Federal Court Finds DOL Properly Categorized Loan Officers As Non-Exempt

POSTED BY SCOTT T. SILVERMAN ON JUNE 12, 2012

In Mortgage Bankers Association v. Solis et al., Case No. 1:11-cv-00073 (D.D.C. June 6, 2012), U.S. District Judge Reggie B. Walton ruled that the Department of Labor ("DOL") lawfully acted within its discretion when, in 2010, it stated that mortgage loan officers are not generally exempt from overtime pay. Judge Walton held that the DOL did not violate the Administrative Procedures Act ("APA") when it withdrew a 2006 opinion letter, which had suggested that mortgage loan officers were covered by the administrative exemption to the FLSA. The 2010 interpretation concluded that because loan officers' primary duties focus on sales, they do not perform the administrative work necessary for the exemption.

The lawsuit argued that, under the APA, the DOL was required to give notice of its intent to change policy, and provide interested parties an opportunity to comment, before switching positions. Judge Walton disagreed, reasoning that such a requirement only applies where there has been substantial and justifiable reliance on the agency interpretation, but the prior opinion letter had been written in 2006, just four years before the new interpretation in 2010.  Further, the Association had argued that its members could assert a "good faith" defense to liability and damages based on the 2006 letter, which, according to the Court, negated detrimental reliance.  Finally, Judge Walton found that  the DOL's position was not arbitrary, capricious or an abuse of discretion.

This decision clarifies any open question as to whether mortgage loan officers may be categorized as falling under the administrative exemption to the FLSA.  Typical loan officers, whose primary duties involve sales, cannot be categorized as exempt, unless they meet the test for the outside salesman or other exemption.

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Employers Must Carefully Draft Attorneys' Fees Provisions In Non-Compete Agreements

POSTED BY SCOTT T. SILVERMAN ON JUNE 12, 2012

In Rogers v. Vulcan Manufacturing Co., Inc., No. 11-3927 (Fla. 1st DCA June 1, 2012), the First District Court of Appeal explained that employers must carefully draft non-compete agreements to avoid owing attorneys' fees to former employees who do not pay for their own defense, but, rather, have it funded by a subsequent employer.  In the case, a former employee prevailed in a non-compete case when the former employer's suit was involuntarily dismissed for lack of prosecution. The contract provided for attorneys' fees to the prevailing party: "In any action to enforce any term, condition, or provision of this agreement, the prevailing party shall be entitled to recover the reasonable attorney's fee incurred to enforce same."  The trial court awarded $0 in fees, reasoning that the defendant did not personally "incur" any fees, because they were paid by the subsequent employer.  On appeal, the First DCA disagreed, opining that the clear intent of the agreement was for the loser to pay attorney's fees incurred in the case, regardless of the source of the funds.  The court stated that “If the parties had intended to limit entitlement to situations in which the prevailing party was the one who actually paid attorney’s fees and was seeking reimbursement, or incurred an obligation to pay such fees, the Agreement could have so provided. But it did not, and the trial court erroneously read such a limitation into the Agreement.”  This case illustrates the need for employers to consider revising their non-compete agreements to make sure that they are not obligated to pay fees in a losing effort to enforce a non-compete, where the defense is funded by a subsequent employer.  Although not an issue in the case, employers should also be aware that an agreement to fund defense of a non-compete may be grounds for a tortious interference claim against the subsequent employer.

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Eleventh Circuit Recognizes Retaliatory Hostile Work Environment As A Viable Cause of Action

POSTED BY SCOTT T. SILVERMAN ON JUNE 6, 2012

In Gowski v. Peake,  No. 09-16731 (11th Cir. June 6, 2012), the Eleventh Circuit held that claims of a retaliatory hostile work environment are cognizable under Title VII.  The court reasoned that all other federal circuit courts have recognized this cause of action, and, further, that allowing such a claim is consistent with the statutory text, congressional intent and the EEOC's interpretation of the statute.  The court made two other important points in applying its ruling: (1) the same legal standards governing claims of a hostile work environment on the basis of membership in a protected group, such as race, gender, national origin or religion, apply; and (2) a defendant cannot utilize the defense that it would have made the same decision in the absence of retaliatory animus.  Where an adverse action is partly motivated by retaliation, an employer may avoid liability for that particular action by establishing the "same decision" defense, but it does not eliminate the adverse action from consideration of a retaliatory hostile work environment.  Accordingly, employers should examine their policies to make sure that retaliatory harassment is forbidden and subject to the same reporting requirements as other hostile work environment claims.  In addition, employers should be certain to document that any adverse actions taken against an employee are completely unrelated to protected activity.

