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Maryland State Bar Association Section of Labor & Employment Law

Spring 2018 Newsletter


MARYLAND STATE BAR ASSOCIATION SECTION OF LABOR AND EMPLOYMENT LAW

Volume XXIII, No. 1 Spring 2018

NEWSLETTER Section Officers:

Keith J. Zimmerman, Chair Melissa McGuire, Recording John Alvin Henderson, Recording Secretary Albert W. Palewicz, Editor

FROM THE CHAIR by Keith Zimmerman

EDITOR’S CORNER by Al Palewicz

Spring is upon us, sap is rising, and the weather is awful as I write. No need to worry. There is plenty to be excited about.

Keith’s article is a lengthy one this time, so I will be brief. This edition is done by attorneys Kollman and Saucier PA of Baltimore, with Council member Darrell VanDeusen as coordinator. They had the material ready some weeks ago, and have been most patient as we have dealt with some other issues before publishing this. Many thanks to those who wrote articles for this issue. You will find them all timely, thought-provoking, and exceeding well done.

First up is our biennial Section Council Election that will take place in Ocean City, Maryland on Friday June 15th, just before we present our program at the MSBA Legal Summit and Annual Meeting in Ocean City. A few weeks ago, I sent an email on our Section’s listserv announcing the nominating procedures. A copy of that notice appears at the end of my column. Second, is our biennial Employment Law Institute on April 18, 2018 at the Ecker Business Training Center in Columbia, Maryland. This is an excellent all-day program presented by panelists from all walks of labor and employment law. It is an excellent primer for young attorneys and a great refresher for more experienced folks. You can sign up for it here: msba.inreachce.com/Details?groupId=1fd357e1-ba34-47fa-aa69-7cd6b40b2aec Third, and it may not sound exciting, but by the time you read this column, MSBA will have a new website that works! It’s true. I have seen it. No longer will you need to brew a pot of coffee or tea while you wait for it to load. It has a much more accessible interface and should allow us, as a Section, to add content without having to trouble the staff at MSBA. Continued on p. 3

The delay in getting this out has been the beginning of a transition in the editor’s position. I remain as editor, but two attorneys from Gilbert Employment Law PC in Silver Spring are working with me to get this and future issues out. The plan is that in two to three more issues, they will become the Co-editors, and I become Editor Emeritus until they feel comfortable doing this. The two working with me are Cori Cohen and Elizabeth Moran. Their names will appear on the newsletter within an issue or two. I have been the editor of the newsletter since its beginning, over 20 years ago. This change is overdue. Cori and Elizabeth are enthusiastic about the task, and I look forward to working with them.

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FROM THE CHAIR continued Next, is our Annual Program. This year, the topic is #MeToo Movement and the New Era of Sexual Harassment Claims. It will be presented at 9:00 a.m. on Friday, June 15th and will take place in the Clarion Hotel in Ocean City. Our panelists are Glendora Hughes, General Counsel for Maryland Commission on Civil Rights, The Honorable John A. Henderson, Administrative Judge, U.S. Equal Employment Opportunity Commission, and Wendy Moore of the Law Office of Melissa Menkel McGuire. The program will be moderated by Tonya Baña, Esquire. If you have not already registered for the MSBA Annual Meeting, you can do so here: annualmeeting.msba.org. Finally, as I have been writing over the last several months, the U.S. Supreme Court is poised to make a sea change, read “overrule its 1977 decision in Abood v. Detroit Bd. of Educ.,” much to the detriment of the financial viability of public sector labor unions. On February 26, 2018, the Court heard argument in Janus v. American Federation of State, County, and Municipal Employees, Council 31 on this very point. If ignoring stare decisis is something that the Court was loathe to do in the past, the present composition of the Court is not. See Encino Motorcars, LLC v. Hector Navarro, et al., 2018 WL 1568025, an FLSA case in which the Court enlarged the FLSA exemption for salesmen, partsmen, or mechanics to include service advisors in the automobile industry. Justice Ginsburg, in footnote 7 of her dissent wrote, “In a single paragraph, the Court “reject[s]” this longstanding principle [precluding the enlargement of FLSA exemptions by implication] … without even acknowledging that it unsettles more than half a century of our prece-

dent.” And with that bit of news, here is the notice about nominations: Under the MSBA Labor and Employment Section Bylaws, an election of Section Council members is to take place at the Annual Meeting for the Maryland State Bar Association in even numbered years. This year, the election will take place in Ocean City on Friday, June 15th at the Section’s Annual Meeting, during the morning session of the Convention at approximately 8:00 a.m. The Bylaws provide for a Nominating Committee to convene at least 60 days prior to the election. This year, the Nominating Committee will convene on April 10th. The Nominating Committee is to provide to the Recording Secretary a list of proposed nominations at least 45 days prior to the election, which will be May 1st, this year. The Nominating Committee, in its consideration of nominees, is to take into account past service to the Section and, to the extent possible, to select persons from varying geographic areas. A notice to the members of the nominees of the Nominating Committee will be sent to members about 30 days before the election, which will be May 16th this year. The notice will contain instructions for write-in candidates. If you are interested in serving on the Section Council, please contact me at zimmerman@ kahnsmith.com and let me know of your interest no later than April 9, 2018. All names will be turned over to the Nominating Committee. As always, we welcome your input, comments, and suggestions. Please contact me at zimmerman@kahnsmith.com and Happy New Year!

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ARTICLES Paid Sick & Safe Leave Comes to Maryland By Garrett Wozniak With enactment of the Healthy Working Families Act (“MHWFA” or the “Act”), Maryland employers must now provide earned sick and safe leave (“SSL”) to eligible employees. Md. Code Ann., Lab. & Empl. §§ 3-1301 et seq. The MHWFA went into effect on February 11, 2018, 30 days after the legislature voted to override Governor Larry Hogan’s veto of the Act. Maryland Healthy Working Families Act Information, Maryland Department of Labor, Licensing & Regulation, available at www.dllr.state.md.us/paidleave/ [DLLR MHWFA Website]. The following is a summary of the MHWFA. Employer and Employee Coverage The MHWFA covers all Maryland employers. See Md. Code Ann., Lab. & Empl. § 3-1301(f). Employers with 15 or more employees must provide paid SSL. Employers with fewer than 14 employees must, at a minimum, provide unpaid SSL. The number of employees is determined by calculating the average monthly employee count -- including full-time, parttime, temporary, and seasonal employees, regardless of whether the employees are entitled to leave under the MHWFA -- for the prior 12-month period. Id. § 3-1304(a)(1) - (2). The Department of Labor, Licensing and Regulation’s (“DLLR”) guidance states that employers are to count only employees who work in Maryland for this purpose. DLLR HB1 Guidance, available at www.dllr.state.md.us/paidleave/paidleavefaqs.pdf. The Act covers most employees who primarily work in Maryland and regularly work 12 or more hours per week. Id.; Md. Code Ann., Lab. & Empl. § 3-1303(a)(1). The Act does not define what it means to “regularly work,” however. Exclusions from Coverage The MHWFA excludes a number of workers, including:

(1) independent contractors; (2) certain licensed real estate salespersons and licensed associate real estate brokers; (3) individuals who are under 18 before the beginning of the year; (4) certain agricultural workers; (5) individuals working on an as-needed basis in the health or human services industry who can reject or accept a shift offered by an employer, are not guaranteed to be called to work, and are not employed by a temporary staffing agency; (6) individuals who are directly employed by an employment agency to provide part-time or temporary services to another person; (7) temporary staffing agency employees, if the agency does not have day-to-day control over work assignments and supervision; and (8) individuals in the construction industry who are covered by a collective bargaining agreement (“CBA”) in which the Act’s requirements “are expressly waived in clear and unambiguous terms.” Md. Code Ann., Lab. & Empl. §§ 3-1301(e)(1) (6); 3-1303(a)(2) - (3), (b) (excluding janitors, building cleaners, building security officers, concierges, doorpersons, handypersons, and building superintendents from the construction industry exemption). In addition, the MHWFA does not apply to employees who are covered by a CBA entered into before June 1, 2017, until the contract is up for extension or renewal. House Bill 1 (2017), Section 2. Sick and Safe Leave Uses SSL may be used for a variety of reasons, including: (1) to care for or treat an employee’s mental or physical illness, injury, or condition; (2) to obtain preventive medical care for an employee or employee’s family member; (3) to care for a family member with a mental or physical illness, injury, or condition; (4) maternity/paternity leave; and (5) in domestic violence, sexual assault, and stalking situations against the employee or the employee’s family member: (a) medical or mental health attention; (b) services from a victim services organization; (c) legal services or proceedings; and

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(d) while an employee has temporarily relocated. Md. Code Ann., Lab. & Empl. §§ 3-1305(a); 3-1301(g) (defining “family member”); 3-1301(c), (j), and (k) (defining “abuse,” “sexual assault,” and “stalking”). Employers may require that employees use SSL in up to four-hour increments. Id. § 3-1305(e). SSL pay is at the employees’ normal wage rate, however, SSL for tipped employees is paid at the applicable minimum wage rate. Id. § 3-1304(a)(1). Sick and Safe Leave Allotment and Caps The MHWFA requires that employers provide SSL at a rate of at least one hour of leave for every 30 hours worked. An employee who is exempt from the Fair Labor Standards Act’s overtime requirements is presumed to work 40 hours each workweek. Id. § 3-1304(b), (e). Employers may cap the amount of SSL each employee can earn in a year at 40 hours, limit each employee to using 64 hours of earned SSL annually, and may cap the amount of SSL each employee may accrue at any time at 64 hours. Id. § 3-1304(c). Additionally, under the MHWFA, employees may carry over SSL balances from year to year, however, employers may cap the carry over amount at 40 hours. Within these parameters, employers have flexibility in complying with the MHWFA. For example, employers may annually frontload the amount of SSL employees would earn over the course of the year instead of using an accrual system. An employer who awards SSL at the beginning of each year, need not permit employees to carry over unused leave from year to year. Id. § 3-1304(d), (g). In addition, employers are not required to permit an employee to carry over leave if the employee is employed pursuant to a one-year, non-renewable grant. Id. The Act does not require SSL accrual for employees who: (1) work fewer than 24 total hours during a two week pay period; (2) work fewer than 24 hours in a one week pay period and the immediately preceding one week pay period; or (3) work fewer than 26 hours in a pay period in which the employee is paid bi-monthly. Id. § 3-1304(c)(5). Employers are not required to permit employees to use SSL during the first 106 calendar days of employment. Id. § 3-1304(c)(4). Nor are employers re-

quired to compensate employees for unused earned SSL upon separation of employment. Id. § 3-1302(b) (1). However, employees who are rehired within 37 weeks after leaving a job are entitled to reinstatement of unused SSL they had when leaving employment, unless the SSL was paid out upon separation. Id. § 3-1304(h). Employers who advance SSL before employees have accrued the leave may deduct the advanced amount from employees’ final pay if there is a signed agreement permitting the deduction and the employees have not accrued sufficient leave to make up for the advanced amount. Id. § 3-1304(i). Existing Leave Policies Employers are not required to modify existing paid leave policies if: (1) the existing policy permits employees to accrue and use leave under terms and conditions that are at least equivalent to the MHWFA’s minimum requirements; or (2) employees do not lose compensation because of sick and safe leave absences. Existing paid leave includes vacation days, sick days, short-term disability benefits, floating holidays, parental leave, and “other paid time off that may be used under the terms and conditions as paid [SSL].” Id. § 3-1302(a), (b)(2), (c). Notice, Verification, and Denying Leave Employers may require reasonable advance notice of up to seven days where employees’ need to use SSL is foreseeable. Where the need to use SSL is not foreseeable, employees must provide notice to employers “as soon as practicable” and comply with employers’ notice requirements, so long as those requirements do not interfere with employees’ ability to use sick and safe leave. Id. § 3-1305(b)(1) - (2). Employers may require employees using SSL to provide verification that SSL use was proper, if: (1) the leave was used for more than two consecutive scheduled shifts; or (2) the leave was used between the first 107 and 120 calendar days (inclusive) of employment and the employee agreed to provide verification at the time of hire. Employers may deny subsequent leave requests that are for the same reason as the leave for which employees do not provide verification. Id. § 3-1305(g). Employers may deny leave requests from employees who do not provide proper notice only if an em-

