Hunton Employment & Labor Perspectives

In an opinion issued on October 18, 2012, the Federal District Court of Massachusetts provided clarity and relief for private equity firms on the significant, but murky, question of whether a private equity fund can be liable for the ERISA pension obligations (including multiemployer withdrawal liability and defined benefit pension plan underfunding) of its portfolio companies.

In September, the Newark Municipal Council passed Ordinance 12-1630, which prohibits any employer with five or more employees from asking job candidates before or during the application process about their criminal history (i.e., the ordinance “bans the box” from an employment application). 

The employer shared responsibility rules under the Patient Protection and Affordable Care Act will go into effect in 2014.  Government guidance was issued earlier this year on an important aspect of these rules – the determination of who is a full time employee.

The Supreme Court of Virginia recently ruled in VanBuren v. Grubb that supervisors or managers who participate in the termination of an employee may be held liable in claims of wrongful discharge.  This ruling is significant because it places supervisors in the shoes of their employers and threatens them with liability.

The National Labor Relations Board’s (“NLRB”) General Counsel recently released an analysis of contested at-will employment clauses in two employment handbooks and ultimately concluded that neither violated the National Labor Relations Act (“NLRA”).

Employees had filed charges with the NLRB alleging that the at-will employment clauses contained in the employee handbooks distributed by Rocha Transportation, a California trucking company, and SWH Corporation d/b/a Mimi’s Café, a restaurant in Arizona, defined at-will employment so broadly that employees would reasonably think that they could not engage in activity protected by the NLRA.  The clause contained in Rocha Transportation’s handbook advised its employees that their employment is at-will and may be terminated at any time.  It also stated that “No manager, supervisor, or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will.  Only the president of the Company has the authority to make any such agreement and then only in writing.”  Mimi’s Café’s description of at-will employment in its handbook included the sentence: “No representative of the Company has authority to enter into any agreement contrary to the foregoing “employment at will” relationship.”  The NLRB’s Division of Advice prepared two memos which found that each of the clauses described above were lawful.

A 2-1 California Court of Appeal held on October 17 that drivers for a food service provider did not have to arbitrate their state statutory claims brought under the California Labor Code despite a binding arbitration agreement covering the “application or interpretation” of the driver agreements.  The drivers alleged that their employer, Mike Campbell & Associates, misclassified them as independent contractors, denying them wage law protections under the California Labor Code, and was thus liable for nonpayment of wages, illegal deductions, and recordkeeping violations.  Rather than challenge the trial court’s ruling that they were bound by the arbitration clause, the drivers argued that their statutory claims did not arise out of the arbitration agreement and thus did not require an interpretation of the arbitration clause. 

A California Court of Appeal recently found that California employers can lawfully apply the federal standard for rounding. This standard is set forth in 29 CFR Sec. 785.48(b), and previously has been adopted by California’s Department of Labor Standards Enforcement (“DLSE”).  29 CFR Sec. 785.48 (b) permits an employer to round an employee’s starting time and stopping time to the nearest 5 minutes, or one-tenth, or quarter of an hour, assuming the rounding will not result in a failure to compensate the employees, over time, for all the time they have actually worked. The DLSE had previously adopted this standard in its Enforcement Manual. In the October 29, 2012 published decision in See’s Candy Shops v. Superior Court of San Diego County, No. D060710, the court concluded that the federal/DLSE standard is legal in California, if the employees are fully compensated over a period of time.  See also Alonzo v. Maximus, Inc. (C.D. Cal. 2011) 832 F.Supp.2d 1122, 1126. (“[t]his ‘regulation permits employers to use a rounding policy for recording and compensating employee time as long the employer’s rounding policy does not ‘consistently result[] in a failure to pay employees for time worked.’ ’ ”). The Court rejected Plaintiff’s argument that the federal regulation is inconsistent with California Labor Code Section 204, which provides that “all wages [other than certain specified exceptions] are due and payable twice during each calendar month.” Plaintiff essentially argued that employers should be required to engaged in a mini actuarial process at the time of payroll. The Court rejected this argument.

The Administrative Review Board (“ARB”) has issued its decision in OFCCP v. Florida Hospital of Orlando, ruling that Florida Hospital is not a federal subcontractor and therefore not subject to the jurisdiction of the Office of Federal Contract Compliance Programs (“OFCCP”). The OFCCP is a federal agency that enforces equal employment opportunity and affirmative action laws. Entities subject to its jurisdiction have numerous affirmative action obligations. The ARB’s decision addresses whether the OFCCP can establish jurisdiction over hospitals and other health care entities based solely on their contracts to provide medical services for beneficiaries of TRICARE.

The Department of Labor (DOL) takes audits of employee plans very seriously.  Over the past few years, the Employee Benefit Security Administration (EBSA) has increased its civil and criminal audits of plans and, in 2011, collected $1.39 billion in fines in the process.  EBSA has recently added several hundred more auditors to its ranks to increase audits.

At an SEC enforcement conference held last Thursday, October 18, 2012, several SEC speakers remarked that the agency had received an average of eight whistleblower tips per day, for a total of nearly 3000 tips from 45 countries, in the first year of operation of the SEC’s Dodd-Frank whistleblower rules.  The SEC’s revised whistleblower rules, which took effect in August 2011, permit each whistleblower to receive a bounty of 10-30% of all monetary sanctions collected by the SEC on cases associated with the whistleblower’s tip.  To be eligible for a bounty, a whistleblower must voluntarily provide the SEC with original information that leads to a successful SEC enforcement action in which the SEC obtains monetary sanctions greater than $1 million.  This announcement follows the first award (and first denial of an award) of bounty payments to SEC whistleblowers in August 2012.