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2023 Newsletters

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JULY 2023

Inside This Issue

1. Independent Contractor Standard Modified by NLRB

2. The Clash between Non-Reliance Clauses and “As-Is” Realty Contracts

3. NLRB Region-22 Wins Injunction Requiring HSA Cleaning to Rehire Two Unlawfully Fired Workers

Independent Contractor Standard Modified by NLRB

In a decision issued June 13, 2023, in The Atlanta Opera, Inc., the NLRB returned to the 2014 FedEx Home Delivery (FedEx II) standard for determining independent contractor status under the National Labor Relations Act (the Act), and overruled SuperShuttle (2019). In applying the FedEx II standard, the NLRB found that the makeup artists, wig artists, and hairstylists who work at the Atlanta Opera—had filed an election petition with the NLRB seeking union representation—are not independent contractors, excluded from the Act, but rather are covered employees.

In its decision, the NLRB reaffirmed longstanding principles—consistent with the instructions of the Supreme Court—and explained that its independent-contractor analysis will be guided by a list of common-law factors. The NLRB expressly rejected the holding of the SuperShuttle NLRB that entrepreneurial opportunity for gain or loss should be the “animating principle” of the independent-contractor test.

The NLRB further explained that entrepreneurial opportunity would be taken into account, along with the traditional common-law factors, by asking whether the evidence tends to show that a supposed independent contractor is, in fact, rendering services as part of an independent business.

In reviewing the facts of this case and applying the FedEx II standard in Atlanta Opera, the NLRB determined that the majority of the traditional common-law factors point toward employee status. The NLRB also determined that the evidence did not show that the stylists rendered services as part of their own independent businesses.

“In today’s decision, the NLRB returns to the independent contractor test articulated in FedEx II, and reaffirms the NLRB’s commitment to the core common-law principles that the Supreme Court has determined should guide the NLRB’s consideration of questions involving employee status,” said Chairman Lauren McFerran. “Applying this clear standard will ensure that workers who seek to organize or exercise their rights under the National Labor Relations Act are not improperly excluded from its protections.”

In December 2021, the NLRB invited parties and amici to submit briefs addressing whether the NLRB should reconsider its standard for determining the independent contractor status of workers.

Members Wilcox and Prouty joined Chairman McFerran in issuing the decision. Member Kaplan dissented from the overruling of SuperShuttle, but concurred in finding that the stylists were employees, not independent contractors.

The Clash between Non-Reliance Clauses and “As-Is” Realty Contracts

The question becomes can a real estate contract seller rely on an “as-is” clause in a real estate contract which also contains a non-reliance clause.

The buyer bought a residential property from a seller bank which contained an “as-is” and non-reliance provision in the contract for which the buyer sued for misrepresentation and fraudulent concealment.

To succeed on a fraud claim, a plaintiff must establish that its reliance on the misrepresentation was justified.

The defendant trustee argues plaintiff cannot establish that its reliance on the trustee’s representations was justified because, as part of the closing, plaintiff signed an “as-is” contract with an addendum that included a non-reliance clause.

The court was not convinced the non-reliance clause in this case automatically bars plaintiff’s fraud claim.

In reaching this determination, the court looked to Sec. 35 of the Residential Real Property Disclosure Act, which obligates the seller of residential real property to provide a report disclosing material defects of which he or she has knowledge but does not

require the seller to undertake any specific inquiry in order to complete the required report.

An “as-is” clause, however, can function as a non-reliance clause. See Walls v. VRE Chicago Eleven, 2016 WL 5477554 (N.D. Ill. 2016).

While the non-reliance clause may bar fraud claims based on misrepresentations about the general condition of the property, it does not bar plaintiff’s fraud claim arising out of an alleged misrepresentation on the disclosure report that the trustee had no notice of any open code violations.

In any event, while a non-reliance clause may effectively ward off a fraudulent misrepresentation claim, Illinois courts have suggested that a non-reliance clause will not bar a fraudulent concealment claim unless the clause specifically references omissions.

Because the portion of the addendum the defendant trustee relies on refers only to “oral or written” warranties, guarantees, and representations, and not omissions, the non-reliance clause does not preclude plaintiff’s fraud claim to the extent it is based on fraudulent concealment.

To prove fraudulent concealment, plaintiff must establish that: (1) the trustee concealed a material face under circumstances that created a duty to speak; (2) that trustee intended to induce a false brief; (3) plaintiff could not have discovered the truth through reasonable inquiry or inspection, and justifiably relied upon the trustee’s silence as a representation that the fact did not exist; (4) the concealed information was such that plaintiff would have acted differently had it been aware of it; and (5) plaintiff’s reliance resulted in damages.

A duty to speak arises where the parties are in a fiduciary relationship, or where one party occupies a position of

superiority or influence with respect to the other party. A party may also be subject to a statutory duty to disclosure certain facts.

Section 45 of the disclosure act “provides, without exception, that it does not limit or modify any duty to disclose information in order to avoid liability for fraud.” Rolando v. Pence, 331 Ill.App.3d 40 (2d Dist. 2002). Thus, Sec. 45 allows plaintiffs to seek recovery for fraudulent misrepresentation based solely on a disclosure made pursuant to the disclosure act.Whether the trustee had a duty to disclosure the 15-day notice under the disclosure act depends, at least in part, on a disputed question of fact: whether the violations identified in the 15-day notice were corrected prior to the sale of the property. This summary judgment was denied.

NLRB Region-22 Wins Injunction Requiring HSA Cleaning to Rehire Two Unlawfully Fired Workers

On July 6, 2023, U.S. District Judge Kevin McNulty of the District Court of New Jersey issued an injunction requiring HSA Cleaning, Inc. to reinstate two unlawfully fired workers, read and post the Court’s Order in English and Spanish, expunge the employees’ records, and cease and desist from unlawful activities.

The injunction was issued based on a petition for temporary injunctive relief filed by Region 22 Regional Director Suzanne Sullivan in June 2023. Section 10(j) of the National Labor Relations Act authorizes the NLRB to seek injunctions against employers and unions in federal district courts to stop unfair labor practices and ensure that employees' rights will be adequately protected from remedial failure due to the passage of time.

The Region’s petition explained that HSA Cleaning illegally fired two workers after they spoke to their colleagues about their wages and working conditions, assisted in union organizing efforts with the Service Employees International Union Local 32, and engaged in protected concerted activities.

In his decision, Judge McNulty stated that the NLRB has satisfied its burden of establishing that there is reasonable cause to believe that HSA engaged in unfair labor practices and that the NLRB has also put forward evidence of the chilling effect that these alleged actions appear to have had on other employees’ support for the union. Judge McNulty also noted that the NLRB’s application for an injunction was “made in the public interest to remove an employer-created impediment to organization.”

“This injunction ordering HSA Cleaning to reinstate the two unlawfully fired workers in New Jersey is a crucial step in ensuring these workers can freely exercise their right to join together to improve their working conditions,” said NLRB General Counsel Jennifer Abruzzo. “HSA Cleaning, and other employers should take note that the NLRB will continue to vigorously protect workers’ rights to organize.”

“I’m extremely proud of our Regional employees for their hard work on this case,” said Region 22-Newark Regional Director Suzanne Sullivan. “Region 22’s staff is dedicated to effectuating the National Labor Relations Act so that all workers can fully and freely exercise their Section 7 rights.”

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