Meet Trump’s Pick for the U.S. Department of Labor – CEO Andrew Puzder

President-elect Donald Trump tapped Andrew Puzder to lead the U.S. Department of Labor (“USDOL”) in his administration, an appointment that could have important implications for employers in terms of the USDOL’s recent hardline enforcement policies on joint employer relationships and independent contractor status. It also may signal how vigorously the USDOL will defend certain regulatory changes made under the current administration, such as the revised Persuader Rules (which significantly hinder an employer’s ability to use law firms during a union organizing campaign) and the amendment to the Fair Labor Standard Act’s “White Collar” exemptions (which more than doubles the minimum salary an employee must be paid in order to qualify for an overtime exemption). Both of these regulatory changes were blocked by federal courts last month and remain unenforceable unless the USDOL successfully appeals the federal courts’ injunctions.

Mr. Puzder has been CEO of CKE, which owns fast food chains Hardee’s and Carl’s Jr., since September 2000. CKE has 75,000 employees in the U.S. and nearly 100,000 worldwide. Mr. Puzder was an outspoken critic of the Labor Department under the Obama administration. He wrote multiple Wall Street Journal op-eds against any increase in the minimum wage or changes in overtime rules. Mr. Puzder has advocated for employers to consider automation in the face of rising employee costs.  Concerning automation, Mr. Puzder commented, “[machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.” Mr. Puzder has written about how overregulation from Obamacare has held back the restaurant industry and has made the case for less regulation in the labor market.  In 2010, Mr. Puzder released a book with professor David Newton entitled “Job Creation: How it Really Works and Why Government Doesn’t Understand It.” Leading up to the 2012 election, Mr. Puzder was an economic advisor and spokesman for the Romney Campaign for President. This election cycle, Mr. Puzder was an advisor and fundraiser for the Trump campaign.

If you have any questions or would like to discuss how the change in the administration could affect your business, please contact John Vreeland, Esq., Chair of the firm’s Wage and Hour Compliance Group, at (973) 535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at (973) 646-3275 or acarter@nullgenovaburns.com.

OSHA Whistleblower Retaliation Cases Continue to Rise

Based on the most recent statistics published by OSHA, the number of whistleblower retaliation cases being filed by employees has continued to rise.  In FY-2015, there were 3,288 cases filed, an increase of over 6% from the 3,098 cases filed in FY-2014.  This continued a long upward trend.  In fact, the number of whistleblower claims filed with OSHA has increased by over 70% since 2005, when only 1,934 cases were filed.  Along the same lines, more and more cases are being resolved in a way that is favorable to the complaining employee, either through a settlement or a finding that the whistleblower claim had merit.  In FY-2015, there were 835 cases that resulted in such a positive outcome for the complaining employee, which is more than double the 397 such cases in FY-2005.

Two recent OSHA Whistleblower cases underscore the need for Employers to be aware of these types of claims and to take precautionary measures.

  • On November 15th, OSHA announced that it had found that a Denver company, TruBlue, LLC, had unlawfully terminated an employee after the employee suggested to the company’s CEO that more safety research needed to be conducted on zip-line equipment. TruBlue develops and manufactures products used for climbing, zip-line, free-fall and other recreational activities.  OSHA has ordered TruBlue to pay the former employee $125,000 in back wages and to take other corrective actions.
  • On October 11th, OSHA announced the settlement of its lawsuit against Lear Corp. (dba Renosol Seating LLC. Lear manufactures foam seating for the automotive industry.  The lawsuit had been filed on March 4, 2016, following OSHA’s investigation had determined that employees who reported hazards from chemical exposure at the company’s Selma, AL plant suffered multiple forms of retaliation in violation of the OSH Act’s whistleblower provisions.  The settlement requires Lear to dismiss its lawsuit filed against one of the employees and to reinstate that employee to her former position.  In addition, the disciplinary records of the employees who had complained of the hazards will be purged from their personnel files, and those employees will be compensated for the work time lost due to the suspensions.  Lear also agreed to permit OSHA to provide annual training regarding protected rights under the OSH Act to all workers for a period of 3 years.

