Insights

Following a multi-million-dollar ruling against it by the National Labor Relations Board (“NLRB”), nursing home operator Care One, LLC, is now challenging the authority of NLRB-appointed Administrative Law Judges (“ALJs”) on constitutional grounds before the Second Circuit Court of Appeals. The Second Circuit’s line of questioning during the November 12, 2024, oral argument revealed the Court’s apparent skepticism towards Care One’s challenges, creating the prospect of a circuit court split on key issues that are likely to make their way to the Supreme Court. Care One’s arguments follow the trend over the past several years of employers increasingly questioning the authority of ALJs to adjudicate their labor and employment claims before administrative agencies.

Over the past several years, federal courts have increasingly questioned the authority of administrative law judges (ALJs) to adjudicate alleged violations of certain labor and employment statutes.  In the last several weeks, two U.S. district courts in Texas issued decisions halting unfair labor practice proceedings before the National Labor Relations Board (NLRB) on the grounds that NLRB ALJs lack the constitutional authority to preside over such actions due to unconstitutional protections against their removal.[1]  Similarly, the last year has seen several decisions by courts in the Fifth and Eleventh Circuits finding that ALJs, whose decisions are not reviewable by a Presidential appointee, lack constitutional authority under the Appointments Clause to adjudicate claims.[2]  The trend illustrated by these decisions, combined with the Supreme Court’s decision in June to abandon the Chevron doctrine of extending deference to federal agency rule-making proceedings, portend significant changes in the way employers interact with federal agencies that enforce labor and employment law. 

On June 13, 2024, The Supreme Court ruled in Starbucks v. McKinney that the National Labor Relations Board (“Board”) must meet the same four-part test that other litigants must satisfy in order to obtain a preliminary injunction. This holding resolves a split amongst the circuit courts, some of which have applied a “less exacting” two-factor test to preliminary injunctions under Section 10(j) of the National Labor Relations Act (“NLRA”).

On January 10, 2024, the U.S. Department of Labor (“DOL”) published its final rule on Employee or Independent Contractor Classification under the Fair Labor Standards Act (“FLSA”). Crowell & Moring previously reported on the proposed rule announced on October 11, 2022. The final rule rescinds the “core factors” independent contractor rule adopted by the Trump administration in 2021 and returns to a “totality of the circumstances” analysis for determining whether a worker is properly classified as an employee or independent contractor. According to the DOL, the new final rule institutes an analysis that better aligns with judicial precedent and the FLSA’s text and purpose. The final rule goes into effect on March 11, 2024.

On October 27, the National Labor Relations Board (“NLRB”) issued a long-awaited Final Rule (“Final Rule”) that will dramatically alter the test for joint-employer status. As proposed,  the Final Rule rescinds the NLRB’s 2020 Final Rule, with the NLRB claiming that the new rule “more faithfully grounds the joint-employer standard in established common-law agency principles.”   In effect, the Final Rule will make it easier for employees of franchises, staffing agencies, and potentially a broad swath of contractors to show that two entities are joint employers. If an entity is found to be a joint employer with the direct employer of unionized employees, “under common-law agency principles,” the entity can be liable for the unfair labor practices of the co-employer and can be required to negotiate with the union representing the workers under the National Labor Relations Act (“NLRA”).  The NLRB’s new rule will take effect on December 26, 2023 and is not retroactive.

The NLRB recently effected two significant, pro-union changes to the way in which future union organizing and representation cases proceed.  First, abandoning more than 50 years of settled law, the National Labor Relations Board’s recent decision in Cemex Construction Materials Pacific (372 NLRB No. 130), changed the way in which unions will likely organize private sector employers in the United States.  Pursuant to Cemex, if a union claims to have majority support and demands recognition, an employer must either (1) grant recognition without the benefit of an NLRB election, or (2) file its own NLRB petition seeking an election.  If the employer fails to take either step, the union can file an unfair labor practice charge, and the NLRB will find a violation and order mandatory union recognition unless the employer proves the union did not have majority support in an appropriate bargaining unit.  And even if the employer files a petition for election (an “RM petition”), the NLRB may cancel the election and issue a bargaining order if the employer commits virtually any unfair labor practice during the period preceding the election.

On June 21, 2023, the New York State Department of Labor (“NYSDOL”) issued updated regulations to the New York State Worker Adjustment and Retraining Notification Act (“NYS WARN Act”), which requires employers with 50 or more employees to provide 90 days’ notice of mass layoffs, plant closings and other specified employment losses.  According to the NSYDOL website, these new regulations are intended to “address the post-pandemic employment climate” and “simplif[y] language to ensure businesses better understand their obligations.”  The changes include, among other things:

On May 30, 2023, the General Counsel of the National Labor Relations Board, Jennifer Abruzzo, issued a memorandum stating broadly that the proffer, maintenance, and enforcement of non-compete agreements between employers and employees tend to infringe on employees’ exercise of rights under Section 7 of the National Labor Relations Act (the “Act”). General Counsel Abruzzo opines that non-competes are therefore unlawful under the Act (as to non-supervisory employees), unless “narrowly tailored” to a special circumstance justifying the infringement on employee rights. This memorandum comes on the heels of her prior memo, taking the position that confidentiality and non-disparagement provisions in employee severance agreements are invalid, as Crowell reported in late March.

On May 1, 2023, the National Labor Relations Board issued a decision in Lion Elastomers LLC II, which overruled the Board’s earlier decision in General Motors LLC, 369 NLRB No. 127 (2020), and rejected Trump-era precedent that had made it easier for employers to discipline workers who make profane, harassing or discriminatory comments in the course of a workplace dispute.  In its statement, the NLRB described its decision as “returning to the long-established ‘setting-specific’ standards applicable to cases where employees are disciplined or discharged for misconduct that occurs during activity otherwise protected by the National Labor Relations Act” (the “NLRA” or the “Act”).  

