The Third Circuit Court of Appeals, the appeals court that has jurisdiction over federal cases in Pennsylvania, New Jersey, Delaware and the U. S. Virgin Islands, recently held that a public employer violates the First Amendment of the United State Constitution when it retaliates against an employee based on the employee’s union membership. In reaching its conclusion, the Court distinguished between First Amendment “free speech” claims and First Amendment “association” claims.
Last week the Supreme Court issued its long-awaited opinion in Janus v. AFCSME. It held that requiring public sector employees to pay fair share fees to unions violates the First Amendment. A fair share fee (sometimes called an agency fee) is a fee that non-union members must pay to the union to cover the expenses incurred by the union while representing an employee in collective bargaining and related matters. Fair share fees were often required under state law, despite the employee opting not to join the union, because unions have a legal obligation to represent all employees within the bargaining unit, regardless of whether the employee is a member of the union. These laws became common after the Supreme Court issued its 1977 opinion Abood v. Detroit Board of Education, which held that fair share fees were constitutional and maintained labor peace by preventing “free riders.”
In recent years, there have been increasing challenges to the constitutionality of fair share fees and the validity of Abood. Back in 2014, we discussed the Supreme Court’s ruling in Harris v. Quinn. The Court in Harris began to question the validity of Abood and its supporting rationale. As we noted, the Court came close to overruling Abood but ultimately decided Harris on its specific facts. It held that collection of the fair share fees in the specific context (personal assistants in Illinois) violated the First Amendment. In 2016, another challenge of fair share fees made it to the Court, only for Justice Scalia to die after oral argument, leaving a 4-4 split decision.
With Justice Gorsuch now on the bench, as was foreshadowed in Harris, the Court ruled that fair share fees violate public sector employees’ right to free speech. As a basic premise, the Court recognized that the right to free speech includes the right to refrain from speaking at all. Thus, “[c]ompelling individuals to mouth support for views they find objectionable violates the cardinal constitutional command, and in most contexts, any such effort would be universally condemned.” Accordingly, forcing employees to pay fair share fees (i.e., compelling employees to speak when they may otherwise remain silent) violates the First Amendment. Finally, the Court overruled Abood, dissecting and dismantling its labor peace and free rider justifications.
The end result of the Court’s holding is clear: “States and public-sector unions may no longer extract agency fees from nonconsenting employees. . . . Neither an agency fee nor any other payment to the union may be deducted from a non-member’s wages, nor may any other attempt be made to collect such payment, unless the employee affirmatively consents to pay.” The Court recognized that the loss of these payments would cause unions to “experience unpleasant transition costs in the short term,” but it did think that such a challenge justified continued constitutional violations. Rather, it pointed out that such a disadvantage must be weighed against the considerable windfall that unions received in fair share fees in the 41 years after Abood.
Surely there will be questions that follow. Will unions continue to participate in public sector workforces? Is there a process for employees who now want to opt out of union membership? Do public sector employers now negotiate separately with non-union members? All of these questions may take time to resolve and consultation with legal counsel.
It appears that a number of labor unions are planning for the potential negative impact of a big decision regarding fair share fees. We have heard from several public sector clients who have been contacted directly, or who have had employees contacted, by labor unions about the potential impact of Janus v. AFSCME Council 31, which is currently pending before the United States Supreme Court. The case, which could ultimately declare fair share fees unlawful, is expected to be released before the end of June of 2018. Continue Reading Some Unions Planning for Impact of Big Decision on Fair Share Fees
The federal Fair Labor Standards Act (FLSA) establishes requirements for minimum wages and overtime pay. The FLSA’s requirements can be complex, and employers can face significant liability for unpaid wages and liquidated damages by failing to ensure compliance with its myriad requirements.
The FLSA contains a somewhat unique quirk regarding its statute of limitations. The statute of limitations for FLSA violations is two years. However, if the plaintiff(s) can show that the violation was willful, the statute of limitations is extended to three years. In other words, employees who commit willful violations face a potential additional year of damages (if the unpaid wages date back at least three years before the filing of the lawsuit).
In an FLSA case filed against Lackawanna County, the Third Circuit recently clarified what constitutes a willful violation to trigger the third year of liability under the FLSA. In Souryavong v. Lackawanna County, the County failed to aggregate the hours worked by part-time employees who worked multiple jobs for the County. For overtime pay purposes, all hours worked by a non-exempt employee for an employer must be recorded and counted. If the total hours worked in any workweek exceeds 40, the employee is entitled to overtime pay, regardless of whether the hours were worked in one or multiple positions for the same employer.
