Bus. Law Chapter 15 – Flashcards

As we saw in Chapter 14, the common law presumes that employers may hire and fire at will, and employees may quit at will. Those two parties to the employment relationship may contract around that presumption by an agreement that limits employers' ability to dismiss an employee without consequences. Besides contractual agreements that place limits on the employment relationship, there are public policy exceptions that have arisen over the years. Most of these exceptions come from statutes, but some come from the application of common law rules.

Employers violate public policy if they fire or punish an employee for certain actions. The courts craft some of the exceptions with the presumption of at-will employment; others are imposed by legislation. Under the most common of these exceptions, employers cannot fire an employee for: Refusing to commit an illegal act, such as falsifying reports required by a government agency or refusing to commit perjury (lie) at trial Performing a public duty, such as reporting for jury duty or military service Exercising a public right, such as filing a claim for workers' compensation or filing for bankruptcy The first two of these issues arise rarely, but firing workers for filing workers' compensation claims is not uncommon. It rarely results in litigation because it mostly affects low-wage workers who are not sophisticated about their rights and, even if they do act, the damages are usually small because another job at about the same wage is usually available. An exception to the rule that gets a lot of attention because it has involved some notable cases is the whistle-blower exception. This occurs when an employee reports an employer's illegal act. The general test of when this applies is that the whistle-blowing is primarily for the public good—to help law enforcement—rather than for private gain. This exception is more likely to apply to public-sector employees under state statute than to private-sector employees. For example, a government employee who reveals that bribes were taken by her supervisors could be rewarded for having taken that action if her charges are shown to be true. When a firm dismisses an employee in violation of a public policy exception to the right of at-will discharge, the employee may sue for wrongful discharge or retaliatory discharge, which are torts. Most courts limit the public policy exceptions to cases in which there is a clear constitutional or statutory basis. That is, the wrongful discharge suits exist because the state wants to enforce and protect certain public goals, such as reporting for jury duty and reporting health violations, not because there is a desire to control the employment relationship. However, it must be emphasized that these cases are not easy to win. In the Ballalatak case, we see the Iowa Supreme Court discuss a particular limitation on this kind of action.

As we discussed in Chapter 10, some contracts are not enforceable because they violate public policy; that same principle applies to employment contracts. The courts do not look with favor at exculpatory agreements that are part of an employment relationship. One party promises not to sue another in case of an injury caused by a tort or some other event. An employer may have employees sign an agreement not to sue the employer for any tort that occurs at the workplace. As the Connecticut Supreme Court noted, such contracts are "almost universally rejected in the employment context [and] ... are void as against public policy" (909 A.2d 43).

Supreme Court of Iowa 781 N.W.2d 272 (2010) Case Icon Case Background Ballalatak worked for Hawkeye Downs as a security supervisor. Two employees were injured in a work-related accident. They called Ballalatak and reported the injury. He drove to the scene, helped get the men to a hospital, and filled out an accident report. Later, the general manager, Nowers, told the three men to meet with him before returning to work. He told the men that their medical expenses would be taken care of without filing for workers' compensation. Later, the injured men told Ballalatak they were concerned they would not receive workers' compensation benefits. He relayed the concerns to Nowers and said the workers had a right to the benefits. Nowers fired him. Ballalatak sued, contending he was fired for inquiring into whether the company was fulfilling its workers' compensation obligation to the injured workers. Nowers claimed he was fired for insubordination. The district court dismissed the suit; Ballalatak appealed. Case Decision Streit, Justice * * * Generally, an employer may fire an at-will employee at any time. However, under certain circumstances we recognize a common law claim for wrongful discharge from employment when such employment is terminated for reasons contrary to public policy. To support a claim of wrongful discharge, the employee must show: existence of a clearly defined public policy that protects employee activity; the public policy would be jeopardized by the discharge from employment; the employee engaged in the protected activity, and this conduct was the reason for the employee's discharge; and there was no overriding business justification for the termination. The tort of wrongful discharge exists as a narrow exception to the general at-will rule, and this court is careful to ground recognition of such claims in "a well-recognized and defined public policy of the state." [In an earlier case, this court] explained that this court has recognized four categories of activities protected by public policy in Iowa law: " exercising a statutory right or privilege, refusing to commit an unlawful act, performing a statutory obligation, and reporting a statutory violation." Ballalatak claims he was fired for raising concerns to his employer, Hawkeye Downs, about potential mishandling of two employees' workers' compensation claims. ... Ballalatak argues the public policy interest in allowing employees to pursue their statutory rights to workers' compensation benefits should be understood to extend to supervisors who advocate on behalf of or otherwise attempt to help those whom they supervise to receive such benefits. ... This court has repeatedly recognized public policy protection for employees who exercise their own statutory rights. This court has also recognized that public policy protects employees who refuse to violate statutory or administrative regulations or to commit an unlawful act. Ballalatak was not fired for attempting to secure his own statutory rights nor was he fired for refusing to violate workers' compensation law. Instead ... he was fired for his attempt to ensure his employer did not violate the statutory rights of other employees. ... Iowa law does not protect an employee who advocates internally for another employee's workers' compensation claim or internally raises concerns about the employer's compliance with workers' compensation statutes as it relates to another injured employee. Iowa law also does not protect an employee who asserts that other employees may contact an attorney regarding their workers' compensation rights. For these reasons, the district court did not err in granting summary judgment to Hawkeye Downs. District court judgment affirmed.

It is not uncommon for employers to ask employees in certain positions to sign noncompete agreements. That is, the employee cannot leave and go into competition against the employer or go to work for a competitor for a certain time, usually one to three years. In states where such clauses are legal, some employers use them aggressively to discourage other companies from hiring their employees. They threaten suit against the employee and the new employer if there is such a move. The cost of fighting the litigation is often enough to discourage hiring people away from a competitor. In many states, common law governs such covenants. As long as the restraints are reasonable in time and extent of coverage, the courts uphold them. Other states have statutory restrictions on agreements or covenants not to compete. The California Business and Professions Code, § , states that, with few exceptions, every contract that restrains anyone from engaging in a lawful profession, trade, or business is void. So this is an area where employers must pay careful attention to state law. Where a restriction is struck as void, some states allow the court to imply reasonable terms into the covenant not to compete in order to save it in part. Other states do not and just eliminate any overly broad agreements entirely. In the Zambelli Fireworks case, we see a covenant not to compete upheld.

United States Court of Appeals, Third Circuit, 592 F.3d 412 (2010) Case Icon Case Background Zambelli is one of the oldest and largest fireworks companies in the United States, doing business in most states. Wood was hired by Zambelli in 2001 to work as a pyrotechnician and choreographer, executing fireworks displays in combination with music. While he had some background in fireworks, he had little experience in aerial fireworks displays. On the job, he learned many technical trade secrets, client lists, pricing, costs, and contract terms. Zambelli paid for Wood to become a certified trainer for the Pyrotechnic Guild International. A noncompete agreement, signed in 2005, specified that if Wood left Zambelli, he would not work for a competitor in the United States for two years; he would not solicit former clients; he would not disclose or use trade secrets; and if there was litigation, and Zambelli prevailed, Wood would pay all legal fees and costs. In 2007, Wood sought employment with Pyrotecnico, a major competitor. He was hired and signed an agreement that he would not take or use any Zambelli information or trade secrets. Pyrotecnico agreed to pay his salary for two years if needed as a result of the covenant, and it would cover legal expenses. In 2008, Wood resigned from Zambelli and went to Pyrotecnico. Zambelli sued to enforce the covenant not to compete. The district court held the agreement to be enforceable under Pennsylvania law and enjoined most technical work by Wood. He and Pyrotecnico appealed. Case Decision Fisher, Circuit Judge * * * Although restrictive covenants are a disfavored restraint on trade under Pennsylvania law, they are enforceable in equity where they are "incident to an employment relationship between the parties; the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and the restrictions imposed are reasonably limited in duration and geographic extent." To be "reasonably necessary for the protection of the employer," Pennsylvania law requires that the covenant be tailored to protect legitimate business interests. Wood challenges on appeal the District Court's holding that Zambelli had two legitimate business interests in enforcing the restrictive covenant. First, the District Court concluded that "protection of Zambelli's customer goodwill is a legitimate business interest." Second, the District Court held that "the specialized training, knowledge and skill Wood acquired during his seven years of employment with Zambelli is also a legitimate interest." Both interests, the Court reasoned, can be safeguarded through a reasonable restrictive covenant in Wood's employment agreement. The District Court's holding is consistent with Pennsylvania law on legitimate business interests. We have held, applying Pennsylvania law, that legitimate business interests include trade secrets, confidential information, goodwill, unique or extraordinary skills, and specialized training that would benefit competitors. A business' goodwill entitled to protection is that which "represents a preexisting relationship arising from a continuous course of business." Here, Wood's considerable amount of client contact, and attendant familiarity with Zambelli's confidential business information, are both legitimate and protectable parts of a business' goodwill relationship with its clients. ... Wood had access to Zambelli's client list, pricing and business strategy, and had a longstanding relationship with Zambelli clients, who viewed him as a leader in the industry due, in part, to Zambelli's efforts to advertise Wood's specialized skills. Zambelli therefore had a legitimate business interest in ensuring that Wood did not transfer that goodwill to Pyrotecnico, its direct competitor. ... Accordingly, we hold that the District Court did not err in holding that Zambelli had a legitimate business interest in its customer goodwill and Wood's specialized training and skills.

