2021: A Whirlwind Year for Labor & Employment Law
ABSTRACT: 2021 was a busy year in labor and employment law, with major cases concerning Covid-19, arbitration, accommodating disabilities, joint employer liability, and new statutory requirements for employers.
As in 2020, a major theme of the past year has been the Covid-19 pandemic, and the response of employers and governments, as the economy began to re-open and vaccines became widely available. But Covid-19 litigation was not the only activity in the labor and employment law arena in 2021.
FEDERAL VACCINE MANDATE LITIGATION
The saga of the OSHA “vaccine-or-testing” Emergency Temporary Standard (ETS) has been extensively documented on this Blog. However, as the new year dawns, the story is merely entering a new chapter.
In the first week of 2022, the Supreme Court held oral argument on the two Covid-19 vaccine mandates and issued two unsurprising opinions on January 13th. First, the Court overturned the decision of the Sixth Circuit and reinstated the Fifth Circuit’s stay of the OSHA ETS, regarding vaccine mandates for private employers with 100 or more employees. Although the Court did not strike down the ETS, as a practical matter, the ETS in its current form is dead. OSHA has stated that it will not enforce the ETS as currently written (although OSHA has indicated that it will still hold employers to the OSH Act’s “general duty” clause in ensuring workplace safety). In its opinion, the Court stated forcefully that if it reviewed the ETS in the merits, the ETS would be struck down. Importantly, the concurring opinion written by Justice Gorsuch (and joined by Justices Thomas and Alito) relied upon the “major questions” doctrine. Justice Gorsuch described the doctrine as “closely related to the nondelegation doctrine.” The Biden administration is certainly not eager to see a robust application of the doctrine over the next three years.
Although the Court held that the petitioners were likely to succeed in overturning the ETS on the merits, a more tailored ETS, focusing on particular industries could pass muster. For example, work environments where many people are compressed in a small area may pose the necessary “grave danger” justifying OSHA intervention. You may read the full opinion here: National Federation of Independent Business v. OSHA
In the companion case concerning vaccine mandates for healthcare workers, the Court held that in certain environments, vaccine mandates are authorized. In Biden v. Missouri , Missouri, Kansas, and several other states challenged a Center for Medicare and Medicaid Services (CMS) rule requiring all facilities receiving Medicare or Medicaid funds to require vaccination of all employees. The Court wrote, in its per curiam opinion, that the Secretary of Health and Human Services was enabled by statute to place detailed conditions with which facilities must comply to receive Medicare or Medicaid funds. Those conditions have also included a requirement that healthcare providers maintain and enforce an “infection prevention and control program designed … to help prevent the development and transmission of communicable diseases and infections.”
Finding that the Secretary could enact the final interim rule, the Court vacated the injunction issued by the Eastern District of Missouri. For healthcare providers, the window for compliance with the CMS rule is narrow, and immediate action is required. Here are the major features of the CMS rule:
- For the 25 petitioner states (except Texas), which include Missouri and Kansas, healthcare workers must receive their first vaccine dose by February 14, 2022, and be fully vaccinated by March 15.
- For all other states, covered healthcare workers must receive their first vaccine dose by January 27, 2022, and be fully vaccinated by February 22.
- Healthcare facilities are required to keep records of employees’ vaccination status.
- Employers must develop policies to include medical and religious exemptions or accommodations.
- The CMS rule does not apply to healthcare workers who provide exclusively telehealth services.
- Employers face serious consequences for noncompliance, including hefty fines and revocation of eligibility to receive Medicare or Medicaid funds.
While litigation surrounding CMS’s authority to issue the vaccine mandate appears to be resolved for all practical purposes, there will be no shortage of litigation over its implementation. Baker Sterchi attorneys anticipate that the litigation areas to watch over the coming year include: denial of religious or medical accommodations (including requests which employers deem to be “insincere”) and federalism concerns in states enacting laws purporting to contravene the CMS Rule.
