Monthly Archives: March 2017

March 21, 2017

Supreme Court Rules That NLRB Acting GC Became Ineligible To Serve After Nomination To Permanent Role

Once a President nominates a candidate for a Senate-confirmed office, that person may not serve in an acting capacity for that office while awaiting Senate confirmation, pursuant to a ruling today by the U.S. Supreme Court. In a 6-to-2 decision, the Court ruled that Lafe Solomon, who had been appointed by President Obama to serve as acting general counsel for the National Labor Relations Board (NLRB) during a vacancy, could no longer serve in that acting role after the President later nominated him to fill the position outright.

NLRB General Counsel Appointment

The position of general counsel of the NLRB must be filled through an appointment by the President with the advice and consent of the Senate – a so-called “PAS” office. When a vacancy in a PAS office arises, the President is permitted to direct certain officials to serve in the vacant position temporarily in an acting capacity. Under the Federal Vacancies Reform Act of 1998 (FVRA), only three classes of government officials may become acting officers. The FVRA, however, prohibits certain persons from serving in an acting capacity once the President puts that person forward as the nominee to fill the position permanently.

In Lafe Solomon’s case, he was directed by President Obama in June 2010 to serve temporarily as the NLRB’s acting general counsel when the former general counsel resigned. Solomon had worked for ten years as the Director of the NLRB’s Office of Representation Appeals and was within the classes of officials who could be directed to serve in an acting capacity under the FVRA. In January 2011, President Obama nominated Solomon to serve as the NLRB’s general counsel on a permanent basis. Solomon continued to serve as acting general counsel for an additional two-plus years as the Senate failed to act on his nomination. In mid-2013, the President withdrew Solomon’s nomination, putting forward another candidate whom the Senate confirmed in late October 2013.

Company Facing ULP Argued Solomon Couldn’t Be Acting GC After Nomination

In January 2013, while Solomon was acting general counsel, SW General, Inc., a company that provides ambulance services, received a complaint alleging it committed an unfair labor practice (ULP) for failing to pay certain bonuses to employees. After an administrative law judge and the NLRB concluded that SW General had committed the ULP, the company argued in court that the complaint was invalid because Solomon could not legally perform the acting general counsel duties after the President had nominated him for the permanent position. The company pointed to wording in the FVRA restricting the ability of acting officers to serve after being nominated to hold the position permanently. Whether the FVRA prohibits all classes of acting officials or only first assistants who automatically assume acting duties from continuing to serve after nomination was the issue before the Supreme Court.

Once Nominated, Official Is No Longer Eligible To Serve In Acting Capacity

The Court ruled that once a person has been nominated for a vacant PAS office, he or she may not perform the duties of that office in an acting capacity. The Court rejected the NLRB’s position that the FVRA restricted only first assistants who were in an acting capacity, rather than restricting all classes of officials directed to serve in an acting capacity who are later nominated for the permanent position. In applying its ruling to Lafe Solomon, the Court ruled that Solomon’s continued service as the NLRB acting general counsel after he had been nominated to fill that position permanently violated the FVRA. NLRB v. SW General, Inc., ___ 580 U.S. ___ (2017).

Solomon’s Actions “Voidable”

So what does this mean for all of Solomon’s actions taken during the over two-year period in which Solomon improperly served as the acting general counsel after his nomination for the permanent position? For example, what happens to the ULP complaints filed by, or at Solomon’s direction, during that period?

The Court noted in a footnote that the FVRA exempts the general counsel of the NLRB from the general rule that actions taken in violation of the FVRA are void ab initio (i.e. from the beginning). The Court of Appeals had ruled that Solomon’s actions during that period were “voidable.” Because the NLRB did not appeal that part of the lower appellate court’s ruling, it was not before the Supreme Court to decide. Consequently, the Court of Appeals’ decision that Solomon’s actions are voidable stands. Accordingly, each action taken by Solomon during the time that he improperly served as acting general counsel would need to be challenged on an individual basis.

March 7, 2017

Utah Payment of Wages Act Amendments Passed

By Bryan Benard

On March 7, 2017, the Utah Legislature passed a bill amending certain provisions of the Utah Payment of Wages Act (“UPWA”). H.B. 238 was sponsored by Representative Tim Hawkes and if signed into law by the Governor, will make three primary changes to the law.

Individual Liability For Payment of Wages

First, the bill changes the definition of “employer” from a unique Utah definition to the definition of employer as used in the federal Fair Labor Standards Act (“FLSA”). The change will allow case interpretation of the FLSA definition of employer to apply to Utah employers under the UPWA. The reason behind this change is to clarify that in certain situations, individual directors and officers of companies may be held individually liable for the non-payment of wages. In a 2015 case, the Utah Supreme Court had ruled that there was no individual liability under the UPWA (Heaps v. Nuriche, 2015 UT 26), causing the Utah legislature to take action this session to effectively overrule that decision, replacing it with the individual liability standards applicable under the FLSA.

Private Cause of Action

Second, this new law expressly creates a private cause of action for wages under the UPWA. This change also was prompted by a court ruling, namely Self v. TPUSA, Inc., 2009 U.S. Dist. LEXIS 10822, D.Utah Jan. 16, 2009, in which the federal court in Utah suggested that there was no private right of action under the UPWA. After the effective date of the new amendments, a private citizen clearly has the right to file a lawsuit to recover payment of wages under the UPWA in Utah state court. The amendments also provide that Utah state courts may award actual damages (i.e., the unpaid wages), a potential penalty for the violation, and an amount equal to 2.5% of the unpaid wages owed for up to 20 days.

