Employment Law

Recess Is Over: Supreme Court Strikes NLRB Appointments

Why it matters: Striking a blow to the President and the National Labor Relations Board, the U.S. Supreme Court held that three recess appointments made by President Barack Obama in January 2012 were invalid. The unanimous Court upheld the President’s ability to fill vacancies under the Recess Appointments Clause but held that the Constitution requires the recess to be “of sufficient length.” Unfortunately for the President, the three-day gap between a series of pro forma Senate sessions was held to be insufficient “to bring a recess within the scope of the clause,” Justice Stephen Breyer wrote for the Court. The practical implication for employers: Hundreds of decisions issued with the participation of the recess appointees between January 9, 2012, and August 4, 2013 (when three new appointees were confirmed by the Senate) are now ripe for reconsideration. Because Supreme Court precedent requires the Board to have a three-member quorum to operate, decisions issued with the inclusion of the recess appointees have been invalidated and other actions – such as the appointment of regional directors – could also be up for challenge.

Detailed Discussion
On January 4, 2012, President Barack Obama appointed three individuals – Sharon Block, Richard Griffin, and Terence Flynn – to the National Labor Relations Board (NLRB). Their nominations had been pending in the Senate, which was utilizing a series of brief recesses. Beginning December 17, 2011, the Senate adopted a resolution that it would take a break until January 23, 2012, but would hold pro forma sessions every Tuesday and Friday in the interim. President Obama made the appointments between the pro forma sessions on January 3 and January 6.

To make the appointments, the President invoked his powers under the Recess Appointments Clause of the Constitution, Article II, Section 2, Clause 3. The Clause grants the President the power “to fill up all Vacancies that may happen during the Recess of the Senate.”

The Board, complete with the three recess appointments, found that Noel Canning unlawfully refused to reduce to writing and execute a collective bargaining agreement with a labor union. The Pepsi-Cola distributor was ordered by the Board to execute the agreement and make employees whole for any losses.

Noel Canning appealed the decision, arguing that because three of the five members of the Board were invalidly appointed, the decision should be set aside. The District of Columbia Circuit Court of Appeals agreed, and with hundreds of other decisions potentially on the line, the U.S. Supreme Court granted certiorari on the NLRB’s writ.

Emphasizing historical practice and the fact that the Recess Appointments Clause is intended to be a subsidiary, not primary, method for appointment, the majority reviewed hundreds of years of presidential appointments, opinions by Attorneys General, and Senate actions to conclude that because President Obama’s appointments occurred during a three-day break, they were invalid.

Writing for the majority, Justice Stephen Breyer broke his analysis into three issues: whether the Clause applied to any type of recess – intra-session or inter-session; if the recess must be of a certain length; and whether a vacancy must occur during the recess or if the President had the power to fill a preexisting vacancy, as he did with the NLRB appointees.

First, the majority held that the Clause applies to either an inter-session or an intra-session recess. “The Senate is equally away during both an inter-session and an intra-session recess, and its capacity to participate in the appointments process has nothing to do with the words it uses to signal its departure,” the Court said. And the upshot of a restriction limiting the Clause to inter-session recesses “would frustrate its purpose.”

The Clause itself does not state how long a recess must be in order for a President to make a valid appointment. But the Court ruled that a three-day break was too short, with breaks lasting from 4 days to 10 days presumptively too short. “We add the word ‘presumptively’ to leave open the possibility that some very unusual circumstance – a national catastrophe, for instance, that renders the Senate unavailable but calls for an urgent response – could demand the exercise of the recess-appointment power during a shorter break,” Justice Breyer explained.

Finally, the majority determined that the phrase “vacancies that may happen during the recess of the Senate” applies both to vacancies that first come into existence during a recess as well as to vacancies that initially occur before a recess and continue into the break. This Court found the broad interpretation of the phrase to be compatible with the “spirit, reason, and purposes” of the Clause and supported by historical practice.