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NLRB Issues Third Social Media Report

POSTED BY SCOTT T. SILVERMAN ON JUNE 4, 2012

On May 30, 2012, the National Labor Relations Board's ("Board") Acting General Counsel, Lafe Solomon, issued his Third Report on Social Media Cases. This Report describes the restrictions on employee use of social media that an employer may lawfully include in its policies.

Under the National Labor Relations Act ("Act"), an employer may not implement a policy that would reasonably tend to chill employees in the exercise of their rights. If the rule does not explicitly restrict protected conduct, then the Board considers the rule to violate the Act, if: (1) employees would reasonably construe the language to prohibit protected activity;  (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict protected rights. Ambiguous rules must contain both limiting language and examples of clearly illegal or unprotected conduct to clarify that the rule does not restrict protected rights and may not be reasonably construed to do so.

The Report identifies, in great detail, the application of the foregoing standards to seven social media policies.  In six of the cases, the General Counsel found certain aspects of the policy to be lawful, although certain parts were unlawful.  In the last case, the General Counsel held that the entire policy was lawful.  Of particular interest, the Report explains that the following clauses were not overbroad: (1) a prohibition on "inappropriate postings that may include discriminatory remarks, harassment and threats of violence or similar inappropriate or unlawful conduct," because it could not be reasonably construed to reach, and there was no evidence that the rule was used to discipline, protected activity; (2) a requirement that employees be "fair and courteous" and "respectful," because examples made it clear that the policy did not reach protected activity;  and (3) a restriction on divulging trade secrets or  private or confidential information, because employees have no right to divulge trade secrets and, again, the rule contained sufficient examples of prohibited disclosures so that employees could not reasonably conclude that protected communications were prohibited.  The Report reprints the entire policy.

Employers are encouraged to review the Report and discuss with counsel the need to revise their social media policies, as necessary. 

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NLRB Member Terence F. Flynn Resigns

POSTED BY SCOTT T. SILVERMAN ON MAY 30, 2012

On May 26, 2012, Board Member Terence F. Flynn submitted his resignation to  President Barack Obama and to NLRB Chairman Mark Gaston Pearce.  The resignation is effective July 24, 2012.  However, Mr. Flynn immediately recused himself from all agency business and has asked that the President withdraw his nomination for Board Member of the NLRB.

Mr. Flynn was sworn in as a Board Member on January 9, 2012, following a recess appointment by the President.  However, he had recently come under fire for alleged ethical transgressions. The Board’s inspector general, David P. Berry, issued a report in early May that found that Mr. Flynn, a Republican, had committed serious violations by leaking drafts of board decisions and details of internal deliberations to Peter Schaumber, a former labor board chairman who had been co-chairman of Mitt Romney’s labor advisory committee.

On May 29, 2012,  NLRB Chairman Pearce and Members Brian Hayes, Richard Griffin and Sharon Block met with the agency’s staff to answer questions and issued a joint statement.   The NLRB will be able to continue to conduct business with its four (4) remaining members.  The Board's composition will now be three (3) Democrats and one (1) Republican.  We therefore expect that the Board will continue to implement its pro-labor agenda.

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Middle District Judge Disagrees With NLRB Over Class and Collective Action Waivers

POSTED BY SCOTT T. SILVERMAN ON MAY 25, 2012

In a decision filed on May 18, 2012, Oliveira v. Citicorp North America, Inc. and Citigroup, Inc., Case No. 8:12-cv-251-T-26TGW (M.D. Fla. 2012), Judge Richard A. Lazzara of the Middle District of Florida held that a complete waiver of class and collective actions in either a judicial or arbitration forum was enforceable.  This decision directly conflicts with the National Labor Relations Board's ("NLRB") holding in In re D.R.Horton, Inc., 357 NLRB No. 184 (2012), that such agreements violate employees' right to engage in protected concerted activity under the National Labor Relations Act. 

