The Importance of Written Employment Offers


Although written employment contracts or offer letters are not required by Florida law, employers should clearly state the terms of a new hire’s offer in writing to avoid any misunderstandings – or, worse, claims of breach of contract or fraudulent inducement.  

A recent case from Florida’s Fourth District Court of Appeals, Ioannides v. Romagosa (Fla. 4th DCA, July 11, 2012), illustrates these principles.  Dr. Tim Ioaniddes is a dermatologist who recruited Dr. Ricardo Romagosa to open one of his satellite offices in Stuart and work with him for three years under a contract.  The parties anticipated that, after three years, Dr. Romago would become a partner.  

When recruiting Dr. Romagosa, Dr. Ioannides allegedly told him that his “total annual compensation from salary and bonuses would easily exceed $500,000 per year for the years prior to making partner.”  Thereafter, the two doctors entered into a contract that contained specific provisions regarding how Dr. Romagosa’s salary and bonuses would be calculated.

Dr. Romagosa began working for Dr. Ioannides, but the relationship soon soured.  Dr. Romagosa left the practice after 23 months and sued Dr. Ioannides, claiming that Dr. Ioaniddes fraudulently induced him into entering into his employment contract by orally representing that he would earn more than $500,000 per year.  The case went to trial, and the jury awarded Dr. Romagosa $760,000 damages on his fraudulent inducement claim.  

But on appeal, the Fourth DCA vacated the award to Dr. Romagosa and remanded the case to the trial court with directions to enter judgment in favor of Dr. Ioannides.  

Why the reversal of fortune?  Because, under Florida law, a party cannot recover in fraud for alleged oral misrepresentations that are adequately covered or expressly contradicted in a later written contract.  And in this case, the parties’ written contract adequately covered the issue of Dr. Romagosa’s compensation.  Thus, regardless of whether Dr. Ioannides actually told Dr. Romagosa that his compensation “would easily exceed $500,000 per year,” and regardless of whether this statement was true, Dr. Ioannides could not be held liable for fraudulent inducement.  The terms of Dr. Romagos’s compensation were detailed in a subsequent written contract, and it was that contract that determined the parties’ legal rights and obligations.

For Florida employers, the lesson of the Ioannides case is clear.  Set forth the terms of a new hire’s employment in writing in an offer letter or employment contract.  And make it clear that the offer letter or contract, and not any prior representations, will determine the parties’ legal rights and obligations. 


Can An "At-Will" Employment Disclaimer Violate the NLRA?


The National Labor Relations Board (the Board) has started to move aggressively against "at-will” employment disclaimers that many employers include in their handbooks. Typically, employers include an "at-will" employment policy, which states that employees may be terminated at any time for any lawful reason, with or without notice and with or without cause.  Further, employers advise employees that their "at-will" employment status may not be amended absent a written document signed by a high-level official and require employees to sign an acknowledgement of these provisions.  These statements are intended to counter any argument by employees that the handbook creates a contract of employment, or that they entered into an oral employment contract with the employer.  The Board has recently taken the position that broadly written "at-will" employment policies chill employee's’ rights to engage in protected concerted activity under Section 7 of the National Labor Relations Act (the Act).

In N.L.R.B. v. Am. Red Cross Ariz. Blood Servs. Region, 2012 WL 311334 (N.L.R.B. Feb. 1, 2012), a Board ALJ found that the American Red Cross violated the Act by maintaining an employee handbook policy that stated, in part, "I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.” The ALJ opined that the clause could be reasonably construed by an employee as relinquishment of his or her right to engage in action to change “at-will” status through union representation, collective bargaining or other protected concerted activity.  The ALJ reasoned such an implicit waiver impermissibly chills employees' exercise of Section 7 rights.

Then, on February 29, 2012, the Board's Acting General Counsel issued a Complaint against Hyatt Hotels Corporation (Hyatt), asserting that Hyatt's broadly written "at-will" employment disclaimer violated the Act by interfering with employees' Section 7 rights.  At issue was Hyatt's policy statement that the "at-will" status of employment could only be changed in a writing signed by the employee and either the Executive Vice President/Chief Operating Officer or  President.  Again, the Board took the position that requiring an employee acknowledgement that "at-will" employment could only be altered by written agreement amounted to an interference with protected Section 7 rights.

In response to these developments, employers should carefully examine their "at-will" employment policies.  Broadly worded disclaimers, which unequivocally state that "at-will" employment cannot be altered or can only be changed in a certain way, should be avoided. Employers may wish to consider language that recognizes employees' Section 7 rights, while asserting the employer's position on "at-will" employment. 



Supreme Court Upholds Health Reform Law


The United States Supreme Court (the "Court") issued a historic holding today, June 28, 2012.  The Court has ruled that the Patient Protection and Affordable Care Act of 2010, together with the Health Care and Education Tax Credits Reconciliation Act of 2010 (collectively, the "Health Reform Act"), which had been signed into law in late March of 2010, is almost entirely constitutional.

The Court, in a 5 to 4 decision, opined that the portions of the Health Reform Act that most directly impact employers are lawful, including the polarizing individual coverage mandate taking effect in 2014.  The Court's rationale for upholding the individual mandate was not that Congress can force individuals to buy health insurance (as the Court found that the mandate would actually violate the Commerce Clause), but rather that Congress, under its power to "lay and collect taxes," is permitted to impose a tax on individuals for failing to have insurance. 

