SCOTUS: Public sector union agency fees violate the 1st amendment (5-4)

Janus v. AFSCME (US Supreme Ct 06/27/2018)

The US Supreme Court has ruled (5-4) that it is a violation of the 1st amendment for a state to require nonconsenting public sector employees to pay agency fees to a union, overruling Abood v. Detroit Bd. of Ed., 431 U. S. 209 (1977). "We conclude that this arrangement violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern." The Court characterized agency fees as compelled subsidy of the speech of other private speakers, and emphasized the inherently political nature of public-sector bargaining. The Court applied "exacting scrutiny" (less than strict; more than rational basis) to the issue and concluded that agency fees do not "serve a compelling state interest that cannot be achieved through means significantly less restrictive of associational freedoms."

Thus, neither an agency fee nor any other form of payment to a public-sector union may be deducted from an employee, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay.

The Court found that agency fees cannot be upheld on the ground that they promote an interest in labor peace because labor peace can readily be achieved through less restrictive means. As for the argument that agency fees are needed to eliminate free riders, the Court said that in non-agency-fee jurisdictions, unions are quite willing to represent nonmembers in the absence of agency fees, and any event States can avoid free riders through less restrictive means.

The Court said that Abood is not supported by the 1st amendment's original meaning. Also, Abood was never based on Pickering v. Board of Ed., 391 U. S. 563 (1968), and even under some form of Pickering, agency-fee arrangements would not survive. 

Stare decisis was not enough to save Abood. The Court said Abood was poorly reasoned, applied a deferential analytical standard, did not take into account the difference between the effects of agency fees in public- and private-sector collective bargaining, did not anticipate administrative problems with classifying union expenses as chargeable or nonchargeable, did not foresee practical problems faced by nonmembers wishing to challenge those decisions, and did not understand the inherently political nature of public-sector bargaining. 

DISSENT: The dissent views Abood as striking "a stable balance between public employees' First Amendment rights and government entities' interests in running their workforces as they thought proper," and says "the majority subverts all known principles of stare decisis."

Another railroad payroll tax case hits the US Supreme Court

Here's a case that's unimportant unless you are a railroad company or railroad employee. And then it is very important.

A railroad worker got a jury verdict against the railroad on his Federal Employers Liability Act claim that the railroad was liable for negligently causing a knee injury. The verdict included an amount of $30,000 for lost wages. The railroad moved the court to offset the lost wages award by the amount of the employee’s share of taxes ($3,765 ) owed under the Railroad Retirement Tax Act (RRTA). The trail court refused. The 8th Circuit affirmed. Loos v. BNSF Railway (8th Cir 08/03/2017) [PDF].  

The US Supreme Court granted certiorari on May 14 to review the 8th Circuit's judgment. BNSF Railway v. Loos (US Supreme Ct cert granted 05/14/2018) [Briefs]

The Railroad Retirement Tax Act together with the Railroad Retirement Act establishes a retirement and disability system that is separate from Social Security. The lower courts held that the damages that plaintiff received for time lost from work do not constitute taxable "compensation" under the RRTA. Altogether, various courts – both state and federal – seem to be hopelessly divided as to whether taxable “compensation” under the RRTA includes pay for time lost. This obviously makes life complicated for an interstate railway company and its employees, and makes them subject to differing tax treatment depending on where lawsuits are filed. In other words, there's a forum-shopping nightmare.

There is an IRS regulation that interprets taxable “compensation” under the RRTA as including pay for time lost. Courts differ as to whether to follow that regulation.

Expect an oral argument to be scheduled for the Fall of 2018.

NLRB joint employer issue may go to rulemaking

Really, what's next? The NLRB is now considering using its rulemaking authority to address the standard for determining joint employer status under the National Labor Relations Act. [Press release] Meanwhile, there's a minor Twitter war between Chairman Ring, Member Lauren McFerran, and Member Mark Gaston Pearce. What is this? Junior High School?

My guess is that the Board majority has been looking for a case in which neither Chairman Ring nor Member Emanuel has a conflict of interest – a tough job because they both came out of a huge law firms that represent parties in Board cases.

So the Board is considering using rulemaking. That's typically a much slower process than deciding an actual case, but in today's climate it might be faster.

In December 2017 the Board decided Hy-Brand Industrial Contractors, Ltd. (Hy-Brand I), 365 NLRB No. 156 (2017) [PDF], which overruled Browning-Ferris Industries, 362 NLRB No. 186 (Aug. 27, 2015). This changed the rules for determining when a company is considered a "joint employer." Hy-Brand I adopted a "direct control" test rather than Browning-Ferris' "indirect control" test.