MISSOURI AND OTHER STATES SUE TO STOP FEDERAL CONTRACTOR VACCINE MANDATE
Missouri, et al. v. Biden, 4:21-cv-01300 (E.D. Mo. 2021)
On October 29, 2021, Missouri and nine other states filed suit against President Biden, the United States, and 13 other defendants seeking to stop Executive Order 14042, 86 Fed. Reg. 50,985 (Sept. 14, 2021) which required that all employees of federal contractors be vaccinated. The contractor mandate includes all full-time and part-time employees of any employer who has a contract with the federal government, including those employees who are not themselves working on or in connection with a federal contract. Unlike the OSHA ETS, EO 14042 applies to all employers with federal contracts, regardless of size. Employers must ensure that their employees are fully vaccinated by no later than December 8, 2021.
The States assert that they and their state agencies have contracts with the federal government and therefore would be required to ensure that their employees are vaccinated. Their lawsuit alleges that the mandate violates the federal Procurement Act, Procurement Policy Act, Administrative Procedures Act, and violates the States’ police powers, as well as the Tenth Amendment’s anti-commandeering doctrine, separation of powers, and various other constitutional provisions.
On December 13, 2021, the Eighth Circuit Court of Appeals denied the States’ motion to stay enforcement of the Executive Order pending appeal. Like the litigation surrounding the OSHA ETS, this case seems destined to be decided by the Supreme Court.
NOTEWORTHY EIGHTH CIRCUIT DECISIONS
The Supreme Court Will Hear Eighth Circuit Case Involving Employment Arbitration
The Supreme Court granted certiorari in an Eighth Circuit case involving employment arbitration. In Morgan v. Sundance, Inc., (read the Opinion here) the District Court held that the employer had waived the right to compel arbitration where the case had been in litigation for more than eight months. A divided Eighth Circuit panel reversed the decision of the District Court, holding that the defendant had not waived its right to compel arbitration. According to the Eighth Circuit, the defendant had not slept on its rights, because much of the eight months in court had been devoted to trying to stay the case on procedural grounds, rather than litigating the merits. Therefore, the plaintiff was not prejudiced by the motion to compel arbitration. One circuit judge dissented, questioning why the defendant would wait eight months to even mention arbitration.
According to the Morgan majority, the nine federal circuit courts that have adopted the “prejudice” standard for finding waiver of arbitration rights, contradict the 2011 Supreme Court decision in AT&T Mobility LLC v. Concepcion which requires lower courts to evaluate arbitration agreements “on an equal footing with other contracts.” Adding the “prejudice” requirement to waiver of arbitration rights is an additional step that is not used in other contract cases. Therefore, the Supreme Court should weigh in on the appropriate standard in order to ensure consistency across all federal circuits.
The Supreme Court is likely to decide the case in fall 2022.
Eighth Circuit Clarifies that Attendance is Generally an Essential Job Function for ADA Purposes
Throughout its history interpreting the ADA, the EEOC has generally been reluctant to state unequivocally that regular attendance is an essential job function. Rather, in recent years, the EEOC has suggested that an extended leave of absence can constitute a reasonable accommodation in many instances.
Bucking that trend, the Eighth Circuit held in May that regular attendance is generally an essential job function for many jobs. In Evans v. Cooperative Response Center, Inc., No. 19-2483 (8th Cir. May 4, 2021), the plaintiff sued for violations of the ADA and FMLA, and retaliation. Evans suffered from reactive arthritis. Due to complications from her medical condition, Evans exhausted her FMLA leave, and when she could not report to work, she was assessed points under a “no fault” attendance policy and terminated. The Court evaluated the requirements of Evans’ position as well as the employer’s testimony, job descriptions, and policies regarding attendance. Because she was the only office assistant for the company, and the employer was not required to reassign existing workers to fill her job duties, attendance was essential. Under these circumstances, the Court found that intermittent FMLA leave and the ADA did not excuse her from the essential job requirement of regular and reliable attendance.
As always, ADA accommodation claims must be evaluated on a case-by-case basis. With the increasing practicability of remote work, not all jobs require in-person attendance, and for many, remote work may be a reasonable accommodation.
