Monday, September 19, 2022
In a witty and engaging opinion that begins with a seeming tangent about pro football, Judge Rosenbaum of the 11th Circuit (left) reinstated the anti-trust claims of plaintiff Burger King (BK) employees. The case is Arrington v. Burger King Worldwide. After her football intro, Judge Rosenbaum begins by explaining that 99% of BK restaurants are independently owned franchises. Nonetheless, BK and its franchisees include in their employment agreements a "no-hire agreement" which provides that no BK franchisee can hire a BK employee from another franchise for six months after the employee leaves employment at another franchise.
The main sticking point was "concerted action." BK claimed that it and its franchisees were a single economic enterprise incapable of concerted action. Judge Rosenbaum and the rest of the 11th Circuit panel disagreed.
The no-hire agreement in question has been in effect since 2010. It is nasty. If it is violated, the franchisee who poaches workers must pay all costs and attorneys fees incurred in an action to enforce the provision. That franchisee may also soon lose its franchise. Although BK stopped insisting on the provision in new franchise agreements entered into after 2018, it is still in effect for older franchises. The District Court had dismissed the complaint on the ground that BK is a single economic enterprise and ruled that amendment of the complaint would be futile.
Judge Rosenbaum lays out the structure of BK's franchise system and walks through Section 1 of the Sherman Act. Arguing by analogy to the 201o Supreme Court case American Needle, Judge Rosenbaum found concerted action. In that case, the 32 NFL teams gave Reebok an exclusive license to sell team headgear. The Court there specified that the "concerted action" inquiry is tailored to the facts of the case. The question is not whether the defendants engage in concerted activities for all purposes but whether they did so in connection with the action or actions at issue.
When football teams market their own teams' garb, they are not furthering the common interest of the NFL. On the contrary, they are competing against one another. As Judge Rosenbaum notes, "No self-respecting Dolphins fan would ever buy a Jets or Patriots hat (at least not for herself). And Jets and Patriots fans are pretty unlikely to purchase Dolphins garb (though they are missing the boat on that one)." As the spouse of a proud Buffalonian, I can attest that my in-laws would at best take a "hate the sin, love the sinner" approach if I were to show up at a family gathering in aqua and orange, and a costume change would be in order.
The syllogism then quickly arrives at its conclusion: "So too here. Burger King and its franchisees, though they certainly have some economic interests in common, each separately pursue their own economic interests when hiring employees." BK still argued that the restraint on trade involved was not unreasonable. Judge Rosenbaum would not bite on that one, remanding the issue back to the District Court. When it gets there, I hope the plaintiffs' attorney will ask in voice dripping with sarcasm and innuendo, "If it was so 'reasonable' [using air quote hands here], why did not you take it out of your franchise agreements in 2018?"
Tuesday, August 30, 2022
This article from Robert Combs on Bloomberg Law shows striking growth in unionization. The growth outpaces last year's growth, even if one does not count all unionizing efforts at Starbucks shops, a topic about which we have already posted here and here. Unionization at Starbucks seems to account for something like 1/3 of all votes in favor of unionization thus far in 2022. However, because those are small shops, Starbucks workers account for only about 5300 of the nearly 45,000 new union workers. Unionization efforts at Amazon have generated over 8300 new union workers. Unionization at MIT accounts for nearly 4000 new union workers.
In short, I think the story here is that Starbucks is a big story, but it's just one story, and there are some other big ones that help us understand the dramatic uptick in unionization after about 15 years of lower rates of new union creation. As Robert Combs concludes,
Based on these findings, it would be short-sighted for management lawyers to presume that labor’s recent resurgence is limited to any one company—even one as high-profile as Starbucks.
Unionization at Starbucks also might be less significant because its effects might be short term. It's hard to know how sticky unionization will be at Starbucks outlets, but I'm guessing that there is a lot of turnover. I don't expect many Starbucks employees consider it a long-term career option. If they do, they will become managers, and the reporting I've seen is that the managers tend to oppose the unions very actively. By contrast, employees at MIT, Kaiser Permanente, and Stanford Health Care seem more likely to be at their current jobs long-term.
In general, the uptick in unionization seems like a predictable response to a saturated job market, especially in a time of relatively high inflation, exacerbated by dramatic inflation in the housing market. Even if your employer offers you pay increases, inflation eats away at such gains, and you still can't find decent housing in an urban setting on $15/hour. So called "cost of living increases" are not coming close to keeping up with inflation. For once, workers have leverage because the national "great resignation" has employers scrambling for warm bodies. Training costs are high, especially when one is trying to maintain a brand that involves knowing how to quickly make an iced brown-sugar-oat-milk espresso.
Lauren Bobert thinks this will not be a problem, because universities are churning out graduates who major in lesbian dance theory and that for such people, work at Starbucks may be the best option. Ouch. As the father of a daughter majoring in theater, that cuts me pretty close. But this chart of current majors tells a different story.
As does this one:
Wednesday, August 24, 2022
As Emma Goldberg reports in The New York Times, our nation's #1 employer is offering abortion coverage, including travel expenses in its healthcare package for employees. The travel coverage is necessary because Walmart's home state, Arkansas, has adopted a strict abortion law that does not include exceptions for rape of incest.
According to a memo from Walmarts "chief people officer" [?], the policy covers abortions related to “health risk to the mother, rape or incest, ectopic pregnancy, miscarriage or lack of fetal viability." Travel funds are available if the nearest abortion provider is not within 100 miles of the employee's home.
When the Supreme Court overturned Roe and Casey in the Dobbs opinion, the Justices said that they were simply returning the issue to the states. Perhaps they should have said that they are returning the issue to the states and the major corporations within those states. Lately, such corporate measures are met with legislative countermeasures. Does the Arkansas legislature want to take on Walmart the way Florida took on Disney? Stay tuned.
Wednesday, August 17, 2022
Over at The New York Times, you can test your worker productivity score in a piece written by Jodi Kantor and Arya Sundaram and produced by Aliza Aufrichtig and Rumsey Taylor. It is pretty disturbing.
