News

Supreme Court Holds NLRB's Acting General Counsel Had No Authority to Act After Being Nominated for the Position

In National Labor Relations Board v. SW General, Inc.[1] the U.S. Supreme Court recently considered the question of whether the acting general counsel of the NLRB had authority to issue an unfair labor practice complaint after being nominated by President Obama to fill the position.

Fact Summary

In June 2010, following the resignation of the NLRB’s general counsel, President Obama directed Lafe Soloman, then-director of the NLRB’s Office of Representation Appeals, to temporarily serve as the NLRB’s acting general counsel. The president relied on the Federal Vacancies Reform Act of 1998 (FVRA) [2], in making the appointment. Soloman met the requirements under the FVRA for the appointment because he held a senior position at the agency. On Jan. 5, 2011, the president nominated Soloman to serve as the NLRB’s general counsel on a permanent basis and submitted his name to the Senate for consideration; however, Soloman’s nomination was not acted on during the 112th Congress. The president resubmitted Soloman’s name for consideration in the spring of 2013, but no action was taken and the nomination was subsequently withdrawn; eventually a new nominee was submitted and confirmed. However, Soloman continued to serve as acting general counsel until the new nominee was confirmed by the Senate.[3]

In January 2013, during Soloman’s tenure as acting general counsel, an NLRB regional director, exercising authority on behalf of Soloman, issued an unfair labor practice complaint against SW General Inc. Thereafter, an administrative law judge found that a violation of the National Labor Relations Act had occurred and the NLRB affirmed the decision. The employer filed a petition for review in the United States Court of Appeals for the District of Columbia Circuit and argued that Soloman had no authority to issue the unfair labor practice complaint once he was nominated by the president to fill the general counsel position. The Court of Appeals agreed holding that Soloman was “ineligible to serve as Acting General Counsel once the President nominated him to be General Counsel.”[4] An appeal to the U.S. Supreme Court followed.

The Supreme Court’s Opinion

The court began its analysis by noting Article II of the U.S. Constitution’s “Advice and Consent” requirements and examining the history of legislation addressing the process of temporarily filing vacancies pending Senate confirmation of the president’s appointments, including the FVRA.The court noted that under Subsection (b)(1) of the FVRA “a person who has been nominated for a vacant PAS office [one requiring president appointment and Senate confirmation] [may not perform] the duties of that office in an acting capacity.”[5] The court held “that the prohibition in subsection (b)(1) applies to anyone performing acting service under the FVRA” and not just to “first assistants performing acting service under subsection (a)(1)” as the NLRB argued.[6] In reaching its conclusion, the court examined the plain language of the statute and rejected the NLRB’s invitation to utilize legislative history.[7] The court considered but rejected the NLRB’s other arguments, including its reliance on practice following the enactment of the FVRA.[8] The court concluded its analysis by noting that once President Obama submitted Soloman’s nomination to the Senate to fill the NLRB general counsel position on a permanent basis, subsection (b)(1) of the FVRA “prohibited him from continuing his active service.”[9] Therefore, the court affirmed the judgment of the Court of Appeals and concluded that Soloman’s service as acting general counsel following his nomination violated the FVRA.[10]

Take-Aways

The Supreme Court’s ruling in SW General (and its earlier decision in NLRB v. Noel Canning[11]) demonstrate the court’s willingness to curb executive overreach when it runs counter to clear constitutional or statutory authority. Moreover, the ruling underscores the importance of raising threshold technical defenses before the agency or lower court, since a failure to do so may result in a waiver of the defense and its non-consideration by the appellate court.

--------------------------

J. GREGORY GRISHAM is a partner in the Nashville and Memphis Offices of Ford Harrison LLP, and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his Juris Doctor (with honors) from the University of Memphis, Cecil C. Humphreys School of Law in 1989. Greg may be reached at ggrisham@fordharrison.com or 615-574-6707.


[1] __ U.S. __, 137 S.Ct 929 (2017).

[2] 5 U.S.C. §3345 et seq.

[3] id.On Nov. 4, 2013, Richard F. Griffin Jr. was sworn in as general counsel of the National Labor Relations. https://www.nlrb.gov/who-we-are/general-counsel/richard-f-griffin-jr

[4] id. at 937-38 [quoting SW General Inc. v. NLRB, 796 F.3d 67, 78 (Cir. D.C.2015)].

[5] id.at 938.5 U.S.C. § 3345(b)(1).

[6] id. at 938.5 U.S.C. § 3345(a)(1).

[7] id. at 938-42.

[8] id. at 942-43.

[9] id. at 944.

[10] id.

[11] 573 U.S. ___, 134 S.Ct. 2550 (2014).

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Fry v. Napoleon Community Schools: U.S. Supreme Court Makes Challenging Schools’ Failure to Accommodate Disabled Students Easier

On Feb. 22, 2017, the U.S. Supreme Court released its much-anticipated (among a certain segment, anyway) decision in Fry v. Napoleon Community Schools.[1] The case concerned the most adorable plaintiffs one can imagine: a smiling little girl with a mop of dark curls, Ehlena Fry (known in the litigation as E.F.), and her fluffy white goldendoodle, Wonder. Wonder was prescribed as a service dog for E.F., who has cerebral palsy. Wonder was supposed to help E.F. with everyday tasks, such as standing up, balancing, opening doors and picking up items. However, E.F.’s Michigan elementary school refused to allow Wonder to come to kindergarten with her. The Frys eventually moved E.F. to a school where Wonder was welcome and filed suit, seeking damages for the first school’s failure to accommodate Wonder.

The Fry's suit involved two statutes, both of which are familiar to all employment attorneys: the Americans with Disabilities Act (ADA) and the Rehabilitation Act of 1973. Title II of the ADA forbids any public entity, including public schools, from excluding from participation, denying benefits to, or otherwise discriminating against individuals based on disability.[2] Similarly, Section 504 of the Rehabilitation Act prohibits discrimination by any federally funded “program or activity,” including in schools.[3] Regulations and court decisions interpreting Title II and Section 504 require public entities to make “reasonable modifications” in existing programs, practices, and procedures in order to accommodate individuals with disabilities.[4]

But, while the Frys did not invoke it, there was also a third act specifically directed at disabled students lurking in the background: the Individuals with Disabilities Education Act (IDEA).[5] The IDEA is the main law through which students receive special education services. The IDEA requires that states receiving federal education funds provide children with intellectual and physical disabilities with a “free appropriate public education,” or FAPE.[6] If parents are dissatisfied with their disabled child’s education, they can file a complaint with an administrative agency (in Tennessee, the state Department of Education), culminating in a “due process hearing” before an administrative law judge.[7] If either party is unhappy with the ALJ’s findings, they may appeal to a district court for a “modified de novo” review of the ALJ’s decision.[8] The IDEA purports to make its administrative process the sole path for parents challenging issues with a disabled student’s school, stating in part, “[B]efore the filing of a civil action under such laws seeking relief that is also available under this part, the [administrative procedures] shall be exhausted to the same extent as would be required had the action been brought under this part.”[9]

If you follow that jumble of overlapping protections and jurisdictions, you may spot the issue: the IDEA, ADA and Section 504 all require schools to provide services and accommodations for disabled students, such as letting Wonder the service dog come to school, but they all provide different methods for getting the accommodation. So, in a case like the Fry's, what is a plaintiff to do? Must the IDEA and its administrative procedure be invoked in all cases involving disabled students? The question has stumped courts, advocates and parents for years and made “failure to exhaust administrative remedies” a go-to argument for attorneys defending school districts against any special education claim, regardless of which statute the plaintiff claims was violated.