Post #MeToo, a Hostile Work Environment Must Still Be “Severe and Pervasive”
In Lopez v. Whirlpool Corp., No. 19-2357 (8th Cir. Mar. 4, 2021), the Eighth Circuit affirmed the grant of summary judgment to an employer on claims of hostile work environment and retaliation. The district court found that the alleged conduct of a co-worker which included touching the employee on her back, invading her personal space, and blowing on her finger while calling her “baby” was not severe or pervasive enough to rise to a hostile work environment. The court also affirmed summary judgment on the retaliation claim, finding although the employee complained about feeling unqualified for an assigned task, she did not tie that complaint to sex discrimination or harassment.
Plaintiff Lopez worked at a Whirlpool manufacturing plant in Amana, Iowa, where she made refrigerators. Lopez claimed her co-worker Brian Penning, made multiple unwanted advances, touched her, and stared at her for long periods of time. To raise a triable fact on whether the complained of harassment affected a term, condition, or privilege of employment, the claim triggering conduct must be severe or pervasive enough to create an objectively hostile or abusive work environment. The court found that although her co-worker should be embarrassed and ashamed of his behavior towards Lopez, it did not meet the exacting standard that must be applied when determining an employer’s liability for a hostile work environment. The court further concluded that Lopez failed to provide evidence that Whirlpool knew or should have known about Penning’s conduct. Lopez admitted to not informing superiors of the unwanted touching, and she resigned four days after filing a formal complaint, which did not give Whirlpool reasonable time to address the complaint.
MISSOURI FEDERAL DISTRICT COURT CASES
Eastern District Finds McDonald’s and Franchisee were Joint Employers
In Johnson v. McDonald Corp., No. 4:20-cv-1867-RWS (E.D. Mo. June 3, 2021), the plaintiff worked at a McDonalds franchise located in St. Louis. Plaintiff claimed she was exposed to sexual harassment and assault during the few weeks she worked at the McDonalds. Plaintiff brought a Title VII suit against not only the franchisee, Tenaj, LLC, but also McDonald’s Corp. and McDonald’s USA, LLC, which both moved to dismiss arguing Plaintiff was not their “employee” under Title VII.
Applying the pleading standard required by Fed. R. Civ. P. 8, the Court determined that Plaintiff satisfied the standard when pleading that the Defendants were her employers under either a joint employer or agency theory. The Court reasoned that since the employee had only worked for the McDonald’s franchise for a short period of time, she may not have been aware of the entities that provided oversight of the franchise, or the individual role each entity played within the corporate structure. The court readily distinguished these facts from cases cited by Defendants, finding Plaintiff’s allegations of Defendants’ involvement in the day-to-day operations of the franchise was sufficient to raise a reasonable expectation that discovery will lead to relevant evidence of the claim.
The parties disagreed on which joint employer standard the Court should apply. The Defendants urged the Court to adopt the Baker test (Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8th Cir. 1977), which requires courts to consider: (1) interrelation of operations (2) common management (3) centralized control of labor relationship and (4) common ownership or financial control. Again, the Court determined that Plaintiff had pleaded sufficient facts to plausibly allege that McDonald’s USA and/or McDonald’s Corp. was a joint employer with the franchisee. Under the Twombley standard, the Plaintiff raises a reasonable expectation that one or more of these factors would become apparent during the course of discovery.
Although this decision is not binding outside of the Eastern District of Missouri, it is a sobering result that may attract potential plaintiffs to the district and require national franchisors to defend local employment disputes beyond the motion to dismiss stage.
NOTEWORTHY MISSOURI COURT OF APPEALS DECISIONS
Arbitration Clauses with “Unfettered” Modification Rights Are Unenforceable
In July, the Western District Court of Appeals affirmed that a delegation provision in an arbitration agreement must be supported by consideration. An “unfettered” right vested in management to modify its terms is an illusory promise, which is not adequate consideration to support a contract.
In Johnson v. Menard, Inc., WD 84138 (Mo. Ct. App. W.D. July 27, 2021), the court of appeals held that reference to AAA rules is “clear and unmistakable” evidence that the parties intended threshold questions of arbitrability to be determined by the arbitrator. However, whether an arbitration agreement is formed remains within the province of the courts. The question then was whether the delegation provision was supported by consideration. The Agreement stated “I UNDERSTAND THAT THIS AGREEMENT CANNOT BE MODIFIED EXCEPT BY THE PRESIDENT OF MENARD, INC.” The court held that vesting unilateral authority to modify the agreement without limit or notice meant it was “unfettered,” and made Menard’s promise illusory.
