Large employers and corporations have been pushing arbitration as the panacea for a host of consumer issues, from purchasing phone plans and automobiles to applying for jobs. But, there are some things arbitration just cannot do. In 2012, Lance Armstrong admitted he had used drugs as part of his training regimen. But, for years before his admission, he had successfully fought those allegations. In fact, he even took to arbitration in 2006 one sponsor, SCA Promotions, for a $5 million bonus saying there was no proof that he had doped. The sponsor had refused to pay the bonus because the allegations were so strong. The arbitration panel eventually awarded the cyclist a total of $7.5 million – based on a settlement reached by SCA and Mr. Armstrong.

After Mr. Armstrong’s admissions in 2012, SCA asked the same arbitration panel to re-convene and order Armstrong to pay back the money. The panel did so and awarded SCA Promotions $10 million as a sanction. But, the panel of arbitrators is not a court. There is a very complicated, robust scheme for awarding sanctions in the judicial system. Arbitration is not part of the judicial system. Arbitration is based on contract. The parties must agree to arbitration. Arbitrations are supposed to be limited to the terms of the parties’ agreement. Lance Armstrong did not sign any agreement allowing possible sanctions as part of an arbitration award. It would be rare for any arbitration agreement to address even the remotest possibility of sanctions.

The panel found jurisdiction based on Mr. Armstrong coming to them twice before seeking relief. The majority panel pointed to the decision in Nielsen S.A. v. Animal Feeds International Corp., 130 S.Ct. 1758 (2010) for the finding that prior use of the panel amounts to continued use of the panel. The majority also pointed to an “implied covenant to cooperate” and to Mr. Armstrong’s bad faith. So, the majority awarded that the $7.5 million be repaid to SCA, $2 million in attorney fees, and $500,000 in “additional costs insusceptible of precise calculations” (say what? I can just imagine if I tried to ask a court for $5,000 in “additional costs insusceptible of precise calculations”).

One arbitrator on the panel dissented. Ted Lyon pointed to the 2006 settlement agreement between the parties that specifically provided the intent of the parties was to “fully and forever” resolve their differences. See Louisiana Bar Journal, vol. 63, no. 2 (Aug./Sept., 2015).

And, now SCA is seeking a declaratory action in a Texas court seeking recognition of the award. There is no legal precedent for this reconsideration of a prior award. In a traditional court, SCA would seek reconsideration based on new evidence. The new evidence would be Lance Armstrong’s very public confessions. The party would have a good chance of getting the settlement reversed. But, what happens when the “judicial system” is based on contract? The parties did not agree to sanctions. Arbitration was created in the nineteenth century for shipping companies to deal with the vagaries of international courts – or the lack of any courts. Now, these parties are trying to morph a system based on contract into a judicial system.

This reminds me of the old saw often heard in criminal court, “if you can’t do the time, don’t do the crime.” The saw refers to defendants who whine about his/her punishment. It means do not whine. We need a new saw for arbitration agreements, “if you don’t like the result, don’t sign the agreement.” SCA paid the bonus under the original agreement. SCA drafted the agreement to pay the bonus to Lance Armstrong. It was SCA who chose arbitration initially, not Lance Armstrong. But, now SCA is trying to turn arbitration into a full-blown court of law. Now,the company has second thoughts…..

There are some areas in which Texas does not want to be the national leader. But, Texas is the national leader in work place deaths. The state had 524 work place deaths in 2014. That was an increase from the 508 deaths in 2013. Texas has been the national leader in work place deaths 11 of the last 14 years.

The next highest state in 2014 is California, which has a larger population that our state. California had 334 work place deaths last year. In the 2010 census, California had 35 million people, compared to Texas’ 25 million. So, despite having about a 40% larger population, the no. 2 state had some 30% fewer deaths.

Texas is the only state not to require worker’s compensation coverage. See Texas Tribune report. I am sure there is a connection. Without worker’s compensation, some employers may lack financial incentive to focus on safety as they should. A very young man once came to see me because he had been fired from his job after he sustained a serious injury at a bar. He was very concerned about his medical bills. The bar was supposedly self-insured and it refused to pay the young man’s hospital bills. He was afraid his father, who lived out of town, would be upset with him. Before I could decide to accept his case or not, he lost control and went to the bar and took a hostage or two. He ended up in jail.