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ployee’s absence will cause a disruption to the employer. Employers may also deny leave requests in narrowly prescribed situations involving services to developmentally disabled or mentally ill individuals. Id. § 3-1305(b)(3). Employer Notice and Recordkeeping Obligations Employers must notify employees that they are entitled to SSL. The notice must explain how leave is accrued; permitted uses; that adverse action for use of SSL is prohibited; that the Act prohibits an employee making a complaint, bringing an action, or testifying in an action in bad faith; and information regarding how employees may report alleged violations of the Act. Id. § 3-1306(a) - (b). The notice posting published by DLLR is available at www.dllr.state.md.us/ paidleave/paidleaveposter.pdf Employers must keep and maintain SSL records (covering accrual and use) for at least three years. Failure to maintain records creates a rebuttable presumption that an employer violated the MHWFA. Id. §§ 3-1307(a), (c)(1). Employers must provide employees, in writing, at each regular pay date, a statement regarding the amount of SSL available. This requirement can be accomplished via an online portal accessible to employees. Id. § 3-1305(f). Enforcement and Prohibitions Employers may not take adverse action against employees (discharge or demote, including threats, or any other retaliatory action effecting the terms and conditions of employment) who have exercised SSL rights in good faith. Employers are also prohibited from interfering with, restraining, or denying an employees’ exercise of SSL rights. Id. § 3-1309. Employers may not count SSL use against employees under an absence control policy, however, employers may adopt and enforce policies prohibiting “the improper use of earned [SSL]” and may prohibit a pattern of abuse of SSL. Id. §§ 3-1302(b)(5); 3-1309(c)(3).

provides for a payment of leave and economic damages. DLLR may also order the payment of treble damages and a civil penalty of up to $1,000 for each violation. Failure to comply with a DLLR order may result in a court action and civil penalties. Treble damages (three times the value of the unpaid leave), punitive damages, attorneys’ fees and costs, and injunctive relief are available in a civil action under the Act. Id. §§ 3-1308(a), (b)(1) - (2), (c)(3). Employees found to have filed bad faith complaints or civil actions, or testified in bad faith, are subject to conviction of a misdemeanor and a civil fine of up to $1,000. Id. § 3-1310. Conclusion The MHWFA is less than clear in many areas and it is reasonable to expect corrective legislation at some point. In addition to complying with the MHWFA, employers with employees in Montgomery County must comply with that County’s SSL law, which was enacted in 2015. Montgomery County Code §§ 27-76 et seq. While Prince George’s County passed a SSL law in 2017, Prince George’s County Labor Code §§ 13A-119 through 13A-126, that law is preempted by state law. Md. Code Ann., Lab. & Empl. § 3-1302(d). As of this writing, legislators have introduced eight bills in the current legislative session that seek to amend the MHWFA (see House Bill 779 (2018), House Bill 1262 (2018), House Bill 1314 (2018), House Bill 1364 (2018), House Bill 1417 (2018), House Bill 1421 (2018), Senate Bill 304 (2018), and Senate Bill 712 (2018)), though no changes are likely this session. See Scott Dance, “As Maryland regulators and businesses scramble over new paid sick leave law, delegates block push to delay.” The Baltimore Sun, February 1, 2018, available at www.baltimoresun.com/news/maryland/politics/bs-md-paid-sickleave-delay-20180130-story.html. In the interim, employers can look to the DLLR for guidance. DLLR MHWFA Website; see also Md. Code Ann., Lab. & Empl. § 3-1306(c).

Employees can file written complaints with DLLR. The law does not contain a statute of limitations for filing a complaint with DLLR, which is tasked with investigating complaints and attempting to resolve disputes through mediation. If DLLR finds a violation and cannot reach an informal resolution, the Act Maryland State Bar Association Section of Labor & Employment Law

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Labor and Employment Laws: Are They Working? By Frank L. Kollman The Supreme Court recently decided a case by referring to a Senate Committee Report to find one of the “purposes” of the Dodd-Frank Act. The issue was whether the plain language of the statute should be stretched to accommodate the purpose of the law. The majority found that the legislative history supported the plain language of the statute, so the Court saw no reason to stretch it to behavior that could have been covered. There were two concurrences. Justice Sotomayor wrote that legislative history can be used to stretch in all circumstances. Justice Thomas wrote that the Court should enforce what Congress actually wrote, not what it intended to write. Digital Realty Trust Inc. v. Somers, 200 L.Ed.2d 15, 2018 U.S. LEXIS 1377 (2018). The footnote in Justice Thomas’ concurrence, which denigrates the use of legislative history in any case to find “the purpose” of the law, is priceless.

Let’s start with the National Labor Relations Act (“NLRA”), enacted in 1935 and significantly amended in 1947. The NLRA, to me anyway, was clearly a reaction to bad behavior by employers trying to thwart union organization. Although the statute says that employees have the right to refrain from union (or concerted) activities, Congress was more concerned about their right to engage in them. The Taft-Hartley amendments were a reaction to what Congress perceived (but not Harry Truman, who vetoed them) to be the power of unions to do mischief under the law, or so I have been told. So far so good, but does the NLRA have a grander purpose, and is it effectively meeting it?

The purpose(s) of each labor and employment law (“LEL”) could be subject to debate by the members of this section. Even where we might agree on the LEL’s purpose, opinions will differ on whether that purpose is being met. Should we, as labor and employment attorneys, be concerned about the purpose of the laws we work with and whether they are effective? I believe we should, even if all we do is increase awareness by the elected officials who enact laws, the government employees who promulgate regulations, the people who enforce them, and the lawyers and government employees who interpret them.

If the grander purpose is to foster increased unionization, then the answer is probably “no.” Private sector unionization is shrinking (and apparently growing in the public sector, although the Supreme Court’s pending decision in Janus v. AFSCME, Council 31, 138 S. Ct. 54 (2017) may have some impact there). Union officers have told me that they go to the NLRB to file unfair labor practices, but they would rather use other means to unionize than the Board’s election procedures. If the purpose is to provide a level playing field for labor and management when dealing with employees and their unionization desires, labor and management would also say “no,” claiming that the other side has all the advantages. The party losing an NLRB election frequently blames the other party’s advantage for the loss, but are election results good evidence of the NLRA’s effectiveness? Both management and labor claim to want employee freedom of choice, but neither is above asserting that they lost the election because the other party coerced employees illegally to vote as they did.

Never one to shy away from controversy, I hope to encourage discussion and debate over the purpose(s) of certain LEL’s, and whether the laws are accomplishing their purpose. I hope to give a balanced treatment to several laws, not necessarily my management lawyer view of it. In many cases, I will identify conflicting purposes that should be addressed at some point, if only to reign in the excesses of management, labor, and plaintiffs. Our lawmakers might like to know from us practitioners if the law is working or if we LEL lawyers are perverting or diverting its intended purpose(s).

As we know, the Obama-era NLRB made significant changes in the way the NLRA is interpreted and implemented. The Trump-era Board has undone some of them and will likely undo a good deal more. The future of the NLRA may depend on resolving the issue whether we can insure full and free, informed voter choice on the subject of unionization in NLRB secret ballot elections. We cannot do that in political elections, for many of the same reasons: fake news (company or union lies), apathy and ignorance (if an employee had all the facts, he would vote and vote for me), and fear (whether real or imagined). But before

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anyone makes changes to the NLRA, maybe we ought to talk about the goals of the NLRA in the context of the clear philosophical differences between management and labor. Labor peace may be the goal, but that will not happen if one or more parties view the system as rigged in favor of the other guy. With respect to Title VII, the ADA, and the ADEA, it has always puzzled me that if the purpose of these laws is to stop discrimination in the workplace, why does the government tout that the number of charges and cases being filed is going up? Does that mean our anti-discrimination laws are failing? What is working and what is not? If one of the purposes of these laws is to slow down impulsive employers, it is doing that. I have no doubt that employers today are far less likely to fire someone in a protected class impulsively, and this reluctance has spilled over to all employees. Companies, even nonunion ones, use “just cause” as the gold standard for discipline. The ADA is changing the way employers handle employees with injuries that were not previously considered disabilities, which is a good thing. If these laws make it harder for those who are protected to get hired in the first place, however, then they are clearly not working as intended. I do not believe that we know how these anti-discrimination laws have psychologically affected hiring, discipline, accommodation, and other employee interactions generally. Hiring and firing decisions have many subjective elements, which makes constructing an objective experiment difficult. That does not mean we should not try. The other problem is sifting out confirmation bias (believing you are not prejudiced, but . . . .) and being cognizant that a tolerance for different people is more of a learned than an inherited trait. Maybe we need more studies on human behavior, or maybe we need to encourage employers to hire more women and minorities by identifying the conscious and subconscious reasons why they don’t. We might also ask if employers are just getting better at disguising their true motives. The Fair Labor Standards Act has created more labor law outlaws than any other LEL. If a company, however good its intentions, is not possibly violating the FLSA in some way, it is a rarity. The DOL regulations are so convoluted and interpreted differently depending who is in the White House that it is near-

ly impossible to give foolproof advice to clients on compliance. There are many subjective and objective factors that must be considered. If the purpose of the FLSA is to make employers violators, it is working. If the purpose is to insure baseline compensation and overtime pay for most non-management employees, then the lack of simplicity is limiting that goal. Raising the salary threshold for exempt employees is one approach, but we need more discussion to ensure that employers do not have to worry that a highly-paid employee is not exempt because of a technical issue caused by the regulations. In Maryland, is the “don’t ask” restriction really preventing employers from accessing their applicants’ and employees’ social media posts? Is the purpose to protect employee privacy or to prevent the use of social media in employment decisions? It certainly does not do the latter. The Occupational Safety and Health Act, which arguably has as its purpose the creation of a safe working environment, is one less controversial example. OSHA (or MOSH here in Maryland) enforces its safety regulations through employer penalties, and as a result it has become a “compliance” agency more than a pure safety agency. After 47 years, do we agree on what OSHA’s purpose is, and are the law and regulations accomplishing that purpose? By making compliance with regulations, rather than the adoption of safe practices, the principal purpose, we probably do the workplace a disservice. If the fines could be satisfied by the purchase of safety equipment or training on safety, that would be a start. I believe that many workplaces are safer today because they do not want to be cited by OSHA. It is therefore working somewhat, but do paperwork regulations and other “how to” regulations with no obvious correlation to safety need to be enforced through fines? Creating adversarial relationships between MOSH and employers seems counterproductive if safety is the goal. At least we should talk about it. We should be more concerned than we are with whether these LELs are serving their purposes. I know it sounds fanciful, but someday Congress or the General Assembly might ask us practitioners what is working and what is not. We should be prepared with answers untarnished by our confirmation bias.

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The Federal Defend Trade Secrets Act Two Years In By Michael Severino The Federal Defend Trade Secrets Act (DTSA) was enacted in May 2016 in order to set uniform standards for trade secret misappropriation. While the DTSA complements state trade secret laws (which are usually based on the model Uniform Trade Secrets Act), it provides a couple of important additions and, perhaps more importantly, provides an independent basis for federal jurisdiction. While appellate decisions construing the DTSA are sparse given its relatively recent enactment, some trends and issues have emerged. Timing of Misconduct Perhaps the most litigated issue to date is what conduct falls under the DTSA. As with most federal statutes, the DTSA provides that it applies only to conduct that occurred after the date of its enactment, which was May 11, 2016. However, violators often engage in a pattern of conduct that begins with an improper acquisition and continues with prolonged use and dissemination of the trade secrets. In Sleekez, LLC v. Horton, 2017 U.S. Dist. LEXIS 71410, *13-15 (D. Mont. April 21, 2017), the District Court, citing Adams Arms, LLC v. Unified Weapons Sys., 2016 U.S. Dist. LEXIS 132201, *14-19 (M.D. Fla. Sept. 27, 2016), distinguished between the “acquisition” and “disclosure/use” theories of liability. The Court noted that pursuant to an acquisition theory, a “DTSA claim is only actionable if the trade secret was acquired after the effective date of the Act,” but that a claim based on disclosure/use theory is “actionable when the disclosure or use continued to occur after the effective date.” Other courts have followed this analysis. See Tesla Wall Sys., LLC v. Related Cos., L.P., 2017 U.S. Dist. LEXIS 207932, *26 (S.D.N.Y. December 18, 2017) (“Additionally, Tesla states a plausible claim arising out of defendants’ pre-enactment conduct. Moreover, defendants appear to concede that as long as plaintiff continues to use trade secrets acquired wrongfully prior to enactment, the Act’s requirements are met.”); God’s Little Gift, Inc. v. Airgas, Inc., 2017 U.S. Dist. LEXIS 162701, *5-6 (W.D.N.C. October 2, 2017) (citing Sleekez) (“However, while this may be the case under an ‘acquisition’ theory of liability,

under a ‘disclosure’ theory of liability a DTSA claim is actionable when the disclosure or use continued to occur after the effective date.”). But see Avago Techs. United States Inc. v. NanoPrecision Prods., 2017 U.S. Dist. LEXIS 13484, *28 (N.D. Cal. January 31, 2017) (“[Counter-Plaintiff] has not cited any authority suggesting that the DTSA allows a misappropriation claim to be asserted based on the continued use of information that was disclosed prior to the effective date of the statute.”). Accordingly, it seems relatively clear that so long as either the improper acquisition of the trade secret occurred after the effective date, or the improper use continued after the effective date, although it may have begun before the effective date, a plaintiff may maintain an action under the DTSA. In practical usage, however, this may be a distinction without a difference. In most cases of trade secret misappropriation, the improper conduct doesn’t end when the trade secret is merely taken, but rather continues when the trade secret -- be it a customer list, computer database or other valuable information -- is sold or used in order to give the acquiring party an advantage in the marketplace. While the pre-enactment and post-enactment distinction seems clear (at least outside the Northern District of California), the ability to recover damages for pre-enactment misconduct is a little murkier. The DTSA provides for “damages for actual loss caused by the misappropriation of the trade secret … ” 18 U.S.C. § 1836(b)(3)(B). Sleekez suggests that a plaintiff cannot recover for pre-enactment conduct: “The Court notes that Plaintiff’s potential recovery on Count Two of the proposed Amended Complaint may only be available for acts of misappropriation that occurred after May 11, 2016.” Sleekez, at fn. 5 (referring to Adams Arms). However, Tesla left the question open: “Thus, the question is whether Tesla should be allowed to recover for damages that occurred as a result of its pre-enactment use of Tesla’s trade secrets - an issue which the parties suggest has not been reached previously by other courts.” Tesla, at *26. How the appellate courts treat this issue remains to be seen. One can expect that it will not be easy to distinguish between pre-enactment and post-enactment damages, especially when relying on

