NEWSLETTER

The National Labor Relations Board (NLRB) has established new procedures to be implemented by Board personnel as a result of the Board’s decision in Dana Corp., 351 NLRB No. 28. In Dana, the Board modified the recognition bar doctrine that blocks decertification petitions and rival union representation petitions for a reasonable period of time following an employer’s voluntary recognition of a union.

Specifically, the Board adopted a prospective rule providing that it will not impose an election bar after a card-based recognition unless: (1) employees in the bargaining unit receive notice of the recognition and of their right, within 45 days of the notice, to file a decertification petition or to support the filing of a petition by a rival union; and (2) 45 days pass from the date of notice without the filing of a valid petition. Additionally, the Board held that if a valid petition supported by 30% or more of the unit employees is filed within 45 days of the notice, the petition will be processed. The Board also modified the contract-bar doctrine to provide that a collective bargaining agreement executed on or after the date of voluntary recognition will not bar a decertification or rival union petition unless notice of recognition has been given and 45 days have passed without a valid petition being filed.

The decision in Dana also requires the union and/or the employer to promptly notify the appropriate NLRB regional office in writing of the voluntary recognition and provide a copy of the recognition agreement stating the scope of the unit and the date of recognition. The NLRB will then send the employer an official NLRB notice to be posted in conspicuous places in the workplace throughout the 45-day period, which begins to run the day the notice is posted. In addition to the notice, the Board will send the employer a certificate of posting form, which the employer should complete and return to the NLRB at the close of the notice posting period.

Employers considering voluntary recognition should be aware that the decision in Dana has created a degree of uncertainty surrounding this procedure. For example, if the employer fails to comply with the 45-day notice period, there is no apparent time limitation on when the voluntary recognition can be challenged, even if a collective bargaining agreement has been executed. Additionally, while an employer may agree to voluntary recognition to avoid the costs and burdens of an election campaign and surrounding proceedings, it may find itself subject to similar or greater costs and burdens if a decertification petition is filed during the 45-day notice period.

Here, the complaining employees were store managers responsible for supervising the work of an average of seven to eight other full-time employees. The store managers were paid on a weekly salary basis and were also eligible for bonuses based on store performance. The store managers reported to district managers, who oversaw between 15 and 25 stores and were responsible for visiting their stores approximately once per month.

Store managers followed the employer’s written procedures and plans for managing the stores and setting up merchandise. The store managers performed many duties identified as "managerial" in nature by federal regulations, such as interviewing and training employees; setting employees’ hours; directing employees’ work; making promotion recommendations; handling employee grievances; seeing to the safety of employees and to the security of the premises; and controlling budgets.

However, store managers were not permitted to perform some traditionally "managerial" tasks. Store managers needed permission to enter the store after hours; could not determine employees’ pay rates; and could not hire or terminate employees without district manager approval. Store managers also could not make certain decisions with respect the operation of their stores. Moreover, the store managers spent as much as 85% of their time handling non-managerial duties, such as stocking inventory items, cleaning the store, and assisting customers.

The store managers sued, claiming they were owed overtime compensation because they had been improperly classified as exempt employees. The store managers claimed they were not exempt executive employees because their primary duties were non-managerial.

To qualify as an executive employee exempt from the FLSA’s overtime requirements, an employer must show that the employee’s primary duty is management. Here, the court made it clear that the employees’ title of "store manager" was irrelevant, since the regulations require an examination of the actual, specific duties performed by an employee to determine whether the primary duty is management. While the store managers admitted they performed many exempt management duties, they claimed management was not their primary duty because they spent as much as 85% of their time performing non-exempt tasks identical to those performed by the non-exempt employees they supervised.

The DOL regulations interpreting the FLSA provide that "[i]n the ordinary case it may be taken as a good rule of thumb that primary duty means the major part, or over 50%, of the employee’s time. Thus an employee who spends over 50% of his time in management would have management as his primary duty." The court noted that "[t]ime alone, however, is not the sole test, and in situations where the employee does not spend over 50% of his time in managerial duties, he might nevertheless have management as his primary duty if the other pertinent factors support such a conclusion."