In Fry, a unanimous Supreme Court in an opinion authored by Justice Kagan finally articulated when a parent must seek an IDEA due process hearing for a denial of an accommodation or service for their child, holding, “[A] plaintiff [must] exhaust the IDEA’s [administrative] procedures before filing an action under the ADA, the Rehabilitation Act, or similar laws when (but only when) her suit seeks relief that is also available under the IDEA. … [T]o meet that statutory standard, a suit must seek relief for the denial of a FAPE, because that is the only relief the IDEA makes available.”[10]

To determine if a case is really about the denial of a FAPE, the court said lower courts should look to the “gravamen” of the plaintiff’s complaint, regardless of what “labels” the plaintiff uses. If the complaint shows that what the plaintiff is really saying is that the school’s failure to offer services to or accommodate the student means that the child is being denied “meaningful access to education based on her individual needs,”[11] than the plaintiff must follow the IDEA administrative procedure. If, however, the plaintiff simply seeks an accommodation, exhaustion is not required.

But how does a lower court determine what the “gravamen” of a complaint is? To begin with, courts should “attend to the diverse means and ends of the statutes” and determine whether the IDEA, ADA or Rehabilitation Act best offer the relief the plaintiff seeks.[12] The court summarized the acts this way: “In short, the IDEA guarantees individually tailored educational services, while Title II and §504 promise non-discriminatory access to public institutions.”

Then, courts should look at two “clues” to determine the gravamen of the complaint. First, courts should ask themselves a pair of hypothetical questions: “First, could the plaintiff have brought essentially the same claim if the alleged conduct had occurred at a public facility that was not a school — say, a public theater or library? And second, could an adult at the school — say, an employee or visitor — have pressed essentially the same grievance?”[13] When the answers are yes, the complaint is not about denial of FAPE; but if the answers are no, it probablyis about FAPE, since the only thing that makes a child in school unique is their educational requirements. However, the court was quick to caution courts against confusing a FAPE with “educational consequences,” using the example of a child in a wheelchair who cannot get into the school building without a ramp: of course the child cannot learn without being inside the building, but it is the lack of access to the building, not the child’s educational experience, that is really at issue, making that a proper claim for the ADA and Rehabilitation Act, not the IDEA.

Second, lower courts should look at the history of the proceedings in the case before them.[14] If the plaintiff did indeed invoke IDEA administrative procedures but “switched” to court before achieving full exhaustion, it is a sign that they were seeking a FAPE.

In Fry, the court remanded the case for the lower court to find out the answers to those questions, so the fate of Wonder the Goldendoodle remains uncertain. But the decision has far-reaching consequences for cases involving a school’s failure to accommodate disabled children. Essentially, Fry clarifies that straightforward ADA and Rehabilitation Act lawsuits filed by public school students should be treated exactly like all other ADA and Rehabilitation Act cases; they are not automatically subjected to the IDEA’s process simply because a disabled student is involved.

As this case law develops, overlap between this newly opened area of ADA law and the well-established rules of disability discrimination in employment is inevitable. Employment lawyers should be on the lookout for ways these cases might impact the law of disability discrimination and accommodation in public places.

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CARALINE RICKARD is an associate attorney at Gilbert Russell McWherter Scott & Bobbitt, in its Franklin office. She received her law degree from Vanderbilt Law School in 2015. She concentrates her practice on labor and employment law, with other work in special education law. Caraline may be reached at 615-354-1144 or crickard@gilbertfirm.com.


[1] 580 U.S. __, 137 S. Ct. 743, 197 L.Ed.2d 46 (2017).

[2] 42 U.S.C. §§ 12131–12132.

[3] 29 U.S.C. § 794(a).

[4] See Fry, 137 S. Ct. at 749–50 (citing sources).

[5] 20 U.S.C. § 1400 et seq.

[6] § 1412(a)(1)(A).

[7] § 1415(f).

[8] § 1415(i)(2)(A).

[9] § 1415(l).

[10] Fry, 137 S. Ct. at 752 (internal quotation marks omitted).

[11] Id. at 753–54.

[12] Id. at 755–56.

[13] Id. at 756–57.

[14] Id. at 757.

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U.S. Supreme Court Decides Standard of Review Related to EEOC’s Subpoena

When the EEOC seeks to enforce a subpoena, the district court’s review of the subpoena is highly deferential. “If the charge is proper and the material requested is relevant, the district court should enforce the subpoena unless the employer establishes that the subpoena is “too indefinite,” has been issued for an “illegitimate purpose,” or is unduly burdensome.”[1] Prior to April 2017, the majority of circuits agreed a district court’s decision to enforce or deny an EEOC subpoena is reviewed for abuse of discretion.[2] Only the Ninth Circuit Court of Appeals applied a different review, choosing instead to review de novo.[3]

On April 3, 2017, the Supreme Court used the case of McClane Co. v. Equal Employment Opportunity Commission to clarify district court decisions regarding whether to enforce an EEOC subpoena should be reviewed for “abuse of discretion.”[4]

In McClane, a former employee of McClane Co., a supply-chain services company, asserted a claim of sex discrimination arising from the company’s choice to subject her to a physical strength test before she returned to work from maternity leave. In the course of its investigation, the EEOC sought information from McClane, including “pedigree information” -- names, genders, social security numbers, contact information, reasons for separation, etc. -- for all employees who had taken the test. The company refused to provide names, contact information, and the reasons for separation for each employee who took the test. The EEOC issued a subpoena for the requested information, which it sought to enforce in the Arizona District Court.

The district court denied enforcement as to the “pedigree information” on the grounds that it was irrelevant to the subject matter of the charge because “ ‘an individual's name, or even an interview he or she could provide if contacted, simply could not shed light on whether the [evaluation] represents a tool of ... discrimination.’ ”[5] On appeal, the Ninth Circuit reversed, applying a de novo review, consistent with that Circuit’s precedent, and determined the pedigree information was relevant and therefore subject to subpoena.[6]

The Supreme Court unanimously agreed with the majority of the circuits that “abuse of discretion” is the appropriate review standard for district court decisions reviewing agency subpoenas.[7]  Writing for the court, Justice Sotomayor noted the court’s decision was in line with the “longstanding practice of the courts of appeals” which predated Title VII.[8] Justice Sotomayor noted Title VII confers the same authority upon the EEOC as the National Labor Relations Act (NLRA) confers upon the National Labor Relations Board, and the circuits were unanimous in holding that a district court's decision whether to enforce an NLRB subpoena should be reviewed for abuse of discretion.[9] Thus, the same review should apply to the EEOC.

