News

State Employees Group Calls for End to Private Prisons

The association representing state employees is calling on Tennessee to stop using private prisons, a move that comes a week after the U.S. Department of Justice announced it would end its contracts with private prison operators. It is a new issue for the Tennessee State Employee Association, which has typically focused on issues involving working conditions and compensation. The group, which represents correctional officers and other state employees, argues there is “simply no good reason to continue paying a private prison company that provides an inferior product, lower levels of safety and security, and debatable cost savings for the public.” The Tennessean has the story.

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Northern Virginia Law Firm Opens Nashville Office

The northern Virginia Spiggle Law Firm has opened an office in Nashville, founder Tom Spiggle announced today. The employment law firm in the Washington, D.C., area focuses on wrongful termination and pregnancy and family-care discrimination in the workplace. The new office is being led by Phillis Rambsy, a Jackson native. An employment law attorney, Rambsy has worked at law firms in Tennessee, Kentucky, Washington and Maryland. The office is located in the UBS Tower at 315 Deaderick St., Suite 1550, Nashville 37238 and can be reached at 615-647-8952. Read more in this press release from the firm.

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UT Facing Costs of $3M for Title IX Suit

The University of Tennessee will spend roughly $3 million to settle a federal lawsuit alleging that the school allowed a “hostile sexual environment” and violated Title IX in its response to sexual assault cases, especially those accusing student athletes. The amount includes a $2.48 million payment to eight plaintiffs and legal fees to their lawyers, and more than $500,000 to the Nashville law firm Neal & Harwell, which represented the university in the matter, Knoxnews reports. The settlement was announced July 5.

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New Harassment Policy in Place for Officials, Staff

Tennessee House Speaker Beth Harwell, R-Nashville, has announced the immediate implementation of a new workplace harassment policy for the Tennessee General Assembly. The new policy expands the current focus on sexual harassment to include all workplace harassment and includes for the first time a transparency component, which will require that a public report be issued for any elected official or staff member found to be in violation of the policy. The new policy is the result of recommendations from a committee appointed by Harwell. Humphrey on the Hill has more from speaker's office and a link to the policy.

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Corporate Counsel Courses Now Online

Did you miss the 2016 Corporate Counsel forum? Good news, you can now stream high-quality online videos from the program on our website. Sessions cover ERISA and ACA litigation updates, new federal overtime rules, OSHA investigations and recent developments in employment law.

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Court Will Not Rehear Union Dues Case

The U.S. Supreme Court on a 4-4 vote declined to rehear a challenge by California teachers to a ruling that a union’s “fair share” agreement with the state did not violate their constitutional rights. The teachers had urged the court to hold the case until a ninth justice was confirmed and seated, but the court denied the petition for rehearing without comment. Legal counsel for the group said it was disappointed in the court’s action but “will look for opportunities to challenge compulsory union dues in other cases.” Bloomberg BNA has more on the case.

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Disability Rights Tennessee Wants to Hear From You!

Disability Rights Tennessee has launched a survey aimed at gathering information from people with disabilities, family members, service providers and professionals to help shape the work of the organization.

The organization is looking for as much information as possible, so please feel free to share the survey with partners, colleagues and friends, so that an accurate picture of the needs of those with disabilities in the State of Tennessee can be compiled. Take the survey now. The deadline to respond is July 11.

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Mississippi Religious Objections Bill Blocked

A federal judge ruled yesterday that Mississippi clerks cannot cite religious beliefs to avoid issuing marriage licenses to same-sex couples, the Associated Press reports. The ruling blocks the state from enforcing part of a religious objections bill that was supposed to become law Friday. State officials indicated they likely would appeal the decision to the Fifth Circuit Court of Appeals. News 5 has the story.