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a use/disclosure theory of liability. For example, in the case of a departing employee who takes with him or her protected customer lists and attempts to use that information to compete with his or her old employer, some of the competition may occur before enactment and some may occur after. It may be possible to cut off certain categories of damages (for example, damages resulting from improper solicitations) as of the date of the DTSA enactment, but will the courts draw a line or simply treat all the damages from a continuous course of conduct as recoverable notwithstanding whether some of the damages accrued before the DTSA. Looking long-term, however, one would expect this issue to diminish as the DTSA matures and lawsuits address wholly post-enactment conduct and damages. Whistleblower Protections The DTSA contains whistleblower protections for employees, including contractors and consultants, which immunizes an individual for a disclosure made in confidence to a government official or attorney solely for the purpose of reporting a suspected violation of law. This issue has been raised in very few cases, most notably Unum Grp. v. Loftus, 220 F.Supp. 3d 143 (D. Mass. 2016). In Unum, the defendant-former employee did not deny taking trade secrets from his former employer, but argued in a motion to dismiss that the claims should be dismissed because he turned over the documents to his attorney to report and investigate a violation of law. The Court treated defendant’s argument as an affirmative defense, and ruled that the record at such an early stage did not support or reject the defense. While an affirmative defense may be granted based on a motion to dismiss, proper facts showing such a defense with certitude is required. The Court also noted that no discovery had taken place and no whistleblower action had been filed. Unum, at 147. While this provision of the DTSA has yet to be tested, one should expect these types of claims and defenses to increase. Practitioners should also bear in mind that if confidential information is transmitted to the government because of suspected employer malfeasance, an investigation could dramatically alter the scope and parameters of any pending trade secret lawsuit, as well as invoke other concerns (i.e. criminal sanctions against the employer, disclosure of protect-

ed health information, etc.). Those employers who may be faced with potential trade secret cases should have already updated their employee handbooks to provide employees with the necessary notice of the DTSA’s whistleblower immunity. This notice must be provided to employees in any employment contract governing the trade secrets, or cross reference to the policy, for the employer to recover attorneys’ fees or exemplary damages in any subsequent lawsuit. Attorneys’ fees and exemplary damages can be powerful tools. In any DTSA case, employees and employers should determine whether this notice was provided. Ex Parte Seizures The DTSA allows for the ex parte seizure by law enforcement of the claimed trade secret in “extraordinary circumstances” and “if an order issued pursuant to Rule 65 of the Federal Rules of Civil Procedure or another form of equitable relief would be inadequate.” Much like a temporary restraining order, an applicant must still show immediate and irreparable injury, balance of harm, and likelihood of success on the merits. While plaintiffs have generally avoided seizures under the DTSA and instead have continued to rely on temporary restraining orders pursuant to Federal Rule of Civil Procedure 65, litigants should weigh the need for an ex parte seizure order against the possibility that a defendant might ignore a TRO and/or destroy or disseminate the claimed trade secret in violation of the TRO. In Blue Star Land Servs., LLC v. Coleman, 2017 U.S. Dist. LEXIS 202396, *8-9 (W.D. Ok. December 8, 2017), the Court issued an ex parte seizure order after finding extraordinary circumstances. While the Court’s opinion was in response to defendants’ motion to dismiss rather than plaintiff’s initial application for ex parte seizure, it did outline the defendants’ conduct that led to the seizure order. Among other things, the Court noted that one defendant allegedly downloaded confidential information to his personal Dropbox account, and that both defendants allegedly solicited plaintiff’s employees and poached plaintiff’s clients while defendants were still employed by plaintiff. While the facts alleged in Blue Star were egregious, they do not differ from those seen in many trade secrets cases.

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Plaintiff also argued in Blue Star that the issuance of the ex parte seizure order constituted law of the case, which mandated denial of defendants’ subsequent motion to dismiss. Plaintiff reasoned that if the complaint met the heightened standards for the issuance of the seizure order, it necessarily met basic pleading standards sufficient to survive dismissal. Ruling that the ex parte order did not constitute law of case, the Court stated that it “must proceed to an independent 12(b)(6) review of Plaintiff’s Complaint.” Blue Star, at *9. Conversely, the District Court for the Northern District of California refused to enter an ex parte seizure order in OOO Brunswick Rail Mgmt. v. Sultanov, 2017 U.S. Dist. LEXIS 2343, *4-5 (N.D. Cal. January 6, 2017), in favor of a preservation order directed to third parties and a temporary restraining order (issued without notice) to the defendants directing them to maintain and bring with them to the preliminary injunction hearing a company-issued laptop and mobile phone. The Court reasoned “that seizure under the DTSA is unnecessary because the Court will order that [defendant] must deliver these devices to the Court at the time of the hearing scheduled below, and in the meantime, the devices may not be accessed or modified.” The trend thus far has been for litigants to rely on injunctive relief under Federal Rule 65 in seeking preservation and imaging orders, instead of resorting to the more onerous standards of DTSA seizure. See also Magnesita Refractories Co. v. Mishra, 2017 U.S. Dist. LEXIS 10204, *3-4 (N.D. Ind. January 25, 2017) (“While one of [Plaintiff’s] substantive claims in this action arise under the DTSA, it moved for a temporary restraining order, including the seizure of [defendant’s] personal laptop, under Federal Rule of Civil Procedure 65, not the DTSA, and I granted its motion.”). One should expect this trend to continue.

Bldg. Prods., 2017 U.S. Dist. LEXIS 202748, *57-60 (N.D. Ill. December 9, 2017) (based on federal law), while others have rejected it (based on state law), see LeJeune v. Coin Acceptors, Inc., 381 Md. 288, 315322 (2003) and Whyte v. Schlage Lock Co., 125 Cal. Rptr. 2d 277, 290-294 (Cal. Ct. App. 2002). It is often characterized, at least by jurisdictions that reject the doctrine, as an after-the-fact non-competition agreement. The elimination of this disparate treatment lends itself to the DTSA’s goal to provide nationwide uniformity as to what constitutes misappropriation, especially in cases where it may be difficult or impossible to prove any actual use of confidential materials. The DTSA seems to reject the doctrine: “In a civil action brought under this subsection, a court may grant an injunction to prevent any actual or threatened misappropriation, provided the order does not prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows.” 18 U.S.C. § 1836(b)(3)(A)(i)(I) (italics added). Accordingly, while a court can enjoin threatened misappropriation, it cannot enjoin a former employee from taking a new position without something more than just knowledge of a trade secret. This analysis is made more difficult, however, by the fact that many courts analyze misappropriation claims based both on the DTSA and state law without differentiating between the two causes of action. One should expect the federal appellate courts to weigh in on the matter and finally settle the issue as it relates to the DTSA. State laws, of course, will be up to the states.

Inevitable Disclosure Doctrine Perhaps the most anticipated issue posed by the DTSA concerns the viability, or not, of the inevitable disclosure doctrine. This doctrine allows a claim of misappropriation where the plaintiff can show that a departing employee will inevitably utilize or rely on his or her former employer’s trade secrets in a new position. Some jurisdictions have adopted a version of the doctrine, see PrimeSource Bldg. Prods. v. Huttig Maryland State Bar Association Section of Labor & Employment Law

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The NLRB Eyes Obama-Era Board Decisions By Andrea E. Murphy The dawn of a new presidential administration last year caused the anticipated swing of the proverbial pendulum concerning the National Labor Relations Board’s (Board) members and decisions. The Board’s political makeup has shifted, and there will soon be three Republican members and two Democratic members. The Board has already reversed several cases decided under the Obama-era Board that many had considered controversial. Unsurprisingly, there are many more Obama-era Board upheavals predicted to come as the Board moves forward. The Board Overturns Three Decisions Last December, the Board overturned three Obama-era decisions that many had criticized as troublesome for employers. First, as reported in the last newsletter, the Board’s decision in The Boeing Company and Society of Professional Engineering Employees in Aerospace, 365 NLRB No. 154 (2017) overruled the Lutheran Heritage “reasonably construe” standard for determining whether facially neutral workplace rules, policies, and handbook provisions interfere with employees’ labor rights. In Boeing, the Board adopted a new standard designed to provide employers with more certainty. Going forward, in cases concerning whether a facially neutral rule would potentially interfere with Section 7 rights, the Board will consider “(i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.” 365 NLRB No. 154, at *14. Second, in PCC Structurals, Inc. and International Association of Machinists & Aerospace Workers, 365 NLRB No. 160 (2017), the Board overruled Specialty Healthcare & Rehabilitations Center of Mobile, 357 NLRB No. 934 (2011). There, it clarified the applicable standard for determining whether a proposed bargaining unit is appropriate for collective bargaining when the employer contends that the smallest appropriate unit must include additional employees. In PCC Structurals, the Board reiterated the two-step standard as set forth in Specialty Healthcare. First, “when a union seeks to represent a unit

of employees ‘who are readily identifiable as a group (based on job classifications, departments, functions, work locations, skills, or similar factors), and the Board finds that the employees in the group share a community of interest after considering the traditional criteria, the Board will find the petitioned-for unit to be an appropriate unit’ for bargaining.” 365 NLRB No. 160, at *1. Next, if the bargained-for unit is appropriate, the burden shifts to the proponent of a larger unit (which is usually the employer) to prove that the proposed additional employees “share ‘an overwhelming community of interest’” with the petitioned-for employees, “such that there ‘is no legitimate basis upon which to exclude certain employees from’” the petitioned-for unit because the traditional community-of-interest factors “‘overlap almost completely.’” Id. The Board decided to eliminate the “overwhelming” community-of-interest standard and reinstate the traditional community-of-interest standard. Going forward under the traditional community-of-interest standard, the Board will consider the interests of all employees, regardless of whether they fall within the petitioned-for bargaining unit or share an “‘overwhelming’ community of interests.” Id. at *5. The authors of the last newsletter also reported on a third impactful ruling: Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017). There, the Board overruled Browning-Ferris Industries, 362 NLRB No. 186 (2015), and returned to a more stringent test for finding joint employer liability. Under Browning-Ferris, two entities could be considered joint employers based on the mere right to control the terms and conditions of employment. In Hy-Brand, the Board adopted a higher standard for finding joint employment, requiring evidence of “direct and immediate” control. Hy-Brand, 365 NLRB No. 156, at *34. The Board Vacates Hy-Brand On February 26, 2018, the Board vacated and set aside its Hy-Brand decision, following a conflict of interest investigation regarding recently-appointed Board Member William Emanuel (who took part in the Hy-Brand majority opinion). Therefore, as of the writing of this article, the Board’s decision to overturn Browning-Ferris is of no effect.

