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Employment Law Worldview

US Appeals Court Says Collective Action Waiver in Separation Agreement Unenforceable As Improper Limit on FLSA Rights

Posted in Arbitration, Class Action, Recent Cases

As we’ve reported here and here, recent decisions from the US Supreme Court, federal appellate courts, and more recently, even the California Supreme Court (see here) have clarified that class and collective action waivers in arbitration agreements, including those that waive employees’ right to bring a claim under the federal Fair Labor Standards Act (FLSA) on behalf of themselves and a group of similarly situated employees, are enforceable.  Employers favor arbitration agreements containing these waivers because they require an employee who, for example, believes that he or she has a claim for unpaid wages, to bring that claim only on an individual basis, and in arbitration, rather than in court and on behalf of not only the individual employee filing the lawsuit, but perhaps dozens, hundreds, or even thousands of employees.

In Killion v. KeHE Distributors, Inc. [pdf], the Sixth Circuit Court of Appeals addressed a related, but significantly different situation involving class and collective action waivers.  In that case, the employer terminated approximately 70 sales representatives as part of a restructuring.  It offered the employees severance pay as part of a separation package.  In return, the employer requested that the employees sign release agreements that, among other things, included a waiver of the right to bring collective action claims under the FLSA.  Not long after the ink was dry on these agreements, several employees sued the employer, asserting a collective action claim on behalf of themselves and the other terminated sales representatives for unpaid overtime compensation under the FLSA.

The employer argued that the collective action waiver in the separation agreements signed by the employees prohibited them from bringing the collective action FLSA lawsuit.  It pointed to the cases we’ve discussed in prior blog entries – American Express, D.R. Horton, Inc., and others – enforcing collective action waivers as part of agreements to arbitrate claims.  The court, however, disagreed.  It relied on the fact that the separation agreements here contained no agreement to arbitrate any claims, only a waiver of the right to bring a collective action claim.  It explained that in the absence of any agreement to arbitrate, the court’s prior decision in Boaz v. FedEx Customer Information Services, Inc. [pdf] applied.  In that case, the court held that restrictions on FLSA rights are unenforceable, and that an employee cannot waive their right to participate in a collective action.  Thus, the court in Killion reversed the lower court’s ruling that held that the collective action waivers in the separation agreements were enforceable and prevented the sales representatives from bringing a collective action claim under the FLSA.

This case is significant in that it demonstrates that the rationale that courts have relied upon to approve and enforce class and collective action waivers – the strong federal policy of enforcing agreements to arbitrate under the Federal Arbitration Act – is not present when there is no agreement to arbitrate.  Accordingly, it appears that, at least in the Sixth Circuit, an FLSA collective action waiver is only enforceable when it is part of an arbitration agreement, and is not enforceable as part of a separation or other release agreement when arbitration of claims is not agreed upon as an alternative dispute resolution procedure.

Employment Mediations – An Insider’s Guide, Part Four

Posted in Mediation

This is the next in our re-run of a series of posts on employment mediations written for us by http://www.cedr.com/about_us/people/?p=Caroline-Sheridan.

Sometimes the parties to a mediation are asked to provide the mediator in advance with a “position paper”.  This is a document of a few pages (as a rough rule of thumb, the equivalent of five minutes’ talking).  It sets out in broad terms how the parties have got to where they are, how they feel about that and where they want to get to.  Often the phrase used here is what they “want tomorrow to look like”. 

A position paper is not generally a compulsory part of a mediation (it is very rarely requested in judicial employment mediations, for example) but it can be helpful to both the mediator and the parties themselves.   Sometimes they are for my eyes only and sometimes they are written expressly with a view to being exchanged between the parties.  It does not matter much which, as obviously there is never any exchange unless I have the agreement of all concerned.

From my perspective as mediator, a position paper can help me make prior sense of a dispute where either there is very little documentation (for example a falling-out between colleagues) or where the paperwork is voluminous or badly-organised.  It can certainly be helpful during my preparatory work to have my attention drawn to particular key documents.  After all, the less time needed to set out these basics at the mediation itself, the greater the time the parties can apply to the process.  A position paper can also help me assess in advance the intended approach of each party to the mediation.  While the tone and demeanour which each adopts is ultimately a matter entirely for them, ignorance or anxiety can sometimes lead position papers to come across as particularly unrealistic, insulting or uncompromising.   In those circumstances I would tend to have an “Are you sure?” conversation with the party, just on the basis that its continuing that approach in the mediation itself might increase the risk that the other would walk away.