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Court Still to Rule on Most Controversial Cases

The U.S. Supreme Court issued five decisions Monday, including rulings (1) upholding a patent review procedure known as inter partes review, which has been used by Apple and Google to invalidate patents; (2) directing lower courts in Alabama, Louisiana and Mississippi to re-examine three convictions for evidence of racial prejudice in jury selection; and (3) directing the U.S. Labor Department to do a better job of explaining why it is changing a longstanding policy on whether certain workers deserve overtime pay. With just one week left in the court’s current term, however, the most contentious cases still need to be resolved, including regulation of Texas abortion clinics, the use of race in college admissions, the legality of the president’s immigration executive orders, and the public corruption conviction of Virginia’s former governor. WKRN looks at the remaining cases.

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Columnists Cover Elders, Recording Employees and Coffee, Milk and Sugar

This month's Tennessee Bar Journal columnists cover a lot of ground: Monica Franklin writes about "Protecting Older Adults from Financial Exploitation: Proposed Federal Laws and Regulations." Edward Phillips and Brandon Morrow explore the issues of one employee recording another's harassment in "O, That Mine Enemy Would Record Me With Her Smartphone." Humor columnist Bill Haltom handles a hot topic with a cold outcome -- a recent lawsuit involving too much ice in Starbucks coffee. The Hon. Creed McGinley reviews Haltom's new book, Milk & Sugar: The Complete Book of Seersucker. Read the review, then come to the TBA Convention on Thursday to have the book signed, following the CLE, "Seersucker and Civility: How to Dress and Behave Like a Lawyer."

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Learn About New Overtime Rule in 1-Hour Webcast

Nashville attorneys Stanley Graham and Andrew Naylor, both of Waller Lansden Dortch & Davis LLP, will explain the new federal overtime rule in a one-hour webcast CLE on June 28 at noon CST. The changes include increasing the minimum salary required for exempt employees from $23,660 to over $47,000 per year. The course, approved for one CLE credit, will replay on July 21. 

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Former UT Football Player Sues SEC, NCAA

The Tennessean reports that former University of Tennessee football player O.J. Owens is suing the Southeastern Conference and the NCAA in an effort to recoup unspecified damages for the effects of head trauma he experienced during his college career. His suit is one of 10 filed in the past two months by Chicago-based law firm Edelson on behalf of former college football players. UT is not named as a defendant in the suit. 

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Sen. Alexander Acts to Block New Overtime Rule

U.S. Sen. Lamar Alexander, R-Tenn., today filed legislation that would nullify the new federal overtime rule that allows full-time salaried employees to qualify for overtime if they make up to $47,476 a year. Alexander argued the change – set to take effect later this year – would reduce work hours and inhibit flexible work schedules. The Knoxville News Sentinel reports U.S. Sen. Ron Johnson, R-Wis., chairman of the Senate Homeland Security and Governmental Affairs Committee, joined Alexander in the filing. 

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Jury Awards $2M to Conductor Struck by Train

A jury this week awarded railroad conductor Shawn Hall more than $2 million after he was struck by a train in Shelby County, even after determining that Hall was 50 percent responsible for the accident. Hall, who lost part of his leg and fractured both of his arms in the accident, argued Illinois Central Railroad Company was negligent because it failed to warn him of the unscheduled train that hit him. Read more from The Commercial Appeal

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Court to Decide Whether Workers Can Sue Employers Over Tips

The Tennessee Supreme Court today heard a case that debates whether service industry workers who believe their tips are being unfairly split can sue their employers, or if they must file complaints with state regulators. State law says that tips left at businesses like bars and restaurants should go to employees who serve patrons, according to The Tennessean. The case was brought by a former server and bartender at a PGA Tour country club in Memphis who filed a class-action suit in March that claimed the business and PGA affiliates were withholding tips she and others had earned. 

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New Federal Overtime Rule Finalized

The U.S. Department of Labor finalized today a new overtime rule that will make employees who earn yearly salaries of $47,476 or less to be eligible for overtime if they work more than 40 hours a week. The overtime rule, which has not been changed since 2004, is expected to impact 4.2 million workers. Read more from Fast Company.

