Labor Day has come and gone. Summer is over.  Can we all stop listening to Despacito now. (Please?)

But it’s time to look at a decision that came out during the dog days of summer that might have been overlooked.  A recent federal district court case (Noffsinger v. SSN Niantic Operating Co. LLC, download here) has answered the question of whether Connecticut’s medical marijuana laws were preempted by federal law.

The decision held that Connecticut employees who have received approval from the state agency to use medical marijuana outside of work cannot be fired just because they test positive for marijuana during a drug screening.  In doing so, the court held that employees and job applicants can sue based on a termination or a rescinded job offer.

As my colleague wrote for my firm’s alert:

Unlike the laws of other states permitting residents to be prescribed medical marijuana, Connecticut’s statute expressly makes it unlawful to refuse to hire or to discharge an employee solely because of the individual’s status as a qualifying patient, or for testing positive in a drug screening as a result of using medical marijuana within the protections of the statute. However, Connecticut does not protect such individuals if they are found to be using or are under the influence of medical marijuana during working hours.

The court analyzed federal drug laws and determined that they do not address the issue of employment and do not make it unlawful to employ a medical marijuana user. As a result, even though federal law prohibits possession or use of marijuana, those restrictions do not apply to someone properly using medical marijuana under state law.

The decision follows one from Massachusetts that we previously recapped here.

In prior posts, I’ve talked about the difficulties for employers trying to navigate this still-developing area of law.  Employers should proceed carefully under such circumstances and ensure compliance with the state’s medical marijuana laws that prohibits firing employees solely because of the individual’s status as a qualifying medical marijuana patient.

If an employee is under the influence of marijuana during working hours, that may afford employers the opportunity to take decisive employment action but other circumstances may not be so clear.

Consulting with your legal counsel on this changing area of law is advisable for the foreseeable future while more court decisions define the parameters of acceptable action.

So yesterday, I made a convincing case that employees who smoke outside the workplace can’t be treated differently than your non-smokers. 

But what about your health insurance plans? Doesn’t the state law prohibit your plan from imposing higher premium costs on those smokers?

Well on first glance it appears yes.  The state law would seem to apply.

But, dig deeper (and without getting too technical) and you’ll understand that there is a federal law — ERISA — that trumps that state law when it comes to insurance plans. 

Indeed, back in 2006, the Office of Legislative Research (one of the underappreciated government offices) wrote a report that said exactly that:

You asked if Connecticut law prohibits insurers or employers from factoring in whether a person smokes when determining insurance premiums or employee contributions for health care benefits. …

Connecticut law prohibits employers from discriminating against any individual who smokes outside the workplace with respect to compensation, terms, conditions, or privileges of employment (CGS § 31-40s). The Connecticut Department of Labor (DOL) interprets this law as not prohibiting an employer from having smokers contribute more toward health benefits than non-smokers due to preemption by the federal Employee Retirement Income Security Act (ERISA). To our knowledge, this issue has not been litigated in a Connecticut court. …

Since that time, the question remains undecided, but there is little reason to doubt the conclusion. Indeed, there’s much more to this area than a simple blog post can provide.  But employers who believe in healthy workplaces and want to keep their insurance premiums down do have a small arrow in their quiver to make it happen.

What a difference a few weeks can bring.

Back on May 5th, Attorney General George Jepsen issued a letter to legislators expressing his support of the so-called "captive-audience" bill.  That letter was used in the debate by Connecticut House members as proof that the bill would pass a legal challenge.  Indeed, on May 11th, the bill passed the House.

In a May 12th post, however,  l expressed serious reservations about whether the bill, if passed, would be preempted by federal law. 

It seems that Attorney General Jepsen’s office has now come to the same conclusion, according to a report in The CT Mirror.  Because of that opinion, legislators have decided not to pursue it further.

Legislators said Friday that Attorney General George Jepsen, a staunch ally of labor, effectively has killed a legislative priority of the Connecticut AFL-CIO by advising them that federal labor law appears to pre-empt the state from passing a "captive audience" bill.