A related area in which the law varies from state to state concerns the enforceability of anti-raiding covenants. In these cases, employees are required to sign, as a condition of employment, an agreement that they will not recruit fellow employees for another company when they leave their current place of employment. Some courts have held such clauses to be in violation of public policy as an illegal restraint on competition; others have held them to be enforceable. For example, a New York court held that once an employee leaves a place of employment, continued restraints are not favored except to protect trade secrets. Other states, including California and Texas, have held that such covenants—if limited in time and coverage—are enforceable. In Missouri, the legislature specifically held such covenants to be legal. So, as in other policy areas, employers must be sure to consult state law.

Some abused substances, such as cocaine, are illegal; others, like OxyContin, are legal but can be obtained illegally. The most commonly abused substance, alcohol, is legal in most of the United States. The Department of Health and Human Services reports that about eight percent of workers are serious alcohol abusers. Add to this the estimated three to eight percent of the adult population who abuse or are addicted to illegal drugs or improperly dispensed drugs, such as pain killers, and it could mean that as many as one in eight working-age persons have a substance-abuse problem. This issue provides an example of how employers may change the employment relationship in response to a problem.

Substance abuse directly affects employers because it can mean reduced productivity and higher medical insurance costs. The total economic cost of substance abuse is estimated to be more than $ billion per year. The cost to employers is about $ billion a year. The National Institute on Alcoholism and Alcohol Abuse estimates that health care (insurance) costs for families with an alcoholic are double the average. The huge cost of substance abuse does not include costs that arise from another widely used addictive legal drug, nicotine, which also reduces productivity and increases medical expenses. The U.S. Chamber of Commerce reports that workers under the influence of alcohol or other drugs are times more likely to suffer an injury or cause one than someone not under such influence. Those who abuse alcohol, even if not under the influence, are estimated to have a percent greater chance of injury on the job, the RAND Institute reports. The Federal Railroad Administration found that alcohol- or other drug-impaired workers caused many railroad accidents. The National Transportation Safety Board found alcohol or other drugs to be a factor in one-third of all accidents involving truck drivers killed in highway accidents.

The discussion here largely concerns non-unionized places of employment. Companies that are unionized cannot impose a drug-testing program unless approved by the union in collective bargaining. Another issue we ignore at this point, but cover in the next chapter, are the rights of a substance abuser under disabilities laws. Drug-Free Workplace Act The Drug-Free Workplace Act requires all companies with more than $ worth of business with the federal government, which includes almost all large companies, to certify that they provide a "drug-free" workplace. The main requirements are that the employer: Publish and distribute a statement notifying employees that the use, distribution, or possession of drugs in the workplace is prohibited. State what action will be taken against employees who violate the policy, which may range from completion of a rehabilitation program to dismissal. Establish a drug-free awareness program and make an effort to make it work. Notify employees that, as a condition of employment, the employer must be notified of any drug-related convictions that occur, and the employer must notify the federal government of these. Employers who fail to comply may lose their business with the federal government. In practice, this statute has been simple to deal with and is not regarded as having a significant effect in curtailing substance abuse. The Omnibus Transportation Employee Testing Act requires employers who operate aircraft, public transportation, or commercial motor vehicles to test their employees for use of alcohol and illegal drugs. This includes pre-employment testing, random testing during employment, and testing after any accident. Confidentiality of test results is maintained, and the laboratory procedures used are highly accurate.

Court cases give guidance as to what private employers can do in a substance-abuse policy. Because the elements listed here may not be treated the same in all states, managers are advised to seek counsel or to employ an experienced drug-testing firm. Pre-employment screening of job applicants for substance abuse is usually legal. Testing of employees on an annual basis, or as a part of occasional physical examinations, is generally legal. However, physical examinations must be voluntary or directly related to the ability to perform the job. Drug tests are upheld when a job is safety-sensitive or when the policy is announced and applied consistently. Random drug tests, when announced as a condition of employment, are upheld for jobs where safety is an issue, such as for truck drivers and pipeline welders. Drug tests for employees not in sensitive positions are more likely to be subject to challenge. Drug tests after accidents have been upheld, again because public safety issues generally outweigh the employee's right to privacy. Substance tests given because of "reasonable suspicion" of improper usage are likely to be allowed when there is an announced policy of such tests and when safety is an issue. Use certified labs to give and process drug tests. Give all employees a copy of the company policy and keep a signed receipt from the employee. A substance-abuse policy should be clear and ensure that the testing is not discriminatory or done carelessly. The policy should state why the tests are done, what the test is looking for, what is done with the results, and the consequences of the test results. To eliminate the chance of a false test result, employees should be given an opportunity to have a second, high-quality test performed if they challenge positive test results.

Concern about worker health and safety dates to the late 1800s. Federal regulations on coal mines were first enacted in the late 1800s, but most early job-safety legislation was at the state level. Early legislation concentrated on the major issues of job safety—accidents, injuries, and deaths. Between 1890 and 1920, most states enacted job safety laws, often together with workers' compensation laws (discussed later in this chapter). By the 1930s, concern had expanded from accidents to occupational health and concerns about long-term exposure to dusts and gases in the workplace. Most states began to address such exposure. Over the years, laws have imposed more requirements on employers to provide certain levels of safety and health protection to employees.

Workers' compensation laws cover most workers. To have a claim, a workers must show that he has: an injury, as a result of an accident or occupational disease, that arose out of and in the course of employment. The negligence or fault of the employer in causing the injury is not an issue, and coverage is broad. Compensable injuries can include mental and nervous disorders and heart attacks that occur on the job. Issue Spotter Most courts are strict in interpreting state statutes that clearly state that the liability coverage of workers' compensation "shall be exclusive in place of any and all other liability to such employees ... entitled to damages in any action at law or otherwise on account of any injury or death." The actions of the employer, employee, or third person become relevant only if there was an intentional tort. Injured employees may want to sue in tort instead of accepting the workers' compensation payments because tort damages can be much larger. But, in general, suit outside of workers' compensation is rarely allowed. Exceptions may be for injury in case of intentional tort, injury caused by a defective product or toxic substance, or injury caused by the actions of a third party. Workers' compensation is generally considered the exclusive remedy.

Congress enacted the Occupational Safety and Health Act in 1970 (OSH Act). It created the Occupational Safety and Health Administration (OSHA), the Occupational Safety and Health Review Commission (OSHRC), and the National Institute for Occupational Safety and Health Council (NIOSH). The OSH Act states that employers must provide employees a workplace "free from recognized hazards that are causing or are likely to cause death or serious physical harm" and that employers must "comply with occupational safety and health standards" issued by OSHA. OSHRC reviews administrative cases brought by OSHA, while NIOSH does studies to help set standards. Inspections OSHA inspectors visit workplaces and respond to workers' reports of problems. In Marshall v. Barlow's (436 U.S. 307), the Supreme Court held that the Fourth Amendment prohibits warrantless searches. But because OSHA inspectors routinely obtain administrative warrants that do not require showing probable cause, unlike criminal search warrants, the warrant requirement has little impact in OSHA cases. During a worksite visit, inspectors explain the purpose of the inspection and the procedures involved. The employer sends a representative to accompany the compliance officer on the walk around as the inspector looks for health or safety hazards. Some problems may be noted casually and not put in the formal report. At the end, the officer meets with the employer and, possibly, an employee representative to discuss findings. Employers may be given a chance to correct problems, or a citation may be issued as part of a formal report. The employer may contest the findings, as we see in the Caterpillar Logistics case. Caterpillar Logistics Services, Inc. v. Solis United States Court of Appeals, Seventh Circuit, 674 F.3d 705 (2012)

