In a major victory for a South Carolina poultry processor, the U.S. Court of Appeals for the Fourth Circuit has reversed a jury’s verdict in favor of 16 plaintiffs who claimed they were promised they would be paid “punch-to-punch,” instead of line time, as was the practice in the unionized facility where they worked. This wiped out an award of more than $270,000, including attorneys’ fees. The Court also invalidated verdicts in favor of six employees who claimed they were fired in retaliation for initiating workers’ compensation claims, cancelling more than $100,000 of the damages awarded by the jury. Awards in favor of only two employees were affirmed. The case is Barton et al. v. House of Raeford, Nos. 12-1943. 12-1945, & 12-1946 (4th Cir., March 11, 2014). The employer was represented by Larry Stine of our firm's Atlanta office.

Background: The plaintiffs originally filed suit alleging violations of the Fair Labor Standards Act (FLSA) as well as South Carolina’s wage payment act. They claimed that when they went to work for House of Raeford, they were told at orientation they would be paid clock time, not line time. They also claimed that they didn’t get proper breaks, and should be paid for that time as well. Some of the plaintiffs also asserted that they were terminated in violation of a South Carolina statute that prohibits terminating an employee who has “instituted proceedings” under the state’s workers’ compensation law. Binding precedent compelled the District Court to enter judgment in favor of the employer on the FLSA claims, and the case proceeded to a jury trial on the South Carolina wage act and bench trials on the workers’ compensation retaliation claims. All the plaintiffs prevailed on the wage claims, and half of those who claimed retaliation won. The employer appealed.

Decision: A majority of the 3-judge panel of the U.S. Court of Appeals for the Fourth Circuit reversed nearly all of the District Court’s decisions. (One judge dissented, saying he would have affirmed the District Court in every respect). Because the plant where the plaintiffs had worked was a unionized facility, the plaintiffs’ claims were governed by the Labor Management Relations Act (LMRA), and by the collective bargaining agreement (CBA) that set the terms and conditions of employment. One of those terms was that complaints be resolved through the grievance and arbitration process, which the plaintiffs had failed to use. The Court of Appeals rejected the plaintiffs’ argument that they were not bound by the CBA, and that their state law claims could be resolved without reference to that document. Because the LMRA governed, their state law claims should have been dismissed.

As to the retaliation claims, the majority found that the District Court applied the wrong test to determine whether 6 of the employees would not have been discharged “but for” their institution of workers’ compensation proceedings. The District Court had found that a visit to the plant nurse, coupled with a request to see a company doctor, was sufficient to put the employer on notice that a workers’ compensation claim was imminent, but the Court of Appeals found this inconsistent with precedent from the South Carolina Supreme Court. The Court of Appeals deferred to the District Court with respect to the claims of the two remaining employees, both of whom had instituted workers’ compensation proceedings prior to their termination.  Their judgments were affirmed.

Commentary: This is a significant victory because it affirms a central tenet of Federal labor law that the District Court had failed to respect: that Federal labor law pre-empts State law claims. This decision also corrects the District Court’s erroneous conclusion that employees who work at unionized facilities are not bound by the provisions of a valid CBA. The Court of Appeals also restored the South Carolina Supreme Court’s standards for determining what triggers coverage under the workers’ compensation anti-retaliation law. South Carolina had held that protection is triggered when a claim is filed, a company doctor is consulted, or the employer is billed for medical services rendered to an employee: simply going to see the plant nurse and asking to be sent to a company doctor is not sufficient. Left uncorrected, the District Court’s ruling could have exposed South Carolina employers to a retaliation charge almost every time an employee sought first aid.

This ruling puts an end to a hard-fought battle that spanned four years, one jury trial, and one bench trial. The Court of Appeals’ decision upholds the primacy of Federal labor law and standards decreed by the South Carolina Supreme Court that clarify when the workers’ compensation anti-retaliation law is triggered.

There has been a long string of announcements by the Obama administration delaying implementation of the Affordable Care Act (ACA). The administration had previously delayed the application of the employer responsibility provisions (the tax) from January 2014 to 2015. The most recent announcement gives large employers with 100 or more employees more flexibility in beginning compliance in 2015, and gives employers with between 50 and 99 employees an additional year, until January 2016, to comply, subject to certain conditions.

Regarding those employers with at least 50 but fewer than 100 full-time employees, the employer tax generally will not apply until 2016, if the employer provides an appropriate certification described in the rules. Further, for 2015 only, the $2,000.00 penalty for each full-time employee will exempt the first 80 full-time employees instead of 30.