The Court declined to follow the Solicitor General’s suggestion and engage in an in-depth factual appraisal of what the Senate actually did during its pro forma sessions, finding such a review to be both legally and practically inappropriate.

Although the decision was unanimous, Justice Antonin Scalia authored a concurrence joined by Chief Justice John Roberts, and Justices Clarence Thomas and Samuel Alito, in which he disagreed with the bulk of the majority’s reasoning.

Cautioning that the majority’s decision “transforms the recess-appointment power from a tool carefully designed to fill a narrow and specific need into a weapon to be wielded by future Presidents against future Senates,” Justice Scalia wrote that the Clause should not apply to intra-session recess periods and be limited to vacancies that arise during the recess in which they are filled.

To read the opinion in NLRB v. Noel Canning, click here.

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LGBT Workers, Same-Sex Couples Get Coverage From Feds

Why it matters: President Barack Obama has announced he will issue two more employment-related executive orders – following his increase to the federal minimum wage earlier this year – one banning federal contractors from engaging in discrimination on the basis of sexual orientation or gender identity and a second prohibiting discrimination against federal employees based on gender identity. Announcing his plans, the President said his administration has “gone further in protecting the rights of lesbian and gay and bisexual and transgender Americans than any administration in history.” In other employment news from the federal government, the Department of Labor (DOL) announced a proposed rule adopting the “state of celebration” interpretation of same-sex couples for purposes of the Family and Medical Leave Act (FMLA). Under the new rule, employees would be allowed to take FMLA leave to care for a same-sex spouse regardless of the law of the state where the worker resides as long as the couple was validly married in a jurisdiction that legally recognizes same-sex marriage. The practical impact of the orders will be limited, as many states and local jurisdictions already have laws in place providing such protections, and many employers have established non-discrimination policies that include such individuals. But taken together with the DOL’s proposal, the changes reflect a major development for gay rights.

Detailed Discussion
With federal legislation prohibiting discrimination against lesbian, gay, bisexual, and transgender (LGBT) individuals languishing in Congress, President Obama has taken action. The President announced his intention to sign an executive order to make it illegal for companies with federal contracts to fire or decline to hire employees based on sexual orientation and gender identity.

Just a few weeks later, it was announced that a second executive order was in the works, this one banning discrimination against federal employees based on gender identity.

Although the Employment Non-Discrimination Act (ENDA) passed the Senate, it stalled in the House. Currently, laws recognizing sexual orientation as a protected category can be found in local jurisdictions, 21 states, and the District of Columbia. Eighteen states and D.C. prohibit gender identity discrimination.

Gay rights advocates hailed the order, which the Human Rights Campaign estimated would apply to about 20 percent of the American workforce.

But House Speaker John Boehner (R-Ohio) threatened legal action over the President’s use of executive orders, arguing that the multiple orders are encroaching on the powers of the legislative branch. Rep. Boehner said he will have members of the House vote later this year on whether or not to sue the President. President Obama has issued several executive orders already this year, including an increase to the federal minimum wage.

In other gay rights news, the DOL released a proposed rule changing the agency’s interpretation of validly married same-sex couples from a “state of residence” to a “state of celebration.” Previously, a same-sex spouse had to live in a state that recognized his or her marital status to request leave under the FMLA.

Going forward, residence will be irrelevant. As long as the couple was validly married in a state that legally recognizes same-sex marriage, either spouse may request leave under the FMLA.

“The basic promise of the FMLA is that no one should have to choose between succeeding at work and being a loving family caregiver,” DOL secretary Thomas Perez said in a statement about the change. “Under the proposed revisions, the FMLA will be applied to all families equally, enabling individuals in same-sex marriages to fully exercise their rights and fulfill their responsibilities to their families.”

