LABOR & CONSTRUCTION LAW UPDATES



MARCH 2017



Inside This Issue​

1.    So You Think You Can Call the Police Anytime a Union is Misbehaving. . .Think Again

​2.    No “Good Faith” Defense to OSHA Violation Where There is A History of Disregard for OSHA Rules


​3.    Retaliation Claim – Family and Medical Leave Act


​4.    First Illinois Appellate District in Chicago Clarifies Implied Warranty of Habitability Rules


​5.    Illinois Human Rights Act:  Disability Harassment Found to Constitute Unlawful Discrimination



So You Think You Can Call the Police Anytime a Union is Misbehaving. . .Think Again


The National Labor Relation Board (“Board”) recently ruled that subcontractors on multi-employer jobs in the construction industry are not permitted to call the police even when a union is trespassing on a job site. The Board’s logic is the general contractor is in control of the jobsite not the subcontractor so it is in the exclusive purview of the general contractor to call the local police.


Does the rule change if the union is engaging in violence or the destruction of property? Probably yes, since the union and employees are permitted to engage in lawful concerted activities. Violence and destruction of property are not protected concerted activity.  In proper circumstances Illinois employers are able to obtain an injunction in a state court against violence, destruction of property and against blocking jobsite egress and ingress. Concerted activity is the right to self-organize, to join or assist a labor organization, to bargain collectively through its chosen representative or to engage in other mutual aid and protection which would include picketing and protesting.  In a case decided this month, the Board ruled that employees who were wrongfully laid off could protest outside of a plant as well as on private property.


In the same case the Board ruled that the mere threat of calling the police when there is concerted activity is an unfair labor practice. Similarly, the actual call to the police also constitutes an unfair labor practice.  It did not make any difference to the Board that when the police arrived no one was forced to leave or was arrested. 


The Board’s view is that minor trespassing may also be lawful. For example, if the job access is along a busy highway, a union may be able to stand or picket on private property.


It would be prudent for general contractors, as well as subcontractors and suppliers, to review their policies to determine if a policy violates the Board rulings.



No “Good Faith” Defense to OSHA Violation Where There is A History of Disregard for OSHA Rules


Last month the 7th U.S. Circuit Court of Appeals rejected an employer’s petition for review of an Occupational Safety and Health Review Commission (“Commission”) decision which found  the employer willfully violated OSHA regulations. The Court found the petition as insufficient to warrant review.


The employer was in the business of cleaning truck trailer tanks that haul toxic products such as ink and latex. The OSHA violation came in response to an employee-supervisor who was hospitalized from inhaling fumes after he entered a tank to clear a clogged valve. The supervisor knowingly entered a dirty trailer tank in violation of various employer rules. Although, he followed other employer rules by obtaining an entry permit, attaching himself to a retrieval device, and having a fellow employee stand by to supervise.


An Administrative Law Judge (“ALJ”) found the employer had violated OSHA rules, and the Commission affirmed the ALJ’s findings. The employer filed a petition for review with the 7th Circuit, presenting the following 2 arguments: 1) the accident was caused by “unpreventable employee misconduct;” and 2) there was no proof that any OSHA violation was “willful.”


The Court found that the “unpreventable employee misconduct” argument lacked merit; to establish the OSHA violation all that needed to be shown was that a supervisory employee had knowledge of the violation. Such knowledge can be imputed to the employer.  In this case,  the injured supervisor had actual knowledge of his own misconduct, so the Commission imputed his knowledge to the employer.


With respect to its second argument, the employer set forth a defense that it had acted in “good faith,” which should have precluded imputing knowledge of the violation to the employer.  The employer presented evidence it had rules prohibiting exactly what the supervisor did; employees did not usually violate the rules; it had shown instances of discipline and a lack of recidivism; its wash process eliminated toxic atmospherics; it had continuous testing and forced air ventilation in clean trailer tanks; and it’s written program had been previously reviewed by OSHA and found acceptable.

The Court considered the employer’s evidence but noted, “on the other hand, the facility manager had never disciplined an employee for improperly completing permits or for the violations apparent on the face of the permits. The Commission concluded that [the employer] therefore failed to take actions when violations of safety rules were plain, as would have been required in a good-faith-effort.”


The Court found it was reasonably foreseeable that employees would disregard safety procedures since most of the permits had contained errors or omissions which indicated a pattern of disregard for the rules.  The Court concluded the Commission made no error in rejecting that the employer acted in good faith.


Employers would be prudent to examine their procedures to determine if there is a pattern of disregarding OSHA rules.



Retaliation Claim – Family and Medical Leave Act


The U.S. Court of Appeals for the 7th Circuit recently affirmed in part a district court finding of a retaliation claim under the FMLA in the termination of an employee who needed time away from work to care for her autistic son.


Tracy Wink (“Wink”) had been employed by Miller Compressing Co. (“Miller”) for nearly 12 years when she requested intermittent FMLA leave to take care of her autistic son throughout the year. Miller granted Wink’s request in 2011.


In February 2012, Wink’s son was expelled from daycare due to the boy’s aggressive behavior. Wink requested, and Miller agreed, that she be allowed to work from home two days a week in conjunction with using FMLA leave for hours spent taking care of her son. The hybrid arrangement allowed Wink to log her work hours and deduct non-payable FMLA hours spent taking care of her son on the days she worked at home.


However, when Miller experienced financial problems in the summer of 2012, Miller decided none of its employees could work from home. So Miller gave Wink an ultimatum: either work full time in the office, or be considered a “voluntary quit.” Wink showed up on Monday to explain that she hadn’t been able to find day care for son. She subsequently left the office to take care of her son, and her employment was terminated.


The panel for the 7th Circuit stated the FMLA entitled Wink to take leave necessary to take care of her sick child, and that Wink had proved that Miller retaliated against her for asserting her FMLA right. The panel noted that Miller had no compelling reason to fire her, as Wink had been working two days a week from home since February without Miller complaining.



First Illinois Appellate District in Chicago Clarifies Implied Warranty of Habitability Rules


The implied warranty of habitability is a court-created creature of public policy designed to protect purchasers of new homes and condominiums who discover latent defects in their homes or units. 


Generally, the claim must be asserted against the builder-vendor, but was expanded in 1983 to permit the implied warranty claim to be asserted against a subcontractor of a builder-vendor where the purchaser had “no recourse” against an “insolvent” general contractor. 


In Sienna Court Condo Association v. Champion Aluminum (2017), the First Appellate District clarified a number of issues.  In Sienna the court made it clear that design professionals, such as architects and engineers, cannot be sued under the implied warranty.  Similarly, anyone who merely supplies materials is not subject to the implied warranty.  In other words, the design professional and supplier did not take part in the actual construction nor were they involved in the construction-sale of the real property which is a prerequisite to such a suit. 


The Sienna court was faced with the issue that the insolvent builder had insurance which may protect against the claim and that the Plaintiff-homeowner actually recovered over $300,000 from the developer’s warranty fund.  The court first addressed whether or not a plaintiff-homeowner can sue the subcontractor where the builder-developer was insolvent but in good standing with limited assets.  The court defined “insolvency” as simply meaning liabilities exceeded assets and the builder-developer had stopped paying debts in the ordinary course of business.  


The court emphasized that the possibility of “recourse” is not a determining factor in deciding whether the subcontractors are subject to liability.  The court rejected the “recourse” test and now the “insolvency” test is the sole test.  In other words, potential recovery from insurance policies is not a factor to be considered and the subcontractor can be sued under the implied warranty.  With respect to the next question, recovery of any proceeds from an insolvent developer’s warranty fund does not bar a property owner from maintaining a cause of action for the breach of implied warranty of habitability against subcontractors of a developer who participated in the construction of a residence.