The preparation of a position paper can also help the parties themselves.  The mere process of reducing their thoughts and aspirations to paper can help bring order and a strengthened degree of realism to their thinking.  In addition, when it comes to their opening statements, the position paper can often act as a script (or the basis of one) for what can be a daunting moment (see next post). 

So the position paper is mostly good news.  But all that said, I would never insist on one if I thought that the mere process of writing it would be off-putting to a party.  They might have limited writing skills or fear (quite unjustifiably) that their paper will somehow be “trumped” in my eyes by a more polished product from a professional representative.  They may just feel happier to talking to me than writing, and that could make any requirement for such a paper an obstacle in their mind to the mediation itself.  Under those circumstances, while not preventing the other party doing such a paper for its own use, I would not ask either to produce one.

Next, there you are in the mediation room with the other side, the process just kicked off.  The mediator turns to you and asks you if you have anything to say.  What should be in your opening statement?

US Nonimmigrant Visa Applications Experiencing Worldwide Delays

Posted in Immigration

This past week the US Department of State announced, through its Bureau of Consular Affairs, that Embassies and Consulates are experiencing technical problems with the passport and visa system. While the system is supposedly operational, the Bureau reports that posts are issuing documents at a reduced capacity. This issue is worldwide and is not specific to any particular country, citizenship document, or visa category.

Many visa applicants have been waiting several days to receive their passport and visa after notification that their visa application was approved. Despite the outage, consulates are still conducting visa appointments. Furthermore, the online systems for completing visa application forms and making interview appointments remain in operation.

For further updates regarding this situation please consult travel.state.gov and follow this blog. For assistance with urgent situations, please contact your principal Squire Patton Boggs professional.

The Social Action, Responsibility and Heroism Bill – a new low in UK Legislative proposals

Posted in Health & Safety, Legislation

Anything designed to reduce the burden of regulation on employers must be a good idea, right?  Well, not necessarily, no, and certainly not the proposed Social Action, Responsibility and Heroism Bill, a legislative proposal defective from conception to execution in almost every way it is possible to imagine.  

The Bill is designed, says proud sponsor Justice Secretary Chris Grayling, to “slay the health & safety culture” and that other pet hate of Daily Mail readers everywhere, ambulance-chasing lawyers advertising on daytime television.  It is Mr Grayling’s view, his advisers tell him, that fear of personal injury claims from employees is deterring would-be employers from hiring new staff.  

The Bill requires a Court considering whether an employer has been negligent or breached a statutory duty to have regard to whether it (i) was acting for the benefit of society; (ii) demonstrated a generally responsible approach towards protecting the safety of others; and (iii) was acting heroically by intervening in an emergency to assist an individual in danger.  

And that’s it, the work of scarcely a page.  The draft is unburdened by definitions, and so offers no clue as to what is meant by “for the benefit of society”, “heroically” or “generally responsible approach”.  As a means of generating further remunerative work for those same lawyers through endless satellite litigation on those points, this is a masterstroke.  The Courts themselves may justifiably wonder whether “have regard to” means that they can (or must?) find someone acting for the benefit of society not to have been negligent in circumstances where someone less public-spirited who did exactly the same thing would be.  Or is it a quantum issue only, i.e. that if you are injured by the negligence of a “generally responsible” employer, you should receive less compensation than for the same injury caused by the same negligence on the part of an employer with a generally more cavalier approach?  

Aside from the drafting, what about the objective of the Bill – to make people less likely to blame others for their own negligence or foolishness?  “I think perhaps [there is] too little inclination to say “it was me that messed that up”.  We are a bit of a society that is a bit too inclined to blame someone else”, Mr Grayling told The Telegraph in somewhat halting English.   He continued: “It is about trying to restore common sense to the kind of situations which happen all too often and very seldom get to Court – where somebody…does something dumb, hurts themselves and sues the employer anyway.  For responsible small businesses it is a real headache and most of the time they just pay up because it is less hassle to do so”.    

So the reality even in Mr Grayling’s own case is that employers pay out because health and safety proceedings are “hassle”, not because they fear losing.  Nothing in this Bill makes the remotest difference to that, since by definition it forces the employer all the way to Court before its provisions would apply anyway.  The provisions are too ill-drafted to offer any greater certainty of outcome even when you get there and the Courts already have a very wide discretion to find against unmeritorious claimants and those who brought their misfortune upon themselves in whole or part.  In particular, the Bill completely fails to consider the position of the injured person – if my health, career, life is destroyed because of someone else’s negligence, it will be no compensation to me that the person who did this to me has a generally (though not in my case) responsible approach to worker safety.   

