Kentucky Supreme Court Reasserts Constitutional Power, Opens Door to Class Actions

By Thomas E. Travis

With the Kentucky Supreme Court’s recent ruling in McCann v. The Sullivan University System, Inc., employers should take heed to potential class action exposure in cases related to alleged violations of Kentucky’s wage and hour statute. However, the Court, in its text-centric opinion, appears to have issued a broader warning shot as to how to interpret Kentucky statutory causes of action in light of the Kentucky Rules of Civil Procedure.

The underlying dispute arose when Sullivan University hired McCann as an admissions officer in 2006 at its campus in Fort Knox, later transferring her to its Spencerian College campus in Louisville in 2007. After a prolonged tilt in federal court, McCann filed a state court motion under Kentucky Rule of Civil Procedure 23 to certify a class action on behalf of admissions officers for back overtime pay. KRS 337.385—Kentucky’s wage and hour statute—neither

United States Supreme Court to Resolve Class Action Waiver Issue

By Michelle D. Wyrick

In a matter of great interest to many employers, last week, the United States Supreme Court agreed to decide whether arbitration agreements that prohibit employees from pursuing class and collective remedies are enforceable. Courts are currently divided on the issue. The Supreme Court granted certiorari in three cases, Epic Sys. Corp. v. Lewis, from the Seventh Circuit, Ernst & Young LLP v. Morris, from the Ninth Circuit, and NLRB v. Murphy Oil, USA, from the Fifth Circuit, to resolve the question.

The dispute pits the savings clause of the Federal Arbitration Act (“FAA”), 9 U.S.C. §2, which allows invalidation of arbitration agreements only “upon such grounds as exist at law or in equity for the revocation of any contract” against employees’ rights to engage in protected, concerted activity under the National Labor Relations Act, 29 U.S.C. §157. The National Labor Relations Board (“NLRB”) takes the position that provisions in arbitration agreements requiring employees to waive their rights to pursue class or collective actions violate employees’ rights to engage in protected, concerted activity under the National Labor Relations Act (“NLRA”). In May 2016, the Seventh Circuit agreed and

United States Supreme Court to Revisit Class Action Issues

By Michelle D. Wyrick

Last week, the United States Supreme Court agreed to review Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, which gives the Court an opportunity to consider class certification questions about how damages may be proven in a class action and whether a class can include members who were not injured.

Tyson Foods is a donning and doffing case in which the lower court certified collective and class actions under the Fair Labor Standards Act and state law. The plaintiffs, who were hourly production workers at an Iowa processing facility, alleged that Tyson Foods did not adequately compensate them for time spent donning and doffing protective equipment and walking to and from their work stations. Although Tyson Foods did not record the time actually spent by each employee on these tasks, it added several minutes per shift to each employee’s paycheck to compensate them.

At trial, to prove damages, the workers relied on individual time sheets and compared them to a time study of a sample of employees who were observed donning, doffing, and walking. The jury returned a verdict for

Kentucky Court of Appeals Rules That Kentucky Wage and Hour Statute Does Not Permit Class Actions

By Michelle D. Wyrick

In an important ruling for employers, on February 27, 2015, the Kentucky Court of Appeals ruled that KRS 337.385 does not permit individuals to pursue claims for unpaid wages and overtime in Kentucky as class actions. See McCann v. The Sullivan University System, Inc., No. 2014-CA-000392-ME. The Court relied on the language in KRS 337.385(2) stating that actions for unpaid wages and overtime may only be maintained by one or more employees “for and in behalf of himself, herself, or themselves.” The Court concluded that this language does not permit plaintiffs to pursue claims for unpaid wages and overtime compensation in a representative capacity.

The Court contrasted the language in KRS 337.385 and the Fair Labor Standards Act, which expressly permits plaintiffs to

Proposed FCRA Class Action Lawsuit Filed Against Uber Technologies

By Leila G. O’Carra

A proposed class action lawsuit filed on November 24, 2014, alleges that Uber Technologies, Inc. and others violated the Fair Credit Reporting Act by obtaining criminal history reports, and taking adverse employment actions based on the information in the reports, without making disclosures required under the Act.