​The rules explained above only apply to the jurisdiction of the First Illinois Appellate District which covers Cook County.  For example, if a homeowner were to litigate the same issues in the Second Appellate District covering the counties of DuPage, Lake, Kane, Kendall, McHenry and other counties extending west to the Mississippi River, the result is likely to be different.  The result may also be different if the case were litigated in the Fourth Appellate District which includes most of Central Illinois extending from the border of Indiana to the Mississippi River including the counties of Sangamon, Champaign and Logan.  For a complete list of counties check the Illinois Courts’ website.



Illinois Human Rights Act:  Disability Harassment Found to Constitute Unlawful Discrimination


​The Illinois Second District Appellate Court, in Rozsavolgyi v. City of Aurora, recently held that disability harassment is a cognizable civil rights violation, that a claim for failing to provide a reasonable accommodation for a disability is cognizable as a separate civil rights claim and that the standard of employer liability for coworker harassment applicable to sexual harassment is also applicable to disability harassment.


Patricia Rozsavolgyi worked for the City of Aurora (“the City”)  from 1992 to 2012, eventually holding the position of Property Maintenance Compliance Officer.  She had a medical history of depression, anxiety, panic attacks and partial hearing loss, which constituted a “disability” under the Illinois Human Rights Act (“the Act”).  Ms. Rozsavolgyi claimed that her coworkers intentionally agitated, embarrassed, humiliated, degraded, harassed, discriminated and provoked her by calling her names such as “cuckoo, Shutter’s Island, nuts, crazy, weird, whacko” among other vulgarities, and by leaving offensive notes in her mailbox, spitting on her car window, and creating rumors about her.


Ms. Rozsavolgyi notified the City about the harassment and requested they make a reasonable accommodation to make it stop. She further alleged that the City “failed and refused to take action” which ultimately lead to emotional distress (depression, fatigue, irritability, anxiety, etc.).  She claimed that things finally boiled over just prior to her employment being terminated by the City, in a verbal exchange with a coworker where she called the coworker an “idiot.” Her subsequent complaint alleged unlawful termination based on her disability under the Act.


On interlocutory appeal, the Second District answered whether the Act prohibits “disability harassment” as a civil rights violation.


The Act provides that discrimination based on race, religion, national origin, age, sex, and disability, among other traits, is unlawful.  However, the only harassment expressly prohibited by the act is sexual harassment.


Ms. Rozsavolgyi argued that even before the 1983 amendment which listed sexual harassment as prohibited under the Act, the Act prohibited sexual harassment as sex discrimination. Therefore, the same reasoning should be applied to disability discrimination, and as such, disability harassment should be found prohibited under the Act.


The Court reasoned that liberal construction of the phrase “terms, privileges, or conditions of employment” to include a prohibition on the creation of hostile work environments based on disability, consistent with the Act’s purpose to protect the right of the disabled to be free from workplace discrimination. Thus, the Court found that the Act prohibits disability harassment. The City has appealed to the Illinois Supreme Court.




JANUARY 2017



Inside This Issue​

1.    New Illinois Laws Effective January 1, 2017

​2.    Seventh Circuit Court of Appeals Rules That The Obligation

       To Make Contributions Can Survive A De-Certification of a Union


​3.    NLRB Signals Further Union Favor


​4.    First District  Illinois Appellate Court Upholds Pay-If-Paid Clause


​5.    New Employee Privacy Laws 



New Illinois Laws Effective January 1, 2017


- Senate Bill 3163: Bans any company from asking a worker paid less than $13.50 an hour to sign a non-compete agreement.


- House Bill 6162: Requires employers to give their workers greater flexibility in using their sick time.  A company providing sick leave to employees must allow the eligible employees to use up to one-half of their allotted time to attend to medical needs of family members.  HB 6162 was further amended by SB 2799 adding stepchildren and domestic partner to list of persons, illnesses which are eligible for leave.  It also excludes collective bargaining agreements which may provide differently.


- House Bill 1260: Amends Personal Information Protection Act.  Classified online logins, biometric data and health information as protected information.  Informs groups how to notify the public of a data breach.


- House Bill 436: Amends the Victims’ Economic Security & Safety Act by mandating that employers provide unpaid work weeks of leave to any employee who is a victim of domestic or sexual violence or has a family member who is such a victim.  An employee working for an employer who employs 1-14 persons can be entitled to a total of 4 work weeks leave during any 12-month period.  For employers who employ at least 50 employees, such employees are entitled to 12 work weeks leave during a 12-month period.   The Bill does not create a right for additional leave that exceeds the unpaid leave allowed under or is in addition to unpaid leave time under the FMLA.


- Senate Bill 2804: Amends the Illinois Wage Assignment Act which allows employees to revoke a wage assignment at any time by submitting a written notice to the creditor.



Seventh Circuit Court of Appeals Rules That The Obligation
To Make Contributions Can Survive A De-Certification of a Union


This case is very fact intensive.  The employer, Cleveland Quarry, had a union agreement with the Operating Engineers Local 150, but in 2013 the employees voted in an election supervised by the NLRB to de-certify Local 150 as their collective bargaining representative.  Local 150 was de-certified and the employer stopped contributing to the Funds created under the collective bargaining agreement.  The Funds brought suit for payment of contributions from the date of the de-certification to the expiration of the collective bargaining agreement.  The Union agreement said in part “The employer’s responsibility to make contributions to the welfare plan shall terminate upon the expiration of this agreement.” 

Three district courts and the 7th Circuit Court of Appeals ruled in favor of the Plaintiff Funds, because the collective bargaining agreement made the employer’s obligation to contribute to the Funds survive the de-certification of the Union.  While the Union could not enforce the collective bargaining agreement, the Funds as third party beneficiaries could collect since the Funds were also entitled to enforce the agreement.   The court further noted that there is nothing in ERISA that makes the obligation to contribute depend on the existence of a valid collective bargaining agreement. 

Management negotiating teams should be prepared to respond to union proposals that “The employer’s responsibility to make contributions to the welfare plan shall terminate upon the expiration of this agreement.”



NLRB Signals Further Union Favor


On January 30, 2015, the United Government Security Officers of America, Local 365 filed a petition to represent the special police officers employed by Longwood Security Services Inc.  An election was conducted pursuant to a stipulated agreement which stated “each party may station an equal number of authorized, non-supervisory employee observers at the polling places to assist in the election.” Most stipulated election agreements contain such language.

However, on the day of the election, the employee designated to be the observer for the Union was not able to attend. A union official asked the Board agent conducting the election if he could substitute in as the observer. The Board agent refused based on the union officials non-employee status. The election resulted in 30-26 vote against the Union.

The NLRB’s case handling manual directs that “a union official should not serve as an observer unless he/she is also an employee of the employer.”

By split decision, the Board recently set aside the election and directed a second election.  The majority found that the agent did not follow proper procedure when he learned that the Union intended to use a potentially objectionable observer; the agent should have 1) advised the parties that the election might be set aside if it is later determined that the union official was unreasonable under the circumstances; and 2) allowed the election to proceed with the chosen observers. The Board found that the numerical imbalance in the number of observers was a material breach of the stipulated agreement.

The Dissent would have found that by preventing a high ranking Union official from serving as an observer, the Board agent furthered the important goal of protecting employees’ freedom of choice, while avoiding more substantive problems.

By overlooking its own case handling manual and the “non-employee” language stated in the stipulated election agreement, the NLRB appears to be favoring unions.



First District  Illinois Appellate Court Upholds Pay-If-Paid Clause


Since 1985, the enforceability of pay-if-paid clauses have been upheld under A.A. Conte v. Campbell-Lowrie-Lautermilch Corp., the seminal Illinois case on the issue, which held that payment to a subcontractor  may be conditioned on the receipt of payment by the general contractor (“GC”), where the agreement provides that the GC’s payment is an “unambiguous condition precedent” to the subcontractor’s payment. Condition precedents are generally disfavored in contract law, as is forfeiture of compensation. This interpretative principle, as well as public policy concerns, has left many waiting for the courts to find such clauses unenforceable.

