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By:  Jeff Embleton

WHITE PAPER

Continuing an effort to reverse or modify many of the employee and union-friendly policies promulgated by his predecessor, the NLRB’s General Counsel, Peter Robb, announced new guidance on handbook rules and policies following the NLRB’s decision in the Boeing Company (2017).

Many employers may recall that the former General Counsel of the NLRB, Richard Griffin, issued GC Memorandum 15-04 in March 2015 which resulted in most employers having to carefully review and revise handbook rules and policies in response to the Memorandum.  Griffin’s Memorandum also resulted in increased investigation enforcement activities by the various Regional Offices of the NLRB involving handbook rules and policies.  Specifically, in the GC Memorandum 15-04, the former General Counsel, following the Board’s decision in Lutheran Heritage Village – Livonia (2004) decided to emphasis the first prong of the three prong test announced in Lutheran Heritage:

Even if a rule does not explicitly prohibit Section 7 activity, however, it will still be unlawful if (1) employees would reasonably construe the Rule’s language to prohibit Section 7 activities; (2) the Rule was promulgated in response to union or other Section 7 activity; or (3) the Rule was actually applied to restrict the exercise of Section 7 rights.

Indeed, the new emphasis on the first part of the Lutheran Heritage standard resulted in number of enforcement charges against even facially neutral rules if the rule “could” be interpreted to have a chilling effect on employees and Section 7 rights.

However, under the Robb Memorandum, the new General Counsel said two very important things: (1) since the repudiation of the first prong of Lutheran Heritage in the Boeing Company case, the focus will now be on balancing the Rule’s impact on the employee’s ability to exercise their Section 7 rights and the Rule’s connection to the employer’s right to maintain discipline and productivity in the workplace; and (2) the Regions have been directed that ambiguities in Rules are no longer interpreted against the employer. In essence, the new guidance moves away from prohibiting rules that could be interpreted to impact Section 7 rights to reviewing the rules that would impact Section 7 rights. The Memorandum further described the three categories of Rules and how they will be reviewed:

Category 1. Rules that are Generally Lawful to Maintain.

 The Memorandum directs that these Rules are generally going to be considered lawful either because the Rule does not prohibit or interfere with the exercise of Section 7 rights or because the potential impact on Section 7 rights is outweighed by the business justification associated with the Rule. Interestingly, the Memorandum spends most of its focus on providing guidance on rules that will be considered lawful, even if they could cover Section 7 activity. Those Rules include:

1. Civility rules. Rules that regulate conduct in the workplace that has been a focus of attention by the former General Counsel and the Obama Board. For example, rules that regulate negative or disparaging remarks; rude behavior; offensive language and the like were fair game under the Obama Board. However, the new guidance makes clear that policies that are otherwise neutral will be considered lawful unless misapplied.
2. No-photography and no-recording rules. This was a very controversial area as the Obama Board took the position that any blanket rules prohibiting video or audio recording were, on their face, unlawful because they tended to chill employee’s rights to record protected activity. Under the new interpretation, “no-recording” rules will be considered lawful (unless used for unlawful reasons). In rationalizing the change in the interpretation, the General Counsel recognized the employer’s legitimate and substantial interest in limiting recording and photography on their property because of security concerns, protection of property, protection of proprietary, confidential and customer information, avoiding legal liability and maintaining the integrity of operations.
3. Rules against insubordination, non-cooperation or on-the-job conduct that adversely affects operations. After the issuance of GC15-03, rules that prohibited insubordination towards a manager or the company were universally held to be unlawful because they tended to chill employee’s Section 7 rights. However, under the new Memorandum, where the Rule prohibiting insubordination or lack of cooperation lacks any reference to Section 7 activity, the Rule will be considered lawful. The Memorandum was careful to note that there may be some activity that could warrant individual scrutiny, such as rules prohibiting disparagement or criticism of an employer. In other words, the rules may not be unlawful as written but may be unlawful as applied.
4. Disruptive behavior rules. Similar to the discussion above, rules that prevent “fighting, roughhousing, horseplay, tomfoolery, and other shenanigans” generally will be considered lawful as well as workplace rules that prohibit “yelling, profanity, hostile or angry tones, throwing things, slamming doors, waving arms or fists, verbal abuse, destruction of property, threats or outright violence.” However, rules that prohibit walk-outs may invite additional scrutiny.
5. Rules protecting confidential, proprietary, and customer information or documents. Rules that prohibit dissemination of the company’s or employee’s private information, trade secrets or other confidential information will generally be considered to be lawful under the new interpretation. Recognizing that “employers have an obvious need to protect confidential and proprietary information, as well as customer information,” the General Counsel concluded that on balance, the business justification outweighed any potential Section 7 concerns. However, rules that prohibit employees from discussing wages, benefits or working conditions will be considered on unlawful on their face.
6. Rules against defamation or misrepresentation. With the explosion of social media, many employers have been subject to damaging statements and criticism by some of their own employees. Under the new interpretation, blanket rules which prohibit defamatory, false or misleading statements about an employer will generally be considered to be lawful. The General Counsel felt that while blanket rules against defamation or misrepresentation may possible cover some Section 7 activity, it was concluded that a majority of the behavior is unrelated to the National Labor Relations Act and, on balance, the business need for such a rule outweighed any concern over the impact on Section 7 rights. Of course, even a facially neutral rule, if improperly or unfairly applied, can result in a violation of the National Labor Relations Act.
7. Rules against using employer’s logos or intellectual property. Rules that prohibit the use of the company logo or intellectual property without the company’s consent will not be considered to be lawful on their face.
8. Rules requiring authorization to speak for a Company. Recognizing employers have an interest in insuring that only authorized representatives speak for a company, rules that prevent employees from responding to media requests or prevent employees from commenting on behalf of an employer will generally be considered to be lawful on their face.
9. Rules banning disloyalty, nepotism or self-enrichment. Rules and policies that prohibit employees from engaging in conduct which is damaging to a company, disloyal to a company, competes with a company or interferes with the business of the company will be considered to be lawful.

Again, it is important to note that Category 1 Rules will be deemed to lawful on their face which is a change from the previous General Counsel’s interpretation. However, keep in mind that even facially neutral rules can result in violations of the NLRA if improperly applied.

Category 2. Rules Warranting Individualized Scrutiny.

 In describing this Category, the Memorandum gave several examples of rules that would require additional scrutiny to determine the legality of the rules. Examples include: rules regarding disparagement or criticism of an employer (as opposed to rules that prohibit disparagement of employees), rules generally restricting employee’s right to speak to media or third parties (as opposed to a rule that prohibits from speaking to a media on behalf of the employer), rules prohibiting making false or inaccurate statements (as opposed to rules prohibiting making defamatory statements).

These rules are more difficult to define, but also tend to be much broader in their context. These likely will be decided on a case-by-case basis.

Category 3. Rules that are Unlawful to Maintain.

This Category considers rules and policies unlawful that would prohibit or restrict protected activity under the National Labor Relations Act and where they impact on the Section 7 rights outweighs any business justification. Specifically, these rules include:

1. Confidentiality rules specifically regarding wages, benefits or working conditions. It has long be accepted that rules that prohibit employees from discussing salaries, wages, benefits or the terms and conditions of employment are unlawful. Likewise, rules that prohibit employees from disclosing to any “media source” information regarding an employer’s wages, benefits, or working conditions would be considered to be unlawful.
2. Rules against joining outside organizations or voting on matters concerning employer. This, of course, strikes to the heart of union organization and rules that prohibit such activity have universally been considered to be unlawful.

CONCLUSION

The General Counsel’s newly issued interpretation promises to offer clarification for employers and organizations and a clear road map for professionals who write and interpret these policies and rules. We think this also continues the trend under the Trump Board of pulling back and overturning many of the Obama Board decisions which favored employee and union rights over rights of employers.  However, we invite everyone to stay tuned as these cases unfold before the NLRB.

By:  Ken Smith

The Supreme Court of the United States recently issued a major decision in the case Epic Systems Corp. v. Lewis that upholds the rights of employers to require its employees to pursue individual arbitration for resolving employment disputes.