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Circuit Court Denies Claims in Age Discrimination Suits

Two former Knox County 4th Circuit Court supervisors filed identical age discrimination lawsuits that claim their ages and salaries were the reason for their termination in January 2015. But Knox County Criminal Court Clerk Mike Hammond paints a different picture of why they were let go, claiming the pair “acted as ringmasters over a circus atmosphere surrounding the handling of domestic violence cases.” The county also denied the women, ages 66 and 60, were the oldest on staff. The Knoxville News Sentinel reports the women are each seeking $500,000 in punitive damages as well as lost wages.

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Volkswagen to Appeal Ruling on Chattanooga Union Election

Volkswagen is appealing a National Labor Relations Board ruling that enabled a union vote by the United Auto Workers at the automaker’s Chattanooga assembly plant, the Associated Press reports.  A Volkswagen Chattanooga spokesman said the board “declined to fully evaluate” Volkswagen's challenge to the election. About 160 workers participated in the December election; the company said labor decisions should be made by the entire hourly workforce.

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Annual Labor & Employment Forum, May 6

Debra Lawrence of the Equal Employment Opportunity Commission will speak on the Equal Pay Act at the 20th Annual Labor & Employment Forum on May 6 at the Bar Center in Nashville. Other topics include federal and Tennessee Law updates, hot topics in wage and hour law, and perspectives from the bench. The forum, approved for six CLE credits, is from 8:30 a.m. – 3 p.m. Register by May 1.

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Calculating Economic Losses in Employment Termination Cases in Tennessee

*By Charles L. Baum II, Ph.D.

In employment termination cases, plaintiffs will typically claim compensatory damages that include lost earnings. In these cases, attorneys may hire a forensic economist to calculate the value of these losses. The courts provide guidance to be followed when calculating lost earnings from a termination. For example, in Suggs v. ServiceMaster Educ. Food Management, the court identifies the following factors to be considered: “(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’” (quoting Shore v. Federal Express Corp.).[i] In this article, I review the guidance provided by Tennessee statutes for these and other key factors when calculating lost earnings in ET cases.

I. Earnings Capacity

Tennessee courts allow damages from lost earnings to be recovered in ET cases[ii] to make the injured party whole.[iii] In Frye v. Memphis State Univ., the Tennessee Supreme Court defines the appropriate measure of damages to be “the amount the employee 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.”[iv]

Plaintiffs may recover losses from the time of the termination to the trial—referred to as back pay—and losses incurred after the trial—referred to as front pay—if it is not possible for the terminated employee to be reinstated to the original position of employment.[v] Otherwise, the courts seem to view reinstatement as the preferred remedy.[vi] Regardless, reinstatement and an award of front pay are alternative remedies and should not be applied cumulatively.[vii]

II. Employment Benefits

Many workers receive compensation from their employers in the form of employment benefits. For example, health insurance benefits and retirement contributions are often at least partially financed by the employer. Other benefits, such Social Security and Medicare contributions made by the employer on behalf of the employee, are mandated by the government.

Employment benefits in ET cases in Tennessee are recoverable;[viii] however Tennessee courts do not provide instructions for calculating their value. As a result, these losses are typically handled in the same fashion as lost wage and salary earnings. If a worker lost an employment benefit as a result of an employment termination but that individual did not replace the benefit that had been provided by the employer after the termination, then the plaintiff may be ineligible to claim damages, and therefore receive compensation, for that benefit.[ix]

III. Growth Rates

Earnings typically grow over time with inflation as prices increase and with productivity increases. Tennessee courts in ET cases allow awards of front pay to grow for these reasons.[x] Although earnings are anticipated to grow over time, Tennessee statutes do not address what acceptable growth rates might be. Earnings growth should not be included as damages when future raises are speculative.[xi]

IV. Worklife and Life Expectancies

Worklife expectancy is often used in ET cases when calculating front pay to estimate the number of years an individual would have remained in the labor force and been employed. Tennessee courts recognize the appropriateness of examining losses over one’s worklife,[xii] but they provide no preference for the methodology to use when approximating worklife expectancy. Economists in Tennessee cases have used worklife expectancy tables produced by researchers, made their own separate adjustments for the probability of living and the probability of being employed, and assumed fixed worklife durations based on common retirement ages.[xiii] Front pay damages have not been allowed when the terminated worker could not reasonably have remained with the terminating employer.[xiv]