For assistance dealing with OSHA’s Whistleblower provisions or other OSHA-related issues please contact Doug E. Solomon, Esq., Chair of the Firm’s OSHA Practice Group and Partner in the Labor Law Practice Group.  Mr. Solomon can be reached at dsolomon@nullgenovaburns.com or (973) 535-7128.

Federal Judge Halts Final Overtime Rule Days Before Implementation

On November 22, U.S. District Court Judge Amos L. Mazzant III, sitting in Sherman, Texas, issued a nationwide preliminary injunction against the U.S. Department of Labor’s (“USDOL”) enforcement of its Final Overtime Rule which would have more than doubled the minimum salary employees must be paid to be treated as exempt from overtime. The USDOL estimated that the Final Overtime Rule, which was set to go into effect December 1, 2016, would capture 4.2 million workers into the overtime ranks.

The case, entitled Nevada v. U.S. Department of Labor, Civil Action No. 4:16-CV-00731, was filed by 21 states in the Eastern District of Texas. The States argued that the Department of Labor lacked the statutory authority to use a salary-level test and an automatic updating mechanism to determine overtime eligibility. Judge Mazzant agreed. Judge Mazzant found that under a plain reading of the statute, nothing in the White-Collar exemption indicates Congress intended the USDOL to define and delimit parameters for a minimum salary level. Instead, the focus is on the employee’s duties and Judge Mazzant found that the USDOL “exceed[ed] its delegated authority and ignor[ed] Congress’s intent by raising the minimum salary level such that it supplants the duties test.” While the USDOL may appeal the preliminary injunction, and the Court will eventually rule on whether to grant a permanent injunction, the Court has told the USDOL that it may not enforce the Rule.

So, what does this mean? For now, because of the nationwide preliminary injunction barring enforcement of the Overtime Rule, employers do not have to comply with the Overtime Rule’s requirements.  Right now, the current minimum salary that must be paid to qualify an executive, administrative or professional employee for an overtime exemption is $455 per week and this will remain the minimum salary on December 1st and until such time as Judge Mazzant’s decision is modified at the permanent injunction phase or successfully appealed.

Whether and when the government will appeal is unclear. The Final Overtime Rule is unpopular with employers, employer groups (like the Chamber of Commerce), and Senate and House Republicans. Whether President-elect Trump’s Department of Labor will defend the Overtime Rule in the face of State and business opposition is an issue that will be addressed in early 2017. We will keep you posted about any new developments regarding the Overtime Rule.

If you have any questions or would like to discuss the preliminary injunction against the Overtime Rule and options available to your business if it has already taken action to comply with the Overtime Rule, please contact John Vreeland in our Labor Group at (973) 535-7118 or jvreeland@nullgenovaburns.com.

 

Court Blocks Rule Requiring Federal Contractors to Disclose Labor Law Violations, But Okays Pay Transparency Rule

On October 24, 2016 the federal district court in Beaumont, Texas enjoined implementation of President Obama’s Executive Order 13673 and the enforcement of FAR Council regulations and U.S. DOL guidance requiring disclosures of labor law violations, which were scheduled to take effect on October 25, 2016.  The court found that the requirement to report labor law violations exceeded the Executive Branch’s authority and violated free speech and due process rights of federal contractors and subcontractors.  The court also halted the ban on pre-dispute arbitration agreements covering Title VII claims and tort claims relating to sex harassment.  However, on January 1, 2017 the Order’s pay transparency rules will take effect, requiring federal contractors to furnish wage statements each pay period stating hours worked, overtime hours worked, rate of pay and any additions and/or deductions from pay.