The page tracks you as you read an article about being tracked at work. It's fun, because it's not the real deal, but apparently, many workers are now being tracked all the time, and for some, pay, promotion, and even keeping one's job depends on how well one does working while being tracked. Holy panopticon, Batman!
How it started:
Yesterday, I blogged about unionization efforts at Starbucks, and that topic seems relevant here. Workers hate being tracked, not only because none of us operate at peak efficiency but also because some of the things we do are productive in ways that cannot be tracked. According to The Times, Amazon pulled back on some of its worker productivity measures in response to unionization. Workers who are unionized can fight back against the crapification of work. They don't focus exclusively on pay and benefits.
Efficiency is now a value in many work spaces where efficiency should not be a primary value. The article spends a lot of time on pastors working in hospice settings being tracked for their efficiency. That's sick, and not in a good way.
Lots of workers complain that they are being penalized for "idling" when they are in fact thinking, working out problems with pen and paper, consulting with colleagues, or pausing to reflect on things. Workers are having to explain dips in their productivity by telling their managers that sometimes they have to use the toilet.
How it's going:
I am so grateful to be an academic! So much of what I do is not productive in any way that can be measured. I clear my head by walking around my building, talking to colleagues or students. I work through my ideas by talking to them. I socialize with my co-workers because I like to get to know the people I work with. I blog. I surf the Internet looking for images to put in my PowerPoint presentations. In the interest of full disclosure, once I'm surfing, I get curious about things and read stuff on the Internet. Some of it may be relevant to teaching or scholarship; some of it isn't. I often don't know until I've finished reading something whether it will be relevant to my work. What would tracking technology know of that?
While I was reading the Times article and hyper-conscious of being tracked, a student poked his head in to say hello. It was a student who had me for contracts last year but who will not be taking classes with me this year. The efficient thing to do would be to tell him I was in the midst of reading an article and I couldn't spare the time to chat. I didn't do the efficient thing and I hope I never have to.
Tuesday, August 16, 2022
We have posted before about the changing fortunes of labor unions in this country, focusing on successful organizing campaigns at Starbucks. As reported in The New Yorker by E. Tammy Kim here, Starbucks' workers have come up with something even bolder than charging $3 for a cup of coffee!
Rather than outsourcing recruiting to union professionals, the baristas are recruiting their own to join Starbucks Workers United, and their efforts have been quite successful, according to Ms. Kim's reporting. Even at the 15,000 square-foot Reserve Roastery in Seattle, some baristas have joined the union, citing "concerns over chronic understaffing, race discrimination in promotions, mistreatment by managers, and low pay." Fifteen dollars an hour doesn't go very far towards rent in an urban setting.
It can be a tough sell. Management discourages employees from unionizing, and there are instances of claimed retaliation against workers for union activities. Fortunately, the union baristas know how to work under cover. They pretend to be ordinary Starbucks customers, even going so far as to order "iced brown-sugar-oat-milk espressos." Then they give the frazzled barista a flyer as he toggles between the walk-up window and the drive-through window. The organizers sometimes come up against management in stores, but they give their pitch to managers as well, who say that they are not interested. Reifications of false consciousness all. Then employees suddenly realize that it is time to take out the trash, and they sneak out to grab a flyer from the organizers.
Another interesting theme in Ms. Kim's article is the role of LGBTQ+ employees in union organizing. I don't usually get my coffee from Starbucks, but when I travel, I am grateful for the company's market saturation. I know that I can get drinkable caffeinated beverages on the road, pretty much no matter where I travel. I noticed last year on a trip to the Ozarks that I was seeing a much higher percentage of out LGBTQ+ people serving me beverages than I saw in other venues in Arkansas. Back in the day, the rainbow masks were a definite tell. It turns out, once you have the activism bug, it translates across subject matters. One Seattle protest adopted the the slogan "Be Gay! Do Strikes!"
[Sidebar: I expect better slogans from LGBTQ+ folks. A friend from grad school was an early participant in ACTUP! When police came to clear them out of a building, the police wore gloves so that they wouldn't catch anything from these terrifying gay men. The media showed up, and the ACTUP men started chanting "Your gloves don't match your shoes! You'll see it on the news!" Zing.]
The workers and Starbucks are now locked in a war of attrition. Howard Schultz (right, at a 2014 book signing), Starbucks' CEO (for the third time) is adamantly anti-union, as Ms. Kim describes, but the company has a reputation as a progressive force and so it will only issue mealy-mouthed statements about its willingness to negotiate. Negotiations have yet to begin, notwithstanding a request from 32 unionized locations. The company is actively seeking to shut down unionized locations. It has been especially aggressive in Seattle, the company's corporate home. By the way, if you are in my home city of Oklahoma City and are looking for a cold brew or an iced chai latte, the unionized locations are at 36th & May and 23rd & Robinson. It sounds like they could use the support.
Meanwhile, Starbucks workers and Amazon workers are changing the make-up of the union movement, as young people join in numbers the union movement has not seen in decades. Starbucks and Amazon are among the country's top ten employers. Union movements at those two companies can have a huge impact. The National Labor Relations Board can only do so much to help. Starbucks' anti-union strategy has precedents in the conduct of companies like Walmart, Boeing, and Chipotle, all of which shut down venues or departments or moved production to escape unionization. The NLRB has its own problems: having been gutted during the Trump administration, its workload has now doubled. The ability of a federal agency to stand up for American workers is yet another matter that will turn on the 2024 elections.
In the meantime, unionization efforts are giving participants much more than work experience. They are gaining self-confidence, empowerment, and a sense of community, belonging, and purpose. Expect great things from these young people, who will contribute to our economy and to our political life much more than they would have done if their Starbucks experience were just about earning $15/hour. That is, so long as their efforts are not crushed.
Tuesday, June 21, 2022
Although this blog has a category called "Labor Contracts," we rarely use it. Labor unions have long been in decline, and there just haven't been many labor contracts to discuss outside of the context of collective bargaining in professional sports. Perhaps the tide has turned.