V. Mitigation

Those who are injured are typically assumed by forensic economists to take action to limit damage. In ET cases, a primary way terminated workers can limit damage to offset losses is by acquiring another job with earnings and benefits. For example, in Frye v. Memphis State Univ., the Tennessee Supreme Court states that in the case of a wrongful termination, “there is a duty to minimize this loss by seeking other employment.”[xv] With mitigation, economic damages should be the difference in compensation from earnings and benefits without and with the employment termination (i.e., mitigating factors should be subtracted from any economic losses).[xvi] If the worker becomes employed at another job that pays more than the terminating employer, there would be no subsequent damages from earnings losses.[xvii]

The terminated worker is “required to exercise reasonable diligence in seeking other employment of a similar or comparable nature … [but] … [t]he employee is not required to mitigate damages by accepting a position that is not comparable or is, in effect, a demotion.”[xviii] If the plaintiff does not exercise reasonable diligence to find another job, then the right to subsequent damages is forfeited, but the defendant has the burden of proving this.[xix]

Similarly, economic damages should be reduced by payments, such as severance pay, made by the terminating employer to the plaintiff, [xx] but the tortfeasor’s liability should not be reduced for payments, such as unemployment compensation, that they have not financed.[xxi]

VI. Interest

Tennessee courts have allowed interest to be paid on pre-judgment losses as damages in ET cases,[xxii] to make the plaintiff whole,[xxiii] with a few exceptions (such as inexcusable delays in pursuing a claim).[xxiv] Post-judgment interest on upheld damages awards may be allowed during appeals.[xxv]

Tennessee Code Annotated §47-14-123 limits interest to not more than 10 percent.[xxvi] In compliance, the District Court in Taylor v. Brennan used the interest rate on U.S. Treasury bills during the relevant loss period.[xxvii] However, in Killian v. Yorozu Auto. Tenn. Inc., the jury failed to include pre-judgement interest, which benefited the defendant, and failed to discount future losses to present value, which benefited the plaintiff, so the appeals court did not adjust the damages calculations because these errors were thought to at least partially offset one another.[xxviii]

[i] Suggs v. ServiceMaster Educ. Food Management, 72 F.3d 1228, 1234 (6th Cir. 1996); Shore v. Federal Express Corp., 777 F.2d 1155, 1160 (6th Cir. 1985).

[ii] Frye v. Memphis State University, 806 S.W.2d 170 (Tenn. 1991); Shore, 777 F.2d at 1158.

[iii] Barnes v. Goodyear Tire and Rubber Co., 2001 WL 568033 at *4 (Tenn.Ct.App. 2001); Hawley v. Dresser Industries, Inc., 958 F2d 720, 725 (6th Cir. 1992).

[iv] Frye, 806 S.W.2d at 173.

[v] Coffey v. Fayette Tubular Product, 929 S.W.2d 326, 332 (Tenn. 1996); Suggs, 72 F.3d at 1234; Sasser v. Averitt Exp., Inc., 839 S.W.2d 422, 433 (Tenn.Ct.App. 1992).

[vi] Sasser, 839 S.W.2d at 432.

[vii] Suggs, 72 F.3d at 1234; Sasser, 839 S.W.2d at 435.

[viii] For example, see Jordan v. A.C. Enterprises, Inc., 2012 WL 6562032 at *4 (Tenn.Ct.App. 2012) or Taylor v. Brennan, 2015 WL 3466272 at *1 (W.D. Tenn. 2015).

[ix] Plunk v. Gibson Guitar Corp., 2013 WL 2420539 at *10 (Tenn.Ct.App. 2013).

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

[xi] Barnes, 2001 WL 568033 at *4.