 Pay-if-paid clauses transfer the risk of upstream insolvency to subs down the chain, effectively passing liability of an owner’s non-payment back to each contractor in the amount of their own work, i.e., subcontractors ultimately get stuck with most of the losses. Otherwise, the GC is forced to act as bank and essentially extend credit to the owner; if the GC is not paid by the owner, whether due to a dispute over the work, owner bankruptcy, or any other reason, the GC is still liable for payment to their subcontractors.

In the first published Illinois decision on the topic since 1985, Beal Bank Nevada v. Northside Center THC, LLC, the First District Appellate Court recently held that pay-if-paid clauses remain enforceable in contract if the payment condition is an unambiguous condition precedent to payment. The decision emphasizes not only that unambiguous language is a strict requirement of a pay-if-paid clause, but also the importance of clear language.


Absent plain language in the subcontract, the clause will likely be deemed a pay-when-paid clause, which merely governs the timing of payments rather than the ever more important obligation to pay. Thus, under circumstances such as owner insolvency, whether the GC is liable for payment to the subcontractor depends greatly on whether the pay-if-paid clause is clearly drafted.


A pay-when-paid clause governs the timing of a contractor’s payment obligation.  A typical clause might say: “contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.”  They do not excuse a contractor’s ultimate liability if it does not receive payment by the owner.


In contrast, a pay-if-paid clause  provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work.  A typical clause of this type might say:  “Contractors’ receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk.”     


GCs and subcontractors alike are encouraged to seek legal assistance when reviewing any contracts that may pose a concern, particularly where an owner has failed to make payment.



New Employee Privacy Laws


According to the newly amended Right to Privacy in the Workplace Act, effective Jan. 1, 2017, Illinois employers may be subject to fines and found guilty of a petty offense for asking, requiring or coercing employees to invite employers to join online groups of which the employee belongs.

In 2013, the Act was amended to prevent employers from requesting employees’ and applicants’ social media passwords on networking sites. Last summer, Governor Rauner approved the House Bill which extends protection beyond passwords, to usernames and personal online accounts, and further adds retaliation provisions.


The 2016 updates, effective January 1, 2017, prohibit employers from the following:

  • Asking, requiring or coercing employees or applicants to provide passwords or other account related information for accessing their personal online accounts;
  • Demanding access to employee’s and applicant’s personal online accounts;
  • Asking, requiring or coercing employees and applicants to authenticate or access their personal online accounts in employer’s presence;
  • Requiring or coercing employees and applicants to invite employers to join groups affiliated with their personal online accounts;
  • Requiring or coercing employees and applicants to join employers’ online accounts or add employers or employment agencies to contact lists for their personal online accounts; and
  • Retaliating against applicants or employees for refusing any of the above activities.

Illinois employers would be prudent to review and update their social media policies in accordance with the newly effective law, particularly those policies regarding employee use of personal accounts while on the job, inadvertent disclosures of personal information, and reporting requirements under the Act.




DECEMBER 2016


Inside This Issue​

1.    Update: Injunction to New OSHA Post-Accident Testing Rules Denied by Federal Judge


​2.    Judge Enjoins DOL FLSAOvertime Rule



Update: Injunction to New OSHA Post-Accident Testing Rules Denied by Federal Judge


Enforcement of OSHA post-accident drug testing and safety incentive rules had been delayed until December 1, 2016. OSHA agreed to the delay at the request of a federal Judge who was considering a lawsuit requesting injunctive relief from the new rules. The Judge recently issued a decision denying the request for injunctive relief. In light of the decision, OSHA has announced that the new rules will be enforced as of December 1, 2016. 
 
The Judge found that OSHA is merely placing limitations on practices that might discourage the reporting of accidents. Post-accident drug testing and safety incentive programs are not barred by OSHA’s new rules.

The rules require employers to establish reasonable procedures for employees to report work related injuries and illnesses. OSHA will issue citations for failing to provide such a procedure, or providing an unreasonable procedure. OSHA has indicated that requirements for “immediate” and “in person” reporting are unreasonable.

The rules further prohibit retaliation for reporting of work related illness and injury, focusing on three requirements: 1) that the disciplining of employees for safety violations be consistent, regardless of whether violations resulted in injury; 2) that drug testing only occur when there is an objectively reasonable basis for the testing, and should not be implemented where employee impairment could not have contributed to the cause of the injury; and 3) safety incentive programs should not be directly tied to injuries or illness.

For example, raffling off a $500 gift card each month in which no accidents have been reported, and cancelling the raffle for months in which there were accident reported, would violate section 1904.35(b)(1)(iv) because it would constitute adverse action against an employee simply for reporting a work-related injury. Whereas, raffling off a $500 gift card each month in which employees universally complied with all workplace safety rules would not violate the rule. Likewise, rewarding employees for participating in safety training or identifying unsafe working conditions, would not violate the rule.

It is important that employers check that policies and practices concerning drug testing and safety incentives have been reviewed and updated in light of OSHA’s new rules.For a full copy of the new Guidance please contact us.



Judge Enjoins DOL FLSAOvertime Rule


On November 22, 2016, U.S. District Court Judge Amos Mazzant III granted a nationwide preliminary injunction against the U.S. Department of Labor’s overtime rule. State of Nevada v. U.S. Dept. of Labor, No. 4:16-cv-00731-ALM (E.D. Tex. 11/22/2016).

The Court enjoined the rule’s December 1, 2016 implementation that would have changed the salary level to $913 per week for overtime-exempt executive, administrative, and professional white collar workers. That is more than double the amount of the current salary level.

The state plaintiffs had argued that the Department of Labor usurped Congress’ authority in establishing new salary thresholds. Finding that the Department had overstepped its bounds, Judge Amos Mazzant III wrote, “The state plaintiffs have established a prima facie case that the Department’s salary level under the final rule and the automatic updating mechanism are without statutory authority.”

The injunction could leave employers in a state of limbo for weeks, months and perhaps longer as injunctions often do not resolve cases and, instead, lead to lengthy appeals. Here, though, the injunction could spell the quick death to the new rules should the Department choose not to appeal the decision in light of the impending Donald Trump presidency. We will continue to monitor this matter as it develops.The last-minute injunction puts some employers in a difficult position, though — those that already implemented changes in anticipation of the new rules or that informed employees that they will receive salary increases or will be converted to non-exempt status effective December 1, 2016. Issues regarding reversing salary increases, or delaying same, and providing notice to employees, should be dealt with carefully and under advise of legal counsel.


Law Offices of Stanley E. Niew, P.C. and its Staff

Wish you a wonderful Holiday and a New Year of Health, Happiness,Peace and Prosperity!
 




NOVEMBER 2016


****BULLETIN – HIGHLY IMPORTANT****
****(PLEASE READ BELOW)****


OSHA Delays Enforcement of New Regulations
For A Second Time



Earlier this year OSHA announced new regulations which limit post-accident drug testing, virtually outlawed all safety related incentive plans and required additional notifications to employees.  The regulations were to go into effect on August 10; however, the regulations were delayed to November 1.  In response to a federal judge’s request in Texas, OSHA again has agreed to delay enforcement until December 1, 2016

The portion of the new rules relating to electronic filing of Forms 300, 300A and 301 are not affected by this delay. 

We will keep you posted as to any other developments




October 2016


Inside This Issue​


1.    “Pay-When-Paid Clause” Versus “Pay-If-Paid Clause”

2.    NLRB Revises Damages Available to Discriminatees

3.    Sexual Orientation Discrimination Not Prohibited by Title VII

4.    Implied In Fact Contracts



“Pay-When-Paid Clause” Versus “Pay-If-Paid Clause”


Under the 1985 case of A.A. Conte, an Appellate Court in the 1st District concluded that the parties’ subcontract “clearly make the receipt of payment from the [property owner] to [the Contractor], the condition precedent to [the Subcontractor’s} payment.” Thus, the concept of “pay when paid clauses” was found to be lawful and enforceable in Illinois.