Such is the state of worker’s compensation in Texas.

I previously wrote about an employer who fired a female employee when she became pregnant. The Houston office of Wayne Wright, LLP then sued her after she filed a charge with the EEOC. See my prior post here. At about the same time as those events unfolded, the same law firm, Wayne Wright, LLP, who demands respect and justice for its clients, fired another female paralegal when she became pregnant. In the El Paso office of Wayne Wright, the law firm fired Erika Hernandez when she became pregnant. Ms. Hernandez filed suit, but the firm invoked an arbitration agreement. On appeal, the El Paso Court of Appeals reversed the trial court and found the existence of a valid arbitration agreement. So, the matter will proceed to arbitration. See Wayne Wright, LLP v. Hernandez, Mo. 14-00303, 2015 WL 4389582 (Tex.App. El Paso 7/17/2015).

Some employers just will not tolerate pregnancy…..

Many years ago, when I was a captain in the Texas National Guard, I was involved in a new military unit. It is not often in one’s career that you are involved in “standing up” a brand new unit from scratch. Our RCPOC (Rear CP Operations Cell) had a new paragraph and line number on the TOE (Table of Organization and Equipment). It was a great challenge. You need the best non-commissioned officers and officers at a time like that, because the beginning of an organization affects so much. I was just a Captain, one of four or five in this staff section. We had a major and a Lieutenant-Colonel. The LTC was outstanding, my old mentor, Dan Densford. You also have to be careful at times like that, because some units will shove off their malcontents or trouble-makers on you.

LTC Densford was very sharp and well-informed about personnel issues across the former 49th Armored Division. We got this one Sergeant First Class Gravier. “Rumor control” said SFC Gravier was a problem child. He was Active Guard Reserve, which meant he served everyday, not just on weekends like the rest of us. The AGR guys had informal influence on the unit, disproportionate to his/her rank. If SFC Gravier was a problem, then that would have a ripple effect on all of us. But, I remember also hearing that he was treated badly at his old unit. Whoa. That changes everything. In the military, much like the civilian world, you can have a wonderful unit, right next door to shiftless, lazy, point-the-finger dirtbag unit.

As time went on, I noticed SFC Gravier was very competent. He was abrasive. In the first few months, he was testy with me and others – as if he expected us to be hyper-critical or unfair in some way. But, we were not. We all appreciated his direct answers and his helpful suggestions. As the months passed, his prickliness went away. We all realized what an excellent sergeant SFC Gravier was. It was obvious he had been mis-treated at his former unit. Our senior sergeant was MSGT Reeve. MSGT Reeve came with a stellar reputation and he was very competent. MSGT Reeve out-ranked SFC Gravier. Those two became fast friends. They both shared the same level of dedication and attention to detail.

I learned a valuable lesson from this dynamic. We all bring different qualities to an organization. What some perceive as problems may be nothing more than a lack of polish. If that lack of polish comes with dedication and sincere caring for soldiers, polish means nothing. All organizations must bring out the best in each member and learn to use each member to his/her fullest capacity to flourish. Within a couple of years, our Rear Operations Cell did very well. In our second year, we participated in the Warfighter Exercise, in which division level staffs are tested by a computer exercise over five days. We were evaluated by active component officers and NCO’s from Ft. Leavenworth. We excelled. Success in any military unit means the non-commissions officers, including SFC Gravier, did very well. Our third year, I was gone, but I was told that the NCO’s worked hard on the coffee that Summer Camp. They perfected various coffee blends….

So, now, 20 years later, when I see corporate America or federal civil service relegate someone to the rear simply because s/he has a disability, I think back to SFC Gravier. SFC Gravier had no disability. But, he was perceived to have some fundamental flaw. Yet, in reality, he became one of the go-to persons in our small, 15 person staff section, because we gave him the opportunity to fail or succeed. He took the opportunity and showed what he could do. Next time you have a person with a disability in your work area, ask yourself, what does s/he bring to the table? If s/he brings the right stuff to the table, then whatever disability might be present matters not one whit.