Plaintiffs brought FLSA overtime claims, alleging that they were improperly categorized as exempt.  Defendants moved to compel arbitration on the basis of handbook acknowledgements, which both required employees to bring all claims in arbitration and waived any right to collective or class arbitration.  While the parties agreed that FLSA claims are subject to arbitration, plaintiffs, relying on D.R. Horton, argued that the collective action waiver was unenforceable. Judge Lazzara disagreed, reasoning that the Eleventh Circuit has enforced waivers of FLSA collective actions in mandatory arbitration agreements. Caley v. Gulfstream Aerospace Corporation, 428 F.3d 1359 (11th Cir. 2005). The court noted that district courts outside of the Eleventh Circuit are split as to whether to follow D.R. Horton, but determined that it was bound to apply the Eleventh Circuit precedent of Caley

As previously reported, the NLRB continues to apply D.R. Horton and has brought unfair labor practice proceedings to enjoin enforcement of such arbitration agreements.  Given the divergent authority, employers are cautioned to review their arbitration agreements and to carefully consider whether to amend them.  Until further notice, courts in the Eleventh Circuit will likely enforce such waivers in employment-related lawsuits, but this will not prevent the NLRB from bringing unfair labor practice charges against employers who have such agreements.  It is expected that the Eleventh Circuit will soon be asked to consider the continued vitality of Caley and this issue may wind up in front of the Supreme Court.  We will continue to provide updates as new developments occur. 

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Premarital Sex is Not Protected Under Title VII - But Pregnancy Is

POSTED BY RICHARD D. TUSCHMAN ON MAY 18, 2012

Premarital sex is not protected activity under Title VII.  But it can lead to pregnancy, which is a protected status under Title VII.  Which raises the question:  can an employer use an employee’s pregnancy as evidence of premarital sex, and terminate her employment because the employer has a moral objection to premarital sex? 

The answer is yes.  But as the Eleventh Circuit’s recent decision in Hamilton v. Southland Christian School illustrates, the court will closely scrutinize the employer’s motivations if the employee alleges pregnancy discrimination. 

The Eleventh Circuit summarized the facts of the case as follows:

In January 2008, Jarretta Hamilton began teaching at Southland Christian School. Sometime in January 2009, she and her then-fiancé conceived a child. They got married the next month. On Sunday, April 5, 2009, Hamilton met with John and Julie Ennis, Southland’s administrator and assistant administrator, to tell them that she was pregnant and to ask for maternity leave during the next school year. During that meeting, she admitted that she had conceived the child before getting married. Southland fired Hamilton the following Thursday, purportedly because she had sinned by engaging in premarital sex and, as John Ennis put it, “there are consequences for disobeying the word of God.”

Hamilton sued the school alleging pregnancy discrimination.  The district court granted summary judgment to the school on the grounds that Hamilton had not produced evidence of a non-pregnant comparator who was treated differently.  But on appeal, the Eleventh Circuit reversed the trial court’s ruling.  The court noted that a plaintiff in a Title VII case does not have to show a comparator if there is enough other circumstantial evidence to raise a reasonable inference of discrimination. 

In this case, such evidence existed.  “Hamilton presented evidence,” wrote the court, “that, in making the decision to fire her, Southland was more concerned about her pregnancy and her request to take maternity leave than about her admission that she had premarital sex.”  Therefore, the court remanded the case to the district court, where it will either be settled or proceed to trial. 

For employers, the Hamilton decision should serve as a reminder to proceed carefully when proceeding with a termination of a pregnant or other “high-risk” employee.  If an employer cannot demonstrate that only legitimate, non-discriminatory reasons motivated its termination decision, reconsideration of that decision may be in order.

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NLRB Suspends Implementation Of Representation Case Process Changes

POSTED BY SCOTT T. SILVERMAN ON MAY 15, 2012

According to a D.C. federal court, another regulation issued by the National Labor Relations Board (the "Board") is unlawful.  This time, the Board's so-called "quickie election" rule, which would shorten the time period between an union petition and the election, has been struck down.  This is an important outcome for employers, because the new regulation, if it had been approved, would have resulted in a greater percentage of union victories and a consequential increase in union organizing.  For the time being, at least, those outcomes have been avoided.