According to Justice Sotomayor, the court’s decision was also rooted in the “basic principles of institutional capacity” as determining whether the evidence sought is relevant to the specific charge or whether the subpoena is unduly burdensome in light of the circumstances are “[b]oth tasks … well suited to a district judge's expertise.”[10] Furthermore, the district courts’ “considerable experience” in making similar decisions such as whether particular evidence is admissible at trial gave district courts an “institutional advantage” over the appellate courts in making such determinations and thus, vesting district courts with discretion in these decisions “streamline[s] the litigation process by freeing appellate courts from the duty of reweighing evidence and reconsidering facts already weighed and considered by the district court.”[11] Accordingly, the Supreme Court sent the case back to the Ninth Circuit to review the district court’s decision for abuse of discretion.[12]

Interestingly, on remand, the Ninth Circuit reaffirmed the result of its prior ruling, this time determining the district court had indeed abused its discretion by denying enforcement of the subpoena.[13] Taking a cue from Justice Ginsburg’s concurrence, Judge Watford held the district court's ruling was “predicated on an erroneous view of the legal standard governing relevance in this context” and therefore should be overturned for abuse of discretion.[14] The alleged erroneous view held by the district court concerned the extent of the relevance limitation imposed by Title VII.[15] According to the Ninth Circuit, the appropriate question was not whether the evidence sought would tend to prove a charge of unlawful discrimination, as would be the case at trial, but whether the evidence would tend give the agency “reasonable cause … to believe that the charge is true.”[16]  The court held that under this inquiry, which “sweeps more broadly” at the subpoena stage than it would at trial, the universe of “relevant” information encompasses “virtually any material that might cast light on the allegations against the employer.”[17] Thus, under this review, the EEOC’s subpoena for “pedigree information” was appropriate.

Unlike Justice Ginsburg’s separate concurrence, the majority did not opine on whether the district court’s decision was appropriate, but rather focused only on the appropriate framework for review. It remains to be seen whether the Ninth Circuit’s doubling down on its earlier decision under the newly minted standard will cause the Supreme Court to take the case back up for a second review. Review may be necessary, however, to provide clear guidance as to how far district courts should expect to be able to run with the nationwide standard created by McClane.

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JOSH SUDBURY is a senior associate at Ford Harrison in its Nashville office, where he concentrates his practice on representing management in a variety of labor and employment matters. He received his J.D. at University of Memphis School of Law in 2009. Josh may be reached at jsudbury@fordharrison.com or 615-574-6705.


[1]McClane Co. v. EEOC, 137 S. Ct. 1159, 1165 (April 3, 2017).

[2]See, e.g., EEOC v. Kronos Inc., 620 F.3d 287, 295–296 (3rd Cir. 2010); EEOC v. Randstad, 685 F.3d 433, 442 (4th Cir. 2012); EEOC v. Roadway Express, Inc., 261 F.3d 634, 638 (6th Cir. 2001); EEOC v. United Air Lines, Inc., 287 F.3d 643, 649 (7th Cir. 2002); EEOC v. Technocrest Systems, Inc., 448 F.3d 1035, 1038 (8th Cir. 2006); EEOC v. Dillon Companies, Inc., 310 F.3d 1271, 1274 (10th Cir. 2002); EEOC v. Royal Caribbean Cruises, Ltd., 771 F.3d 757, 760 (11th Cir. 2014) (per curiam).

[3]EPA v. Alyeska Pipeline Serv. Co., 836 F.2d 443, 445–446 (9th Cir. 1988) (holding that de novo review applies).

[4]McClane at 1170.

[5]Id. at 1166 (quoting EEOC v. McLane Co., 2012 WL 1132758, *5 (D. Ariz., Apr. 4, 2012)).

[6]See 804 F.3d 1051, 1057 (2015).

[7]Justice Ginsburg wrote a separate opinion agreeing that “abuse of discretion” standard was appropriate but noting she would have affirmed the Ninth Circuit’s judgment to reverse the lower court’s decision regarding enforcement of the subpoena. See 137 S. Ct. 1159, at 1170 (Ginsburg, J., concurring in part and dissenting in part).

[8]Id. at 1166.

[9]Id. at 1167 (citing NLRB v. Consolidated Vacuum Corp., 395 F.2d 416, 419–420 (2nd Cir. 1968); NLRB v. Friedman, 352 F.2d 545, 547 (3rd Cir. 1965); NLRB v. Northern Trust Co., 148 F.2d 24, 29 (7th Cir. 1945); Goodyear Tire & Rubber Co. v. NLRB, 122 F.2d 450, 453–454 (6th Cir. 1941)). 

[10]Id. at 1168.

[11]Id. (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 404 (1990)).

[12]Id. at 1170.

[13]--- F.3d ---, 2017 WL 2261015, *1 (May 24, 2017).

[14]Id. at *2.

[15]Id.

[16]Id.

[17]Id.

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Labor & Employment Update: An Interpretative Reading of President Trump’s Tweets (a.k.a 'The Shakespeare of Twitter')

Brevity is the soul of wit.
-- William Shakespeare, Hamlet, Act 2, Scene 2

President Donald J. Trump agrees, as he needs no more than 140 characters to set the world astir. The parallels between The Bard and The Donald are clear. Both have a flare for drama. Shakespeare invented over 1,700 words that became part of the English language. Trump gave us “bigly.” Many voted for Trump to “Make America Great Again.” Many others feel that they have had his “greatness thrust upon them.”[1] Either way, Trump keeps things interesting. Within the first few months of his presidency, he has:

  • issued approximately 36 executive orders,
  • published approximately 30 Presidential Memoranda,
  • nominated and had confirmed one U.S. Supreme Court Justice, and
  • made countless policy statements via Twitter. 

Some of Trump’s tweets have conflicted with official White House statements. Some have appeared at 3 a.m. Some have mentioned Rosie O’Donnell. Struggling to keep up, employers may ask, “Though this be madness, [is] there method in’t?”[2] While many significant unknowns remain, here is what we do know.

(1)  New Direction for the NLRB

In recent years, many employers have felt that “something is rotten in the state of” the National Labor Relations Board (NLRB).[3] Even under normal circumstances, the NLRB changes policy under each new administration. Now, it’s Trump’s turn. Although he moved slowly to fill two board vacancies, he quickly tapped Philip Miscimarra as the new chairperson. Miscimarra should sway the board toward employer-friendly rulings, particularly once Trump’s appointments give Republicans a majority of board members. The following are a few recent rulings that the board may revisit:

  • The “quickie” election rule that shrinks the time for employers to counter union campaigns.
  • The “joint employer” rule from the 2015 Browning-Ferris case, which revised the standard for determining whether two business are joint employers by claiming that “indirect control” can lead to joint liability.[4]
  • The 2011 decision in Specialty Healthcare allowing for more micro units for union representation.
  • The 2014 decision in Purple Communications allowing workers greater use of their employer’s email system for NLRA-protected activity on non-working time.
  • The D.R. Horton[5] and Murphy Oil[6] cases rejecting class arbitration waivers in the employment setting. If the board does not readdress this issue soon, the U. S. Supreme Court will resolve the matter during the upcoming fall term.
  • The 2016 Persuader Rule that added reporting requirements for employers and law firms related to indirect efforts and advice seeking to persuade employees not to favor union representation. A Texas federal court issued an injunction to block the Rule, which the Department of Labor (DOL) under the Obama Administration appealed. On May 22, the Trump Administration sent a Rescission of the Rule to the Office of Management and Budget for review, a required step in route to repealing the rule.
  • Trump has proposed a 6 percent reduction in the NLRB budget and directed the board not to use funds to “provide employees any means of voting through any electronic means” in a union election.