Uber runs a smartphone ridesharing application. Riders can request transportation, enter their location and destination, pay their driver, and rate their experience with the app. Drivers use company-provided smartphones pre-loaded with the Uber app to accept transportation requests.

Named plaintiff Abdul Mohamed was a driver with Uber until October 28, 2014, when he was notified by email that the company would not consider his proposal to work as an “Uber X” driver due, in part, to information obtained through a background report. Mohamed’s complaint alleges that he has only a minor criminal history involving Medicaid for his seven children.

According to Uber.com,

“Every ridesharing and delivery driver is thoroughly screened through a rigorous process we’ve developed using constantly improving standards. This includes a three-step criminal background screening for the U.S. — with county, federal and multi-state checks that go back as far as the law allows — and ongoing reviews of drivers’ motor vehicle records throughout their time on Uber.”

The FCRA regulates the use of “consumer reports” (including background reports provided by third party vendors) for employment purposes. In general, an employer may only obtain such a report when it (1) makes a clear and conspicuous disclosure to the employee or applicant, before the report is obtained, in a document that consists solely of the disclosure, that a report may be obtained; and (2) obtains prior written authorization from the applicant/employee. Before an employer takes adverse action against an applicant/employee based in part on a consumer report, it must provide the affected individual with a copy of the report and a description of consumer rights under the FCRA. The employer must also provide an adverse action notice if the report is used to deny employment. Mohamed claims that Uber failed to properly notify him that it would obtain his background report, and it did not provide him with a copy of his background report and description of his FCRA rights prior to terminating his employment.

Employers can avoid the issues that Uber is facing by consulting with their legal counsel to review FCRA requirements and craft compliant FCRA notices, authorizations, and disclosures. The FCRA regulations even provide a model summary of consumer rights – one of the documents that Mohamed claims Uber did not provide to him.

Supreme Court Affirms Arbitrator’s Holding That Contract Permitted Class Relief

The U.S. Supreme Court on June 10, 2013, issued its decision in Oxford Health Plans v. Sutter, 569 U.S. ___, No. 12-135 (2013), holding unanimously that once an arbitrator decides that a contract permits a class arbitration proceeding, the parties are bound by that decision under the Federal Arbitration Act’s very narrow scope of judicial review. In this commercial arbitration case involving a healthcare provider’s claim against a medical plan, Justice Kagan, speaking for the Court, stated, in part:

“Because the parties ‘bargained for the arbitrator’s construction of their agreement,’ an arbitral decision ’even arguably construing or applying the contract’ must stand, regardless of a court’s view of its (de)merits. Eastern Associated Coal Corp. v. Mine Workers, 531 U. S. 57, 62 (2000) (quoting Steelworkers v. Enterprise Wheel & Car Corp., 363 U. S. 593, 599 (1960); Paperworkers v. Misco, Inc., 484 U. S. 29, 38 (1987)…. Only if ‘the arbitrator act[s] outside the scope of his contractually delegated authority’—issuing an award that ‘simply reflect[s] [his] own notions of [economic] justice’ rather than ‘draw[ing] its essence from the contract’—may a court overturn his determination. Eastern Associated Coal, 531 U. S., at 62 (quoting Misco, 484 U. S., at 38). So the sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.”

Significantly, the cases relied upon by the Court in this commercial arbitration case were prior labor and employment law decisions.

NLRB Invalidates Mandatory Arbitration Provision Restricting Class Claims

In a decision issued January 3, 2012, a two Member NLRB, with Member Hayes recusing himself, ruled in D.R. Horton, Inc., 357 NLRB No. 184 (2012), that an employer may not require employees covered by the National Labor Relations Act to sign arbitration agreements which prevent them from pursuing class or collective action claims in court or arbitration.  Such agreements, according to Chairman Pearce and Member Becker, violate Section 7 of the Act.  In reaching this decision, the Board rejected a 2006 NLRB General Counsel internal opinion to the contrary. 

The agreement in question prohibited an arbitrator from consolidating claims, fashioning a class or collective action, or awarding relief to a group or class of employees.  Prior to its decision, the Board had sought amicus briefs on the issues raised by the case from interested parties and received more than a dozen.

The Board’s order requires D.R. Horton to rescind the agreement or revise it to make clear to employees that they are not waiving their right to pursue a class or collective action in all other possible forums including the courts and arbitration.