The Texas worker’s compensation system has been broken for many years, ever since the state passed a pack full of so-called reforms in the late 1980’s. Now, we learn that Texas Mutual Insurance Company, one of the largest providers of worker’s compensation insurance in the state, has a sweetheart deal with the Travis County District Attorney’s Office. Texas Mutual refers cases to the Travis County D.A. In return, Texas Mutual pays the salaries of prosecutors and investigators within the DA’s office. As Roy Kyees found out when he was prosecuted for alleged worker’s compensation fraud, the prosecutor and investigators essentially accept whatever cases Texas Mutual refers. Mr. Kyees won his criminal case for alleged fraud. He then sued Texas Mutual for malicious prosecution. He settled his case for less than $10,000. See Texas Tribune report.

According to the news report, many insurance companies enter into deals like that with District Attorneys in various states. But, in all other states, the insurance companies enter a pooled arrangement in which their funds are pooled and then contributed to the D.A. These units prosecute complicated fraud claims, for which the local D.A. lacks resources. When Ronnie Earle first signed the contract with Texas Mutual, the agreement was to prosecute major fraud cases, not low dollar cases like worker’s compensation claims. Typically, worker’s compensation claims may involve only some $5,000 in restitution. But, unaware of the contract terms, the Travis County D.A. unit prosecutes any and all claims referred by Texas Mutual. It truly is justice for hire. The unit is called the Travis County Worker’s Compensation Fraud Unit.

I have only infrequent first-hand contact with worker’s compensation claimants. But, when I do, I notice 1) it is extremely hard to find a lawyer who represents claimants and 2) the worker’s compensation rates are incredibly low. For someone injured in the cause of his/her employer, it is very difficult to live on half your former income. And, often the claimant has to fight with the doctor’s hired by the insurance company to obtain that one-half income.

The Worker’s Compensation Fraud unit has never taken a case against Texas Mutual itself. Nor has it ever prosecuted a case involving an insurance company other than Texas Mutual. Yes, that sounds a lot like justice for hire.

Mr. Kyees settled his claim with Texas Mutual for less than $10,000. He refused to agree to a provision that would have kept the agreement confidential. Today, Texas Mutual says the system worked the way it should have. The prosecutor dropped the case when Mr. Kyees’ lawyer produced a letter showing he had had indeed reported his income from a new job. But, the scary part is that the senior prosecutor says she would not have dropped the case. The senior prosecutor says she had actually told the junior prosecutor not to drop the case against Mr. Kyees.

In February, 2015, the Texas Supreme Court ruled that persons cannot sue worker’s compensation companies for malicious prosecution. See that decision in In Re Crawford and Co., No. 14-0256 (Tex. 2/27/15) here. The decision is per curiam, meaning it was not even assigned to an author. So, there will be no more lawsuits like Roy Kyees’ lawsuit. Texas Mutual can enjoy virtual immunity from future disregard of the facts of a case.

County Clerk Kim Davis has gone to jail rather than enforce the Supreme Court’s ruling that gay persons can marry. See CBS news report. She claims she is acting on her conscience. But, in my opinion, if she was following the dictates of her conscience, she would simply resign. Law enforcement officials face these sorts of quandaries all the time, should they enforce laws with which they disagree? Back in the 1980’s, I clerked for a state district judge in rural Louisiana. Judge Robert Jackson had been a judge for some 20 years and a prosecutor some ten years before that. I remember when the seat belt laws first went into effect in Louisiana. Many of us considered strapping on a seat belt an aggravation, especially for short in-town trips. But, Judge Jackson always put his belt on. He complained. He grumbled. But, he always put on his seat belt. He knew he was a judge and would have to enforce this law if that sort of issue came into court.

I think its more than her conscience. If it was just her conscience, she could just resign.

Target has reached a settlement with the Equal Employment Opportunity Commission for $2.8 million regarding Target’s use of personality tests in hiring. It no longer uses the tests. But, it formerly used the tests for executive and professional level hiring. Target dropped the tests when the EEOC started its investigation in 2006. The EEOC’s investigation resulted in a cause finding that use of the tests resulted in discrimination against women and minorities. The tests were not sufficiently related to the jobs for which the applicants were being tested, said the EEOC. One of the three tests was performed by psychologists. The ADA prohibits medical exams before a job offer.See Fortune news report.