In the case of Beal Bank Nevada v. Northshore Center, decided on September 30, 2016, the court carved out a distinction between “pay when paid clauses” and “pay if paid clauses.” The Beal Bank court was unwilling to extend the A.A. Conte case “without clear language indicating the parties’ intent that the subcontractor would assume the risk of non-payment by the owner.” A “pay-when-paid clause” governs the timing of the contractor’s payment obligation to the subcontractor within a fixed time, but in contrast a “pay-if-paid clause” provides that a subcontractor will be paid only if the contractor is paid provided the contract has language such as “Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk." [1]

The court seems to have relied upon upon language in the subcontract agreement to the effect that “contractor agrees to pay subcontractor within seven days after receipt of payment from the owner.” The court refused to overturn A.A. Conte, but distinguish it on its facts and went on to say there are no “magic words” when making a determination of the parties’ intent from clear and ordinary language in a subcontract agreement. The court indicated it would review such disputes on a “case-by-case” basis.

Under Brown & Kerr v. St. Paul Fire, a Federal court interpreting Illinois law ruled that a “pay when paid clause” did not preclude payment under a surety bond when the subcontractor had satisfactorily performed but was not paid. The Illinois Mechanics’ Lien Act also provides in part, that “[a]ny provision in a contract, agreement or understanding, when payment from a contractor to a subcontractor or supplier is conditioned upon receipt of the payment from any other party including a private or public owner, shall not be a defense by the party responsible for payment to a claim brought… against the party.”


In sum, the Beal Bank case is the law in the 1st Appellate District in Cook County; however, there is no assurance that it will be followed in other Illinois appellate districts. [2] Contractors and subcontractors are advised to carefully look at their construction agreements under the holding in Beal Bank.


Footnotes:

[1] The Beal Bank court was quoting from a federal case which is not binding on Illinois courts.

[2] Trial courts in other appellate districts must follow the Beal Bank and A.A. Conte decisions until another appellate court rules differently.


NLRB Revises Damages Available to Discriminatees


In August the National Labor Relations Board (“Board”) overruled its longstanding policy that treated expenses as offsets to interim earnings rather than a make-whole remedy for someone who was unlawfully fired.


By example, Perez worked at a remote location earning $1,000 per month prior to her unlawful discharge. During the month following discharge, Pere spent $500 traveling to different locations looking for work. Perez could only find interim employment in another state that paid $750 per month. Perez moved to the new state to be closer to her new job and was also required to obtain training for her new position, costing her $5,000 and $500, respectively. Under the Board’s traditional approach, Perez would receive compensation for only $1,500 of her $6,000 expenses, far less than make-whole relief. Under King Soopers the make-whole remedy to a discriminatee will now include all search for work costs and interim expenses regardless of whether those expenses exceeded interim earnings.


In another 2016 case the Board ruled in Advo Serv of New Jersey that employers must compensate employees for the adverse tax consequences of receiving lump sum back payment awards. 


There are also cases pending before the Board requesting consequential damages as a result of being terminated in violation of the NLRA. A make whole remedy for loss of earnings suffered as a result of unlawfully withheld wage increases requires a payment of interest compounded daily.

These cases illustrate the need for training supervisors and managers on how to avoid committing unfair labor practices. We offer such training programs. To inquire about a training program or schedule a training program, contact our office.



Sexual Orientation Discrimination Not Prohibited by Title VII


​​In a recent case alleging employment discrimination of a lesbian employee, The 7th U.S. Circuit Court of Appeals found that it was bound by its prior rulings concerning the scope of Title VII of the Civil Rights Act of 1964. The Court opined, “our precedent has been unequivocal in holding that Title VII does not redress sexual orientation discrimination … our holdings[] reflect the fact that despite multiple efforts, congress has repeatedly rejected legislation that would have extended Title VII to cover sexual orientation.”


The Court went on to note the emerging consensus among judges that sexual orientation discrimination cannot be tolerated. Inasmuch, the 7th Circuit has signaled that such an expansion of protection will require new legislation.



Implied In Fact Contracts


In Trapani Construction v. Elliot Group, an Illinois appellate court ruled that contracts implied in fact arise from promissory expression that show the parties’ intent to be bound as inferred from the facts. Here the Plaintiff was paid in excess of $18 million dollars by Defendant for construction work on other projects performed under unsigned draft contracts. The Defendant cannot deny a contract implied in fact based on the history of working together in the past under the same unsigned contracts.


September 2016


Inside This Issue​

1.    Construction Companies Must Assess Risks When Contracting For Labor Only Under New NLRB Decision

2.    NLRB Announces New Joint Employer Test

3.    Employee Benefits – Breach of Contract vs. Negligent Administration of Employee Benefits

4.    Representation Election Highlights NLRB Pro-Union Posture


5.    Grieving Parents Now Entitled to Leave Under Illinois Law



Construction Companies Must Assess Risks When Contracting For Labor OnlyUnder New NLRB Decision


In Miller & Anderson, a case decided in July 2016, the National Labor Relations Board (“NLRB”) ruled that “bargaining units that combine employees who are solely employed by a user employer and employees who are jointly employed by that same user-employer and an employer supplying employees to the user employer constitute multi-employer units,” which are appropriate without the consent of either the user-employer or the supplying employer.


What does the decision mean as a practical matter?  For example, if Employer A uses a temporary construction service (Employer B) and a union wins an election as to Employer B, the employees of Employer A may be part of the bargaining unit.[1]  Thus if the union wins the election, the employees of  both Employers A and B may be subject to the election conducted by the NLRB for employees of Employer B.  This decision will routinely apply wherever temporary workers are used to supplement a regular workforce. 


Another concern that is common in the residential construction industry is for a builder-developer to contract for only labor and to purchase all the materials.  Under this decision the supplier of labor can have an election before the NLRB and, if the union wins the election, it may include builder-developer employees who have a community of interest.  How this would play out in practical terms is that if the builder-developer has jobsite employees who move cabinets and other materials, those employees would be subject to being included in the unit of the labor supplier.  Taking this decision to its extreme, even if the builder-developer had no employees, it could now have a bargaining relationship with the union.  This would be particularly true for the labor supplier of carpenters or laborers.[2] 


All contractors are encouraged to re-visit their existing practices and contracts to best minimize the risk associated with this decision.  Contractors are encouraged to read the next article which also has implications on this decision.

Footnotes:

[1] Employers can challenge the appropriateness of the unit before an election by a unit clarification petition.
[2] Note that the Laborers Union in this area has taken the position that it will represent carpenter employees in the unit so long as the carpenter employees want to be represented by the Laborers.
  



NLRB Announces New Joint Employer Test


Joint employer status allows one employer to be found liable for the debts and obligations of another employer under the theory that they are a “joint employer.”   In the Browning-Ferris of California decision, the NLRB greatly expanded the definition of a joint employer.   The new standard only requires potential control of terms or conditions of employment even if that right is not exercised.  Direct and immediate control is no longer the standard for becoming a joint employer.  


Contractors are encouraged to look at their contracting arrangements and consider removing any and all control over the operations of another contractor.   This is especially important in light of the Miller & Anderson decision in the prior article.  While there are no current cases that we could find that would extend these decisions to the Equal Opportunity and Wage and Hour laws, there will likely be a logical extension to these laws. 


Restructuring operations and business practices need to be considered in light of the NLRB’s continued assault on what was considered “black-letter” employer-employee law.



Employee Benefits – Breach of Contract vs. Negligent Administration of Employee Benefits


In a recent U.S. District Court case, at issue was the extent to which employee benefits liability coverage exists for the insured for negligent conduct in the administration of an employee benefits program.


The case involved a retired lawyer who alleged violation of the Illinois Wage Collection and Payment Act (“Wage Payment Act”) and Breach of Contract when his former law firm refused payment of $951,000 in accrued vacation time and sick time.


The law firm had claims made coverage from Hartford Casualty Insurance Co. for employee benefit liability based on negligent administration of benefits. Hartford denied the claim and filed a complaint for declaratory judgment, claiming a breach of contract claim is not a negligent act claim, thus barring benefit liability coverage. The district court agreed with Hartford and granted its motion for summary judgment.