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The Board’s Office of Inspector General (OIG) conducted the investigation, which revealed that Emanuel’s participation in the Hy-Brand decision was improper. The OIG considered the Board’s deliberative processes in the Hy-Brand and Browning-Ferris decisions. The OIG set forth the findings of the investigation in a Board Memorandum dated February 9, 2018. See nlrb.gov/sites/default/files/attachments/ basic-page/node-1535/OIG%20Report%20Regarding%20Hy_Brand%20Deliberations.pdf. The OIG found that at the outset, Hy-Brand and Browning-Ferris were two distinct and separate cases. In Browning-Ferris, then-Member Miscimarra took part in the dissent. The OIG identified that Emanuel’s former law firm also participated in the Browning-Ferris dissent, by providing legal arguments for the Board’s consideration. It opined that Miscimarra’s “marshal[ling]” of Hy-Brand through the Board’s deliberations effectively caused the two cases to be consolidated into “one particular matter involving specific parties.” Id. As a result, the deliberative processes in each case were inseparable, and Hy-Brand “was merely the vehicle to continue the deliberations of Browning-Ferris.” Id. Following the Board’s order to set aside Hy-Brand, the Board petitioned the U.S. Court of Appeals for the District of Columbia Circuit to reopen Browning-Ferris and review the Board’s 2015 decision. On March 8, 2018, the Court ordered Browning-Ferris (the employer) to respond to the request that the Court reconsider the case. Emanuel’s conflict of interest also has caused appointee John Ring to commit to an investigation into his own potential conflicts. Like Emanuel, Ring’s background includes employment with a management-side labor law firm. The Board Targets More Cases On December 1, 2017, the Board’s General Counsel (GC) issued Memorandum GC 18-02, mandating submission of certain cases for advice. Seeemployerlaborrelations.com/wp-content/uploads/ sites/220/2017/12/GC-18-mandatory-advice.pdf. In the Memorandum, the GC acknowledged “many changes in precedent” through cases that had emerged from the Obama-era Board, noting that such changes were often accompanied by “vigorous dissents.” Id.

The GC requested that cases containing “[s]ignificant legal issues includ[ing] cases over the last eight years that overruled precedent and involved one or more dissents” be turned over for advice. Id. The GC identified a list of cases that fit these criteria. For instance, the list includes a set of cases that effectively expanded employee Weingarten rights. In Manhattan Beer Distributors, LLC, 362 NLRB No. 192 (2015), the Board found that an employee’s discharge violated his Weingarten rights after the employer failed to allow the employee a reasonable period of time to obtain union representation prior to submitting to the drug test. The dissent found that the employee’s right to union representation was satisfied because the employee in fact had a phone call with his union representative. In Smith’s Food and Drug Center, Inc. d/b/a Fry’s Food Stores, 361 NLRB No. 140 (2015), the employer was found to have violated Section 8(a)(1) by denying an employee the rights to her choice of a union representative for an investigatory interview and to confer with a representative, and by implicitly instructing the union representative not to speak at the investigatory interview. The dissent there found instead that the employee was not denied the right to confer with a representative because she had not asked for a conference. It also found that the employer did not instruct the union representative to stay silent at the interview, nor was silence implicit in its statements. In Howard Industries, Inc., Transformer Division, 362 NLRB No. 35 (2015), the Board found that the employer unlawfully threatened a union steward for using notes during an investigatory interview of an employee; the dissent opined that it was lawful for the employer to hear the employee’s account of the matter under investigation from the employee directly. The Memorandum also points out specific decisions that present “conflict[s] with other statutory requirements.” This includes Pier Sixty, LLC, 362 NLRB No. 59 (2015), wherein an employee’s outrageously obscene language in a Facebook post (calling the supervisor a “nasty mother f-----” and stating “f--- his mother and his entire f------ family!”) was still protected concerted activity. Pier Sixty is noted as particularly difficult for employers who also must comply with EEO principles. Another case identified in this category is Cooper Tire & Rubber

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Company, 363 NLRB No. 194 (2016). There, an employee was discharged for making racist comments aimed at replacement workers while picketing. The conduct violated the employer’s policies prohibiting racial harassment. Nonetheless, the Board found that the employee’s statements were insufficient to lose NLRA protection, and the discharge was unlawful.

Department of Education Issues New Interim Guidance for Handling Title IX Complaints of Sexual Misconduct

The Memorandum makes clear that the list of identified cases is not exhaustive. Indeed, it does not mention The Trustees of Columbia University in the City of New York, 364 NLRB No. 90 (2016). In this case, the Board overturned Brown University, 342 NLRB No. 483 (2004), which held that graduate student assistants were not employees for purposes of Section 2(3) of the NLRA. The Board in Columbia University explicitly disagreed with the Brown University Board’s reasoning that graduate assistants could not be statutory employees because they “are primarily students and have a primarily educational, not economic, relationship with their university.” 364 NLRB No. 90, at *1. Although the GC does not cite this case explicitly in the Memorandum, the case appears to satisfy the GC’s criteria of cases to submit for advice.

On September 22, 2017, the U.S. Department of Education announced important changes to its regulatory guidance for schools’ handling of sexual misconduct complaints under Title IX of the Education Amendments Act of 1972. Rescinding Obama-era policies introduced in 2011 and 2014, the Education Department has published new interim guidance entitled September 2017 “Q&A on Campus Sexual Misconduct,” that on a whole gives schools greater discretion for how to handle complaints of sexual misconduct, and shifts the focus from protections for the victim to equal treatment of both parties at all stages of an investigation. The interim guidance is available at: www2.ed.gov/about/offices/list/ocr/docs/qa-titleix-201709.pdf.

By Bernadette Hunton

Evolution of Discrimination Based On Sex Title IX of the Education Amendments Act was signed into law on June 23, 1972. Designed to correct imbalances in programs and activities for women and girls, the command of the law was seemingly simple: no discrimination based on sex for federally-funded educational programs. But as the meaning of “discrimination based on sex” began to evolve in various contexts, so too did the scope of protections recognized under Title IX. The Supreme Court first held that discrimination based on sex encompasses sexual harassment in 1986, with the landmark employment discrimination case, Meritor Savings Bank v. Vinson, 477 U.S. 57 (1986). The following year, Congress passed the Civil Rights Restoration Act of 1987, which clarified that a recipient of federal funds must guarantee non-discrimination in all programs and activities, not just the particular project for which the funds were issued. Almost a decade later, in 1997, the Department of Education issued its first guidance document on sexual assault entitled “Sexual Harassment Guidance: Harassment of Students by School Employees, Other Students, or Third Parties.” The 1997 publication affirmed protections for students at all levels of education, and ar-

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ticulated the government’s expectations that schools would use “judgment and common sense” to address problems when they arose. Shortly thereafter, the Supreme Court held in two landmark decisions, Gebser v. Lago Vista School District, 524 U.S. 274 (1998) (teacher v. student harassment), and Davis v. Monroe County Bd. of Ed., 526 U.S. 629 (1999) (student v. student harassment), that a school could be liable for private damages under Title IX only if it displayed “deliberate indifference” to known acts of harassment. The Department of Education responded to Gebser and Davis with revised regulatory guidance in 2001, to clarify that the liability standards articulated in those cases were limited to private actions for monetary damages, and that schools were still expected to take reasonable steps to prevent and eliminate sexual harassment, as a condition of receipt of federal funding. Still, another decade would pass before we began to see the reach of Title IX as we understand it today. On April 4, 2011, the Department of Education issued its well-publicized “Dear Colleague Letter,” explaining that the requirements of Title IX pertaining to sexual harassment also cover sexual violence, which includes rape, sexual assault, sexual battery and sexual coercion. The April 4, 2011 Dear Colleague Letter also described in detail what the Department of Education considered to be a school’s “prompt and equitable” resolution of sex harassment complaints. Certain elements of the 2011 Letter were incorporated into law with the passage of the Violence Against Women Reauthorization Act (VAWA) in 2013. The following year saw additional reforms, as the White House issued its comprehensive report “Not Alone: The First Report of the White House Task Force to Protect Students From Sexual Assault;” the Department of Education published its extensive 2014 “Questions and Answers on Title IX and Sexual Violence;” and witnesses testified before the Sexual Assault on College Campuses Congressional inquiry in June 2014. The events firmly nudged issues of sexual harassment and misconduct into the national spotlight, and made protections for an alleged victim, at all stages of the Title IX investigative process, an area of central concern. That is until September 2017, when the Department of Education announced in its September 22,

2017 “Dear Colleague Letter” that it was withdrawing its April 4, 2011 “Dear Colleague Letter,” and 2014 “Questions and Answers on Title IX and Sexual Violence,” and replacing them with new interim guidance, a September 2017 “Q&A on Campus Sexual Misconduct.” Below, a look at some of the most significant changes under the new 2017 Guidance: Interim Measures The 2017 Guidance, like previous guidance, recognizes the importance of interim measures, or services offered during an investigation to provide protections to an individual until a complaint has been resolved. However, contrary to past guidance which required schools to “minimize the burden on the complainant,” the new guidance prohibits schools from relying on “fixed rules or operating assumptions that favor one party over another.” Grievance Procedures The 2017 Guidance requires schools to adopt and publish procedures that provide for “prompt and equitable” resolution of complaints of sex discrimination. The 2017 six factor test mirrors the rescinded 2014 guidance, and considers whether a school: • Provides notice of procedures, including how to file a complaint, to students, parents of elementary and secondary students, and employees; • Ensures an adequate, reliable and impartial investigation of complaints, including opportunity to present witnesses and evidence; • Designates and follows a “reasonably prompt” timeframe for major stages of the complaint process; • Notifies the parties of the outcome of the complaint; and • Provides assurance that the school will take steps to prevent recurrence of sexual misconduct and to remedy its discriminatory effects, as appropriate. Notably, the 2017 Guidance does not define what constitutes a “prompt” investigation. This differs from the 60-day start to finish timeframe recommended in the 2011 “Dear Colleague Letter.” New guidance also disfavors gag orders and investigative training materials that apply sex stereotypes or generalizations. The new mantra is “what’s available to one should be available to the other.” Informal Resolution

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Another major change is that the 2017 Guidance declares mediation and other forms of voluntary resolution appropriate for resolution of sexual assault complaints. The 2011 “Dear Colleague Letter” recommended schools include a statement in their grievance procedures that mediation will not be used to resolve sexual assault complaints. The “recommendation” was strictly enforced by the Department of Education when investigating schools accused of violating Title IX. Adjudication Procedures Perhaps the most significant change in guidance is the shift from a mandatory preponderance of the evidence standard for evaluating complaints of sexual misconduct, to an optional clear and convincing standard. Schools may now choose which burden of proof to apply. Disciplinary Sanctions As for sanctions, the 2017 Guidance dictates that sanctions must be imposed with the goal of how best to enforce the school’s code of conduct, while considering the impact of separating a student from his or her education. In the past, no consideration was made for the impact on education. Schools were also required to consider remedies for the complainant and school community. The focus now is strictly on sanctions for the respondent. Notice of Outcome Although schools are still required to provide written notice of the outcome of an investigation to both parties concurrently, the 2017 Guidance gives schools discretion to decide the content of notice depending upon the allegations, the institution, and student age. In the past, schools were required to adhere to a strict script. Appeals

Impact Not surprisingly, the new guidance has drawn criticism from victim advocates, and on January 25, 2018, three civil rights groups filed a lawsuit in the U.S. District Court for the Northern District of California against Secretary of Education Betsy Devos, Acting Assistant Secretary for Civil Rights Candice Jackson, and the U.S. Department of Education, challenging the roll back of the Obama-era policies as violating federal law and discriminating against accusers. See SurvJustice, Inc. v. Devos, et al., Case No. 3:18-cv00535 (N.D. Cal. 1/25/18). Specifically, the complaint alleges that the new 2017 Guidance has had a “chilling effect” on campus sexual assault investigations, making accusers less inclined to pursue complaints of sexual misconduct, and colleges less urgent to resolve them. The Department of Education has defended its position, asserting that previous regulatory guidance failed to consider the due process rights of the accused, and the new guidance will restore balance to campus disciplinary proceedings. Meanwhile, as a result of the new guidance, schools are left to contend with something they have had little experience with the past few years. Choice. Indeed, schools may now choose, among other things, whether to raise the standard of proof for evaluating complaints of sexual misconduct, whether to use mediation as a tool for resolution, and whether to offer appeals processes to the accused only. Reminiscent of 2001 guidance, which cautioned schools that “depending on the circumstances, there may be more than one right way to respond,” the 2017 Guidance puts decisions for how best to respond back into the hands of those doing the responding. Time will tell whether schools hold tight to the scripted procedures of the past, or, embrace new freedoms to set policies tailored to their individual institution.

