High Court Docket: Unions, Overtime

High Court Docket: Unions, Overtime

By: Carol Patton
This article was originally published by Human Resource Executive on December 6, 2017

The Supreme Court’s decisions on two upcoming employment-law cases could end up weakening organized labor and impacting overtime for some workers, legal experts say.

Legal experts say the Supreme Court’s upcoming decisions in two employment-law cases involve a pair of hot-button topics: labor unions and overtime.

The first case, Janus v. American Federation of State, County and Municipal Employees, Council 31, challenges the constitutionality of public employees being forced to pay union dues even if they don’t support or join unions. The other case, Encino Motorcars, LLC v Navarro, focuses on whether service advisors at auto dealerships are exempt from overtime.

The plaintiff in the first case, a public-sector worker, refused to join the union but was still required to pay 84 percent of full members’ dues, which excludes fees for the union’s political activities, says employment-law attorney Ann Fromholz, founder of The Frumholz Firm in Pasadena, Calif.

“Employees have the right to decide whether to join the union and can be required to pay a fee even if they elect not to be a member,” she says. “There’s no doubt in my mind that the Supreme Court will rule in favor of the worker and against the union. This could be a big blow for public employee unions.”

This isn’t surprising considering that Justice Gorsuch, who filled Justice Scalia’s seat following his sudden death, is likely to support his predecessor’s conservative views.

If the high court rules in favor of workers, Fromholz says, union membership may dwindle, resulting in less dues and power to negotiate contracts. Such a decision could also create HR quagmires as well. For example, if a union negotiates worker benefits that would not have been otherwise offered, should nonunion members receive those same benefits? Likewise, would nonunion employees be required to pay a portion of their health insurance premiums while employers pay the entire premium for union workers?

“It’s hard to say [if this is fair] because employees do benefit from the work of unions,” says Fromholz. “If there are environments where the union is weak and doesn’t negotiate much beyond what the employee would get, it’s probably not overly fair to ask everyone to contribute.”

Other HR problems would involve worker protections, she says. For example, union employees can only be fired for cause and must receive progressive discipline before termination. However, nonunion employees at the same workplace would be employed at will and not guaranteed those same rights.

This sets the stage for possible instances of inequity, says Fromholz, and opens the door for employers to scale back benefits to ensure consistency between the two employee groups.

“Workers may be unhappy if those protections are stripped away,” she says, adding that benefits such as retirement, however, would remain intact. “That would be an issue HR would need to manage.”

Regarding the second employment-law case, Encino Motorcars, LLC v. Navarro, the U.S. Supreme Court in June rejected a 2011 final rule issued by the U.S. Department of Labor that stated that service advisors at auto dealerships are not exempt from overtime. This final rule contradicted DOL’s 1978 opinion letter, which concluded that service advisors (along with salesmen, partsmen or mechanics, according to the Fair Labor Standards Act) were exempt from overtime.
Initially, the district court dismissed this case on the grounds that service advisors were “functionally equivalent to salesmen, partsmen and mechanics,” says Lee Schreter, an attorney and co-chair of the national wage and hour practice at Littler Mendelson in Atlanta.

Since then, she says, the case has bounced between the Ninth Circuit, which deferred to the DOL’s latest interpretation and unanimously rejected the lower court’s decision, and the U.S. Supreme Court, which reversed the Ninth Circuit’s decision, finding that the DOL’s explanation for departing from the interpretation it had followed for nearly 40 years was inadequate. The case was remanded back to the Ninth Circuit, which not only upheld its decision but also opposes previous rulings made by the Fourth and Fifth Circuits and Supreme Court of Montana. Due to the courts’ disagreements, the case is back in the hands of the Supreme Court.

Ironically, Schreter says, the DOL’s “flip-flopping” won’t help service advisors, because employers can still prevent them from working overtime, reduce their hourly rate to compensate for overtime expenses or put them on commission.
“No good comes from a federal agency having dramatic swings in its interpretation of the law,” says Schreter. “It becomes very hard to comply when you have dramatic swings from one administration to the next [and] makes it very difficult for employers and employees because you don’t have settled expectations.”

Robert Brock, an attorney at the law office of Lowell J. Kuvin in Miami, supports the Ninth Circuit’s opinion but believes the U.S. Supreme Court’s decision will swing the other way. As, he says the Ninth Circuit’s persuasive argument is based on historic records dating back to ground zero for the statute.

Making service advisors exempt would be a stretch, he says, signaling a broadening of exemptions even though exemptions are supposed to be construed narrowly.

But if this occurs, he says HR professionals at auto dealerships need to review nonexempt, even borderline exempt positions.

“If there is a broadening of the construction of statutory exemptions for overtime, that’s going to affect a lot of gray area positions throughout the country,” he says. “If that happens, we’ll see more of it in the future, a loosening of the narrow construction.”