial level, the Utah Labor Commission read this provision broadly to extend the safety responsibilities to anyone with supervisory control over a particular worksite. The Utah Supreme Court instead interpreted this provision as focused on the employment relationship. The Court held that the duty to furnish a workplace free from recognized hazards and to comply with the UOSH Act standards is one that extends between employer and employee. The Court stated “the relevant control is not over the premises of a worksite, but regarding the terms and conditions of employment.” In determining whether an employment relationship exists, the relevant factors include the existence of covenants or agreements, the right to direct and control the employee, the right to hire and fire, the method of payment (i.e., wages versus payment for a completed job or project) and the furnishing of equipment.

Applying its analysis, the Court found Hughes was not an “employer” in connection with the work done by B.A. Robinson’s workers. B.A. Robinson was the sole employer involved in the masonry work and controlled the workers involved in the scaffolding problems that resulted in the citations. Hughes did not have any of the rights of control that would deem it an employer in connection with the work done by B.A. Robinson’s employees (e.g., no right to hire or fire, no payment of wages, etc.).

Utah Safety and Health Act Distinguished from Federal Law

Numerous federal courts have recognized the multi-employer worksite doctrine under the federal OSH Act. However, the Utah Supreme Court analyzed the structure of the federal OSH Act and found that it sets forth the duty to comply with certain safety standards in separate sub-sections of the statute. By contrast, the Court held that Utah law requires “each employer” to provide a safe workplace and to comply with promulgated standards in a single provision of the statute.

Second, the Utah Supreme Court distinguished its decision because of the lack of administrative deference that applied in interpreting Utah law. The Court noted that when federal courts resolve ambiguity in a statute, the courts look to the interpretation of the statute provided by the relevant federal agency and defer to the agency’s viewpoint as long as it is based on a permissible construction of the statute. The Court wrote that federal courts typically have not rendered an independent assessment of the meaning of the relevant OSH Act provision and instead have deferred to the federal agency’s regulation that construes the statute to allow for the multi-employer worksite doctrine. However, Utah has not adopted a similar standard of judicial deference to an agency’s resolution of a statutory ambiguity so the Court conducted its own independent determination to find that the Utah law did not allow for the multi-employer worksite doctrine.

Important Victory for General Contractors

It is unclear what broader impact this decision may have. For now it is a significant victory for general contractors overseeing projects in Utah. Time will tell if state courts in other occupational safety and health state plan jurisdictions will follow Utah’s lead in rejecting the multi-employer worksite doctrine. Should these courts flirt with the idea, they may find the Utah Supreme Court’s analysis to be a helpful road map. Further, it will be interesting to watch the impact this may have on the multi-employer worksite doctrine in federal OSHA jurisdictions. We will keep you posted on any new developments on this issue.

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February 12, 2014

Wyoming Legislature Convenes, Again!

By Bradley T. Cave

The Wyoming Legislature convened its 2014 Budget Session on February 10. Most of the Legislature’s time will be consumed with the state’s finances, but a few significant employment measures have been proposed. If any of these bills can obtain the two-thirds vote required for introduction of non-budget bills, Wyoming employers may need to call their legislators!

Criminal Penalty for Misclassification of Employees as Independent Contractors. House Bill 16 is the most concerning measure proposed this session, and it is a surprise that the measure was approved by the Joint Corporations Committee. It would create a misdemeanor criminal penalty for “knowingly failing to properly classify an individual as an employee” to reduce the employer’s unemployment contributions or to reduce or avoid the payment of benefits to an employee. The offense would permit a sentence of up to 90 days in jail and a fine of up to $750.00. The measure would add the same language to the workers compensation statute, making it a misdemeanor offense to knowingly fail to properly classify an employee on a workers compensation payroll report or generally in connection with workers compensation coverage.

