The Avoidable Consequences Doctrine
Some lawyers in my law firm attended a legal education program this week that included a corporate defense attorney arguing for a Faragher-Ellerth approach to the Federal overtime law. The argument is that employers should be able to avoid the consequences of violating the Fair Labor Standards Act if the employees did not report violations of the Act to the employer. The burden of knowing the overtime law and complying with it should be shifted to the employees.
Its understandable that corporations would want to try to lift the “Faragher-Ellerth defense” from sexual harassment law and apply it to overtime cases. The words “Faragher-Ellerth” have become a shorthand generic phrase that means employees must report violations of the law to the company before the company has any liability for violating the law. This means that we can expect that we will soon be hearing defense attorneys arguing the defense in our overtime negotiations.
The Legal Education Version of the Gong Show.
One of my pet peeves is that too many lawyers—and judges, I suspect—don’t actually read the law that they are citing. My first instinct when I heard the argument that Faragher-Ellerth applies to overtime cases was to laugh. If the lawyers who listened to the presentation had actually read the Supreme Court’s opinions in Faragher and Ellerth, they would have laughed the lawyer advocating for applying it to the Fair Labor Standards Act off the stage. They would have heard a large gong then seen a hook on the end of a long stick pull the speaker off the stage. My second instinct was to be concerned, because too many people fail to read what the law actually says.
What the Supreme Court Actually Said in Faragher and Ellerth.
Burlington Indus., Inc. v. Ellerth, 524 US 742 (1998), and Faragher v. City of Boca Raton, 524 US 775 (1998) were two different Title VII sexual harassment cases decided by the United States Supreme Court on the same day. In those cases, the Supreme Court wrestled with the idea of why a company should be responsible for the sexual harassment by the company’s supervisors of the company’s employees. Sexual harassment is not a part of any supervisor’s job duties or done in furtherance of the company’s business. Why should a company be responsible for the sexual activities of its supervisors? The Court applied agency law to Title VII sexual harassment cases to explain when and why a company can be held responsible for sexual harassment.
The Supreme Court held that whenever sexual harassment by a supervisor culminates in a tangible employment action—such as a loss of wages—the company will automatically be responsible for the sexual harassment.
Why the "Avoidable Consequences Doctrine" or "Faragher-Ellerth Defense" Can Not Apply to the Fair Labor Standards Act.
Paying employees their wages and complying with the Fair Labor Standards Act is the business of every company with employees. It cannot even be compared to the sexual motivations of supervisors.
The Court created affirmative defenses that apply only when sexual harassment does not involve tangible employment actions. The Supreme Court said that even though sexually harassing employees is not part of the job of supervisors, companies must anticipate that sexual harassment happens. Employers must take action to prevent harassment.
To establish the defense, the employer must prove first, that it took reasonable steps to ensure that supervisors do not sexually harass employees, and second, that the employee unreasonably failed to take advantage of the corrective and preventive opportunities provided by the company to prevent or correct the harm.
The reasoning of the Faragher and Ellerth decisions cannot form the basis for an employer defense to the Fair Labor Standards Act. The FLSA involves the loss of tangible job benefits and complying with the FLSA involves wages only. The Faragher-Ellerth decisions provide a defense for the company when supervisors are pursuing non-work related activities (like sexual harassment) when they do not affect tangible employment benefits.
Gong!
The author is an attorney at Barrett & Farahany, LLP, representing employees in Atlanta, Georgia.
Friday, August 27, 2010
Sunday, August 1, 2010
Class Action Waiver Clauses in Employment Contracts Are Illegal "Yellow Dog" Contracts.
Employees have little power to resist coerced arbitration agreements.
Courts should not enforce class action waiver clauses in employer-employee arbitration agreements because the clauses will wipe out long-standing and hard fought legal rights of employees. Most of the Federal employment laws allow for employees to join together in collective action lawsuits to advocate for terms and conditions of employment. If courts enforce the agreements, employers will be able to eliminate the ability of employees to act concertedly to challenge employers in court.
Many employers are using class action waivers in arbitration agreements that they make their employees sign to get or to keep their jobs. It seems a bit unfair to slip an arbitration agreement into an employment application or even to force employees to sign away their right to go to court. But the courts have enforced coerced arbitration agreements and point out that the Federal Arbitration Act favors the arbitration of disputes--as long as certain conditions are met, like the employer pays the costs of the arbitration and employees are not forced to give up their substantive legal rights. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
Class action waivers should not be in abritration agreements.
A problem that I see is that employers are pushing the line when they require employees to sign a document where the employees must agree not to be a part of a class action lawsuit against the employer. I fight class action waivers as an illegal "yellow dog" contract. Yellow dog contracts were originally used by employers to force their employees to agree not to join a union.
The Norris-LaGuardia Act and the National Labor Relations Act enacted by congress in the 1930's outlawed yellow dog contracts. Employees have the right to join together to advocate for their mutual aid in improving the terms and conditions of their employment. This includes the right to file and participate in a class action lawsuit against the employer and specifically includes the right to file and opt-in to a collective action under the Fair Labor Standards Act. Trinity Trucking & Materials Corp., 221 NLRB 364 (1975), Le Madri Restaurant, 331 NLRB 269 (2000), Novotel New York, 321 NLRB 624 (1996), United Parcel Service, Inc., 252 NLRB 1015, (1980).