Somewhat against the run of informed opinion, one commentator has described the Bill as “Chris Grayling’s finest hour” – it is only on closer reading that it becomes clear that his article is so laden with sarcasm that it can scarcely stand up.  It is impossible to disagree.  Employers and society generally deserve much better than this.

Employment Mediations – an Insider’s Guide, Part 3

Posted in Mediation

This is the next in our re-run of a series of posts on employment mediations written for us by http://www.cedr.com/about_us/people/?p=Caroline-Sheridan.

In Part 1 of this series I referred to some of the basic principles underlying a successful mediation. But why should the parties consider themselves bound by them? This is where the formal mediation agreement comes in.

CEDR mediators will tend to start with the CEDR model agreement, available here http://www.cedr.com/about_us/modeldocs/?id=20.  The parties have the right to vary that document but only by agreement, and in my experience alterations of substance are relatively rare.  So what can you expect to be asked to sign up to?

1.         First, a commitment that the mediation process represents a good faith attempt by each party to settle.  Though this is just words and in that sense no more legally enforceable than an oral statement to the same effect, it is a representation which the mediator can more easily refer a party back to by virtue of its being in writing.  It may also be of some reassurance to a party otherwise sceptical of the other’s intentions.  The model agreement refers to just three parties, usually employee and employer, plus the mediator.  In disputes with more moving parts, for example two employees at odds plus an employer which will need to be involved in the resolution between them, the cast list may grow. 

2.         To avoid arguments at a late point, a promise that the attendees for each party have full authority to bind it by the terms of any settlement.

3.         An express reiteration of the confidential and without prejudice “bubble” around the process.  It requires the parties to agree that they will not call the mediator as a witness in any proceedings, nor make any application for disclosure of his/her notes.  The agreement also prohibits the mediator from giving evidence or producing case notes voluntarily.

4.         The CEDR model agreement provides that no settlement reached at the mediation will be legally binding until set out in writing and signed by the parties.  This is not always adhered to, especially where the mediation moves into facilitation territory and a mutual clarification or clearing of the air may make the necessary difference without anything more formal than a handshake. Pushing the parties to put something in writing in these cases can force them into defensive positions and so be counter-productive. However, if the mediation is to resolve a live dispute where the employee has brought proceedings or is still in time to do so, then a settlement in the form of a statutory settlement agreement is most usual. 

5.         Last, the mediator’s fees.  The default position under the model agreement is that these are split equally between the parties.  Sometimes just to get the thing underway the employer will agree to pay the whole cost, but be aware that who pays the fee is a matter of no interest to the mediator and you get no “brownie points” as employer in such a case.

Next, if you are asked to provide a position paper in advance of the mediation, what should it say to be most helpful to the process?

No help from UK Courts for “absurd” non-competition covenant – over to you, employers

Posted in Covenants, Employment Contracts, Restrictive Covenants

A strong message to employers from the Court of Appeal this week to check your restrictive covenants, but this time to do it properly.  None of that just casting an idle eye over the relevant page of your executive’s contracts – description of territory, tick; vague reference to competition, tick; not wholly fanciful restraint periods, tick, etc.  

In Prophet Plc –v- Huggett the Court of Appeal was determining the enforceability of a non-competition covenant in Mr Huggett’s contract with Prophet.  It engaged in a word-by-word analysis of what the covenant actually said and reached the conclusion that it prohibited Mr Huggett from working only for companies which dealt in the same products as he had handled at Prophet, i.e. Prophet’s products.  Since only Prophet dealt in Prophet’s products, that meant that Mr Huggett was not actually prevented from working for any company except the one he had just left, being Prophet itself.  This was clearly an absurd result, everyone agreed, but what should be done about it?   

The Judge in the High Court had concluded rather boldly (excessively so, as it turned out) that he should “fix” the absurdity by amending the covenant clause to refer also to products “similar to” Prophet’s. That brought Mr Huggett’s new employer’s products within range and an injunction was granted accordingly.  

On Mr Huggett’s appeal, the Court of Appeal took a much harder line.  At a pinch, it said, the Courts can “blue-pencil” bits of covenants (i.e. delete them, like the war-time censor) if that would make them enforceable, but they cannot add new words to make effective a provision which otherwise is not.  