Employers should aggressively resist this proposal because it would greatly raise the stakes of classification decisions that are rarely clear cut. One of the three factors in the definition of an independent contractor for unemployment and workers compensation purposes – whether the individual “represents his services to the public” – is not even in the employer’s control, and could change without the employer’s knowledge. A second factor in the definition – whether the worker is free from control or direction over the details of performance of the services – often depends on the perspective of the person looking at the relationship. Independent contractor relationships are not “check the box” decisions. While an employer could not be convicted of the proposed crime unless they “knowingly” misclassified an employee, the determination of whether a decision was “knowingly” incorrect is the stuff of jury trials. Also, the measure is not needed. Employers already face aggressive auditing by the Employment Tax Division about the independent contractor classification of workers, and audits can result in civil liability and substantial administrative costs.

Finally, don’t buy the argument that the criminal penalty will only be pursued in the worst cases – if a criminal penalty for misclassification is adopted, it will remain a subtle and unspoken threat to employers whenever the Department of Workforce Services conducts an audit and questions independent contractor relationships, and employers may need to “lawyer up” and protect themselves at an entirely new level whenever the Department audits those relationships.

Update: Although House Bill 16 failed to get the two-thirds vote needed to be introduced during the budget session, it was proposed by the Joint Corporations committee and is likely to be raised in future legislative sessions.

Minimum Wage Increase. House Bill 45 is a perennial attempt to raise the minimum wage for employees not covered by the federal Fair Labor Standards Act. The measure would increase the standard minimum wage from $5.15 per hour to $9.00 per hour, and increase the minimum hourly wage for tipped employees from $2.13 to $5.00. As in past years, this bill is not likely to make much progress.

Repeal of Vacation Pay Amendment. Last year, the Legislature amended the wage collection statute to give employers the flexibility to offer paid vacation that was forfeited upon termination of employment, rather than being considered unpaid wages which were required to be paid out after termination. House Bill 57 would repeal the language adopted last year. We expect this measure also has a dim future.

Bottom Line. Employers should pay attention to House Bill 16 and watch if it is proposed again in future legislative sessions. If it makes any progress, employers will want to contact their legislators. You can track the progress of these and all the measures before the Legislature here through the link entitled “2014 Bill Tracking Information.”

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February 7, 2014

NLRB Again Proposes Rules to Speed Union Elections

By John M. Husband

After dropping its appeal of a District Court ruling that invalidated its “ambush election” rules, the National Labor Relations Board (NLRB or Board) has proposed those rules again. By a vote of 3-2, the Board reissued proposed amendments to its representation case procedures. The Board states that the amendments are designed to remove unnecessary delays and inefficiencies in representation case procedures. The effect, however, is expected to be an increase in union wins as the union election procedures are streamlined and votes occur quicker.

Board Lacked Quorum When Rules Adopted in 2011

The NLRB first proposed its rules to speed up the union election process in June of 2011. At the time, the Board had just three members as two positions were vacant. Despite an outcry by the business community and receipt of almost 66,000 comments, two of the three Board members voted to adopt the rules. The final rules were published in December of 2011 and went into effect on April 30, 2012.

The U.S. Chamber of Commerce and other interested groups sought to stop the implementation of the ambush election rules by suing the NLRB in federal court in the District of Columbia. Just two weeks after the rules went into effect, the judge in the case invalidated the rules, finding the Board lacked a three-member quorum needed to pass the rules. Although two of the Board members voted in favor of the rules, the third Board member, the sole Republican, did not participate in the vote. Finding that the rules were invalid for lack of the statutorily-mandated quorum, the judge did not need to address the challenge to the rules’ constitutionality and the lack of authority of the NLRB to adopt the rules. In a distinct incident of foreshadowing of this week’s events, the judge specifically stated “nothing appears to prevent a properly constituted quorum of the Board from voting to adopt the rule if it has the desire to do so."