Then in February three Members (not including William Emanuel) vacated Hy-Brand I, having decided that Emanuel ought not to have participated. Hy-Brand Industrial Contractors, Ltd. (Hy-Brand II), 366 NLRB No. 26 (2018) [PDF]. It's pretty clear that Emanuel was blind-sided by this action.

I think the handwriting on the wall is pretty clear. Right now the Browning-Ferris standard prevails. Just as quickly as the Board majority can get it done (either through rulemaking or by deciding a case), they will adopt the standard articulated in Hy-Brand I.

Dynamex: Employee vs. Contractor ABC test rocks the Gig World


California has adopted a rigid three-part test for deciding whether a worker is an employee or an independent contractor for purposes of California wage orders, which impose obligations relating to the minimum wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.

This new test will make it practically impossible for app platforms such as Uber and Lyft to continue classifying their drivers as "contractors" in California. Wow. Will other states pick up on this?

Dynamex Operations West, Inc. v. Superior Court (California Supreme Court 04/30/2018) [PDF] unanimously held that a worker is presumed to be an employee unless the hiring entity can establish all three of the following:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

This is being described as "a bombshell decision," the “contractor apocalypse," "a rigid three-pronged test that will appear in the nightmares of your average gig economy business executives," and "Misclassification Doomsday." See Misclassification Doomsday in California: State Supreme Court Adopts Notorious “ABC” Test

Class action arbitration case hits US Supreme Court

Once again the US Supreme Court will wade into the contentious arena of class action arbitrations. In Stolt-Nielsen S.A. v. AnimalFeeds, 559 U.S. 662 (2010) [Decision] the Court held (5-3) that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." [Emphasis in original.] The Court overturned an arbitration award that had allowed arbitration to proceed on a class basis. But Stolt-Nielsen was a pretty easy case because the parties stipulated that there was no agreement on the question of class arbitration.

On April 30 the US Supreme Court granted certiorari in Lamps Plus Inc. v. Varela (US S Ct cert granted 04/30/2018) [Briefs]. The official issue is: "Whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements."

Varela was an employee who brought a class action suit claiming his employer Lamps Plus released his personal information in response to a phishing scam. Lamps Plus moved to compel bilateral arbitration pursuant to an arbitration agreement the parties had signed. The district court found that the agreement was a contract of adhesion and ambiguous as to class arbitration, construed the ambiguity against the drafter Lamps Plus, and compelled class-wide arbitration. The 9th Circuit affirmed (2-1) in an unpublished opinion. Varela v. Lamps Plus (08/03/2017) [PDF].

The 9th Circuit distinguished Stolt-Nielsen by saying that the lack of any express reference to class arbitration is "not the 'silence' contemplated in Stolt-Nielsen." The court then applied state law to interpret the agreement, found an ambiguity, and resolved the ambiguity against Lamps Plus. The court actually used a lot of the language in the arbitration agreement (which Lamps Plus characterizes as "general language commonly used in arbitration agreements"). For example, the 9th Circuit pointed out that "The Agreement then specifies that arbitrable claims are those that 'would have been available to the parties by law,' which obviously include claims as part of a class proceeding."

Judge Fernandez dissented in two sentences: "I respectfully dissent because, as I see it, the Agreement was not ambiguous. We should not allow Varela to enlist us in this palpable evasion of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684–85, 130 S. Ct. 1758, 1775, 176 L. Ed. 2d 605 (2010)."

Expect this case to be set for oral argument in the Fall of 2018.

Fast food store employees vote for union – first in the country


Portland. Oregon. Of course.

For the first time ever, a fast food store has unionized following an NLRB election. On April 23 workers at Burgerville voted 18-4 in favor of being represented by Industrial Workers of the World (IWW) [often known as Wobblies], Portland Chapter, d/b/a Burgerville Workers Union.

So now the question is whether this is a flash in the pan or the opening of nation-wide floodgates.

Mark Medina, a worker at the store, said, “Burgerville leaves a lot of us workers poor, hungry, and homeless. “With the company’s use of e-verify, some of us even face possible deportation.”

“Employees at Burgerville Store #41 have voted to unionize in the fair and free election overseen by the NLRB. Our employees have spoken, we hear them, and we support their decision. We will navigate this new working relationship together in a positive, productive way and bargain in good faith with the union at Burgerville Store #41,” said Beth Brewer, Senior VP of Operations for Burgerville. “We are proud of our relationship with our coworkers, and we will continue to provide a fair, positive work environment for all.” "With the same pioneering spirit that Burgerville is known for, we are ready to support the nation’s first unionized fast-food store.”

Burgerville is a regional chain, operating in Oregon and Southwest Washington.