One of the most controversial issues in employment law these days involves the position of the National Labor Relations Board (“NLRB” or “Board”) that an employer violates the National Labor Relations Act (“NLRA”) when it requires employees to pursue any dispute they have with their employer on an individual, rather than on a class or collective action, basis with other employees. It is a position that has been adopted by two circuit courts and rejected by three—a conflict that suggests that the issue is ripe for U.S. Supreme Court review.

The NLRB has contended that when an employer requires employees to sign an agreement precluding them from bringing or joining a concerted legal claim regarding wages, hours, and other terms and conditions of employment, the employer deprives them of rights guaranteed under Section 7 of the NLRA to engage in concerted activities for employees’ mutual aid or protection. That right, the proponents argue, includes the right to join together in class and collective litigation to pursue workplace grievances in court or in arbitration.

In making that argument, the NLRB appears to be neglecting the second part of Section 7 (added to the NLRA by the 1947 Taft-Hartley Amendments), which guarantees to employees an equal right to refrain from engaging in concerted activities for their mutual aid and protection. It would seem to follow that, if they have the right to refrain from engaging in concerted activities, employees could waive their right to participate in class and collective actions.

While the NLRB’s argument appears flawed, the Seventh and Ninth Circuits have agreed with the NLRB that where such agreements are a condition of employment, they deprived employees of their rights to engage in “concerted activities” for their mutual aid and benefit guaranteed to them under Section 7 of the NLRA. These decisions conflict with earlier decisions of the Fifth, Eighth, and, most recently, Second Circuits rejecting the Board’s position.

At least one dissenting judge, Sandra Ikuta of the Ninth Circuit, stated that the majority decision was “breathtaking in its scope and in its error.” She noted that the majority decision was directly contrary to Supreme Court Federal Arbitration Act (“FAA”) precedent and that the individual arbitration mandate should have been enforced according to its terms under the FAA. The Ninth Circuit, it should be noted, previously held that an arbitration agreement with a class and collective action waiver did not violate the NLRA when the employee could opt out of the individual arbitration agreement but chose not to do so.

In those jurisdictions covered by the Seventh and Ninth Circuits, class and collective action waivers are likely unenforceable to the extent they are a condition of employment. In jurisdictions covered by the Second, Fifth, and Eighth Circuits, class and collective action waivers would appear to be enforceable. Other circuits have yet to rule on the issue, leaving district courts within those circuits to weigh conflicting arguments on both sides.

The Supreme Court may well step in to resolve the conflict between the circuits on this important issue. Petitions for certiorari have been filed recently in four different cases. The issue before the Supreme Court in all four of these cases is whether the NLRA prohibits an employer from requiring employees to agree to waive their rights to arbitrate class and collective disputes or whether the FAA, which favors arbitration, controls; in short, whether class and collective waivers in arbitration agreements are enforceable. As there is clearly a conflict among the circuits, it would appear that there is a significant chance that the Supreme Court will grant certiorari and resolve this conflict.

As a practical matter, U.S. Supreme Court Justice Anthony Scalia’s death earlier this year, his still-unfilled seat, and the upcoming presidential election may play significant roles in resolving this issue if the Supreme Court grants certiorari. As many will recall, it was Justice Scalia who wrote the majority opinions in AT&T Mobility v. Concepcion and American Express v. Italian Colors. In those cases, the Supreme Court upheld class action waivers, albeit in the commercial setting, not in an employment, setting. With Justice Scalia’s seat unfilled and only eight current justices, a four-to-four split at the Supreme Court would leave all of the circuit decisions standing, including both the Seventh and Ninth Circuit decisions in favor of the NLRB’s position, as well as the Second, Fifth, and Eighth Circuit decisions rejecting the NLRB’s position. Depending upon which party wins the upcoming presidential elections, the makeup of the Supreme Court justices (and of the five-member NLRB) may play a significant role in the outcome of this issue.

A version of this article originally appeared in the Take 5 newsletter Five Critical Wage and Hour Issues Impacting Employers.”

The top story on Employment Law This Week is the EEOC’s release of fiscal year 2015 enforcement data.

Retaliation claims were once again the number one type of charge filed, up 5% from last year for a total of 44.5% of all charges. Race claims were second, making up 34.7% of claims. 30.2% of charges alleged disability discrimination, up 6% from last year. Ronald M. Green from Epstein Becker Green (EBG) gives more detail on what’s behind the numbers.

View the episode below or read recent comments about the EEOC’s release, from David W. Garland of EBG.

Conference room behind blindsIn a split decision, the Ninth Circuit Court of Appeals has declined to adopt a bright-line rule to assess whether a managerial employee has filed a complaint for the purposes of § 215(a)(3) of the Fair Labor Standards Act (“FLSA”), the statute’s anti-retaliation provision.  The decision, Rosenfield v. GlobalTranz Enterprises, appears to highlight a disagreement among the Circuits.