Under the proposed change, the definition of spouse would be amended to include “an individual in a same-sex or common law marriage that either (1) was entered into in a State that recognizes such marriages or, (2) if entered into outside of any State, is valid in the place where entered into and could have been entered into in at least one State.” By updating the definition, the DOL stated that same-sex spouses will now be able to take qualifying exigency leave due to a spouse’s military leave or take military caregiver leave for their same-sex spouse who is a covered service member.

The proposal comes as no surprise in light of last year’s U.S. Supreme Court decision in U.S. v. Windsor, where the high court struck down the Defense of Marriage Act provision that interpreted “marriage” and “spouse” to be limited to opposite-sex marriage for purposes of federal law.

Comments on the proposed rule will be accepted by the agency until August 11.

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Ninth Circuit: Employer Legally Amended Arbitration Agreement

Why it matters: Upholding the legality of an employer’s arbitration agreement, the Ninth U.S. Circuit Court of Appeals ruled that the company satisfied California’s requirement of providing employees reasonable notice of changes in the employee handbook. Nordstrom sent a letter to all of its employees when it tweaked the terms of its arbitration agreement to prohibit class suits and require individual arbitration. The employer also refrained from enforcing the updated policy for a 30-day period. Even though the communications to employees “were not the model of clarity,” the federal appellate panel held that Nordstrom’s actions were sufficient to make the agreement enforceable, reversing denial of a motion to compel arbitration of an employee’s putative class action suit. In a further victory for employers, the court held that Nordstrom was not required to inform its employees that continued work after receiving the letter constituted acceptance of the new terms of employment.

Detailed Discussion
Faine Davis filed a purported class action lawsuit against Nordstrom in California federal court, alleging the employer failed to provide meal periods and rest breaks. The national retailer moved to compel Davis to individual arbitration of her claims based on the company’s employee handbook.

When Davis began working for Nordstrom, she received an employee handbook. At that time, it contained an arbitration provision that required employees to arbitrate individual disputes but permitted employees to bring class action lawsuits against the company. After the U.S. Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), Nordstrom revised its handbook.

Pursuant to the Court’s opinion, Nordstrom prohibited class suits and required individual arbitration of employee disputes. A federal district court denied the employer’s motion to compel arbitration, finding that Nordstrom and Davis did not enter into a valid arbitration agreement with respect to the revised handbook.

But the Ninth Circuit reversed.

Noting the preference for arbitration under the Federal Arbitration Act (FAA), the court first observed that the original handbook Davis received included an arbitration agreement. Because she accepted employment on that basis, there was already a binding agreement to arbitrate.

The panel explained that California law permits an employer to amend an arbitration agreement as long as employees are given reasonable notice of the change and vested employee benefits are not affected. Nordstrom’s handbook additionally provided that employees would receive 30 days’ written notice of substantive changes in which to decide whether to continue their employment

Nordstrom sent the revised arbitration provision to all employees, including Davis, and did not enforce the new policy for 30 days. Davis herself never objected to the revised provision and did not quit her job.

“While the communications with its employees were not the model of clarity, we find that Nordstrom satisfied the minimal requirements under California law for providing employees with reasonable notice of a change to its employee handbook by sending a letter to Davis and other employees informing them of the modification, and not seeking to enforce the arbitration provision during the 30-day period,” the panel concluded.

In addition, the court held that the employer was not bound to inform Davis that her continued employment after receipt of the letter constituted acceptance of its terms. While California courts have held that continued employment constitutes such acceptance, the Ninth Circuit found no case law mandating that employees be expressly told that fact.

To read the decision in Davis v. Nordstrom, click here.