Over the weekend, The New York Times featured a story about Jaz Brisack, a Rhodes Scholar who decided that the best use of her time and talents was to become a union organizer and so she took a job as a Starbuck's barista. Hers was the first Starbucks-owned store to unionize; 150 others have since followed suit, and 275 have filed paperwork to hold elections. The are two unionized Starbucks shops in my fair city, Oklahoma City! I don't always drink Starbuck's Coffee, but when I do, I will henceforth prefer to purchase it at 36th & May or 23rd and Robinson!
It is such a great story, and it is an exciting moment in the history of the labor movement. The long slide in the percentage of the work force in labor unions seems to have stalled. There are even some signs of growth, such as this story about the first Apple Store to unionize.
Let us hope for a future when Americans are outraged that there are billionaires and not by a mandatory living wage for hourly workers.
Wednesday, June 8, 2022
Still reeling from Justice Kagan's opinion for the unanimous Supreme Court last month limiting employers' ability to compel arbitration, such employers got hit again by another unanimous opinion (except that Justice Barrett was recused). This time the author is Justice Thomas, in Southwest Airlines v. Saxon. The issue was whether Saxon, a ramp supervisor for ❤️Southwest❤️, is exempt from arbitration provisions under § 1 of the Federal Arbitration Act (FAA).
According to § 1 of the FAA, workers who engage in foreign or interstate commerce are exempt from its provisions. Ms. Saxon's employment "requires her to load and unload baggage, airmail, and commercial cargo on and off airplanes that travel across the country." For that reason, the Court agreed with Ms. Saxon, and she cannot be compelled to arbitrate her claims.
The victory is a limited one. Ms. Saxon argued that because airlines engage in interstate commerce, all airline employees should be covered under § 1. The Court disagreed. Whether a worker is covered depends on the conduct in which that worker is required to engage. The Seventh Circuit had reserved judgment on whether Ms. Saxon, as a ramp supervisor, would be exempt had she been restricted to a supervisory role. However, the Seventh Circuit ruled that she was exempt from the FAA because she was personally required to load and unload aircraft. The Supreme Court agreed. It's a pretty simple case.
Because of the new fashion for textualism, Justice Thomas could not reach that pretty obvious conclusion without consulting a dictionary.
The word “workers” directs the interpreter’s attention to “the performance of work.” Id., at ___ (slip op., at 10) (emphasis altered); see also Webster’s New International Dictionary 2350 (1922) (Webster’s) (worker: “One that works”); Funk & Wagnall’s New Standard Dictionary 2731 (1913) (worker: “One who or that which performs work”). Further, the word “engaged”—meaning “[o]ccupied,” “employed,” or “[i]nvolved,” Webster’s 725; see also, e.g., Black’s Law Dictionary 661 (3d ed. 1933) (defining “engage”)—similarly emphasizes the actual work that the members of the class, as a whole, typically carry out. Saxon is therefore a member of a “class of workers” based on what she does at Southwest, not what Southwest does generally.
Justice Thomas performed a similar service, resorting to dictionaries in rejecting an argument from ❤️Southwest❤️ that people who load cargo onto airplanes that fly between states are engaged in foreign or interstate commerce. Yes, we need to look up "engaged" and "commerce," don't we? Ugh.
The opinion provides an extended discussion of the ejusdem generis canon of construction, on which both sides relied. This is perhaps not the best advertisement for the utility of the canons. The Court rejects both sides' ejusdem generis arguments, and it's generally not great when both sides rely on the same canon, but perhaps Karl Llewellyn would have a good chuckle over it.
It was nice to see Justice Thomas picking up on a theme from Justice Kagan's opinion from last month. In Concepcion and other cases, the Court relied on Congress's pro-arbitration purposes in giving expansive scope to employers' and vendors' abilities to impose mandatory arbitration on workers and consumers. In Morgan v. Sundance, Justice Kagan stressed that Congress's pro-arbitration purposes extends only far enough to make arbitration provisions every bit as enforceable as other contractual provisions, but no more so. Justice Thomas will not construe ambiguous language in the FAA to favor arbitration:
[W]e are not “free to pave over bumpy statutory texts in the name of more expeditiously advancing a policy goal.” New Prime, 586 U. S., at ___ (slip op., at 14). Here, §1’s plain text suffices to show that airplane cargo loaders are exempt from the FAA’s scope, and we have no warrant to elevate vague invocations of statutory purpose over the words Congress chose.
Still confused about how class-action waivers fit into all of this, but that is a matter for another time.
This case could have afforded the perfect opportunity for a one-paragraph opinion, consisting of Justice Thomas's conclusion:
Latrice Saxon frequently loads and unloads cargo on and off airplanes that travel in interstate commerce. She therefore belongs to a “class of workers engaged in foreign or interstate commerce” to which §1’s exemption applies. Accordingly, we affirm the judgment of the Court of Appeals.
What more is there to say, really?
Well, I'm glad ❤️Southwest❤️ lost, and I'm a bit disappointed in them for even trying to argue that § 1 should not apply to people who load cargo. But I still ❤️ Southwest. No fees for bags, no fees for changes, a sense of humor about itself, but most of all, a classless society.
I hope the reader found this blog post persuasive despite the fact that no dictionaries were consulted in its composition.
Thursday, June 2, 2022
This is probably not Elon Musk's top concern these days, but last week a California court denied his company's motion to compel arbitration in a case involving a Tesla worker who alleges in her complaint "nightmarish conditions of rampant sexual harassment" at the company. Jessica Barazza alleges that she experienced a "pervasive culture of sexual harassment, which includes a daily barrage of sexist language and behavior, including frequent groping on the factory floor." She claims that she complained to managers and the company human resources department about what she described as a "frat house" environment, but the company failed to protect her.