Employment contracts that prevent employee concerted action are unlawful.
The Norris-LaGuardia Act says that Federal Courts do not have the jurisdiction to enforce yellow dog contracts.
The problem is that a Federal Court has already enforced an arbitration agreement that prohibited employees from participating in class actions--without even considering the Norris-LaGuardia Act. Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294 (5th Cir. 2004). The Countrywide decision focused on the liberality of the Federal Arbitration Act, but did not discuss whether the court was enforcing a yellow dog contract--without the jurisdiction to do so.
My law firm is prosecuting a collective action lawsuit on behalf of current and former pharmaceutical reps who work for Nephron Pharmaceuticals who were denied overtime pay. Nephron forced most of its drug reps to sign arbitration agreements that contains a clause that says the reps cannot file or participate in class action lawsuits. Nephron has asked the Federal Court in Atlanta to order the case to arbitration. We have asked the court to strike the anti-class action clause from the agreement before sending the case to arbitration.
We advocate for the rights of all employees.
The issue is important to fight because it involves the balance of power between employers and employees. We can handle multiple individual arbitrations against Nephron and adequately protect the rights of all of our clients. The problem is the setback to employee rights. With the ability to eliminate collective actions, employers will have the incentive to not comply with the Fair Labor Standards Act. Fewer employees will be able to challenge the employers and employers will profit from violating the law--even when they lose in arbitration. Employers who do not comply with the law will gain an unfair advantage over companies who do comply with the law. In an era of a decline of organized labor, enforcement and preservation of employee legal rights is essential.
Courts should not enforce class action waiver clauses in employer-employee arbitration agreements because the clauses will wipe out long-standing and hard fought legal rights of employees. Most of the Federal employment laws allow for employees to join together in collective action lawsuits to advocate for terms and conditions of employment. If courts enforce the agreements, employers will be able to eliminate the ability of employees to act concertedly to challenge employers in court.
Many employers are using class action waivers in arbitration agreements that they make their employees sign to get or to keep their jobs. It seems a bit unfair to slip an arbitration agreement into an employment application or even to force employees to sign away their right to go to court. But the courts have enforced coerced arbitration agreements and point out that the Federal Arbitration Act favors the arbitration of disputes--as long as certain conditions are met, like the employer pays the costs of the arbitration and employees are not forced to give up their substantive legal rights. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
Class action waivers should not be in abritration agreements.
A problem that I see is that employers are pushing the line when they require employees to sign a document where the employees must agree not to be a part of a class action lawsuit against the employer. I fight class action waivers as an illegal "yellow dog" contract. Yellow dog contracts were originally used by employers to force their employees to agree not to join a union.
The Norris-LaGuardia Act and the National Labor Relations Act enacted by congress in the 1930's outlawed yellow dog contracts. Employees have the right to join together to advocate for their mutual aid in improving the terms and conditions of their employment. This includes the right to file and participate in a class action lawsuit against the employer and specifically includes the right to file and opt-in to a collective action under the Fair Labor Standards Act. Trinity Trucking & Materials Corp., 221 NLRB 364 (1975), Le Madri Restaurant, 331 NLRB 269 (2000), Novotel New York, 321 NLRB 624 (1996), United Parcel Service, Inc., 252 NLRB 1015, (1980).
Employment contracts that prevent employee concerted action are unlawful.
The Norris-LaGuardia Act says that Federal Courts do not have the jurisdiction to enforce yellow dog contracts.
The problem is that a Federal Court has already enforced an arbitration agreement that prohibited employees from participating in class actions--without even considering the Norris-LaGuardia Act. Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294 (5th Cir. 2004). The Countrywide decision focused on the liberality of the Federal Arbitration Act, but did not discuss whether the court was enforcing a yellow dog contract--without the jurisdiction to do so.
My law firm is prosecuting a collective action lawsuit on behalf of current and former pharmaceutical reps who work for Nephron Pharmaceuticals who were denied overtime pay. Nephron forced most of its drug reps to sign arbitration agreements that contains a clause that says the reps cannot file or participate in class action lawsuits. Nephron has asked the Federal Court in Atlanta to order the case to arbitration. We have asked the court to strike the anti-class action clause from the agreement before sending the case to arbitration.
We advocate for the rights of all employees.
The issue is important to fight because it involves the balance of power between employers and employees. We can handle multiple individual arbitrations against Nephron and adequately protect the rights of all of our clients. The problem is the setback to employee rights. With the ability to eliminate collective actions, employers will have the incentive to not comply with the Fair Labor Standards Act. Fewer employees will be able to challenge the employers and employers will profit from violating the law--even when they lose in arbitration. Employers who do not comply with the law will gain an unfair advantage over companies who do comply with the law. In an era of a decline of organized labor, enforcement and preservation of employee legal rights is essential.
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