In August 2016 the FAR Council and the DOL issued a Final Rule and Guidance on E.O. 13673 titled Fair Pay and Safe Workplaces.  The Final Rule requires federal contractors and subcontractors that solicit a contract with the Federal Government estimated to exceed $500,000 to disclose all violations of 14 federal labor laws committed during a look-back period, including FLSA, OSHA, FMLA, ADA, ADEA, Title VII and the NLRA.  The Federal Government will consider these labor law violations and decide whether they are too serious, repeated, willful or pervasive to award or extend a contract.

Because this injunction is only preliminary and partial and an appeal or amended rule is likely, federal contractors and subcontractors cannot ignore E.O. 13673, the Final Rule or DOL Guidance.  If the injunction is dissolved, then contractors and subcontractors will be faced with disclosure duties covering a look-back period of one year that will gradually increase to three years.  In addition, no disclosures will be required in the six months following the Rule’s effective date for prospective contractors, and one year for prospective subcontractors.  This phase-in disclosure process is in response to the DOL’s recognition that contractors and subcontractors were not previously required to track and report federal labor law violations and need time to familiarize themselves with the Final Rule, set up protocols and create or modify internal databases to track covered labor law decisions, including administrative merits determinations, arbitral awards or decisions, and civil judgments.

As discussed above, the court did not enjoin the Executive Order’s pay transparency requirements taking effect January 1, 2017.  In addition, the DOL requires every federal contractor and subcontractor covered by E.O. 11246 to provide notice to applicants and employees that the employer will not discriminate based on questions, discussions, or disclosures about pay.  The contractor must post the Pay Transparency Nondiscrimination Provision either electronically or in conspicuous places available to the employee or applicant at the employer’s premises and include it in existing employee handbooks and manuals.  Sample DOL language is available at https://www.dol.gov/ofccp/PayTransparencyNondiscrimination.html.

On a somewhat related issue, the DOL issued its Final Rule implementing President Obama’s E.O. 13706, which mandates paid sick leave for employees of federal contractors.  Beginning January 1, 2017 the DOL will require a covered federal contractor to provide an employee with at least 56 hours per year of paid sick leave, or alternatively the contractor must permit an employee to accrue not less than one hour of paid sick leave for every 30 hours worked under a covered federal contract.  An employee may use the paid sick leave for a physical or mental illness, injury or medical condition, obtaining diagnosis, care or preventive care, caring for the employee’s child, parent, spouse, domestic partner, or to seek counseling, relocation, assistance from a victim services organization or legal action for domestic violence, sexual assault or stalking.  If a labor agreement signed before September 30, 2016 applies to an employee’s work performed under a covered contract and provides the employee with fewer than 56 hours of paid sick time each year (or fewer than seven days, if the agreement refers to days rather than hours), the contractor must provide the difference between 56 hours and the amount provided under the existing agreement.  However, if a labor agreement signed before September 30, 2016 already provides for at least 56 hours per year of paid sick leave, the other requirements of the Executive Order and Final Rule, such as recordkeeping, notice and timing of pay, will not apply to the contractor until either the agreement terminates or January 1, 2020, whichever is sooner.

For assistance in complying with the Executive Orders, Final Rules or DOL Guidance on labor law violation disclosures, pay transparency or paid sick leave, please contact Patrick W. McGovern, Esq. at 973-535-7129 or pmcgovern@nullgenovaburns.com, or Nicole L. Leitner, Esq. at 973-387-7897 or nleitner@nullgenovaburns.com.

Regulations Require Paid Sick Leave for Federal Contractors

On September 29, 2016, the Department of Labor (DOL) issued a final rule requiring federal contractors to provide employees with at least seven days of paid sick leave each year. This requirement applies to all new contracts.

What contracts must comply with the paid sick leave requirement?  Four types of contracts fall within the new sick leave requirement.  They are: 1) procurement contracts for construction covered by the Davis-Bacon Act; 2) service contracts covered by the Service Contract Act; 3) concession contracts; and 4) contracts in connection with Federal property or lands related to services for Federal employees and the general public.