(2)  Wage and Hour: The DOL’s Final Rule Not So Final and Other Changes

Employers faced a conundrum last winter when a Texas federal court issued an injunction on the DOL’s Final Rule that was to raise the guaranteed minimum salary for executive, administrative and professional exemptions from $23,660 to over $47,000. After the DOL issued this rule, many employers began reclassifying exempt employees as nonexempt or raising salaries. The DOL under the Obama Administration appealed the Texas injunction to the Fifth Circuit. Since Trump has taken office, the question has been to brief or not to brief this appeal.[7] The court has granted the DOL an extension until June 30, giving the new DOL Chief, Alexander Acosta, time to formulate a position. Acosta indicated at his confirmation hearing that the DOL might not pursue the appeal. He did suggest, however, a possible middle ground increasing the guaranteed minimum salary to $33,000. The current minimum falls below the federal poverty level.

Other possible changes on the wage and hour front could include the following:

  • On June 7, the DOL retracted its 2015 guidance on whether employers can classify workers as independent contractors. As a word of caution, this retraction may signal more of a downgrade in DOL focus than a shift in substantive law, and State agencies and private attorneys will remain vigilant on this front.
  • Also on June 7, the DOL retracted its 2016 guidance on joint employer status, which particularly impacted companies involved with contracting, outsourcing, or franchising.
  • The DOL may become less aggressive in litigation and settlement, less frequently demanding liquidated damages and issuing penalties.
  • Trump has proposed a 20 percent budget cut for the DOL.
  • On May 2, the House passed a Comp Time bill that would allow private employers to give employees paid time off in lieu of cash for overtime, where employees voluntarily agree in writing.

(3) The EEOC

Trump chose Victoria Lipnic, another pro-employer pick, to chair the Equal Employment Opportunity Commission (EEOC). In terms of possible changes for this agency, it is notable that:

  • Lipnic was one of two commissioners to vote against the EEOC’s 2015 decision that sexual orientation discrimination constitutes gender discrimination. 
  • Lipnic opposed the EEO-1 pay data report proposal, stating that it “was past its prime and should be relegated to the heap of bad policy ideas once and for all.” 
  • Lipnic has noted in presentations that she would like to see more EEOC involvement in litigation decision, instead of delegating these decisions to the general counsel.
  • Trump’s proposed budget calls for the EEOC to absorb the OFCCP, which enforces anti-discrimination laws that apply to federal contractors, at the end of FY 2018. Despite its increased scope, the EEOC would see a slight reduction in its budget.

(4)  Paid Family Leave

Trump allocated $20 billion in his proposed budget toward a new national paid leave program. The administration has not provided details, but the concept would be to provide up to six weeks of paid leave for new parents through states’ unemployment insurance agencies. The budget also includes a line item for $13 billion in new unemployment insurance revenue, suggesting that states may need to increase unemployment insurance taxes.

(5) Rollback of the Fair Pay and Safe Workplaces Executive Order

This Obama Executive Order, referred to as the “Blacklisting Rule,” would have required federal contractors to disclose alleged labor violations for the prior three years and to give wage statements detailing pay and hours of employees and independent contractors. Through a review procedure, Congress rolled back this rule in the early days of the Trump administration.

(6) Withdrawal of OSHA’s Union Representative Walk-Around Letter

On April 25, OSHA rescinded its 2013 letter of interpretation that gave unions a greater opportunity to use an OSHA inspection as an organizing tool. The Walk-Around Letter gave a single employee in a non-union workplace the right to select a union organizer to act as an “authorized employee representative” during an OSHA inspection. OSHA’s April 25 memorandum came as part of a settlement of a lawsuit in (you guessed it) conservative Texas.

(7)  The Invisible Wall: Trump Uses Employers to Crackdown on Unauthorized Workers.

Trump seeks to extend the wall not just along the border, but also into the workplace. A favorite enforcement tool of the Immigration and Customs Enforcement Agency (ICE) is the Form I-9, which employers must complete and maintain to verify the identity and employment authorization of employees. Trump’s immigrant agenda, which includes a plan to hire an additional 10,000 ICE officers, should increase workplace audits and site visits, and may reinstitute raids of employers. He also has pushed to require more employers to sign up for E-Verify, where employers submit employees’ personal information from the Form I-9 to be checked against the Social Security Administration’s and U.S. Citizenship and Immigration Services’ (USCIS) databases. Not only does this system assist employers in determining whether an employee has work authorization, but it may open employers to new risks for discrimination claims by data mining the information submitted.

(8)  There’s a New Justice in the House

On April 7, Congress confirmed Neil Gorsuch for a seat on the U.S. Supreme Court. Overall, his opinions as a judge on the Tenth Circuit tend to favor employers. One upcoming pivotal case is Epic Systems Corp. v. Lewis,[8] which will determine whether a class action waiver in an arbitration agreement in the employment setting violates the NLRA. Given Gorsuch’s conservative leanings, many anticipate that he will favor arbitrability.

Gorsuch’s textualist approach to statutory construction and reluctance to apply Chevron[9] deference (the doctrine that courts largely defer to government agency interpretations of federal statutes unless deemed unreasonable) may also lead to significant developments. For instance, the Seventh Circuit recently held in an en banc decision that Title VII prohibits discrimination based on sexual orientation, leading to a circuit split. In the past, the EEOC has championed this interpretation. However, Justice Gorsuch’s past adherence to textualism and questioning of Chevron deference could reject this view.

 

Tomorrow, and tomorrow, and tomorrow.
-- Macbeth,
Act 5, Scene 5

We can be sure that Trump’s tweets will continue to be “full of sound and fury,” but will they “signify [ ] nothing?”[10] Will Trump be “hoist with his own petard” in the Russia investigation?[11] We can expect a number of significant changes in employment law, but, as the health care repeal efforts have shown, nothing is easy or a sure thing.

________________________

BRADFORD HARVEY is a member of Miller & Martin at its Chattanooga office. Brad received his J.D., Order of the Coif, from Vanderbilt University School of Law in 1995. He concentrates his practice in labor and employment law and class and collective action defense. He may be reached at 423-785-8210 or brad.harvey@millermartin.com.

MEGAN WELTON is an associate of Miller & Martin at its Chattanooga office. She focuses her area of practice on labor & employment law. She received her J.D. from the University of Memphis Cecil C. Humphreys School of Law in 2015. She may be reached at 423-785-4326 or megan.welton@millermartin.com.


[1] Twelfth Night, Act 2, Scene 5.

[2] Hamlet, Act 2, Scene 2.

[3] Hamlet, Act 1, Scene 4.

[4] Browning-Ferris Industries of California d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (Aug. 27, 2015).

[5] 357 NLRB No. 184 (2012).

[6] NLRB v. Murphy Oil USA, 808 F.3d 1013 (5th Cir. 2015), cert granted, No. 16-307 (Jan. 13, 2017).

[7] C.f. Hamlet, Act 3, Scene 1.