The 2017 Guidance permits schools to allow appeals of an investigation either: i) solely by the responding party; or (ii) by both parties, in which case appeals procedures must apply equally to both parties. Previous guidance recommended appeals for procedural error; to consider previously unavailable relevant evidence; or where a sanction was “substantially disproportionate to the findings.” Appeals processes in the past were required to be available to both parties. Maryland State Bar Association Section of Labor & Employment Law

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DOL Roundup By Randi Klein Hyatt Wage and hour issues, as well as Department of Labor (DOL) activity, continue to be on the forefront of the minds of lawyers who practice employment law. From the planned, the shelved, change to the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA) that has seemingly gone on indefinite hold, to the DOL’s revival of its Opinion Letters and abandoning of its six-factor intern test and tip-sharing regulations, there is much to discuss. Show Me The Money While the backstory is old news, I’ll share to make sure we all are on the same page. In May 2016, the Obama DOL issued a final rule revising the FLSA overtime regulations to increase the required salary payment of exempt employees to $47,476 (as compared with $23,660) and sent employers everywhere into a tailspin trying to figure out what to do. Lawsuits were filed left and right (21 states filed suit challenging the validity of the new rule, but not Maryland) and Judge Amos Mazzant of the Eastern District of Texas emerged the hero just ten days before the deadline for compliance when, on November 22, 2016, he placed a temporary injunction, effective nationwide, on the revised rule preventing it from taking effective on December 1. Then Trump was inaugurated two months later and, as has been politely stated since that time, “the rule’s implementation and enforcement are on hold.” In July 2017, the DOL started seeking public comment as it considered revisions to the new overtime rule.

to ask the Fifth Circuit to “hold” the appeal indefinitely while it tries to continue rulemaking and determine what the new salary threshold should be. This approach permits the DOL the authority to establish overtime regulations while permitting it also time to review the more than 140,000 comments received from their July 2017 request for information. Since the hold first was put in place in November 2016, Trump administration officials have remarked on a salary threshold somewhere in the $35,000 range (give or take). The outcome of the old new (or a newnew overtime) rule remains uncertain but there is a consistent murmur that the DOL will be issuing a proposed rule sometime in 2018 with the salary threshold in the $30,000-$35,000 range. Tell Us How You Feel Back in June 2017, the DOL announced it was reviving its long-standing practice of Wage and Hour Opinion Letters, a practice that the Obama DOL eliminated in 2010. The Wage and Hour Division (WHD) of the DOL confirmed it would once again provide guidance to covered employers and employees regarding the FLSA, the Family and Medical Leave Act (FMLA), Davis-Bacon, and the various other statutes that the DOL administers and enforces. The WHD apparently values its ability to respond to fact-specific requests rather than producing the more general Administrator Interpretations that were prevalent during the Obama DOL.

On August 31, 2017, Judge Mazzant officially killed the Obama overtime rule finding that the salary test did not meet the intended guidelines regarding the overtime rule. Specifically, he noted, the executive, administrative and professional exemptions are not intended to exclude the duties test and base exemption status solely on salary level, which is what this new overtime rule would have mandated.

Fast forward to January 5, 2018, when the DOL republished seventeen (17) previously issued Opinion Letters with new FLSA-designated Opinion Letter numbering. A quick review of each of these 17 documents confirms that each prior Opinion Letter was issued as an official statement during January 2009, but then had been withdrawn on March 2, 2009, “for further consideration” with the promise that the DOL would “provide a further response in the near future.” Nine (9) years later (not quite the near future), the DOL further analyzed each such Opinion Letter, redesignated each with a new FLSA2018-number, and confirmed the contents to be legitimate policy and an official ruling.

On October 30, 2017, the DOL appealed Judge Mazzant’s decision that the FLSA overtime rule is invalid. At the same time, the DOL said it intends

As of this writing, the DOL has not issued any newly considered or decided Opinion Letters, Ruling Letters, Administrator Interpretations or Other Inter-

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pretive Guidance. So Long, Farewell, Auf Wiedersehen, Goodbye In January 2018, the DOL issued the following statement: “On Dec. 19, 2017, the U.S. Court of Appeals for the Ninth Circuit became the fourth federal appellate court to expressly reject the U.S. Department of Labor’s six-part test for determining whether interns and students are employees under the Fair Labor Standards Act (FLSA). The Department of Labor today clarified that going forward, “the Department will conform to these appellate court rulings by using the same “primary beneficiary” test that these courts use to determine whether interns are employees under the FLSA. The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.” Relying on Walling v. Portland Terminal Co., 330 U.S. 148, 152-53 (1947), a case involving “trainees,” the DOL long ago developed a six-factor test for determining whether a worker is an employee entitled to minimum wage. The DOL has since taken the position that in most scenarios, the six factors control whether an intern actually is an “employee” under the FLSA. Under this test, each of the six factors had to be met to exclude the individual from the FLSA’s minimum wage and overtime protections. There was, among other concerns, an increase in litigation across industries filed by those classified as interns but who believed they were entitled to compensation as employees. Indeed, four appellate courts agreed that the six-factor test was not workable, opting instead to focus on who is the “primary beneficiary” of the services provided by the intern. See Benjamin v. B & H Educ., Inc., — F.3d —, 2017 WL 6460087, at *4-5 (9th Cir. Dec. 19, 2017); Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 536-37 (2d Cir. 2016); Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199, 1211-12 (11th Cir. 2015); Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518, 529 (6th Cir. 2011). The primary beneficiary test came into the spotlight when it was adopted by the Second Circuit in Glatt

v. Searchlight Pictures. In Glatt, the appellate court considered: • Whether the intern and the employer clearly understood that there was no expectation of compensation. Any promise of compensation, express or implied, suggested that the intern is an employee, and vice versa. • Whether the internship provided training that would be like training in an educational environment, including the clinical and other hands-on training provided by educational institutions. • Whether the internship was tied to the intern’s formal education program by integrated coursework or the receipt of academic credit. • Whether the internship accommodated the intern’s academic commitments by corresponding to the academic calendar. • Whether the internship’s duration is limited to the period in which the internship provided the intern with beneficial learning. • Whether the intern’s work complemented, rather than displaced, the work of paid employees while providing significant educational benefits to the intern. • Whether the intern and the employer understood that the internship was conducted without entitlement to a paid job after the internship. As with any such list of criteria, the decision and analysis are made on a case-by-case basis. No one factor is dispositive, and the list is non-exhaustive. Significantly, every factor does not have to point in the same direction for a court to conclude that an intern is not an employee. The primary beneficiary test is more employer-friendly than the DOL’s six-factor test and may encourage employers to offer unpaid internships. Even though not expressly rejecting the six-part test, the Fourth Circuit and U.S. District Court of Maryland have relied upon the primary beneficiary test well before this DOL shift. See McLaughlin v. Ensley, 877 F.2d 1207 (4th Cir. 1989); Wolfe v. AGV Sports Group, No. CCB-14-1601 (D. Md. Nov. 3, 2014). The new DOL Fact Sheet on unpaid interns is at dol.gov/whd/ regs/compliance/whdfs71.htm. To Share Or Not To Share I spent the summer prior to my first year of law school working as waitstaff at the now defunct Rock-

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ville Legal Seafoods (the biscuits were to die for). It was fast-paced, hard work with long hours. Hangry customers demanding biscuits certainly left me exhausted at times. That said, I learned quite a bit during that summer of 1991, including that tips mattered. To this day, I will only leave less than a twenty percent tip if the service is really that bad. The DOL’s proposal to remove Obama-era regulations prohibiting certain employers from requiring certain employees to share their tips sets out a significant departure from a tip-sharing arrangement that many of us have experienced personally, if not handled professionally. The FLSA requires a minimum wage be paid to all employees. 29 U.S.C. 206(a)(1). Under section 3(m), employers may pay a lower wage to tipped employees and put a portion of the employees’ tips against the minimum wage requirement to make up the difference. 29 U.S.C. 203(m). In other words, the employer can use some of the money an employee earns in tips (in certain instances) to meet its minimum wage requirements. This tip credit is why restaurant waitstaff commonly earn an hourly wage below the general minimum wage. I think my hourly rate that summer was $2 something. The tip credit provision imposes certain conditions on employers who want to take advantage of the tip credit. In 2011, the Obama DOL issued updated regulations recognizing its “longstanding” position that tips are the property of the employee who earns them, regardless of whether that person’s employer takes the tip credit. The regulations explicitly prohibit employers from using an employee’s tips for any reason other than (1) to take the tip credit against its minimum wage obligations or (2) in furtherance of a valid tip pool. 29 C.F.R.§ 531.52.

to customers’ overall experience but may receive less compensation than tipped coworkers; • Since 2011, a “significant amount” of litigation has arisen involving tip-pooling establishments that pay the federal minimum wage and do not take the tip credit and challenging the DOL’s ability to promulgate the regulation in the first place; and • Fewer employers can take the tip credit because of state laws requiring tipped employees to be paid at least the federal minimum wage. On December 5, 2017, the Notice was published in the Federal Register for public comment. On December 15, the comment period was extended to February 5, 2018. The issue also is currently before the Supreme Court in National Restaurant Association, et al. v. Department of Labor, et al., No. 16-920 (pet. for cert. filed Jan. 24, 2017). Critics of the rollback claim removing the regulations will permit employers to pocket the tips that employees earn, cause more pay inequity to a large population of restaurant workers, and negatively affect women in particular because of their prevalence in the restaurant industry tipped employee pool. Whether these anticipated consequences will be realized remains to be seen.

Not surprisingly, the Trump DOL is looking to make change (see what I did there). On December 4, 2017, the DOL released a notice of proposed rulemaking to remove portions of the regulations that restrict employers who pay the full federal minimum wage and do not claim a tip credit. Specifically, the DOL identified several concerns: • •

Wage disparities exist between tipped and nontipped workers (such as cooks and dishwashers); These “back of the house” employees contribute

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The New “Weinstein Tax:” Does it Apply to #MeToo?

(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

By Eric Paltell

(2) attorney’s fees related to such a settlement or payment.”

One of the lesser-known provisions in the 2017 tax reform legislation is the so-called “Weinstein Tax.” Named for disgraced Hollywood mogul Harvey Weinstein, the new law was intended to discourage alleged sexual harassers from paying off their victims in order to keep the allegations out of the public eye. However, the way the law has been written, it appears to preclude both the harasser and the victim from deducting their respective attorneys’ fees when the settlement agreement includes a confidentiality clause. As a result, the tax implications of harassment settlements have changed dramatically, and both plaintiff and defense counsel need to reevaluate their approaches when resolving these claims. Before delving into the terms of the new tax law, let’s do a quick review of where things stood prior to December 22, 2017. Under the old tax law, payments made by an employer in settlement of a claim of discrimination or harassment were deductible as an “ordinary and necessary business expense” under Section 162(a) of the Internal Revenue Code. Therefore, an employer who paid $100,000 to settle a claim of workplace harassment could take a corresponding $100,000 deduction on its tax return. Since the corporate tax rate stood at 35%, this meant that the $100,000 settlement really cost the business only $65,000. This long-standing practice changed on December 22, 2017, when President Trump signed into law the Tax Cut and Jobs Act (“Act”). Section 13307 of the Act amended Section 162(q) of the Internal Revenue Code to deny a deduction for any settlement or payment -- and any attorney fees related to such payment -- if the settlement agreement is subject to a non-disclosure agreement. Specifically, the Act reads as follows: Internal Revenue Code Section 162(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. — “No deduction shall be allowed under this chapter for:

Although the language of Section 162(q) is short and simple, it throws a wrench into settlements of harassment claims and leaves a host of unanswered questions. Can plaintiffs deduct their attorneys’ fees? In 2005, the Supreme Court held that attorneys’ fees are taxable income to plaintiffs. Banks v. Commissioner, 543 U.S. 426 (2005). This resulted in employee-plaintiffs paying income tax on money they don’t see because it goes to their attorneys, not them. That changed with the passage of the Civil Rights Tax Relief Act of 2004 (part of The American Jobs Creation Act of 2004), which allowed plaintiffs to take deductions for attorney fees paid in discrimination cases. Therefore, employees only paid income taxes on what they received net of the payment to their counsel. It seems pretty clear that the new Section 162(q) applies to the deductibility of any fees incurred when a settlement of a sex harassment or sex abuse claim includes a non-disclosure agreement, regardless of which party is paying the fees. While Senator Robert Menendez (D.-N.J.), who sponsored the Senate proposal to deny tax deductions to harassers, has reportedly expressed concerns that the law was not intended to apply to claimants, it appears that legislative action will be necessary to correct the error. Until such legislation is signed into law and we find out if it will apply retroactively, plaintiff’s counsel need to factor in the tax implications of their fees on their clients when negotiating harassment settlements. What is a claim related to sex harassment or sex abuse? Section 162(q) offers no guidance as to what is a “claim related to sex harassment or sex abuse.” Does this mean there must be a claim of physical contact? Is a claim of unwanted remarks or offensive text messages sufficient? And what does it mean for a payment to be “related to sexual harassment or sexual abuse?” Is a claim of gender-based pay discrimination and a retaliatory denial of a promotion sufficiently “related”

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to a claim of sex harassment to fall within the grip of Section 162(q)? Can the payment be allocated so that at least a portion can be deducted? Many times, an actual or threatened lawsuit includes claims in addition to sexual harassment. Moreover, most settlement agreements include a general release paragraph detailing a litany of state and federal employment claims that are being released in return for the payment. It seems that the parties should be able to allocate only a portion of the settlement payment and the fees related to it to the harassment claim, and therefore take a deduction for the settlement payment and fees related to the remaining claims. However, even if such an allocation is permissible, it’s not at all clear how to determine what would be a reasonable allocation that would withstand IRS scrutiny. What are attorney fees “related to such a settlement payment?” Section 162(q) says that “attorney’s fees related” to the settlement of a claim of sex harassment or sexual abuse are not deductible. Does that mean all of the fees incurred in the case are not deductible, or just those related to negotiating a settlement? Except where the case settles early on, the vast majority of fees will be incurred long before the parties begin talking settlement. What about severance payments made in connection with a reduction in force or individual termination?