The court went on to analyze the four "pertinent factors" that must be weighed where an allegedly exempt executive employee spends less than 50% of his or her time performing exempt management duties.

1. The relative importance of managerial duties as compared with other types of duties. The court found that the manner in which Dollar General trained, evaluated, and compensated the store managers demonstrated that managerial duties were more important to Dollar General than the non-managerial duties that the store managers performed.

2. The frequency with which the employee exercises discretionary powers. The court found that the store managers exercised independent discretion even though they were required to consult manuals or guidelines.

3. The relative freedom from supervision. The court found that despite instruction from district managers, the store managers were generally the highest level of supervisory personnel in the stores on a daily basis, particularly since district managers only visited their stores approximately once per month.

4. The relationship between the employee’s salary and the wages paid other employees for the kind of non-exempt work performed by the supervisor. The court observed that the store managers earned approximately twice as much as the next highest paid employee in their store and were the only employees eligible for bonuses. According to the court, "[t]his factor clearly supports a determination that [the store managers] are exempt."

Based on its analysis, the court held that the store managers had been properly classified as exempt executive employees under the federal FLSA and were entitled to no overtime compensation. Some other federal courts have reached the same conclusion in similar cases. For example, a federal court in Texas found Starbucks store managers to be exempt from overtime requirements even though they spent a majority of their time performing non-exempt duties, such as cleaning the store and serving customers.

However, it should be noted that this case arose in Alabama, which has not enacted a state law regarding exempt classifications for employees. Other states (for example, California) have enacted regulations regarding exempt classifications that, at times, are more challenging for employers. Employers should consult both federal and state law when classifying employees as exempt from overtime requirements.

For more information regarding this decision or the FLSA in general, please contact the Ford & Harrison attorney with whom you usually work or the authors of this article, Jeff Mokotoff, jmokotoff@fordharrison.com, 404-888-3804, or Ben Fryer, bfryer@fordharrison.com, 404-888-3934.

According to at least one federal Appeals Court, obtaining a signed settlement agreement from a former employee waiving the employee’s right to bring a Family and Medical Leave Act (FMLA) claim does not necessarily mean that this employee cannot turn around and file a FMLA claim against your company and potentially prevail. In a recent Fourth Circuit Court of Appeals case, the court interpreted a Department of Labor (DOL) regulation that states, "employees cannot waive, nor may employers induce employees to waive, their rights under [the] FMLA." See Taylor v. Progressive Energy, Inc. (4th Cir. 2007). The court held that this regulation prohibits employees from waiving their right to sue for past violations of the FMLA without prior approval of the DOL or a court. In so concluding, the court rejected the Secretary of Labor’s interpretation of the regulation, which allowed parties to enter into retrospective waivers of claims arising from prior acts.

In this case, Barbara Taylor sued her employer for FMLA violations arising from her discharge as part of a reduction in force, even though she accepted a severance package when she was discharged and signed a general release and separation agreement. Although the release did not specifically mention the FMLA, it stated it was a general release of all rights and claims relating to her employment and separation from employment arising out of federal, state, and local law.

The trial court granted summary judgment in favor of the employer, finding general release barred Taylor’s claims. In reaching this decision, the trial court held that the DOL regulation only prohibits prospective waivers (that is, waiver of the right to sue for violations of the FMLA that arise after the release). Taylor appealed the trial court’s decision.

In 2005, when the Fourth Circuit first heard the case, the court held that the DOL regulations only permit the waiver of a FMLA claim with the prior approval of the DOL or a court, regardless of whether the waiver is executed before or after the employer allegedly violates the FMLA. The Secretary of Labor did not participate in the proceeding.

The court’s decision generated much concern. The employer sought reconsideration by the full Court of Appeals, and the Secretary of Labor filed a brief as amicus curiae (friend of the court) in support of the employer’s petition for rehearing, arguing that the court had misinterpreted the regulation. The U.S. Chamber of Commerce, the Society for Human Resource

Management, and the Equal Employment Advisory Counsel also filed briefs in support of the employer’s position. The Fourth Circuit denied the request for rehearing by the full court, but vacated its earlier ruling and granted a panel rehearing.