Thus, it was undisputed that the County violated the FLSA by failing to aggregate weekly the hours worked for these part-time employees. It also was undisputed that the County was liable for unpaid overtime pay and liquidated damages dating back two years from the date the lawsuit was filed. What was in dispute was whether the County’s violation was willful, which would trigger a third year of damages.
The plaintiffs claimed that the violation was willful and pointed to testimony by the County’s chief financial officer and HR director that the County had been generally aware of its FLSA obligations since 2007. The plaintiffs also identified an e-mail from the HR director to two other County officials regarding “wage and hour issues.”
The Third Circuit rejected the plaintiff’s willfulness argument. Specifically, the Third Circuit found that the evidence did not establish that the County was aware of the specific overtime pay issue (i.e., aggregating hours worked by part-time employees who worked multiple jobs for the County) before or at the time that the FLSA violations occurred. General awareness of the FLSA’s existence and its general requirements is not enough to prove a willful (i.e., intentional) violation of one of its specific requirements.
There are two important takeaways from the Third Circuit’s Souryavong decision:
- To prove a willful FLSA violation and get that third year of potential damages, employees will need to prove that the employer actually knew of the specific FLSA requirement at issue at the time of the violation and intentionally did not comply with it. General FLSA awareness is not sufficient to prove a willful violation of a specific requirements.
- Employers should keep this decision in perspective and understand what it means and what it does not. Even with the Third Circuit’s favorable decision, the County still was liable for two years of unpaid wages for multiple employees, an equal amount in liquidated damages, an additional $56,000 for the plaintiffs’ attorneys’ fees, and an additional undisclosed amount for its own attorneys’ fees. FLSA violations present significant potential liability for employers, and it is in every employer’s interest to audit its pay practices and ensure compliance before a lawsuit is filed or a Department of Labor investigation begins. While this decision confirms that it can be hard to establish a willful violation, employees need to prove only a violation of the FLSA (regardless of whether the violation was intentional) to get two years of damages plus their attorneys’ fees paid by the employer.
Employers often shy away from discharging employees for disciplinary reasons when those employees are receiving workers’ compensation benefits, such as in instances where the employee is working a modified duty assignment. However, such employees can and should be held to the same standards as other employees, including compliance with applicable policies and procedures. Additionally, so long as the discharge is found to be related to the disciplinary violation, any subsequent loss of earnings will be deemed to be unrelated to the work injury, thus rendering the discharged employee ineligible for reinstatement of workers’ compensation wage loss benefits.
In a recent unreported Commonwealth court case, (Waugh v. WCAB, No. 702 C.D. 2016), the Claimant was employed as a certified nursing assistant (CNA) at a medical center. She had sustained an accepted work injury to her right arm, when a patient grabbed and twisted her arm in the course and scope of her employment. She underwent two surgeries and eventually returned to work in a modified duty capacity.
While working modified duty, Claimant was reprimanded for acting outside the scope of her employment for administering medication to a patient. Several months later, there was a similar incident, in which Claimant applied a tourniquet to a patient while assisting a phlebotomist, who was attempting to draw blood. Employer’s policy in the event a phlebotomist cannot locate a vein, is to call a specialized IV team to insert the needle and draw blood. Claimant was terminated for this second instance of acting outside the scope of her employment. Despite her protests that she was “only trying to help,” the termination was held to be proper, as was the workers’ compensation determination denying reinstatement of benefits.
The Court reaffirmed the longstanding rule that a lack of “good faith” on the part of the claimant, is sufficient to deny reinstatement of workers’ compensation wage loss benefits. This is so, even where unemployment benefits are awarded, on the basis that the employer had not established a case of willful misconduct under the Pennsylvania Unemployment Compensation Act.
The determination of good faith or bad faith is obviously “fact sensitive,” but in situations where the employer would discharge the employee absent a workers’ compensation backdrop, this factor alone should not discourage the employer from taking the appropriate disciplinary action, including discharge.
As the baby boom generation reaches retirement age, many Pennsylvania municipalities face the potential of substantial knowledge and skill loss. To confront this challenge, municipalities continue look for ways to keep their seasoned employees long enough for knowledge transfer to occur. The problem can be finding sufficient incentives. For these employees, the most important benefit is often their pension. Therefore, municipalities’ ability to entice these employees to stay is often directly linked to pension distributions. Continue Reading In-Service Pension Distributions Now Simplified in Pennsylvania: Is it Time to Amend Your Pension Plan?
Much like a business corporation, a municipality can only act through its employees. A municipal official may inadvertently (or advertently) make representations regarding municipality business, leading to unintended consequences. Municipalities must keep in mind that their agents and employees, including township supervisors and other officials, can bind municipalities to agreements and subject them to liability for breach of contractual obligations.