The EEOC also found that Target did not maintain adequate records with which to assess the impact of those tests. The EEOC believes the personality tests affected the non-hiring of thousands of applicants.

Robin Shea at Employment and Labor Insider, who has a wicked sense of humor, has penned an instructive piece on Human Resources departments. Robin generally represents employers. So, she comes to this issue with much experience. Should we trust HR or not, she asks? Well, the answer is mixed. She cut and pasted posts from other internet commentators who clearly find HR to be the source of much trouble in the corporate world. . . .  And, she admits there is some justification for that view. Employees who think HR might be an advocate for the average worker in the same way a friend or family member would be are unrealistic. But, she closes with “true” examples of HR persons doing the right thing at least once in regard to one employee. Keep in mind her explanation: HR employees are employees and their mission is largely recruiting and retaining good workers. That gibes with my experience, as well. There are many HR workers who seek to fulfill the greater good of recruiting and retaining good employees – and that does sometimes mean “squaring away” (as we say in the Army) some manager who needs education. See Robin’s post here.

For those of us who deal with the Equal Employment Opportunity Commission regularly, that can be a lesson in futility. Like too many agencies, they are assigned too many cases and are expected to do too much with too little. So, it is not surprising that the EEOC folks do make their share of errors. But, the thing is their errors may deprive some hard-working victim of discrimination his or her day in court.

In Alvarado v. Mine Service, Ltd., No. 14-50668 (5th Cir. 7/30/2015), that victim of discrimination came very close to losing his day in court because the EEOC made a mistake. The EEOC let Mr. Alvarado’s complaint sit around for two years before his lawyer noticed and asked for the right-to-sue letter. The EEOC issued a letter dated June 14, 2013 allowing Mr. Alvarado to file suit. Mr. Alvarado had complained about a noose that was left on the foreman’s desk. The worker asked about the noose, and set up meetings for his Hispanic fellow workers to discuss issues with the supervisor. Mr. Alvarado was later fired for “stirring up” racial problems. Mr. Alvarado’s complaint was based on race. Yet, the June 14 notice from the EEOC referred to an age discrimination claim. The plaintiff’s claim was based on Title VII. Yet, the EEOC checked the block for ADEA.

And, even though it had a space for an EEOC official to sign it, the space was blank. It was not signed by the EEOC. And, the notice said the charge had been on file for less than 180 days, even though it actually had been on file for two years.

The plaintiff’s lawyer called the EEOC. The EEOC said they would send a new corrected notice of right-to-sue. They sent a second correct notice on July 8. The plaintiff then filed suit within 90 days of the second letter, not the first notice. Mine Service moved to dismiss saying the proper deadline started June 14 with the first letter, not the second letter. The district court agreed, finding the first letter conveyed all the necessary information, so that is when the 90 day deadline started. The lower court made an oblique reference to tolling, saying the EEOC did not mis-lead the plaintiff because the first letter was valid.

But, the court of appeals disagreed. It did find equitable tolling. The lower court had rejected the office administrator’s testimony as hearsay. She testified that the EEOC told her the first letter was incorrect. The Fifth Circuit said no, that was not offered to prove the matter asserted. It was not offered to show the letter was incorrect. It was actually offered to show the law office relied on what they were told by the EEOC. That reliance constitutes a “hornbook” law exception to the hearsay rule. Alvarado, at 7 (slip opinion). Too, noted the court, the July 8 letter said the plaintiff could file suit within 90 days of this letter.

So, now with the evidence regarding what they were told by the EEOC, the case falls within the line of cases which hold equitable tolling will extend a deadline. And, noted the court, extending the deadline 20 days will not cause any prejudice to the employer. And, this was not a case in which the lawyer was slow to act. The law firm was generally quick to react to the EEOC errors, seeking clarification and at one point, contacting the agency again when the EEOC was slow to send the second letter.

The EEOC makes plenty of clerical errors every year. They process thousands and thousands of claims every year. The courts should not allow a person’s claim to be subverted by clerical errors, especially when that claimant has been as diligent as this plaintiff was. It is refreshing to see a higher court bring some degree of common sense to the discussion.