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

[xiii] For examples, see Branson v. Harrah’s Tunica Corp., 832 F.Supp.2d 929, 939 (W.D. Tenn. 2011), Cox v. Shelby State Community College, 194 Fed.Appx. 267, 276 (6th Cir. 2006), and Mountjoy v. City of Chattanooga, 2002 WL 707467 at *5 (Tenn.Ct.App. 2002).

[xiv] For examples, see Ayala v. Summit Constructors Inc., 788 F.Supp.2d 703, 724 (M.D. Tenn. 2011) and Bohannon v. Baptist Memorial Hospital-Tipton, 2010 WL 1856548 at *7 (W.D. Tenn. 2010).

[xv] Frye, 806 S.W.2d at 173.

[xvi] Coffey, 929 S.W.2d at 332; Sasser, 839 S.W.2d at 434.

[xvii] Maness v. Collins, 2010 WL 4629614 at *11 (Tenn.Ct.App. 2010); Denney v. Lovett, 2006 WL 1915303 at *10 (Tenn.Ct.App. 2006).

[xviii] Frye, 806 S.W.2d at 173.

[xix] Maness, 2010 WL 4629614 at *10; Frye, 806 S.W.2d at 173.

[xx] Barnes, 2001 WL 568033 at *9.

[xxi] Hoback v. City of Chattanooga, 2012 WL 3834828 at *13 (E.D. Tenn. 2012); Barnes, 2001 WL 568033 at *8; Jackson, 31 F.3d at 1360.

[xxii] Frye, 806 S.W.2d at 172; Shore, 777 F.2d at 1158.

[xxiii] Scholz v. S.B. Intern., Inc., 40 S.W.3d 78, 83 (Tenn.Ct.App. 2000); Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998); Spencer v. A-1 Crane Serv., Inc., 880 S.W.2d 938, 944 (Tenn. 1994).

[xxiv] Foster-Henderson v. Memphis Health Center, Inc., 479 S.W.3d 214, 226 (Tenn.Ct.App. 2015); Scholz v. S.B. Intern., Inc., 40 S.W.3d at 783.

[xxv] Shalka v. Fernald Environmental Restoration Management Corp., 178 F.3d 414, 427 (6th Cir. 1999).

[xxvi] T.C.A. §47-14-123. [xxvii] Taylor, 2015 WL 3466272 at *3. [xxviii] Killian, 454 F.3d at 558.

_________________________

*Charles L. Baum is a professor of economics at Middle Tennessee State University, where he has taught since 1999. Dr. 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.  Dr. 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. Dr. Baum has published several articles in peer-reviewed economics journals on the methodologies used when calculating economic losses.  In July 2015, he published an article in the Tennessee Bar Journal on guidance provided by Tennessee statutes on economic damages in employment termination cases.  To contact Dr. Baum, please e-mail him at baumeconomics@gmail.com or call at 615-556-9287.

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More Damages Ordered to Trooper Wrongly Labeled Terrorist

A federal appeals court ordered U.S. District Judge Tena Campbell to consider "a more appropriate damages award" for a former trooper with the Knoxville branch of Tennessee Highway Patrol, who was fired after a military liaison falsely labeled him a budding terrorist. De'Ossie Dingus, a Sunni Muslim, was denied his attorney’s request for $300,000 in damages; Campbell denied that request primarily because Dingus did not seek counseling. She symbolically awarded him $1. Dingus had won a separate hearing that awarded him back pay and lost wages. Read more from the Knoxville News Sentinel

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Don't Miss 20th Annual TBA Labor and Employment Law Section CLE

Join us at the 20th Annual TBA Labor and Employment Law Section CLE, which will address the latest developments in labor and employment law. This CLE will be held on May 6 at the Tennessee Bar Center in Nashville.

Speakers include:

  • United States District Court Judge Pamela Reeves
  • Sixth Circuit Court of Appeals Judge Julia Gibbons
  • Debra Lawrence of the Equal Employment Opportunity Commission

Topics include the following:

  • Perspectives from the bench
  • Important new federal cases
  • A primer on the Equal Pay Act
  • Ethics

As a bonus, TBA Labor and Employment Law Section Members receive a section discount for this program and all other CLE sponsored by the Labor and Employment Law Section throughout the year. If you know someone who is not a section member, please encourage him or her to join the section and start saving money on CLE programming.