[8] 823 F.3d 1147 (7th Cir. 2016), cert. granted, No. 16-285 (Jan. 13, 2017); see also Ernst & Young v. Morris, 834 F.3d 975 (9th Cir. Aug. 22, 2016), cert. granted, No. 16-285 (Jan. 13, 2017) (agreeing with NLRB’s position that waivers in mandatory arbitration agreements restrained employees’ rights to engage in concerted activity).

[9] Chevron, U.S.A.v. National Res. Def. Council, 467 U.S. 837 (1985).

[10] Macbeth, Act 5, Scene 5.

[11] Hamlet, Act 3, Scene 4.

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Letter from the Editor

Here’s the latest newsletter from TBA’s Labor and Employment Section. I want to thank this issue's authors for their insightful articles -– Brad Harvey, Megan Welton, Greg Grisham (a regular contributor), Caraline Rickard and Josh Sudbury. If you have an article, I invite you to e-mail me at bbuchanan@sblimmigration.com
 
Bruce Buchanan
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Corporate Counsel: Recent Developments in Employment Law

Corporate counsel attorneys, what do you need to know about changes in employment law? Attorney Stacie Caraway appears in a CLE available on the TBA website to give an overview of recent developments. Topics include court, agency and legislative developments.
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Turn Your Expertise into a Magazine Article

It’s no surprise that some of the best articles in the Tennessee Bar Journal have come from TBA section members. Your membership in this section shows that you have a keen interest in trends, developments and case law in this practice area. Sharing this knowledge with your colleagues is one of the best traits of the profession.

How can you become a Journal author? Think of and refine your topic. It should be of interest to Tennessee lawyers, which is a broad criteria. This could mean you might explain a new state law, explain a complicated area of law, or take a larger issue and connect it to what it means for Tennessee attorneys and the justice system. Find a global issue within your particular experience or knowledge and tell about it and how it affects Tennessee law. Then take a look at the writer’s guidelines at http://www.tba.org/submit-an-article, which will tell you about length, notes and other details. Once it’s in the proper format, send it in! It goes to the editor, Suzanne Craig Robertson, who will then get it to the seven members of the Editorial Board for review.

If you are published, you may apply for CLE credit for your work under Supreme Court Rule 21 Section 4.07(b). For details on claiming the credit, check with the Commission on CLE & Specialization at http://www.cletn.com/.

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TBA Convention in Kingsport is Just Around the Corner

Registration is open for the 2017 TBA Annual Convention. This years programming offers plenty of opportunities to make new friends and renew acquaintances with colleagues from across the state. The highlight comes Thursday night with the Kingsport Karnival at the downtown Farmers Market. Along with fabulous food and drink, there will be live music from two bands, an aerialist, juggler, magician, body and face painters, caricaturist and more. Plus, you'll have access to the fabulous Kingsport Carousel, the delightful project of community artisans. Special thanks to Eastman for support of this event! 

This years convention also offers 12 hours of CLE programming, highlighted by sessions on the Hatfields and McCoys, The Neuroscience of Decision-Making, and the popular Better Right Now wellness program. It is all set at the beautiful MeadowView Marriott Conference Resort & Convention Center. To receive the TBA $129 room rate, you must book your reservation by May 23. Book your room online now or call 423-578-6600.

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Call For Submissions — Law Practice Pointers

One of the benefits of being a TBA Section Member is having access to information from experienced practitioners to assist in your day-to-day practice. The sharing of this information amongst colleagues is one of the best traits of the profession. It is also a way of helping each other to maneuver the evolving legal market and strengthen your legal practice.

How can you help your fellow Section Members?  If you have some Law Practice Pointers you would like to share with your fellow section members, write an article between 300-500 words and submit it to the Section Coordinator for review and approval. These Law Practice Pointers can be related to a court opinion, piece of legislation, or current event or industry trend that affects the practice of law as it relates to the specific Section. The main requirement is to make sure the article gives lawyers practical tips, based on experience, to include in their day-to-day practice.

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Nashville Parks Department Faces Discrimination Lawsuit

A longtime Metro Nashville Parks employee has filed a suit alleging gender discrimination under former director Tommy Lynch, the Tennessean reports. Sally Davis, an employee of more than three decades, claims that Lynch took deliberate steps to keep Davis from getting promotions. Davis is asking a judge to order Metro to stop discrimination within the department, order training to prevent discrimination, pay her back wages and benefits and award her at least $300,000 in compensatory damages.
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MPD Officers Claim They Were Denied Promotions Due to Military Service

Three Memphis Police Department officers have filed a lawsuit against the city for not allowing them the opportunity to reschedule a promotional test that they missed due to their military service, the Commercial Appeal reports. The suit was filed in the U.S. District Court Western Division and claims that about 20 officers experienced this problem. They are seeking an order to require the city to promote them or else offer a make-up test.
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Survey to Come on Performance of Workers' Comp Judges

The Court of Workers’ Compensation Claims will soon be conducting its annual judicial performance survey, Chief Judge Ken Switzer writes in the Court Blog. Each of the 12 judges will be listed individually for respondents to provide a rating on nine categories, ranging from the judge’s understanding of the case to their punctuality in conducting their hearings.

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Get Details on Wage Litigation, Gender Issues at Labor and Employment Forum

The TBA’s 21st annual Labor and Employment Forum will be held May 8 at the Tennessee Bar Center in Nashville. Sessions will cover the latest federal and state developments, with separate emphasis on the expansion of labor laws in non-union settings, emerging gender-related issues, and the continued explosion of wage and hour litigation. This year’s list of presenters include judges from each of the Tennessee’s federal districts and a former member of the National Labor Relations Board. Read more and register here.

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Court Holds Death Not Compensable in Workers' Comp Case

The Tennessee Supreme Court has held that based on the testimony regarding Charles Kilburn’s death, his death is not compensable as a direct and natural consequence of his original compensable injury from a motor vehicle accident. Kilburn died from oxycodone toxicity a little over a year after an on-the-job accident. His surviving spouse sought workers’ compensation death benefits, and the trial court concluded that the death was compensable. The Supreme Court unanimously opined, however, that a subsequent injury is not compensable if it is the result of an independent intervening cause, such as the employee’s own conduct.
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Federal Court: Civil Rights Act Protects LGBT employees

A federal appeals court on Tuesday ruled that Title VII of the Civil Rights Act protects employees from discrimination on the basis of sexual orientation, the ABA Journal reports. The majority of the 8-3 decision ruled on behalf of a former math teacher at a community college in Indiana who said she was denied promotions because she is a lesbian. 
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CLE Outlines How to Change Your Practice to Meet Market Demands

The fourth and final CLE in the “Modern Law Practice Series” will explore emerging trends in the delivery of legal services and how focusing on consumer behavior could benefit your law firm. This session will examine the ways in which consumer-facing companies like Avvo and LegalZoom have capitalized on tailoring services to the needs of the modern legal client and how you can adjust your practice to meet those same demands. The program will be held April 13, and will be available in person and on-demand.

