Fair Share Fees Safe After 4-4 Decision in Friedrichs v. CTA

In a brief, one-sentence ruling, the United States Supreme Court upheld fair share fees in California.  In Friedrichs v. California Teachers Association, a teacher who benefited from the contract CTA negotiated, asserted a right to "free ride" and pay nothing to the union.  But courts have long decided all employees who benefit from a union contract have to pay a fair share, even if they opt out of union membership.  In California, PERB has detailed regulations for how public sector unions determine and charge these fair share fees.

The Court's ruling stated, "The judgment is affirmed by an equally divided Court."  Initially, many expected the Court to rule against labor in a 5-4 decision, but the death of Justice Scalia resulted in a 4-4 tie among the justices.  The ruling means the decision by the Ninth Circuit Court of Appeals stands and unions may continue to charge fair share fees.

Chicago Can't Impair Public Employee Pensions

On March 24, 2016, the Illinois Supreme Court declared Chicago Mayor Rahm Emanuel’s pension reductions unconstitutional under state law. (Jonesv. Municipal Employees' Annuity and Ben. Fund of Chicago 2016 IL 119618.)

The sole question before the court was whether a pension reform act violated the pension protection clause of the Illinois state Constitution. Similar to the U.S. Contracts Clause, the Illinois’ Pension Protection Clause prohibits the State or local governments from diminishing or impairing pension benefits.  

The Act reduced the value of annual annuity increases, eliminated them entirely for certain years, postponed the time at which they began, and completely eliminated the compounding component. The Act applied regardless of whether the employee was in active service on or after the effective date of the Act. The court found the modifications “unquestionably” diminished the value of the retirement annuities promised to the employees when they joined the pension system.

Chicago's political leaders, like many throughout the country, responded to the great recession and accompanying revenue reductions by under-funding the pension system.  City leaders then sought to reduce their funding obligations by reducing promised pensions. The City argued the pension cuts were necessary to avoid bankruptcy within 15 years, and therefore did not violate the Illinois Constitution.

The Illinois Supreme Court rejected the argument, stating that it “would lead to an unjust result” because employees have a “legally enforceable right to receive the benefits they have been promised” – not merely the remaining funding after politicians satisfied their more glamorous spending priorities.  

Further, under pension law any detriment to pensioners must be accompanied by an offsetting advantage. The court rejected the City's argument that "by offering a purported 'offsetting benefit' of ... sound funding and solvency in the funds, the legislation merely offers participants in those funds what already is guaranteed to them — payment of the pension benefits in place when they joined the fund." This justification for impairment of contract is frequently raised. The court flatly rejected the argument, stating "thus, the 'guaranty' that the benefits due will be paid is merely an offer to do something already constitutionally mandated by the pension protection clause." 

California courts have also held public employment gives rise to certain vested rights, including pension and retiree medical benefits, under both the United States and California Constitutions.  Our office has successfully vindicated the vested pension and retiree medical rights of public employees in cities as small as Pacific Grove and large as Los Angeles.  Nationally, this ruling sends an important message to public entities that they cannot resolve their budgetary woes on the backs of their employees by breaking promises.

U.S. Supreme Court Upholds the Right to Use Statistical Evidence in FLSA Class Actions

On March 22, 2016, the United States Supreme Court held that plaintiffs in a donning and doffing class action properly used representative and statistical evidence to establish class-wide liability in Tyson Foods, Inc. v. Bouaphaeko.   

Employees working in the kill, cut, and retrim departments of the Tyson Food plant in Iowa, argued Tyson violated the Fair Labor Standards Act (FLSA) by failing to compensate them for time “donning and doffing” protective gear. Tyson failed to keep any records of the time employees took for this purpose. As a result, the employees had to rely primarily on a study performed by an industrial relations expert, Dr. Kenneth Mericle. Mericle conducted 744 videotaped observations of employees donning and doffing their gear and averaged the time taken in the observations. Mericle then used the average donning and doffing times and added it to the regular time worked by the 3,344 members in the class action to determine whether they had worked over forty (40) hours in the week. 

At trial, the jury awarded the class $2.9 million in compensatory damages. Tyson sought to reverse the judgment, arguing it was unfair to allow class members to rely on representational evidence to establish damages.  Tyson's primary objections were that some class members had no damages and that the amount of time spent donning and doffing gear varied by job assignment.