United States Court of Appeals, Seventh Circuit, 674 F.3d 705 (2012) Case Icon Case Background Caterpillar Logistics handles parts orders for Caterpillar products. Employees locate parts and put them on a conveyor belt. The packing department boxes parts for shipping. Each employee handles about parts per day. The work requires repetitive hand, wrist, elbow, and shoulder movements, although most parts handled are light in weight. A month after MK began work in the packing department, she had pain in her elbow. The company doctor put her on leave for three months after a diagnosis showed that MK had swelling in ligaments and tendons around a joint. After she returned to work, the same problem arose, so she was transferred to a position that required less movement, which took care of the problem. Caterpillar Logistics had a review panel of five specialists in musculoskeletal disorders determine if MK's injury was work related or not. The panel concluded the problem existed prior to MK's going to work, so was not work related. The Department of Labor disagreed and assessed a $ fine for failing to report a work-related injury. An Administrative Law Judge (ALJ) held a four-day hearing on the matter and upheld the penalty. The OSHRC upheld that decision, which became the final decision of the Secretary of Labor. Caterpillar filed a petition for review of the order. Case Decision Easterbrook, Chief Judge * * * Robert Harrison, the only physician to testify in support of the Department's position, provided the basis of the ALJ's decision. ... He testified that, nonetheless, the combination of moderate repetition plus pronation of the wrist, hand, and forearm must have caused MK's condition. He did not explain, however, why if this is so no other worker in the history of Caterpillar Logistics' operations has contracted epicondylitis. Nor did he discuss any epidemiological study, pro or con. Caterpillar Logistics' witnesses did discuss these matters. ... The adjudicator ... must take account of competing evidence and inferences. That's essential to show why the agency credited one witness rather than another. This principle does not require elaborate discussion; the goal is not to produce tedious opinions that bury the analysis under an avalanche of detail. But it does require the agency to test its hypothesis against competing hypotheses. It may not simply ignore strong indications that its favored witness got things wrong. That's what happened here. The big consideration missing from the ALJ's analysis is Caterpillar Logistics' person-years of experience with its packing department. Epicondylitis occurs at a rate of about % to % per year in the general population. This implies that Caterpillar Logistics should have encountered between three and six cases of epicondylitis among the staff of the packing department if work played no causal role at all. It actually had one case (MK's). If conditions in the packing department do cause or contribute to epicondylitis, the condition should occur at levels exceeding those of the populace at large. The record does not show an elevated incidence. It might require a statistical analysis to determine whether the incidence of epicondylitis among the staff could have been the result of chance, and what frequency would imply a causal role for workplace conditions. Caterpillar Logistics did not perform tests for statistical significance—but the agency has the burden of proving causation by a preponderance of the evidence. Maybe a sample of person-years is too small for the numbers to be significant when the background incidence of epicondylitis is so low—but the ALJ, having disregarded the experience at Caterpillar Logistics, did not make a finding one way or the other about statistical significance. ... Dr. Harrison's failure to consider Caterpillar Logistics' actual experience matters. ... It would be hard to know whether Caterpillar Logistics' own experience has any salience. What is certain is that the agency must choose among these possibilities; the judiciary cannot choose for it but must affirm, or not, based on the agency's rationale. The ALJ did not choose, indeed did not appreciate the need for choice, and the Commission as a whole has never discussed the subject. ... The petition for review is granted, the Secretary's decision is vacated, and the case is remanded for proceedings consistent with this opinion. Questions for Analysis Since the fine was only $, why would the company spend vastly more than that on legal fees to contest the fine? Poor use was made of statistical evidence. Should it be used when available?

Penalties Based on inspections by compliance officers, citations may be issued for violations of OSHA rules or for failure to meet the general standard of a workplace free of preventable hazards that could cause injury or death. Penalties may be imposed under Section of OSH Act for the violations, running from small fines as in the Caterpillar Logistics case, to fines in the millions for serious multiple violations. Because fines are often multiplied when violations continue over time, the total fine can be high. For example, Bridgestone/Firestone was fined $ million for willful safety violations related to the death of a worker at an Oklahoma City plant.

No written hazard communication program No information or training on hazardous chemicals Electrical conductors not protected when entering boxes or fittings Electrical covers missing Guards missing on grinding wheels or spinning machinery Hard hats not worn on construction sites No fall protection for workers on elevated work surfaces No portable fire extinguishers Improper use of electrical cords Not maintaining OSHA Injury and Illness Log

Most OSHA standards concern safety. However, health standards have been also issued, some of which have had major impacts. Protection from exposure to asbestos was one of the first health standards developed; compliance has cost billions of dollars. Other standards have been issued for exposure to vinyl chloride, coke-oven emissions, and other industrial carcinogens. The law calls for OSHA to issue standards that "most adequately assure, to the extent feasible ... that no employee will suffer material impairment of health or functional capacity even if such employee has regular exposure to the hazard ... for the period of his working life." Besides listing exposure limits for some specific toxic substances, the hazard communication standard (HazCom) concerns exposure to hazardous chemicals. Failure to comply with HazCom properly is a common problem, as Exhibit 15.1 notes. Chemical producers and users must conduct a "hazard determination" of each chemical. Information about chemical hazards must be updated as new evidence becomes available. Where hazardous chemicals are used, employers must have the following: A written plan that includes: A list of hazardous chemicals in the workplace The manner in which safety data sheets, chemical labels, and worker training about chemical safety will be handled A description of how employees are trained to handle non-routine tasks, such as chemical spills or explosions Labels for hazardous chemical containers that identify the chemical, hazard warnings, and the name and address of the producer or seller Material safety data sheets (MSDSs) provided by chemical distributors with every container. MSDSs identify each chemical, its characteristics, its physical hazards (such as flammability) and health hazards, its primary route of entry (such as skin contact), exposure limits, cancer dangers, precautions for safe handling and use, control measures in the work place, emergency procedures, date of issue, and how to get more information Programs to train employees at risk of exposure about the chemicals and proper procedures

States adopted workers' compensation law in the early 1900s. They require employers to pay insurance premiums for injury and death benefits for employees. Workers' compensation was popular for workers because it provided a more certain recovery with benefits paid regardless of the cause of a work-related injury; that is, workers' comp is no-fault insurance. For employers, it reduced payments from tort damages to a schedule set by state law. In exchange for paying premiums, employers become immune from employee damage suits (torts) arising from on-the-job accidents. The objectives are to: Provide sure, prompt, and reasonable income and medical benefits to work-accident victims or income benefits to their dependents, regardless of fault Provide a certain remedy and reduce court costs and time delays associated with tort litigation Prevent public and private charities from incurring the financial strains that would accompany uncompensated accidents Reduce payment of fees to lawyers and expert witnesses Encourage employer interest in safety and rehabilitation of workers through an insurance scheme that bases rates on the accident rating of the employer Promote open discussion of the causes of accidents rather than encourage concealment of fault, thus helping to reduce accidents and health hazards

Workers' compensation laws cover most workers. To have a claim, a workers must show that he has: an injury, as a result of an accident or occupational disease, that arose out of and in the course of employment. The negligence or fault of the employer in causing the injury is not an issue, and coverage is broad. Compensable injuries can include mental and nervous disorders and heart attacks that occur on the job. Issue Spotter Reducing Risks and Improving Looks To reduce worker injuries and thereby reduce the likelihood of an OSHA safety violation as well as the number of workers' compensation claims, you would like to impose a dress code for employees that covers both safety and looks. You believe such a code would also improve professionalism in the workplace. Can you do what you want in this regard? Does a new dress code change the nature of the work contract you have with the workers? Must the workers agree to the new dress code? © Cengage Learning Most courts are strict in interpreting state statutes that clearly state that the liability coverage of workers' compensation "shall be exclusive in place of any and all other liability to such employees ... entitled to damages in any action at law or otherwise on account of any injury or death." The actions of the employer, employee, or third person become relevant only if there was an intentional tort. Injured employees may want to sue in tort instead of accepting the workers' compensation payments because tort damages can be much larger. But, in general, suit outside of workers' compensation is rarely allowed. Exceptions may be for injury in case of intentional tort, injury caused by a defective product or toxic substance, or injury caused by the actions of a third party. Workers' compensation is generally considered the exclusive remedy.