Pen

In a recent ruling, the National Labor Relations Board has adopted a new standard regarding joint employers. Joint employers is a relatively new creation in the area of labor and employment law. Joint employers, as the name suggests, refers to separate employers both being employers of the same employee. Many years ago, I worked on a case in which a large office supply house contracted out its drivers to a third party. One day the drivers worked for Acme Office Supply. The next day, they worked for Speedy Delivery Service. Based on many factors, the drivers were eventually found to be employees of both entities. Yet, both entities had completely different ownership structures.

That situation was more apparent. It was obvious the large office supply company was trying to avoid liability when it switched to a third party. And, since the large office supply business still actually supervised the drivers in every way, it was easy to see that Acme Office Supply was still an employer, at least in part. But, what if Speedy Delivery hired some of the old drivers, but not all? What if Speedy Delivery had its own human resources department? And, what if Acme had some employees on-site, but so did Speedy Delivery? That is much like the case in Browning-Ferris Industries, 362 NLRB 186 (8/27/2015). BFI operated a recycling center. BFI hired and supervised the employees who worked outside the center. But, to perform the functions of sorting and cleaning the items inside the center, BFI contracted with Leadpoint Business Services. The chief Leadpoint person reports to his corporate office in Arizona.

The Board noted that the common law test for joint employers up to now has focused on control. Who controls the employee? If both entities control, then both entities are employers. The Board then looked to the test for independent contractors, which does look at who may control the employee, not necessarily who actually does control the employee. There was some evidence that BFI exercised control over some Leadpoint employees. But, the Regional Director found these instances were too infrequent to establish control. The national level Board, however, focused not on actual control but on the degree to which the second entity could control. So, the Board by a 3-2 vote, decided that no longer will it be necessary to show that the second entity must actually exercise that authority which it possesses over the employee. Browning-Ferris, at p. 15-16 (slip opinion).

The Board then noted that BFI though its agreement with Leadpoint, possessed “significant” control over who Leadpoint hired. Although BFI did not participate in Leadpoint’s day-to-day hiring decisions, it “codetermined” the outcome of that process by imposing specific conditions on Leadpoint’s ability to make hiring decisions. Even after Leadpoint has determined that an applicant meets the required qualifications, BFI still retains the authority to reject that employee “for any or no reason.” BFI retained the authority to “discontinue” any of the personnel assigned by Leadpoint. Two BFI managers testified that BFI has never discontinued any employee or has ever been involved in discipline. But, said the Board, two such incidents occurred in which BFI requested the immediate dismissal of two workers.

So, the Board determined that BFI was mis-leading. Prevarication to a tribunal always leads to problems for that entity.

The Board also found that BFI exercised indirect control over the speed and methods of Leadpoint’s work. The speed of the conveyor belts has been a source of constant tension between BFI and Leadpoint. Apparently on their own, BFI personnel have coached Leadpoint personnel on how to work smarter, faster – with no apparent involvement of Leadpoint managers. Since BFI retained “ultimate control” over the sorting and sifting lines, the Board found it difficult to see how Leadpoint could bargain with a union over issues involving work speed and breaks. BFI also assigned work positions, and assigned specific tasks that need to be completed. It dictated the number of workers needed and the timing of the work shifts.

Regarding wages, BFI played a significant role in the rates of pay and how the Leadpoint workers were paid. Under the terms of the agreement, Leadpoint may not pay its employees more than BFI pays its employees.

So, yes, this decision is possibly far-reaching. The standard for many principles of employment and contract law start with NLRB decisions. If the NLRB finds that indirect control is “control” for purposes of the National Labor Relations Act, then that certainly could spread to other employment statutes. The other day, I heard one reporter say this could affect franchises and their corporate headquarters. Yes, indeed. If McDonald’s requires its franchisees to establish certain work schedules, pay certain wages and even positions the workers in the work area, then that would certainly make them a joint employer of the local McDonald’s employees. See decision here.

This is a 3-2 decision. That means when the next President comes into office and points his two new members of the board, this decision could change. But, until then, we have a very new standard that will change the outcome of many cases. This decision is a game;changer.