The NLRB appealed the District Court’s decision, asking the U.S. Court of Appeals for the District of Columbia Circuit to reverse the lower court’s ruling. On December 9, 2013, the NLRB withdrew its appeal pursuant to a joint stipulation by the parties. It did so in anticipation of doing exactly what the District Court judge had suggested, namely proposing the rules again so that a properly constituted quorum of the Board can vote to adopt the rules. Board Chairman Mark Gaston Pearce and Board members Kent Y. Hirozawa and Nancy Schiffer approved the re-issuance of the proposed rules.

“Ambush Election” Rules Would Speed Union Election Process

Published in the February 6, 2014 Federal Register, the proposed changes are virtually identical to those proposed in 2011. Highlights of the proposed amendments include:

A union may file its representation petition electronically, rather than by hand or regular mail.
A hearing must be held within 7 days of the union filing its petition.
Employers must provide a comprehensive “statement of position” on the union’s representation petition in advance of the hearing; any issues not included in the statement are waived.
Pre-election hearing is to determine only whether a question concerning representation exists; issues related to individual voter eligibility may be deferred to post-election procedures.
The parties right to file a post-hearing brief is discretionary as allowed by the hearing officer.
Deadline for employer to provide voter eligibility list is shortened from 7 work days to 2 work days from the Direction of Election.
Employer must provide email addresses and telephone numbers for employees eligible to vote in addition to the required names and home addresses.
Election need not wait for 25 days after the issuance of a Direction of Election.
Pre-election appeals to the Board are eliminated, leaving only a discretionary appeal of both pre- and post-election issues after the election occurs.

Two Board Members Dissented

Board members Philip A. Miscimarra and Harry I. Johnson III are not in favor of the proposed rules. Although stating that they share in the majority’s desire to protect and safeguard the rights and obligations of those subject to the National Labor Relations Act, they do not believe it necessary to adopt a “wholesale rewrite” of the Board’s election procedure.

Interested parties and the public may submit comments on the proposed rules until April 7. Electronic comments may be submitted through http://www.regulations.gov. Comments may also be mailed or hand delivered to: Gary Shinners, Executive Secretary, National Labor Relations Board, 1099 14th Street NW., Washington, DC 20570. The Board intends to hold a hearing on the amendments during the week of April 7. We will keep you informed of developments on this issue.

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February 4, 2014

Colorado General Assembly Considers Labor and Employment Bills

By John Karakoulakis

Colorado’s 2014 Legislative Session began on January 8th and nearly 400 bills have been introduced already. Below is a description of proposed legislation impacting labor and employment issues for Colorado employers. The proposed changes to the workers’ compensation system could result in one of the more controversial bills this session. We will keep you apprised of these and any other bills affecting employment matters as they progress through the legislative process.

2014 Labor & Employment Legislation

Number	Title	Summary
Draft	Workers’ Compensation Benefits	The bill seeks to make changes to the following three areas of the workers’ compensation system: 1) Allow for more doctor choice for workers; 2) Address the issue of job separation when a claim is made; and 3) Add a penalty provision for employers that willfully placed employees in a dangerous situation. This last provision is drawing the most concern because it is seen as overly broad and would expose employers to litigation.
Draft	Worker Access to Employment Records	Would allow employees to have access to their personnel records and provide written rebuttal information to be added to their file. Creates a new civil cause of action for an employee to file against an employer for not complying with the provisions of the bill. The employee can seek actual damages, back pay, reinstatement, or other equitable relief, and reasonable attorney fees and costs.
SB-005	Wage Claims	Reintroduced this year after significant changes from the version of the bill that was killed by the business community last year. The bill speeds up the process by which workers can claim they did not get their full wages and creates a process by which the Colorado Department of Labor and Employment can adjudicate those claims. These changes which remove last year’s criminal penalties and a provision to require claims to be settled in district court resulted in most business associations taking a neutral stance on the bill, so it is now expected to pass.
HB-1033	Regulatory Reform	Provides relief for business under 100 employees that unknowingly violate a regulation that was put in place within the prior year and one that is defined as a “minor violation” which is mostly clerical in nature and does not affect the life safety of the public or workers. The first violation of such a rule will result in a warning and written education sent to the business.
HB-1040	Drug Testing Criminal Provisions	Establishes a level 1 drug misdemeanor for an employee who is legally required to undergo drug testing as a condition of the person's job and who uses a controlled substance without a prescription; or knowingly defrauds the administration of the drug test. Also establishes a level 2 drug misdemeanor for any other person who knowingly defrauds a drug test.