At least four Circuit Courts – the First, Fifth, Sixth and Tenth – have adopted a manager-specific legal standard:  in order to engage in protected activity under § 215(a)(3), the employee must step outside his or her role of representing the company and either file (or threaten to file) an action adverse to the employer, actively assist other employees in asserting FLSA rights, or otherwise engage in activities that reasonably could be perceived as directed towards the assertion of rights protected by the FLSA.  Declining to adopt such a standard, the Ninth Circuit has opted to follow a generalized “fair notice” standard, ruling that a complaining employee’s position as a manager is only one contextual element for a fact-finder to consider.

In Rosenfield, a former Director of Human Resources alleged that her employer fired her for complaining to other managers and executives about alleged FLSA violations.  The issue before the Ninth Circuit was whether managerial employees must step outside of their roles representing the company in order to be considered to have engaged in protected activity under § 215(a)(3), by either filing (or threatening to file) an action adverse to the employer, actively assisting other employees in asserting FLSA rights, or otherwise engaging in activities that reasonably could be perceived as directed towards the assertion of rights protected by the FLSA.  In addition to considering arguments presented by the parties, the Ninth Circuit solicited the views of the Department of Labor and the Equal Opportunity Commission.

In Rosenfield, both the majority and dissent agreed that managers are necessarily in a different position vis-à-vis the employer than are rank-and-file employees because their employer expects them to voice work-related concerns and to suggest changes in policy.  The majority went so far as to acknowledge that while an employer “almost certainly” would understand a report made by an entry-level employee that someone is underpaid in violation of the FLSA as a “complaint,” a reasonable employer would not necessarily recognize as a “complaint” an identical report made by a manager tasked with ensuring the company’s compliance with the FLSA.  Rather, the employer would understand the manager to be simply carrying out his or her duties.

While other Circuits have adopted a manager-specific legal standard that requires a managerial employee to step out of his or her role of representing the company by becoming adverse to his or her employer in some way in order to file a “complaint” under § 215(a)(3), the Ninth Circuit has concluded that  such a bright-line rule is unnecessary.  Instead, it concluded that the “fair notice” test articulated by the U.S. Supreme Court in a 2011 decision provides adequate guidance for considering an employee’s status as a “manager” as one of several important factors.  In addition, the Ninth Circuit held that a narrower rule fails to account for varying levels of managers.  Specifically, “[a] different perspective on fair notice may apply as between a first level manager who is responsible for overseeing day-to-day operations and a high-level manager who is responsible for insuring the company’s compliance with the FLSA.  Refining the general rule to focus on only one specific factual element may obscure important nuances.”

Applying the fair notice test to the facts, the Ninth Circuit reversed the District Court’s decision granting summary judgment in favor of GlobalTranz and found that a reasonable jury could find that the plaintiff’s advocacy reached the requisite degree of formality to constitute protected activity under § 215(a)(3).

While the Supreme Court may eventually weigh in on the split between the Circuits, it remains as important as ever for employers in all Circuits to take all reports of FLSA violations seriously, regardless of whether they are made by managerial or non-managerial employees.

By David Jacobs and Amy B. Messigian

We would like to call your attention to a significant change to the whistleblower statute in California that went into effect on January 1. The statute, Cal. Lab. Code section 1102.5, has been substantially expanded beyond its prior form to now protect employees from retaliation for making internal complaints or even potential complaints about suspected violations of federal, state or local law.

California previously protected employees from retaliation for reporting reasonably suspected violations of state or federal laws to a government agency. The new law also extends whistleblower protections to employees who report behavior that they reasonably believe to be illegal to a supervisor or other employee with authority to “investigate, discover or correct,” or to a “public body conducting an investigation, hearing or inquiry.”  The new law also expands these protections to cover complaints about local laws. Thus, it is possible that a complaint relating to the purported violation of an obscure ordinance could give rise to protection under the amended statute.

Therefore, under the new law any complaint made to human resources that relates to purportedly unlawful conduct may result in the protection of California’s whistleblower statute. Moreover, these protections will apply regardless of whether the employee is required as a function of his or her job to disclose purported illegal activity.

Also of concern, under the revised provisions of Labor Code section 1102.5, it is unlawful for any person acting on behalf of the employer to retaliate against the employee based on a belief “the employee disclosed or may disclose” the information, either internally or to a government agency. In effect, the revamped law protects employees who have not yet even complained against “anticipatory retaliation.”

Due to the expansive scope of the new provisions, it is possible that the changes in the law may lead to an increase in whistleblower claims and claims under the Private Attorney General Act brought on behalf of the public welfare. As violations of Labor Code section 1102.5 may subject an employer to a variety of damages, including civil penalties of up to $10,000 per violation, California employers should consider training their supervisors and human resources personnel on the expansion of the new law in order to prevent against unwitting violations or becoming a test case on the scope of these new provisions. Particularly, supervisors should be reminded to document performance issues as they occur to avoid someone turning into a “whistleblower” to forestall disciplinary action.