The immediate impact of this holding on employers is fully discussed in Akerman's Practice Group Update. In summary, the following main points should be kept in mind: (1) small employers with average wages of less than $50,000 who pay at least 50% of the premium for employees' health insurance will be able to take an income tax credit equal to a percentage of premiums paid; (2) plan mandates continue to apply, such as (i) certain restrictions on pre-existing condition exclusions; (ii) the reduction/elimination of lifetime dollar limits and caps on annual limits on essential health benefits; (iii) the restrictions on rescission of coverage; and (iv) the extension of dependent coverage to age 26 (though this requirement does not apply to grandfathered plans if the dependent is otherwise eligible for another employer-sponsored health plan); (3) a summary of benefits and coverage must be provided commencing in the fall of 2012; (4) the aggregate cost of health coverage must be included in the 2012 W-2 for employees; (5) the $2,500 limit on health FSA spending applies for plan years after January 1, 2013; (6) state exchanges for small business health option programs must be established by 2014; and (7) large employers with over 50 employees will be subjected to fines or penalties if they don't offer insurance, or the offered insurance is too expensive for employees, commencing in 2014.


The Supreme Court Issues Its First Exemption Decision


In Christopher, et al. v. SmithKline Beecham Corp., d/b/a GlaxoSmithKline, No. 11-204 (June 18, 2012), the Supreme Court held that pharmaceutical sales representatives qualify for the "outside salesman" exemption to the Fair Labor Standards Act and are, therefore, not entitled to overtime compensation for hours worked over 40 in a workweek.  Because representatives do not actually sell prescription drugs, but merely try to convince physicians in their assigned territory to write prescriptions in appropriate cases (a process called "detailing"), Plaintiffs argued that the outside sales exemption did not apply to them.  The DOL agreed and submitted an amicus brief, which argued that the exemption only applies where the employee actually transfers title to the property in question.

The Supreme Court disagreed with the DOL and affirmed the grant of summary judgment to Defendant. The Court held that deference was not required to the DOL position, because it amounted to "unfair surprise" in light of the longstanding industry practice of treating detailers as exempt and the massive amount of liability sought, and opined that the DOL stance was unpersuasive, because it was reached without public input and was contrary to the language of the FLSA.  The Court then focused on a functional inquiry of whether  the work of the detailers should qualify as sales, and found that the nonbinding commitments to prescribe drugs that the detailers obtained from physicians amounted to an "other disposition" of the property, in the context of the peculiar regulatory environment of the industry, so as to fall within the FLSA definition of sales.  In addition, the Court reasoned that the purpose of the FLSA exemption would be met by applying it to the pharmaceutical sales detailers, because the FLSA assumes that exempt employees earn well above the minimum wage, perform work that is difficult to standardize to a particular timeframe, and engage in activities that cannot be easily spread to other workers. The salesmen were not the type of workers that the FLSA was enacted to protect.

Three important points arise from this opinion for all employers: 1. because the DOL is expected to recognize the Court's criticism, employers must remain vigilant in staying abreast of the latest DOL interpretations applicable to their industry; 2. in deciding whether an exemption applies, courts should employ a functional, rather than formulaic, analysis, which will allow employers in exemption cases to argue the particular realities applicable to their industry; and 3. defendants' arguments that the employees in question are paid well above the minimum wage,  do not have a set work schedule and perform functions that cannot be assigned to other workers are entitled to careful consideration by a court when ruling on any exemption issue.



Offering to Settle an EEOC Charge Can be Unlawful


An employer’s unconditional offer of a light-duty position to a pregnant employee became a conditional offer after the employee filed an EEOC charge, and was rescinded when the employee refused to withdraw her charge. That was unlawful retaliation in violation of Title VII, according to the Eleventh Circuit in a recent decision, Chapter 7, Trustee v. Gate Gourmet, Inc. (11th Cir., June 11, 2012).

The employee’s job involved driving a truck from a warehouse to a gate where an airplane was docked, using a lift system to raise the truck’s storage container to the airplane’s height, and then pushing carts of food, drink, and ovens across a ramp from the truck to the airplane.  When the employee’s pregnancy made it impossible for her to perform her job, she submitted a doctor’s note listing various medical restrictions. Her supervisor initially told her that the company had no light duty positions available and purported to fire her.  When the employee filed a union grievance, the employer found a light duty job for the employee and offered to reinstate her in that job, which was consistent with company policy.  Subsequently, when the employer received the employee’s EEOC charge of pregnancy discrimination, the employer conditioned its offer upon the employee’s withdrawal of her charge.  When the employee refused to withdraw her charge, the employer rescinded its offer.

On one level, the employer’s response was natural.  Why would an employer want to reinstate an employee if she is not going to withdraw her charge of discrimination?  The problem here was that the employee should have been given a light duty position to begin with, and when the company realized its error, it offered to reinstate the employee unconditionally.  By imposing a condition on that offer after the employee filed her EEOC charge, the company was punishing the employee for filing the charge.  That is unlawful retaliation, according to the Eleventh Circuit.

The lesson is that once an employee files an EEOC charge, an employer must proceed very cautiously when dealing with the employee.  Employers are free to offer a benefit to an employee in an attempt to settle an EEOC charge. But conditioning the employee’s receipt of a benefit that the employer already owes to the employee on the withdrawal of the employee’s charge will be construed as retaliation.  The difference is critical.


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


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.



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


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.


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


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.


NLRB Issues Third Social Media Report


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. 



NLRB Member Terence F. Flynn Resigns


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.



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


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. 



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


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.


NLRB Suspends Implementation Of Representation Case Process Changes


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.



NLRB Seeks To Invalidate Arbitration Agreements


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.



Private Internships Must Almost Always Be Paid


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.


Useful Resources