Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

In Kimberley Group Housing Ltd v Hambley and ors and Angel Services (UK) Ltd v Hambley and ors, the Employment Appeal Tribunal (EAT) has overturned an Employment Tribunal’s finding that where a service provision contract is performed by one company and is taken over by two companies, the liability for transferred employees should be apportioned between the two companies.

This is an important case, as it is the first guidance to be given by the EAT on the effect of service provision changes under TUPE.

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This post was written by John T. McDonald and E. David Krulewicz.

Adding to a series of recent employment law cases decided by the United States Supreme Court, the Court issued three more opinions affecting employment law on June 19, 2008: two interpreting the Age Discrimination in Employment Act of 1967 (“ADEA”) and one concerning the Employee Retirement Income Security Act of 1974 (“ERISA”). 

In Kentucky Retirement Systems v. EEOC, 554 U.S. ___ (2008), a 5-4 decision, the Supreme Court held that “differential treatment based on pension status, where pension status…itself turns, in part, on age” does not violate the ADEA. Specifically, Kentucky’s state retirement plan (the “Plan”) for employees in “hazardous positions” provided that an employee could obtain “normal” retirement benefits in two ways: (1) after 20 years of service; or (2) after 5 years of service provided the employee had attained the age of 55. If an employee became disabled prior to satisfying either avenue, however, the Plan would “impute” the number of years necessary to meet either the years of service or age requirement, whichever was less. The amount of benefits a retiree received depended upon the number of years of service (either actual or imputed). 

The EEOC challenged the Plan on behalf of an employee who retired after becoming disabled at age 61. As the employee was already eligible for “normal” retirement benefits (having achieved 18 years of service and age 55), the Plan did not “impute” any additional years of service to him. The EEOC claimed that the Plan discriminated on the basis of age because had the employee become disabled before reaching age 55, he would have been credited with additional years of service and, therefore, received increased benefits. In rejecting the EEOC’s argument, the Supreme Court explained: “[w]here an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a disparate treatment claim under the ADEA, must adduce sufficient evidence to show that the differential treatment was ‘actually motivated’ by age, not pension status.” Because the EEOC had failed to produce such evidence, the Supreme Court found no violation of the ADEA. 

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In a unanimous ruling by a three-judge panel on June 18, 2008, the Ninth Circuit Court of Appeals in Quon v. Arch Wireless Operating Co., Inc. et al., 2008 U.S. App. LEXIS 12766, held: (1) that a third party vendor provided an electronic communication service to the subscriber/employer and that it violated the Stored Communications Act (SCA) when it turned over text-messaging transcripts to its subscriber, who was not an addressee or intended recipient of the messages; and (2) that an employer’s search of the text-messaging transcripts violated the Fourth Amendment because employees have a reasonable expectation of privacy in those messages. 

Facts — A police sergeant (employee) filed a lawsuit against the city, the police department (employer) and the city’s provider of wireless text messaging services for violations of the SCA and the Fourth Amendment prohibition against unreasonable search and seizure. The employer had a computer usage, internet and e-mail policy that entitled it to monitor all network activity without notice and stated that users had no expectation of privacy or confidentiality and that use of computers for personal benefit was a violation of the policy. The employee signed an acknowledgment of the policy and attended a meeting in which it was stated that the policy applied to the use of pagers. The employee was issued a pager by his employer, which was governed by the policy. He used the pager for both work and personal messages, including sexually explicit messages to his wife. He exceeded the department’s informal policy limiting use of the pagers to 25,000 characters. The “operational reality” was that the department would not audit their employees’ pagers as long as the employees agreed to pay for any overages. The employee paid the overages on the three to four occasions he exceeded the character limit. The police chief ordered that the transcripts of the employee’s text messages be obtained and reviewed to determine whether the pagers were being used for purely work purposes. The provider, Arch Wireless, produced the transcripts to its subscriber, the employer. 

The Decision — The Ninth Circuit held that the provider provided a service that enabled the employee to send or receive electronic communications under the plain meaning of the SCA and therefore violated the SCA. The court ruled against the police department, stating that its informal policy of requesting a check for any overages created an expectation of privacy in the text messages. The search of the text messages was unreasonable in scope and therefore in violation of the Fourth Amendment because there were a host of simple ways to verify the efficacy of the 25,000 limit without intruding on the employee’s constitutional rights. 

