By Erin L. Kilgore

It’s been a busy end of February.  For employers, the past two weeks have included several notable decisions:

Dodd-Frank Does Not Protect In-House Whistleblowers

Last Wednesday, on February 21, 2018, the United States Supreme Court unanimously held that the anti-retaliation provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) does not apply to employees who report alleged violations internally.  Relying on the plain language of Dodd-Frank’s definition of “whistleblower,” the Supreme Court found that the statute’s whistleblower protections extend only to those employees who report suspected securities law violations externally, directly to the Securities and Exchange Commission (“SEC”).  Thus, employees who allege that adverse action was taken against them because they reported fraud in-house, such as to a supervisor  – but not to the SEC – are outside the scope of Dodd-Frank and are not protected from retaliation under that statute.

Instead, those alleged whistleblowers must avail themselves of the anti-retaliation provision of Sarbanes Oxley Act, which covers employees who report fraud to outlets including the SEC, other federal agencies, or a supervisor, but includes pre-suit requirements for exhaustion of administrative remedies, a shorter statute of limitations period within which to file suit, and different damages available to a prevailing plaintiff.

Additional information about the Supreme Court’s decision can be found here.  

The NLRB’s Browning-Ferris Joint Employer Standard is Back

On Monday, February 26, the National Labor Relations Board (“NLRB”) reinstated its prior expansive standard for joint-employer liability, previously announced in Browning-Ferris Industries, 362 NLRB Bo. 186 (2015).   In doing so, the Board threw-out its December 2017 decision, Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017).

In Hy-Brand, the NLRB reinstated a previous test that said companies are “joint employers” only when they exercise direct control over workers.  According to the NLRB’s press release  in the wake of Hy-Brand, “two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.”   Businesses welcomed that standard for joint employer liability, but it was short-lived.

Hy-Brand was decided by a 3-2 vote.  But, it was determined that one of the voting members had a conflict of interest because his law firm, prior to his joining the NLRB, had represented one of the companies in the Browning-Ferris case. The NLRB’s Designated Agency Ethics Official determined that member was, and should have been, disqualified from participating in the Hy-Brand proceeding.   Consequently, on February 26, the NLRB issued an Order vacating the Hy-Brand decision.  As explained in the Board’s press release, “Because the Board’s Decision and Order in Hy-Brand has been vacated, the overruling of the Board’s decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015), set forth therein is of no force or effect.”

Consequently, the Browning-Ferris standard is back in effect, and two or more entities are joint employers of a single workforce if:  (1) they are both employers within the meaning of the common law;  and (2) they share or co-determine matters governing the essential terms and conditions of employment.  In assessing  whether an employer possesses sufficient control over employees to qualify as a “joint employer,” the NLRB will (among other factors) evaluate whether an employer has exercised control over the terms and conditions of employment indirectly through an intermediary or whether it reserved the authority to do so.

Additional information can be found here and here.

Title VII Prohibits Discrimination Based on Sexual Orientation, Says the Second Circuit

Also on Monday, February 26, the Second Circuit Court of Appeal (the federal appellate court with jurisdiction over courts in Connecticut, New York, and Vermont) ruled that terminating an employee because of his sexual orientation is unlawful sex discrimination under Title VII of the Civil Rights Act of 1964.

Title VII prohibits workplace discrimination on the basis of several prohibited characteristics, including “sex.”   On Monday, the Second Circuit held that sexual orientation discrimination falls within the scope of unlawful sex discrimination under Title VII, concluding that “sexual orientation discrimination is motivated, at least in part, by sex and thus is a subset of sex discrimination.”

The Second Circuit now joins the Seventh Circuit as the two Courts of Appeal to find that Title VII bars employment discrimination based on sexual orientation.

Employers should stay tuned as standards, laws, and interpretations continue to evolve.  Although the law has been, and shows signs of continuing to be, fluid under this Administration, employers must remain vigilant to ensure that their workplace policies and practices remain current and compliant with applicable law.