Similar to its first ruling, the Court of Appeals decided that the regulation prohibits both retrospective and prospective waiver of FMLA rights unless there is prior approval by the DOL or a court. The court also declared that the DOL’s interpretation was inconsistent with the regulation. The employer again petitioned the court for rehearing en banc and was denied.

On October 22, 2007, the employer filed a petition for writ of certiorari to the U.S. Supreme Court. It is uncertain whether the Supreme Court will grant the petition and hear the case. However, since the Fourth Circuit’s decision is inconsistent with other courts and the Secretary of Labor’s interpretation of the regulation, the Supreme Court may decide to hear the matter.

Employers should still be aware of the Fourth Circuit decision. If the Supreme Court agrees to hear the case and follows the Fourth Circuit’s interpretation of the regulation, the standard created by the Fourth Circuit will apply to all jurisdictions. In addition, the DOL has not changed the language of the regulation and continues to disagree with the Fourth’s Circuit position on this issue. As a result of this disagreement, it has been Ford & Harrison’s experience that the DOL has been unwilling to approve or disapprove of any such waivers. Therefore, as of now, in the Fourth Circuit, the only way to obtain approval of a waiver is when an actual lawsuit has been filed and a court rules on the matter.

Accordingly, employers should proceed cautiously and seek legal advice before entering into settlement agreements where there are or could be potential FMLA claims involved. From a practical standpoint, in the Fourth Circuit, compliance with the FMLA has become more complex and burdensome. Ford & Harrison will continue to follow this case and report any further developments as warranted.

If you have any questions regarding this decision, or labor or employment related issues in general, please contact the Ford & Harrison attorney with whom you usually work or the author of this article, David Rosenberg, drosenberg@fordharrison.com, 202-719-2012.

The U.S. House of Representatives has passed the Employment Nondiscrimination Act (ENDA), which prohibits discrimination on the basis of sexual orientation. Although the ENDA has been proposed numerous times over the past several years, this is the first time the legislation has been approved by the House. The bill would make it illegal for employers, other than churches and the military, to make decisions about hiring, firing, promoting or paying an employee based on actual or "perceived" sexual orientation. The bill originally included protection for transgendered individuals as well, but the bill’s sponsors dropped these provisions to ensure passage by the House. Senator Ted Kennedy plans to introduce similar legislation in the Senate; however, President Bush has indicated he will veto any such legislation if it is presented to him.

Although currently there is no federal law prohibiting discrimination by private employers based on sexual orientation, 19 states and the District of Columbia have enacted such laws. Additionally, 9 states currently have laws protecting transgendered individuals from discrimination.

We will continue to keep you updated on the status of this legislation.

The U.S. Citizenship and Immigration Service (USCIS), formerly the INS, has just announced the release of a new I-9 form to be used to verify an employee’s authorization to work in the United States. On the revised form, the government has eliminated 5 documents from List A of the List of Acceptable Documents. These documents are: Certificate of U.S. Citizenship (Form N-560 or N-570); Certificate of Naturalization (Form N-550 or N-570); Alien Registration Receipt Card (Form I-151); the unexpired Reentry Permit (Form I-327); and the unexpired Refugee Travel Document (Form I-571). The government also added the most recent version of the Employment Authorization Document (Form I-766) to List A.

The revised I-9 form is available now and will become effective once notice is published in the Federal Register. Be aware that some companies are offering to sell employers the revised forms; however, there is no need to purchase these forms since they are available at no charge from the USCIS web site at: http://www.uscis.gov/i-9. The government has also revised the Handbook for Employers, Instructions for Completing the Form I-9, which can be downloaded from the USCIS web site at: http://www.uscis.gov/files/nativedocuments/m-274.pdf.

Employers are encouraged to begin using the revised I-9 form immediately. After the form is published in the Federal Register, noncompliant employers may be fined or penalized.

If you have any questions regarding the revised I-9 form or any other employment-related immigration question, please contact Geetha Nadiminti at gnadiminti@fordharrison.com or 404-888-3940, or any member of Ford & Harrison’s Business Immigration practice group.