Practical Impact — This is the first time a federal appellate court has provided Fourth Amendment protection to electronic messages. The ruling gives government workers Fourth Amendment protection against searches of text and e-mail messages by their employers. Government employer subscribers will now have to obtain a warrant, court order or consent before their outside vendors will permit access to email and text messages. The SCA portion of the decision may encourage employers to maintain archived email and text messages on their own internal servers, rather than hiring third-party vendors, so they can control access to them. The decision should also remind employers that they should implement strong internet and computer usage policies. However, even if they have strong policies that allow monitoring of all network activity without notice, that expressly state that users have no expectation of privacy or confidentiality and that use of computers for personal benefit violates the policy, they need to to regularly monitor employee email and text messages. The Quon case makes it clear that an employer’s statement that it has the right to monitor is not sufficient if, in practice, employees are lead to believe they have an expectation of privacy in their personal communications. In addition, the opinion highlights the need for employers to thoroughly train supervisors who are responsible for ensuring employee compliance with computer and internet policies and to evaluate their performance of these duties on a regular basis to avoid a custom or “operational reality” which supercedes the written policies. 

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This post was written by John A. DiNome and Daniel J. Moore.

In a 7–2 decision, the U.S. Supreme Court held that California’s Assembly Bill 1889 (“AB 1889” or the “Act”) is preempted by the National Labor Relations Act (“NLRA”). Chamber of Commerce v. Brown, 554 U.S. ___ (2008). The decision represents a significant victory for employers and maintains the current federal policy favoring free debate between employers and employees on unionization. 

Background — On September 28, 2000, California enacted AB 1889, known as the union “neutrality law.” AB 1889 forbids private employers who receive either state grants or more than $10,000 in state funds during a calendar year from using such funds to “to assist, promote, or deter union organizing.” Although termed the “neutrality law,” AB 1889 benefited employees because few, if any, employers would dedicate funds to encourage its employees to unionize. AB 1889 requires employers to maintain strict accounting records demonstrating a complete separation of state funds. The penalties for violating AB 1889 are severe—employers found in violation of AB 1889 are subject to treble damages, attorneys’ fees, and costs. 

The U.S. Chamber of Commerce, along with a group of employers and business associations, filed a lawsuit challenging the Act. In 2002, a federal district court held that the Act was preempted by the NLRA and therefore unenforceable. The U.S. Court of Appeals for the Ninth Circuit struggled with the case. In two separate decisions, a three-judge panel affirmed the district court’s decision. However, in 2006, the full Ninth Circuit vacated the earlier panel decisions, and ruled that the Act was not preempted by the NLRA. Chamber of Commerce v. Lockyer, 463 F.3d 1076 (9th Cir. 2006) (en banc). 

The Decision — In reversing the Ninth Circuit, the Supreme Court relied on a doctrine known as Machinists preemption, which forbids states to regulate conduct that Congress intended to be unregulated and left to the free play of economic forces. The Court found that both the text and the history of the NLRA demonstrated a congressional policy “favoring uninhibited, robust, and wide-open debate in labor disputes.” The NLRA protects an employee’s right not only to unionize, but also to refuse to join a union, which implies an underlying right to receive information opposing unionization. Accordingly, AB 1889, which embodied California’s judgment that partisan employer speech necessarily interferes with an employee’s choice about whether to join a labor union, violated Congress’s policy in favor of free debate. 

Practical Impact — AB 1889, and similar statutes, threatened to seriously undermine the speech rights of employers related to union organizing campaigns. The potential costs of litigation, plus the threat of severe penalties gave employees tremendous leverage to halt employer campaigns in opposition to labor organizing activities. The Supreme Court’s decision preserves the federal policy in favor of free debate on unionization. It also maintains a consistent policy throughout the nation, thereby avoiding a patchwork approach to employer speech varying from state to state.

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The Scottish Court of Session in the case of Cannop & Others –v- The Highland Council has confirmed that where the employee’s Employment Tribunal claim follows on from a grievance previously communicated, there does need to be a necessary relationship between the grievance and the complaint pleaded in the ET1 Tribunal claim form, so that the grievance underlying the ET1 is essentially the same as the grievance earlier communicated. In respect equal pay claims, the Court declined to comment on the Employment Appeal Tribunal’s decision that the relevant grievance must refer to the comparators which are subsequently cited in the ET1.

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