U.S. Supreme Court Upholds Idaho Law Re Union Political Activities Checkoff

I know I'm posting late on this, but I have a strong need to have full coverage of the U.S. Supreme Court's employment law opinions, even the ERISA cases. I hope I didn't inconvenience my devoted followers, and the copycats who don't read the advance sheets themselves .... (Hi!)

This one is a labor / First Amendment crossover. A union claimed Idaho law, prohibiting deductions from employees' pay for union political action funds, is unconstitutional in violation of the First Amendment. The Court disagreed and upheld Idaho law.

Here's the issue and the Court's resolution, as framed by the Court itself:

Under Idaho law, a public employee may elect to have a portion of his wages
deducted by his employer and remitted to his union to pay union dues. He may not, however, choose to have an amount deducted and remitted to the union’s political action committee, because Idaho law prohibits payroll deductions for political activities. A group of unions representing Idaho public employees challenged this limitation. They conceded that the limitation was valid as applied at the state level, but argued that it violated their First Amendment rights when applied to county, municipal, school district, and other local public employers.

We do not agree. The First Amendment prohibits government from “abridging the freedom of speech”; it does not confer an affirmative right to use government payroll mechanisms for the purpose of obtaining funds for expression. Idaho’s law does not restrict political speech, but rather declines to promote that speech by allowing public employee checkoffs for political activities. Such a decision is reasonable in light of the State’s interest in avoiding the appearance that carrying out the public’s business is tainted by partisan political activity. That interest extends to government at the local as well as state level, and nothing in the First Amendment prevents a State from determining that its political subdivisions may not provide payroll deductions for political activities.

So, there you have it. The case is Ysursa v. Pocatello Ed. Assn. and the opinion is here.

Another Court of Appeal Decision on Tip Pooling

Did lawyers file a whole bunch of class actions on tip pooling at about the same time a year or two ago? Apparently so. Several judicial opinions have now emerged. They're not good for the plaintiffs.

We recently posted about Budrow v. Dave & Buster's here. There, the court decided that a restaurant's requirement that cocktail waitrons tip out a bartender was lawful.
Now, in Etheridge v. Reins International California, Inc. opinion here, the court of appeal reached the same conclusion, albeit with a slightly different formulation. Tip pooling, the court held, is fine when the tips are doled out to employees in the "chain of service." It is still forbidden to involve managers / supervisors in tip pools. But the bussers, bar backs, and hosts can breathe again.

Another Arbitration Agreement Bites the Crust

er... Dust, too.

Western Pizza owns some Domino's franchises. Their arbitration agreement had a class action waiver (illegal). It also had an arbitration selection procedure specifying a certain "dispute resolution service" that had only one arbitrator employed. So, that kind of took the surprise out of who would conduct the arbitration. The court struck down the arbitration agreement as unconscionable. Not a surprise given the current state of arbitration case law.

Interestingly, though, the court of appeal held that the company's "small claims" procedure, permitting relaxed discovery, evidence, and hearing procedures for claims worth less than $50,000. The court noted that such things are normal in arbitration anyway. Also, the court did not find unconscionable the agreement's silence on discovery procedures and no requirement of a written award, holding these were "implied" in the agreement under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.

The case is Sanchez v. Western Pizza Enterprises, Inc. and the opinion is here.

Court of Appeal Holds Statements Regarding Termination Were Not Defamatory "Per Se"

Slander per se means that a false statement is actionable without proof of actual damages. In California, the law defines the types of slander that count as "per se," which include a statement that:

[¶] 1. Charges any person with crime, or with having been indicted, convicted, or punished for crime; [¶] 2. Imputes in him the present existence of an infectious, contagious, or loathsome disease; [¶] 3. Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits; [¶] 4. Imputes to him impotence or a want of chastity . . .

Mike Regalia was a senior executive. When he was fired, the senior management said that he demanded a "finders fee" or "commission" on a sale without a justification, and that people would not work for him and had threatened to leave. He sued for, among other things, defamation. A jury decided he had been slandered and awarded him $750,000 for damage to his reputation without proof of actual economic loss.

The Court of Appeal disagreed. It is the court's job to decide if a statement is slanderous "per se" or if proof of damages is required (called slander per quod). Here's the court's analysis:

A person can make a claim for money that is rejected as not being justified, and still not be viewed as having committed an act that reflects negatively on that person. Thus a statement about such a claim does not necessarily directly injure him in his profession, trade or business (Correia v. Santos, supra, 191 Cal.App.2d at p. 852) so as to fit within subdivision (3) of Civil Code section 46. (See Gang v. Hughes (9th Cir. 1954) 218 F.2d 432 [alleged statements that a plaintiff‟s attorney refused to settle a case until he was paid and that he was paid because he demanded immediate payment not slander or libel per se].) Likewise, the statement that Regalia was fired because other employees would not work for him and would leave if he remained employed does not, on its face, clearly fall within subdivision (3) of Civil Code section 46. That one or more employees do not want to work for someone, without more, again, does not necessarily reflect adversely on the person. The employee or employees might not want to work for a person because of the person‟s work ethic or rectitude, or legitimate business policies.