What is a new contract?  The rule applies to new contracts, which is defined as a contract awarded or resulting from solicitations on or after January 1, 2017.  A contract prior to January 1, 2017 will also be considered a new contract if: 1) the contract is renewed; 2) the contract is extended, unless the extension arises from a term for a short term extension in the original contract; or 3) the contract is amended as a result of a modification outside the scope of the original contract.

How much paid sick leave must a federal contractor provide?  Employees working on covered, new contracts accrue one hour of paid sick leave for every thirty hours worked. Employers may also limit paid sick leave to 56 hours per year.  For administrative ease, an employer may “front-load” or provide the 56 hours at the beginning of the accrual year.  Special rules apply for carrying-over any unused paid sick leave to the following year.  The regulations also allow employers to implement a policy allowing forfeiture of any accrued, unused paid sick leave upon separation from employment.  However, if an employee is rehired within 12 months, the employer must reinstate accrued, unused paid sick leave.

What uses of paid sick leave are permitted?  The regulations provide that an employee may use paid sick leave for the following reasons:

  1. for the employee’s own physical or mental injury, injury, or condition
  2. for the employee to obtain diagnosis, care, or preventative care
  3. for the employee to care for a child, parent, spouse, domestic partner, or person in a family relationship for reasons relating to that person’s medical condition
  4. for reasons related to domestic violence, stalking, or sexual assault

For more information on the Final Rule and implementing best practices with these regulations, please contact Brigette N. Eagan, Esq., Counsel in the firm’s Human Resources Practice Group at beagan@nullgenovaburns.com or 973-533-0777.

Third Circuit Deals Blow to Jersey City Ordinance Requiring PLAs on Privately Funded Projects in Exchange for Tax Abatements

Jersey City’s Municipal Code offers real estate developers generous tax exemptions that are designed to spur the City’s economic growth, but the tax incentives have strings attached. Specifically, to receive a tax exemption, even on a privately funded project, the developer must agree to use the City-approved project labor agreement (“PLA”), which is a pre-hire agreement that favors unionized contractors and subcontractors. On September 12, 2016, the Third Circuit Court of Appeals reinstated claims against Jersey City that its tax exemption ordinance mandating PLAs is preempted by the National Labor Relations Act and the Employee Retirement Income Security Act, and violates the dormant Commerce Clause of the U.S. Constitution. Now the case returns to the District Court for a determination whether Jersey City’s PLA requirement is unlawful. The Court was careful to explain that its ruling has nothing to do with public construction projects, and is limited to the City’s attempted regulation of privately funded projects. Associated Builders and Contractors v. City of Jersey City, No. 15-3166 (3rd Cir. Sept. 12, 2016).

By imposing the PLA requirement on privately funded projects that sought tax abatements, the Third Circuit found that Jersey City “require[d] that an employer negotiate with a labor union and that all employees be represented by that labor union as part of the negotiations— even if the developers, contractors, and subcontractors do not ordinarily employ unionized labor and the employees are not union members.” In addition, the City’s standard PLA requires that employers and unions agree not to strike or lock-out during construction, and agree to sponsor or participate in apprenticeship programs.

The Court of Appeals found that the three laws allegedly violated by Jersey City’s ordinance — the NLRA, ERISA and the Commerce Clause — “share the same threshold requirement before their constraints are triggered: that the allegedly unlawful act by the state or local government be regulatory in nature,” as opposed to action by a market participant. The Court determined that Jersey City is not a market participant because the City “is not selling or providing any goods or services with respect to Tax Abated Projects, nor acting as an investor, owner, or financier with respect to those projects.” Invoking Supreme Court precedent, the Court rejected the City’s claim that offering tax abatements gives the City a proprietary interest in the project. The Court found that the City acted instead as a market regulator and since the ordinance strips employers and employees of the economic weapons of strikes and lockouts, and relates to employee benefit plans, the City’s ordinance may indeed be preempted by the NLRA and by ERISA. Finally, by enacting “regulatory measures designed to benefit in-state economic interests by burdening out of state competitors,” the ordinance arguably violates the dormant Commerce Clause.