In Chamber of Commerce of the United States of America, et al. v. National Labor Relations Board, Civil Action No. 11-2262 (JEB) (D.D.C. May 14, 2012), Judge James Boasberg of the D.C. District Court held that the Board's regulation was invalid, because no quorum existed for the final vote in favor of its adoption.  Although expressing no formal opinion on other challenges, Judge Boasberg strongly hinted that a properly constituted quorum of the Board could vote to adopt a final version of the regulation.  Until then, however, Judge Boasberg held that the Board's prior procedures govern representation elections.

On June 22, 2011, the Board formally proposed to amend its procedures governing election disputes in a Notice of Proposed Rulemaking ("NPRM"), which was issued by a 3-1 vote. Member Brian Hayes ("Hayes") dissented. On November 30, 2011, the remaining three members of the Board voted to prepare a final rule containing certain of the amendments contained in the NPRM, which passed by a 2-1 vote, with Hayes again dissenting.  Thereafter, a final rule was prepared and circulated in the Judicial Case Management System ("JCMS").  Both Chairman Mark Pearce and Member Craig Becker voted to approve the rule, and it was forwarded to the Solicitor for publication in the Federal Register on the same day.  However, Hayes did not register a vote on the final version in JCMS.

The Board argued that, because Hayes had continually voted against the new regulation, he had sufficiently indicated his opposition to be counted toward the quorum.  However, Judge Boasberg disagreed with the Board's position, reasoning that, under 29 U.S.C. §153(b), "three members of the Board shall, at all times, constitute a quorum," and, therefore, three members' participation was necessary for the vote on the final version of the rule. Judge Boasberg noted three (3) facts that led him to consider Hayes absent: (1) Hayes took no action whatsoever in response to the JCMS notice; (2) no one requested that Hayes provide a response; and (3) only a short amount of time passed between the circulation of the JCMS notice and the forwarding of the rule for publication.  Hayes' mere Board membership was insufficient for a quorum.

In response to the decision, the Board announced that it has temporarily suspended the implementation of changes to its representation case process, which had taken effect April 30.  Further, Acting General Counsel, Lafe Solomon, withdrew the guidance to regional offices that he had issued on the new procedures and advised regional directors to revert to previous practices governing election petitions.  The Board stated that it is considering its options. However, it will likely seek a stay of the decision pending appeal, or may seek to revote, with its current composition of three Democrats and two Republicans.  Still, consistent union avoidance strategies continue to be paramount in this ever-changing landscape.

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NLRB Seeks To Invalidate Arbitration Agreements

POSTED BY SCOTT T. SILVERMAN ON MAY 11, 2012

On April 30, 2012, the National Labor Relations Board ("Board")  issued a complaint alleging that 24 Hour Fitness USA, Inc. violated the National Labor Relations Act ("Act") by requiring that all employment disputes be resolved by an arbitration in which only individual, and not class or collective, claims could be brought.

24 Hour Fitness, which operates centers across the country, requires employees as a condition of employment, to execute an arbitration agreement, in which they forego any rights to file collective or class action lawsuits or arbitrations.   Earlier this year, in D.R. Horton, Inc., 357 NLRB No. 1 (2012), the Board had held that such a requirement violates the protected rights of employees to engage in concerted activity under Section 7 of the Act.

The Board's San Francisco Regional Office issued a complaint, which charged that the company had enforced its policy by asserting it in numerous actions in an effort to compel employees to submit common claims to individual arbitrations.  The company engaged in an unfair labor practice by violating protections guaranteed by the Act, according to the complaint issued by the agency’s San Francisco Regional Office.

The Board's action demonstrates that employers must examine their arbitration policies to see if they are in compliance.   An effort by employers to compel employees to bring all employment-related claims through individual arbitration may be found to constitute an unfair labor practice.