The court explained that Hartford’s coverage was on a claims-made basis which provided that Hartford would pay damages for which the insured became liable because of an “employee benefits injury.” It covered the insured’s negligent administration of an employee benefits program which is not a contract claim.


The court found the claim for accrued vacation and sick time was a claim for breach of contract and not a claim for negligent act, and that the claim citing the Wage Payment Act sounds in contract and not negligence. The Court further noted that “[t]he policy provides coverage for negligent errors or omissions only, and does not provide coverage for breach of contract, even when that contract may involve an employee benefit program.”


At first glance, a breach of contract might seem to qualify as negligent administration of employee benefits. The recent holding illustrated the Court’s limited reading of contractual language in an insurance policy. It would be wise to consult with a lawyer if you have any questions regarding the scope of coverage under a company’s insurance policy.



Representation Election Highlights NLRB Pro-Union Posture


In early 2012, the Steelworkers Union sought to represent Intertape Polymer Corp.’s production and maintenance employees. The Board conducted a secret ballot election among Intertape employees and Intertape won by a wide margin of 142 to 97.


The Steelworkers claimed that Intertape interfered with the election by 1) surveilling employees’ union activities, and 2) on 3 occasions a month before the election, removing pro-union literature from the employee break room.


In 2014, a NLRB majority sustained the Steelworkers objections, overturned the election results and ordered a rerun election, ruling that Intertape interfered with the employees ability to exercise their free choice. The dissent noted “it is not possible to conclude that Intertape affected the lopsided outcome of this election by expediting the cleanup of a break room.”


Intertape appealed the Board’s decision to the 4th U.S. Circuit Court of Appeals in September, 2015. The appeals court found that Intertape’s confiscation of material from the break room was illegal, but refused to sustain the NLRB’s finding that any unlawful surveillance occurred. The court remanded the case to the Board to determine if a new election was still needed, based on the appellate court overruling one of the bases for ordering a new election. On remand, the Board again ruled for the Union and required a second election, and remanded the case to the regional director for further proceedings.


This case is another clear indication of the NLRB’s pro-union stance. When confronted with review by the NLRB, employers should bear in mind that the NLRB may not provide them a fair shake.



Grieving Parents Now Entitled to Leave Under Illinois Law


An Illinois law that became effective July 29, 2016 requires employers with 50 or more employees to provide two weeks unpaid bereavement leave to attend a funeral of a child, making arrangements for a funeral or just grieving the death of a child.  “Child” is broadly defined as biological, adopted, foster child, stepchild, legal ward or child of a person standing in loco parentis.  Employers can request documentation.  


Employers should consider amending their leave policies that the bereavement leave should run concurrently with FMLA leave.  Since there are no regulations published, we cannot say with certainty if this would be permissible.  At this time, no poster is required. 


For a copy of the law, email or call us.



July 2016

Inside This Issue


1.    OSHA’S New Regulations Dramatically Affect All Employers’ Safety Policies and Require Some Policies to be Terminated

       While Some Must be Re-Written  ***HIGHLY IMPORTANT – READ IMMEDIATELY***    


2.    So You Think You Can Replace Strikers Permanently Under Any Conditions:  THINK AGAIN


3.    Consider if Your Company is a Joint Employer

4.    Single-Employer Doctrine Reaffirmed as Defense by 7th​ Circuit



***OSHA’S New Regulations Dramatically Affect All Employers’ Safety Policies and Require Some Policies to be Terminated While Some Must be Re-Written***


****HIGHLY IMPORTANT****
OSHA DELAYS ENFORCEMENT OF NEW REGULATIONS
*** Following Up on our July Newsletter***


OSHA announced that it is delaying the enforcement of the Regulations which were to become effective August 10, 2016 until November 1, 2016.  This was in response to a lawsuit filed in Texas.

The increase in fines, however, remain in effect.

- Stan Niew


OSHA issued new safety regulations which become effective August 10, 2016.  The regulations are 72 pages long, single space, three columns to a page with seemingly hundreds of exhibits.  The regulations are intended to stop under-reporting of injuries by employees.  A summary of the key provisions are outlined below:

1.    Post-Accident Drug Testing Now Permissible In Limited Circumstances

Virtually every employer drug tests immediately after an injury.  OSHA believes that blanket post-accident testing policies deter proper reporting of injuries.


Post-accident testing is now limited.  Under OSHA’s new standard employers need not specifically suspect drug use before testing “but there should be a REASONABLE POSSIBILITY that the drug use by the reporting employee was a CONTRIBUTING FACTOR to the reported injury.”  OSHA also believes that drug testing that is designed in a way that it may be perceived as punitive or embarrassing to the employee is likely to deter injury reporting. 


A policy that requires immediatereporting of an accident or injury violates the new regulations.  Each employer must amend their drug testing policies to provide an employee a reasonable time to report an injury once an employee actually knows of the injury.  Drug policies must take into consideration slow growing illnesses. 


Every employer must revise their policies to comply with this standard before August 10, 2016.  The only exception to the rule is post-accident testing required to comply with State or Federal law. 

2.    New standards require notification to Employees of their Rights 

Effective August 10, 2016 all employers must adopt a policy which informs all employees of their right to report work-related injuries and illness; modify existing policies for reporting work-related injuries to be reasonable and not to deter or discourage employees from reporting injuries; and incorporate in the policy anti-retaliation provision for employees who report work-related injuries and illnesses. 

3.    Most Safety Related Incentive Plans Unlawful

OSHA takes the position in the new regulations that incentive programs for safety cause employees not to report injuries.  OSHA specifically mentions incentive programs that are now unlawful such as: 

  • entering employees who have not been injured in the previous year in a drawing to win a prize;
  • employee team bonuses for team member, uninjured for a period of time;
  • bonuses for foremen and supervisors for no lost days in a period;
  • company program giving an incentive of $1500 only if zero recordable injuries.


      Safety programs that are permissible:

  • giving t-shirts for participating in safety committee;
  • incentive programs that promote worker participation in safety-related activity such as identifying hazards;
  • modest rewards for suggesting ways to strengthen safety;
  • supervisor incentive plan that covers multiple jobsites and is coupled with other non-safety related incentive plans.  Employers must do an analysis to determine that the program will not cause underreporting.


4.    New Reporting Requirements
The new rule requires an electronic reporting of employer records.  Companies with 250 or more employees must submit Forms 300, 300A and 301 to OSHA on an annual basis.  Companies with 20 or more employees, but less than 250, must electronically file Form 300A annually. 

5.    Recommended Action

  • Prior to August 10, prepare and adopt a policy that informs employees of their rights as stated in paragraph 2 above. 
  • Revise all drug testing policies prior to August 10.  If that deadline is impossible to meet, suspend your current policy until a new policy is adopted.
  • Evaluate all safety incentive plans and immediately suspend all incentive plans that violate the new regulations.


Compliance will not be easy and it will take you and your staff valuable time to comply.

 We can assist you in developing such a policy.  Just call or email Stan Niew since certain company information is needed.



So You Think You Can Replace Strikers Permanently Under Any Conditions:  THINK AGAIN


The law has been clear since the passage of the National Labor Relations Act that employers may permanently replace economic strikers at any time, for any reason. 


On May 31, 2016 in a 2 to 1 decision, the National Labor Relations Board (“NLRB”) ruled that economic strikers may not be replaced if there is an “independent, unlawful purpose” for doing so.  In the American Baptist Homes case, the NLRB found that the employer was replacing workers “to punish the strikers” and show the union that it should “avoid future strikes.”  The NLRB said that these are two independent, unlawful purposes, are now impermissible.   The NLRB reasoned that the independent, unlawful purposes were to break union solidarity and punish a majority of the striking workers.  Thus, the employer’s motive has become a material factor in determining whether replacing economic strikers amounts to an unfair labor practice. 


Hopefully this decision will be appealed and overturned by a federal appellate court. 

Now, employers must analyze if there is a business justification for permanently replacing economic strikers. Reasons may include termination from the project, delay damages or loss of future work with the particular client.



