In a 5-4 decision, the Supreme Court has ruled that the National Labor Relations Board (the “Board”) acted without authority during the 27-month period in which it operated with only two members.  The Court’s ruling in New Process Steel, L.P. v. NLRB effectively invalidates nearly 600 National Labor Relations Act decisions issued by the Board from January 2008 through March 2010.  The majority opinion, authored by Justice Stevens, concluded that because the Board as a whole did not have at least three members, a quorum of the Board did not exist, and the Board could not act.  In a press release issued in response to the Supreme Court’s ruling, the Board indicated that New Process Steel and other pending cases challenging the two-member decisions, five of which are currently before the Supreme Court with another 69 pending in the federal courts of appeal, are expected to be remanded for consideration  by the current Board, consisting of Members Liebman, Schaumber, Becker,  Pearce, and Hayes.   It seems likely that membership issues may continue to plague the Board.  With Member Schaumber’s term expiring on August 27, 2010, the Board will  be left with only four members. Given that  the term of Member Liebman and the recess appointment of Member Becker  are set to expire in  2011, the Board could  again  be reduced to two unless the Senate acts to confirm additional nominees.   

For further information on the Supreme Court's ruling and its potential impact, see our Legal Alert here

Most employers are familiar with the Americans with Disabilities Act’s requirement to accommodate disabled employees.  This accommodation can take the form of a temporary or permanent reassignment to a different, vacant position.  Although the Act contemplates such a reassignment, it does not clarify whether a vacant position includes one currently occupied by a temporary worker.  In Duvall v. Georgia-Pacific Consumer Products LP, the Tenth Circuit defined a “vacant position” under the ADA to include only those positions also available to similarly situated non-disabled employees. 

 After the plaintiff’s disability rendered him unable to work around paper dust in its paper mill, Georgia-Pacific (“GP”) placed him on leave while it searched for a position he could safely perform.  Plaintiff claimed that he should have been offered one of the temporary jobs staffed by third-party temporary workers in either the mill’s shipping department or the storeroom.  GP ultimately found the plaintiff a permanent position in the mill’s storeroom, which he accepted.

 The plaintiff nevertheless filed suit against GP, claiming that while the company endeavored to find him a permanent position, he should have been awarded one of the temporary positions, displacing a temporary worker from a third-party staffing agency.  The Eastern District of Oklahoma disagreed, finding instead that GP treated the plaintiff appropriately because the plaintiff failed to identify any vacant positions denied him.  The Tenth Circuit affirmed the decision, defining vacant positions as only those available to similarly situated non-disabled employees.  Kilpatrick Stockton’s Randall D. Avram and Sabrina P. Rockoff represented GP before both courts.

Title VII generally requires an employee claiming discrimination to file a charge with the EEOC within 180 or 300 days (depending on the jurisdiction) of the occurrence of the allegedly discriminatory act.  This requirement was prominently at issue in the 2007 Lilly Ledbetter case, in which the Supreme Court ruled that an employee’s claim of pay discrimination was untimely because it was based on decisions allegedly made by her employer outside the 180-day period.  Congress effectively reversed this ruling in 2009, amending Title VII and other antidiscrimination statutes to provide that, in pay discrimination cases, the 180-day filing period “resets” with each new paycheck – even if the discriminatory pay decision occurred much earlier.  Now, the Supreme Court has unanimously held that a group of employees who failed to timely challenge an employer’s administration of an allegedly discriminatory test may still bring a timely claim based on the later application of the test’s scores to hiring decisions.

In Lewis v. City of Chicago, the City administered a written test to applicants for fire-fighter positions and selected candidates based on their scores.  In May 1996, candidates were selected randomly from the group of applicants who scored at least 89 out of 100 points.  Those scoring between 65 and 88 were deemed qualified and kept on an eligibility list, but were informed it was unlikely they would be selected.  In March 1997 an unselected African-American candidate filed an EEOC charge alleging that the test’s cut-off score negatively and unfairly impacted African-American candidates.

