Wednesday, January 16, 2019

Supreme Court limits arbitration in interstate trucker case

Yesterday, the Supreme Court issued an opinion limiting the scope of the Federal Arbitration Act (FAA) in New Prime Inc. v. Oliveira. Yes, you read that right - limiting. The Supreme Court actually ruled against arbitration. Is this it? The end times? Apocalypse? Only time will tell . . . .

The FAA generally requires courts to compel arbitration where the parties agreed to arbitrate their dispute. There are, however, exceptions. One of which is "contracts of employment of . . . workers engaged in . . . interstate commerce." Important sidenote: the Supreme Court had previously limited this exception to only include transportation workers. Welp, New Prime involved a driver, working for an interstate trucking company.

The Court was faced with two questions. First, if the parties agreed to delegate the arbitrability question to an arbitrator, then who decides whether the arbitration agreement falls under the FAA exception (arbitrator or court)? Justice Gorsuch, for a unanimous court (except Kavanaugh who did not participate) held that the court and not the arbitrator decides that issue. Why? Because the delegation of the arbitrability question is itself an arbitration agreement - and therefore, the court must first resolve whether the FAA covers the agreement (or instead falls under an exception) before compelling arbitration.

Second question: the company and the driver had a contract designating him an "independent contractor." So, does the contract count as a "contract of employment"? Modern lawyers will probably have a gut reaction of "heck no - we have a very clear distinction between 'employee' and 'independent contractor' under the law!"

Not so fast! The FAA was adopted in 1925, and we're dealing with a (mostly?) originalist Supreme Court! So, the question is not "What does 'contract of employment' mean now" - but, rather, "What did 'contract of employment' mean in 1925?" The answer is that 'contract of employment' was understood as a very broad phrase. Per Justice Gorsuch's opinion, "dictionaries tended to treat 'employment' more or less as a synonym for 'work.'" Court opinions and statutory text at the time also support this broad interpretation. The Court concluded that "contract of employment" therefore includes independent contractors as well as employees.

So, contracts of employees and independent contracts with interstate transportation companies are  excluded from the FAA's compulsory arbitration provisions. And, the court (not the arbitrator) determines whether the exclusion applies.

Tuesday, January 15, 2019

Wednesday, January 9, 2019

SCOTUS on the "wholly groundless" exception to the arbitrability question

Yesterday, Justice Kavanaugh issued his first Supreme Court opinion in Henry Schein, Inc. v. Archer & White Sales, Inc. The opinion was a relatively mundane and unanimous arbitration ruling. Of course, arbitration (just about) always wins at the Supreme Court. Frankly, I can't think of a single exception, but I'm adding the "just about" parenthetical just in case.
Justice Kavanaugh

Under the Federal Arbitration Act (FAA), parties can contract to resolve certain disputes via arbitration instead of court litigation. Sometimes, when a dispute arises, they disagree on the threshold question of whether the arbitration agreement covers their specific dispute. The arbitration agreement may specify that the arbitrability question itself is something that must be decided by an arbitrator.

Yesterday, the Supreme Court held:
When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.
Some courts had applied an exception to this general rule where the arbitrability claim was "wholly groundless." Yesterday, the Supreme Court rejected the "wholly groundless" exception - the arbitrability question goes to the arbitrator whether the court thinks the request to arbitrate is "wholly groundless" or not. 

Thursday, January 3, 2019

University Liability Under Title IX for Anonymous Internet Harassment?

In a remarkable ruling, the Fourth Circuit held that a university may be liable for anonymous posts on a third party app - Feminist Majority Fdn. v. Univ. of Mary Washington.

Students generally alleged that they were harassed and threatened on Yik Yak because of their involvement in a feminist organization. Not familiar with Yik Yak? The now defunct app allowed anonymous posts from anyone within a certain geographic radius. It quickly devolved into something like Mos Eisley from Star Wars - "You will never find a more wretched hive of scum and villainy."

Title IX imposes liability on educational institutions that fail to adequately respond to sex-based harassment. Supreme Court precedent requires, however, that the university "exercises substantial control over both the harasser and the context in which the known harassment occurs." Davis v. Monroe County Board ofEducation.

Mary Washington was decided on a 12(b)(6) motion (i.e. under a very deferential standard at the initial pleadings stage). There are several truly remarkable components of the decision:
Not official use.
  • A university may have an obligation under Title IX to police a third party app that has no real connection to education (we're not talking about a forum used in courses or for any other university purpose);
  • The harassers might not even be students - the app was open to literally anyone who was within the geographic zone;
  • The geographic zone included nearby Fredericksburg, and was not limited to just the university campus.
Put more bluntly, and quoting from a blistering dissent: 
The majority . . . would hold a public university and its officers liable for an allegedly inadequate response to anonymous messages posted by unknown persons on a third-party social media app unrelated to the university.
The majority opinion stretches the boundaries of Title IX liability. It also creates significant First Amendment concerns as some of the proposed solutions included censoring or blocking access to certain online forums. Another quote from the dissent:
Institutions, like the University, will be compelled to venture into an ethereal world of non-university forums at great cost and significant liability, in order to avoid the Catch-22 Title IX liability the majority now proclaims.
The majority opinion maintained that the university had other reasonable steps that it could have taken to address the harassment without infringing on anyone's First Amendment rights. The dissent concluded by expressly advising the university to "seek further review."