The Pennsylvania Commonwealth Court decision of Pezzano v. Towamencin Township recently addressed whether a Township can incur contractual liability stemming from the actions of municipal supervisors. In Pezzano, Towamencin Township entered into a confidential separation agreement with an employee, Kevin Pezzano. The terms of the agreement specified that neither Pezzano nor the Township would divulge any information to a third party about the agreement. The Township Board of Supervisors approved the agreement by a vote of 3-2, and the Township’s solicitor signed the agreement. A few days later, the dissenting supervisors, David Mosseo and Harold Wilson, provided statements to a local newspaper. The newspaper published an article which quoted Mosseo and Wilson as saying the Township terminated Pezzano for cause.
In response, Pezzano filed numerous claims against Mosseo and Wilson, individually, as well as a breach of contract claim against the Township. The trial court found that Mosseo and Wilson were entitled to official immunity because they acted within the scope of their authority as township officials and dismissed the claims against them. The trial court likewise dismissed the claim against the Township because, since Mosseo and Wilson were not parties to the agreement with Pezzano, their actions could not constitute a breach on the part of the Township.
On appeal, the Commonwealth Court disagreed and ruled that the Township could be held liable for breach of contract because Supervisors Mosseo and Wilson were agents of the Township. Consequently, even though an agent of a municipality, such as a township supervisor, may not be personally liable for his or her actions, the municipality itself may still be held liable if its agent breaches an obligation of the municipality.
Pezzano leaves us with some important takeaways. When a municipality is bound to a contract, it will be held vicariously liable for actions by its agents, servants, and employees which amount to a breach of its contractual obligations. Individuals authorized to act on behalf of a municipality, such as a supervisor, mayor, council member, or manager, will be considered agents if their actions are within the scope of their authority. Accordingly, municipal officials must act and choose their words carefully. To avoid potential problems, officials should keep abreast of their municipality’s contractual and other legal obligations, and think carefully before making statements regarding the municipality.
Liability arising from the actions of officials is only one example of the issues faced by municipalities and other local government organizations. The Public Sector Group at McNees Wallace & Nurick can assist solicitors and municipal officials in navigating the unique legal issues that face governmental entities of all sizes.
The author extends a special thanks to summer associate Logan Hetherington for assisting in preparing this article.
Back in 2015, Pittsburgh enacted a paid sick leave ordinance, following a trend among cities throughout the country. Pittsburgh’s paid sick leave ordinance required employers with fifteen employees or more to provide up to forty hours of paid sick leave per calendar year. Employers with less than fifteen employees were not spared. The ordinance required that those employers provide up to twenty-four hours per calendar year. The impact: 50,000 workers would receive paid sick leave.
But, what authority did Pittsburgh have to impose such a requirement? Continue Reading A Tale of Two Cities: The Demise of Pittsburgh’s Paid Sick Leave Ordinance and the Durability of Philadelphia’s
Yeah, I know, crazy right? Here is the story. Apparently the Union did not think so. When the American Federation of State, County and Municipal Employees (“Union”) and the City of Philadelphia (“City”) could not reach terms on a new collective bargaining agreement, they submitted the dispute to binding interest arbitration.
The Union was seeking, among other things, 8 percent annual wage increases! The City countered that it simply did not have the money to fund the Union’s demands. The Union argued that the City’s financial health was irrelevant. Huh? How can you pay for something if you don’t have any money?
The Union’s argument was essentially – cut programs, raise taxes, lay off other workers we don’t care; how you pay for our 8 percent annual pay increases is your problem not ours! Insane, right?
Thankfully, the arbitration panel rejected the Union’s argument and determined that it was appropriate to consider the City’s ability to pay. However, the Union was undeterred. The Union petitioned the court to vacate the arbitration decision, arguing that the panel should not have considered the financial health of the City when rejecting their hefty wage increases. Thankfully, the court disagreed.
The court concluded that the Union’s arguments lacked merit, and that it was appropriate for the arbitration panel to consider ability to pay when making decisions regarding wages and other compensation related items.
Thankfully, the arbitration panel and the court brought some sanity to what seemed like an insane dispute. Ability to pay is obviously highly relevant to consideration of pay and benefit demands. Public employers are facing increasing budget constraints these days and are often on the brink of distressed status. When evaluating union demands, public employers must consider their ability to pay and when appropriate explain to the union early and often that the budget simply cannot tolerate increased expenses. Where appropriate, lay the foundation for demonstrating the financial inability to meet the union’s demands.