At this point in the proceedings, Tesla is simply trying to get the case dismissed and sent to arbitration. Ms. Barazza claims that Tesla's arbitration agreement with her is unenforceable due to procedural and substantive unconscionability. The alleged ground for substantive unconscionability is the agreement's one-sidedness. Ms. Barazza must arbitrate its claims against Tesla, but Tesla can sue her. The procedural unconscionability relates to the take-it-or-leave it nature of Ms. Barazza's employment agreement.
According to Bloomberg.com, Alameda County Judge Stephen Kaus agreed with Ms. Barazza, finding that Tesla's arbitration agreement was unconscionable and denying Tesla's motion to compel arbitration. Judge Kaus's key procedural finding was the Telsa did not present Ms. Barazza with the arbitration agreement until she had already quit her previous job in expectation of starting work at Tesla.
New federal legislation bars employers from requiring arbitration of sexual harassment claims, but that law did not apply to claims that arose prior to its enactment.
Tuesday, March 22, 2022
In 2017, Jonathan Waber entered into an employment contract with Howmedica Osteonics Corp. (HOC), the parent corporation of his employer, Stryker Corporation (Stryker). The contract included a one-year non-compete and non-solicitation clause and choice of law and forum-selection clauses requiring adjudication of disputes in New Jersey. Waber is a California resident, and he worked in Palm Springs. Nine months after starting work for Stryker, Waber left to work for Depuy Synthes Sales, Inc. (DePuy). When Stryker threatened legal action, Waber availed himself of California Labor Code § 925, which permits a California employee to avoid forum-selection and choice-of-law clauses that would require adjudication of disputes outside of California.
Depuy and Waber then filed suit in a federal district court in Central California seeking a declaration that the forum-selection and choice-of-law clauses were void under California law and that the non-compete and non-solicitation provisions violated California Business and Professions Code § 16600. Stryker filed a motion to transfer to the District Court of New Jersey under 28 U.S.C. § 1404(a).
The District Court found that the forum-selection clause could not be enforced under California law. It then weighed the appropriate factors under §1404(a) and denied Stryker's motion to transfer.
After Depuy amended its complaint to add HOC as a defendant, the District Court granted partial summary judgment in favor of DePuy and Waber, holding the forum-selection, non-compete and non-solicitation clauses in Waber’s contract void and unenforceable under California law.
On appeal before the Ninth Circuit, HOC argued that the court must transfer the cases to New Jersey under Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) and Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 571 U.S. 49(2013). In an argument reminiscent of those deployed to defeat state statutory challenges to arbitration clauses, HOC asserted that only general contracts law, not state statutes directed at forum-selection clauses, can render such clauses invalid. In this case, however, courts have tended to find that state law governs the enforceability of forum-selection clauses, just as it would any other contractual provision.
In Depuy Synthes Sales v. Howmedica Osteonics Corp., a Ninth Circuit panel unanimously found that HOC read Stewart and Atlantic Marine too broadly. Those cases stand for the proposition that, given a valid forum-selection clause, federal law governs a court's decision on a motion to transfer under § 1404(a). Here, however, where there is no valid forum-selection, state law applies and informs the § 1404(a) analysis. Stewart assumed a valid forum-selection clause and never considered the effects of statutes like California's § 925. The District Court undertook the proper § 1404(a) analysis in this case, and so the Ninth Circuit found no grounds for disturbing its grant of summary judgment to the plaintiffs.
H/T to Timothy Murray
Monday, January 31, 2022
Last week, we posted about a healthcare provider, ThedaCare, that persuaded a judge to issue a temporary injunction preventing seven employees from starting work at a rival, Ascension, last Monday. As Madeline Heim reports here, the judge wisely lifted the injunction on Monday, allowing the workers to begin their new employment on Tuesday. On Friday, ThedaCare dropped its suit and went into full spin mode. Everything is now fine again, operating as normal.
Monday, January 10, 2022
Last week, the Supreme Court heard argument in two cases relating to the federal government's attempts to address the COVID-19 pandemic through vaccine mandates/testing and masking requirements in the workplace.
In NFIB v. Department of Labor, Petitioners bring a challenge to an Occupational Safety and Health Association's "Emergency Temporary Standard" (ETS). The ETS applies to workplaces with over 100 employees and requires that affected workers either get vaccinated or wear face masks and submit to weekly COVID testing. The ETS provides for both medical and religious exemptions from any vaccine requirement. While the Fifth Circuit granted petitioners an administrative stay of the ETS, all challenges to the ETS were consolidated and heard by the Sixth Circuit. One footnote from the Sixth Circuit opinion gives you a sense of the range of sensibilities animating these two sister Circuits:
In comparing this case with Alabama Association, the Fifth Circuit wrote, “But health agencies do not make housing policy, and occupational safety administrators do not make health policy.” BST Holdings, 17 F.4th at 619. The Fifth Circuit fails to acknowledge that OSHA stands for the Occupational Safety and Health Administration. See 29 U.S.C. § 651(b) (“The Congress declares it to be its purpose and policy . . . to assure so far as possible every working man and woman in the Nation safe and healthful working conditions . . . .”) (emphasis added).
In a 2-1 panel opinion, the Sixth Circuit refused to enjoin the ETS.
In the second case, Biden v. Missouri, the issue is whether the Supreme Court should uphold an injunction issued by a Missouri District Court blocking a federal rule that requires all health care workers at facilities that participate in Medicare and Medicaid programs to be fully vaccinated against COVID-19 unless they are eligible for a medical or religious exemption.
The cases come to the Court in a highly unusual posture. In the last few terms, the Court has been deciding cases in an expedited manner, without full briefing or oral argument, on what has come to be known as the "shadow docket." Perhaps in light of concerns raised in the legal community about the shadow docket, the Court has adjusted, placing the case on its regular docket, but with an expedited briefing schedule. Based on oral argument, it seems that the Court is poised to strike down the ETS, at the very least.
