Labor and Employment Law Cocktail

NLRB Postpones Notice–Posting Requirement . . . Again By Timothy M. McConville, Esq.

The National Labor Relations Board (“NLRB”) on December 23, 2011, postponed the deadline for its poster-mandate at the request of the federal district court in Washington, D.C., that is hearing a legal challenge regarding the rule.  The Board’s action marked the second time the deadline for its requirement that employers post a notice of rights under the Act.  A final rule requiring the notice posting originally required the posting by November 14, 2011, but the Board delayed the deadline for posting until January 31, 2012.  By its action on December 23, 2011, the Board again postponed the deadline for posting, this time until April 30, 2012.

See NLRB Postpones Notice-Posting Requirement for more details about the notice posting requirement.

NLRB Pushes Ahead with Election Changes By Timothy M. McConville, Esq.

The National Labor Relations Board (“NLRB” or the “Board”) on November 30, 2011, voted two-to-one to approve a resolution to amend procedures that govern the NLRB’s conduct of certification elections.  The amendments are designed to limit the time between the filing of a certification petition and the conduct of an NLRB secret ballot election.  The resolution called for a final rule to be drafted and subject to approval by the Board.  Board Chairman Mark Pearce and another former union lawyer now serving on the Board, Craig Becker, have been reported to want adoption of a final rule before Becker’s term expires at year’s end.  Expiration of Becker’s term will leave the Board with only two members and lacking a quorum.

The resolution adopted by the Board contained six amendments to Board procedures, all of which are aimed at limiting the time employers and employees have to communicate among themselves regarding the prospect of a union in the workplace.  The amendments would give NLRB hearing officers authority to limit evidence and issues presented in pre-election hearings and also to decide whether to deny parties the opportunity to file briefs.  The amendments also would eliminate the right to seek Board review of pre-election rulings and allow an election to proceed despite the existence of significant issues relating to appropriateness of units and voter eligibility.  In addition, the proposed amendments would narrow opportunities for appeal of issues relating to the election process.

The proposal approved by the Board excluded other significant changes to Board procedures which had been included in a proposed rule issued by the Board on June 22, 2011.  Among the proposed amendments excluded from the resolution adopted by the Board on November 30 are provisions for electronic filing of petitions, a requirement that hearings be set for seven days after service of the notice of hearing, a requirement of the statement of position filing, inclusion of email addresses and phone numbers in the voter list, and a change of the period for filing the voter list from seven to two work days.

As further explained in another blog post, the effect of the NLRB’s proposal would be significant.  By shortening the time between petition and election, the Board’s proposal would reduce the time employers and employees have to communicate among themselves regarding union issues, which would lead to an increase in organized labor’s election win rate.  As a result, employers should consider proactive measures to prepare for a higher risk of organizing, including regular supervisor training in labor relations and communications to employees regarding how a union in a workplace can affect them.  Effective communications with employees on labor relations can be accomplished through meetings with employees, letters and flyers, and the employer’s own notice postings, all of which should be considered by employers. 

New Employee Personal Conflict of Interest Rules Now Effective By Matthew R. Keller, Esq.

Last month, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration issued a new change to the Federal Acquisition Regulation (FAR) that will affect federal government contractors who have employees that support government acquisition functions.  The change became effective December 2, 2011.

The new rule, which is being implemented by a newly created FAR Subpart 3.11 and a related contract clause, requires contractors working under “covered contracts” to identify and prevent personal conflicts of interest of their covered employees, and prohibit covered employees who have access to non-public information by reason of performance on a government contract from using that information for personal gain.  A “covered contract” is one that exceeds $150,000 and involves performance of acquisition functions closely associated with inherently governmental functions for, or on behalf of, a federal agency.

The definition of “acquisition function closely associated with inherently governmental functions” is very broad.  It includes “supporting or providing advice or recommendations with regard to:”

-        acquisition planning,

-        developing statements of work,

-        developing solicitation evaluation criteria,

-        evaluating proposals,

-        awarding contracts,

-        administering contracts,

-        terminating contracts, and

-        determining the allowability of costs, among other functions.

 In order to comply with the new FAR clause, contractors will be required to establish internal procedures to screen employees for potential personal conflicts of interest by requiring each affected employee to disclose interests that may be implicated by the employee’s work.  This includes financial interests of the employee and his or her close family members and other members of his or her household.  In addition, the covered employee will be required to update his or her disclosure statement whenever circumstances change in a way that may create a new personal conflict of interest. 