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Court: Employment-at-Will Doctrine Applies to Judge's Assistant

The Tennessee Supreme Court has ruled that the position of trial judge secretarial assistant is subject to the employment-at-will doctrine that generally applies in Tennessee. The court’s holding means that either the trial judge or the person employed in the secretarial assistant position may terminate the employment relationship at any time during the trial judge’s tenure, according to a news release. If the employment relationship is not terminated earlier, then the employment relationship ends automatically when the trial judge’s tenure ends. The unanimous opinion in Judith Moore-Pennoyer v. State of Tennessee, et al., was authored by Justice Cornelia A. Clark.

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Discrimination Against Gay Employees Not Prohibited, Court Rules

An Atlanta-based appellate court ruled that the Civil Rights Act of 1964 does not prohibit discrimination against gay employees, the ABA Journal reports. The three-judge panel ruled 2-1 in the case of Jameka Evans, who said she was forced out of her job because of her orientation. The court said it was bound by precedent via 1979’s Blum v. Gulf Oil Corp., which said Title VII doesn’t prohibit “discharge for homosexuality.”
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Seymour Appointed to Workers' Compensation Court

Deana Seymour has been appointed as a trial judge on the Court of Workers’ Compensation Claims by the Bureau of Workers’ Compensation. Seymour is currently a partner with Rainey, Kizer, Reviere and Bell in the firm's Jackson office. She will sit in Memphis after her April 5 swearing-in.

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Court Dismisses Tip Suit; Says Server Not Allowed to File

The Tennessee Supreme Court has held that a Memphis food-service employee may not file a lawsuit against her employer for distributing tips in a way that violates Tennessee’s tip statute, because the law does not allow a private party to file suit for a violation. Kim Hardy filed the suit against the Tournament Players Club, claiming the business owed her damages because it had distributed tips to employees who were not entitled to receive them. 
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SAVE THE DATE! Mark Your Calendars for the Upcoming 21st Annual Labor & Employment Forum

Mark your calendar to attend the TBA Labor & Employment Law Section 21st Annual Labor & Employment Forum scheduled for Friday, May 8, 2017, at the Tennessee Bar Center in Nashville. 

Presenters at this year's annual forum include U.S. District Judge Tom Fowlkes, U.S. District Judge Waverly Crenshaw, U.S. Magistrate Judge Chris Steger, and former National Labor Relations Board member John Raudabaugh.  Other practitioners will address recent federal and state law developments in the field, including emerging gender-related topics, the continued explosion of wage and hour litigation, and ethics. 

Section members receive a substantial discount so register today by clicking here.  Do not miss out on this years information packed forum.  Register today!

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Next Week: Corporate Counsel Forum

Join your colleagues March 3 for the 2017 Corporate Counsel Forum, with topics ranging from technology's influence on the modern law practice to recent developments in employment law. Speakers will address cyber security and privacy, as well as productivity tools for the present-day corporate counsel. Another session covers the EEOC's new rules on what incentives employers may provide to employees who provide medical information as part of a wellness program under the Americans with Disabilities Act. 
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'Minus One' is Worse than it Sounds When Someone Is Injured or Killed On the Job

by:  Mr. Mike Mallen*

Precisely because I have practiced OSHA and environmental law for the past 30 years representing contractors and heavy manufacturers, it is not unusual for a client or a chief executive to reach out for practical advice on best practices and methods for reducing and ideally avoiding catastrophic workplace injuries, illnesses and fatalities.

Usually, I am disappointed to say, the call comes after the bad thing has happened, and the caller is desperately seeking guidance on how to deal with bereft family members, co-employees, press inquiries, medical examiners, law enforcement investigators and OSHA (or TOSHA) inspectors, all of whom have questions that require immediate answers and are focused on the loss of life or a catastrophic injury or illness which has just occurred in a manufacturing or construction setting. 

Once in a while, however, I feel lucky, fortunate and appreciative.  Those are the less frequent times when a CEO will call me to ask protectively: “How can we be safer?”

On a recent Saturday morning, I was the luckiest OSHA lawyer in the business. The CEO of a national industrial manufacturing company invited me to address his entire workforce at their monthly Saturday morning “all hands-on deck” company meeting.  I spoke last. The speakers before me offered presentations about “the numbers.” They spoke of production, quality control, shipping and receiving, customer service, employee benefits and performance.  These topics had one thing in common – math, numbers and stats: all metrics that were measured, evaluated, sliced and diced.  As I listened to the speakers who preceded me, I folded up my prepared remarks and put them in my pocket. What these managers were saying enlightened me. It changed my message.

In the linear, numeric business world, “minus one” equals “minus one.” What I decided to share with those workers, all of whom had woken early and left their families to meet with their “company family,” was the sorrow that I had observed numerous times in my career. The speakers who went before me provided me with a more meaningful way to narrate it. To make the point, minus one is not minus one when a worker is hurt or killed. Minus one equals minus infinity when that happens, because the impact affects not only the worker but also every person whom that worker loves and cares for and every person who cares for and loves that worker. 

I did share one part of my prepared remarks with the group after talking about the infinite impact that a workplace injury or fatality causes. I read from three obituaries that were related to catastrophic workplace situations in which I had recently been involved. I reminded each person who was polite enough to sit through my remarks that those obituaries did not write themselves. I asked them to think for a minute about the loved ones who were forced to sit down together to recount the lives of people that they had loved and lost because of workplace dangers or carelessness. I have had hundreds of conversations with employers and employees where I have talked about “regs.," OSHA standards, environmental regulations and company policies. Those conversations have to happen. Training is a necessity. 

Notwithstanding all of that, the conversation that I had on that Saturday morning about the infinite impact on loved ones, the opportunity to scare someone straight -- or to make someone more conscious of the consequences when the bad thing happens-was much more impactful.

_________________________

*Mr. Mallen co-chairs Miller & Martin’s Workplace Safety/OSHA Group out of its Chattanooga office. He received his J.D. from University of Tennessee in 1987. He can be reached at 423-785-8435 or mike.mallen@millermartin.com.

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Discounting Future Losses to Present Value in Employment Termination

In employment termination (ET) cases, plaintiffs will typically claim damages that include lost earnings. This is allowable in Tennessee courts.[1]  In Frye v. Memphis State University, recoverable lost earnings are defined as what the plaintiff “would have earned had the employer not dismissed him, less what would have been earned, or might have been earned, in some other employment, by the exercise of reasonable diligence.”[2]  A portion of these economic losses may occur after the trial, when reinstatement is not possible.[3]  If so, Tennessee courts will require these future losses (often referred to as front pay) to be discounted to present value.[4]

Attorneys frequently hire economists to perform these present value calculations, although an economist is not required. In this article, I discuss the rationale for discounting future losses to present value, review the formulas used to perform this calculation, and summarize which methods are acceptable in Tennessee ET cases.

I. The Rationale for Discounting

Would you rather be given a gift of $1,000 now or in 20 years? Most people would readily answer “now.” One likely reason is because the $1,000 gift received now could be invested and grow with interest to a larger sum in 20 years. This suggests an amount of money is worth more today than in the future, so a future amount’s present value is less than that future amount.

Forensic economists discount losses to be incurred in the future to their present value to identify the amount paid in the present as a lump-sum that when invested will grow in the future to the amount of the losses. For example, with annual compounding, a $10,000 loss one year in the future with a 5 percent investment interest rate could be replaced with a lump-sum payment of $9,523.81 today.