It bears noting that the Supreme Court itself subjects all people who enter its halls (and it allows very few people in) to a mandatory COVID testing regime. Both the Ohio and the Louisiana Attorney Generals, who are challenging the OSHA regulation, had to attend oral argument remotely, having tested positive for COVID. Justice Sotomayor, who has diabetes, attended remotely, perhaps because she knew that Justice Gorsuch would not wear a mask, despite court rules requiring that everyone in attendance other than the Justices wear N95 masks.
Such rules are wise. The median age on the Court right now is 66. We want the Justices to stay healthy, and it is perfectly reasonable that the Court should adopt rules to protect the Justices' health and safety. It will be most peculiar if the Justices deny the federal government the power to adopt rules that safeguard those of us who cannot control the safety of our own work environments.
The issue may be largely symbolic. Most people are vaccinated. They can still contract and spread the omicron variant, although its effects are likely to be less severe in the vaccinated. But the threat of serious illness or death, and the attendant anxiety accompanying that threat, is not symbolic for millions of workers whom the Court refuses to allow the government to protect. If the Court rules as court-watchers predict it will, it will be making a larger legal and political point. It may not uproot the administrative state root and branch, but it can engage in some selective pruning.
Perhaps, if the Court strikes down the ETS, workers across the nation should adopt Justice Sotomayor's posture and simply opt out. There has been a lot talk on the left about legislative action to temper the power of the Supreme Court. That's a dangerous game if plainly animated by partisan purposes. I have voiced my criticisms of Mark Tushnet’s version of “constitutional hardball.” But a genuine popular uprising in response to an overreaching Supreme Court decision can send a message strong enough to prompt bipartisan legislative action. For once, the left would have the intransigent Republicans over a barrel. The Court seems to want to own the libs so that it can strike a blow in a culture war. But even relatively unorganized labor can hit the Court and its ideological fellow-travelers where it hurts -- in the economy. A week or two without workers should be enough to get even the Republican base to call upon their legislators to vote yes on a piece of legislation or face consequences as the ballot box. A Court decision striking down a reasonable and necessary health and safety regulation can provide a rare opportunity for the people themselves to bypass failed mechanisms of checks and balances and hold the Court accountable for decisions that are inconsistent with our constitutional design and recklessly endanger American lives.
But who knows? Perhaps none of this will be necessary. The ETS was a response to the delta variant. Omicron poses different challenges, and the ETS may no longer be the right response. Or, the next variant may have be as deadly as delta and as communicable as omicron. The ETS is an emergency, temporary standard. The government needs to have the ability to act expeditiously and flexibly to national health challenges. If the Court does not get out of the way, we can call the loss of the Court's legitimacy another COVID casualty, but it's really a self-inflicted wound.
Tuesday, December 7, 2021
California is generally known as a state that takes a dim view of restrictive employment contracts so I was surprised to learn that a three-judge panel of the California Second District Court of Appeals recently upheld a trial court order enjoining Netflix from soliciting Fox employees.
There were two particularly striking facts about the case. First, the employees that Netflix approached had fixed term written employment agreements. The term of these agreements was initially two years, but gave Fox a “unilateral option” to extend the contracts for additional two-year terms. They also allowed Fox to pursue equitable relief, including an injunction, to prevent breach.
The second notable fact was that the Fox employees were paid substantially below market salaries -- approximately in the 25th percentile for their positions. That’s an “F” grade for salary, Fox! No wonder they wanted to leave.
It sounded as though Fox used some rather un-employee friendly practices, including the inclusion of a “no-shop” clause that prohibited employees from seeking new employment more than 90 days before their Fox employment agreement expired. Fox also told its employees that they could “work for Fox (and no one else) through the term of their agreements” and sent employees and prospective employers cease and desist letters. Fox, by contrast, had a contract payout policy where it could terminate employees prior to the end of their fixed term employment agreements. The company also exercised their bargaining power and “frequently offered employees new fixed-term agreements while they had significant time remaining on their existing contracts” and “made raises and promotions contingent on signing a fixed-term agreement.” According to Netflix, “at least 127 Fox employees had entered into sequential fixed-term contracts that, together, provided an employment term that was longer than seven years.”
Fox sued Netflix alleging unfair competition and tortious interference with contracts and sought compensatory and punitive damages and a permanent injunction. Netflix responded that Fox’s fixed term agreements were void as against public policy and that they were unconscionable.
The court sided with Fox, finding that “the undisputed evidence” showed that it intentionally interfered with the agreements of the Fox employees and that the
“undisputed evidence also showed that both employees’ salaries from Fox were below market, at least for most of the years of the employees’ employment with Fox, and that Netflix specifically targeted both of them, offering to double their salary and to defend and indemnify them against any claims brought by Fox.”
In other words, Netflix tried to hire Fox's underpaid employees by offering fair compensation but the court wouldn't let them.
To all this, I say - Are you kidding me, California Second District Court of Appeals?
Hopefully, Netflix will appeal. Better still, maybe the state legislature will pass a law prohibiting some of Fox’s nasty employment practices, such as the no-shop for 90 days provision.
Monday, November 1, 2021
As regular readers know, we here at the blog often fret about arbitration clauses because they appear most often in adhesive contracts (those offered on a take-it-or-leave-it basis) where the adherent lacks bargaining power such as wrap, consumer, and employment contracts. In the wake of #MeToo, a few states such as California and New Jersey, passed legislation banning forced arbitration for sexual harassment claims. However, these laws have been questioned as running afoul of the FAA. There is a bipartisan bill that was introduced in July but who knows how long that might take to become law given how busy those folks are over in D.C. with other matters. Fortunately, in some cases, workers have themselves sought to assert some bargaining power after contract execution, by voicing their discontent to management with their terms. On rare occasions, it even works. Last week, Activision Blizzard’s CEO Bobby Kotick announced in a letter that the company would waive arbitration for sexual harassment and discrimination claims. Presumably, this means that they would not require employees who signed contracts containing forced arbitration clauses to submit to arbitration if they brought a sexual harassment or discrimination claim. It doesn’t say whether the arbitration clauses would remain in their employment contracts, however, for new employees. Also, since a waiver may be retracted, there is a possibility that the company could reinstate the policy, but given the backlash that would cause, it seems unlikely (as of now but who knows). In any event, it’s a start and an indication that as difficult as it may be to harness the power of the collective, when efforts to mobilize are made, they can be quite effective.