Finally, Section 162(q) raises an interesting policy question. The provision seems to be based on the premise that sex harassment claimants would prefer not to have to maintain the confidentiality of their allegations in return for a settlement payment. However, this may not always be the case. In some instances, it is the threat of “going public” that gives the claimant their greatest leverage in negotiating a settlement; if the employer can no longer buy confidentiality, the employer may lose the incentive to settle the claim (in fact, the employer may even feel compelled to litigate to defend its reputation). Additionally, it may well be that a claimant would prefer to avoid the scrutiny that comes with having his or her allegations “outed,” fearing that the publicity will adversely impact their personal life and/or career prospects. Section 162(q) creates an environment where the price of confidentiality has increased substantially, regardless of who is seeking to maintain the secrecy of the allegations. Conclusion It is possible that the IRS will issue technical guidance clarifying some of the problems raised in this article. It is also possible that the IRS will choose not to be very aggressive in enforcing it, at least until Congress acts to amend the language. However, in the meantime, counsel settling claims of sexual harassment in the workplace need to be cognizant of the new landscape and must price and draft their settlements accordingly.

When employers offer departing employees severance pay, the offer is usually accompanied by a requirement that the employee sign a release of claims. Those releases almost always include a paragraph whereby the employee agrees not to pursue any claims of employment discrimination against the employer, including claims of sexual harassment. Similarly, such releases usually include a non-disclosure provision obligating the employee to keep the terms of the agreement confidential. Does Section 162(q) mean that employers can no longer take a tax deduction for these severance payments? Does it mean that employers need to carve out claims of sex harassment by adding language stating that the confidentiality provisions of the agreement do not apply to the promise not to pursue harassment claims? Maryland State Bar Association Section of Labor & Employment Law

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Medical Marijuana Developments In Employment Law By Clifford B. Geiger Over the last decade, public attitudes about medical marijuana use have changed tremendously. Both in Maryland and elsewhere, the law is trying to catch up -- most relevantly here, by seeking to clarify the scope of the federal preemption and wrongful discharge doctrines. Last July, the Supreme Judicial Court of Massachusetts became the first court to recognize limitations on the rule that employers may terminate an employee who tests positive for marijuana use. Barbuto v. Advantage Sales and Marketing, LLC, 477 Mass. 456, 78 N.E.3d 37 (Mass. 2017). The Barbuto Court ruled that an employer may not simply rely on its nodrug policy to discharge someone who lawfully uses medical marijuana under state law, and that doing so could violate state laws against disability discrimination. Some background is helpful to understand the impact of Barbuto as well as the claims and defenses that continue to be hotly litigated. The Federal Controlled Substances Act (CSA) The federal legal regime surrounding marijuana is governed predominantly by the Controlled Substances Act (CSA), passed in 1970, which makes it “unlawful for any person knowingly or intentionally . . . to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance[,]” “except as authorized by this subchapter. 21 U.S.C. § 841(a)(1). Marijuana has always been classified as a Schedule I drug, which means, according to Congress, marijuana (i) has a high potential for abuse, and (ii) has no currently accepted medical use in treatment. Under federal law, the possession of any amount of marijuana is a crime, and the only exception is possession for “Government-approved research projects.” 21 U.S.C. § 823(f)). Congress, however, declared its intent not to preempt state laws governing controlled substances “unless there is a positive conflict between [the CSA] and [] State law so that the two cannot consistently stand together.” 21 U.S.C. § 903.

The Relationship Between The CSA And State Law The states have been willing to test this “wiggle room.” California was the first state to pass a medical marijuana law in 1996. According to the National Conference of State Legislatures (NCSL), “29 states, the District of Columbia, Guam, and Puerto Rico now allow for comprehensive medical marijuana and cannabis programs.” Nine of these states allow recreational use. An additional “17 states allow use of ‘low THC, high cannabidiol’ products for medical reasons or as a legal defense.” NCSL: State Medical Marijuana Laws, ncsl.org/research/health/state-medical-marijuana-laws.aspx. How has the conflict between state and federal law been handled as one state after another has legalized marijuana use? At first the Justice Department issued a series of enforcement guidance memos that instructed federal prosecutors to deprioritize most marijuana-related prosecutions. justice.gov/ opa/press-release/file/1022196/download. However, on January 4, 2018, U.S. Attorney General Jeff Sessions rescinded as “unnecessary” the Obama-era enforcement guidance, creating uncertainty and leaving many wondering what the Justice Department intends to do, if anything, about the seemingly ever growing disconnect between state and federal law. Id. Meanwhile, employers must try to determine how conflicting laws about medical marijuana affect drug testing, anti-discrimination rules, and the obligation to provide disabled employees with reasonable accommodations. Thus far, the answer is only clear under the Americans with Disabilities Act (ADA). The ADA does not require an employer to accommodate an employee by permitting medical marijuana use. The reasoning is that marijuana remains illegal under federal law and the ADA explicitly does not require accommodation for the current use of illegal drugs. See, e.g., James v. City of Costa Mesa, 684 F.3d 825, 828 (9th Cir. 2012); Coats v. Dish Network, LLC, 303 P.3d 147 (Colo. App. 2013), aff’d, 350 P.3d 849 (Colo. 2015); Casias v. Wal-Mart Stores, Inc., 764 F. Supp. 2d 914 (W.D. Mich. 2011), aff’d, 695 F.3d 428 (6th Cir. 2012). Arizona, Arkansas, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New York, Rhode Island, and Pennsylvania each have statutes specif-

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ically prohibiting employers from discriminating against employees who lawfully use medical marijuana. americanbar.org/content/dam/aba/events/labor_law/am/2015/yastrow.authcheckdam.pdf; arkleg. state.ar.us/assembly/2017/2017R/Acts/Act593.pdf; www.legis.state.pa.us/cfdocs/legis/li/uconsCheck. cfm?yr=2016&sessInd=0&act=16. These laws typically do not protect use at work or being under the influence at work. They usually provide exceptions if allowing medical marijuana use would jeopardize a monetary or licensing-related benefit under federal law or regulations. Legislation is pending in California to make it the next state to have such a law. leginfo.legislature.ca.gov/faces/billCompareClient. xhtml?bill_id=201720180AB2069. Other states’ laws typically do not reference employment matters, except to say that the law does not require an employer to permit on-site or on-duty use of marijuana. Where discrimination claims are brought based on state law, either as statutory anti-discrimination suits or public policy wrongful discharge cases, the key legal issue for employers has been preemption. The results have been mixed. In Emerald Steel Fabricators, Inc. v. Bureau of Labor & Industry, the Supreme Court of Oregon ruled that the CSA preempted the Oregon Medical Marijuana Act to the extent that the state law affirmatively authorized the use of medical marijuana, thereby making the employer’s termination legally permissible. 230 P.3d 518 (Ore. 2010). More recently, in Noffsinger v. SSC Niantic Operating Co., 273 F. Supp. 3d 326 (D. Conn. 2017), a Connecticut federal district court found that the CSA, as well as the ADA and the Federal Food, Drug, and Cosmetic Act (FDCA), did not preempt the part Connecticut’s Palliative Use of Marijuana Act (PUMA) that explicitly prohibited adverse employment actions against medical marijuana users. The Noffsinger Court found the ADA did not preempt PUMA because of the ADA’s savings clause, which makes it clear that the states are not limited by the ADA and may provide greater protection for the rights of individuals with disabilities. Distinguishing Emerald Steel, which did not concern a statutory anti-discrimination provision for the benefit of medical marijuana users, the court framed the question as “whether the CSA preempts a provi-

sion that prohibits an employer from taking adverse action against an employee on the basis of the employee’s otherwise state-authorized medicinal use of marijuana.” The court found that the CSA does not regulate employment, and it does not prohibit employers from hiring applicants who may be involved in illegal drug use. Therefore, the court reasoned, there is no conflict between PUMA and the CSA that establishes preemption. The court used the same reasoning to dispose of FDCA preemption. See 273 F. Supp. 3d at 335-38. The Barbuto Decision As explained, not all states have given medical marijuana users explicit statutory protection from adverse employment actions. Some states, however, have laws that contain more general prohibitions against punishing medical marijuana users. Massachusetts law, for example, provides “there should be no punishment under state law for qualifying patients … for the medical use of marijuana.” 2012 Mass. Acts 369, § 1. Significantly, Massachusetts does not explicitly prohibit employment discrimination against medical marijuana users. According to Christina Barbuto’s complaint, Christina Barbuto accepted an entry-level position with Advantage Sales and Marketing (ASM). When Barbuto learned that her employment with ASM was contingent upon passing a mandatory drug test, she told her would be supervisor that the test would be positive for marijuana. Barbuto explained she had a physician’s written certification that allowed her to use marijuana to treat the symptoms of Crohn’s disease, primarily loss of appetite. Without the marijuana, Barbuto had trouble maintaining a healthy weight. Barbuto typically used the marijuana at home, in the evening, usually two or three times a week. Barbuto also told her supervisor she would not consume marijuana before work or at work. The supervisor responded, and then confirmed after further internal discussion, that Barbuto’s medicinal use of marijuana would not be a problem. 477 Mass. at 458. The supervisor was wrong. Barbuto submitted her urine drug test as required and completed her first day of work without incident. Later that night, however, she was contacted by ASM Human Resources Representative Joanna Meredith Villaruz. Villaruz told Barbuto that she was being terminated for her posi-