Managers have the right to explain to employees why they have discharged someone. There are good business reasons to do so, such as to inform employees what performance standards govern employment. If statements such as the above were actionable as slander per se, no employer would ever explain why someone was no longer employed unless it wished to risk liability without proof of damages. Employees, on the other hand, are protected from false statements if they are actually injured. So, the court struck a reasonable balance here it seems to me.

This case, however, reinforces the need to be factual when explaining someone's departure. Had they called the ex-employee a "thief" or an "incompetent" manager, that might have been a different story. And neutral references are still the safest policy.

The case is The Nethercutt Collection v. Regalia and the opinion is here.

New COBRA Notices Available

Employers covered by COBRA have to comply with the new COBRA requirements included in the "ARRA" stimulus bill. We wrote an article about this here, and we posted here.

The US Department of Labor has issued model notices to aid compliance. Those are here.

DGV

EAT follows Malcolm again! (And I become very smug)

When the House of Lords turned the current understanding of Disability Discrimination law on its head by its ruling in Malcolm v London Borough of Lewisham I predicted that because this case made it more difficult for claimants to succeed in Direct Discrimination claims, Employment Tribunals would instead focus on the duty to make reasonable adjustments and would be likely to come down heavier on any failure. My comments were:

"Whilst this creates some difficulties for claimants, employers should still be cautious. Within the judiciary the law relating to disability discrimination is still deemed to be highly unsatisfactory and Employment Tribunals will more than likely focus on the duty to make reasonable adjustments and hit respondents heavily when they have failed to comply. This is especially so given that less claimants are likely to succeed under other ares of their disability discrimination claims".

The EAT has just handed down its latest judgement in Stockton on Tees Borough Council v Aylott and has applied Malcolm to another DDA case. However the EAT has held (and as predicted) that just because Malcolm is good law in respect of employment claims, and although this case does make it more difficult for claimants, they should not be left without redress. Slade J comments are para 113 makes it very clear the line of enquiry Tribunals will be encouraged to take when she states:

In our judgment this conclusion need not leave disabled people who are disadvantaged for a reason relating to their disability but treated in the same way as non disabled people without the possibility of redress. Although they may not now be able to establish that they have been discriminated against for a reason related to their disability within the meaning of Section 3A(1), they may be able to establish discrimination by the employer's failure to make reasonable adjustments under Section 3A(2) and 4A. An employee who is not able to drive because of his disability who is disciplined for frequently arriving late for the night shift would not be able to establish discrimination for a reason related to his disability if a non disabled person with a similar record of bad time keeping would also be disciplined. However, depending on the circumstances, he could claim that his employer had discriminated against him by failing to make a reasonable adjustment by not providing him with transport.

Again this is a call to Employers to be careful when dealing with disabled employees or those potentially disabled. Advice should be sought at every opportunity and furthermore at the outset of any issue. I can be contacted on gda@hrlegalpartners.com for further advice if needed.

Stanford GSB, Entry 19: Rainy, Foamy, Fuzzy, and Right-Wingy: Profs, Secretaries, Do-gooders, and criminals

Wow it’s been a while since I’ve written. I guess I got so caught up in winter quarter stuff that I haven’t really been keeping the blog up to date – so there’s a lot to write about.

So what’s been going on? Well for one thing, we are almost completely finished with the winter term – only one week of classes is left!

It seems like it was just yesterday that I was taking my accounting and my finance midterms. How did I do? Well, the engineering background continues to pay off; since they were both based on solid concepts which can be taught (and learned), I did pretty well.

So what does the end of the winter quarter mean at the GSB?

For one thing, rain. So much for the illusion that attending Stanford means going to school in “Sunny California”! It’s been raining almost non-stop for the past month (or so it seems). Today the sun came out for a few minutes, which was nice.

Yes I know, California is suffering from a drought, California needs rain, so I shouldn’t be complaining, but couldn’t it rain, like every other day, instead of every single day?

It’s enough to make my thoughts turn to Southern California. Or maybe Arizona. Or maybe even Las Vegas. Ahh, to feel the sun shining on my face again…

Which reminds me - Vegas FOAM is next week. FOAM, for those of you following the blog will know is the Tuesday night partying done by the MBA’s (joined by an occasional Sloan or two), since we don’t “officially” have classes on Wednesdays at the GSB. It stands for Friends Of Arjay Miller (Arjay Miller Scholars are the ones who get good grades).