​Consider if Your Company is a Joint Employer


The National Labor Relations Board (“NLRB”) and the U.S. Department of Labor (“USDOL”) are actively looking to Joint Employer complaints.

Joint Employment – General Principles

A single individual may be simultaneously considered an employee of more than one employer under the Fair Labor Standards Act (“FLSA”).  In such cases, the employee’s work for the joint employers is considered as one employment for purposes of the Act.  Joint employers are individually and jointly responsible for FLSA compliance, including paying not less than the minimum wage for all hours worked during the workweek and, if applicable, overtime compensation for all hours worked over 40 in the workweek.  29 C.F.R. 791.2(a).  A determination of whether joint employment exists must be based upon all the facts of the particular case.  For instance, two employers may both supervise the same employee or one may hire and set the pay rates while another has authority to supervise or fire the worker; both scenarios may represent a joint employment relationship.

As a general example, workers sent by a cleaning company to a client-hotel to clean hotel rooms may be jointly employed by both the cleaning company and the hotel.  Similarly, a private agency, non-profit organization, or public entity that hires a home care worker to provide services in an individual’s home may be a joint employer with the individual (or family or household member of the individual).

Determining Joint Employment

Joint employment is determined by applying the “economic realities” test, which examines a number of factors to determine whether a worker is economically dependent on a purported employer, thus creating an employment relationship.  Factors to consider may include whether a possible employer has the power to direct, control, or supervise the worker(s) or the work performed; whether a possible employer has the power to hire or fire, modify the employment conditions or determine the pay rates or the methods of wage payment for the worker(s); the degree of permanency and duration of the relationship; where the work is performed and whether the tasks performed require special skills; whether the work performed is an integral part of the overall business operation; whether a possible employer undertakes responsibilities in relation to the worker(s) which are commonly performed by employers; whose equipment is used; and who performs payroll and similar functions.  Other factors also may be considered and no one factor is controlling.  The ultimate question is one of economic dependence.

The NLRB has slightly different standards that will be discussed in our next newsletter.



Single-Employer Doctrine Reaffirmed as Defense by 7th Circuit


The U.S. Court of Appeals for the 7th Circuit recently ruled that a District Court erred in granting summary judgment to a union pension fund seeking fringe benefit contributions under Labor Management Relations Act and ERISA. Plaintiff-union, Chicago Regional Council of Carpenters fringe benefit funds (the “Funds”), alleged the Funds were owed by Schal Bovis, Inc., (defendant-employer) for failure to make fringe benefit payments for construction work performed by non-union labor and by sheet metal workers.

Ultimately, the appeal boiled down to 2 issues regarding 2 separate claims under the collective bargaining agreement (“CBA”). The CBA required the defendant-employer to track hours and pay fringe benefits for “jurisdictional work” performed by non-union subs.


The first claim involved the installation of cabinetry, undisputedly within the Union’s jurisdiction. Defendant contracted a non-union sub, Canac, who in-turn used its union labor-sister company, Qualifit Kitchens, to perform the work. The Court of Appeals held that Canac and Qualifit Kitchens were a single employer under the single-employer doctrine, and thus, the general contractor did not violate the CBA by assigning work to Canac. 


However, under the CBA the Union also agreed “not to interfere with the existing practices of other unions affiliated with the building trades.”  The second claim involved the jurisdictional work of installing stainless steel kitchen equipment. Defendant subcontracted the work to Edward Don who subcontracted RB Hoods, which was a union signatory with the Sheet Metal Workers. RB Hoods used union labor from the Sheet Metal Workers and paid fringe benefits to the Sheet Metal Workers. The Court of Appeals held that the general contractor’s retention of sheet metal workers to install stainless steel kitchen equipment did not violate the CBA’s provision governing the union’s jurisdiction.



JUNE 2016


Inside This Issue​

1.    EEOC Continues to Expand the Boundaries of Title VII    

2.    USDOL Overtime Rule Change Effective December 1, 2016

3.    Can Schoolyard Type Bullying Be Applied to the Workplace?

4.    NLRB Carves Out “Shop Talk” Exception to Anti-Harassment Policies



EEOC Continues to Expand the Boundaries of Title VII


Title VII of the Civil Rights Act of 1964 is the federal statute prohibiting discrimination in the workplace. Earlier this year, the Equal Employment Opportunity Commission (EEOC) filed two suits alleging discrimination based on employees’ sexual orientation in violation of Title VII.  However, unlike race, gender and other characteristics, sexual orientation is not expressly protected under Title VII. The EEOC posits that such discrimination is nonetheless prohibited by Title VII based on the theory that discriminating against Lesbian Gay Bisexual Transgender (LGBT) employees constitutes sex discrimination.

The EEOC had not previously alleged sexual orientation discrimination in litigation, although its position has been clear for years. The EEOC’s most recent Strategic Enforcement Plan for fiscal years 2013-16 combating discrimination against LGBT individuals is one of its “national priorities.” Additionally, last July the EEOC issued a federal agency sector decision which concluded that sexual orientation discrimination fell within the purview of Title VII. The EEOC reports a 28% increase in sex discrimination charges filed in fiscal years 2014 to 2015.


Illinois is one of 22 states which already prohibits sexual orientation discrimination by state law. However, the EEOC’s recent litigation should warn employers to expressly prohibit sexual orientation and gender identity discrimination in their written policies. Similarly, supervisors should be trained to recognize and deal with comments and situations which could be construed as disparaging to LGBT employees.



USDOL Overtime Rule Change Effective December 1, 2016

The U.S. Department of Labor (USDOL) recently announced that rule changes proposed last year will become effective on December 1, 2016. Since 1940, the USDOL’s regulations have generally required each of three tests to be met for one of the Fair Labor Standards Act’s “white collar” exemptions to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations. The new rule includes the following key changes to the current overtime rules, which focus primarily on the compensation levels needed for executive, administrative and professional workers to be exempt:

  1. The standard salary level will change from $455/week to $913/week; This change in minimum annual salary changes from $23,600 to $47,476 (The new standard salary level is set at the 40th percentile of earnings of full-time salaried workers in the lowest wage census region – currently the South);
  2. The total annual compensation requirement for highly compensated employees overtime exemption, subject to a minimum duties test, will be raised from $100,000 to $134,004 (Set at the equivalent of the 90th percentile of full-time salaried workers nationally).  The minimum duties test requires employees customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee identified in the standard tests for exemption.
  3. The new rule establishes a mechanism for automatically updating the salary and compensation levels every three years, beginning on January 1, 2020, to maintain the equivalent percentile levels.


The USDOL blog provides the following options for employers to consider in light of the new rule:

  1. Raise employee salaries to the new threshold in order to keep them exempt from overtime compensation eligibility;
  2. Instead of raising salary, reclassify current exempt employees as non-exempt, and pay time-and-a-half their weekly regular rate of pay for overtime work;
  3. Leave the employee at his/her current salary, and pay the employee time-and-a-half for hours in excess of 40 hours in any work week;
  4. Limit workers to 40 hours of work per week;
  5. Evaluate and realign hours and staff workload in an attempt to make working overtime unnecessary.


​​

Can Schoolyard Type Bullying Be Applied to the Workplace?

According to the Workplace Bullying Institute, bullying is defined as:

“Workplace bullying is repeated, health

harming mistreatment of one or more

persons (the targets) by one or more

perpetrators.  It is abusive conduct that

is:  Threatening, humiliating, or

intimidating, or; work interference-

sabotage which prevents work from

getting done, or; verbal abuse.”


Examples of bullying behavior can include hovering over employees, social isolation, being sworn at, constant blame without facts, micromanaging or unrealistic work deadlines.  While the list is not all encompassing, it is designed to provide employers with examples of bullying.  Thus far, there is no Illinois Statute or case law which expressly makes bullying  illegal harassment.  However, other states have adopted anti-bullying statutes which deem bullying as illegal harassment and provide employees damages.  Absent the statute, this can be a one-on-one cause of action for intentional infliction of emotional distress.  In Illinois such claims may be covered under the Worker’s Compensation Act.