In Epic Systems, a company employee sought to file a lawsuit against his employer in federal court for failure to pay overtime wages under the Fair Labor Standards Act. The employee tried to file the case as a class action – in other words, on behalf of himself and similar employees who also were allegedly not paid overtime.  Traditionally, because individual claims generally don’t have high value, employees and their lawyers have filed class actions on behalf of a much larger group of employees to leverage settlements and increase legal fees. However, in this case,  the employee had signed an arbitration agreement that explicitly stated any claims relating to his employment would be subject to individual arbitration, and that any claims pertaining to different employees would be heard in separate arbitration proceedings. In other words, the agreements specifically prohibited class actions.

The employee challenged the arbitration agreement, in part, by alleging that the agreement violated the Fair Labor Standards Act. Specifically, the employee pointed to a part of the FLSA that allows for class action lawsuits and claimed that this conflicted with law authorizing the arbitration of employment disputes. The employee also alleged that forcing him to go to individual arbitration violated the National Labor Relations Act, which provides employees the right to engage in “concerted activities” for collective bargaining or other mutual aid or protection.

But the Supreme Court held that when Congress passed the Federal Arbitration Act in 1925, it evidenced a liberal federal policy favoring arbitration. In light of this policy favoring arbitration, the Supreme Court found that there was no conflict between the FLSA and the arbitration agreement. In order to escape from individual arbitration, the employee would have had to demonstrate that the arbitration agreement was entered into fraudulently, or that he was placed under duress when he signed the agreement, or that the agreement was so unfair that it should not be enforced. The employee did not claim any of those defenses.

Moreover, the Supreme Court found that the National Labor Relations Act focuses on the rights of employees to organize unions and bargain collectively. It does not say anything about class action lawsuits or that it overrules the Federal Arbitration Act.

Bottom line, the Epic Systems case is a strong endorsement from the Supreme Court that arbitration agreements are lawful and can be used for a wide variety of employment disputes. Even where employees seek to band together to bring a class action lawsuit in the court system, each employee who signed an arbitration agreement can instead be compelled to litigate his or her  claims in a separate arbitration proceeding. Epic Systems is a big win for employers who prefer the generally quicker, less costly arbitration process over being tied up in court. Employers are encouraged to consider arbitration clauses as part of their employment agreements and policies.

Mansour Gavin Shareholder John Monroe was recently quoted in a front-page article that appeared in the Cleveland Plain Dealer on August 12, 2018 regarding membership interest sales used to transfer title to real estate. When asked about recent legislative efforts to “close” the alleged legal loophole, Monroe opined that such efforts were “wrongheaded.” Monroe stated, “I’m not sure I see the need to close a loophole versus valuing property correctly.” He observed what many Northeast Ohio property owners have seen in their recent property revaluations, that “some properties in Northeast Ohio are dramatically undervalued while others are sharply overvalued, with little apparent logic.” Monroe suggested that “public officials should turn their focus away from entity sales and onto two things: better appraisals and broader tax reform.”

By:  Jim Budzik

Ohio’s public sector landscape will likely be changing dramatically, thanks to yesterday’s 5-4 U.S. Supreme Court vote in Janus v. American Federation of State, County, and Municipal Employees Council 31.  The Supreme Court overturned a 1977 decision that allowed “fair share,” or “agency,” fees to be collected from all public employees, regardless of whether they had joined a union. The rationale was that all employees benefitted from non-political activities, such as a union’s collective bargaining agreement or contract administration, even if certain employees were not members.

This ruling now means that non-union members in approximately two dozen states – Ohio being one of them – cannot be forced to pay fees to unions that represent public employees. Until yesterday, a public employer whose employees were represented by a union could require any employee to pay fees to the union where the collective bargaining agreement authorized such deductions.

The case was initially brought by Mark Janus, an Illinois public employee – and non-union member – who sued the American Federation of State, County and Municipal Employees Council 31 over the collection of fair share fees. Janus’s position was that the Illinois statute that allowed for the collection of such fees violated his right to free speech and free association under the U.S. Constitution’s First Amendment.

In siding with Janus, however, the Court stated that while the ruling “may cause unions to experience unpleasant transition costs in the short term,” that had to be weighed against all of the funds taken from non-union employees and transferred to public sector unions. This ruling now deprives unions of a key revenue stream, and could affect their ability both to attract new members and spend in political races.