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No WARNing Needed by Vanderbilt

*By Joshua Sudbury and Allison Cotton

In the recent Sixth Circuit case, Morton v. Vanderbilt University, 809 F.3d 294, the Sixth Circuit Court of Appeals considered Vanderbilt University’s appeal of the Middle District of Tennessee’s decision that it failed to give proper notice to employees during a 2013 mass layoff.

The plaintiffs in Morton consisted of a class of 194 employees who were terminated by Vanderbilt on July 1, 2013. Standing along, the class was insufficient to constitute a “mass layoff,” as defined under WARN.[i] As a result, the Morton plaintiffs sought to invoke the WARN Act’s aggregation provision, which allows separate layoffs to be counted together for purposes of the 500 employee threshold if they occur during a 90-day period.[ii]  The plaintiffs argued the WARN Act applied as a result of 279 other Vanderbilt University employees who were notified on or about Sept. 17, 2013, that their jobs would be eliminated on Nov. 16, 2013.[iii]  The District Court agreed.

On appeal, the Sixth Circuit noted the case presented an unusual situation in that the fate of the Morton plaintiffs rested upon the Court’s determination of Vanderbilt’s handling of its termination of 279 other employees who were not party to the lawsuit and who had not protested their termination.[iv] Between approximately Sept. 17 and 19, 2013, Vanderbilt provided 279 employees with individualized letters notifying them that their positions would be eliminated on or about Nov. 16, 2013 – 60 days following the date of their notification.[v]  The letters specifically stated the employees would “remain employed” but would be placed on a “paid leave” for the 60-day period. The employees were told they should gather their personal belongings and return all Vanderbilt property. They were given career transition counseling, following which, they were to leave the campus. The employees were told not to return to work and that it would be inappropriate to come to their work areas to socialize or visit. The employees remained on Vanderbilt's payroll and received their full pay and benefits on their regular pay dates during the 60-day period. Finally, the employees were free to use the 60–day leave period to seek other employment, and were not required to inform Vanderbilt if they found employment elsewhere during this time. They continued to be paid through the notice period, regardless.

The District Court found the termination occurred on Sept. 19, 2013, when the employees were informed their employment was over, asked to turn in all Vanderbilt property, and asked to leave campus and not return. The District Court found persuasive that the employees were on “paid leave” and could find other employment without losing their full 60 days of benefits from Vanderbilt.

The Sixth Circuit disagreed, finding instead the termination occurred on Nov. 16, 2013, outside the 90-day window provided in the WARN Act’s aggregation clause. Rather than relying on Vanderbilt’s instruction that the employees not return to work, the Sixth Circuit focused on the financial realities of the termination, noting the employees continued to receive their regular salaries, and were unable to receive unemployment benefits under the 60-day period had ended. In so holding the Sixth Circuit panel noted “so long as these employees were being paid and accruing benefits, there had not been a permanent cessation of the employment relationship.”[vi] The Court reasoned the 60-day paid notice period comported with the purpose of the WARN Act, which is to provide workers “some transition time to adjust to the prospective loss of employment, to seek and obtain alternative jobs and, if necessary, to enter skill training or retraining that will allow these workers to successfully compete in the job market.”[vii] The Sixth Circuit further opined that the District Court’s ruling would make it impossible for employers to give notice of termination as required under the Act.[viii]

Plaintiffs argued that the 60-day pay period was “pay in lieu of notice,” which is a violation of the WARN Act, but the Court found notice was properly given, and the pay was in addition to notice.  The Court further found that Vanderbilt was not wrong in spacing out layoffs so that some occur beyond a relevant 90–day period under the WARN Act, and employers are permitted to rely on the WARN Act’s provisions to time their layoffs.

The Morton opinion provides employers within the Sixth Circuit with a helpful guide for structuring the timing and of potential layoffs as well as for planning for giving employees sufficient notice and opportunity to transition to alternative employment. Adhering to the procedures highlighted in the opinion can help covered employers successfully navigate mass layoffs without incurring additional liability.