Because the delegation provision was not enforceable, the Court had authority to determine enforceability of the entire arbitration agreement. The Court held that unfettered modification provision meant entire agreement lacked consideration, and motion to compel arbitration was denied.
A Leave of Absence May be a Reasonable Accommodation under the MHRA
In Sherry v. City of Lee’s Summit, Missouri, WD 83635 (Mo. Ct. App. W.D. Mar. 9, 2021), following a trial for disability discrimination under the Missouri Human Rights Act, the City of Lee’s Summit moved for judgment notwithstanding the verdict. The City argued that Sherry did not prove he was disabled because the MHRA defines “disability” as “a physical or mental impairment which substantially limits one or more of a person's major life activities, being regarded as having such an impairment, or a record of having such an impairment, which with or without reasonable accommodation does not interfere with performing the job.” According to the City, since Sherry could not report to work for an extended period of time, his disability interfered with performing the essential functions of his job.
The City relied on Medley v. Valentine Radford Communications, Inc., 173 S.W.3d 315 (Mo. App. W.D. 2005) for the proposition that “an employee who cannot regularly come to work is not able to satisfy any functions of the job, let alone the essential ones.” However, the Court of Appeals held that Medley does not hold that a leave of absence is an unreasonable accommodation as a matter of law. In a footnote, the Court holds open the possibility that in some cases, “a factfinder may determine that a requested leave started out as a reasonable accommodation but becomes unreasonable as time wears on or as circumstances change.” But ultimately whether an employee meets the definition of disabled under the MHRA is a question of fact for the jury.
This case illustrates some of the difficulties employers may face in accommodating disabilities, particularly where an extended leave of absence may be a reasonable accommodation. Like the EEOC, the Western District is reluctant to state that regular attendance is always an essential job function. Disability accommodations must therefore be evaluated on a case-by-case basis.
NOTEWORTHY DISTRICT OF KANSAS CASES
District of Kansas Compels Arbitration where Employer’s Right to Modify is not “Unfettered”
A recent District of Kansas decision is worth revisiting, given how few arbitration cases are published in the District. In Braden v. Optum RX, Inc., the Court held that an arbitration provision which limited the employer’s right to modify terms was not one that granted “unfettered” discretion, and so it did not lack consideration. The provision at issue required the employer to provide at least 30 days’ notice to its employees of impending modifications, and only went into effect on January 1 of the following year. The employer’s promise to arbitrate was not “illusory.” More on this case can be found in a recent post on Baker Sterchi’s Kansas Employment Law Blog.
NEW LAWS, ORDINANCES, AND RULES
St. Louis “Ban the Box” Went into Effect on January 1, 2021
In 2020, the City of St. Louis enacted Ordinance No. 71074, a ban-the-box ordinance applicable to private employers with ten or more employees. The Ordinance went into effect on January 1, 2021. Under the ordinance, employers cannot inquire about an applicant’s criminal history until after the employer has interviewed the applicant and determined that the applicant is otherwise qualified for the position. Employers cannot base a hiring decision on the applicant’s criminal history unless the decision was based on all the information available, including the frequency, recency, and severity of the crime and the crime was reasonably related to or bears upon the duties and responsibilities of the position. However, the Ordinance is inapplicable where local, state, or federal law or regulation excludes applicants with certain criminal convictions. A similar ordinance was enacted in Kansas City in February 2018.
U.S. Department of Labor Issues Regulations to Benefit Tipped Employees
A new DOL regulation will likely mean that tipped employees will see larger paychecks in 2022. The Fair Labor Standards Act contains an exception to the standard minimum wage for tipped employees. Employers may take a “tip credit” and pay tipped employees as little as $2.13 per hour, as long as they earn at least the standard minimum wage of $7.25 (with tips included). In a final rule published by the DOL on October 29, 2021, the DOL revived the so-called “80/20 Rule” for tipped employees. The Trump administration had rescinded the rule in favor of a “reasonable time” standard.