Workers' compensation usually has major benefit categories: death, total disability, permanent partial disability, temporary partial disability, and medical expenses, including rehabilitation. While some injuries require only medical assistance, others take the worker out of the workplace for a recovery period, or possibly for life. Workers usually receive about two-thirds of their gross wages as disability income, up to a state-imposed weekly maximum—as low as $ in some states to as much as $ in others. Premiums Tied to Safety Generally, workers' compensation provides employers with financial incentives to invest in safety at the worksite. Insurance premiums are based on injury claims records. Firms with the lowest number of injuries, and therefore the fewest claims, pay the lowest premiums. Different states have different systems, different rules, and different payout histories. Some states run the system directly, while others allow private insurers to compete for the business. Premiums vary widely: North Dakota has the lowest rate in the nation at $ per $ of payroll; rates in Connecticut and California are about three times higher. Premiums also vary by occupation. For example, in Indiana, the rate is $ per $ in payroll for university workers and $ per $ in payroll for workers in logging operations. Rates also vary depending on how many claims an employer has had, which is called the business' experience rating. Because of the cost, some employers would like to not pay for workers' compensation or other obligations for employees, as we see in the Long case. Besides workers' compensation, there are other tax and insurance obligations that an employer has for an employee that do not exist for an independent contractor. An employer must pay FICA (Social Security and Medicare) taxes and must withhold federal income taxes. Similar to workers' compensation is unemployment compensation. The premium rate for that generally runs one to five percent of payroll. Employers can avoid those costs and reporting obligations by using independent contractors. Both the Internal Revenue Service (IRS) and state agencies look closely at employer practices of declaring employees to be independent contractors rather than employees.

Case Background Long was an in-home certified nursing assistant (CNA). She had worked for one company for seven years before she began work for Superior Senior Care. The company had five employees in its office and about independent contractors. Clients who needed in-home assistance would contact Superior. It would post the requirements to match CNAs with clients' needs. Superior operated as a referral service and received fees for that. Most clients deposited funds in escrow accounts with Superior, out of which CNAs were paid, so CNAs did not have to collect personally from each client. Long was told her pay would be $ an hour. Duties would be based on client needs. She did not have to take any given assignment; she could choose which one was most suited to her skills. Duties generally included cooking, house cleaning, laundry, and helping clients shower and move around. The first day she was working at a client's home, she was helping the client move from a wheelchair to her bed when the client "went limp" and became dead weight. Long felt her back pop as she struggled to help the client. Although in pain, she stayed with the client for two more days. Afterwards she went to the hospital for tests and was given a back brace to wear. She was in pain and could not work, so she filed for workers' compensation. Superior protested that Long was an independent contractor, not an employee. The Workers' Compensation Commission Administrative Law Judge held that Long was an employee. The Commission reversed that finding, ruling that she was an independent contractor not eligible for workers' compensation. She appealed. Case Decision David M. Glover, Judge * * * [In an earlier case, the state Supreme Court] set forth the following factors that are to be considered in determining whether one is an employee or an independent contractor: the extent of control which, by the agreement, the master may exercise over the details of the work; whether or not the one employed is engaged in a distinct occupation or business; the kind of occupation, with reference to whether in the locality, the work is usually done under the direction of the employer or by a specialist without supervision; the skill required in the particular occupation; whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; the length of time for which the person is employed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the employer; whether or not the parties believe they are creating the relation of master and servant; and whether the principal is or is not in business. ... The issue of whether an individual was functioning, at the time of an injury, as an employee or an independent contractor must depend on the particular facts of each case. ... The terms of a contract, by themselves, cannot convert an employee into an independent contractor if the other surrounding facts do not support that conclusion. Here, however, the Commission determined that the facts supported Superior's position that Long was acting as an independent contractor, not as an employee. In accordance with our standard of review, we cannot say that fair-minded persons using the same facts could not reach the same conclusion as the Commission. ... Affirmed.

The Family and Medical Leave Act (FMLA) applies to private employers with or more employees and applies to all governmental units. Employers must grant workers up to weeks of unpaid leave per year after childbirth or adoption; to care for a seriously ill child, spouse, or parent; or for an employee's own serious illness. Many states have similar laws, often applying to employers not covered by the federal statute. A "serious health condition" that qualifies for FMLA leave includes illness, injury, a physical or mental condition that involves in-patient care (an overnight stay in a medical facility), or continuing treatment by a health care provider, which includes at least one of these: More than three consecutive days of incapacity and treatment for a condition that involves two or more treatments, including exams, by a health care provider; or one treatment with continuing prescription medicine or special equipment Incapacity due to pregnancy Incapacity or treatment for a chronic, serious health condition Any absence for multiple treatments and recovery for surgery or a condition that would likely result in more than a three-day period of incapacity if left untreated While on leave, health care benefits, if provided, must remain in place. When employees return from leave, they must be returned to the same job or a comparable position. Cyber Law Social Media Rules in the Workplace As technology evolves, so do workplace rules and habits. The law also evolves as we determine legal standards that apply in the employment situation. Many employers have policies making it clear that the organization has the right to access all e-mails that come to company computers or accounts. Software scans e-mails for red flag words—sex, guarantee, social security number, and so on. These controls help companies reduce lost work time, litigation from employees who claim harassment from e-mails with sexual content, and loss of information that should be secure. In 2012, Maryland became the first state to ban employers from requesting access to social media accounts of employees and job applicants. Employers may not ask for user names or passwords to personal sites such as Facebook. Giving your Facebook login information is a violation of the site's terms of service, and the Department of Justice considers it a federal crime to enter social media sites in violation of such terms However, in practice, there is no prosecution. Some employers say they ask for voluntary access to social media sites but do not insist on it. The companies are not interested in personal items but indications of employment history or behavior that are not consistent with the information provided by the prospective employee. Regardless of permission, employees and applicants should realize that there are firms that specialize in scouring the Internet for information that employers pay for as part of a background check. While it does not happen often, remember that anything once posted, despite removal, is in an archive that can be retrieved later.

While the law does not seem that complicated, it has resulted in a lot of litigation, so employers should have clear policies that have been reviewed by a knowledgeable attorney. In general, an employer should designate a manager who is knowledgeable about the law to ensure compliance. Individual managers should not make determinations of eligibility because liability for FMLA violations may be imposed on individual managers as well as on the employing organization. As the Callison case indicates, employers can have policies to ensure such leave is not abused. FMLA coverage may be denied, on a case-by-case basis, to "key" employees. This may include only employees among the percent highest paid, whose leave would cause "substantial and grievous economic injury to the operations of the employer." Also not covered are employees who have not worked for at least one year and who have not worked at least hours in the past year. Employees are required to notify employers at least days in advance for foreseeable leave, such as for birth, adoption, or planned medical treatment. Workers with chronic conditions may be required to certify that they visit a doctor at least twice a year for that condition, but supervisors may not contact an employee's health-care provider directly to obtain medical certification of a condition. Workers who have been out on leave may be required to obtain a "fitness for duty" evaluation to ensure that they are qualified to return to their specific jobs.

ase Background Callison had worked for the city for two years when he was diagnosed with anxiety caused by stress at home and on the job. He used a lot of sick leave and was put on a Sick Abuse List. Employees on the list were required to get medical certification for all sick days and were subject to penalties for violations of the policy. Employees on sick leave were to call a hotline to report if they left home. A sick leave investigator would call homes to see if employees were there or not. Callison took three months FMLA leave; the city checked on him, and he was often not home. He was suspended for failure to follow policy. Callison sued, contending that he should not be subject to discipline while on FMLA leave and that to discipline him was retaliation in violation of the statute. The trial court held for the city. Callison appealed. Case Decision Cowen, Circuit Judge * * * The FMLA is meant to prohibit employers from retaliating against employees who exercise their rights, refusing to authorize leave, manipulating positions to avoid application of the Act, or discriminatory applying policies to discourage employees from taking leave. In the instant case, the City did not engage in any of these prohibited acts. The City provided Callison with the entitlements set forth in the FMLA (e.g., a 12-week leave and reinstatement after taking medical leave). Callison's contention that the FMLA's anti-abuse provisions ... preempt the City's procedures is meritless. The anti-abuse provisions in the FMLA permitting employers to request second opinions and certifications does not conflict with the City's provision requiring employees on medical leave to call in when leaving their home during business hours. These "certification" provisions merely outline some of the employer's rights and employee's corresponding obligations. ... Contrary to Callison's assertion, there is no right in the FMLA to be "left alone." Nothing in the FMLA prevents employers from ensuring that employees who are on leave from work do not abuse their leave, particularly those who enter leave while on the employer's Sick Abuse List. ... Because the City's internal call-in policy neither conflicts with nor diminishes the protections guaranteed by the FMLA, it is not invalidated by the Act. Accordingly, Callison was required to comply with the policy, and the City did not abrogate his FMLA rights by placing him on suspension for the violations. For the foregoing reasons, the judgment of the District Court ... will be affirmed.