The House of Representatives passed the controversial bill two weeks ago, 78 to 65, after an 11-hour debate in which the key sponsor, Rep. Zeke Zalaski, D-Southington, relied on a letter from Jepsen assuring him that the bill was legally sound.

An unhappy Zalaski said that Jepsen visited him earlier this week to inform him that additional legal research by his staff concluded that the state cannot bar employers from requiring employees to attend a meeting called to discuss religious or political matters.

The CBIA had also come to the same conclusion and had an opinion from from Clinton-era NLRB appointee to back it up.  

But for now, it appears that the "captive audience" bill is dead in this year’s General Assembly.

A few weeks ago, I indicated (in posts here and here) that the AT&T Mobility v. Concepcion case would have a huge impact on forcing arbitrations of employment matters and limiting class actions.

An important new federal District Court case in Connecticut decided yesterday, D’Antuono v. Service Road Corp., (download here) has shown that to be the case exactly.

But, coming from the school of “you can’t make this stuff up”, it is remarkable that the case that is deciding this issue is one grounded in the claims of “exotic dancers” who allege that they were misclassified as independent contractors instead of employees.

(How can the strip club claim that the individuals were independent contractors? While it is not relevant to the court’s decision here, the dancers signed “leases” to the “performance space”.  Within those leases were arbitration provisions.  The Court did not decide that issue, though if you’re interested, I discussed a similar case back in January here. )

What is important for all employers to know is that here, the central issue in this case was whether the agreement to arbitrate (found in a lease agreement between the exotic dancer (as “tenant”) and the strip club (as “landlord”) was enforceable. The Court said that it was. In doing so, the Court forced the plaintiffs to arbitrate their FLSA claims and remove the specter of a collection action, finding that the plaintiffs gave up that right in their case.

Continue Reading In Titillating Case, Court Compels Strip Club Dancers to Engage Individually …in Arbitration

My colleague, Joshua Hawks-Ladds, has this post regarding an important new case that further explains the breadth of the preemption effect of the Federal Arbitration Act, a case he handled on behalf of our client, Ulti-Mate Connector, Inc. 

Last week was a watershed moment for arbitration preemption cases, both at the federal and state level. As highlighted in an earlier post, the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that the Federal Arbitration Act preempts state laws that limit arbitration agreements that proscribe class action arbitration procedures

Earlier in the week, a Superior Court decision which Pullman & Comley successfully litigated, held that the Connecticut Sales Representative’s Commissions Statute, C.G.S. §42-481 et seq., is also preempted by the Federal Arbitration Act.  That case, Avionics Technologies, Inc. v. Ulti-Mate Connector, Inc., can be downloaded here. 

Avionics is a Connecticut-based sales representative that sued Ulti-Mate for the payment of allegedly unpaid commissions. Ulti-Mate is a California corporation. Avionics was Ulti-Mate’s eastern United States’ sales representative. 

Avionics and Ulti-Mate entered into two manufacturer’s representative agreements, one in 2004 and one in 2006, both of which provided for arbitration of any dispute in California, with California law applying. 

Avionics brought suit in the Connecticut Superior Court under the state’s Sales Representative’s Commission Statute, which provides that “any provision in a contract between a sales representative and a principle that provides for waiver of any provision of §§42-482 and 42-483 (of the Sales Commission Statute) shall be void.” C.G.S. §42-484(a). Section 42-482(b) provides for the right of a sales representative to recover “in a civil action. . . twice the full amount of the commission owed to such sales representative.” 

Avionics argued that the Commission Statute trumped the arbitration agreements and permitted the lawsuit against Ulti-Mate to go forward in the Connecticut Superior Court.

Ulti-Mate moved to compel arbitration in California pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. §2, which provides that any contract involving interstate commerce and containing a written provision agreeing to submit a controversy to arbitration “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. §2. 

The Superior Court discussed the strong policy favoring arbitration both in Connecticut and California, as well as the strong national policy (as demonstrated by the AT&T case) and also cited Second Circuit and Supreme Court precedent which declares that “the FAA preempts all state laws that impermissibly burden arbitration agreements.” 