The Supreme Court ruled that the employee’s charge was timely filed within 180 days after the City applied the results of this test to a hiring decision.  The Court's decision turned in large part on the fact that the employee’s claim was not one of “disparate treatment,” which requires an employee to show that the employer engaged in intentional discrimination within the 180-day period.  Instead, the employee’s claim was that the cut-off score had a “disparate impact” on African-American candidates.  Because this claim did not require the showing of an intent to discriminate, but only a disparate impact within the 180-day period, the Court ruled that a claim based on the City’s later application of the test scores was timely filed.    

The United States Department of Labor ("DOL") has announced an enhanced regulatory and enforcement strategy entitled, Plan/Prevent/Protect: The Beginning of a Broader Regulatory and Enforcement Strategy.  The new strategy requires companies to take steps to comply with employment laws before they are the subject of a federal investigation. 

Under Plan/Prevent/Protect, employers will be required to create “Compliance Actions Plans” in collaboration with employees for the purpose of clarifying for employees how to identify and remedy workplace safety hazards and other risks.  The plans must specifically address compliance with standards set by the Occupational Safety and Health Administration, the Mine Safety and Health Administration, the Office of Federal Contract Compliance Programs, and the Wage and Hour Division.  The DOL plans to release additional, specific details regarding the regulations in the coming months and will provide employers with an opportunity to comment on both the regulations and the DOL’s strategy.  It is the agency’s hope that the new regulations will force employers to address employment laws proactively instead of waiting for an issue to arise before taking action.

In preparation for the new regulations, employers should proactively review their employment practices, safety and human resources policies and conduct wage and hour audits to ensure that they will be in compliance when the regulations are released.

According to recent studies, at least 2.5 million students participate in internships each year, the vast majority of which are unpaid.  Unpaid internships have only grown in popularity and desirability due to the recession and the increasingly competitive labor market for college graduates.  The once unheard of practice of replacing full-time workers with unpaid interns has become the new status quo. 

Realizing the shift in employment trends, the United States Department of Labor (“DOL”) is stepping up nationwide enforcement efforts on employers that fail to properly pay interns.  These efforts include educating students and colleges about the Fair Labor Standards Act’s internship requirements.  The DOL utilizes a six-factor test for determining whether student workers are interns whose work can be uncompensated or employees entitled to compensation.  Two of the six factors pose significant challenge to employers -  the requirement that interns not displace regular workers and that employers derive no immediate benefit from the internship.  Not surprisingly, most internships do not meet this standard.

Industry experts have encouraged the DOL to adopt a cost-analysis to determine whether the per-hour benefit to the employer of the intern’s work outweighs the per-hour cost of the intern.  However, there are no signs that the DOL intends to back away from its more stringent test.  Nancy J. Leppink, acting Director of the DOL’s Wage and Hour Division, recently told the New York Times, “There aren’t going to be many circumstances where you [for-profit employers] can have an internship and not be paid and still be in compliance with the law.” 

 The increased attention from the DOL suggests that litigation over the unpaid internship issue may be on the horizon.  Employers with unpaid internship programs should contact their Kilpatrick Stockton attorney to review best practices and to ensure that the company is doing everything possible to comply with the FLSA’s internship requirements.

Proposed changes in Georgia’s restrictive covenant law have cleared their last legislative hurdle.  Absent a legal challenge, the proposed constitutional amendment to Georgia’s law will be on the November ballot.  If the amendment passes, a major shift in Georgia restrictive covenant law will follow.  Georgia is currently one of the most difficult jurisdictions in the country for employers to successfully enforce non-compete and non-solicitation agreements with former employees.  If adopted, the proposed changes would make the state more hospitable to restrictive covenants and ease their legal enforcement.

The proposed changes are going through a complicated procedure because of the history of earlier efforts to change Georgia law in this area.  In 1990, the Georgia General Assembly passed legislation with provisions much like those in this latest enactment.  However, the Georgia Supreme Court invalidated those provisions as contrary to the Georgia Constitution.  The General Assembly has tried to keep that from happening again by passing a constitutional amendment requiring voter approval.  The constitutional amendment authorizes the actual change in the Georgia Code, which will not go into effect unless and until the voters adopt the amendment in the November election.