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January 30, 2014

Firing for Off-Duty Medical Marijuana Use to be Reviewed by Colorado Supreme Court

By Emily Hobbs-Wright

The Colorado Supreme Court announced that it will review last year’s lower court decision that upheld the termination of an employee who tested positive for marijuana but was unimpaired at work following his off-duty marijuana use for medical reasons. As we previously wrote on this blog (see this post), last April, the Colorado Court of Appeals ruled that using pot during non-working hours is not a “lawful activity” under the state’s lawful off-duty activity statute (C.R.S. §24-34-402.5). Coats v. Dish Network LLC, 2013 COA 62. The Court of Appeals reached its decision by relying on the fact that marijuana use remains illegal under federal law and therefore, medical marijuana use, though legal in Colorado, was not “lawful” for purposes of the Colorado lawful off-duty activity statute.

The Colorado Supreme Court will review two questions:

1. Whether the Lawful Activities Statute protects employees from discretionary discharge for lawful use of medical marijuana outside the job where the use does not affect job performance; and

2. Whether Colorado’s Medical Marijuana Amendment makes the use of medical marijuana “lawful” and confers a right to use medical marijuana to persons lawfully registered with the state.

Over the next few months, the parties will submit written briefs to the Court presenting their positions on these two questions. With the importance of this case for both Colorado businesses and the marijuana industry, watch for additional groups to ask permission to submit briefs advocating their respective viewpoints. Though the case before the Colorado Supreme Court deals with medical marijuana, the Court’s decision could establish precedent that would apply to the legal use of recreational marijuana. We will watch this case very closely and will report on any new developments as they occur.

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January 27, 2014

Union Membership: By the Numbers – 2013

By Jeffrey T. Johnson (retired)

The results are in. For 2013, the percentage of union members in the private sector ticked up slightly, to 6.7%. The percentage for 2012 was 6.6%. The total number of union members working in the private sector rose from 7.0 million in 2012 to 7.3 million in 2013.

Numbers for the public sector dipped slightly from 2012, with 35.9 percent of public sector employees reported to be union members in 2012 and 35.3 percent in 2013. The total number of public sector union members remained relatively flat, with 7.2 million union members in 2013, down just over 100,000 members from 2012.

In analyzing the data provided by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), the trend in both percentage and total number of union members has been a steady downward one. For example, in 2005, 7.8% of private sector employees were union members. In 2005, 15.7 million workers (private and public) were union members; in 2013, only 14.5 million.

The BLS report breaks down the union membership data by many categories, including by state, gender, age, industry, and occupation. It also provides comparative earnings information. Here are some highlights:

Men had a higher union membership rate (11.9%) than women (10.5%).
The age category with the highest percentage of union members was age 55-64 (14.3%).
The occupations with the highest percentage of private sector union members were protective service occupations (35.3%), utilities (25.6%), and transportation and warehousing (19.6%)
New York continues to have the highest union membership rate (24.4%), while North Carolina had the lowest rate (3.0%).

Statistics for 2013 union membership in the primary states served by Holland & Hart’s offices were as follows:

Nevada – 14.6% unionized, total of 169,000 members
Montana – 13.0% unionized, total of 52,000 members
Colorado – 7.6% unionized, total of 171,000 members
New Mexico – 6.2% unionized, total of 751,000 members
Wyoming – 5.7% unionized, total of 15,000 members
Idaho – 4.7% unionized, total of 29,000 members
Utah – 3.9% unionized, total of 49,000 members

Note: Above figures are private and public sectors combined

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