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According to Court of Appeals for D.C. Circuit Earlier today, the Court of Appeals for the District of Columbia Circuit ruled that the National Labor Relations Board, which has functioned with only two of its five members since January 1, 2008, is “not properly constituted” and has no decision-making authority. Laurel Baye Healthcare of Lake Lanier, Inc. v. N.L.R.B., No. 08-1162 (D.C. Cir., 5/1/09). At the same time, in another unfair labor practice case raising the identical issue, the Seventh Circuit agreed to enforce a Board Decision and Order issued by the two-member Board. New Process Steel L.P. v. N.L.R.B., No. 08-3517, et al. (7th Cir., 5/1/09).

As a result of term expirations and the election-year failure to make appointments to fill the three vacancies on the Board, an NLRB reduced to two members — Chairman Wilma Liebman and Member Peter Schaumber — has issued hundreds of decisions over the course of the last 16 months in both unfair labor practice and representation cases. Today’s ruling by the District of Columbia Circuit calls the validity of those decisions into question.

The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”) creates a variety of affirmative action obligations for employers with federal government contracts. The Act was amended in 2002 by the Jobs for Veterans Act (“JVA”). In May 2008, the Department of Labor finalized rules that implement changes to these obligations made by the JVA for employers with federal government contracts that are entered into or modified on or after December 1, 2003. Employers with federal contracts entered into before December 1, 2003 must continue to comply with VEVRAA’s pre-JVA requirements, and employers with contracts in both categories are required to comply with both the new and the old regulations.

Most of the affirmative action requirements set out in VEVRAA remain unchanged by the JVA. This Tip of the Month outlines several important requirements under VEVRAA, and highlights the key changes created by the JVA.

As of this writing, the Centers for Disease Control and Prevention has confirmed 109 cases of the H1N1 virus, commonly known as swine flu, in the United States. The World Health Organization has confirmed 331 cases of swine flu worldwide and has raised the pandemic threat level to Phase 5 on its six-step scale (Phase 5 designation essentially means that infections from the outbreak that originated in Mexico have been jumping from person to person with relative ease). This Client Alert outlines a few of the myriad legal issues that employers may face with regard to swine flu. As every situation is different, employers are strongly encouraged to seek the advice of counsel with respect to any questions related to these issues. We are, of course, available to provide a more detailed analysis as to any of the matters discussed below or to advise on any other questions that you may have on pandemic flu planning and its implications for the workplace.

On April 24, 2009, President Obama announced his intention to nominate Craig Becker and Mark Gaston Pearce to fill two of the three vacant positions on National Labor Relations Board.

The NLRB is comprised of five members appointed by the President who are subject to approval by the Senate Health, Education, Labor and Pensions Committee and confirmation by the full Senate. Board Members are appointed for a term of five years. The two current Board Members are Wilma B. Liebman (Democrat), who on January 20, 2009 was designated Chairman by President Obama, and Peter C. Schaumber (Republican), whose term expires on August 27, 2010.

The U.S. Department of Labor’s (the “DOL”) Wage and Hour Division recently issued a Wage and Hour Opinion Letter, FLSA 2009-3, addressing how a company can compute overtime payments retroactively for salaried employees it had mistakenly classified as exempt (not overtime-eligible) under the Fair Labor Standards Act (“FLSA” or the “Act”). The DOL reiterated its support for the half-time methodology in calculating back overtime due, endorsing the so-called “fluctuating workweek” model on a retroactive basis for remedying the misclassification of salaried employees. This is a significant development and, in so deciding, the DOL has “weighed in” on an issue that remains a source of lively debate in the federal courts.

Generally, the FLSA requires that overtime pay be calculated weekly (notwithstanding that an employer’s payroll period might be semi-monthly or bi-weekly) and that employees receive one and one-half times their regular hourly rate of pay for each hour worked in excess of 40 hours in a workweek. Here, the employer paid a guaranteed salary bi-weekly and expected the employees to work a minimum of 50 hours per week. The employer’s payroll software even converted the bi-weekly salary to an hourly rate by dividing the salary by 100, without regard to whether the employees worked more or less than 100 hours in the payroll period. When the employer concluded that it had mistakenly classified certain salaried employees as exempt, it wished to pay them back overtime retroactively, using a half-time methodology, reasoning that the employees had already been compensated straight-time for each hour over 40 worked in the workweek.