If Georgia voters adopt the constitutional amendment, significant changes will occur in this area of the law.  Any employer with an interest in restrictive covenants will need to review its agreements and consider whether they are appropriate for the new environment.  In general, it appears that a new era in this area of the law is fast approaching.  Highlights of the new law include:

·        The Ability to Change Defective Agreements.  Under current Georgia law, any defect in a non-competition or non-solicitation agreement renders the entire covenant unenforceable, even if the defect is hypothetical.  Additionally, when an agreement includes both non-competition and non-solicitation provision, a defect in the non-competition provision can destroy the enforceability of the non-solicitation provision.  The new law would remedy both of these problems, allowing the court to “blue pencil” or edit a defective provision to make it enforceable so long as it did not make the provision less favorable to the employee.  In addition, the law will remove the provision requiring invalidation of both covenants when one is unenforceable.

·        New Law Not As Strict.  In the past, agreements have been found to be void and unenforceable because they did not adequately describe the types of activities prohibited or the geographic area of the restraint.  Under the new law, “any description that provides fair notice of the maximum reasonable scope of the restraint shall satisfy [the] requirement [for a description], even if the description is generalized or could possibly be stated more narrowly. . . .”  With regard to a post-employment covenant, a “good faith estimate of the activities, products, and services, or geographic areas that may be applicable at the time of termination shall also satisfy” the requirement of a restriction.  This gives the drafters of such agreements, and the employers seeking to enforce them, considerably greater breathing room.

·        Acceptance of New Business From Old Customers Can Be Prohibited.  Non-solicitation agreements are an important type of restrictive covenant, and their potential scope would expand under the new law.  In the past, even when an employer could prohibit former employees from soliciting its customers, it could not prohibit the passive acceptance of business in a non-solicitation agreement.  In other words, if the customer initiated the contact, the former employee could take on the business even if there was a non-solicitation agreement in effect.  This passive acceptance of business can be prohibited under the new law in certain circumstances, eliminating disputes over who contacted whom.

·        Confidential Information.  The restrictive covenant amendment also covers the protection of confidential information.  Currently, agreements protecting confidential information have to have a reasonable time limit unless the confidential information also qualifies as a trade secret.  The new law removes this requirement as well, allowing employers to protect such confidential information as long as it remains truly confidential.

·        Presumptions As To Reasonable Time Limits.  Georgia will continue to require that restrictive covenants be reasonable as to time, activities covered, and geographic scope.  A customer restriction will continue to be an acceptable substitute for a geographic limitation on solicitation.  However, a major question under Georgia law in the past has been what a reasonable time limit is on a restrictive covenant.  The legislature has provided guidance on this question.  Rebuttable presumptions are created as to the appropriate time limit.  Where a restrictive covenant is sought to be enforced against a former employee outside of the context of the sale of a business, it is presumed that a restraint of two years or less is reasonable and that more than two years is unreasonable.  In the case of former distributors, dealers, franchisees, lessees of real or personal property, or licensees of trademarks, trade dress or service marks not in connection with the sale of a business, three years or less is presumed reasonable and more than three years is presumed to be unreasonable.  The presumption in the case of the sale of a business is that five years or less is reasonable and greater than five years is unreasonable.

The 2.2 million-strong Service Employees International Union (“SEIU”) has elected Mary Kay Henry, a veteran health-care organizer, to be its next president.  Henry succeeds Andy Stern, the Union’s long-serving and controversial leader, who announced his retirement last month.  In selecting Ms. Henry, the Union rejected Mr. Stern’s chosen candidate to be his successor, SEIU Secretary-Treasurer Anna Burger.

Ms. Henry identified organizing, political involvement, and “restoring our relationships with the labor movement” as her three main goals for SEIU.  Ms. Henry’s comments reflect the tension that has existed between SEIU and other unions since at least 2005, when Mr. Stern led SEIU to leave the AFL-CIO and created the “Change to Win” coalition.  Nevertheless, the new president made it clear in a conference call following her election that she had no plans to return the Union to the AFL-CIO or engage with one of  SEIU’s rivals in California – the National Union of Healthcare Workers.