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ADA Suit Based on Facebook Post Moves Forward

Why it matters: Providing an important lesson to employers, a federal court in Indiana allowed an employee’s Americans With Disabilities Act (ADA) lawsuit to move forward based upon a manager’s Facebook post that referenced his medical condition. Although the employer argued that it could not be liable because the employee had voluntarily and publicly disclosed his condition in a separate lawsuit filed prior to the post, the court said a question of fact remained as to how the manager acquired her knowledge of the employee’s medical condition. Denying the employer’s motion to dismiss, the court further rejected the argument that the employee failed to allege a tangible injury based on the post, holding that allegations of both emotional injury and that prospective employers refused to hire him were sufficient. If employers don’t already have a social media policy in place addressing the problems with such posts, this case offers a good reminder

Detailed Discussion
George Shoun filed two lawsuits against his former employer, Best Formed Plastics. After falling and injuring his shoulder while on the job, he filed his first suit in Indiana state court on February 14, 2013.

Five days later, a manager at the company posted the following on her Facebook page: “Isn’t [it] amazing how Jimmy experienced a 5 way heart bypass just one month ago and is back to work, especially when you consider George Shoun’s shoulder injury kept him away from work for 11 months and now he is trying to sue us.” The post remained on her page for 76 days.

Shoun’s second lawsuit alleged that the Facebook post violated the confidentiality provisions of the ADA. The manager’s role at the company was processing workers’ compensation claims, a position, Shoun said, that required her to monitor his medical treatment and learn the nature and extent of his injury.

Shoun claimed that the manager’s Facebook page is linked to her business e-mail address and is available to the business communities in his region.

Best Formed Plastics moved to dismiss the ADA suit, arguing that it could not be liable as Shoun voluntarily disclosed his medical condition to the public in his first complaint. As a backup position, the employer argued that Shoun failed to allege any tangible injury from the alleged ADA violation.

Section 102 of the ADA provides that information relating to a medical condition of an employee obtained by an employer must be treated as a confidential medical record. To state a claim for violation of the confidentiality provision, a plaintiff must allege “that his employer obtained his medical information through employment-related medical examinations and inquiries, the information obtained through such means was disclosed by the employer rather than treated as confidential . . . and he suffered a tangible injury as a result of the disclosure,” the court explained.

U.S. District Court Judge Robert L. Miller found that Shoun met all three requirements.

While the court took judicial notice of Shoun’s first complaint, the Judge held that a question of fact remained as to whether he voluntarily publicized his medical condition outside the context of an authorized employment-related medical examination or injury prior to his complaint. By alleging that the manager learned of his condition on the job, Shoun set forth sufficient facts to allege a violation of the confidentiality provisions of the ADA, the court held.

Further, Shoun alleged a tangible injury in two different ways: by claiming he suffered emotional injury and that prospective employers refused to hire him because of the post, “both of which have been recognized as tangible injuries under the ADA.”

The court denied Best Formed Plastics’ motion to dismiss.

To read the opinion in Shoun v. Best Formed Plastics, Inc., click here.

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California Court Sides With Employer, Ruling Employee’s E-Mail Was Extortion, Not Protected Speech

Why it matters: Protected speech or extortion? A California appellate court decided that a former employee’s e-mail threatening to report his employer to the U.S. Attorney and file a federal lawsuit unless the employer agreed to a settlement was not speech protected under the state’s anti-SLAPP statute – instead, it constituted extortion as a matter of law. After he was fired, an employee announced his plans to file a defamation and wrongful termination complaint and sent the threatening e-mail when the employer declined to discuss the potential suit. An actual complaint followed. The employer responded with an extortion cross-complaint that the employee countered with a motion to strike under California’s statute protecting free speech (better known as the anti-SLAPP law, for strategic lawsuit against public participation). A trial court granted the motion to strike, but the appellate court reversed. Although the employee argued that his e-mail merely expressed “a benign desire” to discuss his claims, the court disagreed. “The absence of either an express threat or a demand for a specific sum of money in the e-mail does not negate its fundamental nature as an extortionate writing,” the panel wrote, setting a standard for employers facing similar communications. While the facts of the case may be unusual, the decision stands for the proposition that even a vague threat against an employer may constitute extortion.