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Private Internships Must Almost Always Be Paid

POSTED BY SCOTT T. SILVERMAN ON MAY 11, 2012

With the summer almost upon us, private, for-profit companies may be thinking of high school or college students as a resource for unpaid labor, through "summer internships."  This is almost always unlawful!

According to the Department of Labor ("DOL") Fact Sheet, internships in the “for-profit” private sector will most often be viewed as employment, unless a six-factor exclusion test is met.  Interns in the “for-profit” private sector who qualify as employees must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. The determination of whether an internship program meets the exclusion depends upon all of the facts and circumstances. However, the DOL states that the employer must meet all six criteria to exempt interns from payment, and that the exclusion is "quite narrow":

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

In the unlikely event that an employer decides  that its program  meets this test, it must have a document for the student to sign, which should replicate the six factors and include the intern's acknowledgement that the position is an unpaid internship. The document should also specify the ending date of the experience.

In the more likely scenario that the summer hire qualifies as an employee, the employer would simply follow its normal hiring procedures.  However, it is vital that the employer include a written acknowledgement that the work is only for the summer and the employment position will terminate on a date certain.

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Akerman Labor & Employment Breakfast Seminar Provides Guidance on Conducting Workplace Investigations

POSTED BY CHRISTOPHER DUKE ON MAY 8, 2012 

Today's employers are often called upon to conduct internal investigations into claims of workplace misconduct. When performed correctly, a proper workplace investigation can effectively shield an employer from liability in the face of many types of employment related claims. However, a poorly performed or ineffective workplace investigation can not only fail to protect the company from liability, but can actually increase potential exposure to an employee's claim. Now more than ever it is important for employers to learn the proper way to conduct an internal investigation.

Topics to be covered include:

  • Whether and to what extent to initiate a formal investigation
  • How to choose the right investigator
  • Best practices for conducting witness interviews
  • How to discipline violators when warranted

Armed with the information provided at this seminar, employers can feel confident in their ability to conduct an effective workplace investigation.

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EEOC Updates Enforcement Guidance on Arrest and Conviction Records

POSTED BY RICHARD D. TUSCHMAN ON MAY 1, 2012 

The Equal Employment Opportunity Commission has updated its enforcement guidance on employers’ use of arrest and conviction records in making employment decisions.

The enforcement guidance consolidates and clarifies prior EEOC guidance in light of judicial decisions on the use of arrest and conviction records.  The guidance clarifies that the selective use of arrest and conviction records may constitute disparate treatment discrimination in violation of Title VII.  The guidance also explains how a neutral policy or practice that has the effect of screening out a protected group may violate Title VII under a disparate impact theory if the employer cannot show that the policy or practice is job related for the position in question and consistent with business necessity.   Exclusions based  solely on arrests will never meet this test,  but conviction-based screens may, if the employer considers the nature of the crime, the length of time since the crime, and the job requirements.

Of particular interest are the “best practices” the EEOC recommends when employers are considering using criminal records in making employment decisions.  These “best practices” are:

General

  • Eliminate policies or practices that exclude people from employment based on any criminal record.
  • Train managers, hiring officials, and decisionmakers about Title VII and its prohibition on employment discrimination and how to implement policies and procedures consistent with Title VII.

Developing a Policy

  • Develop a narrowly tailored written  policy and procedure for screening  applicants and employees for criminal conduct. 
    • Identify essential job requirements and the actual circumstances under which the jobs are performed.
    • Determine the specific offenses that may demonstrate unfitness for performing such jobs.
      • Identify the criminal offenses based on all available evidence. 
  • Determine the duration of exclusions for criminal conduct based on all available evidence.
    • Include an individualized assessment. 
  • Record the justification for the policy and procedures.
  • Note and keep a record of consultations and research considered in crafting the policy and procedures. 

Questions about Criminal Records

  • When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity. 

Confidentiality

  • Keep information about applicants’ and employees’ criminal records confidential.  Only use it for the purpose for which it was intended. 

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NLRB Acting General Counsel Issues Memo on New Representation Case Procedures

POSTED BY SCOTT T. SILVERMAN ON APRIL 27, 2012

Yesterday, NLRB Acting General Counsel Lafe Solomon outlined how regional offices will implement new representation case procedures that take effect on Monday, April 30.  Of benefit to employers, the guidance covers the entire representation case process from beginning to end, incorporating the new rules and the procedures that remain unchanged.  Briefly, the changes to the rules are:

1) An explicit statement that the statutory purpose of a pre-election hearing is to determine if a question concerning representation exists.