Usually, Tuesday night FOAMs are held at a local establishment, but next week everyone (well not everyone, but many) will be flying to Vegas after classes on Tuesday, spend the night partying there, and flying back on in time for the non-existent Wednesday classes, or at the very latest, in time for Thursday classes.
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Fuzzy Logic

The other two things that end of the term means are “Final Exams” and “Final Projects”.

The thing about group projects in Business School that I find odd (and perhaps a little bit scary), is that in our fuzzy classes, a very large percentage of our grade (in some cases up to 50%) is based on the final project.

This week, I had thee final project due for my entrepreneurship and VC class, taught by Professor G., a 30-plus veteran of the Venture Capital industry. In that class, we had to write a 20-page business plan); I think we wrote a pretty good one about using iPhones for building communities based on popular TV shows.

How do I know that it was good? I’ve written a plan or two before and it seemd OK.

On the other hand, we also had both a final project and a final exam for our Marketing class.

I can say that I honestly have no fracking idea what the professor was looking for in our final paper, and even worse, many classmates feel like the final exam is going to be a complete mystery. (Any science fiction-oriented readers will will recognize the Battlestar Galactica reference there – for the rest of you, never mind!).

Which brings me to the subject of fuzzy grading. Fuzzy can be a good thing, as in “warm and fuzzy”. More often than not, at least where the GSB is concerned, a fuzzy class is one where the grading is “arbitrary, capricious, and highly subjective”.

There’s a joke around the student body that in many GSB classes (at least the fuzzy ones), your grade is guaranteed to be accurate within 2 letter grades of what you actually get – up or down! (do the math – it basically means that grades in fuzzy classes are pretty meaningless). I have one classmate who got an H, the highest grade possible, for participation in a class where he felt he didn’t participate that much at all – go figure! Good thing Stanford has a policy of not disclosing grades for MBA’s!

Doing Good

Speaking of classes, especially here at Stanford, grades certainly aren’t everything. In fact, there are quite a few things set up to help local charities. A few weeks ago, we had the White Party, which held an auction for everything from Dinners with famous VC's to yaching with groups of MBA1 girls, with all the proceeds going to charities.

Several of my classmates set up a website for their Social Technology class, which aims to use the web as a vehicle for helping out needy causes.

The site, Education Dream Lab, will help educational projects raise money online using the power of Web 2.0 social networking technologies. (See http://educationdreamlab.org/blog/). For their first project, they are helping students at the Phoenix academy in East Palo Alto (which is generally thought of as being more economically needy area than Palo Alto) with a scholarship fund.

Way to go guys!

Right-Wingy

In the past few weeks, we’ve had a number of illustrious visitors and it’s always fun to give the outside world a glimpse of who we get to see.

This Monday, Colin Powell gave a talk on campus. It was a big event – tickets were sold out I think. (Due the rain, though, not everyone came; the seats weren't quite as full as you might expect for such a famous guy).

In person, Mr. Powell was pretty engaging and articulate, and even came across, dare I say, passionate. Which is pretty different from his TV persona.

He told quite a few funny stories. For example, he told us one about when he was National Security Advisor and took his then 21-year old son to buy his first car. As a negotiating tactic, he picked up his brick satellite phone (remember those?) and said things like “Yes, Mr. President, I’ll be right there, Mr. President”, even when the President wasn’t on the phone. Why? To show the car dealer he was ready to walk away and they’d better settle on a deal very fast!

Unfortunately, Powell, who came across very as very likable during this talk, avoided the tough questions – no students were allowed to ask questions. California in general and Stanford in particular is a pretty liberal place, and I couldn’t wait for someone to ask him about his “performance” at the UN convincing the nation to go into the military adventure in Iraq.

Speaking of Iraq, guess who also arrived on campus this week? In fact, her first day was the same day that Colin Powell gave his speech.

Who else but his successor as Secretary of State, Condoleeza Rice. She got her PhD here at Stanford, was a professor and a provost here (I have no idea what a provost is, so don’t ask), before she was recruited by one called “W.” to make the trek up to Washington.

Thus far, no speeches on campus from Condi (though she did give an interview to the Stanford Daily). Now that she's back on campus, I’d be happy to interview her for this blog! I’ll keep you posted.

Speaking of former Secretaries of State, we (the Sloan class) had a private audience with George Schultz, who was Reagan’s Secretary of State in the Eighties a few weeks ago. Speaking of eighties, Schultz is in his late 80’s (89 if I’m not mistaken), but was in very good form for our event.

He sat on a very old-fashioned chair in front of our class, spoke a little bit about wanting to rid the world of Nuclear Weapons, and then proceeded to answer every one of our questions. Come on Colin and Condi, if an 89 year old guy can take questions from students, so can you!

