Tuesday, August 3, 2021

Pennsylvania Supreme Court recognizes "piercing the corporate veil" under "enterprise" liability theory

For the first time, the Supreme Court of Pennsylvania (SCOPA) recognized the "enterprise" theory of liability for "piercing the corporate veil" in Mortimer v. McCool, et al.

The thrust of the doctrine is that, just as a corporation’s owner or owners may be held liable for judgments against the corporation when equity requires, so may affiliated or “sister” corporations—corporations with common ownership, engaged in a unitary commercial endeavor—be held liable for each other’s debts or judgments.

This is also sometime referred to as "single-entity," or "horizontal" liability.

The Court eschewed a rigid formalistic test with a bunch of factors. Instead, the Court turned to the two high-level pillars of "piercing the corporate veil analysis."

When to Pierce

[T]hat there be some fraud, wrong or injustice . . . the basic starting point that piercing is an equitable remedy used to prevent injustice.

Against Whom

[T]here must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, and second, adherence to the corporate fiction under the circumstances would sanction fraud or promote injustice.
In the context of enterprise piercing, the Court will look for common ownership - in other words, the affiliated corporations must be "siblings-of common parentage." There must be some "administrative nexus" between the siblings. "And the prospect of wrongdoing in that scenario depends upon the actions (or omissions) of the common owner to exploit limited liability while failing to observe the separation between the corporations." 

This may result in a sort of "reverse piercing." In other words, liability may run from one sister corporation up to the common owner, and then back down to another sister corporation. Thus, effectively imposing liability across an enterprise (or "horizontally," from one sister to another, if you draw the org chart like a family tree). 

Monday, July 26, 2021

You know those FLSA exceptions for postliminary work and de minimis violations? They don't so much apply in Pennsylvania...

The Fair Labor Standards Act (FLSA) sets a floor, not a ceiling. We see this all of the time in the context of minimum wage. The FLSA (aka "federal minimum wage") is $7.25/hour - but more than half of the states set a minimum wage higher than that. Well, this "floor" concept does not just apply to the minimum wage - it applies to the definition of compensable time too. 

Back in 2014, the U.S. Supreme Court ruled that Amazon warehouse workers were not entitled to compensation for the time they spent waiting to undergo anti-theft security screening before leaving work. Why not? Under the FLSA (and more specifically, amendments in the Portal to Portal Act (PTPA)), activities that are postliminary to the employees' principal activities are not compensable. The security screenings were deemed non-compensable postliminary activities. 

It turns out some Pennsylvania employees were going through these same security screenings before leaving their jobs at Amazon warehouses. They have also sued for unpaid wages. There's an important twist though! Their claims were based on the Pennsylvania Minimum Wage Act (PMWA). 

The procedural posture here is too convoluted to bore you with, but ultimately the Sixth Circuit certified two questions to be decided by the Supreme Court of Pennsylvania (SCOPA):

1. "[W]hether time spent on an employer’s premises waiting to undergo, and undergoing, mandatory security screening is compensable" under the PMWA; and 

2. Whether the de minimis exception applies to bar claims under the PMWA.

SCOPA answered those two questions in Heimbach v.  

Of course, the federal courts - no less than the Supreme Court - have held that the exact security screenings at issue were not compensable under the FLSA, and employers are not liable for de minimis violations. But, SCOPA - applying the PMWA - departed from the federal courts on both issues. 

First, unlike the FLSA, the PMWA was never amended by something like the PTPA. Thus, postliminary activities were never carved out of the definition of compensable time in Pennsylvania. The PMWA regulations (though not the statute itself) broadly define "hours worked" to include "time during which an employee is required by the employer to be on the premises of the employer." SCOPA therefore concluded that the PMWA does not include an exception for postliminary activities. 

SCOPA then went on to eviscerate the de minimis exception. "The PMWA plainly and unambiguously requires payment for 'all hours worked.'" Thus, unlike the FLSA, the PMWA does not include an exception for de minimis violations. 

Bottom line? Two clearly established exceptions to the FLSA now just-as-clearly do not apply to the PMWA. Employers in Pennsylvania must pay their employees for time that is not compensable under federal law. Specifically:  

1. Pennsylvania employers have to pay nonexempt employees for postliminary activities that are not part of their principal activities.

2. Pennsylvania employers can be held liable for de minimis (trivial or insubstantial) violations of the PMWA. 

Saturday, July 24, 2021

Lawffice Space has moved to MailChimp (make sure I'm not going to your spam folder)!

Google is shutting down Feedburner email subscription service, which I have used since launching Lawffice Space 12 years ago. So, I transferred all of the email subscribers over to MailChimp. Everything should be pretty much the same on your end (except a slightly prettier email). 

Make sure your Lawffice Space emails are not going to your spam folder! If you're reading this in your email - congratulations, you're all set! If you are reading this on the website after 7/25/2021 at 8:00 AM and you haven't received an email... then there's a problem. Check your spam folder (or email me at and I'll check on it).

Massive thanks to Cascade Valley Designs for the invaluable walkthrough: Moving Subscribers Away from Feedburner and into MailChimp.  