The DOL agreed. Since the fixed salary covered all the hours the employees worked in a workweek, straighttime already was included in the salary covering the hours worked over 40 and, as a result, the employees needed only to be paid an additional one-half of their actual regular rate for each overtime hour. Important to the DOL’s decision was the fact that the fixed salary was paid to the employees even when they worked less than 100 hours in the bi-weekly payroll period.

The Opinion Letter is particularly noteworthy for its generous interpretation of the fluctuating workweek’s “clear mutual understanding” requirement which, heretofore, many had understood meant that there had to be a “clear and mutual understanding” at the outset of how salary and overtime would be calculated and paid for hours worked. According to this Opinion Letter, the “clear and mutual understanding” criterion does not need to be set forth in writing and intent can be inferred from the parties’ conduct that the fixed salary was compensation for all hours actually worked by the employee in a given week, rather than for a fixed number of hours per week – a stance that adopts the minority view among judicial decisions that have considered the issue.

Recent changes in the legal and economic landscape have significantly heightened the risk that employers’ compensation systems will come under attack. Congress has passed the Lilly Ledbetter Fair Pay Act (“Ledbetter”), which effectively waives the statute of limitations for compensation discrimination claims under the majority of federal employment statutes. The law increases a plaintiff’s ability to recover for compensation discrimination, by placing into issue each and every decision impacting pay, starting from the date of initial hire, rather than just those decisions that occurred within statutory filing period. The law has made the issue of pay equity a hot button issue. Plaintiffs’ attorneys and government regulators are primed for attack.1

The Obama administration also has brought the specter of increased EEOC and OFCCP enforcement activity, as well as the possibility of additional proemployee legislation in the pay discrimination arena. Of note is the Paycheck Fairness Act (“PFA”), which, if passed in its current form, would substantially amend the Equal Pay Act of 1963 and make it significantly easier for employees to establish unlawful pay discrimination. The PFA broadens the categories of employees that plaintiffs can claim as comparators for purposes of showing pay inequity; it sharply curtails the affirmative defenses available to employers; it makes it easier for plaintiff’s attorneys to bring large class-action lawsuits, and it permits uncapped compensatory and punitive damages. It also allows the OFCCP to use a simplistic and often inaccurate “pay grade methodology” when identifying federal contractors unjustly investigated and make it more difficult for them to defend against agency audits.

Coupled with these legal developments have been a rash of company layoffs, rising unemployment, and an increasing number of employees and former employees who face difficult financial plights. All of these forces make employee compensation discrimination lawsuits more likely. Conducting internal audits to identify disparities in compensation that might be subject to legal challenge, and appropriately addressing such disparities, is one of the best ways to prevent pay discrimination lawsuits and to place your organization in the most favorable position should they occur. This Tip of the Month provides guidance for in-house counsel and human resources executives when undertaking such audits.

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1 For more information on the Ledbetter Act see our Client Alert about it.

Proskauer Prevails As The Court Holds That Collectively Bargained Agreements for The Arbitration of Statutory Discrimination Claims are Enforceable

On April 1, 2009, the United States Supreme Court, in a 5-4 decision, ruled in favor of Proskauer Rose’s client 14 Penn Plaza LLC, holding that a collective bargaining agreement (“CBA”) that clearly and unmistakably requires union members to arbitrate Age Discrimination in Employment Act (“ADEA”) claims is enforceable as a matter of federal law. The Court’s decision validates the right of an employer and a union to negotiate about the way disputes can be resolved, even when those disputes involve individual statutory rights. Accordingly, 14 Penn Plaza LLC. v. Pyett, is significant to all employers who have collective bargaining relationships.

Proskauer negotiated the CBA at issue on behalf of the Realty Advisory Board on Labor Relations, Inc., (“RAB”) and handled this litigation on behalf of 14 Penn Plaza — from the district court through argument of the matter before the Supreme Court by Paul Salvatore, co-chair of Proskauer’s Labor and Employment Law Department.