Schultz told us some stories of his days with Reagan, and meeting the leaders of foreign countries. One of the most memorable was about Deng Xiopeng of China.

“People in that part of the world, “ said Mr. Schultz, when asked his impressions of Deng, “sometimes get a reputation of beating around the bush and not being direct. Well let me tell you, Deng did NOT have that problem. He was probably the most blunt person I’ve ever met - He told you exactly what he was thinking without wasting any time.”

In other words, he wasn't Fuzzy at all!

Crazy Eddie

One of our more entertaining speakers thus far came to our accounting class. Yes, you heard that right, I said accounting.

We had Sam Antar, the former CFO of Crazy Eddie’s, which was a well-known electronics retailer in the New York / New Jersey area which went public in the 1980’s. I had never heard of Crazy Eddie’s, but it turns out it was one of the hottest stocks when it IPO’ed, well before the dot com boom, climbing from 8 to 80 very quickly based on it rapid earngins growth.

The only problem was that it turned out to be one of the biggest securities frauds to hit Wall Street up to that time. Sam and his cousin Eddie, the company's founder, had been skimming money off the top, falsely reporting inflated earnings, laundering money, and doing all kinds of unsavory things to defraud investors and keep their stock climbing.

Sam is a convicted felon, and he explained some of the schemes they used in duping the IRS, his auditors (KPMG), and the public. He also explained how white collar crime was usually about making people comfortable so they overlooked the details - it was more about distraction than obstruction, he said.

With the recent Madoff scandal on everyone’s mind, this made for a very colorful presentation.

But do you know what the real crazy thing is? While Eddie went to prison and the Antar family had to pay like $90 million back to investors and to the government, Sam got off scott free – no civil or criminal penalties against the millions he’d made as the deceptive CFO of the now defunct electronics retailer.

Not just that, but he got to keep the $20 million or so he’d made from stock during that period, and now he’s giving talks at Stanford Business School!

Wow. Now that’s pretty crazy...

ECJ has thrown Heyday back to High Court

The European Court of Justice in Heyday has referred the matter back to the UK High Court; In the ECJ's judgement they have held that social policy objectives, "such as those related to employment policy and the labour market", may be considered 'legitimate' under the EU directive.

They then went on to rule that it is for the national court to decide whether or not the legislation reflects such a legitimate aim and furthermore whether or not the means chosen were necessary to achieve those aims. Frankly it seems a long winded way of saying that 'its upto you'!

There are over 800 claims stayed pending the decision in Heyday and I think the way things are going the courts will probably slam the floodgates shut and hold that they are entitled to introduce a default retirement age. However stranger things have happened!

There are also a record number of other age discrimination claims presented to the Employment Tribunals - this is only set to increase whether or not the result in Heyday is positive. If you need advice on this issue please contact me on gda@hrlegalpartners.com

California FEHC Compares ADA, ADAAA and FEHA

The California Fair Employment and Housing Commission issued a handy chart comparing the original Americans with Disabilities Act, the 2008 amendments (ADAAA), and the Fair Employment and Housing Act's coverage of individuals with disabilities. Here is the chart.

California FEHC Compares New FMLA Regulations with CFRA/PDL

The California Fair Employment and Housing Commission issued a helpful comparison chart covering the new FMLA regulations and their effect on California's Family Rights Act and Pregnancy Disability Leave law. Here it is.

Court of Appeal Clarifies California's Tip Pooling Law

If you have worked in a restaurant, then you know. Most restaurants require waitrons (servers) to "tip out" busboys, bartenders, runners, hosts, and/or others involved in the chain of service. If you gain the reputation for stiffing the busboy, bartender, etc. (under-tipping), you will be punished by no water, wrong drink orders, forgotten bread for your table, etc. So, smart wait staff tips out correctly.
In California, though, there is a statute addressing the practice of "tip pooling." The primary purpose of the law is to prevent management from taking a dip into the tip pool, as it were.
Some folks believe that tips by law are retained only by the server who collects it, or who engages in "direct table service."
The Court of Appeal put that interpretation to rest in Budrow v. Dave and Buster's. There, a cocktail waiter objected to tipping out the bartender. No wonder he lasted a month, or three months as he argued.
Anyway, the opinion is here. I'll bet you some side work that the Justices themselves or the court staff pulled a few doubles in their day.

GINA Regulations Coming

The EEOC has proposed regulations implementing and interpreting the Genetic Information Nondiscrimination Act of 2008 (GINA). The draft covers definitions of terms used in the law, what constitutes discrimination, how to protect genetic information in employers' possession, and MORE!

The EEOC is inviting the public to comment on the proposed regulations. If you want to access through the EEOC's own website, it's not posted as of this writing. But it will appear here. As of now, you can view the document here.

Thanks to Ross Runkel for reporting this before it happened.

DGV