For those employers of 100 or more full-time employees, there is an additional break dealing with the permanent rule which provides that these employers must provide coverage for 95% of their employees. The transition rule for 2015 indicates that employers must only offer coverage to at least 70% of full-time employees as one of the conditions for avoiding ObamaCare taxes, rather than 95%, which will begin now in 2016.

In addition to the above two forms of transition relief for 2015, a package of limited transition rules that applied to 2014 has now been extended to 2015 under the final regulations. Employers with plan years that do not start on January 1 will be able to begin compliance at the start of their plan years in 2015 rather than on January 1, 2015, and the conditions for this relief are expanded to include more plan sponsors. The requirement that employers offer coverage to their full-time employees' dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.

A senior Obama administration official said that the postponements were a response to business' concerns. Skeptics responded that the administration did not want another avalanche of bad ObamaCare news and cancellations before this fall's mid-term elections. Last fall reportedly some 6 million Americans lost their health policies because their policies did not conform to ObamaCare's requirements for "essential benefits" and other mandates. Supposedly, the administration was concerned that many small employers in particular would simply cancel their plans shortly before the November elections.

During February, the Congressional Budget Office, a non-partisan agency, reported its annual economic and budgetary outlook, and as part of that outlook addressed the ramifications of ObamaCare. The analysis concluded that subsidies provided by the law create an incentive for many Americans to cut their work hours, leading to a net reduction of between 1.5% and 2.0%. The agency stated that this would be the equivalent of reducing the labor force by 2.5 million workers by 2024. Republicans generally reacted by saying the Congressional Budget Office report confirmed their long-held belief that the law will harm economic growth. Democrats said the study confirmed their belief that the law would free many Americans from "job lock," the idea that people have to work in order to maintain healthcare benefits.

In another little-noticed announcement, another important delay was announced by the administration in January, that had prohibited employers from providing better health benefits to executives and to other employees. Under the healthcare law, an employer that has a fully-insured health plan that discriminates in favor of high-paid executives faces a potential penalty of as much as $100.00 per day for each individual affected negatively. Tax officials indicated that they would not enforce this provision during 2014 because they have yet to issue regulations for employers to follow.

Further, the Wall Street Journal reported on March 12, 2014 that the Department of Health and Human Services extended the "hardship" exemption for individuals who lost health coverage because their policies were cancelled and who find that other coverage is unaffordable. Now, such individuals can avoid paying the individual tax through 2016 (previously 2014) by completing a form called "Application for Exemption from the Shared Responsibility Payment for Individuals Who Experience Hardships" and obtaining approval of the application.

In a stinging defeat for organized labor, particularly in the South, Volkswagen workers in Chattanooga, Tennessee rejected representation by the United Auto Workers on February 14 by a vote of 712-626. Unions have long desired to organize workers in the South, especially to gain a footing in the South in the auto industry, particularly since their union membership in the industry had been decimated in Detroit. German auto companies in the South seem to offer the unions the best opportunity for organization, since German auto companies are almost exclusively union. Indeed, German labor laws require large companies to have worker councils at each job site to represent employees in discussions with management about work conditions. Volkswagen reportedly has some 103 production locations worldwide, and just three do not have such worker councils, one in Chattanooga, and two in China. German unions used their influence and Volkswagen apparently agreed to encourage UAW organization of its Chattanooga plant.

An interesting agreement was reached between Volkswagen and the UAW. Significantly, Volkswagen did not agree to a "card-check," in which the union would have been recognized if the union produced authorization cards signed by more than 50% of production workers. Volkswagen did agree not to oppose the union and indeed granted the union exclusive access to the plant to conduct meetings with workers to encourage them to vote for the union. Anti-union workers were denied similar access to speak to workers. Interestingly, a UAW official publicly stated regarding letting anti-union workers to campaign against the union inside the plant, "The company has no obligation to give them access." This comment is particularly interesting, inasmuch as unions have been clamoring for access to plants for organizational purposes for years, and yet did not support the right of non-union workers for the same access.

One of the issues in the campaign related to an argument that the "deal" between Volkswagen and the UAW was portrayed as "they had already negotiated a deal behind their backs." The "deal" included a provision that the parties agreed to "maintaining and where possible enhancing the cost advantages and other competitive advantages that [Volkswagen] enjoys relative to its competitors in the United States and North America." New hourly workers at Volkswagen start at $14.50 an hour, and rise to $19.50 over three years. In comparison, those at the "Big Three" unionized companies (General Motors, Ford and Chrysler) start at $15.78 and rise to $19.28. The "Big Three" have a two-tier pay system, in which only senior workers make big wages, and those workers have not gotten a raise since 2005. One worker opposed to the union stated, "What the UAW is offering, we can already do without them."