____________________________

*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.

Allison Cotton an associate at Ford Harrison in its Nashville office, where she concentrates her practice on the representation of employers in labor and employment matters.  She received her J.D. from University of Tennessee School of Law in 2010, where she was a Student Materials Editor for the Tennessee Law Review and a Research Editor for Transactions: The Tennessee Journal of Business Law. Allison may be reached at acotton@fordharrison.com



[i] The statute defines “mass layoff” as a reduction in force, which is not the result of a plant closing, that results in an employment loss at a single site of employment during any 30–day period and involves at least 500 full-time employees. 29 U.S.C. § 2101(a)(3).

[ii] 29 U.S.C. § 2102(d). 

[iii] For the purpose of the appeal, the parties stipulated the 500 employee threshold would be met if the Court ruled the group of 279 other employees who got notice on September 17th were terminated on that date. Morton, 809 F.3d at 295 n.1.

[iv] Id. at 295.

[v] Id.

[vi] Morton, 809 F.3d at 296.

[vii] 20 C.F.R. 639.1(a).

[viii] Id.

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NLRB Holds Company Rules Banning Workplace Recording by Employees Violates NLRA

*By J. Gregory Grisham

On Dec. 24, 2015, the NLRB (“Board”), in Whole Foods Market Group Inc., in a 2 to 1 decision, held that two company rules which prohibited workplace recording by employees without prior approval by management were unlawful under the National Labor Relations Act (“Act”).[i]

Background

The Respondent (“Whole Foods”) maintained a General Information Guide (“GIG”) that it issued to employees companywide.[ii] Among the rules contained in the GIG were two rules that restricted workplace recording by employees. The rules were set forth in two sections of the GIG.The first rule under the subheading “Team Meetings” stated:[iii]

In order to encourage open communication, free exchange of ideas, spontaneous and honest dialogue and an atmosphere of trust, Whole Foods Market has adopted the following policy concerning the audio and/or video recording of company meetings:

It is a violation of Whole Foods Market policy to record conversations, phone calls, images or company meetings with any recording device (including but not limited to a cellular telephone, PDA, digital recording device, digital camera, etc.) unless prior approval is received from your Store/Facility Team Leader, Regional President, Global Vice President or a member of the Executive Team, or unless all parties to the conversation give their consent. Violation of this policy will result in corrective action, up to and including discharge. Please note that while many Whole Foods Market locations may have security or surveillance cameras operating in areas where company meetings or conversations are taking place, their purposes are to protect our customers and Team Members and to discourage theft and robbery.

The second rule under the heading “Team Member Recordings” stated:[iv]

It is a violation of Whole Foods Market policy to record conversations with a tape recorder or other recording device (including a cell phone or any electronic device) unless prior approval is received from your store or facility leadership. The purpose of this policy is to eliminate a chilling effect on the expression of views that may exist when one person is concerned that his or her conversation with another is being secretly recorded. This concern can inhibit spontaneous and honest dialogue especially when sensitive or confidential matters are being discussed.

At the hearing before the Administrative Law Judge (“ALJ”), Whole Foods presented testimony from its global vice president for team member services, Mark Ehrnstein, who explained the rules scope and the business purpose for the rules which had been in effect since 2001. Mr. Ehrnstein testified that the rules applied to all types of recording devices, to both employees and managers, and to all areas of every store and store property. Ehrnstein further “testified that an employee on worktime [was] precluded from recording a conversation without prior management approval, regardless of whether the employee [was] engaged in protected concerted activity.”[v] In addition, Ehrnstein set forth the underlying purposes for the no recording rule. One purpose was to prevent employees from being “chilled” in freely expressing their opinions during company meetings, including at the “town hall” meetings held by regional management. Another purpose was to promote free discussion during appeals of termination decisions by employees to a panel of their peers. Finally, Ehrnstein testified that the rule promoted “open dialogue” during meetings at which employees request assistance from the company’s “Team Member Emergency Fund” since such “matters are often confidential, involving financial need, family death, illness or personal crisis.”[vi]