Besides the major laws already discussed, a variety of other laws restrict the labor market. Immigration laws limit who is allowed to work legally in the country. The minimum wage law sets a lower limit on what employees may be paid. States restrict entry into occupations by licensing requirements. Employers must warn employees of certain plant closings. Employee pensions are also subject to federal regulation. As there are many other regulations, and some are very detailed, we only cover some key points about certain employment regulations here

To be hired legally in the United States, a person must present certain documents to show identity and authorization to work. Such documentary proof is required even if a person is a U.S. citizen. Because violations of the law can mean criminal penalties, employers must be sure to meet the basic requirements. Employers must collect evidence of citizenship or of legal work status for all new employees. For every person hired, the employer must have an I-9 form on file. The following documents are used as proof of identity and of employment eligibility: U.S. passport Permanent Resident Card Foreign passport with employment authorization Combinations of other documents, such as a driver's license, school ID card, original Social Security card, or birth certificate, may provide satisfactory proof to the government immigration authorities of identity and employment eligibility requirements. See the U.S. Citizenship and Immigration Services (USCIS) web site for details. General New Employment Procedure Employers must balance the need to obtain sufficient verification of a prospective employee's legal right to work in the United States with avoiding discrimination. The Department of Justice recommends three rules for striking that balance: Fill out an I-9 form for all new hires (which must be kept on file for three years or at least one year after the employee leaves the job, whichever is later). Allow the new employees to choose which documents from the I-9 list to use as proof; never insist on a specific document and accept any documents which appear genuine. Never ask for more documents than the I-9 requires. The key to the I-9 system is the presentation by the prospective employee of documents specified on the I-9 form. The employer must accept documents offered that appear to be valid. Doing so creates a "safe harbor" that protects the employer from civil or criminal penalties unless the employer has been put on notice of its noncompliance or engages in a pattern or practice of violations. In addition to the I-9 system, which relies exclusively on paper documents, USCIS operates an electronic verification system for employment eligibility. The E-Verify program allows employers to submit employee information electronically to the federal government. It then checks the information against a database containing citizenship and work authorization records. If the submitted information matches the Social Security database, and the employee is a U.S. citizen, the employer is notified that the employee is eligible to work. Information on noncitizens is checked against the records of the USCIS. If the information is inconsistent with federal records, the employer is given a "tentative nonconfirmation," and the employee has eight working days to contest the result. During those days, the employer may not take any adverse action against the employee. This program has had accuracy issues since its inception, and employers have complained that the system is slow, which makes it particularly bad for hiring seasonal workers, such as for the Christmas shopping rush. Federal contracts may include a clause requiring E-Verify, so employers with such contracts must use the system. Some states, including Arizona and Mississippi, require employers to use E-Verify. Costly Penalties Hiring unauthorized aliens can be expensive. Civil penalties range from $ to $ per worker for the first offense to $ to $ per worker for the third and subsequent offenses. Discriminating against authorized aliens can produce the same range of penalties. Failing to properly complete I-9 forms can lead to penalties between $ and $ per violation, so if an employer's record keeping is sloppy, the fines can be large. When someone buys a business, the new owner becomes responsible for the previous owners' immigration compliance and so can be liable for any errors or omissions in employment verification for existing employees. The USCIS advises: "To avoid this liability, you may choose to complete a new I-9 Form for each acquired employee. If you do so, you must do so uniformly for all of your acquired employees without regard to actual or perceived citizenship status or national origin."

Federal minimum wage requirements were initiated in 1938 as part of the Fair Labor Standards Act. Over the years, the minimum wage has averaged about percent of the average manufacturing wage. The minimum wage was raised to $ in 2009. Some states, such as California, have higher minimum wages. Some state laws also cover employers exempt from the federal law. Supporters of the minimum wage contend that the law requires employers to pay a fair wage to employees and does not allow workers to be paid so little that they have trouble buying the necessities of life. Critics argue that the law results in lower demand for workers in the minimum wage category—usually young people, often minorities, with little education or job experience. The result is high unemployment among persons in those groups, who never get the chance to work to develop skills that command higher wages. Issue Spotter How Do You Count Hours for Telecommuters? Working at home has become more common. There are over million full-time telecommuters and million more employees who do some work at home. This has raised problems in compliance with the Fair Labor Standards Act and other employment laws. How do you know for sure if an employee put in an -hour day? What if they claim a -hour day and expect overtime? What if they work through mandated break and meal times? © Cengage Learning International Perspective Flexibility in Labor Markets The ability of labor markets to respond to changing conditions in a rapidly changing global economy means that flexibility is more important than ever. A group of researchers from Harvard, Yale, and the World Bank looked at labor laws in many nations to see how they compare. The authors constructed a number of measures as shown in the table in the next column. In all indexes, the lower the score, the greater the flexibility in the labor market. The higher the score, the greater the regulatory barriers faced by an employer. The first measure, the Difficulty of Hiring Index, includes the ability to hire part-time labor and use other nontraditional labor terms. The second measure, the Difficulty of Firing Index, includes the expenses of terminating a worker no longer needed. The third measure is the Rigidity of Hours—the ability to change schedules as needed. The fourth measure, the Rigidity of Employment Index, is a general measure that includes the first three measures. The fifth column, Firing Costs, is the average number of weeks of wages required by law to be incurred by an employer in severance pay and other costs. Notice that many poor countries have the most restrictions on labor markets. How beneficial are these regulations for ordinary workers? Most such labor market controls are generally not helpful and present opportunities for corruption as government bureaucrats accuse employers of violating the law.

Entry into many occupations is controlled by regulations and licensing requirements. Under occupational licensure, a person cannot simply set up and begin to operate a business. Permission from the regulating agency is required. Such permission usually requires some demonstration of competency or payment of a high entry fee. The purpose of these labor restrictions is to protect the consumer, and the restrictions are supposed to help guarantee that businesses are qualified to provide service of a certain quality. Today almost percent of all full-time jobs require a state license compared to about percent of jobs in 1970. Regulations Set by State Law Although entry controls for a few occupations are set at the federal level, most restrictions are set at the state level. Generally, a person must have a license or certificate from the state to practice as a lawyer, doctor, dentist, nurse, veterinarian, optometrist, optician, or architect. In various states, an individual must be licensed to be a dog groomer, beekeeper, industrial psychologist, building contractor, electrician, plumber, or massage parlor operator. Usually, a state commission determines the criteria for a person to be licensed to practice. Employees in contact with children or other vulnerable individuals must often undergo criminal background checks. In most cases, there is a formal education requirement; in some cases, an apprenticeship period is required or a test of knowledge about the profession must be passed. Many state laws regulate employment, ranging from laws affecting how businesses provide references to when employees must be paid their final paycheck. Many states require employees be given time off to vote if their work schedule would otherwise preclude getting to the polls and to attend parent-teacher conferences. These laws are important for three reasons. First, many small- to medium-size firms are unaware of the details of these laws and can find themselves inadvertently violating them. A company expanding into a new market in a different state needs to check the local laws carefully and not assume the same rules apply as in its home state.

Entry into many occupations is controlled by regulations and licensing requirements. Under occupational licensure, a person cannot simply set up and begin to operate a business. Permission from the regulating agency is required. Such permission usually requires some demonstration of competency or payment of a high entry fee. The purpose of these labor restrictions is to protect the consumer, and the restrictions are supposed to help guarantee that businesses are qualified to provide service of a certain quality. Today almost percent of all full-time jobs require a state license compared to about percent of jobs in 1970. Regulations Set by State Law Although entry controls for a few occupations are set at the federal level, most restrictions are set at the state level. Generally, a person must have a license or certificate from the state to practice as a lawyer, doctor, dentist, nurse, veterinarian, optometrist, optician, or architect. In various states, an individual must be licensed to be a dog groomer, beekeeper, industrial psychologist, building contractor, electrician, plumber, or massage parlor operator. Usually, a state commission determines the criteria for a person to be licensed to practice. Employees in contact with children or other vulnerable individuals must often undergo criminal background checks. In most cases, there is a formal education requirement; in some cases, an apprenticeship period is required or a test of knowledge about the profession must be passed. Many state laws regulate employment, ranging from laws affecting how businesses provide references to when employees must be paid their final paycheck. Many states require employees be given time off to vote if their work schedule would otherwise preclude getting to the polls and to attend parent-teacher conferences. These laws are important for three reasons. First, many small- to medium-size firms are unaware of the details of these laws and can find themselves inadvertently violating them. A company expanding into a new market in a different state needs to check the local laws carefully and not assume the same rules apply as in its home state.