On February 21, 2023, the National Labor Relations Board (“NLRB” or the “Board”) issued a decision, McLaren Macomb, 372 NLRB No. 58 (2023), holding that employers may not offer employees severance agreements that contain what might otherwise be considered standard confidentiality or non-disparagement provisions because they arguably impinge upon rights provided under the National Labor Relations Act (“NLRA”). This decision reverses the previous Board’s decisions issued in 2020, holding that offering severance agreements with such provisions was not, standing alone, unlawful.

On January 10, 2023 New Jersey Governor Phil Murphy signed into law a new version of New Jersey’s “mini-WARN Act,” or the Worker Adjustment and Retraining Notification Act (“NJ WARN Act”). The amendment makes the NJ WARN Act in some ways the most expansive WARN Act in the country: it increases the scope of covered employers, counts employee layoffs statewide (rather than by worksite) to meet the notice threshold, requires 90 days’ notice (rather than 60), and mandates severance payments even when proper notice is given. These changes will take effect on April 10, 2023.

On September 6, 2022, the National Labor Relations Board (“NLRB” or “Board”) announced its intention to rescind the existing NLRB rule regarding the joint employer standard, which took effect on April 27, 2020, and replace it with a broader, more union-friendly rule, which, the Board asserts, will be more closely aligned with what it calls “established common law agency principles.”   In its Notice of Proposed Rulemaking, the NLRB claims that the existing rule created by the Trump Board less than three years ago “repeats the errors” that the NLRB corrected in Browning-Ferris Industries, an Obama-era decision that broadened the definition of “joint employer” under the National Labor Relations Act (“NLRA”) to include those employers that have “indirect control” over workers. Public comments relating to the proposed rule can be submitted until November 7, 2022, with reply comments due November 21, 2022.

On February 25, 2021, the U.S. House of Representatives, voting largely along party lines, passed the Equality Act, a bill that if enacted into law would significantly expand the rights of LGBTQ individuals. Specifically, the bill would amend Title VII of Civil Rights Act, as well as other statutes, to explicitly prohibit discrimination based on sexual orientation and gender identity. While President Biden has expressed public support for the Equality Act, it faces an uphill battle before the U.S. Senate, at least as it is currently constituted, because it expressly limits the degree to which the Religious Freedom Restoration Act (RFRA) can be used to defend against claims of unlawful discrimination against gay, lesbian, transgender and bisexual individuals.

The U.S. Congress passed a combined COVID-Relief and Omnibus Spending Bill on Monday, December 21, 2020.  The Consolidated Appropriations Act of 2021—both funded the U.S. government for FY 2021 and included a variety of COVID-19-related relief measures. The COVID-19 bill includes about $900 billion in new federal spending. It also repurposes $429 billion in unused CARES Act funding for the Federal Reserve Main Street Lending Program. The combined appropriations-COVID-19 stimulus relief package is the second largest in the nation’s history behind the CARES Act passed earlier this year.

In response to several requests from industry to extend the a 60-day comment period for the proposed rulemaking (NPRM) and guidance implementing the "Fair Pay and Safe Workplaces Executive Order," the FAR Council and the DoL have extended the comment period to August 11, 2015 (from the current date of July 27, 2015). As discussed previously here, the NPRM and related DOL guidance (available by PDF here and here and explained in more detail on our government contracts blog) would add onerous labor compliance reporting requirements for all contractors and subcontractors on contracts valued over $500,000 (and on non-COTS subcontracts valued over $500,000) and inject uncertainty and subjectivity into the procurement process through the addition of "Agency Labor Compliance Advisors" advising the CO with respect to responsibility determinations based upon a review of the contractor or subcontractor’s labor compliance data over a three-year period, which has prompted many contractors and trade associations to express their concerns about the scope and potential impacts of the Proposed Rule and Guidance.

As expected, and discussed during our recent webinar, the National Labor Relations Board (NLRB or Board) issued 13 complaints against McDonald's, USA, LLC and several of its franchisees alleging that McDonald's is a "joint employer" with its individual franchisees. Specifically, the complaints allege that McDonald's and its franchisees violated the rights of fast food workers by making statements and taking actions against them for participating in protests and other activities to improve their wages and working conditions.  

Marking the twentieth anniversary of the enactment of the Family and Medical Leave Act (FMLA), the United States Department of Labor (DOL) recently issued a Final Rule that significantly expands the FMLA's military caregiver leave provisions. The Rule also contains provisions related to "qualifying exigency leave" for eligible employees whose family members are currently serving in the Armed Forces or are recent veterans. For example, the Final Rule creates a new category of qualifying exigency military leave that enables eligible employees to take leave to provide care to a military member's parent, and expands the scope of military caregiver leave to include care for veterans. The Final Rule, which takes effect on March 8, 2013, also establishes eligibility rules for airline personnel and flight crews with regard to hours-of-service requirements for FMLA leave.

On February 7, 2013, the California Supreme Court issued its decision in Harris v. Santa Monica, No. S181004 (Cal. Sup. Ct. Feb. 7, 2013), rendering a partial victory for employers defending discrimination cases brought under the State's Fair Employment and Housing Act (FEHA). The Court held that even when discrimination is a substantial factor motivating a termination decision, the terminated employee may not recover damages or obtain reinstatement if the employer shows that it would have terminated the employee in the absence of any discriminatory motive. However, employers are not absolved of all liability. An employee whose discharge is motivated substantially, if not exclusively, by discrimination nevertheless may prevail on a claim for declaratory relief, may obtain an injunction, and may recover attorneys' fees and litigation costs.