My law partner, Gabe Jiran, talks today about whether it’s all that easy to change the terms of a collective bargaining agreement.  Is it just as easy as a vote? Or does it require something more? The answer has implications for all employers.  

With all of the talk about the financial difficulties faced by the government, I, and others in here, sometimes get the question of whether the State of Connecticut or other states might try to change the laws on collective bargaining or try to pass legislation to alter the terms of its existing collective bargaining agreements.

Other states have started down this road, but it is not that easy.

Recently, the Connecticut Attorney General was asked to opine on whether the General Assembly could statutorily change the contracts covering State employees to address the fiscal crisis.  A link to the opinion is here.

The short answer is that the State could do so, such as by passing a statute that wage increases be delayed or eliminated in State contracts.

However, the United States Constitution imposes a pretty heavy burden on the State to justify any such changes.

The relevant factors are:

  1. the severity of the fiscal crisis;
  2. the nature and duration of the contractual changes;
  3. the extent that the State has attempted to implement other alternatives in the past;
  4. the extent to which the State has studied and made findings about the feasibility of other alternatives;
  5. whether these alternatives would be a less dramatic option;
  6. the extent to which the fiscal crisis existed or was foreseeable when the State entered into the existing contract; and
  7. the State’s representations during negotiations for the existing contract.

Based on cases utilizing some or all of these factors, the State would face an uphill battle if it wanted to change an existing contract.

For example, a federal appeals court struck down the State of New York’s plan to delay wage increases for employees because New York had alternatives such as raising taxes or shifting money around in its budget.  In another New York case, the same court found that a $1 billion deficit was not a dire enough fiscal crisis to justify a delayed wage increase.

However, one case found that the City of Buffalo was able to impose a wage freeze when it was undeniable that Buffalo was in a fiscal emergency and that the wage freeze was a last resort after looking at other options.

In discussing the matters with others here, we expect that Connecticut and other states will continue to look for creative options to address their financial situations with employees.

However, it is doubtful that these options will involve changes to existing contracts without negotiation with the unions involved.  In addition, any State attempts to change contracts in the private sector would be almost certain to fail.

2d Circuit Opens Door to Class Action Waivers

Continuing my series of posts this week on recent Second Circuit FLSA cases, today I’ll talk about class action waivers and arbitration clauses.

If that last clause is just legalese to you, let me try to walk you through it and why employers should care deeply about it.

As I’ve covered in prior posts, wage & hour claims, typically brought by one employee on behalf of others (known as a collective or class action) have been all the rage for the last decade.  Employers have struggled with how to rein such actions in because litigation them can be costly.

In doing so, employers have tried to use two defense mechanisms. First, employers have tried to get employees to agree to arbitrate all claims before a neutral third party. That typically keeps costs down because arbitrations are quicker and more efficient.

Second, employers have tried to get employees to forego their ability to join a class action. In other words, employees can sue to recover their own missing overtime, but not for hundreds of other employees too. I foreshadowed this in a post back in March.

Recent pronouncements by the U.S. Supreme Court have opened to door to these arguments. Earlier this month, the Second Circuit just made that door a lot wider.

The case, Sutherland v. Ernst & Young, strengthened the ability of employers to use arbitration agreements and to include a class action waiver in them even under the Fair Labor Standards Act.  It upheld both types of provisions relying on the U.S. Supreme Court cases.

For employers, this decision is important because it now provides employers with a tool to use to try to limit exposure in wage & hour cases and more.   Of course, whether arbitration agreements or class action waivers is right for your particular business is something that you should discuss with counsel and may depend on a variety of circumstances.

In the meantime, though, this is not the end of the battle on this issue. The National Labor Relations Board has come to a different conclusion and it remains to be seen how the U.S. Supreme Court will confront the issue. However, I have a hunch based on the prior precedent, that its just a matter of time before the U.S. Supreme Court decides this issue once and for all (and probably in the employer’s favor.)

 

As I continue this week to recap some important FLSA decisions this summer by the Second Circuit, the next one will be important in the long run for employers.

Wage and hour claims have been a thorn in employers side for a while now.  (My friend, Molly DiBianca of the always fabulous, Delaware Employment Law Blog, prefers the term “legal extortion” to many FLSA claims).  The Second Circuit has begun to acknowledge this as well in a series of cases it has decided this year — or at least the tension that has developed from such claims.

As the the court recently pointed out, there is a tension between (1) “the frequent difficulty for plaintiffs in such cases to determine, without first having access to the defendant’s records, the particulars of their hours and pay in any given time period” and (2) “the possible use by lawyers representing plaintiffs in such cases of standardized, bare-bones complaints against any number of possible defendants about whom they have little or no evidence of FLSA violations for the purpose of identifying a few of them who might make suitable defendants — which is to say, the ability to engage in “fishing expeditions.”

To help rein in such claims, the Court — through a series of cases culminating earlier this month in Dejesus v. HF Mgmt. Services (download here) is now requiring some basic allegations before allowing FLSA claims to proceed through discovery.

Molly’s blog neatly summarized the conclusion here:

On appeal, the 2d Cir. affirmed the decision of the trial court, finding that the plaintiff had not plausibly alleged that she worked overtime without proper compensation under the FLSA. The court reiterated the standard that it had announced in Lundy v. Catholic Health System of Long Island, decided earlier this year. Specifically, the standard requires a plaintiff to sufficiently allege 40 hours of work in a given workweek as well as some uncompensated time in excess of the 40 hours.

In Lundy, the court did not go so far as to require that the plaintiff include an approximation of the number of overtime hours sought but it did say that including such an approximation “may help draw a plaintiff’s claim closer to plausibility” and thereby avoid dismissal.

Perhaps the most powerful part of the court’s opinion in Dejesus was the acknowledgment that the information about the plaintiff’s allegations rest squarely with the plaintiff. As the court explained, if an employee has absolutely no recollection whatsoever about the times worked, then he or she should not have pursued a claim in court.

For employers in Connecticut, the case won’t have much day-to-day impact. But for those employers who are litigating such cases, the Second Circuit’s standard may be used to help dismiss some FLSA claims at an early (and cheaper) stage in the case for the employer.