Legal Briefings

In Cordúa Restaurants Inc., a restaurant was accused of violating the National Labor Relations Act when it fired employees who opted into a Fair Labor Standards Act collective action. Each employee signed an arbitration agreement requiring them to waive their right to “file, participate or proceed” in a class or collective action, but it did not specifically bar employees from opting in to collective actions. After a number of employees began opting into the FLSA suit, the employer issued a revised arbitration agreement requiring employees to also waive their right to opt in to collective actions. The National Labor Relations Board, which has authority over most nongovernmental employers, expanded on the U.S. Supreme Court’s Epic Systems decision to find that the revised arbitration agreements were enforceable. While the NLRB held the employer violated the NLRA by discharging the employees who engaged in the protected activity of filing an FLSA lawsuit, it concluded the employer did not violate the NLRA by conditioning continued employment on the execution of a revised arbitration agreement even after the initiation of the FLSA suit. Cordúa Restaurants Inc., 368 NLRB No. 43 (2019).
Impact: Under the decision, employers can condition continued employment on the execution of a mandatory arbitration agreement, even when done in response to a pending collective lawsuit.

Bristol Excavating entered into an agreement with Talisman Energy. Talisman paid all workers on its drilling sites bonuses for safety, efficiency and completion of work. At some point, Talisman and Bristol agreed that Bristol’s workers were eligible to receive the bonuses; however, this arrangement was never codified. The Labor Department found Bristol should have included the bonuses in workers’ regular rate of pay for purposes of overtime compensation. In rejecting this, the Third Circuit emphasized an employee’s regular rate of pay is between the employer and employee. Then it assessed the employer’s involvement in the bonus program: (1) whether the specific requirements for receiving the payment are known by the employees in advance of their performing relevant work; (2) whether the payment is for a reasonably specific amount; (3) whether the employer’s facilitation of the payment is significantly more than serving as a pass through vehicle. In applying the test, the Third Circuit found there was not enough clarity about the requirements or amounts of the efficiency or completion of work bonuses to require Bristol to include these bonuses in overtime compensation. However, the terms of the safety bonus were sufficiently clear. Bristol employees knew the criteria for earning the bonus and how much they would receive, and Bristol invoiced Talisman for payment of the safety bonuses on behalf of its employees. Bristol should have included the bonuses in its employees’ regular rate of pay. Sec’y United States Dep’t of Labor v. Bristol Excavating Inc., No. 17-3663, 2019 WL 3926937 (3d Cir. Aug. 20, 2019).
IMPACT: Employers with leased employees in the Third Circuit (New Jersey, Delaware and Pennsylvania) should audit their compensation practices in light of the new test announced in this case.

Rachel Schaller, an attorney at Taft Stettinius & Hollister LLP, and Allison Czerniak, an associate with Taft, are the authors of Legal Briefings this issue.