Finally, if you're not an email subscriber... what are you waiting for!? Just visit Lawffice Space and enter your email address and hit "Subscribe."

Thursday, July 22, 2021

Another NLRB win for Scabby the Rat

Scabby the Rat
Labor and employment law can be weird sometimes... like, there's an entire line of cases about the right of employees to bring a giant inflatable rodent named Scabby the Rat to protests. Yesterday, the legendary blow-up critter got another win at the National Labor Relations Board in a 3-1 ruling

Here, a union brought ol' Scabby to an RV trade show and placed him right at the entrance alongside two banners. The union's employer supplied components to the RV company that hosted the trade show. In other words, they brought Scabby to a neutral (or "secondary") employer. 

Ultimately, the NLRB held that this did not violate the National Labor Relations Act. Two concurring Members and one dissenting Member all emphasized the importance of enforcing the NLRA's goal of keeping labor disputes from "entangling" or "impairing" neutral or secondary employers. How did Scabby pull off the victory? The two concurring Members and the Chairman sided with Scabby, relying largely on the "constitutional avoidance" doctrine - the idea that the NLRB should not enforce the NLRA in ways that might infringe on the union's First Amendment rights. 

At the end of the day, chalk up another win for Scabby. 

Monday, July 12, 2021

Biden Executive Order Takes Aim at Noncompetes

On Friday, President Biden issues an Executive Order on Promoting Competition in the American Economy. The executive order addresses a lot of issues, including a shot at noncompetes:

To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.

What exactly does that mean? The order does not give us much to go on, and an accompanying Fact Sheet offers only: 

Make it easier to change jobs and help raise wages by banning or limiting non-compete agreements and unnecessary, cumbersome occupational licensing requirements that impede economic mobility.

Another good old "stay tuned!"

Of course, the authority of a federal agency acting without any real express statutory authorization to rewrite state contract law is likely limited. Most states - *definitely including Pennsylvania* - already have very convoluted tests to assess whether restrictive covenants are enforceable. Adding a layer of administrative agency law on top of that will only make it more difficult. In other words - expect some homework soon!

Thursday, June 24, 2021

SCOTUS: Fifth Amendment Takings Clause and Labor Law

Occasionally, the world of labor law intersects with the Constitution's Fifth Amendment Takings Clause: "nor shall private property be taken for public use, without just compensation" (incorporated against state actors via the 14th Amendment). Yesterday, the Supreme Court issued an important property rights-slash-labor law case in Cedar Point Nursery v. Hassid (C.J. Roberts). 

Chief Justice Roberts
A California regulation granted labor organizations a right to access agricultural employer's property for the purpose of union organizing. These Takings Clause cases get complicated where, as here, the government does not fully take ownership of someone's private property - but instead restricts the owner's use of his own property. The Court emphasized the importance of the property owner's right to exclude, and ultimately concluded that a taking had occurred.

Now, takings are not prohibited, but they do require a "public use" and "just compensation." This case was remanded for further proceedings, but clearly this puts a damper on the California reg. 

Justice Breyer, joined by Justices Kagan and Sotomayor, authored a dissenting opinion, including concerns that this will undermine other government regulatory efforts that require access to property (ex. health and safety inspections). 

Labor law sometimes interacts with property rights - Can employees gather in the company parking lot to discuss unions? Can employees use their employer's computer networks and email servers for union organizing? Can employees picket on company property? And on and on. Yesterday's decision will probably not directly impact the answers to the preceding questions - but, it's a push toward stronger employer property rights and weaker labor access rights. 

Wednesday, June 16, 2021

EEOC drops new LGBTQ+ guidance

Yesterday, the EEOC launched a new "landing page" for Sexual Orientation and Gender Identity (SOGI) discrimination, along with a new Technical Assistance Document – Protections Against Employment Discrimination Based on Sexual Orientation or Gender Identity. Yesterday just-so-happened to be the anniversary of the Bostock v. Clayton County Supreme Court ruling (holding that Title VII prohibits workplace discrimination based on sexual orientation and gender identity), and June is also Pride Month.

Some highlights form the new technical assistance doc (aside from the obvious):

  • Title VII also protects straight and cisgender employees from workplace discrimination;
  • Customer or client preferences do not justify discrimination based on SOGI (an acronym I've never seen before, but I can already see it coming in handy);
  • Not official use.
    Employers may not require employees to dress according to their sex (transgender employees may dress or present consistent with their gender identity); 
  • Employers do have the right to maintain sex-segregated bathrooms, locker rooms, or showers for men and women, but "employers may not deny an employee equal access to a bathroom, locker room, or shower that corresponds to the employee’s gender identity."
  • Using the wrong name and pronouns (i.e. not the ones identified by the employee) could be harassment - generally, "accidental misuse" will not create a hostile work environment but "intentionally and repeatedly" using the wrong name or pronouns could. 
All of these come with the giant caveat that this is the EEOC's interpretation of Title VII and the Bostock decision. The courts will not necessarily adopt the same interpretations, and generally afford less deference to "guidance" as opposed to regulations that have actually gone through the notice and comment rulemaking process.