A well-known union publication announced before the election, "A win for United Auto Workers at Volkswagen looks likely today, as the UAW had previously gathered a majority of pro-union signatures and management has made its approval clear." After the election, the same union publication stated, "How could a union lose an unopposed campaign?"

The United Auto Workers, looking for someone to blame, is blaming state and local politicians and community groups. The union has filed election objections with the NLRB, contending that there was a "coordinated and widely-publicized coercive campaign" by politicians and community groups to deprive Volkswagen employees of their federally protected right to join a union "free of coercion, intimidation, threats and interference." The UAW particularly blames former Chattanooga mayor and current U.S. Senator Bob Corker, as well as Gov. Bill Haslam, for making statements indicating what UAW considered a threatened loss of state financial incentives and/or benefits to the workers should they select union representation. Senator Corker published an article in the March 4, 2014 Wall Street Journal, headed "Now the Auto Union Wants to Muzzle Public Officials." Senator Corker stated, "If the UAW came into our community, attracting suppliers and other prospective companies would be far more difficult. Additionally, there was a misconception about the future of a second Volkswagen line coming to Chattanooga. Since last June and through the election, the UAW tried to press the narrative that any future expansion of the plant would be contingent upon the UAW organizing the employees. To counter these purposely inaccurate assertions, and based on years of experience and relationships with the company, I sought to assure the workers that Chattanooga would be Volkswagen's first choice for the new SUV line even if they did not choose to have the UAW represent them."

In spite of this particular election loss, the UAW is likely to continue its effort to organize southern auto plants. There are at least four large auto plants in Tennessee, and others in South Carolina, Georgia, and Mississippi. Victory at Volkswagen in Chattanooga would have marked the first time the union has been able to organize a foreign-owned auto plant in a southern U.S. state. AFL-CIO President Richard Trumka announced after the vote, "We continue on. That was just round one."

Legality of Union-Management "Deals" Like at Volkswagen: The "neutrality agreement" negotiated between Volkswagen and the United Auto Workers in Chattanooga is not unusual. Unions have turned to such agreements as an easier and more effective way to organize. As an example, Hyatt Hotels and UNITE HERE recently negotiated such an agreement after a four-year campaign of workplace disruptions, rallies, pickets, short strikes and a global boycott of the brand by overseas unions. The most contentious issue is the union demand for neutrality for organizing campaigns. The agreement provides for card check at several unorganized Hyatts.

Recently such agreements have drawn legal attack and the Supreme Court was expected to issue a ruling this year in a case involving UNITE HERE and Hollywood Greyhound Track, Inc., doing business as Mardi Gras Gaming, in Hallandale Beach, Florida. In the negotiated agreement between management and the union, the union won access to the premises and other assistance in organizing, and in turn agreed to back a local ballot initiative to expand casino gambling, and to spend over $100,000.00 campaigning for it. A worker at the company got help from the National Right to Work Foundation, and sued the employer and union jointly, for violating a clause in the 1947 Taft-Hartley Act that says an employer cannot provide a union "thing of value." This prohibition was passed to prohibit employer "gifts" to a union, and was designed to prevent labor leaders from being bought out or self-dealing rather than promoting worker interests. The union argues that such deals do not meet the purposes of the federal prohibition, arguing that both employers and unions find such agreements help "avoid the hard feelings that come in many contested organizing campaigns and thereby create a good environment for collective bargaining." The Supreme Court justices asked the union attorney during argument why access to company premises and other assistance was not valuable to the union, and thus violative of the law. Later, the justices declined to rule on the case, leaving the issue unresolved. The circuit courts are in conflict on the issue, but judges on the Eleventh Circuit Court of Appeals voted 2-1 that "organizing assistance can be a thing of value" and thus prohibited by the Taft-Hartley provisions. A judge on another court felt otherwise, stating, "If the court were to find that participation in card-check agreements was illegal, it would have the effect of criminalizing all collective bargaining agreements."

This is an interesting issue for employers to follow, and actually has broader ramifications. An issue can come up when an employer pays union officials or stewards for job-related benefits or pay even though they seem to be working for the union rather than the employer. There is an exception for payments to unions under the law where the payments are "by reason of" service as employees or former employees, but bright-line rules are difficult to draw. For example, in a 2013 Seventh Circuit Court of Appeals ruling, the court found a Section 302(a) criminal prohibition against an employer's paying union officials full-time salaries while on a leave of absence, although it would have allowed such payments for fringe benefits. Titan Tire Corp. of Freeport, Inc. v. United Steelworkers of America, 197 LRRM 2401 (C.A. 7, Nov. 1, 2013).

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