The ALJ ruled that the no recording rule did not violate Section 8(a)(1) of the Act finding that “rule did not explicitly restrict Section 7 activity because it ‘does not prohibit employees from engaging in protected, concerted activities, or speaking about them,’ and because “[m]aking recordings in the workplace is not a protected right.’ The ALJ also noted “that the General Counsel did not allege that [Whole Foods] had promulgated the rule in response to union activity or that the [the company] had applied it to restrict the exercise of employees’ Section 7 rights.” The ALJ “further found that the rule ‘cannot reasonably be read as encompassing Section 7 activity.’”

Board’s Decision

The Board majority disagreed with the ALJ and found that the no recording rule “would reasonably be construed by employees to prohibit Section 7 activity.”[vii] The Board began its analysis by noting that “[p]hotography and audio or video recording in the workplace, as well as the posting of photographs and recordings on social media, are protected by Section 7 if employees are acting in concert for their mutual aid and protection and no overriding employer interest is present.”[viii] The Board cited several examples of protected conduct that involve use of workplace recordings including “recording images of protected picketing, documenting unsafe workplace equipment or hazardous working conditions, and documenting and publicizing discussions about terms and conditions of employment.”[ix] Further, the Board noted that its case precedent had many examples where recordings served as critical evidence in proving violations of the Act. Therefore, the Board reasoned that case law supported “the proposition that photography and audio and video recording at the workplace are protected under certain circumstances.”[x]

Turning to the rules at issue, the Board noted that the rules did not differentiate between workplace recordings protected by Section 7 of the Act and unprotected recordings, but rather prohibited all recording without prior management approval. The Board rejected the argument that the explanation for the rule set forth within the rule cured its overbreadth. Because of the admitted scope of the rules and their “broad and unqualified language, the Board found “that employees would reasonably read the rules as prohibiting recording activity that would be protected by Section 7… and that the rules would reasonably chill employees in the exercise of their Section 7 rights.”[xi] The Board majority concluded its analysis by distinguishing a prior Board decision, Flagstaff Medical Center,[xii] where a no recording rule was upheld based on patient privacy interests and the employer’s obligations to comply with HIPAA.[xiii]

Take Aways

The Board’s decision in Whole Foods is another example of the current Board’s willingness to invalidate longstanding employer work rules that are viewed as potentially posing an obstacle to the exercise of Section 7 rights. After the Board’s decision in Whole Foods, rules placing blanket prohibitions on workplace recording will likely be found to violate the Act outside work environments where statutorily protected privacy interests are found such as in healthcare settings. With the current Board, employers must continue to review handbook rules and policies in light of evolving case law and make modifications where necessary to achieve compliance with the Act.

_________________________

*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.


[i] 363 NLRB No. 87, at p. 1 (2015)

[ii] Id.

[iii] Id.

[iv]Id.

[v] Id.

[vi] Id.

[vii] Id. at p. 3.

[viii] Id. citing Rio All-Suites Hotel & Casino, 362 NLRB No. 190, slip op. at 4 (2015).

[ix] 363 NLRB No. 87, at p. 3.

[x] Id.

[xi] Id.

[xii] 357 NLRB No. 65 (2011), enfd. in relevant part,715 F.3d 928 (D.C. Cir. 2013).

[xiii] 363 NLRB No. 87, at p. 4-5.

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Register Today for the 135th Annual TBA Convention

Join us on June 15-18 in Nashville for the 135th Annual Convention! Registration for the 2016 TBA Convention includes:

  • free access to all TBA CLE programming;
  • the Opening Reception;
  • the Bench Bar Programming and Luncheon;
  • Law School and general breakfasts;
  • the Lawyers Luncheon;
  • the Thursday evening Joint (TBA/TLAW/TABL) Reception;
  • the Thursday night dinner and entertainment at the George Jones Museum;
  • and the Friday night Dance Party.

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