Employers may wish to revise their policies to include bullying as a form of harassment.



NLRB Carves Out “Shop Talk” Exception to Anti-Harassment Policies


Nearly all employers have anti-harassment policies which prohibit profanity in the workplace directed to a fellow employee or a manager.  Most of these policies prohibit repeated infliction of verbal abuse, derogatory remarks, insults or physical contact that a person would perceive as threatening. 

In a series of cases, the NLRB carved out the “shop talk” exception which permits profanity and shouting in the workplace in limited circumstances. By way of example, two waitresses engaged in a profane shouting match with a third waitress in front of customers and management.  In this case the NLRB reversed the employer’s termination of the two waitresses who engaged in the profane shouting match.  Similarly, a barista who was off duty became engaged in a heated conversation with a manager making obscene comments in the presence of customers.  Again the NLRB reversed the firing of this barista.    In another case the NLRB reversed the discipline of employees involved in screaming profanities at each other to managers and to co-workers. 

It is very difficult to square these NLRB cases with required anti-harassment policies.  The only explanation is managers were involved.  Without managers being involved, the results may have been different.  The conclusion is employers are cautioned not to fire every abusive employee under a harassment policy without considering the “shop talk” exception. Always check with competent legal counsel.



MARCH 2016


Inside This Issue​

1.    Restrictive Covenants Limited

2.    Corporate Directors Can Be Held Personally Liable

3.    Severance Pay In Turn For Release of Waivable Title VII Claims

4.    Same-Sex Marriages Affect Benefits And Obligations


​5.    Equal Pay Act Expands In 2016



Restrictive Covenants Limited


A financial planner resigned from one company and began working in the same position at another firm.  His previous employer filed suit against him and his current employer alleging breach of restrictive covenant.  Restrictive covenants attempt to keep former employees from competing against their former employer in their new employment. The former employer asked a DuPage County judge to enter a temporary restraining order (which in essence enforces the restrictive covenant), which was denied.  The trial judge said he did not believe the former employer could succeed on the merits absent factual assertions that the financial planner used confidential information, engaged in former client solicitation or rendered financial advice to his former employer’s customers.  The trial judge’s opinion was affirmed by the Second Illinois Appellate District. 


Note that this case arose under an employment relationship.  If the restrictive covenant was part of a sale of a business, the result may be different.



Corporate Directors Can Be Held Personally Liable


A 25 year director and General Counsel of an international products manufacturer for hospitals was found to be individually liable.  In this case the Company was subject to the Foreign Capital Practices Act (“FCPA”) which outlaws bribery and demands certain record keeping.  The Company previously entered a consent decree admitting they bribed officials in Vietnam, Thailand and Russia and paid $55 million in fines.

Approximately three years after paying the fines the General Counsel noted there was no documentation for Chinese sales so he hired an outside law firm to investigate.  The law firm found no evidence of bribery.  However the General Counsel was concerned that the lack of record keeping alone violated the FCPA.  The General Counsel tried to obtain records from the CEO and CFO without success.  The General Counsel suspected that the CEO and CFO were complicit in some bribery and he took the matter to the Company’s Board of Directors audit committee.  The audit committee recommended again engaging the outside law firm to investigate.  The General Counsel objected to hiring the outside law firm because another finding of improper conduct would demonstrate the Company’s  failure to uncover FCPA violations for three years. 

Thereafter, the CEO, with the approval of the full Board, fired the General Counsel and he promptly filed a complaint under Sarbanes-Oxley Act which protects whistleblowers.  The federal district court noted that there is no case in which the question of whether individual directors can be sued under the whistleblower provisions.  The General Counsel was found to be personally liable because he blew the whistle only internally and not to the SEC. 

The district court case is now on appeal.



Severance Pay In Turn For Release of Waivable Title VII Claims


The EEOC sued CVS Pharmacy alleging that CVS’ practice of offering terminated employees severance pay in return for release of waivable Title VII claims complied with CVS’ requirement that employees agree not to file EEOC charges in the release and severance agreement was unlawful.  According to the EEOC, CVS’ actions served to deter other employees from filing EEOC charges or participating in EEOC proceedings.  

The district court dismissed the case because the EEOC failed to make any effort to conciliate the claim prior to bringing the lawsuit.  More importantly, the trial court said the EEOC complaint should be dismissed because there is no allegation that CVS engaged in any discriminatory or retaliatory conduct.   The Appellate Court agreed and affirmed the trial judge. 

Both the EEOC and the NLRB have taken the position that waiving the right to file a charge at either agency is unenforceable.  Other litigation is likely.



Same-Sex Marriages Affect Benefits And Obligations


​Last June, the U.S. Supreme Court ruled that the fundamental right to marry is guaranteed to same-sex couples by both the Due Process Clause and the Equal Protection Clause of the U. S. Constitution’s 14th Amendment.

Since same-sex marriage is now legal under federal law, many employers are eliminating domestic partner benefits. As a result, same-sex couples must become formally married to obtain the same coverage for a partner. Same-sex spouses will be afforded the federal benefits of COBRA continuation and, in Illinois, the benefits provided under the Illinois Spousal Health Insurance Act.

Same-sex spouses are now also afforded all the social security benefits granted to heterosexual spouses. During a divorce, same-sex spouses may be entitled to these benefits. Likewise, same-sex spouses paying alimony or child support may deduct those amounts on their federal income tax returns.

Additionally, retirement plans now must recognize same-sex spouses for  spousal benefits -- as they are generally governed by federal law. Pursuant to IRS and Labor Department guidance, employer sponsored 401(k) and pension plans must include same sex marriages and shall apply benefits retroactively. Same-sex couples should confirm with their spouse that they are the beneficiary of their retirement plans.



Equal Pay Act Expands In 2016


The Illinois Equal Pay Act of 2003 generally prohibits employers from discriminating between employees on the basis of sex. The Act specifically prohibits paying wages at a rate not less than the rate at which employees of the opposite sex are paid for the “same or substantially similar” work on jobs that require equal skill, effort and responsibility under similar conditions.


Effective January 1, 2016, the Act applies to all employers, whereas it previously only applied to employers with four or more employees. The definition of “Employer” is expansive under the Act, and includes “an individual, partnership, corporation, association, business, trust, person, or entity for whom employees are gainfully employed in Illinois.”


Certain exceptions to the equal pay requirement include seniority systems, merit systems, systems that measure earnings by quantity or quality of production, or differential based on any quality other than sex or a factor that would constitute unlawful discrimination under the Illinois Human Rights Act, i.e., race, color, religion, national origin, ancestry, age, order of protection status, marital status, citizenship status, physical or mental disability, military status, sexual orientation, pregnancy, or unfavorable discharge from military service.


The amended Act provides a tiered layer of penalties ranging from $0 to $5000 per violation based on number of employees and previous violations. Further, employees may recover in a civil action the entire amount of the underpayment with interest, costs and reasonable attorney fees. 


The Act further provides that it is unlawful for an employer to interfere with, restrain, deny or attempt to deny the exercise of any right, as well as to discharge or discriminate against an individual for inquiring about, disclosing, comparing or otherwise discussing the employee’s wages or the wages of any other employee or aiding or encouraging any person to exercise his or her rights under the Act. In short, employees are free to discuss the issue of wages – their wages and the wages of other employees.


All employers would be prudent to draft job descriptions for employee positions  to ensure employers are paying employees wages according to job responsibilities, seniority and applicable exceptions under the Act regardless of sex and the other factors prohibited under the Illinois Human Rights Act.