Unions, which won both in district court and in the Seventh Circuit before the case was appealed to the Supreme Court, had argued in favor of keeping the fair share fees requirement for the following reasons:

• Illinois law regarding collective bargaining includes non-political issues, such as wages, hours, vacations, parking; therefore, political lobbying is not implicated.
• Agency fees are imperative, because ruling in favor of Janus would significantly increase the number of free riders and it would be impossible to adequately fund the activities needed to fully represent constituents and all bargaining unit employees. Inasmuch as unions have to represent all bargaining unit members, union dues paying members should not have to subsidize non-paying members.

Specifically in Ohio, the Court’s ruling means that Ohio House Bill 53, introduced in late 2017, now will change parts of Ohio’s collective bargaining law. The law currently allows a contract to contain a fair share fee provision. That provision is now invalid. House Bill 53 may also eliminate the “free rider” argument, because the bill would require employee organizations to only represent employees who are dues-paying members of the exclusive representative. Thus, only public employees in an appropriate bargaining unit who are members of the union would be eligible to collectively bargain with the Ohio public employer.

Finally, collective bargaining agreements would govern the wages and working conditions of only the employees who are members of the union. This could result in employees in the same job classification receiving different compensation and benefits, because union employees would be subject to the contract, while non-union employees would be subject to wages and working conditions set by the public employer.

The Janus ruling certainly stands to result in a measurable impact for a number of states, including the prohibition of fair share fees in public sector contracts across the United States.

In other words, stay tuned for further developments in the area.

By:  Jeff Embleton

The new General Counsel of the National Labor Relations Board, appointed by President Donald J. Trump, rolled back controversial handbook rules promulgated under the Obama Board. General Counsel Peter Robb has announced new guidelines on interpretation of handbook policies and rules. These new guidelines overturn a number of controversial decisions under the Obama Board that found facially neutral policies unlawful because of a “possible” chilling effect those rules might have on employees’ rights under Section 7 of the National Labor Relations Act. The new guidelines give greater clarity to businesses, HR professionals, and legal advisors who are responsible for writing, maintaining and interpreting handbook policies and rules. The Memorandum issued by Robb specifically repudiates the former General Counsel’s attack on employer handbooks which resulted in increased enforcement efforts against businesses for handbook violations. A white paper describing the Memorandum is available here for further review.

For months, you likely have been seeing articles or receiving e-mails on the topic of the European Union’s (EU) new privacy regulations, termed the General Data Protection Regulation (GDPR), which go into effect on May 25^th. You may have skimmed them, or you may have hit “delete,” thinking they don’t apply to your small business. But are you sure?

The GDPR is designed to improve and harmonize data privacy laws across Europe, and will apply in each of the EU’s 28 member states. Unlike its predecessor law, however, the GDPR’s obligations extend to any U.S. company that handles the personal data of EU citizens. This would include, for example, any U.S. company that has an Internet presence and markets its products or services over the web, regardless of whether a financial transaction or sale takes place. So if your company collects “personal data” of an EU citizen even as part of a marketing survey, for example, then the data would have to be protected pursuant to the GDPR. And personal data can be something as simple as someone’s name, e-mail address or mobile device ID.

Along with the GDPR’s increased territorial scope, there are also other key changes that U.S. companies should be aware of:

Consent – The requirements for consent to collect personal data have been strengthened. Any request for consent now must be given in an intelligible and easily accessible form, and must be clear and distinguishable from other matters. It also must be as easy to withdraw consent as it is to give it, and once consent is withdrawn, any “data subject” (the person whose data is being collected) also has the right to have his or personal data completely erased.

Rights of data subjects – A data subject now has the right to ask for confirmation that their personal data is being processed, where, and for what purpose. Further, any data subject can request, and a company must provide, a copy of the personal data to him or her, free of charge, in an electronic format. Additionally, notification of a data breach will become mandatory if the breach is likely to “result in a risk for the rights and freedoms of individuals.” Under that scenario, notification must occur within 72 hours after a company becomes aware of the breach.

Penalties – Last but not least, the maximum fines for the most serious infringements are steep. Companies in breach of the GDPR can now be fined either (1) up to 4% of their annual global revenue or (2) up to €20 Million (approximately $24 million USD), whichever is greater. Second tier fines for lesser offenses could be either (1) up to 2% of a company’s annual global revenue, or (2) up to €10 Million (approximately $12 million USD).