Monday, September 20, 2021
It is difficult to assert an affirmative defense of economic duress under New York law. The party alleging economic duress has to show a wrongful threat and not merely point to his own financial hardship. The wrongful threat must be some threatening conduct that is not within the other party's legal rights. But in Herrnson v. Hoffman, Judge Oetkin of the District Court for the Southern District of New York found that plaintiff had alleged sufficient facts to survive a motion that the court treated as one for summary judgment.
Pro se plaintiff Samuel Herrnson alleges that defendant Mark Hoffman gave Herrnson a check for $16,000. Hoffman boasted of his wealth and allegedly gave Herrnson the money to assist the latter in a rent dispute he was having with his landlord. Hoffman allegedly told Herrnson that he wanted him to "view Hoffman Management as the place to be for the remainder of his career." Herrnson alleges that Hoffman wrote "loved" on the memo line of the check (he may have written "loan"). Herrnson deposited the money in an escrow account, anticipating litigation with his landlord.
Two months later, Hofmann and his co-defendants terminated Herrnson. Kinda gives Hoffman's statement "the place to be for the remainder of [your] career" a different cast. It's reminiscent of the Delphic Oracle's reply to Croesus: "If Croesus goes to war, he will destroy a great empire." In any case, Hoffman called Herrnson's escrow manager and had the funds frozen, telling the escrow manager that the $16,000 check was a loan, conditional on Herrnson's continued employment. As that employment had terminated, the loan was being called in.
Herrnson's narrative, accepted as true at this stage in the proceedings, was that Hofmann knew that Herrnson was contemplating an ADEA claim against Hofmann and his co-defendants, or similar claims arising under state law. Hofmann mischaracterized a gift as a loan in an attempt to strong-arm Herrnson into dropping his claim. Hofmann made Herrnson sign a general release in order to have the funds released.
Judge Oetkin was having none of it at the summary judgement stage. If Herrnson's narrative is accurate, he received nothing from the release, other than funds that had already been given to him. Defendants' motion to dismiss, converted into a motion for summary judgment was denied.
Tuesday, June 29, 2021
As reported in Isaac Chotiner's New Yorker article, Lebron James’s Agent Is Transforming the Business of Basketball, Rich Paul has been changing the way athletes and agents negotiate with teams. Paul, the agent for LeBron James and other N.B.A all-stars, started his agency, Klutch, nine years ago.
Paul and James became friends in 2002 when James -- only seventeen—was expected to be N.B.A.’s No.1 draft pick. When the two first met, Paul was twenty-one and selling vintage jerseys out of his trunk. James took an interest in one of the jerseys, the two struck up a friendship and stayed in touch. They bonded over being Black kids who grew up in the inner city and the difficulties that come with that. That background has given Paul a unique advantage when advising young players with similar experiences growing up. Paul's mother struggled with drug addiction. His father died of cancer while he was in college. He would have finished, he said, because it was important to his father. But after his father died, Paul's business ambitions took over.
Their contractual relationship began the summer of 2003, when James signed with the Cleveland Cavaliers. James began paying Paul a salary of $48,000. According to Chotiner, James regarded the payments as “an investment in what the relationship could become.” A few years later, Paul began working for James then-agent Leon Rose, at Creative Artists Agency (CAA).
Paul left CAA and formed Klutch Sports Group in 2010 after the controversial announcement made by James on “The Decision” —an ESPN live broadcast—in which he declared he was leaving the Cavaliers. James declared “I’m going to take my talents to South Beach and join the Miami Heat.” The press took a very dim view of "The Decision," but James has no regrets (or will admit to none), and his move from Cleveland to Miami became the model for later moves by star players who want to dictate where they play and with whom they play.
Paul began to develop powerful influence in the N.B.A with James as his star client. They have become associated with “player empowerment.” Player empowerment is the influence that athletes wield as they change teams and build new fan bases. The argument in favor of player empowerment is that too much control has been in the hands of teams who can trade a player on a whim. Players should have some say in where they work and live. This philosophy allows the league’s best athletes to have the most leverage because they bring in the fans, jersey sales, and general revenue. Paul believes players should have more power over who and where they sign with.
The dynamic between the league, athletes, and player empowerment, is intertwined with race. Historically, basketball—a majority Black sport—has always been run by white owners. As players have become increasingly more outspoken about politics, the league has had to follow suit, like embracing the Black Lives Matter movement.
The dynamic in NBA player contracts has certainly changed, at least at the top of the NBA food chain. The game used to be that owners would lock in young players to multi-year contracts. If the players underperformed or became injury-prone, the owners retained the ability to trade them. If the players exceeded expectations, they were systematically underpaid until their contract came up for re-negotiation. Sorry Scottie Pippen. Now, the star players can reverse the option. With Paul's help, they star prospects can now negotiate generous contracts but retain some contractual flexibility to move to different teams, and the league and the owners seem relatively powerless to prevent them from doing so.
Critics of player empowerment say it has put too much power in the hands of players. Bomani Jones, a sports journalist for ESPN state that player empowerment is a catchall for the fact that the league has done a terrible job empowering team, and that the N.B.A. has a problem with real estate; they have teams in places where young Black men do not want to live.
Although Paul is proud and willing to fight for his clients, he struggles with the impression that he is constantly battling with teams. He said that perception is all wrong. “What I am focused on was how to educate the athletes. It’s one thing to be a black man in America it’s a totally different thing to be a black athlete.”