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tive drug test. Villaruz explained it was irrelevant that Barbuto was permitted to use marijuana under state law, because “we follow federal law, not state law.” ASM claimed that it could discharge Barbuto because it followed federal rather than state law. Barbuto then sued ASM for disability (handicap) discrimination under Massachusetts state law and a variety of other state law claims, including wrongful discharge and being denied a right or privilege under the state medical marijuana law. The district court judge dismissed the disability discrimination claim, and Barbuto took an appeal. See id. at 458-59. “[t]he issue on appeal was whether a qualifying patient who was terminated from her employment because she tested positive for marijuana because of her lawful medical use of marijuana has a civil remedy against her employer.” 477 Mass. at 457. Barbuto’s claim was that her Crohn’s disease was a disability under state law, and that she could perform the essential elements of her job at ASM with a reasonable accommodation -- namely, “a waiver of ASM’s policy barring anyone from employment who tests positive for marijuana so that she may continue to use medical marijuana as prescribed by her physician.” ASM made two principal arguments in defense: (i) the accommodation Barbuto sought is per se unreasonable because it violated federal law, and (ii) Barbuto was terminated because of the failed drug test, not because of her disability. See id. at 461-62. (ASM had waived any preemption argument. Id. at 466 n.9.) The court was not convinced by either defense. The court found that an employer is required to engage in the interactive process to determine whether there were other, equally effective medical alternatives that would not violate company policy. If no alternative existed, ASM could avoid making the requested accommodation by showing it would create an undue hardship. Circumstances where accommodation for medical marijuana use may create an undue hardship include those employers who are subject to Department of Transportation regulations for employees in safety sensitive positions and federal contractors and grantees who are obligated to comply with the Drug Free Workplace Act. The court found that in Massachusetts it would not be facially unreasonable to allow an exception to a

drug testing policy for the lawful use of medical marijuana if the drug is the most effective medication for an employee’s disabling condition. Referring to the anti-discrimination provision of the medical marijuana law itself, in somewhat circular fashion, the court noted, “[a] a handicapped employee in Massachusetts has a statutory ‘right or privilege’ to reasonable accommodation” under the state’s employment discrimination laws. The court reasoned that declaring medical marijuana use a facially unreasonable accommodation would impermissibly deny this right or privilege solely because of the employee’s use of marijuana. Finally, the court found it immaterial that marijuana possession remains illegal under federal law, because Barbuto, not ASM, would be at risk of prosecution. The Court explained, “[a]n employer would not be in joint possession of medical marijuana or aid and abet its possession simply by permitting an employee to continue his or her off-site use.” In other words, there is no law against hiring someone who uses marijuana. See id. at 464-65. ASM also argued the court should declare the requested accommodation per se unreasonable solely out of respect for federal law. The court declined the invitation, describing how things have changed over the past 50 years. Congress classified marijuana as a Schedule I controlled substance in 1970, when it determined that marijuana has no currently accepted medical use. Since then, the court explained, 90 percent of the states have enacted some form of medical marijuana law reflecting a determination that there is a currently acceptable medical use. The court wrote, “[t]o declare accommodation for medical marijuana to be per se unreasonable out of respect for Federal law would not be respectful of the recognition of Massachusetts voters, shared by the legislatures or voters in the vast majority of States, that marijuana has an accepted medical use for some patients suffering from debilitating medical conditions.” Id. at 466. The court made quick work of ASM’s second argument that Barbuto was fired because of the positive drug test, not because she used medical marijuana. Just as a company cannot have a policy that per se bars the use of insulin by its employees, because doing so would be discriminating against diabetics because of their disability, the Court concluded that terminating an employee for violating “the company’s

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policy prohibiting any use of marijuana . . . effectively denies a handicapped employee the opportunity of a reasonable accommodation, and therefore is appropriately recognized as handicap discrimination.” Id. at 466-67. Maryland Law Under Maryland law, much like Massachusetts law, a qualifying patient who possess legal amounts of medical cannabis “may not be subject to arrest, prosecution, or any civil or administrative penalty, including a civil penalty or disciplinary action by a professional licensing board, or be denied any right or privilege, for the medical use of cannabis.” Md. Code, Health-General § 13-3313 (emphasis added). Nonetheless, according to the Natalie M. LaPrade Maryland Medical Cannabis Commission (MMCC), which was created by statute and charged with developing policies, procedures, guidelines, and regulations, as well as providing the public with relevant program information, “Maryland law does not prevent an employer from testing for use of cannabis (for any reason) or taking action against an employee who tests positive for use of cannabis (for any reason).” MMCC Patient FAQ’s, mmcc.maryland.gov/Pages/ patients_faq.aspx. Whether this policy holds up in light of cases like Noffsinger and Barbuto remains to be seen. No Maryland state or federal court has yet ruled on the viability of a medical marijuana discrimination claim. When that happens, cases like Noffsinger and Barbuto will play important roles. Will Maryland, like Massachusetts, find that medical marijuana users have the right or privilege to a reasonable accommodation for a disability under the Maryland Human Relations Act (Md. Code, State Gov’t § 20-602)? If not, could an employment termination result in a wrongful discharge claim under state law? Or would these types of claims be preempted by the CSA or some other federal statute? Only time will tell.

Mandatory Arbitration of Sexual Harassment Complaints: Recent Labor Experience By Peter S. Saucier Arbitration of sexual harassment disputes is in the news. There is a general sense that employees responsible for sexual harassment often escape responsibility when the issue is decided in binding arbitration. That feeling is so strong that on February 12, 2018, the National Association of Attorneys General published a letter to the leaders of both parties in Congress urging that sexual harassment disputes never be subject to mandatory arbitration. myfloridalegal.com/ webfiles.nsf/WF/HFIS-AVWMYN/$file/NAAG+letter+to+Congress+Sexual+Harassment+Mandatory+Arbitration.pdf (and other attorney general web pages). Notably, no state Attorney General dissented from that position. From Utah to New York, and from California to Alabama, the Attorneys General were united against mandatory arbitration of sexual harassment disputes. Do published decisions show their concern to be for good cause? In the seminal treatise How Arbitration Works, Elkouri and Elkouri authors explain that arbitration is a “simple proceeding voluntarily chosen by parties who want a dispute determined by an impartial judge of their own mutual selection, whose decision, based on the merits of the case, they agree in advance to accept as final and binding.” (citation omitted). No appeal, no recourse -- how can that be bad? An examination of only the most recent reported labor arbitrations on the topic sheds some light on the answer to that question. Demeaning women as viewed by an arbitrator Beginning in mid-2017, just before the Harvey Weinstein escapades erupted into the public eye, an experienced arbitrator issued an illustrative case about how arbitrators view disciplinary action against sexual harassers in the work force. United States Steel Corp. and USW Local 2660, 137 BNA LA 676 (Bethel 2017). Briefly, an outside contractor had been called in to provide food for the employer’s workers. The General Manager learned that a particular employee, as usual denominated with the pseudonym “grievant,” roundly proclaimed that he wished the women cafete-

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ria workers “would wear shorter skirts so I could stare up their asses while they work.” The employer conducted a full investigation which showed that the grievant regularly directed similar statements to women employees of the contractor. The employer included union officials in the investigation to hear the women’s descriptions. The employer then took statements from the workers in the presence of union representatives. A recitation of the grievant’s many sexual suggestions is available at the published opinion. They are more sordid than the original report, depending upon varied uses of the word “ass” to demean women. They show the grievant to be more than just an unconscionable cad. The grievant’s employment was terminated. At arbitration, the employer presented the evidentiary statements developed at the joint employer-union meetings. Arbitrator Bethel dismissively discounted the statements. Forced to admit that well-developed statements of outrageous misbehavior have been sufficient evidence in other labor cases to justify termination, Arbitrator Bethel wrote that such statements when they come from “other bargaining unit employees,” are more reliable than those from witnesses who are not in the labor bond. The employee was returned to work with full back pay -- not an ounce of punishment was due, per Arbitrator Bethel. Humiliating customers is not cause for discipline In a retail business, positive customer relations are critical. The grievant in Schnuck Mkts. and UFCW Local 655, 137 BNA LA 1085 (Fowler 2017) had accumulated a checkered history that included discipline for going to the home of a customer he described as attractive and asking about her marital status and opening the door to the women’s room at work to flirt with a co-worker. The grievant even had been terminated once before for calling a manager a bitch, though an earlier arbitrator reinstated him after that offense. Naturally, these are only the items that had been reported. Against that background, an upset customer complained about yet another act by the grievant. The customer reported to Schnuck Markets that the grievant approached him and his wife to confirm that their children are twins. According to the customer, the grievant then said, “I guess mommy and daddy had

fun that night.” Arbitrator Fowler devoted time to cataloging differences among witnesses as to precisely what the grievant may have said. The grievant claims that he actually said, “momma had to work extra hard that day.” Meanwhile, another employee who claimed to have heard the exchange said that the grievant mentioned “double fun.” Those differences on the theme seemed to matter to Arbitrator Fowler. Though he was deciding the case in the middle of 2017, the arbitrator equated the grievant’s actions with a prior event from 2003 when the employer may have been more tolerant -- some might think that to be a different time, and the evidence perhaps a bit stale. Interestingly, Arbitrator Fowler added that the grievant is disabled by a mental problem that “clearly revealed an individual who struggles with communication.” The grievant was reinstated with full back pay to go back about his behavior. One view of this arbitration decision is that it condones a man opening women’s rooms doors, trying to pick up customers, and insulting customers on a sexual basis without repercussion. Or, put otherwise women simply have to learn to endure discomfort from a man whose mental incapacity lends itself to harassment as a reasonable accommodation, especially if other women had to do the same thing 14 years earlier. Publishing sexual photos to co-workers on company telephone presents no problem At a crane rental facility in Missouri a driver was suspended for sleeping on the job. Belger Cartage Service, Inc., and Teamsters Local 541, 138 BNA LA 243 (Simon 2017). He already had a written warning for unsafe practices and a three day suspension for failing to timely report an accident on his record. Moreover, he had been counseled about harassment after a complaint against him two years earlier. The sleeping offense could mean discharge. The grievant was ordered to turn over his employer provided mobile phone as part of the investigation of the sleeping offense. On the phone, the employee’s manager discovered photographs showing “women in various states of undress, as well as female and male genitalia.” After an investigation in which the employee admitted having the nude photographs on his phone, and showing

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them to other employees at work, his employment was terminated for having pornographic material on his phone. At the grievance hearing the Union presented a host of defenses. It could not prove that the Company ever had allowed any other employee to engage in such conduct, that the phone was not the employer’s, or that the grievant’s due process rights had been violated. What is more, the grievant seemed proud of his actions: “When Grievant, on direct examination, was asked if had shown any photographs of nude women to any other employees at Belger prior to September 13, 2016, he replied ‘Yes.’ He was then asked how many times that had occurred, and he answered, ‘Honestly, it’s a daily occurrence at Belger.’” Id. at 249. Even though no other employees were identified as having kept and/or displayed sexual photographs, evidence established that other field employees had seen the photographs shown by the grievant at earlier times, including a manager who was disciplined when the employer learned that he had seen the photographs on grievant’s phone. In the view of Arbitrator Simon, that was enough to excuse the misconduct. To be clear, Arbitrator Simon found that the Company had a clear policy against sexual misconduct, that the grievant engaged in proved misconduct, and that the grievant’s disciplinary record “would normally subject him to dismissal under the Company’s discipline policy.” Still, because the grievant had flaunted his sexual photos he was returned to work. The arbitrator concluded that “the Employer’s failure to take remedial action at an earlier time operates to mitigate the level of discipline that may be imposed.” Id. at 250. That conclusion suggests that if he does it once the employer had better catch him fast. If he becomes a serial sexual offender, he will be in far less trouble. Domestic disputes and a clash with harassment free workplace policies Two women co-workers in a domestic partnership had a dispute at work that erupted into trouble within the workforce. Rite Aid of West Virginia, Inc. and Teamsters Local 175, 138 BNA LA 225 (Wilson 2017). The employee who eventually would be disciplined, and become the grievant, grew tired of being

accused by her partner of being unfaithful with a third employee who also is a woman. The grievant angrily told her partner, “If I ever wanted to lick [the third employee], I still would be licking her.” Id. at 226. Later that day, the domestic partner of the grievant confronted the third woman to ask about any relationship. The domestic partner told the third employee about the grievant’s comment, which shocked her. She replied that she was straight and wanted nothing to do with problems between the domestic partners. The kerfuffle came to the attention of the Human Resources Manager who investigated. She confirmed the story from the involved employees and others who had heard about the conversation and who also heard the grievant call her domestic partner “a fucking liar” during the dispute. No one else had heard the oral action language. The employer decided to end the grievant’s employment under its Harassment Free Workplace policy. After a hearing, Arbitrator Wilson affirmed that the employer’s Harassment Free Workplace policy, which explains that a “[s]ingle sufficiently severe use of a word, phrase, gesture, or action can create a hostile work environment,” is reasonable. He further acknowledged that the grievant had been trained, the employer consistently adhered to its Harassment Free Workplace policy, and the employer conducted a thorough investigation. The employer had proved that the commotion took place, but Arbitrator Wilson overrode the employer’s judgment and returned the grievant to work without penalty. In his view, the employer’s management team was wholly wrong to find the comment to be in violation of the policy. After all, he reasoned, “the comment was not directed to or about her co-worker, rather it was a statement about her own lack of interest in the co-worker.” Id. at 231. How could it be sexual harassment if the statement meant that grievant did not want to engage in the sex act graphically described? For Arbitrator Wilson the grievant’s only guilt was “making a bad choice in her romantic partner.” Id. She suffered no penalty. Conclusion The groundswell objection to mandatory arbitration of sexual offense cases is that the regular cadre of arbitrators is tone-deaf to the experience of women

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victims in 2017-18. Without any avenue of appeal, a single person can force those harassed and intimidated to face the same conduct from the same offender. One could argue that this representative sample of recent decisions show that the concern is real.