2) Hearing officers presiding over pre-election hearings have the authority to limit the presentation of evidence to that which supports a party’s contentions and is relevant to the existence of a question concerning representation. Importantly, issues that will not clearly affect the results of an election are to be deferred until after the election

3) Hearing officers have discretion over the filing of post-hearing briefs, including over the issues to be addressed and the time for filing, subject to the authority of the regional director.

4) Most requests for Board review—with the exception of special permission to appeal—are postponed until after the election.

5) The requirement of a 25 day delay between the direction of an election and the actual election is eliminated.

As explained by the Board, the changes primarily affect procedures in elections for which the parties cannot agree on unit, eligibility and similar issues.

The General Counsel’s office also issued a set of frequently asked questions, which explain the Board’s revised rules and the procedures that will be followed by regions in elections.

Employers should understand that the new procedures will dramatically shorten the time period between a petition and the actual election.  Therefore, employers should no longer assume that there will be sufficient opportunity for an effective campaign.  Consistent proactive union avoidance strategies should be considered.

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Transgender Workers Are Protected by Title VII, Rules EEOC

POSTED BY RICHARD D. TUSCHMAN ON APRIL 25, 2012

The EEOC has ruled that claims of discrimination based on transgender status, also known as “gender identity,” are protected by Title VII.

In a decision issued on April 20, 2012, the agency found that the claims of Mia Macy ("Macy"), a transgender woman who had applied for a position with the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATFE”), were cognizable under Title VII.  Macy, who had “presented” as a man when she applied for the position, alleged that she was denied the position when she informed ATF that she was in the process of transitioning from male to female.

The EEOC reasoned that Title VII prohibits not merely discrimination based on sex, but also on gender, i.e. on the “cultural and social aspects associated with masculinity and femininity.”  Thus, decisions based on transgender status constitute gender discrimination, according to the EEOC.  The EEOC cited numerous court decisions that have reached the same conclusion, including the Eleventh Circuit’s recent decision in Glenn v. Brumby, 663 F.3d 1312 (11th Cir. 2011).

But what does “transgender” mean? A male who is in the process of converting to female through surgery and hormone treatments is clearly transgender, but what about a cross-dresser?  Are employers prohibited from taking into account the fact that a male applicant is a “drag queen”, or that a female applicant wears her hair short, applies no make-up, and appears androgynous?

The answer would appear to be yes.  According to the American Psychological Association (“APA”) web site, “transgender” is “an umbrella term for persons whose gender identity, gender expression, or behavior does not conform to that typically associated with the sex to which they were assigned at birth.”  That definition would seem to cover a wide range of people apart from those who have physically converted, or are in the process of converting, from one sex to another – including cross-dressers and people who appear androgynous. 

The lesson of the Macy decision is clear:  Employers faced with an applicant or an employee who does not meet gender-based cultural and social norms should be aware that discriminating against such persons based on their identity, behavior or appearance may constitute a violation of Title VII. 

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NLRB Stays Implementation of Notice Posting Rule

POSTED BY SCOTT T. SILVERMAN ON APRIL 18, 2012

The D.C. Circuit Court of Appeals has temporarily enjoined the National Labor Relations Board's Rule requiring the posting of employee rights, which had been scheduled to take effect on April 30, 2012.  In  light of this order, the Board has stated that regional offices will not implement the Rule, pending the resolution of the issues before the DC Circuit Court.  The Board explained that its action was necessary in order to assure uniform implementation and administration of agency rules. 

The Board represented that it plans to appeal the D.C. District Court's decision that the enforcement mechanisms of the Rule were impermissible.  In addition, the Board will appeal the South Carolina District Court opinion, which found that the NLRB lacked authority to promulgate the Rule, rendering it completely unlawful.

Until further notice, therefore, employers should not post the NLRB rights poster.  Be sure to check this blog as more updates are sure to occur in this rapidly changing environment.

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