If future losses were not discounted, those amounts paid in the present when invested could grow to larger amounts than the future losses. Continuing our example, if $10,000 were paid today to compensate for $10,000 in losses in one year, then the plaintiff could invest this amount at the 5 percent interest rate to have $10,500 when the future loss would have occurred. This would be a $500 windfall for the plaintiff. 

Amounts in the nearer future are discounted by less than losses in the more distant future because less time is available in which to earn interest. For example, if $10,000 were lost two years in the future, then $9,070.29 paid today, when invested at the 5 percent annual compounding interest rate for two years, would replace the loss.

II. Mathematical Methods

The two most common formulas for discounting a future value (FV) to its present value (PV) are for compound annual growth,

    

and for continuous growth,

where r is the interest rate (or the discount rate) and t is the number of years into the future in which the loss occurs. Annual compounding assumes interest is paid once a year — at yearly intervals — on the principle and interest that is re-invested. Continuous growth assumes the investment (the principle and interest) grows with a continuously compounding rate of return. The examples above use annual discounting, so, for example,

With continuous compounding, these would have been

Most forensic economists do not intend to require those with losses to bear risk to attain returns high enough to be made whole from a damages award paid in the present.[5]  Most of these economists will acknowledge their intent to use the risk-free rate of return when discounting.  Otherwise, those with losses would be penalized by being forced to incur risk.  Although no investment is truly risk-free, many economists agree that U.S. Treasuries are reasonably close to being so and so will use the rate on shorter-term Treasury bills, medium-term Treasury notes, or longer-term Treasury bonds or the rates on a mix of treasuries as their discount rate.

Economists may use a discount rate based on historical averages, current rates, or forecasted future rates.  When historical averages are used, they are often calculated over a fixed period, such as the past 20 or 30 years.  Alternatively, a historical average may be based on a past period whose length is the same as the future losses period.  Current rates offer the advantage of being the rates at which a lump-sum award could be invested today, but they may not be reflective of rates in the future.[6]  Future rates are forecasted by economists for the Congressional Budget Office, the Social Security Advisory Board, and the Economic Report of the President.

Earnings typically grow over time with inflation as prices increase and with productivity increases,[7]  and Tennessee courts in ET cases allow awards of front pay to grow for these reasons[8] over one’s work life.[9]  In response, some economists may use a net discount rate in their analysis rather than separately incorporating nominal discount rates and earnings growth rates.  Formally, a net discount rate is defined as the difference in the discount rate (sometimes referred to as the nominal discount rate) and the earnings growth rate.  If the nominal discount rate were assumed to be the same as the wage growth rate, then the net discount rate would be zero and there would be no net discounting.  Economists rarely assume the nominal risk-free interest rate equals the rate of wage growth.  This is at least partially because some economic research has suggested that rates of interest and earnings growth are not equal and that the difference between the two rates is not even constant over time.[10]

III. Tennessee Case Law

When awarding damages for front pay, Tennessee courts in ET cases are guided by the present value of future lost earnings:

“Generally, in awarding front pay, the following factors are relevant: (1) the employee's future in the position from which she was terminated; (2) her work and life expectancy; (3) her obligation to mitigate her damages; (4) the availability of comparable employment opportunities and the time reasonably required to find substitute employment; (5) the discount tables to determine the present value of future damages; and (6) ‘other factors that are pertinent in prospective damage awards.’”[11]

However, the rate to use when discounting is not stipulated or defined by Tennessee courts.[12] For example, in Pollard v. E.I. Dupont de Nemours, Inc.,opposing forensic economists debated whether a 2% or a 4% net discount rate was appropriate and the court elected to use the 2% net discount rate.[13]

In at least two instances, appeals courts did not require front pay damages that had not been discounted to present value to be recalculated.[14]  These courts acknowledged that it is an error not to discount front pay losses to present value.  However, in both instances, future growth in wage and salary earnings was also omitted. These courts determined that the failure to discount, which benefited the plaintiff, was offset by the failure to include future earnings growth, which benefited the defendant.

In Jackson v. City of Cookeville, a district court had reduced a jury’s award of front pay damages in an ET case because the jury was not thought to have discounted these future damages to present value.  However, the appeals court in Jackson overturned this and upheld the jury’s original front pay award because it was determined the jury could have assumed the rate of future pay growth was equal to the nominal discount rate, producing a net discount rate of 0% and, consequently, no net discounting.[15]  This approach — of assuming a net discount rate of 0% because the future earnings growth rate equals the nominal discount rate—is known as the “Alaska Rule,” and the court in Jackson referenced this approach by name, but it declined to uniformly adopt the rule.[16]

Conclusion

Tennessee courts in ET cases require future economic losses to be discounted to present value when calculating the lump-sum award amount that would make an injured party whole. In fact, Tennessee courts call it an error not to discount future losses to present value. This is because awarding a plaintiff an amount in the present equal to the future loss amount would result in a windfall when that award is invested. Nevertheless, Tennessee case law does not stipulate a particular discount rate to use, and damages based on no net discounting have even been upheld. This allows lawyers and economists latitude in their present value calculations.

— Charles L. Baum is a professor of economics at Middle Tennessee State University, where he has taught since 1999. Baum received his Ph.D. in economics from the University of North Carolina-Chapel Hill in 1999.  From 2008 to 2014, he served as the chair of the MTSU Department of Economics and Finance.  Baum is a member of the National Association of Forensic Economists (NAFE) and the American Academy of Economic and Financial Experts (AAEFE). He has served as an economics expert for plaintiffs and defendants in numerous cases around the southeastern United States. To contact Baum, please e-mail him at baumeconomics@gmail.com or call at 615-556-9287.


[1]Coffey v. Fayette Tubular Product, 929 S.W.2d 326, 332 (Tenn.1996); Suggs v. ServiceMaster Educ. Food Management, 72 F.3d 1228, 1234 (6th Cir. 1996); Sasser v. Averitt Exp., Inc., 839 S.W.2d 422,433 (Tenn.Ct.App. 1992).

[2]Frye v. Memphis State University, 806 S.W.2d 170, 173 (Tenn.1991)

[3]Coffey, 929 S.W.2d at 332; Suggs, 72 F.3d at 1234; Sasser, 839 S.W.2d at 433.

[4]Suggs, 72 F.3d at 1234.

[5]Albrecht, Gary R.  (1997).  “The Need to Use Risk Free Discount Rates: A Comment.”  Journal of Legal Economics, 7 (1): 92-95; Gilbert, Roy F.  (1991).  “Forensic Discount Rates.”  Journal of Legal Economics, 1 (3): 40-53; and Breeden, Charles H., and Brian Brush.  (2008).  “The Plaintiff as Victim and Investor: Prudent Investing and the Calculation of Economic Damages.”  Journal of Legal Economics, 14 (3): 15-41.

[6]Rosenberg, Joseph I., and Rick R. Gaskins.  (2012).  “Damage Awards Using Intermediate Term Government Bond Funds vs. U.S. Treasuries Ladder: Tradeoffs in Theory and Practice.”  Journal of Forensic Economics, 23 (1): 1-31.