All covered employees will also be required to sign a non-disclosure agreement to prohibit disclosure of non-public information learned through performance on a government contract.  The new rule does not prescribe any particular forms of disclosure statement or non-disclosure agreement that must be used to satisfy the rule. 

In addition to developing a new compliance program for the contractor employee personal conflict of interest avoidance program, the regulation also mandates contractor self-reporting and also that prime contractors flow the requirement down to subcontractors.            

Strangely, while the new clause, as prescribed in FAR Subpart 3.11, must be included in all solicitations and contracts for “covered contracts,” FAR Part 12 expressly exempts commercial item acquisition from the statute that is the basis for the new rule (the FAR definition of “commercial item” includes commercial services).  Contractors bidding on otherwise “covered contracts” that are solicited pursuant to FAR Part 12 should read the solicitation carefully to determine whether the new requirement is improperly included in the solicitation.      

The new rule applies to all contracts, delivery orders, or task orders issued after the effective date of December 2, 2011.

 

NLRB Postpones Notice-Posting Requirement By Timothy M. McConville, Esq.

The National Labor Relations Board (“NLRB”) has issued a final rule requiring most private-sector employers to notify employees of their rights under the National Labor Relations Act by posting a notice.  The rule originally required posting by November 14, 2011, but on October 5, 2011, the NLRB delayed the deadline for posting until January 31, 2012.  Under the proposed rule, a failure to post the required notice will be an unfair labor practice and also may result in the Board extending the six-month statute of limitations for filing a charge involving other unfair labor practice allegations against the employer.

The NLRB’s final notice-posting rule also requires that the notice be in a foreign language if 20% or more of the employees speak the foreign language and do not speak English.  In addition, the Board’s rule provides that a knowing and willful violation of the notice-posting requirement may be evidence of unlawful motive on the part of the employer in other unfair labor practice cases against the employer.  The NLRB has advised employers that they may post their own notices regarding labor relations issues and employee rights next to the NLRB’s required notice. 

As the NLRB proceeds with its aggressive rulemaking activity, including proposed “quickie election” rules, employers will need to reevaluate strategies for maintaining a union-free environment.  Specifically, employers should consider proactive measures to prepare for a higher risk of organizing, including regular supervisor training and labor relations and communication to employees regarding how a union in the workplace can affect them.  Effective communications with employees on labor relations can be accomplished through meetings with employees, letters and flyers, and the employer’s own notice postings, all of which should be considered by employers.

 

Virginia Supreme Court Ruling Signals Shift in Non-Compete Law By Timothy M. McConville, Esq.

Acknowledging that the language of a non-compete provision was identical to a non-compete provision which it upheld in 1989, the Virginia Supreme Court nevertheless held last Friday that the same non-compete provision is now unenforceable.  The Court’s ruling in Home Paramount Pest Control Companies, Inc. v. Shaffer marks a significant shift in the law in Virginia relating to the enforceability of restrictive covenants against unfair competition.

The law governing the enforceability of non-competes has clearly been evolving in recent years in Virginia, but the Court’s decision in the Home Paramount case signals the change in the law more than any other case.  As a result, employers that use restrictive covenants in employment agreements should have their covenants reviewed to ensure that they will be enforceable going forward.

The case arose after Justin Shaffer resigned his employment from Home Paramount in July 2009 and thereafter became employed by a competitor.  Home Paramount sued both Shaffer and his new employer alleging, among other things, breach of contract by Shaffer and tortious interference with contract by the competitor.  After an evidentiary hearing, the Fairfax County Circuit Court dismissed the counts based on the restrictive covenant.  Home Paramount appealed to the Virginia Supreme Court.

In surveying the law since it upheld the pest control company’s restrictive covenant in a prior case in 1989, the Court found that it has consistently assessed the function element of restrictive covenants by determining whether the prohibited activity is of the same type as that actually engaged in by the former employer.  The Court observed that valid provisions prohibit an employee from engaging in activities that actually or potentially compete with the employee’s former employer.  The Court held that when a former employer seeks to prohibit its former employee from working for its competitors in any capacity, however, it must prove a legitimate business interest for doing so.  Home Paramount’s non-compete provision provided that for two years, a former employee could not “engage directly or indirectly or concern himself/herself in any manner whatsoever” in conducting broadly identified activities of a pest control business in the areas in which the employee worked. 