Absent a request for rehearing or a petition for rehearing en banc, this case will return to the District Court for a determination whether the PLA requirements in the City’s tax exemption ordinance are enforceable. The larger questions are whether PLAs now in place on privately funded projects in Jersey City will remain in effect and, if not, whether this affects developers’ tax exemptions. Also an open question is whether the Third Circuit’s decision affects similar tax exemption ordinances in other municipalities that impose PLA requirements. Questions relating to this important decision and the path forward for developers in Jersey City and elsewhere in the state may be directed to any partner in our firm’s Labor Law Practice Group – James McGovern III, Patrick McGovern, Douglas Solomon, and John Vreeland.

The Monkey and the Cat: Second Circuit Adopts “Cat’s Paw” Theory of Liability for the Acts of a Non-Supervisory Employee in Title VII Retaliation Cases

On August 29, 2016, a unanimous panel of the United States Court of Appeals for the Second Circuit revived a retaliation lawsuit under Title VII of the Civil Rights Act of 1964 under the “cat’s paw” theory of liability. In Vasquez v. Empress Ambulance Service, Inc., et al. (Case No. 15-3239), the Second Circuit held that an employer may be held liable under a cat’s paw theory of liability for an employee’s animus, regardless of the employee’s role within the organization, if the employer’s own negligence gives effect to that animus and causes the victim to suffer an adverse employment action. The decision brings the Second Circuit in line with several of its sister circuits in Fapplying the cat’s paw theory of liability in Title VII retaliation claims, including the Third, Fifth, Sixth, Seventh, and Eighth Circuit Courts of Appeals.

The cat’s paw theory of liability derives its name from one of Aesop’s fables, where a monkey persuades a cat to pull chestnuts from a fire where they are being roasted, promising him a share. As the cat removes the chestnuts – and in the process burning his paw – the monkey eats the nuts, leaving the cat with no food and a burnt paw. The cat was duped by the monkey, who benefited from the pains suffered by the cat. Cat’s paw liability now refers “to a situation in which an employee is fired or subjected to some other adverse employment action by a supervisor who himself has no discriminatory motive and intended to bring about the adverse employment action.” Because the supervisor, acting as an agent of the employer, has allowed themselves to be used “as the conduit of [the subordinate’s] prejudice,” the prejudice may be imputed to the employer.

In this case, the plaintiff, Andrea Vasquez, was employed by Empress Ambulance Service, Inc., as an EMT on an ambulance crew. Another Empress employee, Tyrell Gray, a dispatcher, frequently made romantic gestures and overtures to Vasquez, which she rejected. Gray also sent Vasquez a sexually explicit image via text message on work time. When Vasquez returned to the office from her shift, she notified her supervisor and began to prepare a formal complaint. Before Vasquez was able to finalize her complaint and meet with her supervisor and union representative, Gray began fabricating evidence that he and Vasquez had been involved in a consensual sexual relationship, asking a fellow co-worker to lie and doctoring text messages, which he provided to Empress to corroborate his fabricated story.

When Vasquez met with Empress and her union representative, a member of Human Resources stated that Empress had already reviewed Gray’s “evidence” and had concluded that she was having “an inappropriate sexual relationship” with him. Vasquez denied the allegations and asked to see the “evidence,” but she was not permitted to do so. Vasquez offered to show Empress her own cell phone to disprove the doctored text message history provided by Gray, but Empress declined the opportunity and terminated Vasquez for engaging in sexual harassment.