February 2016


Inside This Issue​

1.    How Employers Can Lose an ADEA Claim

2.    Reverse Discrimination Suit Theory is Viable Cause of Action


3.    To Defeat an Unemployment Insurance Claim an Employer Must Show That it Has a Rule or Policy That Was Violated

4.    Illinois Supreme Court Rules That Subcontractors Are Not Covered by Valid Disclaimers of Implied Warranty of Habitability


​5.    ADA Causation Standard Remains an “Open Question” in the 7th Circuit


​6.    NLRB Decision Leads to Confusion About Workplace Recording



How Employers Can Lose an ADEA Claim


In Bordelon v. Bd. Of Education of the City of Chicago, the 7th Circuit Court of Appeals affirmed a plaintiff-employee claim for age discrimination under the Age Discrimination in Employment Act (“ADEA”).  The plaintiff-employee alleged that the defendant-employer influenced a decision maker to not renew plaintiff’s contract as principal of grade school on account of his age.  The decision maker based his decision to not renew plaintiff’s contract on low test scores of students and disciplinary problems.

The plaintiff-employee failed to demonstrate that defendant’s reasons for non-renewal were "not worthy of belief.”  The Appellate Court did not sustain plaintiff’s claim even though the plaintiff’s supervisor said to “give it up.”  This alone was not evidence of age discrimination since the supervisor did not mention age.

Plaintiff’s witnesses’ general observations that the supervisor wanted someone younger and that the supervisor gave less support to other school principals did not give rise to intentional discrimination.



Reverse Discrimination Suit Theory is Viable Cause of Action


In Deets v. Massman Construction Co., the U.S. Dist. Ct. S.D. Illinois ruled in favor of defendant-employer and granted summary judgment for the employer.  The 7th Circuit Court of Appeals reversed the district court.  The plaintiff-employee brought a Title VII reverse discrimination case alleging that he was laid off from his construction job on account of his white race.  The project superintendent allegedly told plaintiff that reason for layoff was because “[m]y minority numbers aren’t right.”  Record showed that defendant hired minority worker to position plaintiff had previously held shortly after plaintiff’s layoff.   Although project superintendent denied making such statement, the factual conflict over what would be direct evidence of discrimination could not be resolved on summary judgment motion.


The Appellate Court also found existence of sufficient circumstantial evidence of race discrimination, where, in addition to alleged statement by project superintendent, the record suggested that project superintendent knew at time of plaintiff's layoff that defendant was out of compliance with its minority participation goals.



To Defeat an Unemployment Insurance Claim an Employer Must Show That it Has a Rule or Policy That Was Violated


In Petrovic v. The Department of Employment Security (February 4, 2016, Cook Co.), an employee worked as a tower planner at O’Hare, employed by airline for nearly 24 years when she was terminated.  Employer claimed misconduct because employee, upon request from a friend at another airline, arranged for upgrade of passenger from business class to first class and for a bottle of champagne to be delivered to that passenger.  IDES denied Plaintiff’s application for unemployment benefits on basis that she was discharged for misconduct.


This case does not involve illegal or intentionally tortious conduct.  The Appellate Court required evidence of a deliberate rule violation.  The employer failed to offer any evidence of a rule or policy prohibiting employee from the actions taken, and employee testified that special favors of this type had been done previously for customers.


The Illinois Supreme Court ruled the employer failed to meet its burden of proving that Plaintiff was discharged for misconduct under Section 602(A) of the Unemployment Insurance Act.



Illinois Supreme Court Rules That Subcontractors Are Not Covered by Valid Disclaimers of Implied Warranty of Habitability


In Board of Managers of Park Point at Wheeling Condominium Association v. Park Point at Wheeling, LLC, a Condo association filed suit against various parties involved in design, construction and sale of a condo complex completed in 2004.  All defendants were alleged to have breached the implied warranty of habitability by incorporating latent defects into units and common elements.  The disclaimer met the criteria of an effective disclaimer, in part, because it was brought to each buyer’s attention by being conspicuous in the parties’ contract.  The lower courts erred in dismissing counts as to subcontractors who do not come within the scope of the written warranty disclaimer.   The lower courts properly dismissed counts as to developer-seller, and as to architect.


The Illinois Supreme Court ruled that the disclaimer of implied warranty of habitability was valid as to the developer since the disclaimer was conspicuous in bold type and buyers’ initialing the clause was unnecessary.  The lower courts dismissed the general contractor and the subcontractors from the suit based upon the disclaimer.  The Illinois Supreme Court reversed and ruled that since the subcontractors were not specifically mentioned in the disclaimer, the subcontractors are not covered by the disclaimer and remain in the suit brought by the Condo Association.


This decision does not follow any logic.  How can the general contractor/developer be dismissed from the suit while the subcontractors remain liable for latent defects?  It would be prudent to include subcontractors and suppliers in the disclaimer of implied warranty of habitability.



ADA Causation Standard Remains an “Open Question” in the 7th Circuit


Since 2008, the 7th U.S. Circuit Court of Appeals has yet to answer whether mixed-motive discrimination claims can prevail under the Americans with Disabilities Act (ADA). For the second time last year, in Arroyo v. Volvo Group North America LLC, the Court signaled that they are willing to reconsider that question.

The case dealt with an army reservist who was terminated from Volvo. The employee had taken 900 days of military leave over 6 ½ years. After her second deployment, she was diagnosed with PTSD. Her supervisors granted her a number of workplace accommodations, including time off for therapy, a quiet place to meditate, and a mentor. Nonetheless, she was also late to work 11 times in the months leading up to her termination (usually less than 10 minutes late). Through a string of emails, her supervisors discussed the difficulties posed by her absences and accommodations.

The employee brought discrimination claims under both, the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the ADA. The district court granted summary judgment in favor of Volvo. On appeal, the Appellate Panel concluded that the supervisor’s emails could be interpreted by a reasonable jury to show that Volvo was at least partially motivated by anti-military animus towards the employee, and that a reasonable jury could link this animus to the termination. The Panel found that the employee had presented sufficient evidence to make a prima facie case for discrimination under the “motivating factor” test for a USERRA claim, and that Volvo had not met its burden to show that it would have fired the employee even in the absence of her military service.


Turning to the ADA claim, the Appellate Court highlighted the distinction of a “more exacting” but-for standard under the ADA, although it is an open question whether the but-for standard is still “good law” (although the Court avoided deciding the issue because the emails raised a question of fact under the stricter but-for standard). The Appellate Court stated “it is an open question whether the 2008 amendments to the ADA, which changed the operative causation language from ‘because of’ to ‘on the basis of,’ altered the substantive standard.” This is the third time that the 7th Circuit has signaled that it is willing to reconsider the substantive standard.



NLRB Decision Leads to Confusion About Workplace Recording


In a retreat from earlier rulings, the National Labor Relations Board (“Board”) recently struck down as illegal an employer’s policy that prohibited employees from recording co-workers on the job without management’s approval.


In Whole Foods Market, Inc., the supermarket chain defended two workplace policies that prohibited workplace recording. The rules prohibited recording conversations, phone calls, images, or meetings with any device, including mobile phones, digital cameras and tape recorders. The expressly stated purpose of the rules was to encourage open and honest communication and dialogue among employees.


The United Food and Commercial Workers Union, Local 919 and Workers Organizing Committee of Chicago filed Unfair Labor Practice charges against Whole Foods claiming the policies violated the NLRA. An Administrative Law Judge concluded that Whole Foods’ policy was lawful because recording workplace communications is not a protected right, and such a policy was within Whole Foods’ right to regulate its workplace. The Board disagreed and reversed.


The Board reasoned that employee recording or photographing is protected by the Act if the employees are acting for their “mutual aid and protection” and that Whole Foods’ policies could preclude employees from recording protected employee picketing, documenting unsafe working conditions, publicizing workplace discussions concerning wages, employment terms and conditions.


The dissent noted “I believe employees would reasonably read the rules to safeguard their right to engage in union-related and other protected conversations.” In prior cases the Board has barred unions and employers in collective bargaining from insisting that negotiations be recorded or transcribed verbatim by court reporters. The Board’s decision in Whole Foods seems to be at odds with the principle it bestowed in the collective bargaining context.


NOTE:  This decision does not address state laws that bar recordings without agreement of all parties.



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Law Offices of Stanley E. Niew, P.C.

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