Non-Compete was Functionally Overbroad

 The Court held that the expansive functional scope of the non-compete provision rendered it unenforceable:  “On its face, it prohibits Shaffer from working for [Home Paramount’s competitor] or any other business in the pest control industry in any capacity.  It bars him from engaging even indirectly, or concerning himself in any manner whatsoever, in the pest control business, even as a passive stockholder of a publicly traded international conglomerate with a pest control subsidiary.”  The Court also held that “[b]ecause Home Paramount did not confine the function element of the Provision to those activities it actually engaged in, it bore the burden of proving a legitimate business interest in prohibiting Shaffer from engaging in all reasonably conceivable activities while employed by a competitor.”

 The majority opinion of the Court noted that while the law requires the weighing of the function element of a restrictive covenant together with its geographic scope and duration elements, the clear overbreadth of the function element in the Home Paramount agreement could not be saved by narrow tailoring of the geographic scope and duration.

One justice dissented from the majority opinion, emphasizing that the majority was effectively penalizing Home Paramount for its justified reliance upon the prior precedent in ordering its affairs after prevailing in the prior case.  In dissent, Justice Elizabeth McClanahan opined that the doctrine of stare decisis which requires courts to adhere to controlling precedent, required the Court to uphold the restrictive covenant as it did in 1989.  The dissent agreed with an earlier comment by Justice A. Christian Compton that overruling the Supreme Court’s decision “tends to bring adjudications of the Tribunal ‘into the same class as a restricted railroad ticket, good for this day and train only.’”

 

NLRB Aggressive in Election Aid to Big Labor By Timothy M. McConville, Esq.

With private-sector union membership rates at historic lows in 2010, organized labor is looking to agencies in the federal government to improve the union organizing environment.  The National Labor Relations Board, for its part, is complying.

The National Labor Relations Board (“NLRB” or the “Board”) has issued a proposed amendment to its rules governing the filing and processing of petitions relating to the representation of employees for purposes of collective bargaining.  If implemented, the proposed rule would dramatically shorten the time between the filing of a certification petition and the conduct of an NLRB secret ballot election. 

In the years 2002-2010, more than 90% of representation elections were conducted within 56 days of the filing of a petition.  During the same time, the median time between petition and election was 37-38 days.  In the context of federal government responsiveness, a 37-day turnaround is relatively quick.  Not so, according to organized labor and the three NLRB members who endorsed the rule changes, which would result in elections within 10 to 21 days from the filing of a petition.

One Board member, Brian E. Hayes, dissented from the Board’s proposal, citing the proposal’s destructive effect on employers’ and employees’ ability to communicate among themselves regarding the prospect of a union in the workplace.  “Make no mistake, the principal purpose for this radical manipulation of our election process is to minimize, or rather, to effectively eviscerate an employer’s legitimate opportunity to express its views about collection bargaining,” Hayes stated in his dissent.

The NLRB proposal, also known as the “quickie election” proposal, would eliminate pre-election evidentiary hearings and requests for review and defer decision on virtually all issues relating to appropriateness of units and voter eligibility now decided at the pre-election stage.  The amendments would also expand the personal information relating to employees which employers are required to disclose to unions in voter eligibility lists known as “Excelsior lists.”  Specifically, the proposed amendments would require that both telephone numbers and email addresses, if available, be included along with employees’ names and addresses.  In addition, the NLRB would require that the employer disclose the employee’s work location, shift, and classification.

The effect of the proposal would be significant.  In union organizing drives, organizers often conduct their activities underground and employers have no hint of organizing activity until the union files its petition at the NLRB.  Under the NLRB’s current process, the median campaign time of 37-38 days is a relatively short period which generally helps unions.  The NLRB’s election statistics show that, under current rules, unions won 60% of certification elections in the decade 2001-2010.  By shortening the time between petition and election to 10-21 days, the NLRB proposal will certainly increase organized labor’s win rate.

The NLRB’s rulemaking signals the Board’s most aggressive use ever of regulatory power to accomplish objectives advocated by organized labor, and human resource professionals should be prepared to see more union organizing activity.  The old adage that an ounce of prevention is better than a pound of cure will become more and more relevant.  Accordingly, employers should consider proactive measures to prepare for a higher risk of organizing, including regular supervisor training in labor relations and communication to employees regarding how a union in the workplace can affect them.  Effective communications with employees on labor relations can be accomplished through meetings with employees, letters and flyers, and the employer’s own notice postings, all of which should be considered by employers.