The Superior Court stated that “to the extent the Connecticut Sales Representatives Commission Statute conflicts with the FAA, the supremacy clause of the Constitution results in state law being rendered preempted and unenforceable.” 

Thus, in a case of first impression in Connecticut, and the first case that this author is aware of discussing the Connecticut Sales Representative Commission Statute, a Superior Court judge has determined that the FAA preempts that statute when it conflicts with a bona fide arbitration agreement.

The Court in the Avionics case also discussed the defenses to the arbitration agreement that are available to defeat the arbitration agreement (which would have avoided preemption), including unconscionability and all the other standard contract defenses), however, the Court rejected those arguments in this case, finding that the arbitration agreement was valid and enforceable.

For employers, this case and the AT&T case continue to reinforce the importance of arbitration provisions if desired. 

Here’s a quick update on some items and topics that have been covered by the blog over the past year:

Whether individuals believe in performance reviews or not, organizations are increasingly looking to hold managers accountable for accurate, timely and unbiased appraisals which help manage performance and head off legal issues.

“A lot of people are asking questions, given the financial crisis, about what HR or human capital programs companies should be focused on and performance management would definitely make my short list,” said Laura Sejen, Watson Wyatt’s global practice director for strategic rewards in New York. “It’s more important than ever to make sure that employees and managers are clear about organizational goals and priorities.”

 

A recent California Appellate decision spells out Reference - Morgue File (public domain)a possible defense for some banks in discrimination cases.  Specifically, the court held that state discrimination laws are preempted by the National Banking Act for certain national bank employees.  For national banks in Connecticut (and indeed in other states), the decision is worth a review to determine if it applies.

In Ramanathan v. Bank of America, No. A113611 (Cal. Ct. App. Sept. 25, 2007), the Appellate Court was asked to review whether a "Vice President" was an "officer" under the National Banking Act, such that his state law claims, including race discrimination claims, would be preempted.  The Court held that because the employee was not actually performing the duties of his "Vice President", he should not be considered an "officer". Therefore, it reversed summary judgment to the bank and remanded for further proceedings.

The Court provided the following background:

Section 24 (Fifth) of the National Bank Act (“NBA”) provides the following powers to a duly organized national banking association: “To elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.” (12 U.S.C.A. § 24 (Fifth).) Courts have long recognized that the power conferred by Section 24 (Fifth) on national banks to dismiss its officers “at pleasure” is protected by the doctrine of preemption from all state law claims filed by their former officers for breach of an employment agreement. …

Courts have also acknowledged the doctrine of preemption protects national banks that dismiss their officers under Section 24 (Fifth) from state law discrimination claims filed by their former officers, although in this regard, courts have differed on whether such preemption is total or partial. …

In our view, the key issue on appeal is whether [the plaintiff] was an “officer” of the Bank under Section 24 (Fifth). … 

[W]e hold that where an employee asserts his or her position as “Vice-President” is not vested with any of the duties or responsibilities normally associated with such a positio … then to obtain summary judgment on preemption grounds under Section 24 (Fifth) the Bank must show the employee is “an officer” of the bank….

The court then followed four broad factors to review whether an employee is an officer.

  1. First, he or she holds an office created by the board of directors and listed in the bank’s bylaws.
  2. Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws.
  3. Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank’s behalf.
  4. Fourth, his or her decision-making authority, however it might be limited by bank rule or policy, relates to fundamental banking operations in such a manner as to affect potentially the public’s trust in the banking institution.

For national banks out there, this case discusses at length a valuable defense for employment claims. But one cautionary note, the preemption of state laws may not apply to federal discrimination claims.  And recall that this applies to national banks, not state banks.

For attorneys who represent indivdiuals, filing a federal discrimination charge (bypassing state law) may be one way to avoid this whole area entirely.  Nevertheless, given the power of preemption, this defense is worth exploring further when representing a national bank.