For Black athletes, Paul explained, the sudden wealth of an NBA contract comes with a ‘black tax.’ Black tax is the difference in experience black athletes face compared to that of white athletes. For some Black athletes, their number of dependents is higher, their education may be lower, their financial literacy lower, and their family infrastructure is lesser. Paul and others at Klutch say they see their job not only as making money for players, but also teaching them how to spend it. Furthermore, family members of young athletes historically have only seen White men in a position of agent or head coach, so that is who they tend to seek out and listen to. It is difficult for Paul to represent White athletes because they do not seek him out and they do not expect or trust Black agents.
Klutch became known for driving hard bargains, especially for James. Paul's reputation was cemented when James joined the Lakers in 2018. The following year, Paul pressured New Orleans Pelicans to trade Anthony Davis to the Lakers—which cemented the roster that enabled the Lakers to win the NBA championship in 2020. Paul's strategy has aggressive: he let it be known David was demanding a trade and that the he really wanted to be traded to the Lakers. Davis's value to the Pelicans dipped precipitously. He didn't want to play for the team and he didn't want to risk injury. Paul effectively called the bluff of the owners. They disapproved of the tactics, but Paul forced them to recognize the market power their star players wield. The N.B.A. fined Davis fifty thousand dollars for the trade demand. Why even bother?
Paul’s success has led to debate about what it takes to be a good agent. Paul cannot match his rivals in formal education. Most other agents are lawyers or have lawyers. But Paul understands the business, and he understands the psychology of the players, the agents, and the "Euro men in their fifties" who still make the decisions for teams. Now for Paul’s star clients, the job is about finding new ways to wield power, including using the media. In 2018 Paul negotiated an unconventional deal for NBA prospect Darius Bazley. Bazley reneged on a commitment to play for Syracuse University but was later paid $1 million for an internship at new balance. The next year the NCAA announced a new rule: agents could not represent college athletes unless they themselves had a college degree. Then James took to Twitter and dubbed the new regulation #TheRichPaulRule. Within a week the NCAA rescinded the rule.
Chotiner's article provides a behind-the-scenes look at how Paul recruits clients. He recounts a Zoom call between Paul and an NBA-prospect's mother. Paul encourages the young athlete to talk about his teammates and his team mentality, about his enthusiasm for playing defense and being a play-maker rather than just a scorer or showboater. The mother quickly grasps that the strategy is to spout cliches to counteract the prejudices about young Black athletes her son is likely to encounter. But to her, it sounds like forcing her son to repress his personality and bow before these new White masters. Paul is playing the long game. For him, it is not about bowing down to anyone. it's about achieving a balance that enables young stars to rise.
Once players rise to stardom, they have more freedom to speak for themselves. Klutch has athletes speak out on political or social issues. Michael Jordan would not even say whether he preferred classic Coca-Cola or new Coke. James has spoken out on the killing of George Floyd, police brutality, and Georgia’s restrictive voting laws. Paul said that however the players decide to involve themselves is up to them, and that they should not be tone-deaf to things happening around them.
The new model works well for the star players, but does it improve the sport? From my perspective in Oklahoma City, I still hear complaints about Kevin Durant's abandonment of the Thunder. I hear this from White fans, and I suspect that, while the NBA's popularity bridges racial gaps in the U.S., the people buying (unbelievably expensive) seats in stadiums and (unbelievably expensive NBA gear) are mostly White.
I've only been here a year, and with COVID, people aren't thinking much about attending sporting events (other than college football, which never stopped here), but nobody has ever brought up the Thunder in conversation with me since I arrived. I follow basketball a little, but I can't name a single Thunder player. I follow the Bulls, but I know at the start of every season that the Bulls do not have three all-stars, so they will not be in serious competition for the championship. Seems like a doomed model for small-market cities like New Orleans, Oklahoma City, and the New York Knicks.
Still, it seems preferable to baseball contracts where, for some reason, owners lock themselves in to multi-year contracts valued in the hundreds of millions of dollars with players who are nearing their peaks and will be paid tens of millions late in their careers. Such older players often are of limited value to the club, often relegated to the roll of designated hitter. I wonder whether, for that reason, the average age on American League teams is a bit higher than on National League teams. On the one hand, perhaps it is nice that these players get to enjoy the riches denied them in their primes. On the other hand, it must frustrate elite athletes to compete and under-perform. It also hurts their teams, because salary caps prevent baseball teams with older, expensive players from trading for top players still in their prime.
Thanks to ContractsProf Blog Intern, Alyssa Cross, for her research assistance!
Friday, May 28, 2021
The American Association of University Professors (AAUP) issues a Special Report, Covid 19 and Academic Governance. The news is not good. We law professors had a rough ride after 2008's Great Recession, but most law schools were able to ride out the storm and most law schools are now steering towards calmer waters. Meanwhile, smaller colleges and universities are taking on a lot a water as a result of the pandemic, and the report sadly evidences that contracts and tenure do little to protect faculty when educational institutions founder.
The title of this post is a quotation from a university administrator, allegedly in the service of "disaster capitalism." That is, some university administrations may have used the pandemic as an excuse to eliminate programs and faculty that were not carrying their weight in terms of revenue generation. Saying the quiet part loud, academic administrators welcomed the opportunity created by the pandemic. They invoked "act of God" provisions to close departments and terminate tenured faculty members, and they tossed aside existing faculty handbooks, replacing them with new ones written by administrators with limited faculty input. The result may be a permanent adjustment of university governance that will make it -- wholly unsurprisingly -- more resemble corporate governance, with power concentrated in the hands of university administrators, while faculty governance is constrained, especially with respect to financial matters.
The AAUP document is illustrative rather than exhaustive. It reports on an investigation into eight institutions. While the investigation was ongoing, the AAUP was inundated with reports of similar developments at other institutions, but the report remains focused on eight: Canisius College (NY), Illinois Wesleyan, Keuka College (NY), Marian University (WI), Medaille College (NY), National University (CA), University of Akron, and Wittenberg University (OH).