The Worker Adjustment and Retraining Notification Act (WARN) requires employers with or more full-time employees to give advance notice of a plant closing or mass layoff if or more employees will be affected. The notice must be given to employees and local governments days in advance of the closing or layoff. Such notices must be given for permanent terminations and reductions in work time of percent or more for six months or longer. Employees who do not receive proper notice of a plant closing or mass layoff may sue for up to days' back pay and fringe benefits, interest, and attorney's fees. If the local government has not been properly notified, it may sue the company for up to $ per day for each day there was no notice. If a firm fails to comply with WARN, it may be ordered not to cut its labor force. In several states, plant closing requirements go beyond the federal requirements.

The key legislation regulating private employee retirement plans is the Employee Retirement Income Security Act (ERISA). Its main objective is to guarantee the expectations of retirement plan participants and to promote the growth of private pension plans. It has evolved into a very complex statute. One should not deal with such matters without expert guidance. ERISA is directed at most employee benefit plans, including medical, surgical, or hospital benefits; sickness, accident, or disability benefits; death benefits; unemployment benefits; vacation benefits; apprenticeship or training benefits; day-care centers; scholarship funds; prepaid legal services; retirement income programs; and deferred income programs. Vesting Requirements The law establishes vesting requirements. It guarantees that plan participants receive some retirement benefits after a certain length of employment. All plans must be adequately funded to meet their expected liabilities. A termination insurance program is to be provided in case of the failure of a plan. The major problem addressed by ERISA was that of the loss of all benefits by employees who had many years of service with a company and then either quit or were fired. The law makes all full-time employees over the age of with one year of service eligible for participation in employee benefit plans. Mandatory vesting—when the employee becomes the owner of the funds in a retirement program—was established by ERISA. It provides the employer with three options: to have percent vesting after years of employment; to have percent vesting after five years, then five percent vesting a year for five years, then 10 percent vesting a year for five years, to achieve percent vesting in years; and vesting under the rule of , which states that if the age and years of service of an employee total , or if an employee has years' service, that person must be at least percent vested in the plan. Each added year of employment provides percent more vesting so that an employee is fully vested in years. Again, these rules are complex, so employers need reliable guidance on structuring benefit plans.

Labor law generally refers to laws dealing with unions, while employment law refers to laws governing all employees. The federal labor code, the National Labor Relations Act (NLRA), was enacted by Congress in three major phases: the Wagner Act in 1935, the Taft-Hartley Act in 1947, and the Landrum-Griffin Act in 1959. The only major labor law passed before the NLRA was the Norris-La Guardia Act of 1932. While about percent of public-sector employees belong to unions, less than percent of private-sector workers do. Together, this means only about percent of the workforce belongs to unions, but a greater proportionate represented by unions, and they play an important role in some industries.

Before passage of the Norris-La Guardia Act in 1932, there was little federal legislation that specifically addressed labor issues. Some courts held union activities to be criminal conspiracies, while others upheld the activities as legal. The most common tactic of employers was to plead for an injunction to stop strikes and other union activities as a violation of antitrust law. The Norris-La Guardia Act ended such court intervention. The Act declared that every worker should "have full freedom of association, self-organization, and designation of representatives of his own choosing, to negotiate terms and conditions of his employment." Injunctions Prohibited Norris-La Guardia prohibits federal courts from issuing injunctions in nonviolent labor disputes. Management must deal with the union or begin administrative proceedings involving the National Labor Relations Board. Specific acts not subject to court intervention include strikes, belonging to a union, paying strike or unemployment benefits to labor dispute participants, publicizing a labor dispute, picketing, peacefully assembling, and advising others to do any of these acts without violence or fraud. The Act also prohibits employers from requiring employees to sign yellow-dog contracts. Under such contracts, employees agree not to join a union or risk being fired if they do.

The basic goal of the Wagner Act of 1935—the first phase of the NLRA—was to ensure workers the right to "self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. ..." The National Labor Relations Board (NLRB) was created to monitor unfair labor practices and assure that union representation elections are fair. The NLRB does not regulate the substance of bargaining; the terms and conditions of employment are between employers and employees. It deals mostly with procedure and review of claims that the NLRA has been violated. Unlike most federal administrative agencies, the NLRB issues few rules, preferring instead to develop the law through decisions by the NLRB in a common law-like process. Because the Board's decisions vary with the political makeup of the NLRB, the outcomes of Board proceedings vary more over time than is the case with most agencies. Lighter Side of the Law Do What We Say, Not Wha

The Taft-Hartley Act of 1947—the Labor-Management Relations Act—which amended the NLRA—marked a change in federal policy from actively encouraging labor union formation to a more balanced approach. The Act prohibits unions from the following activities: Coercing employees to support the union Refusing to bargain in good faith with employers about wages and working conditions Carrying out certain kinds of strikes, such as secondary boycotts; charging "excessive" union initiation fees or dues; or engaging in featherbedding (making employers pay for work not performed) Going on strike during a -day "cooling-off' period or during a -day period ordered by the president

The Landrum-Griffin Act of 1959—Labor-Management Reporting and Disclosure Act—which amended the NLRA, increased regulation of internal union affairs. Senate investigations revealed the improper use of union funds by union leaders and election fraud. The Act was intended to assure that union members are protected from improper actions by union leaders. Monitoring Leadership Union finances are subject to federal review, and a report is available to union members so they know how their dues are used. Union officials who betray the trust of their office are subject to prosecution. There are penalties if employers bribe union officials or attempt to prevent union activities by other illegal means. Union Member Bill of Rights A "bill of rights" for union members is included in the Landrum-Griffin Act. The Act ensures members the right to nominate candidates for union offices, maintains fair election procedures—such as the use of secret ballots in union elections—and allows members to participate in union business, subject to "reasonable" union rules. Union dues and fees are to be set by majority vote of the members. If a union member is to be disciplined by the union, procedural safeguards protect the member's rights, and punishment may not be inflicted on those who challenge union leadership.

The NLRB is an administrative agency charged with overseeing the National Labor Relations Act. It has five board members, a general counsel, regional directors, and administrative law judges. The board reviews unfair labor practice case decisions by regional directors and administrative law judges. The general counsel oversees the investigation and prosecution of unfair labor practice charges and represents the NLRB in court. The NLRB has jurisdiction over all employers and all employees in labor disputes that affect interstate commerce. Certain classes of employees are not covered by the NLRA—federal, state, and municipal employees (the public sector), supervisors, managers, independent contractors, domestic servants, and agricultural laborers. The Railway Labor Act covers airline and railroad employees. It is similar to the NLRA.

Unfair Labor Practice Complaints In general, unfair labor practices are actions by employers or unions that impair the goals of the NLRA. About cases are filed each year with the NLRB. Most are charges of unfair labor practices. Charges filed against employers outnumber charges filed against unions by about two to one. A worker, a union, or an employer files each case. Examples of employer conduct that violates the NLRA: Threatening employees with loss of jobs or benefits if they join or support a union Threatening to close a plant if employees vote for unionization Questioning employees about union activities Promising benefits to employees if they do not support a union Giving employees worse assignments for participating in protected activities Examples of union conduct that violates the NLRA: Threatening employees with loss of a job if they do not support the union Refusing to help employees with grievances who have criticized union leaders Engaging in picket line misconduct, such as threatening non-strikers Striking over issues unrelated to employment terms and conditions In most cases, charges of unfair labor practices are filed at field offices that do investigations. If the investigation shows the case has merit, the regional director files a complaint. Many charges filed do not lead to a complaint being filed; they are dismissed by the regional director or withdrawn by the complaining party when they are informed of their likely lack of success. Of the charges that do lead to a complaint, most are settled before a hearing takes place. Hearing Complaints An administrative law judge (ALJ), an employee of the NLRB, presides over complaints that are resolved at an administrative hearing. After taking evidence and receiving briefs, the ALJ issues a decision and order. The order either sets out the appropriate remedy or recommends the complaint be dismissed. Unless one of the parties involved files an exception, the decision is final. If an exception to the decision is filed, the appeal is heard in Washington DC by a panel of three NLRB members if the case is routine; if the case is considered important, it is heard by the entire board. Board members hear no evidence and see no witnesses; in that sense, they are similar to an appellate court. If one of the parties refuses to accept the board's decision, the case is referred to the U.S. Court of Appeals for enforcement or review of the order. In rare instances, the Supreme Court takes the case for final review.

The NLRA gives the NLRB great leeway to make policy and remedies regarding unfair labor practices. Its determinations are not to be reversed unless they are arbitrary, capricious, or manifestly contrary to the NLRA. Because of the board's powers to determine much of the substance of labor law in practice, appointment to the NLRB is politically sensitive. Presidents sympathetic to labor unions because of political support appoint pro-labor members; presidents who are more sympathetic to the interests of employers appoint pro-management members. As the composition of the NLRB changes, its rulings tend to swing in one direction or another.