In reversing the District Court’s dismissal of the Complaint, the Second Circuit expressly adopted the cat’s paw theory of liability and addressed a second issue left open by prior case law: whether the cat’s paw approach would render an employer responsible for the animus of a co-worker, rather than a supervisor. The Second Circuit answered the question in the affirmative, applying general principles of agency law, and found that Vasquez could recover against Empress if she can show that Empress itself was negligent in relying on the discriminatory or retaliatory animus of a low-level, non-supervisory co-worker’s false allegations in making its decision to terminate her. Thus, the employer’s own negligence would provide an “independent basis” to treat the non-supervisory co-worker as an agent and hold the employer liable. The Court also cautioned that this approach will not make an employer liable “simply because it acts on information provided by a biased co-worker.” Rather, it is only when the employer “in effect adopts an employee’s unlawful animus by acting negligently with respect to the information provided by the employee [. . .]” that the animus could be imputed to the employer.

Following the Second Circuit’s decision, employers must be vigilant in how they handle accusations and information received by employees, regardless of their level within the organization and evaluate whether or not the employee has a retaliatory motive or other animus against their co-worker. Once an accusation has been made, employers must conduct a thorough and good faith investigation into the allegations to ensure that the employer is not acting on false or misleading information provided by an employee with an agenda. Employers must keep an open mind and maintain impartiality. Failure to do so will impute an employee’s retaliatory intent to the employer to support a claim under Title VII under the cat’s paw doctrine. Employers should consult with counsel to evaluate their employment and investigation policies to ensure conformity with this ruling.

For more information, please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group at jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq., Chair of the Human Resources Practices Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

Immigration Law Violations Occurring After November 2, 2015 Carry Heavier Penalties

Effective August 1, 2016 the Department of Justice is assessing higher penalties for employers that violate immigration laws. These penalties cover violations that occurred after November 2, 2015.  Specifically, the DOJ’s interim final rule increases penalties for a myriad of violations, including penalties for employing unauthorized workers and for technical Form I-9 paperwork violations. These increases are driven by the Civil Monetary Penalties Inflation Adjustment Final Rule which directs federal agencies periodically to increase their administrative penalties to account for inflation. With this increase, the minimum penalty for unlawfully employing a single unauthorized worker will increase from $375 to $539, and the maximum increases from $3,200 to $4,313. These fines apply to the employer’s first offense. For each additional offense, the penalty increases significantly and tops out at $21,563 per unauthorized worker.

The increases in penalties for Form I-9 paperwork violations are similarly stiff. The interim final rule increases the minimum fine from $110 to $216 per I-9 violation, and the maximum penalty increases from $1,100 to $2,156 for a single violation. Fines for I-9 paperwork violations are independent of any unlawful hiring violation. Since the I-9 fines apply to each discrete technical violation and increase with each additional offense, a growing business whose I-9 compliance process is out of compliance could face tens of thousands of dollars in fines if audited by Immigration and Customs Enforcement (ICE).

In addition, the U.S. Department of Labor will also increase penalties for H-1B visa related violations. For example, misrepresenting material facts on the Labor Condition Application now carries a maximum penalty per violation of $1,782. In addition, an employer that displaces a U.S. employee in the period starting 90 days before and ending 90 days after it files an H-1B visa petition faces a maximum penalty of $35,000 to $50,758 per violation, if it does so in conjunction with certain willful violations.

Although these increases are touted as merely keeping pace with inflation, they are problematic for employers that have a poor track record of either ensuring their new hires are authorized to work in the U.S. or completing I-9 paperwork accurately for their new hires. Since these new penalties apply to violations that occurred as far back as November 2015, many in the employer community suspect that ICE has been delaying issuing fines for older violations until now, to recover the higher penalties. Also it is reasonable to anticipate that workplace audits will increase in number since ICE now has greater financial incentives to find employers out of compliance.

An audit with the assistance of counsel allows employers to detect and potentially correct any I-9 or other immigration compliance issues. It can also help to train the personnel responsible for immigration compliance, preventing errors in the future. For further information regarding how the ICE regulatory environment affects your business, recruiting, and hiring, and assistance with auditing your Form I-9 process, please contact Patrick W. McGovern, Esq., the Director of our Immigration Law Practice Group, at 973-535-7129 or pmcgovern@nullgenovaburns.com.