The Court of Appeal said that where a contract clause like a covenant was ambiguous, there was some hope.  If one reading of an ambiguous provision produced an absurd result and another didn’t, then the Court was entitled to apply the non-absurd construction and to “help” a covenant become enforceable in that way.  The problem here, though, was that the offending clause was not ambiguous; it was just wrong, indeed unambiguously wrong.  Because the covenant had been drafted by lawyers and no doubt with the care and consideration appropriate to such clauses (there is a touch of acid in the judgement, as you can tell), it had to be taken that the clause said what Prophet meant it to say.  The fact that what Prophet meant it to say rendered it ineffective was their fault (or at least that of the drafting lawyers, for whom the judgement must make more than faintly uncomfortable reading).   

So employers beware – read your covenants again soon with a nit-picking and hostile eye.  If you find any linguistic gaps or nonsenses in them, take steps to amend them.  Better still, given the emphasis which the Court of Appeal placed upon the Prophet covenants having been drafted by lawyers, get your legal advisers to do so.  The message in Prophet is quite clear – you make your own bed in the drafting of your restrictive covenants, and it is you who will have to lie on it.

US President Obama Signs Executive Order Banning Discrimination Against LGBT Federal Employees and Contractors

Posted in Discrimination, Executive Order, Harassment

Fulfilling a 2008 campaign promise, on July 21, 2014, President Barack Obama signed an Executive Order banning workplace discrimination against millions of lesbian, gay, bisexual and transgender employees of the federal government , as well as federal contractors and sub-contractors providing services to the federal government.

The Executive Order makes it illegal to fire or harass employees of the federal government because of sexual orientation or gender identity, going so far as to explicitly provide employment protection for transgender employees of the federal government.  The Executive Order also prohibits discrimination by federal contractors and sub-contractors, which affects approximately 24,000 companies employing close to 30 million workers, or roughly one-fifth of U.S. workers.

Rather than draft a new Executive Order, President Obama simply added the categories of sexual orientation and gender identity to existing Executive Orders that protect federal employees and employees of federal contractors and sub-contractors from discrimination based on race, color, religion, sex or national origin.  Read the full text of the Executive Order signed by the President.

Surrounded by LGBT supporters, including Virginia Governor Terry McAuliffe, third from right, President Barack Obama signs executive orders to protect LGBT employees from federal workplace discrimination in the East Room of the White House Monday, July 21, 2014, in Washington. Obama’s executive orders signed Monday prohibit discrimination against gay and transgender workers in the federal government and its contracting agencies, without a new exemption that was requested by some religious organizations. (AP Photo/Jacquelyn Martin)

 

Employment Mediations – an Insider’s Guide Part 2

Posted in Mediation

http://www.cedr.com/about_us/people/?p=Caroline-Sheridan

Time in any mediation is often both limited and precious.  Once it is underway there is little time for sorting out the preliminaries.   As a result, it is customary for there to be contact between each of the parties (and/or their representatives) and the mediator(‘s staff) prior to kick-off.  For a judicial mediation arranged through the Employment Tribunal this will normally be a joint Case Management Discussion, but for commercial CEDR mediations of the sort I conduct, the mediator will usually seek to speak to each protagonist or representative separately first.

This serves a number of purposes.  It can deal with any outstanding administrative matters, especially to check that the mediation agreement (see next post) has been signed, and to ensure that my record of the parties’ names, contact details and intended attendees are correct.   In addition, I want to be sure that both parties will have full authority to settle on the day if terms can be agreed – while there is nothing wrong with that authority being subject to a phone call to someone more senior, it is essential to ensure that that someone will be available if and when the need arises.

That prior contact is also very useful to me in clarifying the parties’ respective experience of mediation.  Do they understand the ground rules about confidentiality, process, my neutrality and the outcome being in their hands, not mine?  Even where lawyers are instructed I would sooner have this call with the parties themselves, since it is they and not their lawyers who must ultimately be happy with the process.  However, this direct contact is not always feasible or indeed necessary if experienced representatives are acting.

If I have received all the mediation papers beforehand then I will use this prior contact to raise any remaining questions about the arguments or current state of the case.  If I have not, then I will seek a brief synopsis of what the issues are and where each party stands (and thinks the other stands) in relation to settlement.  Last, since much of the power of the mediation process is borne of the trust the parties must have in the mediator’s discretion and understanding of their position, I will also use this call to try to establish the beginnings of a rapport with them, to make some small talk to create a little bond or to find some point of common interest with the party.  This is particularly true with individual claimants as they are generally the least familiar with or convinced about the process and building that rapport helps turn me from an external stranger into someone to whom they can open up and feel secure that their trust will not be betrayed.

Next, the formal mediation agreement itself, what it says and why you have to sign it.