Under the 80/20 Rule, tipped employees’ duties are divided into three categories: 1) tip-generating duties (e.g., taking orders, talking to customers, serving drinks, delivering food to tables); 2) directly-supporting duties (e.g., rolling silverware, clearing tables); and 3) non-tipped duties (e.g., cleaning bathrooms, washing dishes, taking out trash). Employers may only claim a tip credit for a tipped employee’s work where at least 80 percent of the employee’s time that week is spent on tip-generating duties and no more than 20 percent is spent on directly-supporting duties. If an employee’s time spent on directly-supporting duties exceeds 20 percent of the work week, all time above 20 percent must be paid at the minimum wage rate. Additionally, if directly-supporting work is performed for a continuous period of 30 minutes or more, the employer cannot claim the tip credit. Under the new rule, any time spent on non-tipped duties must be paid at the minimum wage rate.
For example, assume a bartender works 40 hours in a week. If no more than 8 hours is spent on directly-supporting work, then the employer may take a tip credit for all hours worked. However, if she spends 12 hours on directly supporting work, then the minimum wage must be paid for the 4 hours in excess of 20%.
The Rule also prohibits employers from keeping any portion workers’ tips, regardless of whether the employer takes a tip credit. Employers face a fine of up to $1,100 for each instance the DOL finds that the employer retained employee tips. The Rule goes into effect on December 31, 2021, and litigation of the Rule appears likely.
NEW ILLINOIS EMPLOYMENT LAWS
As in 2020, the Illinois legislature was once again busy in the Employment Law arena. The Illinois Freedom to Work Act, (820 ILCS § 90). which limits employers’ use of noncompete and non-solicitation restrictive covenants for employees who are not highly compensated, takes effect on January 1, 2022. Specifically, the law:
- Prohibits employers from entering into noncompete agreements with employees earning $75,000 or less, and from entering into non-solicitation agreements with employees earning $45,000.
- Contains an escalator clause which provides that for noncompete agreements, the salary threshold amount will increase every five years by $5,000 until January 1, 2037, when the amount will equal $90,000. For non-solicitation agreements, the threshold amount will increase every five years by $2,500 until January 1, 2037, when the amount will equal $52,500.
- Prohibits employers from entering into noncompete or non-solicitation agreements with employees who were terminated, furloughed, or laid off due to the Covid-19 pandemic, unless compensation is provided, in an amount equaling the employee’s base salary at the time of termination for the period of enforcement minus compensation earned from outside employment during that same period.
Illinois employers who utilize restrictive covenants in employment agreements should review those agreements, to ensure compliance with the new law.
Earlier in the year, the legislature amended the Illinois Human Rights Act to place new restrictions on employers’ ability to consider criminal conviction records when making employment decisions. The amendments allow employers to consider applicant and employee criminal conviction records in only two circumstances: (1) where a “substantial relationship exists between the conviction and the employment action being taken, and (2) where granting or continuing an individual’s employment would pose an unreasonable risk to safety or property of specific individuals, or to the public. Employers must consider the following factors in determining whether a conviction is disqualifying:
i. The length of time since the conviction;
ii. The number of convictions represented in the conviction record;
iii. The severity of the conviction and its relationship to the safety of others;
iv. The circumstances surrounding the conviction;
v. The age of the employee at the time of conviction; and
vi. Any evidence of rehabilitation.
Further, before an employer takes any adverse action based on a criminal conviction, it must engage in an interactive process with the applicant or employee, giving that individual notice of the potentially disqualifying conviction, providing a copy of any relevant criminal history report, and explaining the individual’s right to respond (within five days), including any challenge to the accuracy of the conviction record or evidence of mitigation. A final decision by the employer must be accompanied by a notice of the disqualifying conviction and reason for the decision, and notification of the person’s right to file a charge with the Illinois Department of Human Rights.
Note that these amendments do not alter and are in addition to the state’s Ban-the-Box law, which dictates when and how during the hiring process an employer my obtain criminal conviction information about an applicant.
A WILD 2021 CONCLUDES, WITH MORE IN STORE FOR 2022
2021 was a lively year for labor and employment law, taking center stage not only in the courts but also in the court of public opinion. In 2022, we can expect much of the same. Baker Sterchi attorneys will be following these developments with great attention and providing updates and analysis on this rapidly developing legal landscape.