Allison Benz, a recent summer associate at Genova Burns LLC, assisted in the preparation of this blog post.

N.J. Supreme Court Rejects Defense of Federal Labor Law Preemption of CEPA Claim in Underlying Unpaid Wage Action

On August 16, 2016 the N.J. Supreme Court held, in a 6-0 opinion, that neither the federal Labor Management Relations Act nor the National Labor Relations Act preempts a claim under the Conscientious Employee Protection Act (CEPA) by a private sector employee who is covered by a collective bargaining agreement.  Puglia v. Elk Pipeline, Inc. (Case No. A-38-14).

Elk Pipeline employed Mr. Puglia, a union member, on a construction project in Camden. The project was subject to N.J. prevailing wage law and apparently as a cost savings measure, Elk reduced severely the wages of several laborers on the project, claiming that the employees were re-classified as apprentices.  Puglia complained to his supervisor and to Elk’s project manager that with the wage reduction, he was not being paid correct prevailing wages. An unhelpful fact for Elk was that its project manager commented to the project engineer that “the owner wanted to [f**k] with [Puglia] and wants to get rid of him.” In fact, no more than 11 months after Puglia first complained to Elk about his wages, Elk laid Puglia off, ahead of two less senior employees who were not laid off. Elk explained that the two less senior employees had relevant certifications that Puglia lacked. Puglia’s CEPA claim alleged that, by complaining internally about Elk’s failure to pay him proper prevailing wages, he engaged in protected whistleblowing activity, for which he lost his job. Elk moved for summary judgment, arguing that Puglia’s CEPA claim was preempted by federal labor law.

The trial court concluded that Puglia’s CEPA claim was preempted, by both the Labor Management Relations Act (LMRA), and based on Garmon preemption, a U.S. Supreme Court-based doctrine that holds that state-law claims that involve conduct arguably subject to Section 7 or Section 8 of the NLRA are preempted. The Appellate Division affirmed, holding that Puglia’s claim was preempted by the LMRA, and by the NLRA under Garmon. The Appellate Division reasoned that the issues of Puglia’s contract seniority and Elk’s assertion that the Camden project was winding down required evaluation of the terms of Elk’s labor agreement.

The Supreme Court reversed and held that Puglia’s CEPA claim was not preempted by federal labor law. The issue the Court teed up for analysis and foreshadowed the Court’s conclusion was “whether complaints about violations of that minimum labor standard [of prevailing wages], and the concomitant State interest in curbing retaliation for such complaints, invoke preemption concerns.”  The Court analyzed Puglia’s CEPA complaint to determine whether it required an interpretation of the CBA and found that it did not. “Whether Puglia performed a whistleblowing activity in reporting the alleged failure by Elk to abide by Prevailing Wage Act requirements, and whether Elk retaliated against Puglia for doing so are factual questions, untied to any interpretation of the CBA.” The Court dismissed Elk’s best argument — that Puglia’s complaint depended on interpreting the labor agreement — and strained to find no contract issue. “It is far from clear that Puglia claimed a violation of the CBA in [his complaint]. He was making a factual allegation: He was more senior than other employees who were not let go. … That Puglia mentioned seniority in his deposition does not alter the substance of his claim. Nor does it inject a question of CBA interpretation into the factual questions at the heart of a CEPA claim. … Having a claim under the CBA does not void state-law remedies that are independent of the CBA. The employer’s attorney cannot change that by the course of his questioning at a deposition.” Despite Puglia’s claim that he was laid off out of seniority order, the Court still determined that it was “unclear” that he was claiming a contract violation. The Court gave no weight to Elk’s argument that the labor contract permitted Elk to lay Puglia off ahead of more junior employees and therefore Puglia’s layoff was dictated by the labor contract, and not retaliatory. Turning to Garmon preemption, the Court agreed with Elk “that Puglia’s conduct was at least arguably protected under Section 7” of the NLRA.  However, the Court determined it could not find that “Puglia’s CEPA claim is identical to the claim that he could have, but did not, present to the Board.” The Court explained, “[W]e believe that when the State’s interests in enforcing CEPA in a factual setting like this one — whistleblowing activity arising out of a prevailing wage dispute — are balanced against any potential interference with the federal labor scheme, the State’s interests win out. New Jersey’s interest in enforcing CEPA runs deep.” The Court concluded with this syllogism: “If an employee can allege a violation of those state minimum labor standards without being preempted by federal law, then it follows that allegations of retaliatory discharge based on whistleblower conduct in response to a violation of those standards should not be preempted.”

