Articles Posted by Insights

A recent decision from the New Jersey Appellate Division serves as a warning to employers that arbitration clauses contained in employee handbooks are likely unenforceable.  In C.M. v. Maiden Re Insurance Services, LLC, (“Maiden Re”), the employee filed an action in the New Jersey Superior Court alleging that she was wrongfully terminated by Maiden Re for seeking a reasonable accommodation to her disability in violation of the New Jersey Law Against Discrimination.  Maiden Re moved to dismiss the Complaint and instead compel the employee to resolve the dispute before an arbitrator pursuant to the arbitration clause contained Maiden Re’s employee handbook.  The Trial Court granted Maiden Re’s motion, sending the matter to arbitration.   On appeal, the Appellate Division refused to enforce the employee handbook’s arbitration clause and remanded the matter back to the Trial Court for resolution of the discrimination claim.

Handbook Disclaimer Renders Agreement to Arbitrate Unenforceable: Like most employee handbooks, Maiden Re’s handbook contained a contractual disclaimer specifically providing that its terms and conditions, “should be regarded as management guidelines only…” and were “not intended to create contractual obligations…” nor “intended to create a contract…”  The inclusion of the contractual disclaimer proved fatal to Maiden Re’s efforts to compel the employee to arbitrate her claims.   The Appellate Division reasoned that Maiden Re “cannot selectively disavow the [disclaimer] language in the handbook to insulate the “arbitration” provision from the legal consequences of the disclaimer provision.”

The court also questioned whether the employees’ electronic acknowledgement of the handbook that failed to include language indicating that the employee was waving her right to adjudicate employment disputes in a judicial forum, was sufficient evidence of an ”unambiguous intention” to arbitrate statutory claims.  The court noted that it did not need to rule on the issue because the disclaimer rendered the arbitration provision unenforceable.

In recent years the National Labor Relations Board (NLRB) has issued numerous opinions that decidedly favor employee rights to engage protected activity under the National Labor Relations Act (NLRA) over employer rights to manage conduct in the workplace. However, a recent decision by a NLRB administrative law judge that Cooper Tire & Rubber violated the NLRA by unlawfully terminating an employee who made overtly racist statements on a picket line has many employers deeply troubled about how far the Board is willing to subordinate employer rights in the workplace.

The Facts: Following the expiration of Cooper Tire’s Collective bargaining agreement with the United Steelworkers, Cooper hired temporary replacement workers at its Findlay, Ohio plant until a new agreement was reached.   In response, the Union set up numerous picket lines at the facility and chanted various “scab” comments to the replacement workers, many of whom were African-American, as they crossed the picket line.   However, union member Anthony Runion was caught on camera yelling racist comments to the replacement workers, including the following: “Hey, did you bring enough KFC for everyone?”, “Hey, anybody smell that? I smell fried chicken and watermelon.”   The company terminated Runion for making racist comments in violation of its anti-harassment policy, and the union’s grievance of the termination was denied at arbitration.

The NLRB’s Ruling: On appeal to the NLRB, the Administrative Law Judge ruled that the Cooper’s anti-harassment policy was not controlling. Rather, the Judge reasoned that Runion was discharged for a reason prohibited under the under the National Labor Relations Act – the protected activity of engaging in picketing. In so doing, the Judge observed that while Runion’s comments were indeed racist and reprehensible, his conduct “did not tent do coerce or intimidate employees [crossing the line], nor did they raise a reasonable likelihood of an imminent confrontation . . . they were not violent in character, and they did not contain any overt or implied threats to replacement workers or their property. The Judge noted that serious acts of misconduct during union activities can negate the protections otherwise available under the NLRA, this was not the case here, and thus the statute’s protections trumped the company’s anti-harassment policy.

On July 15, 2015 the U.S. Department of Labor (DOL) issued an Administrator Interpretation aimed at eradicating what the DOL perceives as widespread improper misclassification of “employees” as “independent contractors” in violation of the Fair Labor Standards Act (FLSA). According to the DOL, misclassifying workers as independent contractors results in workers being deprived of important protections such as minimum wage, overtime compensation, unemployment insurance and workers compensation benefits available to employees. The DOL also pointed to the loss in payroll tax revenues to the government and the intentional misclassification by some employers to cut costs and avoid compliance with labor laws. Citing the “economic realities test” used by the courts to determine whether a worker is an employee or independent contractor under the FLSA, the DOL declared that “in view of the expansive definition of ‘employ’ under the Act, most workers are employers under the FLSA.”

The DOL’s expansive interpretation “employ” under the FLSA: The FLSA simply defines “employ” as “to suffer or permit to work.” Historically, the multi-factored “economic realities test” has been applied to determine whether an employer “suffers or permits” an individual to work within the meaning of the FLSA. The economic realities test considers whether:

• the work being performed is an integral part of the company’s business