Detailed Discussion
A series of legal filings began with a termination. Jerome Stenehjem was fired from his job at Akon, Inc. Eighteen days later, his attorney reached out to Akon’s counsel to inform him of Stenehjem’s defamation claim (he alleged that Surya Sareen, Akon’s chief executive officer, spread a false rumor that Stenehjem had physically attacked a female coworker). Estimating his client’s damages in the $2 million range, the lawyer sought to initiate settlement discussions and suggested a prelitigation deal of $675,000.

Akon’s counsel rejected the “bogus” claim and refused to engage in settlement negotiations on more than one occasion. Stenehjem (after firing his attorney) then wrote an e-mail to Akon’s lawyer, in which he stated that he “never wanted this to become a long and expensive process let alone involve the United States Attorney General, the Department of Justice or the DOD.” He also stressed that he had no desire to “enrich a bunch of bottom feeding attorneys” and said he did “not wish to make a Federal case out of this or create any unnecessary stress on Mr. Sareen or any Akon employees.” The missive, which was titled “Qui Tam,” also included a reference to legally questionable “documents” created by Stenehjem for Sareen.

When that didn’t work, Stenehjem sued the company and Sareen for defamation and wrongful termination because he had protested illegal activities by the defendants.

The defendants filed a cross-complaint against Stenehjem for extortion. The former employee filed a motion to strike the cross-complaint under the anti-SLAPP statute. He argued that his e-mail qualified for protection under the law as a “written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body.”

A trial court agreed and granted the motion to strike. But an appellate panel reversed, finding that Stenehjem’s e-mail was illegal as a matter of law and therefore not protected by the anti-SLAPP statute.

The court stressed that it was “important to consider the context under which the e-mail was sent. This backdrop included Stenehjem’s initial settlement demand through counsel of $675,000; [Akon’s lawyer’s] repeated statements that Stenehjem’s claims had no merit; and [Akon’s lawyer’s] having previously rebuffed any idea of settling the claims.”

Stenehjem’s reference to preparing “documents” makes it “readily apparent that Stenehjem is accusing Sareen of having engaged in illegal activity,” followed by a reference to involving federal authorities in the dispute, the court said.

“Stenehjem’s reference to the potential involvement of specified federal agencies, by itself, may be unclear,” the panel wrote. “But viewed in light of Stenehjem’s accusation of Sareen’s misconduct, and his alluding to bringing a qui tam action, it is plain that Stenehjem is threatening to assert a claim that Sareen had violated the federal False Claims Act and potentially other federal statutes.”

Stenehjem argued that the e-mail contained no demand for money, involved no threat to Sareen, and that he “merely discuss[ed] litigation procedure” and his wish to meet “face to face” to discuss his claims.

The court found this position to be without merit. “The absence of either an express threat or a demand for a specific sum of money in the e-mail does not negate its fundamental nature as an extortionate writing,” the court said. Even poor writing or less-than-explicit language did not make the e-mail any less illegal, the panel added.

“Here, the plain implication of Stenehjem’s [e-mail] was a threat that unless Sareen accepted Stenehjem’s ‘extension of one last opportunity to settle . . . in a gentlemens [sic] manner,’ he would ‘involve the United States Attorney General, the Department of Justice or the DOD’ through a qui tam action alleging Sareen had violated the federal False Claims Act,” the court said. “Stenehjem’s stated ‘request to discuss the matter,’ viewing the totality of the e-mail and the six-month history leading up to its transmission, was in reality a demand to negotiate and settle his personal claims or face the potential exposure of unrelated allegations that Sareen had committed criminal acts.”

Mindful that prelitigation negotiations may not necessarily amount to extortion, even with threats of lawsuits or the reporting of criminal behavior, the appellate panel concluded that when considered in context, Stenehjem’s missive did constitute extortion and was therefore not protected speech under the state’s anti-SLAPP statute.

To read the decision in Stenehjem v. Sareen, click here.

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