[7]Becker, Gary.  (1975).  Human Capital. New York, NY: National Bureau of Economic Research; Ben-Porath, Yoram.  (1967).  “The Production of Human Capital and the Life Cycle of Earnings.”  Journal of Political Economy, 75 (4): 352-365; and Gilbert, Roy F.  (1997).  “Long-Term and Short-Term Changes in Earnings Profiles.”  Journal of Forensic Economics, 10 (1): 29-49.

[8]Jackson v. City of Cookeville, 31 F.3d 1354, 1360 (6th Cir. 1994).

[9]Coffey, 929 S.W.2d at 332; Suggs, 72 F.3d at 1235.

[10]Ireland, Thomas R., and David G. Tucek.  (2011).  “Historical Net Discount Rates: An Update through 2010.”  Journal of Legal Economics, 18 (1): 109-122.

[12]Jackson, 31 F.3d at 1360.

[13]Pollard v. E.I. DuPont de Nemours, Inc., 338 F.Supp.2d 865, 880 (W.D.Tenn. 2003).

[14]Madden v. Chattanooga City Wide Serv. Dep’t, 549 F.3d 666, 679 (6th Cir. 2008); Killian v. Yorozu Automotive Tennessee, Inc., 454 F.3d 549, 558 (6th Cir. 2006).

[15]Jackson, 31 F.3d at 1360.

[16]Id.

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Sixth Circuit Rejects Labor Board's Finding that a 'Protest' by a Union Equates to a Request to Bargain

By: J. Gregory Grisham*

In Ohio Edison Company; FirstEnergy Generation Corp. v. National Labor Relations Board,[i] the Sixth Circuit Court of Appeals recently considered the question of whether a union official’s “protest” over the employer’s change to an employee-recognition program (ERP) amounted to a request to bargain over the change.

Fact Summary

The ERP was established by FirstEnergy Generation Corp (FirstEnergy or employer) in 1973. The ERP evolved over the years with the awards for employees available at the five, 10 and 15 years of service thresholds. The value of the awards were nomina, amounting to “about five to seven dollars per year of service.”[ii] The ERP had never been the subject of bargaining nor had it been mentioned in a collective bargaining agreement.

In 2012, FirstEnergy experienced a revenue decrease and a drop in its stock price prompting the company to take steps to reduce costs. Some of the cost-cutting measures impacted employees. In September 2012, FirstEnergy’s Director of Labor Relations Eileen McNamara began calling leaders of the local unions, including Herman Marshman, to advise of the changes that impacted bargaining unit employees.[iii] McNamara called Marshman on Sept. 18 and read from a prepared script. McNamara stated, effective Jan. 1, 2013, the company would reduce its 401k matching payments by 33 percent, its retiree life-insurance benefit by 60 percent and cap its educational reimbursement benefit. Finally, McNamara advised that the ERP would provide for an award every 10 years instead of every five. Marshman responded by stating “Oh no you don’t! Again? Now you know I have to file a board charge, honey…. [I] would have to come to Akron [the company headquarters] for this one.”[iv] McNamara emailed her supervisor after the call stating that Marshman “[was] not happy” and expressing her belief that he was “serious” about filing a charge and going to Akron.[v]

Marshman never made the trip to Akron. Rather, he filed an unfair labor practice charge with the National Labor Relations Board, six weeks after he spoke with McNamara, claiming the employer violated Section 8(a)(5) of the National Labor Relations Act by making several unilateral changes without bargaining with the union. The changes referenced in the charge were changes in the 401k matching contribution, future retiree benefits, the educational reimbursement, and the ERP.[vi]

Proceedings Before the Board

The only change that was litigated before the Administrative Law Judge (ALJ) was the change to the ERP. The ALJ found that the ERP was a “mandatory subject of bargaining” under the act and that Marshman’s statements to McNamara amounted to a request to bargain over the proposed change.[vii] The ALJ’s ruling was appealed to the board where (with) affirmed the ALJ’s findings, with one member dissenting.[viii] Thereafter, the employer filed a petition for review and the board filed a cross-application for enforcement with the Sixth Circuit.

Sixth Circuit’s Opinion.

The Court of Appeals first examined the issue of whether Marshman’s comments to McNamara amounted to a request to bargain about the change to the ERP. In deciding this issue, the Sixth Circuit set forth the standard for a request to bargain “[a] request to bargain need follow no specific form or be made in any specific words so long as there is a clear communication of meaning and the employer understands that a demand is being made.”[ix]

The Court of Appeals further stated that “the bargaining representative must do more than merely protest the change; it must meet its obligation to request bargaining” noting the difference between a protest -- “seek change by disapproval” with bargaining, and “seek change by signaling a willingness to offer something in return.”[x]

In addition, the Sixth Circuit found that the Board majority “neglected to consider all circumstances” but instead nearly focused exclusively on Marshman’s comments to McNamara.[xi] The comments made by Marshman were characterized by the Court of Appeals as an expression of disapproval that would only establish “protest.”[xii] However, the key inquiry was whether the comments taken as a whole amounted to a request to bargain, which the Court of Appeals found “ambiguous” but not “clear.”[xiii] The Court of Appeals also rejected the argument that Marshman’s threat to file a board charge and go to Akron amounted to a clear request to bargain.

Moreover, the Sixth Circuit stated that the surrounding circumstances did not support the board majority’s finding noting that the ERP change was small in monetary terms (“less than four dollars per member per year”) and as compared to the other changes announced by McNamara on her call with Marshman.[xiv]  In addition, the fact that the ERP had never been a subject for bargaining further undermined the Board’s finding.

The Sixth Circuit concluded by holding that the record did not support the board majority’s finding that a request to bargain had been made.[xv] Rather, the court adopted the views expressed by the dissenting board member thus granting the employer’s petition for review and denying enforcement of the board’s order.[xvi]

Takeaways

The Sixth Circuit’s ruling in FirstEnergy made an important distinction between a “protest” and a “clear” communication that could reasonably be construed as a request to bargain. The Court of Appeals also stressed the importance of the surrounding circumstances, such as course of dealing, in assessing whether a communication amounted to a bargaining request. Despite the court’s ruling, employers should exercise caution when communicating with union leaders about proposed changes that may implicate mandatory subjects of bargaining.  If unilateral changes are made when a “clear” request to bargain has been made, a potential remedy for the resulting unfair labor practice is an order to the employer to “undo” the change which can be very costly depending on the nature of the change.

_________________________

*J. Gregory Grisham is apartner in the Nashville and Memphis Offices of Ford Harrison LLP and focuses his practice on the representation of employers in all aspects of labor and employment law. He received his Juris Doctor (with honors) from the University of Memphis, Cecil C. Humphreys School of Law in 1989. He may be reached at ggrisham@fordharrison.com or 615-574-6707.


[i] ___ F. 3d ____, 2017 WL 541007 (6th Cir. February 10, 2017) (recommended for publication)

[ii] id. at *1.

[iii] id.

[iv] id.

[v] id.

[vi] id. at *2.

[vii] id.

[viii] id.

[ix] id. [quoting NLRB v. Barney’s Supercenter, Inc., 296 F.2d 91, 93 (3d Cir. 1961)].

[x] id. [citations omitted]

[xi] id. at *3.

[xii] id.

[xiii] id.

[xiv] id.

[xv] id. at *4.

[xvi] id.

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