The report makes for sobering reading. There seems to be something of a playbook that administrations follow. Faculty as a whole respond rather timidly, voicing their objections but ultimately acquiescing as their colleagues agree to severance or early retirement. They have little choice, as courts tend to back administrations, who can rely on "financial exigency" or "act of God" provisions in faculty handbooks, and tenured faculty members have few options if they lose their jobs. The AAUP acknowledges that educational institutions face significant financial challenges, and the report does not suggest that there is an alternative to cutting programs and terminating tenure lines. Rather, it admonishes these institutions for failing to follow AAUP procedures and guidelines for doing so with the involvement of and input from faculty.
The AAUP tacitly acknowledges that it has a problem. According to the report Kenneth Macur of Medaille College wrote to his faculty on April 15th, “I believe that this is an opportunity to do more than just tinker around the edges. We need to be bold and decisive . . . . A new model is the future of higher education.” That new model does not include the tenure system as we currently know it.
The report indicates that AAUP reached out to Dr. Macur seeking an interview.
In his May 12 response, the president declined a request for an interview by the investigating committee, submitting instead a three-page statement, which claimed that Medaille “has no affiliation or relationship with the AAUP, does not have a faculty chapter of the AAUP, and does not have any faculty listed as members on the AAUP’s website. The AAUP does not govern, accredit, or have any authority over Medaille College.” It is symptomatic of the current state of affairs in American higher education, we believe, that a college president would declare his intention to dismantle tenure at his institution to the Wall Street Journal but refuse to participate in an investigation conducted by the AAUP.
In such circumstances, all AAUP can do is name and shame, but it is not clear if that approach will be effective. One would hope that being the focus of an AAUP report would serve a disciplinary function on such institutions, but they seem willing to take the risk, and most likely consequence of negative publicity would be declining enrollments and more cuts to faculty and staff.
Wednesday, March 10, 2021
As Colleen Flaherty writes here in Inside Higher Education, John Carroll University, like many small colleges and universities, is having a hard time financially. It has already terminated two tenured professors and eliminated its Art Department. Further cuts would ordinarily require a finding of financial exigency.
But John Carroll gets words to mean whatever it chooses them to mean. Financial exigency now means a projected budget shortfall of six percent or more and a cloudy future. This is termed a "budgetary hardship." You might think that the question is how can words mean so many different things, to which John Carroll (now Humpty Dumpty) responds, "The question is which is to be master -- that's all."
Humpty Dumpty University's administration has proclaimed a new policy permitting termination of tenured faculty upon a determination of a budgetary hardship, and it has issued a new faculty handbook that eliminates a right of appeal from such terminations. The old handbook, Humpty Dumpty says, was outdated. The new policies, on the other hand, "prioritize the retention of tenured positions and the preservation of academic freedom, to which the board is fully committed.”
Faculty members are impressed. They had no idea that words like "tenure" and "academic freedom" were consistent with policies that permit the non-appealable termination of full-time faculty members based on unilateral declarations of economic hardship.
"That's a great deal to make words mean so many different things," the faculty ventured in a thoughtful tone.
"When I make a word do a lot of work like that," said Humpty Dumpty, "I always pay it extra. Ah, you should see 'em come round me of a Saturday night," Humpty Dumpty went on, wagging his head gravely from side to side, "for to get their wages, you know."
Well, at least somebody is getting paid.
Friday, January 15, 2021
According to this article in the L.A. Times, John Eastman, who has recently represented the President in connection with numerous lawsuits challenging election results, has agreed to resign his position as a professor of law at Chapman University. Professor Eastman joined Rudy Giuliani at the "Save America" Rally on January 6th. The L.A. Times reports that, at that rally, he made unsubstantiated claims of voter fraud in connection with the 2020 Presidential election.
More than 160 faculty members called for the University to take action, but Chapman's President Daniele Struppa refused, citing the limitations of his powers as university president and the important principles of academic freedom and contractual rights. President Struppa's statement is worth quoting at length.
I am not the Emperor of Chapman University, nor I am the Supreme Leader of Chapman University. I am the President of the university, and as such, I am bound by laws and processes that are clearly spelled out in our Faculty Manual. The Faculty Manual, despite its common name, is actually a contractually binding document that faculty, administration, and Trustees have agreed upon. This document contains the rules that determine how faculty are hired, and how they are disciplined, up to and including termination. The documents spell out cases under which such actions can be taken, and what process must be followed. The process includes a prominent role for the Faculty Personnel Committee and affords the faculty under discipline a process, and the right to grieve the decision in multiple settings.
I do not know anything about President Struppa (pictured), but if this statement is representative of his qualities, he is a very fine university president. I do have some concerns about wearing such a busy tie with a plaid sports jacket, but I would not question his leadership on that basis.
Happily, Chapman University and Professor Eastman were able to come to an agreement. He voluntarily resigned, and neither party will pursue legal action against the other. Some may think that Professor Eastman was strong-armed into forfeiting his position and some part of his academic freedom and freedom of expression. I choose to see this episode as one in which contract law and contractual negotiation play a starring role and put in a strong showing.
Monday, December 7, 2020
Over at Jotwell, Miriam Cherry has a post up about Jonathan Harris's very timely piece, Unconscionability in Contracting for Worker Training, 72 Ala. L. Rev. __ (forthcoming, 2021), available at SSRN).
In the article, Harris (pictured) looks at various training schemes that purport to assist new workers or job applicants as they enter the work force or transition to new work. Specifically, Harris discusses two new developments. First, training repayment agreements (TRA), require employees to reimburse the employer for outside trainings if the employee quits or is fired before a fixed period of time elapses. Secondm Income Sharing Agreements (ISAs), which require a trainee to pay a percentage of future income in exchange for the ability to participate in a computer coding course or program. The possibilities for exploitation are palpable. Read more over at Jotwell, or download the article. It's what all the cool kids are reading.
Friday, December 4, 2020
Contracts profs around the world are trying to de-mystify contracts and clarify their terms by creating graphic contracts analogous to graphic novels. This video explains the strategy (but you will have to click on it and go to YouTube to get it view it).
Thanks to J. Kim Wright for the link.