An Update on the Supreme Court’s 2017-18 Labor and Employment Cases By Alex Berg The 2017-18 Supreme Court term has been a whirlwind for labor and employment practitioners. Here is a snapshot of relevant rulings to date and summaries and predictions about the massive issues still to be decided, including the breadth of anti-discrimination laws covering public accommodations, the enforceability of mandatory individual arbitration clauses in employment contracts, and compulsory public-sector union dues. Decisions So Far Statutes of Limitations for Supplemental State-Law Claims In Artis v. District of Columbia, 538 U.S. ___, 138 S. Ct. 594 (Jan. 22, 2018), the Court confronted the issue of the extent to which the federal supplemental jurisdiction statute tolls the running of the statute of limitations following dismissal of a federal suit. That statute provides: The period of limitations for any [state] claim [joined with a claim within federal-court competence] shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period. 28 U.S.C. § 1367(d). The question facing the Court was: When a federal court declines to exercise supplemental jurisdiction over state-law claims, must the plaintiff refile still unresolved state-law claims in state court within 30 days of that dismissal (the “grace-period” interpretation)? Or does the plaintiff have 30 days plus whatever time was remaining on the state statute of limitations in which to refile (the “stop-the-clock” interpretation)? A sharply divided Court adopted the “stop the

clock” interpretation. Justice Ginsburg (joined by Chief Justice Roberts and Justices Breyer, Sotomayor, and Kagan) relied on the contemporaneous dictionary definition (supported by precedential case law) of to “toll” a “statute of limitations” meaning “to suspend or stop temporarily.” 138 S. Ct. at 601-02 (citations omitted). Justice Gorsuch (and Justices Kennedy, Thomas, and Alito) would have adopted the narrower “grace-period” interpretation and feared that the majority’s approach would “require state courts to entertain state law claims that state law deems untimely not only by weeks or months but by many years.” Id. at 608 (Gorsuch, J., dissenting). Consequently, the plaintiff, who had filed a Title VII claim and three related “state” law claims for whistleblower discrimination and retaliation, and common-law wrongful discharge, within 13 months of her termination, had timely (re)filed her state law claims when she filed suit 59 days after the dismissal of her federal lawsuit. In other words, because there were (well) more than 29 days left on the limitations periods for her state law claims at the time she filed her federal lawsuit (plus the additional 30 days provided by § 1367(d)), her lawsuit was not time-barred. Going forward, practitioners should both evaluate whether supplemental state law claims are timely filed in federal court to see whether they have a limitations issue and determine how much time is “left on the clock” as of the filing date when crafting litigation strategy. The Dodd-Frank Whistleblower Anti-Retaliation Provision On February 21, the Court unanimously ruled in Digital Realty Trust, Inc. v. Somers, No. 16-1276, 583 U.S. ___ (Feb. 21, 2018), that only whistleblowers who report potential securities law violations to the Securities and Exchange Commission (SEC) are protected by the anti-retaliation provision of the DoddFrank Act. Justice Ginsburg’s opinion of the Court relied on the statutory interpretation principle that, “‘When a statute includes an explicit definition, [courts] must follow that definition,’ even if it varies from a term’s ordinary meaning.” Slip op. at 9 (citation omitted). As the Court observed, Congress defined “whistleblower” in Section 78u-6 of the Dodd-Frank Act as “any individual[(s)] who provides . . . information re-

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lating to a violation of the securities laws to the Commission [(i.e., the SEC)], in a manner established, by rule or regulation, by the [SEC]” and directed that that definition “‘shall apply’ ‘[i]n this section’—i.e., throughout § 78u-6.” Slip op. at 4 (quoting 15 U.S.C. § 78u-6(a)). This “SEC-only” definition of “whistleblower” therefore applied to Section 78u-6’s prohibition of employment discrimination against a person who “‘mak[es] disclosures that are required or protected under’ either [the] Sarbanes-Oxley [Act of 2002], the Securities Exchange Act of 1934, the criminal anti-retaliation prohibition at 18 U.S.C. § 1513(e), or ‘any other law, rule, or regulation subject to the jurisdiction of the [SEC].’” Slip op. at 4-5 (quoting 15 U.S.C. § 78u-6(h)(1)(A)(iii)). This interpretation is consistent with legislative history that the Dodd-Frank Act is intended to protect those who “tell the SEC” of violations. Id. at 3-4, 11-12, 16-18. In other words, the Court thoughtfully explained, “[t]he definition first describes who is eligible for protection,” while the anti-retaliation provision “describe[s] what conduct, when engaged in by a whistleblower, is shielded[.]” Id. at 10 (emphases in original). Thus, because only “[a]n individual who meets both measures may invoke Dodd-Frank’s protections[,]” the purported “whistleblower” was not protected under Dodd-Frank where he only reported the alleged misconduct internally. Id. That said, whistleblowers may still pursue Sarbanes-Oxley remedies as long as they first file an administrative complaint within 180 days of the violation. See id. at 11-12. The decision is notable in two other ways. The Court criticized the SEC’s rulemaking process and refused to defer to its interpretation that individuals need not report securities law violations to the agency. See id. at 6-7, 18-19 (resolving case at Chevron step one because “Congress has directly spoken to the precise question at issue”). In addition, five of the justices engaged in a tangential debate about the merits of legislative history when interpreting statutes. Justice Sotomayor (joined by Justice Breyer) finds reliable legislative history, such as committee reports, valuable when resolving textual ambiguities, whereas Justice Thomas (joined by Justices Alito and Gorsuch) views legislative history as irrelevant to courts’ interpretative duties.

Pending Cases Public Accommodations Anti-Discrimination Statutes and The First Amendment In Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, the Court must resolve whether the First Amendment’s Free Speech and/or Free Exercise Clauses permit businesses to deny service to customers based on their owners’ sincerely held beliefs without violating state public accommodations laws. A Colorado baker refused to make a cake for a same-sex couple’s wedding, arguing that requiring him to do so was an unconstitutional compulsion of his speech (i.e., forcing him to state a message with which he disagreed) in violation of his religious beliefs. The Colorado state courts rejected these arguments, as have courts faced with similar challenges in New Jersey, New Mexico, New York, Oregon, and Washington. The Court had unanimously rejected these arguments as “patently frivolous” when a barbecue restaurant owner claimed that his spiritual beliefs permitted him to deny service to African-American patrons without violating Title VII, and had likewise explained that “[a] shopkeeper has no constitutional right to deal only with persons of one sex.” See Newman v. Piggie Park Enters., Inc., 390 U.S. 400 (1968); Roberts v. United States Jaycees, 468 U.S. 609, 634 (O’Connor, J., concurring). Nevertheless, the Court’s “compelled speech” doctrine has permitted parade organizers to refuse to include an LGBT group among its marchers. Hurley v. Irish-American Gay Alliance, 515 U.S. 557 (1995). Prediction: Despite some tough questioning of the state’s counsel at oral arguments, Justice Kennedy will likely vote to uphold the public accommodations law, with the justices in the same 5-4 composition (with Justice Gorsuch substituted for Justice Scalia) as in Obergefell v. Hodges, 576 U.S. ___, 135 S. Ct. 2584 (2015). Compulsory Public-Sector Union Dues Janus v. AFSCME Council 31 also presents a compelled speech issue in the context of compulsory union dues. Since Abood v. Detroit Board of Education, 431 U.S. 209 (1977), states have been permitted to deduct union dues from public-sector employees -- including those who do not agree with the union’s

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actions -- where the union is the exclusive bargaining representative. Twenty-three states still do so. The challengers have argued that they are being unconstitutionally forced to subsidize government speech, arguing that everything a public-sector union does is inherently political. The Abood decision has been significantly eroded in recent years, with Justice Alito and four other justices signaling in Harris v. Quinn, 134 S. Ct. 2618 (2014), their willingness to overrule the decision. (Friedrichs v. California Teachers Association, 136 S. Ct. 1083 (2016), was the expected death knell of Abood, but likely survived only because Justice Scalia did not.). Prediction: Though Justice Gorsuch did not speak during the oral argument, he will likely join the four clear votes in favor of overturning Abood and invalidating mandatory dues requirements for public sector unions. Individual Arbitration Clauses in Employment Contracts In three consolidated cases, Epic Systems Corporation v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil, the Court will decide whether arbitration agreements requiring employees to waive their right to pursue collective legal action in any forum violate the National Labor Relations Act (NLRA). The NLRA, enacted in 1935, guarantees workers the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection[,]”and employers may not “interfere with, restrain, or coerce employees in the exercise of” that right. 29 U.S.C. §§ 157, 158(a)(1) (NLRA Sections 7 and 8(a)(1)). Thus, the Supreme Court has explained, “[w]herever private contracts conflict with [the] functions” of the NLRA, “they obviously must yield or the Act would be reduced to a futility.” J.I. Case Co. v. NLRB, 321 U.S. 332, 337 (1944). Relatedly, the Norris-LaGuardia Act of 1932 declares that “any . . . undertaking or promise in conflict with” the public policy in favor of workers’ rights to seek “mutual aid or protection” “shall not be enforceable[.]” 29 U.S.C. § 103 (emphasis added). On the other hand, the Federal Arbitration Act (FAA) evidences “‘a liberal federal policy favoring arbitration.’” AT&T Mobility, LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Moses H. Cone

Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Consistent with this policy, privately negotiated arbitration agreements are enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Court interprets this language to require an explicit and “contrary congressional command” before invalidating an arbitration agreement. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 672 (2012) (citing 7 U.S.C. § 26(n)(2) and 15 U.S.C. § 1226(a)(2) as two narrow examples satisfying the “contrary congressional command” test). Consequently, the Court has previously upheld waivers of the right to pursue collective actions under the ADEA and has remarked that class actions are merely a procedural right. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 29 (1991); Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 332 (1980). The Sixth, Seventh and Ninth Circuits have held that mandatory individual arbitration clauses violate the NLRA, whereas the Second, Fifth, Eighth, and Eleventh Circuits have upheld such clauses. Compare NLRB v. Alt. Entm’t, Inc., 858 F.3d 393 (6th Cir. 2017); Lewis v. Epic Systems, 823 F.3d 1147 (7th Cir. 2016); and Morris v. Ernst & Young LLP, 834 F.3d 975 (9th Cir. 2016), with Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013); Murphy Oil v. NLRB, 808 F.3d 1013 (5th Cir. 2015); Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); and Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir. 2014). The Fourth Circuit has not ruled on the issue. Prediction: The Court will likely uphold mandatory individual arbitration clauses in a 5-4 decision, with a dissent advocating for Congress to amend the NLRA to provide an explicit “contrary congressional command” against arbitration clauses in employment agreements. The FLSA Overtime Exemption for Automobile Service Advisors Encino Motorcars, LLC v. Navarro is back before the Court to determine whether automobile service advisors fall within the FLSA overtime exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles[.]” 29 U.S.C.

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§ 213(b)(10)(A). The Fourth and Fifth Circuits have held that service advisors are exempt, while the Ninth Circuit has held that they are not. Compare Walton v. Greenbrier Ford, Inc., 370 F.3d 446 (4th Cir. 2004); and Brennan v. Deel Motors, Inc., 475 F.2d 1095 (5th Cir. 1973), with Navarro v. Encino Motorcars, LLC, 780 F.3d 1267 (9th Cir. 2015) (“Navarro I”). The first time around, Justice Kennedy authored a unanimous opinion reversing the Ninth Circuit because the 2011 DOL regulation to which that court deferred was procedurally defective. Encino Motorcars, LLC v. Navarro, 579 U.S. __, 136 S. Ct. 2117 (2016) (“Encino Motorcars I”). In so doing, the Court highlighted the “decades of industry reliance” on the DOL’s prior policy since 1978. Id. at 2122, 2126 (citations omitted). Consequently, the Court remanded the case to the Ninth Circuit to reexamine the issue without agency deference.

On remand, the Ninth Circuit again held that service advisors were not exempt -- this time, based on its reading of the statutory text as aided by contemporaneous sources and legislative history. Navarro v. Encino Motorcars, LLC, 845 F.3d 925 (9th Cir. 2017) (“Navarro II”). Applying the distributive canon and mindful that FLSA exemptions are to be narrowly construed, the Ninth Circuit concluded that service advisors were not exempt as “salesm[e]n . . . primarily engaged in . . . servicing automobiles.” 29 U.S.C. § 213(b)(10)(A); Navarro II, 845 F.3d at 930. Prediction: At oral argument, Chief Justice Roberts and Justices Alito and Thomas appeared very likely to rule that the exemption covers service advisors, while Justices Ginsburg, Sotomayor, and Kagan appeared very likely to conclude the opposite. Justice Kennedy will likely author a narrow 6-3 ruling finding that the exemption applies, with at least one concurrence advocating for the discarding of the narrow construction doctrine applicable to FLSA exemptions.

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Labor & Employment Law Newsletter | Spring 2018  
Labor & Employment Law Newsletter | Spring 2018