Ultimately, Ms. Henry’s focus appears to be growing SEIU membership.  She has announced plans to devote $4 million to an innovation fund that would support organizing efforts in the private sector and has set a goal of organizing 120,000 new members this year.  In an interview, Ms. Henry indicated that she is not content to wait on legal reforms, stating:  “[W]e can’t pursue the [Employee] Free Choice Act or federal change unless we get the rubber to hit the road across the country and have the labor movement get organizing back as the top priority of our agenda.” 

The Obama Administration has repeatedly expressed support for labor unions.  Department of Labor Hilda Solis has credited unions for her family’s success, stating “[w]ithout the help, protection that we received, and retirement benefits, I know myself and my siblings would not be where we are today.”  However, it does not appear that President Obama or Secretary Solis is swaying the public.  According to a Pew Research Center for the People & the Press survey, union popularity among the American public has decreased since 2007.  The survey, conducted by telephoning 1,383 adults between February 3 and 9, 2010, revealed that 42% of Americans have an unfavorable view of unions, and only 41% of the public favors them.  These numbers represent a steep decline in public support of the labor movement.  By comparison, in January 2007, just three years earlier, 58% of the public had a favorable view of unions, while just 31% of the public disfavored them.

The 2010 survey results are not entirely surprising.  An April 2009 survey foreshadowed the 2010 results, uncovering public concern about the power of unions and increasing doubt about their necessity to protect workers.  As of April 2009, 61% of the public agreed with the statement, “labor unions are necessary to protect the working person,” a 7% decline in support from 2007 and 13% decline from 2003.  Likewise, 61% of the public in April 2009 also agreed that “labor unions have too much power,” a jump from 52% support for the statement in 1999.  The public’s opinion of unions is contrary to that opinion expressed by the Obama Administration.

Additionally, public opinion of unions, their necessity and the power they wield may impact both Congressional support for the Employee Free Choice Act (“EFCA”) and the bill’s overarching effectiveness in the workplace if passed.  EFCA was designed to make it easier for unions to organize and represent employees.  If passed, the bill would allow a union to bypass the traditional secret ballot election and become the employees’ bargaining representative after a majority of employees sign a card indicating their desire for union representation.  Perhaps a reflection of the American sentiment captured by the 2010 survey, discussion of EFCA has largely subsided since Summer 2009.  If, however, Congressional interest in EFCA re-emerges, declining public support for unions suggests that obtaining a majority card check vote may prove to be a greater challenge than originally anticipated by industry experts.  As a result, unions would not be able to organize on the basis of card checks alone and would have to resort to secret ballot elections, which they lose about as often as they win.

On May 13, 2010, interim final rules implementing the mandated expansion of eligibility for adult dependent children were issued.  Beginning January 1, 2011 for calendar year plans, all covered plans, including grandfathered plans, offering dependent coverage must offer such coverage for adult children until age 26.  Plans will no longer be able to condition a child’s eligibility on financial support, marital status, employment status or student status.  Further, plans cannot require higher premiums/surcharges or limit available coverage options for children who are under age 26, unless such higher premiums or limitations apply to all dependents regardless of age.  Please see the attached Legal Alert for additional information by clicking here.

In an effort to control litigation expenses, many employers have entered into mandatory arbitration agreements with their employees. These agreements sometimes proved to be less effective at limiting the costs associated with employee disputes than employers believed as some courts ruled that the mandatory agreements permitted an individual employee to arbitrate claims on behalf of a class of employees. On April 27, 2010, the Supreme Court issued a decision likely to substantially curtail the availability of class action arbitration. The Court ruled that imposing class arbitration on parties whose arbitration clauses are "silent" on that issue is inconsistent with the Federal Arbitration Act ("FAA"). For further information on the Supreme Court's ruling and its potential impact, see our Legal Alert here.