 

DOL Issues Final Rule That Will Impact Service Contract Act-Covered Contracts by Matthew Keller, Esq.

The Department of Labor (DOL) issued a Final Rule on August 29, 2011 promulgating  regulations addressing Executive Order 13495, titled “Nondisplacement of Qualified Workers Under Service Contracts.”  President Obama signed the Executive Order on January 30, 2009.  DOL’s Rule is not effective and will not go into effect until the Federal Acquisition Regulation Counsel issues appropriate regulations implementing this Rule.  Nonetheless, because that action will be taken shortly, this Rule is something that employers bidding on and performing future Service Contract Act-covered contracts should consider and prepare to follow.

The Executive Order and DOL’s Final Rule establish a policy mandating the inclusion of a contract clause in Service Contract Act-covered (“SCA”) contracts that requires successor contractors and their subcontractors to offer those SCA-covered employees working under a predecessor SCA-covered contract, whose employment would otherwise be terminated as a result of the award of the successor contract, a “right of first refusal” of employment under the successor contract in positions for which they are qualified..

 This new Rule applies only to contractors and subcontractors that succeed a different contractor for Service Contract Act-covered work, where the new contract requires performance of the same or similar services as the predecessor contract at the same location.  Moreover, the new Rule itself does not make changes to the Service Contract Act’s requirements for the payment of prevailing wages or bona fide fringe benefits.  However, the Rule does impose certain procedural requirements on successor contractors and subcontractors to offer employees of a predecessor contractor/subcontractor a right of first refusal for employment in positions for which they are qualified under the new contract.  The right of first refusal must be left open for at least ten days.  The new contractor may not hire new employees to replace any member of the old contractor’s workforce until the right of first refusal has been offered to each qualified employee of the old contractor.

 DOL’s Final Rule includes some noteworthy exceptions that limit its applicability and afford service contractors and their subcontractors some relief from the Rule.  Among others, first, the rule does not apply to contracts or subcontracts under the Simplified Acquisition Threshold (currently $150,000 in most cases).  Second, employees who split their time between SCA-covered contracts and other commercial, non-federal government contracts will not be entitled to receive the protections of this Rule.  Third, the successor contractor will not be required to offer employment to employees who have poor work performance with the predecessor contractor.  Finally, the successor contractor and subcontractor need not provide a right of first refusal to fill positions for which they intend to utilize existing employees, provided that those employees have worked for the successor for at least three months and face discharge if not offered employment under the successor contract.  A number of other exceptions apply to particular facts.

Compliance with these new requirements is key because penalties for non-compliance could include payment of lost wages to the affected workers, re-employment, or administrative debarment.

The rule will be formally implemented by a new contract clause in all covered contracts and a flow-down provision for subcontractors.  The final rule does not have an effective date; the rule will not be effective until the Federal Acquisition Regulatory Council issues its own regulations that will implement this final rule.

 

Obama DOL Seeks to Broaden “Persuader” Reporting By Timothy M. McConville, Esq.

The United States Department of Labor (DOL) announced today that, on June 21, 2011, it will issue a proposed rule that will effectively force management-side attorneys and consultants to report their provision of advice in counter-union campaigns.  The proposed rule is an attempt to regulate, and some critics say inhibit, employers’ reliance on consultants and attorneys to guide them in campaigns to counter-union organizing activity.

The DOL is justifying its proposed rule in part based on citations to academic research that the DOL claims “clearly demonstrates that the labor consultant industry has proliferated since the passage of the [Labor-Management Reporting and Disclosure Act], that employers mount sophisticated responses to the presence of union-related activity among their employees, and that employers rely to a great extent on such consultants to assist with those responses.”

The Department of Labor’s Office of Labor-Management Standards will publish a proposed rule to revise the interpretation of “advice” as it pertains to the employer and labor relations consultant persuader reporting requirements of Section 203 of the Labor-Management Reporting and Disclosure Act (LMRDA).  The proposal adopts the plain meaning of the term “advice,” as “an oral or written recommendation regarding a decision or course of conduct.”  The proposed rule will be published in tomorrow’s edition of the Federal Register.  See http://www.ofr.gov/OFRUpload/OFRData/2011-14357_PI.pdf.