French Employer Successfully Challenges Costs Incurred By Works Council

Posted in Recent Cases, Works Councils

Works Councils in France have the right under the Labour Code (Article L.2325-35) to appoint a chartered accountant to assist them with activities such as the annual review of accounts, advice on the strategic direction of the employer company and collective redundancies.  Companies are obliged to pay for the accountants in those circumstances.  If a Works Council appoints an accountant for matters outside Article L.2325-35, it must bear the costs itself.

The fees incurred by chartered accountants instructed by Works Councils can sometimes be very high, but the French courts have traditionally been reluctant to interfere, partly because of the risk of being seen to undermine the quality of the advice provided to the Works Council by limiting the cost of it.  Similarly, French employers have fought shy of challenging the bills because it will bring them into direct conflict with the Works Council in question.  This month, however, the French Court of Appeal upheld an employer’s challenge to the level of fees incurred by accountants advising its Works Council.

Progexa, a firm of accountants, was instructed by the Works Council at Pilpa to examine whether there was a right to raise an alarm (“droit d’alerte”), to undertake a review of accounts and to review a collective redundancy plan. In total Progexa’s bill came to €155,739 (of which approximately €17,000 was for “professional expenses”).  Pilpa challenged the level of fees billed by Progexa and was successful before the Tribunal de Grande Instance in Paris.  Progexa reimbursed €46,000 to Pilpa.  At the same time it lodged an appeal, but the Court of Appeal in Paris has this month upheld the Tribunal’s decision. It also went on to order Progexa to pay part of the costs of the appeal.

This is a rare result and reflects the finding that the bill presented by Progexa was some 30% overstated.  It shows that employers can and should challenge the fees incurred by accountants in advising their Works Councils where the amount billed is felt to be disproportionate to the services rendered.  Our advice is however that such challenges are best limited to very material over-billing.  Otherwise employers face the risk that the costs of the challenge exceed the amount recovered and that they do a degree of damage to employment relations in the workplace which is disproportionate to any actual saving of cash.

The Labour and Employment team in our Paris office acted for Pilpa (R&R Group) in this matter.

EU Advocate General’s decision on obesity as disability makes fat lot of difference

Posted in Disability, Discrimination, Recent Cases, Welfare

In the end, the Advocate General reached the inevitable conclusion – that obesity by itself is not automatically a disability, but can be if and when it “hinders full participation in professional life on an equal footing with other employees”, or (translated into the UK Equality Act’s definition) has a substantial adverse effect on a person’s ability to carry out normal day-to-day activities.

Kirsten Kaltoft worked as a child minder for a Danish council and had done so for fifteen years up to his dismissal, ostensibly for redundancy, in 2010.  He claimed that his dismissal (or at least his selection for redundancy) was on the grounds of his obesity, that obesity should be treated as a disability and therefore that he had potentially been discriminated against on disability grounds.

Mr Kaltoft never in all his time with the council weighed less than 160 kilos, 25 stone in old UK money, and had a body mass index of 54.  Europe uses a BMI of 30 as the gateway to clinical obesity.  My rough calculations suggest that to fall below a BMI of 30 at that weight, Mr Kaltoft would have to have been at least 17 feet tall, which could well have created its own issues on the child-minder front anyway.  There was however no mention in his claim of the widely-reported allegations that he was too big to bend down and tie his charges’ shoelaces, and/or to run after them if they escaped the premises.  The council denied that these considerations formed any part of the decision to dismiss him.

The Advocate General concluded in his Opinion that where obesity plainly hinders a person’s participation in professional life, this will be a disability for the purposes of the EU Equal Treatment in Employment Directive, and therefore also for the purposes of the Equality Act and other domestic member state legislation implementing the Directive.  However, in his opinion, only extreme, severe or morbid obesity (i.e. a BMI over 40) would suffice to create limitations of mobility, endurance or mood etc., plain enough to satisfy that definition.  As something like one in four UK adults has a BMI of over 30, any other finding could have had dramatic consequences for the obligations of employers towards their more comfortably-upholstered employees.  The clear (though technically not yet binding) steer towards 40 will essentially limit the effect of this Opinion to those whose weight would already have led most employers to consider the question of disability anyway.

Two other points come out of this Opinion:

i)  The Advocate General said that the cause of the obesity was immaterial.  A glance at the comments on any obesity-related website will show a vicious division between those who put it down to genetics and/or hormonal imbalances and those who mostly blame cake.  This debate is irrelevant to the issue of whether a person is statutorily disabled and of the employer’s consequent obligations towards him.

ii)  There are decent arguments that the BMI cut-off at 40 should not stand – if someone with a BMI of 39 was suffering the same limitations of mobility and mood, etc., it is not likely that a court or tribunal would disqualify him on that basis.