Delivering the opinion of the Supreme Court, Justice Kennedy held the class could rely on Mericle’s sample study to prove damages because each class member could have relied on the sample to establish liability had each brought an individual action. Justice Kennedy followed precedent authorizing the use of estimates in wage cases, particularly when the employer failed to keep records of hours worked.  It would otherwise be nearly impossible for plaintiffs to establish a claim in cases where the employer fails to keep time records. He noted “that when employers violate their statutory duty to keep proper records, and employees thereby have no way to establish the time spent doing uncompensated work,” barring the use of statistical evidence would create “an impossible hurdle for the employee.”

While acknowledging "the question whether uninjured class members may recover is one of great importance," Kennedy criticized Tyson for opposing bifurcation of liability and damages.  In so doing, Tyson made it difficult to remove uninjured individuals from the class after the award was rendered. Kennedy indicated that Tyson should not profit from the difficulties it created.

The Court distinguished its 2011 decision in Wal-Mart, which rejected use of statistical analysis to establish liability in a class action for gender discrimination.  Kennedy dispatched the effort to pigeonhole Wal-Mart, noting that the Tyson class members were similarly situated.  This case is an important affirmation of the right to use statistical estimates to enforce FLSA rights and prosecute wage and hour class actions.

Media Policies Can't Impede Protected Activity

An administrative law judge (ALJ) found the Chipotle restaurant chain violated Section 8(a)(1) of the National Labor Relations Act (NLRA) when it asked an employee, James Kennedy, to delete his Twitter comments and stop circulating a petition complaining employees were not being given their mandated breaks. (Chipotle Services LLC dba Chipotle Mexican Grill (March 14, 2016) Cases 04-CA-147314,04-CA-149551.)

In response to a customer who had tweeted “Free chipotle is the best thanks,” Kennedy said, “nothing is free, only cheap #labor. Crew members only make $8.50hr how much is that steak bowl worth really?” Chipotle’s national social media strategist saw the tweet and emailed the regional manager of the Haverford, Pennsylvania location. The manager asked Kennedy to take the tweets down because they violated Chipotle’s “social media policy.”  Kennedy complied. The ALJ found the social media policy’s bans on spreading "incomplete, confidential, or inaccurate information" and "making disparaging, false, or misleading statements" were unlawful.  Likewise, asking Kennedy to delete the tweets was unlawful interference with protected activity.

When Kennedy began circulating the petition, his manager, Jennifer Cruz, asked him to speak with her in the office. According to Cruz, another employee expressed concern that she would be in trouble for not taking her breaks. Cruz told Kennedy to stop circulating the petition. Kennedy refused, saying Cruz would have to fire him to get him to stop. Cruz told him, “Okay, just leave.” According to Cruz, she did not decide to fire Kennedy until the next day because she was “fearful that he might hurt her” because Kennedy had PTSD, punched boxes when breaking them down for the garbage, and he declined to help Cruz replace a lightbulb while he was on break. The ALJ stated Cruz’s justifications “would be laughable” “if it weren’t such blatant disability discrimination.” The ALJ determined Chipotle fired Kennedy due to his refusal to cease engaging in protected concerted activity. 

Kennedy’s tweets and petition addressed matters of concern for all Chipotle employees, not just himself. Under the NLRA, an employee is not limited to only seeking support from other employees, but can also seek assistance and sympathy from the public at large. 

Mastagni Holstedt is Proud to Sponsor "Week of Women Presents: Women in the Workplace Panel" at the McGeorge School of Law

Mastagni Holstedt is proud to sponsor the Pacific McGeorge Women's Caucus' "Week of Women Presents: Women in the Workplace Panel.  The panel luncheon will feature Mastagni Holstedt partner Kathleen N. Mastagni Storm, June Coleman, a shareholder at Kronick Moskovitz Tiedemann & Girard, Sabrina Thomas, senior counsel at Renne Sloan Holtzman Sakai, Gurdeep Dhaliwal, an associate at Langenkamp, Curtis & Price, and Katherine Mola, an associate at Boutin Jones.  The event will take place on Monday, March 28th at the McGeorge Schools of Law in Classroom E at 3285 Fifth Avenue, Sacramento, CA at 12:30 p.m.