Section 203 of the LMRDA requires the disclosure of agreements or arrangements between employers and  labor relations consultants pursuant to which the consultant undertakes or agrees to undertake activities that seek to directly or indirectly persuade workers concerning whether or not to exercise, or the manner of exercising, their rights to organize and bargain collectively.  Neither an employer nor a consultant is required to file a report with the Department of Labor covering the services of a consultant if the consultant is merely giving or agreeing to give advice to the employer. 

According to the DOL, under the proposal, an agreement would be reportable in any case where the consultant engages in persuader activities that go beyond the plain meaning of “advice.” Reportable persuader activities would include those in which a consultant engages in any actions, conduct or communications on behalf of an employer that would directly or indirectly persuade workers concerning their rights to organize and bargain collectively, regardless of whether or not the consultant has direct contact with workers. An agreement would also be reportable in any case in which a consultant engages in specific persuader actions, conduct, or communications regardless of whether advice is given such as when a consultant plans or orchestrates a campaign or program to avoid or counter a union organizing or collective bargaining effort.

The DOL has stated that the LMRDA does not involve regulating the actual persuader activities or statements, and the proposed rule only focuses on whether the activities would have to be publicly disclosed.  The DOL claims that the current interpretation of “advice” has resulted in significant underreporting of employer and consultant persuader agreements.  In an effort to assist organized labor, the DOL’s proposed rule will require more reporting and regulation by employers and their consultants. 

Comments must be received on or before August 22, 2011.

For additional information on the Notice of Proposed Rulemaking, including methods to submit comments, see http://www.dol.gov/olms/regs/compliance/ecr_nprm.htm. 

 

Maryland Passes Law Limiting Employers' Use of Credit Checks by Charity Price, Esq.

On April 12, 2011, Maryland Governor, Martin O'Malley, signed into law the "Job Applicant Fairness Act," which prohibits "an employer from using the credit report or credit history as a basis to deny employment to an applicant for hire, discharge an employee, or determine compensation or the terms of employment."  Fiscal and Policy Note, http://mlis.state.md.us/2011rs/fnotes/bil_0002/sb0132.pdf. The new law will go into effect on October 1, 2011. 

Employers Exempt from the Bill

The following categories of employers are exempt from the bill’s requirements:

(1) an employer required by State or federal law to check the credit report or credit history of an applicant or employee;

(2) a financial institution (or its subsidiary or affiliate) that accepts federally insured deposits;

(3) a credit union share guaranty corporation that is approved by the Maryland Commissioner of Financial Regulation; or

(4) an entity, or its affiliate, that is registered as an investment advisor with the U.S. Securities and Exchange Commission.  

Permitted Uses

An employer may request or use a credit report or credit history for an applicant or current employee, if the employer has a bona fide, substantially job-related reason for requesting the information.  The bill designates certain positions or types of employment in which the employer may have a bona fide reason to use credit information.  The bill indicates that employers may have a use for credit information for positions that involve:

(1) setting the direction or control of a business or a department, division, unit, or agency of a business in a managerial capacity;

(2) access to specified personal information of a customer, employee, or employer  – except for personal information customarily provided in retail transactions;

(3) a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts;

(4) the use  of an expense account or a corporate debit or credit card; or 

(5) access to trade secrets or confidential business information.

Penalty for Violations

An aggrieved applicant or employee may file a written complaint to the Commissioner of Labor and Industry.  If the Commissioner finds a willful or negligent violation, the Commissioner will first seek to resolve the matter informally.  If the Commissioner is unable to reslove the matter, the Commissioner may assess a $500 penalty for the first violation and a $2,500 violation for each subsequent violation.

 

Practice Pointer:  Carefully consider the job-related justification before requesting a credit check on an applicant for employment or a current employee.  Employers should note, however, that this bill does not limit the use of employment-related background checks that provide other types of consumer-related information, e.g. criminal background checks or reference checks.

Guns-in-Cars Bill Fails By Timothy M. McConville, Esq.

The Virginia General Assembly in its 2011 session again considered, but did not pass, a bill relating to the storage of a firearm in an employee’s vehicle while the vehicle is parked on employer property. In the past, the General Assembly rejected attempts to prohibit employers from barring the possession of firearms on employer property. This year’s attempt to address this issue provided that any employer that does not prohibit the storage of a lawfully possessed and transported firearm by an employee in the employee’s vehicle while the vehicle is parked on the employer’s property is not liable for any civil damages resulting from the storage or use of such firearm by a person other than the employer. The bill failed to get out of committee in the House.