This decision indicates that rarely if ever will this Court find that a CEPA claim based on an alleged violation of N.J. wage laws is preempted by federal labor law, no matter how many labor contract issues are pled or implicated. A major concern for N.J. businesses flowing from this decision is the proliferation of claims and litigation, since this holding confirms that union-represented employees like Mr. Puglia can prosecute claims of retaliatory discharge and get three bites at the apple — in the contractual grievance-arbitration procedure, before the NLRB, and in state court under CEPA.

Questions relating to this important decision may be directed to any partner in our firm’s Labor Law Practice Group. Our Group’s attorney roster can be accessed at http://www.genovaburns.com/attorney-search-results.

 

Appellate Division Finds c.78 Health Benefits Contributions Requirements Do Not Apply to Public Sector Disability Retirees

Last month, in Brick Twp. PBA Local 230 v. Twp. of Brick, the Appellate Division of the Superior Court of New Jersey confirmed that N.J.S.A. 40A:10-21.1, P.L. 2011, c. 78, § 42, more commonly known as Chapter 78, does not require ordinary disability or accidental disability retirees of public employers to make premium payments for health insurance benefits.

Chapter 78, concerning public employee pension and health care benefits, was passed in recognition of “serious fiscal issues” confronting the State and the underfunding of the pension system. It implemented various changes to pension and health care benefits such as increased required contributions from public employees and suspension of cost-of-living adjustments.  Among these reforms included requirements for certain retirees to pay contributions toward their health benefits in retirement.

In Brick, the Township had required a former police employee, who had retired due to a disability he had sustained while on duty in 2011, to continue making health insurance premium contributions in order to maintain his retiree health benefits coverage. The trial court concluded that Chapter 78 exempted only those employees with 20 or more years of service on its effective date from having to make contributions toward health benefits in retirement. Due to the fact that the employee had served only 19 years, the trial court believed that his obligation to make contributions was required by Chapter 78.

On appeal, the Appellate Division considered “whether Chapter 78 applies to government employees who receive disability retirement benefits.” The Appellate Division opined that the clear language of Chapter 78 does not require that contributions be made by those who retire on disability pensions even if they have less than 20 years of pensionable service. The Court found support for its conclusion based on the fact that the Legislature had designated different statutory sections for employees disabled while at work, which was further supported by the legislative history of Chapter 78. Thus, the Court reasoned that while ordinary retirement is linked to a member’s age or years of service, disability retirement is not predicated on length of service or age, but awarded because of an employee’s disability.

Thus, the opinion suggests that Chapter 78 contributions requirements apply with respect to active public employees and those who retire based on meeting the service requirements. In contrast, those who are forced to retire on an ordinary disability or accidental disability retirement are exempt from making premium payments for health insurance benefits.

If you have any questions or for more information regarding Chapter 78 health benefits or the impact of other laws affecting public employers, please contact Joseph M. Hannon, Esq., jhannon@nullgenovaburns.com or Brett M. Pugach, Esq., bpugach@nullgenovaburns.com in the Firm’s Labor Law Practice Group.