While all of this may seem imposing, the reality is that many small companies can comply with the GDPR’s regulations simply by having a good plan in place. What are three basic steps to take?

• First, evaluate what personal information your company might be collecting, via its website or otherwise, and err on the side of caution that it could include data of EU citizens.
• Second, ensure any website content clearly asks for consent, and provides information on how consent may be withdrawn.
• Third, review, update, and/or create a comprehensive internal policy that covers privacy, data protection, and a process to follow in the event of a data breach. A comprehensive policy should be reviewed by members of your HR, IT, and marketing teams, as well as your legal counsel. It also would be a good idea to schedule an annual review of your policy, because certain aspects of the GDPR will become more clear as the regulation is implemented and interpreted.

For a more in-depth look at the GDPR, please click here to access a more comprehensive publication on the topic. If you have any questions, or would like to discuss the applicability of the GDPR to you or your company, please do not hesitate to contact Jennifer Horn, Brendon Friesen or Ed Patton in our Corporate Law and Business Services Group at (216) 523-1500.

By: Brendon Friesen

More than a year has passed since Governor Kasich signed House Bill 523, legalizing medical marijuana (MMJ) in Ohio and making our state the 25th to adopt such a program. At the time, those interested in getting involved — as a cultivator, processor, dispensary, or physician — had little information on exactly what the program would look like from a practical and economic standpoint.

Rules and regulations are now being created by the Medical Marijuana Control Program (MMCP), part of the Ohio Department of Commerce that regulates Ohio’s MMJ program.

Over the past year, the MMCP developed rules for the program, but not without overhauling them several times – often in response to public comment and hearings held in Columbus, Ohio. Based on these rules, here are some “must knows” for anyone thinking about starting MMJ operations:

Cultivators

Cultivators grow cannabis for later production into medicine. There are two levels of cultivators: Level 1 may grow from 25,000 to 75,000 square feet of cannabis; Level 2 may grow from 3,000 to 9,000 square feet of cannabis. The MMCP received a total of 185 applications: 109 (Level 1) and 76 (Level 2). Cultivators also have the difficult task of selecting a growing space that qualifies under the rules: 1.) Cannot be closer than 500 feet to any school, public park, library, and other facilities; 2.) Has the blessing of the municipality, which is permitted to opt-out of the program.

Cultivators are the first group to receive a final set of rules and the application for submission to the MMCP. Applications were due in June, 2017. Cultivators will not know whether they are granted a license until November, 2017, and they are required to begin cultivation within nine months of obtaining a license.

Processors

Processors extract oils from the plant material that have a medicinal effect on the patient. The extracted oils — Tetrahydrocannabinol (THC) and Cannabidiol (CBD) — can be placed into a variety of consumer productions such as vape cartridges, transdermal patches, edibles, capsules, topical ointments and tinctures, which are used to treat the symptoms of many diseases and conditions.

Processors received a final set of regulations in August, which were effective September 8, 2017. Applications will be due later this fall.

Dispensaries

Unlike cultivators and processors, dispensary licenses will be divided up among the various regions created by the MMCP. For example, Cuyahoga County will have up to five dispensaries. Dispensary rules were also finalized in August and made effective September 8, 2017. Applications are due November 17, 2017.

Among other requirements, physicians must obtain a certification from the Ohio Medical Board in order to recommend (not prescribe) MMJ to patients that suffer from one or more of the 24 qualifying diseases and conditions.

Until patients can receive legal recommendations from their physicians under the Ohio program, criminal charges for possession of the drug is subject to the affirmative defense granted to patients by House Bill 523.

Looking forward

There is still a lot of work for the MMCP to meet its September 8, 2018 deadline. Cultivators have to build-out their facilities and get plants under lights and harvested. Then the processing and dispensing can begin. It is going to be tight – particularly with licenses for facilities to do the required testing of the cannabis products not coming available until July of 2018. We will continue to keep you apprised as the program develops. In the meantime, please contact me at (216) 453-5906 with questions.

Helpful links:

-Click here to read Mansour Gavin’s June 2016 Article on MMJ in Ohio, “Canna-business.”

-To be directed to the official medical marijuana website for the State of Ohio click here.

If you have further questions, please contact Miles Welo in our Corporate and Business Services and Estate Planning and Probate Group.