Remedies If the NLRB finds that an employer has engaged in an unfair labor practice, the remedies it may impose include Posting a notice in the workplace Issuing a cease-and-desist order Providing back pay for lost wages Reinstating dismissed workers Issuing an order to bargain with the union

A major responsibility of the NLRB is to determine whether employees want to be represented by a union. The NLRA focuses on the rights of employees to "self-organization; to form, join, or assist labor organizations." To ensure that the employees' rights of self-organization can be exercised, the NLRB has rules governing employer and union conduct.

If a union does not represent employees, a move to unionize may arise because some interested employees contact a union for assistance or by a union organizer who contacts employees to see if interest exists. The union then starts an organization drive. An employee committee is formed and, with the help of the organizer, calls informational meetings and distributes information. Representation Elections If a union organizer collects authorization cards signed by percent or more of the employees, asking for an election to be held to determine whether the union should represent them (the cards are kept secret from the employer), the organizer turns the cards over to the NLRB and requests a representation election. The election determines whether a majority of employees in a bargaining unit wants the union as their agent. A bargaining unit may be all workers at a company, the workers at one plant, or workers in certain skills at one or more work sites, such as nurses at a hospital or at several hospitals. Managers may not be in a bargaining unit. Before the election, a campaign is held. The union tells the workers of the benefits of unionization, and management tells the workers the benefits the company provides without a union. The company is prohibited from threatening those who favor unionization, nor may it promise, say, a large pay raise if the workers defeat the union. The company can argue about problems it sees from unionization. For example, if the union tells workers it will get them a percent raise, the company can explain the likely consequences of such a demand. The NLRB and the courts protect the interests of the employees, so they have access to union information, and it protects the employers' interest in controlling business without interference. As a rule, union organizers are not permitted access to company property. Like any other private property, the owner can control who is invited to come on the property. Union Certification NLRB agents supervise the election, which is often held at the workplace. There are about such elections around the country each year. After the election, the NLRB certifies the results. If more than percent of the employees vote for the union, then the NLRB grants union certification. Unions win about percent of the elections. The union is declared the exclusive bargaining agent for all employees in the bargaining unit and must be recognized by the company. All employees in the bargaining unit, even those who do not want the union, are bound by the recognition of the union as the exclusive bargaining agent for all employees. Exhibit 15.2 illustrates the process.

When a union is selected to be the collective bargaining agent, the workers who join the union must pay union dues. What about the workers who do not want to be union members? Agency shops—places of employment where a majority of employees have voted to be represented by a union in a collective bargaining agreement—are legal. In an agency shop, employees who belong to the union pay union dues, while employees who do not want to join the union pay agency fees. That is, nonunion employees are represented by the union and have fees deducted from their paychecks that go to cover the costs of union services, including collective bargaining and enforcing the bargain. Agency fees are a little lower than union dues. International Perspective Labor Law in China The People's Republic of China established three important new labor laws in 2007: the Employment Contracts Law (ECL), the Employment Promotion Law (EPL), and the Labor Dispute Mediation and Arbitration Law (LDMAL). The ECL favors long-term employment relationships over short-term ones, providing job security and severance pay. It was aimed at the widespread practice of paying employees late to keep them employed at a firm. It attempts to change the practice of using short-term contracts to one of long-term or open-ended employment contracts with "just cause" termination provisions. For example, the ECL requires any employee with years or more of service to be given an open-ended contract when a contract is renewed. Employees terminated without cause are entitled to reinstatement or double severance pay. Under the ECL, unions' roles are focused on assisting employees in the negotiation of their individual contracts, not collective bargaining. Article 6 of the ECL provides: A labor union shall assist and guide workers in the conclusion of employment contracts with their Employer and the performance thereof in accordance with the law, and establish a collective bargaining mechanism with the Employer in order to safeguard the lawful rights and interests of workers. The EPL addresses employment discrimination issues, including a ban on discrimination based on race, ethnicity, gender, religion, and positive infectious disease status, such as employees with Hepatitis B. The LDMAL covers employment disputes, making many decisions of arbitration commissions binding immediately, including decisions in cases where less than a year's salary is in dispute. The law also increased the time employees had to bring claims to a year. With these changes, China has created a legal system for employment matters equivalent to that in most western countries. Implementing these laws effectively requires a similarly developed legal system, which is still a work in progress. © Cengage Learning Political Action The use of agency fees to support union political activities not directly related to the union's duties as a bargaining representative raises concerns about the constitutional rights of employees who are forced to provide financial support for political action. That is, unions devote significant sums to support favored political candidates. That money comes from union dues and from agency fees. Several Supreme Court cases have been heard on this issue. In Chicago Teachers Union ( S.Ct. ), the Court listed four requirements regarding agency fees paid by nonunion workers to unions at unionized workplaces. There must be: An adequate explanation of the basis for the fee A reasonably prompt explanation of the basis for the fee An opportunity to challenge the fee before an impartial decision maker An escrow account for the amounts in dispute while challenges are pending In the Beck decision ( S.Ct. ), the Supreme Court found that percent of the agency fees paid by Beck and other non-union AT&T employees represented by a union went to political action. The Court ordered the union to cut its agency fees, refund the excess fees collected from nonunion workers, and keep clear records about union expenditures by category. Justice Brennan noted that unions are not "free to exact dues equivalents from nonmembers in any amount they please, no matter how unrelated those fees may be to collective bargaining activities." In practice, the Supreme Court decisions have not been enforced. Unions represent about two million workers who do not belong to the unions but must pay agency fees. Most agency fees, like union dues, go to support political action and other union activities not related to the expenses of collective bargaining at a workplace. Unions generally ignore the Beck ruling, forcing employees to go to the expense of litigation to enforce their rights as the NLRB rarely helps to enforce the Supreme Court's holdings. Issue Spotter Right-to-Work Laws The Taft-Hartley Act allows states to pass right-to-work laws to prohibit agency shops. In right-to-work states, if a majority of the employees vote for union representation and pay union dues, the union is the collective-bargaining agent for all employees. However, no employees can be required to pay agency fees, even though their wages and working conditions are determined by the collective-bargaining agreement. Because some employees receive the benefits of the union without paying union dues or agency fees, unions claim they are free riders. Right-to-work laws, in effect in half the states, clearly retard the effectiveness of unions in such states.

Once employees choose a union, it becomes the legal representative of the employees. The employer must bargain with the union. Collective bargaining is the process by which the employer and the union, on behalf of all employees in a collective bargaining unit, negotiate a contract, setting forth the terms and conditions of employment for a given time period. Collective bargaining includes contract negotiation and contract administration as part of a continuous relationship between an employer and the employee representative.

The NLRA imposes a duty for employers and unions to bargain in good faith. Essentially, good faith means an obligation to meet and be willing to present proposals, to listen to and consider the proposals of the other party, and to search for common ground that can serve as the basis for an agreement—but there is no legal requirement that agreement be reached. The Supreme Court has noted that under the NLRA that the NLRB and the courts should not become involved in the details of the bargaining process because Congress did not intend for direct intervention in the substance of labor bargains. Rather, the parties are free to reach an agreement of their own making.

The NLRA states that bargaining in good faith must occur with respect to mandatory subjects of bargaining about which employers and unions must bargain in good faith. However, either party may insist on its position and back that up with a strike or a lockout. Employers and unions are free to bargain over any topics they agree to discuss. Among the topics that may be placed on the bargaining table because they have been determined by the NLRB or the courts to be subject to mandatory bargaining are the following: Pay rate Insurance plans Holidays Overtime pay Vacations Retirement plans Work hours Individual merit raises Breaks and lunch periods Safety practices Seniority rights Discipline procedures Termination procedures Layoff procedures Recall rights Union dues collection Grievance procedures Arbitration procedures No-strike clauses Drug testing There is no requirement that every issue be covered in a collective bargaining contract, only that the employer must consider demands raised by the union. If the employer and the union cannot reach agreement, an arbitrator may be called in to help get the talks going, or either party may request help from the Federal Mediation and Conciliation Service. These mediators have no authority to impose a settlement, but often help the parties reach an agreement. Arbitration Clauses Under grievance arbitration clauses in collective bargaining agreements, disputes between employers and unions or represented employees are resolved by an internal grievance procedure. If the results are not satisfactory, an outside labor arbitrator chosen under the contract hears disputes. Usually each side gets to veto nominees, helping to ensure both sides see the arbitrator as fair. If an arbitration decision is violated, the aggrieved party may then sue for enforcement. The right to grieve an issue belongs to the union, however, not the worker, as the union controls labor-management relations. If the union refuses to take an employee's concern to arbitration, the employee must sue the union for a violation of the "duty of fair representation." We see an example of this in the Teamsters Local Union No. 523 case. Almost all collective bargaining agreements contain dispute-resolution clauses. The federal courts encourage the use of the grievance arbitration process. This helps prevent the federal court system from being clogged with thousands of disputes.