Wednesday, January 2, 2019

DC Circuit on the Joint Employer Standard

Just another chapter in the long and unbelievably convoluted evolution of the test for joint employment. The NLRB is currently considering a new rule to formally adopt the pre-Browning Ferris standard. Meanwhile, the D.C. Circuit went ahead and decided Browning-Ferris Indus. v. NLRB on December 28, 2018 without waiting for the NLRB rule (Merry Christmas and a Happy New Year!).

The Court applied the common law test for joint employment, often turning to the Restatement (Second) of Agency. Perhaps most notably, the Court does not seem to give a damn what the NLRB is doing:
Not official use.
[I]t is precisely because Congress has tasked the courts, and not the Board, with defining the common-law scope of “employer” that . . . we resolve this case notwithstanding the pending rulemaking. The policy expertise that the Board brings to bear on applying the National Labor Relations Act to joint employers is bounded by the common-law’s definition of a joint employer . . . . [W]e see no point to waiting for the Board to take the first bite of an apple that is outside of its orchard.
It will be interesting to see what happens to the rulemaking in light of this opinion (of course, we still have the possibility of the D.C. Circuit reconsidering en banc, or even the Supreme Court weighing in).

The Court held that the common law test allows consideration of the putative joint employer's "reserved right to control and its indirect control over" the employees (as opposed to just the actual exercise of direct control).

The Court did tweak the NLRB's earlier decision in the case a little though. The common law test confines consideration of indirect control - it must be indirect control "over the essential terms and conditions of the workers' employment." On remand the Court directed the NLRB to "erect some legal scaffolding" to prevent finding joint employment based on "the common and routine decisions that employers make when hiring third-party contractors and defining the terms of those contracts."

Potential joint employers should review the Court's opinion, but it is probably not the last word. We'll see how the NLRB responds in its rulemaking process, and keep an eye out for appeals (or possibly even circuit splits - but the D.C. Circuit carries a lot of weight in review of administrative decisions).

Wednesday, December 19, 2018

Judge offers insight on (and criticism of) employment arbitration

If you're interested in employment arbitration agreements, then this is the opinion for you! In Styczynski v. MarketSource Inc., Judge McHugh (E.D. Pa.) provided a great overview of the law regarding unconscionability (both procedural and substantive) for employment arbitration agreements.

I found the analysis very interesting and helpful. What's getting all of the attention, however, is a concluding section in which Judge McHugh summarizes substantial criticism of employment arbitration agreements. Some of the main points:

  • Roughly 20% of non-union employees have arbitration agreements (often imposed as contracts of adhesion);
  • Employees win less often (compared to court litigation);
  • Employees win less money when they do win;
  • The forum deters many employees from even pursuing claims (with some data suggesting that arbitration is a greater deterrent than litigation).
His argument relied heavily on research following the Supreme Court's decision in 2001 in Circuit City (holding that the Federal Arbitration Act (FAA) covers employment contracts). Ultimately, of course, it's up to the Supreme Court to reverse the precedent holding that the FAA makes employment arbitration agreements enforceable (or for Congress to amend the FAA itself). 

Tuesday, December 11, 2018

Third Circuit on compensation for commuting requirements

Black letter law dictates that time spent commuting is generally not compensable. But are there exceptions? The Third Circuit issued an interesting (albeit, not precedential) opinion on a quirky commuting scenario in Smith v. Allegheny Technologies, Inc.

Not official use.
The employer began a lockout of its union employees, who responded by creating a picket line. The employer hired a temporary workforce, and allegedly required them to take company vans from their hotel to cross the picket line - roughly a 45-minute commute each way. Some of the employees filed a lawsuit claiming they were entitled to compensation for the commuting time under the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA) (also, some Oregon law, which for purposes of this case was identical to the FLSA).

The Court actually reached a split decision - the employees could proceed under the PMWA, but not the FLSA. The Portal-to-Portal Act specifically excludes mandatory compensation under the FLSA for time spent "traveling to and from the actual place of performance of the principal activity," unless the travel was "integral and indispensable" to their principal activity of making steel. The Court held that taking the van to work was "at least two steps removed from making steel." Thus, no FLSA claim.

The PMWA has no express portal-to-portal provision though. Instead, Pennsylvania regulation requires compensation for "time spent in traveling as part of the duties of the employee during normal working hours and time during which an employee is employed or permitted to work.” 34 Pa. Code § 231.1. The plaintiffs alleged that they were required to cross the picket lines in company vans, and that they were to follow specific instructions as a "term and condition of their employment." That was good enough for the Third Circuit to allow them to proceed with their PMWA claims.