Administrative Process Mandatory For Smaller Wage Claims

Finally, the new law requires that certain wage claims alleging a violation of the UPWA be filed first with the Utah Labor Commission. Currently, employees “may” file a wage claim at the Commission. After enactment, all wage claims that are less than $10,000 must first be filed with the Labor Commission and the party must exhaust the administrative remedies there on such claims. Claims that are greater than $10,000, employees with multiple claims (that aggregate above $10,000), or multiple employees in the same civil action whose claims together are greater than $10,000, may file such claims directly in court without exhausting the administrative remedies.

Next Steps

Utah employers should certainly take note of these changes, and specifically the potential for individual liability of directors and officers for the payment of wages. It is also worth watching to see if the new express private right of action increases the amounts of wage claims brought in Utah.

March 2, 2017

Remove That Liability Waiver From Your FCRA Disclosure Form

By Mark Wiletsky

If you use an outside company to run background checks on your applicants or employees, you need to review your disclosure forms asap to make sure the forms don’t violate the Fair Credit Reporting Act (FCRA).

In a case of first impression by a federal court of appeals, the Ninth Circuit recently ruled that a prospective employer willfully violated the FCRA by including a liability waiver in its FCRA-mandated disclosure form it provided to job applicants. Syed v. M-I, LLC, 846 F.3d 1034 (9th Cir. 2017). In fact, any extraneous writing on the disclosure form can lead to significant liability for a willful FCRA violation. And if you think you are safe by using forms provided by your background check company, think again.

FCRA Refresher

Background checks that inquire into a person’s criminal history, driving record, employment history, professional licensing, credit history, or other similar records, can either be done in-house or by an outside third party. In other words, your HR department may make calls, check online resources, or contact law enforcement or the DMV to obtain this information directly, or your company may outsource this function to a background check company that can do the leg work for you. If you use a background check company or another third party to compile this information on your behalf, the information provided to you is considered a consumer report and is subject to the FCRA.

Because of the private nature of this information, the FCRA limits the reasons for which consumer reports may be obtained. Using consumer reports for employment purposes is a permissible purpose under the FCRA, but such use comes with numerous obligations. In 1996, concerned that prospective employers were obtaining and using consumer reports in a way that violated applicant’s privacy rights, Congress amended the FCRA to impose a disclosure and authorization provision. Pursuant to that provision, a prospective employer is required to disclose that it may obtain the applicant’s consumer report for employment purposes and it must obtain the individual’s consent prior to obtaining the report.

FCRA Disclosure Must Consist “Solely” of Disclosure

Specifically, the FCRA provision states that a person may not procure a consumer report for employment purposes with respect to any consumer unless “(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.”

It is clear that the required disclosure should be its own standalone document and should not be included within a job application or other onboarding documents. It is also clear that the authorization (consent form) may be included on the disclosure document. But what about other information? May the disclosure form include a statement that the applicant releases the employer (and/or the background check company) from any liability and waives all claims that may arise out of use of the disclosure and obtaining the background check report?

Court Nixes Liability Waiver As Willful FCRA Violation

What may or may not appear in an FCRA disclosure form has been a hot topic in recent years. Numerous class actions have been filed by job applicants (and their aggressive attorneys) alleging that any extraneous language in a disclosure form violates the requirement that the document consist “solely” of the disclosure. Although numerous lower federal courts have grappled with the meaning of that provision, the Ninth Circuit became the first federal appellate court to examine it. (The Ninth Circuit’s rulings apply to Montana, California, Idaho, Washington, Oregon, Nevada, Arizona, Alaska, and Hawaii.)

In Syed’s case, the prospective employer provided applicants with a document labeled “Pre-employment Disclosure Release” that appears to have been obtained from its background check company, PreCheck, Inc. The third paragraph on the single-page document included the following statement:

“I hereby discharge, release and indemnify prospective employer, PreCheck, Inc., their agents, servants and employees, and all parties that rely on this release and/or the information obtained with this release from any and all liability and claims arising by reason of the use of this release and dissemination of information that is false and untrue if obtained from a third party without verification.”

On behalf of a class of over 65,000 job applicants, Syed alleged that by including this liability waiver, his prospective employer and the background check company violated the statutory requirement that the document consist “solely” of the disclosure. The Ninth Circuit agreed.

The Court found that the text of the FCRA provision was unambiguous and that even though the law permits the authorization to be included on the disclosure document, that was an express exception authorized by Congress. The Court further explained the difference between an authorization and a waiver by stating that the authorization requirement granted authority or power to the individual consumer whereas the waiver requires the individual to give up or relinquish a right. Therefore, the Court rejected the employer’s argument that the FCRA permits the inclusion of a liability waiver in the disclosure.

Moreover, the Court deemed this FCRA violation to be willful. Stating that “this is not a ‘borderline case,’” the Court ruled that the employer acted in reckless disregard of its statutory duty under the unambiguous disclosure requirement. As a willful FCRA violation, the employer faces statutory damages of between $100 and $1,000 per violation (remember, there were over 65,000 class members), plus punitive damages and attorneys’ fees and costs. Read more >>