Case Background Interstate Brands made and distributed bakery products such as Hostess, Dolly Madison, and Wonder Bread. Different distribution systems handled different products. The employer consolidated its distribution so sales representatives, and distributors would handle all product lines. This meant that the union would now represent all distribution workers, rather than only some workers. Rammage had been a Dolly Madison sales representative for years before consolidation and was not represented by the union. Now that the union represented him, he was put at the bottom of its seniority list, which gave preference to workers that the union had represented previously. As a result, Rammage was "endtailed" to the bottom of the distribution system, lost his regular route, and was demoted. He complained to the NLRB that the union and employer were engaged in an unfair labor practice. The Board held in his favor. The union appealed. Case Decision Tacha, Circuit Judge * * * In this case, the NLRB concluded that "in the context of a unit merger, a union and an employer are not lawfully permitted to dovetail the seniority of represented employees while endtailing previously unrepresented employees." This conclusion reflects a reasonable application of the NLRA and the legal principles articulated above. Indeed, the Union's insistence on Mr. Rammage's endtailing coupled with the Employer's acquiescence and its statements that Mr. Rammage was demoted because he was not in the Union reasonably suggest that the Union caused the Employer to discriminate against Mr. Rammage in a way that encourages Union participation. ... Accordingly, we find that the NLRB reasonably concluded that the Union's insistence on Mr. Rammage's endtailing and loss of seniority for route bidding purposes caused the Employer to discriminate against Mr. Rammage. ... Affirmed. Questions for Analysis

To back up their positions, a union can call a strike, an employer can lock out the workers, or other steps can be taken to put pressure on the other party to settle. To promote productive collective bargaining, Congress provided that certain activities would be protected so the parties could back up bargaining demands. Protected Activities The NLRA protects the rights of employees, individually or in groups, to engage in concerted activities for mutual aid or protection. Protected concerted activity includes most union-organizing efforts. It also involves actions by employees, unionized or not, such as a refusal to work because of unreasonable hazards or working conditions that endanger health or safety. Unprotected Activities If workers engage in threats or acts of violence, they are not protected by the law. The Supreme Court has held that employers may fire employees for insubordination, disobedience, or disloyalty, unless the reason for such activity involves protected concerted activity. That is, a worker may not be fired for engaging in a union-organizing activity that the employer thinks is disloyal. Strikes and Boycotts A primary boycott—a strike by a union against an employer whose collective bargaining agreement is in question—is legal. The law restricts secondary boycotts, which occur when a union uses economic pressure to try to force others to stop doing business with an employer not directly involved in a primary labor dispute. Examples include: A strike against an employer other than the one involved in the primary labor dispute, such as a strike against the steel companies that sell steel to the automakers if there is a strike against the automakers. Refusal to handle goods for a secondary employer, such as refusing to carry steel from steel companies to automakers during a strike against the automakers. Threats, coercion, or restraints against any person engaging in commerce—usually an employee—in an effort to spread the dispute beyond the primary employer. For example, in a strike against the food manufacturer Hormel, the union picketed local banks. The NLRB ruled that the union could not picket any banks as they were not directly involved with Hormel products. The picketing was an unfair labor practice.

Although employers may not retaliate against employees for engaging in protected activities, they have the right to use economic pressure. As previously noted, an employer may lock out the employees—refuse to let them work until the dispute with the union is settled. A lockout is usually defensive—in response to a strike, to prevent a sit-down strike in the plant, or to prevent some other activity that would be destructive to the plant or its materials. So long as the lockout is seen as promoting the settlement of a collective bargaining agreement, it is most likely legal. Replacement Workers A tactic successfully used by companies in recent years to weaken a union is the hiring of nonunion workers to replace striking workers. Once a collective-bargaining agreement expires, if the union and the employer have not agreed to a new contract, and the union calls for a strike, the employer may hire new workers and keep using existing workers who cross the picket line (crossovers). In some cases, there were enough replacement workers and crossovers that the union had lost substantial strength by the time a new agreement was signed.

Glossary Agency fees in labor law, the right of a union to charge fees to employees who are not union members, instead of union dues, to cover the cost of representing such employees; such fees are illegal in right-to-work states. Agency shop in labor law, a unionized workplace where employees who are not union members must pay agency fees to the union for being the sole bargaining agent for all employees; illegal in states that have right-to-work laws. Anti-raiding covenant in employment law, when employees are required to sign, as a condition of continued employment, an agreement that in the future, should they no longer work for the employer, they will not attempt to hire away other employees from the company; these are looked at closely by the courts as possible restraints of trade. Authorization card a card signed by an employee at a worksite targeted for possible unionization; the card authorizes the union to request that an election be held to determine if all workers will be represented by the union. Bargaining agent the union recognized and certified by the National Labor Relations Board, upon election by a majority of the workers, to be the exclusive representative of employees in a bargaining unit (worksite) to determine working conditions and wages. Collective bargaining the process by which a union and an employer arrive at and enforce agreements regarding employment of workers represented by a union Concerted activity in labor law, actions by employees, such as a strike or other mutual activity that furthers their employment interests, protected by the National Labor Relations Act. Decertification a process by which employees vote to withdraw their consent to union representation; an election is conducted by the National Labor Relations Board. Hazard communication standard also calledHazCom in employment law; the requirement that an employer provide training and information about hazardous chemicals employees will be exposed to on the job. Labor dispute under labor law, specific actions by employers, a union, or employees that are subject to coverage by standards set by the National Labor Relations Act. Lockout refusal by an employer to allow employees to work. Mandatory subjects of bargaining under the National Labor Relations Act, all terms and conditions of employment that must be discussed by employers and unions or an unfair labor practice occurs. Noncompete agreement in employment law, when an employer requires an employee, as a condition of employment, to agree not to compete with the employer in the future for a certain time and in a certain location; such agreements are not favored in some states. Occupational licensure requirement at the state level that for one to practice a certain profession, one must meet certain educational or experience guidelines, pass an entry examination, and show evidence of continuing educational accomplishments. Primary boycott in labor law, a union action that tries to convince people not to deal with an employer with which the union has a grievance. Public policy exception in employment law, statutory or court-mandated exceptions to the presumption of employment-at-will that goes beyond contract issues in employment; for example, it is illegal for an employer to dismiss an employee for reporting for jury duty. Retaliatory discharge see Wrongful discharge. Right-to-work law state laws that prohibit unions from forcing employees who do not want to pay union dues or agency fees to pay such dues or fees even if the employees are represented by the union under a collective bargaining agreement. Secondary boycott a union's refusal to handle products of or work for a secondary company with whom the union has no dispute; to force that company to stop doing business with another company with which the union has a dispute. Strike a work stoppage by employees for the purpose of coercing their employer to give in to their demands. Substance-abuse policy in employment law, workplace rules adopted by an employer with respect to any required tests and the consequences of abuse of drugs, alcohol, or other substances; must comply with certain federal and state laws. Unfair labor practice in labor law, a wide range of actions that violates the rights of workers to organize and engage in collective activities or that violates the rights of employers to be free from practices defined as illegal under the National Labor Relations Act. Union an association of workers that is authorized to represent them in bargaining with their employers. Union certification in labor law, when a majority of the workers at a workplace vote to have a union be their collective bargaining agent, the National Labor Relations Board certifies the legal standing of the union for that purpose. Vesting under the Employee Retirement Income Security Act, the requirement that pension benefits become the properly of workers after a specific number of years of service to an employer. Whistle-blower an employee who alerts the authorities to the fact that her employer is undertaking an activity that is contrary to the law. Workers' compensation laws state statutes that provide forawardsto workers or theirdependentsifaworker incurs an injury or an illness in the course of employment. Under such laws, the worker is freed from bringing a legal action to prove negligence by the employer. Wrongful discharge a cause of action an employee may have if dismissed for an improper reason, such as exercising a public right or other interest protected in the employment relationship, such as protected class status under Title VII. Yellow-dog contract an agreement between an employer and an employee under which the employee agrees not to join a union, and that if he joins a union, there is a breach of contract and the employee is dismissed.